Document:

Unassociated Document

    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of November 20, 2007, by and among TXCO Resources Inc., a Delaware
      corporation, with headquarters located at 777
      E.
      Sonterra Blvd., Suite 350, San Antonio, Texas 78258 (the
      "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto, dated November 20, 2007 (the "Securities
      Purchase Agreement"),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer shares of
      the
      Company's Series C Convertible Preferred Stock, par value $0.01 per share (the
      "Preferred
      Shares"),
      which
      will, among other things, be convertible into a certain number of shares of
      the
      Company's common stock, $0.01 par value per share (the "Common
      Stock",
      as
      converted, the "Conversion
      Shares")
      in
      accordance with the terms of the Certificate of Designations, Preferences and
      Rights of Series C Convertible Preferred Stock, dated as of November 21, 2007
      (the "Certificate
      of Designations").

     

    B. The
      Preferred Shares may be entitled to dividends, which at the option of the
      Company, subject to certain conditions, may be paid in shares of Common Stock
      (the "Dividend
      Shares").
      

     

    C. To
      induce
      the Buyers to execute and deliver the Securities Purchase Agreement, the Company
      has agreed to provide certain registration rights under the Securities Act
      of
      1933, as amended, and the rules and regulations promulgated thereunder, or
      any
      similar successor statute (collectively, the "1933
      Act"),
      and
      applicable state securities or "blue sky" laws and regulations.

     

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and each of the Buyers hereby agree as
      follows:

     

    1. Definitions.
      

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

     

    a. "Additional
      Closing Date" shall
      have the meaning set forth in the Securities Purchase Agreement.

     

    b. "Additional
      Effectiveness Date"
      means
      the date the Additional Registration Statement is declared effective by the
      SEC.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    c. "Additional
      Effectiveness Deadline"
      means
      the earlier of the date which is (i) in the event that the Additional
      Registration Statement is not subject to a full review by the SEC, ninety (90)
      calendar days after the earlier of (x) the Additional Filing Date and (y) the
      Additional Filing Deadline or (ii) in the event that the Additional Registration
      Statement is subject to a full review by the SEC, one hundred and twenty (120)
      calendar days after the earlier of (x) the Additional Filing Date and (y) the
      Additional Filing Deadline.

     

    d. "Additional
      Filing Date"
      means
      the date on which any Additional Registration Statement is filed with the
      SEC.

     

    e. "Additional
      Filing Deadline"
      means
      if Cutback Shares are required to be included in any Additional Registration
      Statement, the later of (i) the date sixty (60) days after the date
      substantially all of the Registrable Securities registered
      under the immediately preceding Registration Statement are sold
      and (ii)
      the date six (6) months from the Initial Effective Date or the last Additional
      Effective Date, as applicable.

     

    f. "Additional
      Registrable Securities"
      means
      any (i) any Cutback Shares not previously included on a Registration Statement
      and (ii) any capital stock of the Company issued or issuable with respect to
      the
      Preferred Shares, the Conversion Shares, the Dividend Shares or Cutback Shares,
      as applicable, as a result of any stock split, stock dividend, recapitalization,
      exchange or similar event or otherwise, without regard to any limitations on
      conversions of the Preferred Shares.

     

    g. "Additional
      Registration Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering any Additional Registrable Securities.

     

    h. "Additional
      Required Registration Amount"
      means
      any Cutback Shares not previously included on a Registration Statement, all
      subject to adjustment as provided in Section 2(f), without regard to any
      limitations on conversions of Preferred Shares. 

     

    i. "Business
      Day"
      means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in the City of New York are authorized or required by law to remain
      closed.

     

    j. "Closing
      Date"
      shall
      mean either the Initial Closing Date or the Additional Closing Date, as
      applicable.

     

    k. "Cutback
      Shares"
      means
      any of the Initial Required Registration Amount (without regard to clause (II)
      in the definition thereof) of Registrable Securities not included in all
      Registration Statements previously declared effective hereunder as a result
      of
      (x) a limitation on the maximum number of shares of Common Stock of the Company
      permitted to be registered by the staff of the SEC pursuant to Rule 415 or
      (y)
      an election of an Investor in accordance with Section 2(h) hereof.

     

    l. "Effective
      Date"
      means
      the Initial Effective Date and the Additional Effective Date, as
      applicable.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    m. "Effectiveness
      Deadline"
      means
      the Initial Effectiveness Deadline and the Additional Effectiveness Deadline,
      as
      applicable.

     

    n. "Filing
      Date"
      means
      the Initial Filing Date and the Additional Filing Date, as applicable.

     

    o. "Filing
      Deadline"
      means
      the Initial Filing Deadline and the Additional Filing Deadline, as
      applicable.

     

    p. "Initial
      Closing Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement.

     

    q. "Initial
      Effective Date"
      means
      the date the Initial Registration Statement has been declared effective by
      the
      SEC.

     

    r. "Initial Effectiveness
      Deadline"
      means
      the earlier of the date which is (i) in the event that the Initial Registration
      Statement is not subject to a full review by the SEC, the earlier of (x) ninety
      (90) calendar days after the Initial Filing Date and (y) one hundred five (105)
      days after the Additional Closing Expiration Date or (ii) in the event that
      the
      Registration Statement is subject to a full review by the SEC, the earlier
      of
      (x) one hundred and twenty (120) calendar days after the Initial Filing Date
      and
      (y) one hundred thirty five (135) days after the Additional Closing Expiration
      Date.

     

    s. "Initial
      Filing Date"
      means
      the date on which the Initial Registration Statement is filed with the
      SEC.

     

    t. "Initial
      Filing Deadline"
      means
      the first Business Day on or after the earlier of (x) fifteen (15) calendar
      days
      immediately following the Additional Closing Expiration Date (as defined in
      the
      Securities Purchase Agreement) and (x) fifteen
      (15) calendar
      days
      immediately
      following such Additional Closing Date whereafter the Company shall have issued
      the maximum amount of Additional Preferred Shares issuable pursuant to the
      Securities Purchase Agreement.

     

    u. "Initial
      Registration Statement"
      means
      the registration statement of the Company filed under the 1933 Act covering
      the
      Initial Required Registration Amount.

     

    v. "Initial
      Required Registration Amount"
      means
      (I) the sum of (i) the number of Conversion Shares issued and issuable pursuant
      to the Preferred Shares as of the Trading Day (as defined in the Certificate
      of
      Designations) immediately preceding the applicable date of determination and
      (ii) the number of Dividend Shares issued or issuable with respect to the
      Preferred Shares as of the Trading Day immediately preceding the applicable
      date
      of determination assuming that the Preferred Shares remain outstanding through
      the third (3rd)
      anniversary of the Initial Closing Date, each subject to adjustment as provided
      in Section 2(f), without regard to any limitations on conversions or redemptions
      of the Preferred Shares or (II) such other amount as may be required by the
      staff of the SEC pursuant to Rule 415 with any cutback applied pro rata to
      all
      Registrable Securities.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    w. ."Investor"
      means a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      as a holder of Registrable Securities under this Agreement and who agrees to
      become bound by the provisions of this Agreement in accordance with Section
      9
      and any transferee or assignee thereof to whom a transferee or assignee assigns
      its rights as a holder of Registrable Securities under this Agreement and who
      agrees to become bound by the provisions of this Agreement in accordance with
      Section 9.

     

    x. "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    y. "register,"
      "registered,"
      and
      "registration"
      refer
      to a registration effected by preparing and filing one or more Registration
      Statements (as defined below) in compliance with the 1933 Act and pursuant
      to
      Rule 415 and the declaration or ordering of effectiveness of such Registration
      Statement(s) by the SEC.

     

    z. "Registrable
      Securities"
      means
      the Securities; provided,
      however,
      that a
      Security shall cease to be a Registrable Security upon the earliest to occur
      of
      the following: (i) a Registration Statement registering such Security under
      the
      1933 Act has been declared or becomes effective and such Security has been
      sold
      or otherwise transferred by the holder thereof pursuant to and in a manner
      contemplated by such effective Registration Statement; (ii) such Security is
      sold pursuant to Rule 144 under circumstances in which any legend borne by
      such
      Security relating to restrictions on transferability thereof, under the 1933
      Act
      or otherwise, is removed by the Company; (iii) such Security is eligible to
      be
      sold pursuant to paragraph (k) of Rule 144; or (iv) such Security shall cease
      to
      be outstanding.

     

    aa. "Registration
      Statement"
      means
      the Initial Registration Statement and the Additional Registration Statements,
      as applicable.

     

    bb. "Required
      Holders"
      means
      Investors that hold at least two-thirds of the Registrable
      Securities.

     

    cc. "Securities"
      means
      (i) the Conversion Shares issued or issuable upon conversion of the Preferred
      Shares, (ii) the Dividend Shares issued or issuable with respect to the
      Preferred Shares and (iii) any capital stock of the Company issued or issuable
      with respect to the Conversion Shares, the Preferred Shares and the Dividend
      Shares as a result of any stock split, stock dividend, recapitalization,
      exchange or similar event or otherwise, without regard to any limitations on
      conversions of the Preferred Shares.

     

    dd. "Rule
      415"
      means
      Rule 415 promulgated under the 1933 Act or any successor rule providing for
      offering securities on a continuous or delayed basis.

     

    ee. "SEC"
      means
      the United States Securities and Exchange Commission.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2. Registration.

     

    a. Initial
      Mandatory Registration.
      The
      Company shall prepare, and, as soon as practicable but in no event later than
      the Initial Filing Deadline, file with the SEC the Initial Registration
      Statement on Form S-3 covering the resale of at least the number of shares
      of
      Common Stock equal to the Initial Required Registration Amount determined as
      of
      date the Registration Statement is initially filed with the SEC. In the event
      that Form S-3 is unavailable for such a registration, the Company shall use
      such
      other form as is available for such a registration on another form reasonably
      acceptable to the Required Holders, subject to the provisions of Section 2(e).
      The Initial Registration Statement prepared pursuant hereto shall register
      for
      resale that number of shares of Common Stock equal to the Initial Required
      Registration Amount determined as of the date such Initial Registration
      Statement is initially filed with the SEC. The Initial Registration Statement
      shall contain (except if otherwise directed by the Required Holders) the
      "Selling
      Stockholders"
      and
      "Plan
      of Distribution"
      sections for the Investors in substantially the form attached hereto as
Exhibit
      B.
      The
      Company shall use its reasonable best efforts to have the Initial Registration
      Statement declared effective by the SEC as soon as practicable, but in no event
      later than the Initial Effectiveness Deadline. By 9:30 a.m., New York time,
      on
      the Business Day following the Initial Effective Date, the Company shall file
      with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
      to be used in connection with sales pursuant to such Initial Registration
      Statement.

     

    b. Additional
      Mandatory Registrations.
      The
      Company shall prepare, and, as soon as practicable but in no event later than
      the Additional Filing Deadline, file with the SEC an Additional Registration
      Statement on Form S-3 covering the resale of all of the Additional Registrable
      Securities not previously registered on a Registration Statement hereunder.
      To
      the extent the staff of the SEC does not permit the Additional Required
      Registration Amount to be registered on an Additional Registration Statement,
      the Company shall file Additional Registration Statements successively trying
      to
      register on each such Additional Registration Statement the maximum number
      of
      remaining Additional Registrable Securities until the Additional Required
      Registration Amount has been registered with the SEC. In the event that Form
      S-3
      is unavailable for such a registration, the Company shall use such other form
      as
      is available for such a registration on another form reasonably acceptable
      to
      the Required Holders, subject to the provisions of Section 2(e). Each Additional
      Registration Statement prepared pursuant hereto shall register for resale that
      number of shares of Common Stock equal to the Additional Required Registration
      Amount determined as of the date such Additional Registration Statement is
      initially filed with the SEC. Each Additional Registration Statement shall
      contain (except if otherwise directed by the Required Holders) the "Selling
      Stockholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      The
      Company shall use its reasonable best efforts to have each Additional
      Registration Statement declared effective by the SEC as soon as practicable,
      but
      in no event later than the Additional Effectiveness Deadline. By 9:30 am on
      the
      Business Day following the Additional Effective Date, the Company shall file
      with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
      to be used in connection with sales pursuant to such Additional Registration
      Statement.

     

    c. Allocation
      of Registrable Securities.
      The
      initial number of Registrable Securities included in any Registration Statement
      and any increase or decrease in the number of Registrable Securities included
      therein shall be allocated pro rata among the Investors based on the number
      of
      Registrable Securities held by each Investor at the time the Registration
      Statement covering such initial number of Registrable Securities or increase
      or
      decrease thereof is declared effective by the SEC. In the event that an Investor
      sells or otherwise transfers any of such Investor's Registrable Securities,
      each
      transferee shall be allocated a pro rata portion of the then remaining number
      of
      Registrable Securities included in such Registration Statement for such
      transferor. Any shares of Common Stock included in a Registration Statement
      and
      which remain allocated to any Person which ceases to hold any Registrable
      Securities covered by such Registration Statement shall be allocated to the
      remaining Investors, pro rata based on the number of Registrable Securities
      then
      held by such Investors which are covered by such Registration Statement. In
      no
      event shall the Company include any securities other than Registrable Securities
      on any Registration Statement without the prior written consent of the Required
      Holders; provided, however, that the Company shall be permitted to include
      on
      any Registration Statement securities issued pursuant to the transactions
      described on Schedule 2(e) to the Securities Purchase Agreement; provided,
      further, that any such securities issued to an Investor that are to be included
      in a Registration Statement shall be included as Registrable Securities of
      such
      Investor for the purpose of allocating securities in such Registration Statement
      pursuant to this Section 2(c).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    d. Legal
      Counsel.
      Subject
      to Section 5 hereof, the Required Holders shall have the right to select one
      legal counsel to review and oversee any registration pursuant to this Section
      2
      ("Legal
      Counsel"),
      which
      shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
      designated by the Required Holders. The Company and Legal Counsel shall
      reasonably cooperate with each other in performing the Company's obligations
      under this Agreement.

     

    e. Ineligibility
      for Form S-3.
      In the
      event that Form S-3 is not available for the registration of the resale of
      Registrable Securities hereunder, the Company shall (i) register the resale
      of
      the Registrable Securities on another form reasonably acceptable to the Required
      Holders and (ii) undertake to register the Registrable Securities on Form S-3
      as
      soon as the use of such form for such purpose is permitted, provided that the
      Company shall maintain the effectiveness of the Registration Statement then
      in
      effect until such time as a Registration Statement on Form S-3 covering the
      Registrable Securities has been declared effective by the SEC.

     

    f. Sufficient
      Number of Shares Registered.
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section 2(a) or 2(b) is insufficient to cover all of the Registrable
      Securities required to be covered by such Registration Statement or an
      Investor's allocated portion of the Registrable Securities pursuant to Section
      2(b), the Company shall, if the Registration Statement has not been declared
      effective, amend the applicable Registration Statement, or, in all other cases,
      file a new Registration Statement (on the short form available therefor, if
      applicable), so as to cover at least the Initial Required Registration Amount
      or
      the Additional Required Registration Amount, as applicable, as of the Trading
      Day immediately preceding the date of the filing of such amendment or new
      Registration Statement, in each case, as soon as practicable, but in any event
      not later than thirty (30) Business Days after the necessity therefor arises.
      The Company shall use its reasonable best efforts to cause such amendment or
      new
      Registration Statement to become effective as soon as practicable following
      the
      filing thereof. For purposes of the foregoing provision, the number of shares
      available under a Registration Statement shall be deemed "insufficient to cover
      all of the Registrable Securities" if at any time the number of shares of Common
      Stock available for resale under the Registration Statement is less than the
      product determined by multiplying (i) the Initial Required Registration Amount
      or Additional Required Registration Amount, as applicable, as of such time
      by
      (ii) 0.90. The calculation set forth in the foregoing sentence shall be made
      without regard to any limitations on the conversion of the Preferred Shares
      and
      such calculation shall assume that the Preferred Shares are then convertible
      into shares of Common Stock at the then prevailing Conversion Rate (as defined
      in the Certificate of Designations).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    g. Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      If (i)
      a Registration Statement covering all of the Registrable Securities required
      to
      be covered thereby and required to be filed by the Company pursuant to this
      Agreement is (A) not filed with the SEC on or before the respective Filing
      Deadline (a "Filing
      Failure")
      or (B)
      not declared effective by the SEC on or before the Effectiveness Deadline (an
      "Effectiveness
      Failure")
      or
      (ii) on any day after the Effective Date sales of all of the Registrable
      Securities required to be included on such Registration Statement cannot be
      made
      (other than during an Allowable Grace Period (as defined in Section 3(q))
      pursuant to such Registration Statement or otherwise (including, without
      limitation, because of a failure to keep such Registration Statement effective,
      to disclose such information as is necessary for sales to be made pursuant
      to
      such Registration Statement or to register a sufficient number of shares of
      Common Stock or to maintain the listing of the shares of Common Stock) (a
      "Maintenance
      Failure")
      then,
      as partial relief for the damages to any Investor by reason of any such delay
      in
      or reduction of its ability to sell the underlying shares of Common Stock (which
      remedy shall not be exclusive of any other remedies available at law or in
      equity), the Company shall pay to each Investor relating to such Registration
      Statement an amount in cash equal to (A) one percent (1.0%) of the aggregate
      Purchase Price (as such term is defined in the Securities Purchase Agreement)
      of
      such Investor's Registrable Securities included in such Registration Statement
      on each of the following dates: (i) the day of a Filing Failure and on every
      thirtieth day (pro rated for periods totaling less than thirty (30) days)
      thereafter until the date such Filing Failure is cured; (ii) the day of an
      Effectiveness Failure and on every thirtieth day (pro rated for periods totaling
      less than thirty (30) days) thereafter until the date such Effectiveness Failure
      is cured; and (iii) the initial day of a Maintenance Failure and on every
      thirtieth day (pro rated for periods totaling less than thirty (30) days)
      thereafter until the date such Maintenance Failure is cured. The payments to
      which an Investor shall be entitled to pursuant to this Section 2(g) are
      referred to herein "Registration
      Delay Payments." Registration
      Delay Payments shall be paid on the earlier of (I) the last day of the calendar
      month during which such Registration Delay Payments are incurred and (II) the
      third Business Day after the event or failure giving rise to the Registration
      Delay Payments is cured. In the event the Company fails to make Registration
      Delay Payments in a timely manner, such Registration Delay Payments shall bear
      interest at the rate of one percent (1.0%) per month (prorated for partial
      months) until paid in full. The parties agree that the maximum aggregate
      Registration Delay Payments payable to an Investor under this Agreement shall
      be
      10% of the aggregate purchase price paid by such Investor pursuant to the
      Purchase Agreement. 

     

    h. Neither
      the Company nor any Subsidiary (as defined in the Securities Purchase Agreement)
      nor affiliate thereof shall identify any Buyer as an underwriter in any public
      disclosure or filing with the SEC or any Principal Market (as defined in the
      Securities Purchase Agreement) or any Trading Market (as defined in the
      Securities Purchase Agreement) without the prior written consent of such
      Investor. If the Company is required by law to identify an Investor as an
      underwriter in any public disclosure or filing with the Commission or any
      Trading Market, it must notify such Investor in writing in advance (the
      "Identification
      Notice")
      and
      such Investor shall have the option, in its sole discretion, to consent to
      such
      identification as an underwriter or to elect to have its Registrable Securities
      be deemed Cutback Shares solely for the purposes of such Registration Statement
      and removed from such Registration Statement. If the Investor does not make
      such
      election within five (5) Business Days of such Investor receipt of the
      Identification Notice, such Investor shall be deemed to have elected to have
      its
      Registrable Securities be deemed to be Cutback Shares.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3. Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2(a), 2(b), 2(e), or 2(f) the Company will use its
      reasonable best efforts to effect the registration of the Registrable Securities
      in accordance with the intended method of disposition thereof and, pursuant
      thereto, the Company shall have the following obligations:

     

    a. The
      Company shall submit to the SEC, within two (2) Business Days after the Company
      learns that no review of a particular Registration Statement will be made by
      the
      staff of the SEC or that the staff has no further comments on a particular
      Registration Statement, as the case may be, a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. The
      Company shall keep each Registration Statement effective pursuant to Rule 415
      at
      all times until the earlier of (i) the date when the securities covered by
      the
      Registration Statement are no longer Registrable Securities as defined herein,
      or (ii) the date on which the Investors shall have sold all of the Registrable
      Securities covered by such Registration Statement (the "Registration
      Period").
      The
      Company shall ensure that each Registration Statement (including any amendments
      or supplements thereto and prospectuses contained therein) shall not contain
      any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein (in the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading.

     

    b. The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective at all times during
      the
      Registration Period, and, during such period, comply with the provisions of
      the
      1933 Act with respect to the disposition of all Registrable Securities of the
      Company covered by such Registration Statement until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      such Registration Statement. In the case of amendments and supplements to a
      Registration Statement which are required to be filed pursuant to this Agreement
      (including pursuant to this Section 3(b)) by reason of the Company filing a
      report on Form 10-Q, Form 10-K or any analogous report under the Securities
      Exchange Act of 1934, as amended (the "1934
      Act"),
      the
      Company shall have incorporated such report by reference into such Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the 1934 Act report is filed which created the
      requirement for the Company to amend or supplement such Registration
      Statement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    c. The
      Company shall furnish to Legal Counsel and each Investor whose Registrable
      Securities are included in any Registration Statement, without charge, (i)
      promptly after the same is prepared and filed with the SEC, at least one copy
      of
      such Registration Statement and any amendment(s) thereto, including financial
      statements and schedules, all documents incorporated therein by reference,
      if
      requested by an Investor, all exhibits and each preliminary prospectus (unless
      such Registration Statement is available on EDGAR), (ii) upon the effectiveness
      of any Registration Statement, ten (10) copies of the prospectus included in
      such Registration Statement and all amendments and supplements thereto (unless
      such amendments and supplements are available on EDGAR) and (iii) such other
      documents, including copies of the foregoing (regardless of whether such
      documents are available upon EDGAR) and any preliminary or final prospectus,
      as
      such Investor may reasonably request from time to time in order to facilitate
      the disposition of the Registrable Securities owned by such
      Investor.

     

    d. The
      Company shall use its reasonable best efforts to (i) register and qualify,
      unless an exemption from registration and qualification applies, the resale
      by
      Investors of the Registrable Securities covered by a Registration Statement
      under such other securities or "blue sky" laws of all applicable jurisdictions
      in the United States, (ii) prepare and file in those jurisdictions, such
      amendments (including post-effective amendments) and supplements to such
      registrations and qualifications as may be necessary to maintain the
      effectiveness thereof during the Registration Period, (iii) take such other
      actions as may be reasonably necessary to maintain such registrations and
      qualifications in effect at all times during the Registration Period, and (iv)
      take all other actions reasonably necessary or advisable to qualify the
      Registrable Securities for sale in such jurisdictions; provided,
      however,
      that
      the Company shall not be required in connection therewith or as a condition
      thereto to (x) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify but for this Section 3(e), (y) subject itself
      to general taxation in any such jurisdiction, or (z) file a general consent
      to
      service of process in any such jurisdiction. The Company shall promptly notify
      Legal Counsel and each Investor who holds Registrable Securities of the receipt
      by the Company of any notification with respect to the suspension of the
      registration or qualification of any of the Registrable Securities for sale
      under the securities or "blue sky" laws of any jurisdiction in the United States
      or its receipt of notice of the initiation or threatening of any proceeding
      for
      such purpose.

     

    e. The
      Company shall notify Legal Counsel and each Investor in writing of the happening
      of any event, as promptly as practicable after becoming aware of such event,
      as
      a result of which the prospectus included in a Registration Statement, as then
      in effect, includes an untrue statement of a material fact or omission to state
      a material fact required to be stated therein or necessary to make the
      statements therein, in the light of the circumstances under which they were
      made, not misleading (provided that in no event shall such notice contain any
      material, nonpublic information), and, subject to Section 3(r), promptly prepare
      a supplement or amendment to such Registration Statement to correct such untrue
      statement or omission, and deliver ten (10) copies of such supplement or
      amendment to Legal Counsel and each Investor (or such other number of copies
      as
      Legal Counsel or such Investor may reasonably request) (unless such supplements
      or amendments are available on EDGAR). The Company shall also promptly notify
      Legal Counsel and each Investor in writing (i) when a prospectus or any
      prospectus supplement or post-effective amendment has been filed, and when
      a
      Registration Statement or any post-effective amendment has become effective
      (notification of such effectiveness shall be delivered to Legal Counsel and
      each
      Investor by facsimile no later than the next Business Day of such effectiveness
      and by overnight mail), (ii) of any request by the SEC for amendments or
      supplements to a Registration Statement or related prospectus or related
      information, and (iii) of the Company's reasonable determination that a
      post-effective amendment to a Registration Statement would be
      appropriate.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    f. The
      Company shall use its reasonable best efforts to prevent the issuance of any
      stop order or other suspension of effectiveness of a Registration Statement,
      or
      the suspension of the qualification of any of the Registrable Securities for
      sale in any jurisdiction and, if such an order or suspension is issued, to
      obtain the withdrawal of such order or suspension at the earliest possible
      moment and to notify Legal Counsel and each Investor who holds Registrable
      Securities being sold of the issuance of such order and the resolution thereof
      or its receipt of notice of the initiation of any proceeding for such
      purpose.

     

    g. If
      any
      Investor is deemed to be, alleged to be or reasonably believes it may be deemed
      or alleged to be, an underwriter or is required under applicable securities
      law
      to be described in the Registration Statement as an underwriter of Registrable
      Securities, at the reasonable request of such Investor, the Company shall
      furnish to such Investor, on the date of the effectiveness of the Registration
      Statement and thereafter from time to time on such dates as an Investor may
      reasonably request (i) a letter, dated such date, from the Company's independent
      certified public accountants in form and substance as is customarily given
      by
      independent certified public accountants to underwriters in an underwritten
      public offering, addressed to the Investors, and (ii) an opinion, dated as
      of
      such date, of counsel representing the Company for purposes of such Registration
      Statement, in form, scope and substance as is customarily given in an
      underwritten public offering, addressed to the Investors.

     

    h. If
      any
      Investor is deemed to be, alleged to be or reasonably believes it may be deemed
      or alleged to be, an underwriter or is required under applicable securities
      law
      to be described in the Registration Statement as an underwriter of Registrable
      Securities, upon the request of such Investor, the Company shall make available
      for inspection by (i) any Investor, (ii) Legal Counsel and (iii) one firm of
      accountants or other agents retained by the Investors (collectively, the
      "Inspectors"),
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the "Records"),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company's
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree
      to
      hold in strict confidence and shall not make any disclosure (except to an
      Investor) or use of any Record or other information which the Company determines
      in good faith to be confidential, and of which determination the Inspectors
      are
      so notified, unless (a) the disclosure of such Records is necessary to avoid
      or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the 1933 Act, (b) the release of such Records is ordered pursuant
      to a final, non-appealable subpoena or order from a court or government body
      of
      competent jurisdiction, or (c) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other Transaction Document. Each Investor agrees that it shall, upon
      learning that disclosure of such Records is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      notice to the Company and allow the Company, at its expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, the Records deemed confidential. Nothing herein (or in any other
      confidentiality agreement between the Company and any Investor) shall be deemed
      to limit the Investors' ability to sell Registrable Securities in a manner
      which
      is otherwise consistent with applicable laws and regulations.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    i. The
      Company shall hold in confidence and not make any disclosure of information
      concerning an Investor provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws or
      the
      rules of any exchange or other market in which the Company's securities are
      then
      traded, listed or quoted, (ii) the disclosure of such information is necessary
      to avoid or correct a misstatement or omission in any Registration Statement,
      (iii) the release of such information is ordered pursuant to a subpoena or
      other
      final, non-appealable order from a court or governmental body of competent
      jurisdiction or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement, any other
      agreement to which the Company is a party, or, to the Company's knowledge,
      any
      other agreement. The Company agrees that it shall, upon learning that disclosure
      of such information concerning an Investor is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      written notice to such Investor and allow such Investor, at the Investor's
      expense, to undertake appropriate action to prevent disclosure of, or to obtain
      a protective order for, such information.

     

    j. The
      Company shall use its reasonable best efforts either to (i) cause all of the
      Registrable Securities covered by a Registration Statement to be listed on
      each
      securities exchange on which securities of the same class or series issued
      by
      the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange, or (ii) secure
      designation and quotation of all of the Registrable Securities covered by a
      Registration Statement on The NASDAQ Capital Market or (iii) if, despite the
      Company's reasonable best efforts to satisfy, the preceding clauses (i) and
      (ii)
      the Company is unsuccessful in satisfying the preceding clauses (i) and (ii),
      to
      secure the inclusion for quotation on the The New York Stock Exchange, The
      NASDAQ Global Market or the American Stock Exchange for such Registrable
      Securities and, without limiting the generality of the foregoing, to use its
      reasonable best efforts to arrange for at least two market makers to register
      with the Financial Industry Regulatory Authority as such with respect to such
      Registrable Securities. The Company shall pay all fees and expenses in
      connection with satisfying its obligation under this Section 3(k).

     

    k. The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable, facilitate the timely preparation and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Investors may reasonably request and registered in such names as
      the
      Investors may request.

     

    l. If
      reasonably requested by an Investor, the Company shall (i) as soon as
      practicable incorporate in a prospectus supplement or post-effective amendment
      such information as an Investor reasonably requests to be included in the Plan
      of Distribution or Selling Stockholder sections relating to the sale and
      distribution of Registrable Securities, including, without limitation,
      information with respect to the number of Registrable Securities being offered
      or sold, the purchase price being paid therefor and any other terms of the
      offering of the Registrable Securities to be sold in such offering; (ii) as
      soon
      as practicable make all required filings of such prospectus supplement or
      post-effective amendment after being notified of the matters to be incorporated
      in such prospectus supplement or post-effective amendment; and (iii) as soon
      as
      practicable, supplement or make amendments to any Registration Statement if
      reasonably requested by an Investor holding any Registrable
      Securities.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    m. The
      Company shall use its reasonable best efforts to cause the Registrable
      Securities covered by a Registration Statement to be registered with or approved
      by such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

     

    n. The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with, and in the
      manner provided by, the provisions of Rule 158 under the 1933 Act) covering
      a
      twelve-month period beginning not later than the first day of the Company's
      fiscal quarter next following the effective date of a Registration Statement.
      

     

    o. The
      Company shall otherwise use its reasonable best efforts to comply with all
      applicable rules and regulations of the SEC in connection with any registration
      hereunder.

     

    p. Within
      five (5) Business Days after a Registration Statement which covers Registrable
      Securities is ordered effective by the SEC, the Company shall deliver, and
      shall
      cause legal counsel for the Company (which may be the General Counsel of the
      Company) to deliver, to the transfer agent for such Registrable Securities
      (with
      copies to the Investors whose Registrable Securities are included in such
      Registration Statement) confirmation that such Registration Statement has been
      declared effective by the SEC in the form attached hereto as Exhibit
      A.

     

    q. Notwithstanding
      anything to the contrary herein, at any time after the Effective Date, the
      Company may delay the disclosure of material, non-public information concerning
      the Company the disclosure of which at the time is not, in the good faith
      opinion of the Board of Directors of the Company, in the best interest of the
      Company otherwise required or otherwise render the Registration Statement
      unavailable for sales to be effected thereunder (a "Grace
      Period");
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      (provided that in each notice the Company will not disclose the content of
      such
      material, non-public information to the Investors) and the date on which the
      Grace Period will begin on the first day that the effectiveness of the
      Registration Statement is suspended, and (ii) notify the Investors in writing
      of
      the date on which the Grace Period ends; and, provided further, that no Grace
      Period shall exceed twenty-five (25) consecutive days and during any three
      hundred sixty five (365) day period such Grace Periods shall not exceed an
      aggregate of sixty (60) days and the first day of any Grace Period must be
      at
      least five (5) Trading Days after the last day of any prior Grace Period (each,
      an "Allowable
      Grace Period").
      For
      purposes of determining the length of a Grace Period above, the Grace Period
      shall begin on and include the date the Investors receive the notice referred
      to
      in clause (i) and shall end on and include the later of the date the Investors
      receive the notice referred to in clause (ii) and the date referred to in such
      notice. The provisions of Section 3(g) hereof shall not be applicable during
      the
      period of any Allowable Grace Period. Upon expiration of the Grace Period,
      the
      Company shall again be bound by the first sentence of Section 3(f) with respect
      to the information giving rise thereto unless such material, non-public
      information is no longer applicable. Notwithstanding anything to the contrary,
      the Company shall cause its transfer agent to deliver unlegended shares of
      Common Stock to a transferee of an Investor in accordance with the terms of
      the
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an Investor has entered into a contract for
      sale, and delivered a copy of the prospectus included as part of the applicable
      Registration Statement (unless an exemption from such prospectus delivery
      requirement exists), prior to the Investor's receipt of the notice of a Grace
      Period and for which the Investor has not yet settled. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    r. If
      NASDR
      Rule 2710 requires any broker-dealer to make a filing prior to executing a
      sale
      by a Holder, the Company shall (i) make an Issuer Filing with the NASDR, Inc.
      Corporate Financing Department pursuant to proposed NASDR Rule
      2710(b)(10)(A)(i), (ii) respond within five Trading Days to any comments
      received from NASDR in connection therewith, and (iii) pay the filing fee
      required in connection therewith.

     

    4. Obligations
      of the Investors.

     

    a. At
      least
      five (5) Business Days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify each Investor in writing of
      the
      information the Company requires from each such Investor if such Investor elects
      to have any of such Investor's Registrable Securities included in such
      Registration Statement. It shall be a condition precedent to the obligations
      of
      the Company to complete the registration pursuant to this Agreement with respect
      to the Registrable Securities of a particular Investor that such Investor shall
      furnish to the Company such information regarding itself, the Registrable
      Securities held by it and the intended method of disposition of the Registrable
      Securities held by it, as shall be reasonably required to effect and maintain
      the effectiveness of the registration of such Registrable Securities within
      five
      (5) Business Days and such Investor shall execute such documents in connection
      with such registration as the Company may reasonably request. 

     

    b. Each
      Investor, by such Investor's acceptance of the Registrable Securities, agrees
      to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor's election
      to
      exclude all of such Investor's Registrable Securities from such Registration
      Statement.

     

    c. Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(g) or the first
      sentence of Section 3(f), such Investor will immediately discontinue disposition
      of Registrable Securities pursuant to any Registration Statement(s) covering
      such Registrable Securities until such Investor's receipt of the copies of
      the
      supplemented or amended prospectus contemplated by Section 3(g) or the first
      sentence of Section 3(f) or receipt of notice that no supplement or amendment
      is
      required. Notwithstanding anything to the contrary, the Company shall cause
      its
      transfer agent to deliver unlegended shares of Common Stock to a transferee
      of
      an Investor in accordance with the terms of the Securities Purchase Agreement
      in
      connection with any sale of Registrable Securities with respect to which an
      Investor has entered into a contract for sale prior to the Investor's receipt
      of
      a notice from the Company of the happening of any event of the kind described
      in
      Section 3(g) or the first sentence of Section 3(f) and for which the Investor
      has not yet settled. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    d. Each
      Investor covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it or an exemption therefrom
      in
      connection with sales of Registrable
      Securities pursuant to the Registration Statement.

     

    5. Expenses
      of Registration.

     

    All
      reasonable expenses, other than underwriting discounts and commissions incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3, including, without limitation, all registration, listing and
      qualifications fees, printers and accounting fees, and fees and disbursements
      of
      counsel for the Company, shall be paid by the Company. 

    

    6. Indemnification.

     

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    a. To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Investor, the directors, officers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
      an "Indemnified
      Person"),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys' fees, amounts paid in settlement or
      expenses, joint or several, (collectively, "Claims")
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto ("Indemnified
      Damages"),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other "blue sky" laws of any jurisdiction
      in
      which Registrable Securities are offered ("Blue
      Sky Filing"),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading, (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      preliminary prospectus if used prior to the effective date of such Registration
      Statement, or contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the SEC)
      or
      the omission or alleged omission to state therein any material fact necessary
      to
      make the statements made therein, in the light of the circumstances under which
      the statements therein were made, not misleading, (iii) any violation or alleged
      violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement or (iv) any breach by the
      Company of a representation, warranty or covenant contained in this Agreement
      (the matters in the foregoing clauses (i) through (iv) being, collectively,
      "Violations").
      Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
      promptly as such expenses are incurred and are due and payable, for any
      reasonable legal fees or other reasonable expenses incurred by them in
      connection with investigating or defending any such Claim. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
      Person arising out of or based upon a Violation which occurs (A) in reliance
      upon and in conformity with information furnished in writing to the Company
      by
      such Indemnified Person expressly for use in connection with the preparation
      of
      the Registration Statement (including any amendment thereto, any related
      prospectus, or any prospectus supplement) (which information provided by the
      Investors includes Exhibits B and C to this Agreement), (B) failure by the
      Investor to comply with prospectus delivery requirements, if such prospectus,
      or
      any such amendment thereof or supplement thereto, was timely made available
      by
      the Company pursuant to Section 3(d), or (C) the use by such Investor of an
      outdated or defective prospectus after the Company has notified such Investor
      in
      writing that the prospectus is outdated or defective and prior to the receipt
      by
      such Investor of an amended or supplemented prospectus, and (ii) shall not
      apply
      to amounts paid in settlement of any Claim if such settlement is effected
      without the prior written consent of the Company, which consent shall not be
      unreasonably withheld or delayed. Such indemnity shall remain in full force
      and
      effect regardless of any investigation made by or on behalf of the Indemnified
      Person and shall survive the transfer of the Registrable Securities by the
      Investors pursuant to Section 9.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    b. In
      connection with any Registration Statement in which an Investor is
      participating, each such Investor agrees to severally and not jointly indemnify,
      hold harmless and defend, to the same extent and in the same manner as is set
      forth in Section 6(a), the Company, each of its directors, each of its officers
      who signs the Registration Statement and each Person, if any, who controls
      the
      Company within the meaning of the 1933 Act or the 1934 Act (each, an
      "Indemnified
      Party"),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are based upon any Violation, in each case
      to the extent, and only to the extent, that such Violation arises from the
      circumstances described in clauses (A) through (C) of Section 6(a) above; and,
      subject to Section 6(c), such Investor shall reimburse the Indemnified Party,
      promptly as such expenses are incurred and are due and payable, for any legal
      fees or other reasonable expenses incurred by it in connection with
      investigating or defending any such Claim; provided, however, that the indemnity
      agreement contained in this Section 6(b) and the agreement with respect to
      contribution contained in Section 7 shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of such Investor, which consent shall not be unreasonably withheld
      or
      delayed; provided, further, however, that the Investor shall be liable under
      this Section 6(b) for only that amount of a Claim or Indemnified Damages as
      does
      not exceed the net proceeds to such Investor as a result of the sale of
      Registrable Securities pursuant to such Registration Statement. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of such Indemnified Party and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    c. Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, who
      shall not, except with the consent of the Indemnifying Party, be counsel to
      the
      Indemnified Person as the case may be; and after notice from the indemnifying
      party of its election to assume the defense thereof, the indemnifying party
      shall not be liable to the Indemnified party or Indemnified Person for any
      legal
      expenses of other counsel or other expenses incurred in connection with the
      defense thereof; provided,
      however,
      that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses of not more than one counsel for such
      Indemnified Person or Indemnified Party to be paid by the indemnifying party,
      if, in the reasonable opinion of counsel retained by the indemnifying party,
      the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the Indemnifying Party would likely represent a conflict of interest that
      would legally preclude such representation. In the case of an Indemnified
      Person, legal counsel referred to in the immediately preceding sentence shall
      be
      selected by the Investors holding at least 80% in
      interest of the Registrable Securities included in the Registration Statement
      to
      which the Claim relates. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or Claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or Claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      reasonably apprised at all times as to the status of the defense or any
      settlement negotiations with respect thereto. No indemnifying party shall be
      liable for any settlement of any action, claim or proceeding effected without
      its prior written consent; provided,
      however,
      that
      the indemnifying party shall not unreasonably withhold, delay or condition
      its
      consent. No indemnifying party shall, without the prior written consent of
      the
      Indemnified Party or Indemnified Person, consent to entry of any judgment or
      enter into any settlement or other compromise which does not include as an
      unconditional term thereof the giving by the claimant or plaintiff to such
      Indemnified Party or Indemnified Person of a release from all liability in
      respect to such Claim or litigation, and such settlement shall not include
      any
      admission as to fault on the part of the Indemnified Party. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    d. The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    e. The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

     

    7. Contribution.

     

    To
      the
      extent any indemnification by an Indemnified Party is prohibited or limited
      by
      law, the indemnifying party agrees, in lieu of providing such indemnification,
      to contribute to the amount paid or payable by such Indemnified Party or
      Indemnifying Person as a result of such Claims or Indemnified Damages, in such
      proportion as is appropriate to reflect the relative fault of the Company,
      on
      the one hand, and the Investors, on the other hand, in connection with the
      statements or omissions which resulted in such Claims or Indemnified Damages,
      as
      well as any other relevant equitable considerations; provided,
      however,
      that
      (i) no Person involved in the sale of Registrable Securities which is guilty
      of
      fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
      Act) in connection with such sale shall be entitled to contribution from any
      Person who was not guilty of fraudulent misrepresentation and (ii) contribution
      by any seller of Registrable Securities shall be limited in amount of net
      proceeds received by such seller from the sale of such Registrable Securities
      subject to the Claim. The relative fault shall be determined by reference to,
      among other things, whether the untrue or alleged untrue statement of a material
      fact or the omission or alleged omission to state a material fact relates to
      information supplied by the Company, on the one hand, or the Investors, on
      the
      other hand, and the parties' relative intent, knowledge, access to information
      and opportunity to correct or prevent such statement or omission. The Company
      and the Investors agree that it would not be just and equitable if contribution
      pursuant to this Section 7 were determined by pro rata allocation (even if
      the
      Investors were treated as one entity for such purpose) or by any other method
      of
      allocation which does not take account of the equitable considerations referred
      to above in this Section 7. The amount paid or payable by an indemnified party
      as a result of the Claims or Indemnified Damages referred to above in this
      Section 7 shall be deemed to include any legal or other expenses reasonably
      incurred by such Indemnified Party in connection with investigating or defending
      any such action or claim. The Investors' obligations in this Section 7 to
      contribute are several in proportion to their respective underwriting
      obligations and not joint. 

     

    8. Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration ("Rule
      144"),
      the
      Company agrees to:

     

    a. make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    b. file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements and the filing of such reports and other documents
      is required for the applicable provisions of Rule 144; and

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    c. furnish
      to each Investor so long as such Investor owns Registrable Securities, as soon
      as reasonably practicable upon request, (i) a written statement by the Company,
      if true, that it has complied with the reporting requirements of Rule 144,
      the
      1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
      report of the Company and such other reports and documents so filed by the
      Company and (iii) such other information as may be reasonably requested to
      permit the Investors to sell such securities pursuant to Rule 144 without
      registration.

     

    9. Assignment
      of Registration Rights.
      

     

    The
      rights under this Agreement shall be automatically assignable by the Investors
      to any transferee of all or any portion of such Investor's Registrable
      Securities if: (i) the Investor agrees in writing with the transferee or
      assignee to assign such rights and a copy of such agreement is furnished to
      the
      Company within a reasonable time after such assignment; (ii) the Company is,
      within a reasonable time after such transfer or assignment, furnished with
      written notice of (a) the name and address of such transferee or assignee and
      (b) the securities with respect to which such registration rights are being
      transferred or assigned; (iii) immediately following such transfer or assignment
      the further disposition of such securities by the transferee or assignee is
      restricted under the 1933 Act or applicable state securities laws; (iv) at
      or
      before the time the Company receives the written notice contemplated by clause
      (ii) of this sentence the transferee or assignee agrees in writing with the
      Company to be bound by all of the provisions contained herein; and (v) such
      transfer shall have been made in accordance with the applicable requirements
      of
      the Securities Purchase Agreement.

     

    10. Amendment
      of Registration Rights.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and the Required
      Holders. Any amendment or waiver effected in accordance with this Section 10
      shall be binding upon each Investor and the Company. No such amendment shall
      be
      effective to the extent that it applies to less than all of the Investors.
      No
      consideration shall be offered or paid to any Person to amend or consent to
      a
      waiver or modification of any provision of any of this Agreement unless the
      same
      consideration also is offered to all of the parties to this
      Agreement.

     

    11. Miscellaneous.

     

    a. For
      the
      purposes of this Agreement, a Person is deemed to be a holder of Registrable
      Securities whenever such Person owns or is deemed to own of record such
      Registrable Securities. If the Company receives conflicting instructions,
      notices or elections from two or more Persons with respect to the same
      Registrable Securities, the Company shall act upon the basis of instructions,
      notice or election received from the such record owner of such Registrable
      Securities.

     

    b. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile or electronic mail (provided confirmation of
      transmission is mechanically or electronically generated and kept on file by
      the
      sending party); or (iii) one (1) Business Day after deposit with a nationally
      recognized overnight delivery service, in each case properly addressed to the
      party to receive the same. The addresses and facsimile numbers for such
      communications shall be:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    If
      to the
      Company: 

    

    TXCO
      Resources, Inc.

    777
      E.
      Sonterra Blvd., Suite 350

    San
      Antonio, Texas 78258

    Telephone:
      (210)
      679-2429

    Facsimile:
      (210)
      496-3232

    Attention:
      M.
      Frank
      Russell, Vice President and General Counsel

     

    Copy
      to:

     

    Winstead
      PC

    401
      Congress Avenue, Suite 2100

    Austin,
      TX 78701

    Telephone:
      (512)
      370-2800

    Facsimile:
      (512)
      370-2850

    Attention:
      J.
      Rowland Cook

    

    If
      to
      Legal Counsel:

    

      Schulte
        Roth & Zabel LLP

      919
        Third
        Avenue

      New
        York,
        New York 10022

      Telephone:
        (212) 756-2000

      Facsimile:
        (212) 593-5955

      Attention:
        Eleazer N. Klein, Esq.

    

     

    If
      to a
      Buyer, to its address and facsimile number or electronic mail set forth on
      the
      Schedule of Buyers attached hereto, with copies to such Buyer's representatives
      as set forth on the Schedule of Buyers, or to such other address and/or
      facsimile number and/or to the attention of such other Person as the recipient
      party has specified by written notice given to each other party five (5) days
      prior to the effectiveness of such change. Written confirmation of receipt
      (A)
      given by the recipient of such notice, consent, waiver or other communication,
      (B) mechanically or electronically generated by the sender's facsimile machine
      containing the time, date, recipient facsimile number and an image of the first
      page of such transmission or (C) provided by a courier or overnight courier
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or receipt from a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    c. Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    d. All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    e. This
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein constitute the entire agreement among the parties hereto with
      respect to the subject matter hereof and thereof. There are no restrictions,
      promises, warranties or undertakings, other than those set forth or referred
      to
      herein and therein. This Agreement, the other Transaction Documents and the
      instruments referenced herein and therein supersede all prior agreements and
      understandings among the parties hereto with respect to the subject matter
      hereof and thereof.

     

    f. If
      any
      provision of this Agreement is prohibited by law or otherwise determined to
      be
      invalid or unenforceable by a court of competent jurisdiction, the provision
      that would otherwise be prohibited, invalid or unenforceable shall be deemed
      amended to apply to the broadest extent that it would be valid and enforceable,
      and the invalidity or unenforceability of such provision shall not affect the
      validity of the remaining provisions of this Agreement so long as this Agreement
      as so modified continues to express, without material change, the original
      intentions of the parties as to the subject matter hereof and the prohibited
      nature, invalidity or unenforceability of the provision(s) in question does
      not
      substantially impair the respective expectations or reciprocal obligations
      of
      the parties or the practical realization of the benefits that would otherwise
      be
      conferred upon the parties. The parties will endeavor in good faith negotiations
      to replace the prohibited, invalid or unenforceable provision(s) with a valid
      provision(s), the effect of which comes as close as possible to that of the
      prohibited, invalid or unenforceable provision(s).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    g. Subject
      to the requirements of Section 9, this Agreement shall inure to the benefit
      of
      and be binding upon the permitted successors and assigns of each of the parties
      hereto.

     

    h. The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    i. This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    j. Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    k. All
      consents and other determinations required to be made by the Investors pursuant
      to this Agreement shall be made, unless otherwise specified in this Agreement,
      by the Required Holders.

     

    l. The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party. 

     

    m. This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    n. The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated herein.

     

    *
      * * * *
      *

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              COMPANY:

            
	 
	
              TXCO
                RESOURCES INC.

            
	 
	
              By:  

            	 
	 	
              Name:

            
	 	
              Title:

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              BUYERS:

            
	 
	
              CAPITAL
                VENTURES INTERNATIONAL 

              BY: HEIGHTS
                CAPITAL MANAGEMENT, 

              INC., its
                authorized agent  

            
	 
	
              By: 

            	 
	 	
              Name:

            
	 	
              Title:
                

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

    

    
      	
              OTHER
                BUYERS: 

            
	 
	
              UBS
                O'CONNOR LLC F/B/O: O'CONNOR 

              PIPES
                CORPORATE STRATEGIES MASTER 

              LTD

            
	 
	
              By: 

            	 
	 	
              Name:

            
	 	
              Title:

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              UBS
                O'CONNOR LLC F/B/O: O'CONNOR 

              GLOBAL
                CONVERTIBLE ARBITRAGE 

              MASTER
                LTD 

            
	 
	
              By: 

            	 
	 	
              Name:

            
	 	
              Title:

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              UBS
                O'CONNOR LLC F/B/O: O'CONNOR
GLOBAL CONVERTIBLE ARBITRAGE II 
MASTER
                LTD

            
	 
	
               

            
	
              By: 

            	 
	 	
              Name:
                

              Title:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              RADCLIFFE
                SPC, LTD. FOR AND ON 
BEHALF OF THE CLASS A SEGREGATED
                
PORTFOLIO

            
	 
	 
	
              By:

            	 
	 	
              Name:

            
	 	
              Title:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              WHITEBOX
                CONVERTIBLE ARBITRAGE 
PARTNERS, LP

            
	 
	
               

            
	
              By: 

            	 
	 	
              Name:

            
	 	
              Title:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              GUGGENHEIM
                PORTFOLIO COMPANY 
XXXI, LLC

            
	 
	
               

            
	
              By:

            	 
	 	
              Name:

            
	 	
              Title:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              WHITEBOX
                INTERMARKET PARTNERS, LP

            
	 
	
               

            
	
              By:

            	 
	 	
              Name:

            
	 	
              Title:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	
              WHITEBOX
                SPECIAL OPPORTUNITIES 
PARTNERS, SERIES B,
                LP

            
	 
	
               

            
	
              By: 

            	 
	 	
              Name:

            
	 	
              Title:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      OF BUYERS

    

      
        	
                Buyer

              	 	
                Buyer's Address

                and Facsimile Number

              	 	
                Buyer's Representative's Address 

                and Facsimile Number

              
	 	 	 	 	 
	
                Capital
                  Ventures International

              	 	
                 

              	 	
                Schulte
                  Roth & Zabel LLP

                919
                  Third Avenue

                New
                  York, New York 10022

                Attention:
                  Eleazer Klein, Esq.

                Facsimile:
                  (212) 593-5955

                Telephone:
                  (212) 756-2000

              
	 	 	 	 	 
	
                Whitebox
                  Convertible Arbitrage Partners, LP

              	 	
                 

              	 	
                N/A

              
	 	 	 	 	 
	
                Guggenheim
                  Portfolio Company XXXI, LLC

              	 	
                 

              	 	
                N/A

              
	 	 	 	 	 
	
                Whitebox
                  Intermarket Partners, LP

              	 	
                 

              	 	
                N/A

              
	 	 	 	 	 
	
                Whitebox
                  Special Opportunities Partners, Series B, LP

              	 	
                 

              	 	
                N/A

              
	 	 	 	 	 
	
                Radcliffe
                  SPC, Ltd. For and on behalf of the Class A Convertible Crossover
                  Segregated Portfolio

              	 	
                 

              	 	
                N/A

              
	 	 	 	 	 
	
                UBS
                  O’Connor LLC fbo O’Connor Global Convertible Arbitrage Master
                  Limited

              	 	
                 

              	 	
                N/A

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
                UBS
                  O’Connor LLC fbo O’Connor Global Convertible Arbitrage II Master
                  Limited

              	 	
                 

              	 	
                N/A

              
	 	 	 	 	 
	
                UBS
                  O’Connor LLC fbo O’Connor Pipes Corporate Strategies Master
                  Limited

              	 	
                 

              	 	
                N/A

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    American
      Stock Transfer & Trust Company

    59
      Maiden
      Lane

    New
      York,
      NY 10038 

    Attention:
      Carlos
      Pinto, Vice President

    

    Re: TXCO
      Resources Inc.

     

    Ladies
      and Gentlemen:

     

     

    [We
      are][I am] counsel to TXCO Resources Inc., a Delaware corporation, (the
      "Company"),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the "Securities
      Purchase Agreement")
      entered into by and among the Company and the buyers named therein
      (collectively, the "Holders")
      pursuant to which the Company issued to the Holders senior convertible Preferred
      Shares (the "Preferred
      Shares")
      convertible into the Company's common stock, $0.01 par value per share
      (the "Common
      Stock").
      Pursuant to the Securities Purchase Agreement, the Company also has entered
      into
      a Registration Rights Agreement with the Holders (the "Registration
      Rights Agreement")
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the shares of Common Stock issuable upon conversion of the Preferred
      Shares, under the Securities Act of 1933, as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on [   ], the Company filed a Registration Statement on
      Form S-3 (File No. 333-_____________) (the "Registration
      Statement")
      with
      the Securities and Exchange Commission (the "SEC")
      relating to the Registrable Securities which names each of the Holders as a
      selling stockholder thereunder.

     

    In
      connection with the foregoing, [we][I] advise you that a member of the SEC's
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at
[ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and
      [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the 1933 Act
      pursuant to the Registration Statement.

     

    This
      letter shall serve as our standing instruction to you that the shares of Common
      Stock are freely transferable by the Holders pursuant to the Registration
      Statement. You need not require further letters from us to effect any future
      legend-free issuance or reissuance of shares of Common Stock to the Holders
      as
      contemplated by the Company's Irrevocable Transfer Agent Instructions dated
      November ____, 2007, provided at the time of such reissuance, the Company has
      not otherwise notified you that the Registration Statement is unavailable for
      the resale of the Registrable Securities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      
        	 	
                Very
                  truly yours,

              
	 	 
	 	
                [ISSUER'S
                  COUNSEL]

              
	 	 
	 	
                By:

              	 	 
	
                CC: 
                  [LIST
                  NAMES OF HOLDERS]

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      B

    

    SELLING
      STOCKHOLDERS

     

    The
      shares of Common Stock being offered by the selling stockholders are issuable
      upon conversion of the convertible Preferred Shares and in payment of interest
      on the convertible Preferred Shares. For additional information regarding the
      issuance of those convertible Preferred Shares, see "Private Placement of
      Convertible Preferred Shares" above. We are registering the shares of Common
      Stock in order to permit the selling stockholders to offer the shares for resale
      from time to time. Except for the ownership of the convertible Preferred Shares
      issued pursuant to the Securities Purchase Agreement, the selling stockholders
      have not had any material relationship with us within the past three
      years.

     

    The
      table
      below lists the selling stockholders and other information regarding the
      beneficial ownership of the shares of Common Stock by each of the selling
      stockholders. The second column lists the number of shares of Common Stock
      beneficially owned by each selling stockholder, based on its ownership of the
      convertible Preferred Shares, as of ________, 200_, assuming conversion of
      all
      convertible Preferred Shares held by the selling stockholders on that date,
      without regard to any limitations on conversions.

     

    The
      third
      column lists the shares of Common Stock being offered by this prospectus by
      each
      selling stockholder.

     

    In
      accordance with the terms of a registration rights agreement among the Company
      and the selling stockholders, this prospectus generally covers the resale of
      at
      least 110% of the sum of the aggregate number of shares of Common Stock issued
      or issuable (i) upon conversion of the convertible Preferred Shares as of the
      trading day immediately preceding the date the registration statement is
      initially filed with the SEC and (ii) as Dividend Shares pursuant to the terms
      of the Preferred Shares as of the trading day immediately preceding the date
      the
      registration statement is initially filed with the SEC.
      Because
      the conversion price of the convertible Preferred Shares may be adjusted, the
      number of shares that will actually be issued may be more or less than the
      number of shares being offered by this prospectus. The fourth column assumes
      the
      sale of all of the shares offered by the selling stockholders pursuant to this
      prospectus.

     

    Under
      the
      terms of the convertible Preferred Shares, a selling stockholder may not convert
      the convertible Preferred Shares to the extent such conversion would cause
      such
      selling stockholder, together with its affiliates, to beneficially own a number
      of shares of Common Stock which would exceed 4.99% of our then outstanding
      shares of Common Stock following such conversion, excluding for purposes of
      such
      determination shares of Common Stock issuable upon conversion of the convertible
      Preferred Shares which have not been converted. The number of shares in the
      second column does not reflect this limitation. The selling stockholders may
      sell all, some or none of their shares in this offering. See "Plan of
      Distribution."

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
                Name of Selling Stockholder

              	 	
                Number of Shares

                Owned Prior to

                Offering

              	 	
                Maximum Number of

                Shares to be Sold

                Pursuant to this

                Prospectus

              	 	
                Number of Shares

                Owned After

                Offering

              
	 	 	 	 	 	 	 
	
                (1)
                  Capital
                  Ventures International

              	 	 	 	 	 	
                0

              

      

    

     

    (1) Heights
      Capital Management, Inc., the authorized agent of Capital Ventures
      International, has discretionary authority to vote and dispose of the shares
      held by Capital Ventures International and may be deemed to be the beneficial
      owner of these shares. Capital Ventures International
      is
      affiliated with one or more registered broker-dealers. Capital
      Ventures International
      purchased the shares being registered hereunder in the ordinary course of
      business and at the time of purchase, had no agreements or understandings,
      directly or indirectly, with any other person to distribute such
      shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      C

    

    PLAN
      OF DISTRIBUTION

     

    We
      are
      registering the shares of Common Stock issuable upon conversion of the
      convertible Preferred Shares and as interest on the convertible Preferred Shares
      to permit the resale of these shares of Common Stock by the holders of the
      convertible Preferred Shares from time to time after the date of this
      prospectus. We will not receive any of the proceeds from the sale by the selling
      stockholders of the shares of Common Stock. We will bear all fees and expenses
      incident to our obligation to register the shares of Common Stock.

     

    The
      selling stockholders may sell all or a portion of the shares of Common Stock
      beneficially owned by them and offered hereby from time to time directly or
      through one or more underwriters, broker-dealers or agents. If the shares of
      Common Stock are sold through underwriters or broker-dealers, the selling
      stockholders will be responsible for paying any underwriting discounts or
      commissions or agent's commissions. The shares of Common Stock may be sold
      in
      one or more transactions at fixed prices, at prevailing market prices at the
      time of the sale, at varying prices determined at the time of sale, or at
      negotiated prices or any combination of the foregoing. These sales may be
      effected in transactions, which may involve:

     

    · crosses
      or block transactions or other transaction

     

    · on
      any
      national securities exchange or quotation service on which the securities may
      be
      listed or quoted at the time of sale;

     

    · transactions
      in the over-the-counter market;

     

    · transactions
      otherwise than on these exchanges or systems or in the over-the-counter
      market;

     

    · the
      writing of options, whether such options are listed on an options exchange
      or
      otherwise;

     

    · ordinary
      brokerage transactions and transactions in which the broker-dealer solicits
      purchasers;

     

    · block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but
      may position and resell a portion of the block as principal to facilitate the
      transaction;

     

    · purchases
      by a broker-dealer as principal and resale by the broker-dealer for its
      account;

     

    · an
      exchange distribution in accordance with the rules of the applicable
      exchange;

     

    · privately
      negotiated transactions;

     

    · short
      sales;

     

    · sales
      pursuant to Rule 144;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    · transactions
      where broker-dealers may agree with the selling securityholders to sell a
      specified number of such shares at a stipulated price per share;

     

    · a
      combination of any such methods of sale; and

     

    · any
      other
      method permitted pursuant to applicable law.

     

    If
      the
      selling stockholders effect such transactions by selling shares of Common Stock
      to or through underwriters, broker-dealers or agents, such underwriters,
      broker-dealers or agents may receive commissions in the form of discounts,
      concessions or commissions from the selling stockholders or commissions from
      purchasers of the shares of Common Stock for whom they may act as agent or
      to
      whom they may sell as principal (which discounts, concessions or commissions
      as
      to particular underwriters, broker-dealers or agents may be in excess of those
      customary in the types of transactions involved). In connection with sales
      of
      the shares of Common Stock or otherwise, the selling stockholders may enter
      into
      hedging transactions with broker-dealers, which may in turn engage in short
      sales of the shares of Common Stock in the course of hedging in positions they
      assume. The selling stockholders may also sell shares of Common Stock short
      and
      deliver shares of Common Stock covered by this prospectus to close out short
      positions and to return borrowed shares in connection with such short sales.
      The
      selling stockholders may also loan or pledge shares of Common Stock to
      broker-dealers that in turn may sell such shares.

     

    The
      selling stockholders may pledge or grant a security interest in some or all
      of
      the convertible Preferred Shares or shares of Common Stock owned by them and,
      if
      they default in the performance of their secured obligations, the pledgees
      or
      secured parties may offer and sell the shares of Common Stock from time to
      time
      pursuant to this prospectus or any amendment to this prospectus under Rule
      424(b)(3) or other applicable provision of the Securities Act of 1933, as
      amended, amending, if necessary, the list of selling stockholders to include
      the
      pledgee, transferee or other successors in interest as selling stockholders
      under this prospectus. The selling stockholders also may transfer and donate
      the
      shares of Common Stock in other circumstances in which case the transferees,
      donees, pledgees or other successors in interest will be the selling beneficial
      owners for purposes of this prospectus, subject to any requirement of the SEC
      that we amend this prospectus to include the name of such transferee, donee,
      pledge or other successor-in-interest in this prospectus.

     

    The
      selling stockholders and any broker-dealer participating in the distribution
      of
      the shares of Common Stock may be deemed to be "underwriters" within the meaning
      of the Securities Act, and any commission paid, or any discounts or concessions
      allowed to, any such broker-dealer may be deemed to be underwriting commissions
      or discounts under the Securities Act. At the time a particular offering of
      the
      shares of Common Stock is made, a prospectus supplement, if required, will
      be
      distributed which will set forth the aggregate amount of shares of Common Stock
      being offered and the terms of the offering, including the name or names of
      any
      broker-dealers or agents, any discounts, commissions and other terms
      constituting compensation from the selling stockholders and any discounts,
      commissions or concessions allowed or reallowed or paid to
      broker-dealers.

     

    
      
        
        

      

      
        C-2

        
          

        

      

      
        
        

      

    

    Under
      the
      securities laws of some states, the shares of Common Stock may be sold in such
      states only through registered or licensed brokers or dealers. In addition,
      in
      some states the shares of Common Stock may not be sold unless such shares have
      been registered or qualified for sale in such state or an exemption from
      registration or qualification is available and is complied with.

     

    There
      can
      be no assurance that any selling stockholder will sell any or all of the shares
      of Common Stock registered pursuant to the registration statement, of which
      this
      prospectus forms a part.

     

    The
      selling stockholders and any other person participating in such distribution
      will be subject to applicable provisions of the 1934 Act and the rules and
      regulations thereunder, including, without limitation, Regulation M of the
      1934
      Act, which may limit the timing of purchases and sales of any of the shares
      of
      Common Stock by the selling stockholders and any other participating person.
      Regulation M may also restrict the ability of any person engaged in the
      distribution of the shares of Common Stock to engage in market-making activities
      with respect to the shares of Common Stock. All of the foregoing may affect
      the
      marketability of the shares of Common Stock and the ability of any person or
      entity to engage in market-making activities with respect to the shares of
      Common Stock.

     

    We
      will
      pay all expenses of the registration of the shares of Common Stock pursuant
      to
      the registration rights agreement, estimated to be $[ ] in total, including,
      without limitation, SEC filing fees and expenses of compliance with state
      securities or "blue sky" laws; provided, however, that a selling stockholder
      will pay all underwriting discounts and selling commissions, if any. We will
      indemnify the selling stockholders against liabilities, including some
      liabilities under the Securities Act, in accordance with the registration rights
      agreements, or the selling stockholders will be entitled to contribution. We
      may
      be indemnified by the selling stockholders against civil liabilities, including
      liabilities under the Securities Act, that may arise from any written
      information furnished to us by the selling stockholder specifically for use
      in
      this prospectus, in accordance with the related registration rights agreement,
      or we may be entitled to contribution.

     

    Once
      sold
      under the registration statement, of which this prospectus forms a part, the
      shares of Common Stock will be freely tradable in the hands of persons other
      than our affiliates.

     

    
      
        
        

      

      
        C-3RIGHTS
      AGREEMENT

     

    Agreement,
      dated as of June 29, 2000, between The Exploration Company of Delaware, Inc.,
      a
      Delaware corporation (the "Company"),
      and
      Fleet National Bank, a national banking association (the "Rights
      Agent").

     

    The
      Board
      of Directors of the Company has authorized and declared a dividend of one
      preferred share purchase right (a "Right")
      for
      each share of Common Stock, par value $0.01 per share, of the Company (a
      "Common
      Share")
      outstanding on the Close of Business on July 19, 2000 (the "Record
      Date")
      and
      has authorized the issuance of one Right with respect to each additional Common
      Share that shall become outstanding between the Record Date and the earliest
      of
      Close of Business on the Distribution Date, the Redemption Date and the Close
      of
      Business on the Final Expiration Date, each Right representing the right to
      purchase one one-thousandth of a Preferred Share, or such different amount
      and/or kind of securities as shall be hereinafter provided.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    "Acquiring
      Person"
      shall
      mean any Person who or which, together with all Affiliates and Associates of
      such Person, shall be the Beneficial Owner of 15%, or more of the Common Shares
      of the Company then outstanding but shall not include (i) the Company, (ii)
      any
      Subsidiary of the Company, (iii) any employee benefit plan of the Company or
      any
      Subsidiary of the Company, or (iv) any entity holding Common Shares for or
      pursuant to the terms of any such employee benefit plan. Notwithstanding the
      foregoing, (1) no Person shall become an "Acquiring Person" as the result of
      an
      acquisition of Common Shares by the Company which, by reducing the number of
      shares outstanding, increases the proportionate number of shares beneficially
      owned by such Person to 15% (or such other percentage as would otherwise result
      in such person becoming an Acquiring Person) or more of the Common Shares of
      the
      Company then outstanding; provided,
      however,
      that if
      a Person shall so become the Beneficial Owner of 15% (or such other percentage)
      or more of the Common Shares of the Company then outstanding by reason of an
      acquisition of Common Shares by the Company and shall, after such share
      purchases by the Company, become the Beneficial Owner of an additional 1% of
      the
      outstanding Common Shares of the Company, then such Person shall be an
      "Acquiring Person"; and (2) if the Board of Directors of the Company determines
      in good faith that a Person who would otherwise be an "Acquiring Person," as
      defined pursuant to the foregoing provisions of this paragraph, has become
      such
      inadvertently, and such Person divests as promptly as practicable a sufficient
      number of Common Shares so that such Person would no longer be an "Acquiring
      Person," as defined pursuant to the foregoing provisions of this paragraph,
      then
      such Person shall not have become an "Acquiring Person" for any purposes of
      this
      Agreement.

     

    
      
        
        

      

      
        -
          2
          -

        
          

        

      

      
        
        

      

    

     

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

     

    A
      Person
      shall be the "Beneficial
      Owner"
      of and
      shall "beneficially
      own"
      any
      securities:

     

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

     

    
      
        
        

      

      
        -
          3
          -

        
          

        

      

      
        
        

      

    

     

    (ii) which
      such Person or any of such Person's Affiliates or Associates has (A) the right
      to acquire (whether such right is exercisable immediately or only after the
      passage of time) pursuant to any agreement, arrangement or understanding (other
      than customary agreements with and between underwriters and selling group
      members with respect to a bona fide public offering of securities), written
      or
      otherwise, or upon the exercise of conversion rights, exchange rights, rights
      (other than the Rights), warrants or options, or otherwise; provided,
      however,
      that a
      Person shall not be deemed to be the Beneficial Owner of, or to beneficially
      own, securities tendered pursuant to a tender or exchange offer made pursuant
      to, and in accordance with, the applicable rules and regulations promulgated
      under the Exchange Act by or on behalf of such Person or any of such Person's
      Affiliates or Associates until such tendered securities are accepted for
      purchase or exchange; or (B) the right to vote pursuant to any agreement,
      arrangement or understanding; provided,
      however,
      that a
      Person shall not be deemed the Beneficial Owner of, or to beneficially own,
      any
      security if the agreement, arrangement or understanding to vote such security
      (1) arises solely from a revocable proxy or consent given to such Person in
      response to a public proxy or consent solicitation made pursuant to, and in
      accordance with, the applicable rules and regulations promulgated under the
      Exchange Act and (2) is not also then reportable on Schedule 13D under the
      Exchange Act (or any comparable or successor report); or

     

    (iii) which
      are
      beneficially owned, directly or indirectly, by any other Person with which
      such
      Person or any of such Person's Affiliates or Associates has any agreement,
      arrangement or understanding (other than customary agreements with and between
      underwriters and selling group members with respect to a bona fide public
      offering of securities), written or otherwise, for the purpose of acquiring,
      holding, voting (except to the extent contemplated by the proviso to section
      (B)
      of the immediately preceding paragraph (ii)) or disposing of any securities
      of
      the Company.

     

    
      
        
        

      

      
        -
          4
          -

        
          

        

      

      
        
        

      

    

     

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

     

    "Business
      Day"
      shall
      mean any day other than a Saturday, Sunday, or a day on which banking
      institutions in the Commonwealth of Massachusetts are authorized or obligated
      by
      law or executive order to close.

     

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

     

    "Common
      Shares"
      when
      used with reference to the Company shall mean the shares of Common Stock, par
      value $.01 per share, of the Company. "Common Shares" when used with reference
      to any Person other than the Company shall mean the capital stock (or equity
      interest) with the greatest voting power of such other Person or, if such other
      Person is a Subsidiary of another Person, the Person or Persons which ultimately
      control such first-mentioned Person.

     

    
      
        
        

      

      
        -
          5
          -

        
          

        

      

      
        
        

      

    

     

    "common
      stock equivalents"
      shall
      have the meaning set forth in Section 11(a)(iii)(B)(3) hereof.

     

    "Current
      Value"
      shall
      have the meaning set forth in Section 11(a)(iii)(A)(1) hereof.

     

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

     

    "equivalent
      preferred shares"
      shall
      have the meaning set forth in Section 11(b) hereof.

     

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

     

    "Final
      Expiration Date"
      shall
      mean June 29, 2010.

     

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

     

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

     

    
      
        
        

      

      
        -
          6
          -

        
          

        

      

      
        
        

      

    

     

    "Preferred
      Shares"
      shall
      mean shares of Series A Junior Participating Preferred Stock, par value $0.01
      per share, of the Company having such rights, preferences and powers upon
      adoption as are set forth in the form of Certificate of Designation set forth
      as
      Exhibit A hereto.

     

    "Redemption
      Date"
      shall
      have the meaning set forth in Section 23 hereof.

     

    "Right
      Certificate"
      shall
      mean a certificate evidencing a Right in substantially the form of Exhibit
      B
      hereto.

     

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

     

    "Shares
      Acquisition Date"
      shall
      mean the earlier of the date of (i) the public announcement by the Company
      or an
      Acquiring Person that an Acquiring Person has become such or (ii) the public
      disclosure of facts by the Company or an Acquiring Person indicating that an
      Acquiring Person has become such.

     

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

     

    "Subsidiary"
      of any
      Person shall mean any Person of which a majority of the voting power of the
      voting equity securities or equity interest is owned, directly or indirectly,
      by
      such Person.

     

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

     

    
      
        
        

      

      
        -
          7
          -

        
          

        

      

      
        
        

      

    

     

    "Summary
      of Rights"
      shall
      mean the Summary of Rights to Purchase Preferred Shares in substantially the
      form of Exhibit C hereto.

     

    Section
      2. Appointment
      of Rights Agent.
      The
      Company hereby appoints the Rights Agent to act as agent for the Company and
      the
      holders of the Rights (who, in accordance with Section 3 hereof, shall prior
      to
      the Distribution Date also be the holders of the Common Shares) in accordance
      with the terms and conditions hereof, and the Rights Agent hereby accepts such
      appointment. The Company may from time to time appoint such co-Rights Agents
      as
      it may deem necessary or desirable upon ten (10) days prior written notice
      to
      the Rights Agent. The Rights Agent shall have no duty to supervise, and in
      no
      event shall be liable for, the acts or omissions of any such co-Rights Agent.
      

     

    Section
      3. Issue
      of Right Certificates.

     

    (a) Until
      the
      earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the
      tenth
      Business Day (or such later date as may be determined by action of the Board
      of
      Directors prior to such time as any Person becomes an Acquiring Person) after
      the date of the commencement by any Person (other than the Company, any
      Subsidiary of the Company, any employee benefit 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) of, or of the first public announcement of the
      intention of any Person (other than any of the Persons referred to in the
      preceding parenthetical) to commence, a tender or exchange offer the
      consummation of which would result in any Person becoming the Beneficial Owner
      of Common Shares aggregating 15% or more of the then outstanding Common Shares
      (such date being herein referred to as the "Distribution
      Date"),
      (x)
      the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
      by the certificates for Common Shares registered in the names of the holders
      thereof (which certificates shall also be deemed to be Right Certificates)
      and
      not by separate Right Certificates, and (y) the right to receive Right
      Certificates will be transferable only in connection with the transfer of Common
      Shares. As soon as practicable after the Distribution Date, the Company will
      prepare and execute, the Rights Agent will countersign, and the Company will
      send or cause to be sent (and the Rights Agent will, if requested, at the
      expense of the Company, 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.
      As of the Distribution Date, the Rights will be evidenced solely by such Right
      Certificates.

     

    
      
        
        

      

      
        -
          8
          -

        
          

        

      

      
        
        

      

    

     

    (b) On
      the
      Record Date, or as soon as practicable thereafter, the Company will send a
      copy
      of the Summary of Rights by first-class, postage-prepaid mail, to each record
      holder of 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. With respect to
      certificates for Common Shares outstanding as of the Record Date, until the
      Close of Business on the Distribution Date, the Rights will be evidenced by
      such
      certificates registered in the names of the holders thereof together with a
      copy
      of the Summary of Rights attached thereto. Until the Close of Business on the
      Distribution Date (or the earlier of the Redemption Date or the Close of
      Business on the Final Expiration Date),
      the surrender for transfer of any certificate for Common Shares outstanding
      on
      the Record Date, with or without a copy of the Summary of Rights attached
      thereto, shall also constitute the transfer of the Rights associated with the
      Common Shares evidenced thereby.

     

    (c) Certificates
      for Common Shares which become outstanding (including, without limitation,
      reacquired Common Shares referred to in the last sentence of this paragraph
      (c))
      after the Record Date but prior to the earliest of the Close of Business on
      the
      Distribution Date, the Redemption Date or the Close of Business on the
      Final Expiration Date
      shall have impressed on, printed on, written on or otherwise affixed to them
      the
      following legend:

     

    
      
        
        

      

      
        -
          9
          -

        
          

        

      

      
        
        

      

    

     

    This
      certificate also evidences and entitles the holder hereof to certain Rights
      as
      set forth in a Rights Agreement between The Exploration Company of Delaware,
      Inc. and Fleet National Bank, as Rights Agent, dated as of June 29, 2000, as
      it
      may from time to time be amended or supplemented pursuant to its terms (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
      The Exploration Company of Delaware, Inc. Under certain circumstances, as set
      forth in the Rights Agreement, the Rights will be evidenced by separate
      certificates and will no longer be evidenced by this certificate. The
      Exploration Company of Delaware, Inc. will mail to the holder of this
      certificate a copy of the Rights Agreement without charge after receipt of
      a
      written request therefor. Under certain circumstances, Rights that are or were
      acquired or beneficially owned by Acquiring Persons (as defined in the Rights
      Agreement) may become null and void.

     

    With
      respect to such certificates containing the foregoing legend, until the Close
      of
      Business on the Distribution Date, the Rights associated with the Common Shares
      represented by certificates shall be evidenced by such certificates alone,
      and
      the surrender for transfer of any such certificate shall also constitute the
      transfer of the Rights associated with the Common Shares represented thereby.
      In
      the event that the Company purchases or acquires any Common Shares after the
      Record Date but prior to the Close of Business on the Distribution Date, any
      Rights associated with such Common Shares shall be deemed canceled and retired
      so that the Company shall not be entitled to exercise any Rights associated
      with
      the Common Shares which are no longer outstanding.

     

    
      
        
        

      

      
        -
          10
          -

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

      
        -
          11
          -

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    (a) The
      registered holder of any Right Certificate (other than a holder whose Rights
      have become void pursuant to Section 11(a)(ii) hereof or have been exchanged
      pursuant to Section 24 hereof) may exercise the Rights evidenced thereby in
      whole or in part at any time after the Distribution Date upon surrender of
      the
      Right Certificate, with the form of election to purchase on the reverse side
      thereof duly executed, to the Rights Agent at its principal office, together
      with payment of the Purchase Price for each one one-thousandth of a Preferred
      Share as to which the Rights are exercised, prior to the earliest of (i) the
      Close of Business on the Final Expiration Date,
      (ii) the time at which the right to exercise the Rights terminates pursuant
      to
      Section 23 hereof, or (iii) the time at which the right to exercise the Rights
      terminates pursuant to Section 24 hereof.

     

    
      
        
        

      

      
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    (b) The
      purchase price for each one one-thousandth of a Preferred Share to be purchased
      upon the exercise of a Right shall initially be Twelve Dollars ($12.00) (the
      "Purchase
      Price"),
      shall
      be subject to adjustment from time to time as provided in Sections 11 and 13
      hereof and shall be payable in lawful money of the United States of America
      in
      accordance with paragraph (c) below.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

      
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    Section
      9. Status
      and Availability of Preferred Shares.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

    (a) (i) In
      the
      event the Company shall at any time after the date of this Agreement (A) declare
      a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide
      the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares
      into a smaller number of Preferred Shares or (D) issue any shares of its capital
      stock in a reclassification of the Preferred Shares (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing or surviving corporation), except as otherwise
      provided in this Section 11(a), the Purchase Price in effect at the time of
      the
      record date for such dividend or of the effective date of such subdivision,
      combination or reclassification, and the number and kind of shares of capital
      stock issuable on such date, shall be proportionately adjusted so that the
      holder of any Right exercised after such time shall be entitled to receive
      the
      aggregate number and kind of shares of capital stock which, if such Right had
      been exercised immediately prior to such date, he would have owned upon such
      exercise and been entitled to receive by virtue of such dividend, subdivision,
      combination or reclassification; provided,
      however,
      that in
      no event shall the consideration to be paid upon the exercise of one Right
      be
      less than the aggregate par value of the shares of capital stock of the Company
      issuable upon exercise of one Right.

     

    
      
        
        

      

      
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    (ii)
      Subject
      to the following paragraph of this subparagraph (ii) and to Section 24 of this
      Agreement, in the event any Person shall become an Acquiring Person, each holder
      of a Right shall thereafter have a right to receive, upon exercise thereof
      at a
      price equal to the then current Purchase Price multiplied by the number of
      one
      one-thousandths of a Preferred Share for which a Right is then exercisable,
      in
      accordance with the terms of this Agreement and in lieu of Preferred Shares,
      such number of Common Shares of the Company as shall equal the result obtained
      by (x) multiplying the then current Purchase Price by the number of one
      one-thousandths of a Preferred Share for which a Right is then exercisable
      and
      dividing that product by (y) 50% of the then current per share market price
      of
      the Company's Common Shares (determined pursuant to Section 11(d) hereof) on
      the
      date such Person became an Acquiring Person. In the event that any Person shall
      become an Acquiring Person and the Rights shall then be or thereafter become
      outstanding, the Company shall not take any action that would eliminate or
      diminish the benefits intended to be afforded by the Rights.

     

    
      
        
        

      

      
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    From
      and
      after the occurrence of such an event, any Rights that are or were acquired
      or
      beneficially owned by such Acquiring Person (or any Associate or Affiliate
      of
      such Acquiring Person) on or after the earlier of (x) the date of such event
      and
      (y) the Distribution Date shall be void and any holder of such Rights shall
      thereafter have no right to exercise such Rights under any provision of this
      Agreement. No Right Certificate shall be issued pursuant to Section 3 that
      represents Rights beneficially owned by an Acquiring Person whose Rights would
      be void pursuant to the preceding sentence or any Associate or Affiliate
      thereof; no Right Certificate shall be issued at any time upon the transfer
      of
      any Rights to an Acquiring Person whose Rights would be void pursuant to the
      preceding sentence or any Associate or Affiliate thereof or to any nominee
      of
      such Acquiring Person, Associate or Affiliate; and any Right Certificate
      delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
      would be void pursuant to the preceding sentence or any Associate or Affiliate
      thereof shall be canceled.

     

    (iii)
      In
      the
      event that the number of Common Shares which are authorized by the Company's
      certificate of incorporation and not outstanding or subscribed for, or reserved
      or otherwise committed for issuance for purposes other than upon exercise of
      the
      Rights, are not sufficient to permit the holder of each Right to purchase the
      number of Common Shares to which he would be entitled upon the exercise in
      full
      of the Rights in accordance with the foregoing subparagraph (ii) of paragraph
      (a) of this Section 11, or should the Board of Directors so elect, the Company
      shall: (A) determine the excess of (1) the value of the Common Shares issuable
      upon the exercise of a Right (calculated as provided in the last sentence of
      this subparagraph (iii)) pursuant to Section 11(a)(ii) hereof (the "Current
      Value")
      over
      (2) the Purchase Price (such excess, the "Spread"),
      and
      (B) with respect to each Right, make adequate provision to substitute for such
      Common Shares, upon payment of the applicable Purchase Price, any one or more
      of
      the following having an aggregate value determined by the Board of Directors
      to
      be equal to the Current Value: (1) cash, (2) a reduction in the Purchase Price,
      (3) Common Shares or other equity securities of the Company (including, without
      limitation, shares, or units of shares, of preferred stock which the Board
      of
      Directors of the Company has determined to have the same value as shares of
      Common Stock (such shares of preferred stock, "common
      stock equivalents")),
      (4)
      debt securities of the Company, or (5) other assets; provided,
      however,
      if the
      Company shall not have made adequate provision to deliver value pursuant to
      clause (B) above within thirty (30) days following the first occurrence of
      an
      event triggering the rights to purchase Common Shares described in Section
      11(a)(ii) (the "Section
      11(a)(ii) Trigger Date"),
      then
      the Company shall be obligated to deliver, upon the surrender for exercise
      of a
      Right and without requiring payment of the Purchase Price, shares of Common
      Stock (to the extent available) and then, if necessary, cash, which shares
      and
      cash have an aggregate value equal to the Spread. If the Board of Directors
      of
      the Company shall determine in good faith that it is likely that sufficient
      additional Common Shares could be authorized for issuance upon exercise in
      full
      of the Rights, the thirty (30) day period set forth above may be extended to
      the
      extent necessary, but not more than ninety (90) days after the Section 11(a)(ii)
      Trigger Date, in order that the Company may seek stockholder approval for the
      authorization of such additional shares (such period, as it may be extended,
      the
      "Substitution
      Period").
      To
      the extent that the Company determines that some action need be taken pursuant
      to the first and/or second sentences of this Section 11(a)(iii), the Company
      (x)
      shall provide, subject to Section 7(e) hereof and the last paragraph of Section
      11(a)(ii) hereof, that such action shall apply uniformly to all outstanding
      Rights, and (y) may suspend the exercisability of the Rights until the
      expiration of the Substitution Period in order to seek any authorization of
      additional shares and/or to decide the appropriate form of distribution to
      be
      made pursuant to such first sentence and to determine the value thereof. In
      the
      event of any such suspension, the Company shall make a public announcement,
      and
      shall deliver to the Rights Agent a statement, stating that the exercisability
      of the Rights has been temporarily suspended. At such time as the suspension
      is
      no longer in effect, the Company shall make another public announcement, and
      deliver to the Rights Agent a statement, so stating. For purposes of this
      Section 11(a)(iii), the value of the Common Shares shall be the current per
      share market price (as determined pursuant to Section 11(d)(i) hereof) of the
      Common Shares on the Section 11(a)(ii) Trigger Date and the value of any common
      stock equivalent shall be deemed to have the same value as the Common Shares
      on
      such date.

     

    
      
        
        

      

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

     

    
      
        
        

      

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

     

    
      
        
        

      

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

     

    
      
        
        

      

      
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    (ii)
      For
      the purpose of any computation hereunder, the "current
      per share market price"
      of the
      Preferred Shares shall be determined in accordance with the method set forth
      in
      Section 11(d)(i). If the Preferred Shares are not publicly traded, the
      "current
      per share market price"
      of the
      Preferred Shares shall be conclusively deemed to be the current per share market
      price of the Common Shares as determined pursuant to Section 11(d)(i)
      (appropriately adjusted to reflect any stock split, stock dividend or similar
      transaction occurring after the date hereof), multiplied by 1000. If neither
      the
      Common Shares nor the Preferred Shares are publicly held or so listed or traded,
      "current
      per share market price"
      shall
      mean the fair value per share as determined in good faith by the Board of
      Directors of the Company, whose determination shall be described in a statement
      filed with the Rights Agent.

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

    (k) Before
      taking any action that would cause an adjustment reducing the Purchase Price
      below one one-thousandth of the then par value of the Preferred Shares issuable
      upon exercise of the Rights, the Company shall take any corporate action which
      may, in the opinion of its counsel, be necessary in order that the Company
      may
      validly and legally issue fully paid and non-assessable Preferred Shares at
      such
      adjusted Purchase Price.

     

    
      
        
        

      

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

     

    (m) Anything
      in this Section 11 to the contrary notwithstanding, the Company shall be
      entitled to make such reductions in the Purchase Price, in addition to those
      adjustments expressly required by this Section 11, as and to the extent that
      it
      in its sole discretion shall determine to be advisable in order that any (i)
      combination or subdivision of the Preferred Shares, (ii) issuance wholly for
      cash of any Preferred Shares at less than the current market price, (iii)
      issuance wholly for cash of Preferred Shares or securities which by their terms
      are convertible into or exchangeable for Preferred Shares, (iv) dividends on
      Preferred Shares payable in Preferred Shares or (v) issuance of any rights,
      options or warrants referred to hereinabove in Section 11(b), hereafter made
      by
      the Company to holders of its Preferred Shares shall not be taxable to such
      stockholders.

     

    
      
        
        

      

      
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    (n) In
      the
      event that at any time after the date of this Agreement and prior to the
      Distribution Date, the Company shall (i) declare or pay any dividend on the
      Common Shares payable in Common Shares or (ii) effect a subdivision, combination
      or consolidation of the Common Shares (by reclassification or otherwise other
      than by payment of dividends in Common Shares) into a greater or lesser number
      of Common Shares, then in any such case (i) the number of one one-thousandths
      of
      a Preferred Share purchasable after such event upon proper exercise of each
      Right shall be determined by multiplying the number of one one-thousandths
      of a
      Preferred Share so purchasable immediately prior to such event by a fraction,
      the numerator of which is the number of Common Shares outstanding immediately
      before such event and the denominator of which is the number of Common Shares
      outstanding immediately after such event, and (ii) each Common Share outstanding
      immediately after such event shall have issued with respect to it that number
      of
      Rights which each Common Share outstanding immediately prior to such event
      had
      issued with respect to it. The adjustments provided for in this Section 11(n)
      shall be made successively whenever such a dividend is declared or paid or
      such
      a subdivision, combination or consolidation is effected.

     

    
      
        
        

      

      
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    Section
      12. Certificate
      of Adjustment.
      Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
      Company shall promptly (a) prepare a certificate setting forth such adjustment,
      and a brief statement of the facts accounting for such adjustment, (b) file
      with
      the Rights Agent and with each transfer agent for the Common Shares or the
      Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
      to each holder of a Right Certificate in accordance with Section 25 hereof.
      The
      Rights Agent shall be fully protected in relying on any such certificate and
      on
      any adjustment therein contained and shall not be obligated or responsible
      for
      calculating any adjustment nor shall it be deemed to have knowledge of such
      an
      adjustment unless and until it shall have received such
      certificate.

     

    
      
        
        

      

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

     

    In
      the
      event that, at any time after a Person becomes an Acquiring Person, directly
      or
      indirectly, (i) the Company shall consolidate with, or merge with and into,
      any
      other Person, (ii) any Person shall consolidate with the Company, or merge
      with
      and into the Company and the Company shall be the continuing or surviving
      corporation of such merger and, in connection with such merger, all or part
      of
      the Common Shares shall be changed into or exchanged for stock or other
      securities of any other Person (or the Company) or cash or any other property,
      or (iii) the Company shall sell or otherwise transfer (or one or more of its
      Subsidiaries shall sell or otherwise transfer), in one or more transactions,
      assets or earning power aggregating 50% or more of the assets or earning power
      of the Company and its Subsidiaries (taken as a whole) to any other Person
      other
      than the Company or one or more of its wholly-owned Subsidiaries, then, and
      in
      each such case, proper provision shall be made so that (A) each holder of a
      Right (except as otherwise provided herein) shall thereafter have the right
      to
      receive, upon the exercise thereof at a price equal to the then current Purchase
      Price multiplied by the number of one one-thousandths of a Preferred Share
      for
      which a Right is then exercisable, in accordance with the terms of this
      Agreement and in lieu of Preferred Shares, such number of Common Shares of
      such
      other Person (including the Company as successor thereto or as the surviving
      corporation) as shall equal the result obtained by (x) multiplying the then
      current Purchase Price by the number of one one-thousandths of a Preferred
      Share
      for which a Right is then exercisable and dividing that product by (y) 50%
      of
      the then current per share market price of the Common Shares of such other
      Person (determined pursuant to Section 11(d) hereof) on the date of consummation
      of such consolidation, merger, sale or transfer; (B) the issuer of such Common
      Shares shall thereafter be liable for, and shall assume, by virtue of such
      consolidation, merger, sale or transfer, all the obligations and duties of
      the
      Company pursuant to this Agreement; (C) the term "Company"
      shall
      thereafter be deemed to refer to such issuer; and (D) such issuer shall take
      such steps (including, but not limited to, the reservation of a sufficient
      number of its Common Shares in accordance with Section 9 hereof) in connection
      with such consummation as may be necessary to assure that the provisions hereof
      shall thereafter be applicable, as nearly as reasonably may be, in relation
      to
      the Common Shares thereafter deliverable upon the exercise of the Rights. The
      Company covenants and agrees that it shall not consummate any such
      consolidation, merger, sale or transfer unless prior thereto the Company and
      such issuer shall have executed and delivered to the Rights Agent a supplemental
      agreement so providing. The Company shall not enter into any transaction of
      the
      kind referred to in this Section 13 if at the time of such transaction there
      are
      any rights, warrants, instruments or securities outstanding or any agreements
      or
      arrangements which, as a result of the consummation of such transaction, would
      eliminate or substantially diminish the benefits intended to be afforded by
      the
      Rights. The provisions of this Section 13 shall similarly apply to successive
      mergers or consolidations or sales or other transfers. For purposes hereof,
      the
      "earning
      power"
      of the
      Company and its Subsidiaries shall be determined in good faith by the Company's
      Board of Directors on the basis of the operating earnings of each business
      operated by the Company and its Subsidiaries during the three fiscal years
      preceding the date of such determination (or, in the case of any business not
      operated by the Company or any Subsidiary during three full fiscal years
      preceding such date, during the period such business was operated by the Company
      or any Subsidiary).

     

    
      
        
        

      

      
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    Section
      14. Fractional
      Rights and Fractional Shares.

     

    (a) The
      Company shall not be required to issue fractions of Rights or to distribute
      Right Certificates which evidence fractional Rights. In lieu of such fractional
      Rights, there shall be paid to the registered holders of the Right Certificates
      with regard to which such fractional Rights would otherwise be issuable, an
      amount in cash equal to the same fraction of the current market value of a
      whole
      Right. For the purposes of this Section 14(a), the current market value of
      a
      whole Right shall be the closing price of the Rights for the Trading Day
      immediately prior to the date on which such fractional Rights would have been
      otherwise issuable. The closing price for any day shall be the last sale price,
      regular way, or, in case no such sale takes place on such day, the average
      of
      the closing bid and asked prices, regular way, in either case as reported in
      the
      principal consolidated transaction reporting system with respect to securities
      listed or admitted to trading on the New York Stock Exchange or, if the Rights
      are not listed or admitted to trading on the New York Stock Exchange, as
      reported in the principal consolidated transaction reporting system with respect
      to securities listed on the principal national securities exchange on which
      the
      Rights are listed or admitted to trading or, if the Rights are not listed or
      admitted to trading on any national securities exchange, the last quoted price
      or, if not so quoted, the average of the high bid and low asked prices in the
      over-the-counter market, as reported by NASDAQ or such other system then in
      use
      or, if on any such date the Rights are not quoted by any such organization,
      the
      average of the closing bid and asked prices as furnished by a professional
      market maker making a market in the Rights selected by the Board of Directors
      of
      the Company. If on any such date no such market maker is making a market in
      the
      Rights, the fair value of the Rights on such date as determined in good faith
      by
      the Board of Directors of the Company shall be used.

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

      
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    Section
      18. Concerning
      the Rights Agent.
      The
      Company agrees to pay to the Rights Agent reasonable compensation for all
      services rendered by it hereunder and, from time to time, on demand of the
      Rights Agent, its reasonable expenses and counsel fees and other disbursements
      incurred in the administration and execution of this Agreement and the exercise
      and performance of its duties hereunder. The Company also agrees to indemnify
      the Rights Agent for, and to hold it harmless against, any loss, liability,
      or
      expense, incurred without gross negligence, bad faith or willful misconduct
      on
      the part of the Rights Agent, for anything done or omitted by the Rights Agent
      in connection with the acceptance and administration of this Agreement,
      including the costs and expenses of defending against any claim or liability
      in
      connection therewith. The indemnification provided for hereunder shall survive
      the expiration of the Rights and the termination of this Agreement. The costs
      and expenses of enforcing this right of indemnification shall also be paid
      by
      the Company.

     

    
      
        
        

      

      
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    The
      Rights Agent may conclusively rely upon and shall be protected and shall incur
      no liability for or in respect of any action taken, suffered or omitted by
      it in
      connection with its administration of this Agreement in reliance upon any Right
      Certificate or certificate for Preferred Shares or for other securities of
      the
      Company, instrument of assignment or transfer, power of attorney, endorsement,
      affidavit, letter, notice, direction, consent, certificate, statement, or other
      paper or document believed by it to be genuine and to be signed, executed and,
      where necessary, verified or acknowledged, by the proper person or persons.
      Notwithstanding anything in this Agreement to the contrary, in no event shall
      the Rights Agent be liable for special, indirect or consequential 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 and
      regardless of the form of the action.

     

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

     

    
      
        
        

      

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

     

    
      
        
        

      

      
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    Section
      20. Duties
      of Rights Agent.
      The
      Rights Agent undertakes the duties and obligations expressly set forth in this
      Agreement and no implied duties or obligations shall be read into this Agreement
      against the Rights Agent. The Rights Agent shall perform those duties and
      obligations upon the following terms and conditions, by all of which the Company
      and the holders of Right Certificates, by their acceptance thereof, shall be
      bound:

     

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

     

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

     

    
      
        
        

      

      
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    (c) The
      Rights Agent shall be liable hereunder only for its own gross negligence, bad
      faith or willful misconduct.

     

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

     

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

     

    
      
        
        

      

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

     

    (g) The
      Rights Agent is hereby authorized and directed to accept instructions with
      respect to the performance of its duties hereunder from any one of the
      President, a 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 it shall not be liable for any action taken or suffered to be taken
      by it in good faith in accordance with instructions of any such officer. Any
      application by the Rights Agent for written instructions from the Company may,
      at the option of the Rights Agent, set forth in writing any action proposed
      to
      be taken or omitted by the Rights Agent under this Agreement and the date on
      or
      after which such action shall be taken or such omission shall be effective.
      The
      Rights Agent shall not be liable for any action taken by, or omission of, the
      Rights Agent in accordance with a proposal included in any such application
      on
      or after the date specified in such application (which date shall not be less
      than ten 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, in response to such application, written instructions with respect
      to
      the proposed action or omission specifying a different action to be taken or
      omitted.

     

    
      
        
        

      

      
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    (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 shall preclude the Rights Agent from acting in any other capacity
      for the Company or for any other legal entity.

     

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

     

    
      
        
        

      

      
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          42
          -

        
          

        

      

      
        
        

      

    

     

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

     

    (k) The
      Rights Agent shall not be required to take notice or be deemed to have notice
      of
      any fact, event or determination (including, without limitation, any dates
      or
      events defined in this Agreement or the designation of any Person as an
      Acquiring Person, Affiliate or Associate) under this Agreement unless and until
      the Rights Agent shall be specifically notified in writing by the Company of
      such fact, event or determination.

     

    
      
        
        

      

      
        -
          43
          -

        
          

        

      

      
        
        

      

    

     

    Section
      21. Change
      of Rights Agent.
      The
      Rights Agent or any successor Rights Agent may resign and be discharged from
      its
      duties under this Agreement upon 30 days' notice in writing mailed to the
      Company and to each transfer agent of the Common Shares and the Preferred Shares
      by registered or certified mail, and, at the expense of the Company, to the
      holders of the Right Certificates by first-class mail. The Company may remove
      the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
      mailed to the Rights Agent or successor Rights Agent, as the case may be, and
      to
      each transfer agent of the Common Shares and the Preferred Shares by registered
      or certified mail, and to the holders of the Right Certificates by first-class
      mail. If the Rights Agent shall resign or be removed or shall otherwise become
      incapable of acting, the Company shall appoint a successor to the Rights Agent.
      If the Company shall fail to make such appointment within a period of 30 days
      after giving notice of such removal or after it has been notified in writing
      of
      such resignation or incapacity by the resigning or incapacitated Rights Agent
      or
      by the holder of a Right Certificate (who shall, with such notice, submit his
      Right Certificate for inspection by the Company), then the registered holder
      of
      any Right Certificate may apply to any court of competent jurisdiction for
      the
      appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
      by the Company or by such a court, shall be a corporation organized and doing
      business under the laws of the United States or of any state of the United
      States, in good standing, having an office in the State of Texas which is
      authorized under such laws to exercise corporate trust 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 $100 million. After appointment, the successor Rights Agent shall be
      vested with the same powers, rights, duties and responsibilities as if it had
      been originally named as Rights Agent without further act or deed; but the
      predecessor Rights Agent shall deliver and transfer to the successor Rights
      Agent any property at the time held by it hereunder, and execute and deliver
      any
      further assurance, conveyance, act or deed necessary for the purpose. Not later
      than the effective date of any such appointment the Company shall file notice
      thereof in writing with the predecessor Rights Agent and each transfer agent
      of
      the Common Shares and the Preferred Shares, and mail a notice thereof in writing
      to the registered holders of the Right Certificates. Failure to give any notice
      provided for in this Section 21, however, or any defect therein, shall not
      affect the legality or validity of the resignation or removal of the Rights
      Agent or the appointment of the successor Rights Agent, as the case may
      be.

     

    
      
        
        

      

      
        -
          44
          -

        
          

        

      

      
        
        

      

    

     

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

     

    Section
      23. Redemption.

     

    (a) The
      Board
      of Directors of the Company may, at its option, at any time prior to such time
      as any Person becomes an Acquiring Person, redeem all but not less than all
      the
      then outstanding Rights at a redemption price of $0.01 per Right, appropriately
      adjusted to reflect any stock split, stock dividend or similar transaction
      occurring after the date hereof (such redemption price being hereinafter
      referred to as the "Redemption
      Price").
      The
      redemption of the Rights by the Board of Directors may be made effective at
      such
      time, on such basis and subject to such conditions as the Board of Directors
      in
      its sole discretion may establish.

     

    
      
        
        

      

      
        -
          45
          -

        
          

        

      

      
        
        

      

    

     

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

     

    
      
        
        

      

      
        -
          46
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    Section
      24. Exchange.

     

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

     

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

     

    
      
        
        

      

      
        -
          47
          -

        
          

        

      

      
        
        

      

    

     

    (c) In
      any
      exchange pursuant to this Section 24, the Company, at its option, may substitute
      Preferred Shares or common stock equivalents for Common Shares exchangeable
      for
      Rights, at the initial rate of one one-thousandth of a Preferred Share (or
      an
      appropriate number of common stock equivalents) for each Common Share, as
      appropriately adjusted to reflect adjustments in the voting rights of the
      Preferred Shares pursuant to the terms thereof, so that the fraction of a
      Preferred Share delivered in lieu of each Common Share shall have the same
      voting rights as one Common Share.

     

    (d) In
      the
      event that there shall not be sufficient Common Shares, Preferred Shares or
      common stock equivalents authorized by the Company's certificate of
      incorporation and not outstanding or subscribed for, or reserved or otherwise
      committed for issuance for purposes other than upon exercise of Rights, to
      permit any exchange of Rights as contemplated in accordance with this Section
      24, the Company shall take all such action as may be necessary to authorize
      additional Common Shares, Preferred Shares or common stock equivalents for
      issuance upon exchange of the Rights.

     

    
      
        
        

      

      
        -
          48
          -

        
          

        

      

      
        
        

      

    

     

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

     

    
      
        
        

      

      
        -
          49
          -

        
          

        

      

      
        
        

      

    

     

    Section
      25. Notice
      of Certain Events.

     

    (a) In
      case
      the Company shall after the Distribution Date propose (i) to pay any dividend
      payable in stock of any class to the holders of its Preferred Shares or to
      make
      any other distribution to the holders of its Preferred Shares (other than a
      regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
      Shares rights or warrants to subscribe for or to purchase any additional
      Preferred Shares or shares of stock of any class or any other securities, rights
      or options, (iii) to effect any reclassification of 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 50% or
      more
      of the assets or earning power of the Company and its Subsidiaries (taken as
      a
      whole) to, any other Person, (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
      consolidation of the Common Shares (by reclassification or otherwise than by
      payment of dividends in Common Shares), then, in each such case, the Company
      shall give to each holder of a Right Certificate, in accordance with Section
      26
      hereof, a notice of such proposed action, which shall specify the record date
      for the purposes of such stock dividend, or distribution of rights or warrants,
      or the date on which such reclassification, consolidation, merger, 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 shall be so given
      in
      the case of any action covered by clause (i) or (ii) above at least 10 days
      prior to the record date for determining holders of the Preferred Shares for
      purposes of such action, and in the case of any such other action, at least
      10
      days prior to the date of the taking of such proposed action or the date of
      participation therein by the holders of the Common Shares and/or Preferred
      Shares, whichever shall be the earlier.

     

    
      
        
        

      

      
        -
          50
          -

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

      
        -
          51
          -

        
          

        

      

      
        
        

      

    

     

    The
      Exploration Company of Delaware, Inc.

    500
      North
      Loop 1604 East, Suite 250

    San
      Antonio, Texas 78232

     

    Attention:   
       Roberto R. Thomae

    Vice
      President, Finance

     

    Copy
      to:

     

    Mr.
      Frank
      Russell

    Barton
      & Schneider, L.L.P.

    700
      North
      Street Mary's, Suite 1825

    San
      Antonio, Texas 78205

     

    Subject
      to the provisions of Section 21 hereof, any notice or demand authorized by
      this
      Agreement to be given or made by the Company or by the holder of any Right
      Certificate to or on the Rights Agent shall be sufficiently given or made if
      sent by registered or certified mail and shall be deemed given upon receipt
      and,
      addressed (until another address is filed in writing with the Company) as
      follows:

     

    Fleet
      National Bank 

    c/o
      EquiServe Limited Partnership

    150
      Royall Street

    Canton,
      MA 02021

    Attention:
      Client Administration

     

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

     

    
      
        
        

      

      
        -
          52
          -

        
          

        

      

      
        
        

      

    

     

    Section
      27. Supplements
      and Amendments.
      The
      Company may from time to time, and the Rights Agent shall, if the Company so
      directs, supplement or amend this Agreement without the approval of any holders
      of Right Certificates in order to cure any ambiguity, to correct or supplement
      any provision contained herein which may be defective or inconsistent with
      any
      other provisions herein, or to make any change to or delete any provision hereof
      or to adopt any other provisions with respect to the Rights which the Company
      may deem necessary or desirable; provided,
      however,
      that
      from and after such time as any Person becomes an Acquiring Person, this
      Agreement shall not be amended or supplemented in any manner which would
      adversely affect the interests of the holders of Rights (other than an Acquiring
      Person and its Affiliates and Associates). Any supplement or amendment
      authorized by this Section 27 will be evidenced by a writing signed by the
      Company and the Rights Agent. Notwithstanding anything in this Agreement to
      the
      contrary, no supplement or amendment that changes the rights and duties of
      the
      Rights Agent under this Agreement will be effective against the Rights Agent
      without the execution of such supplement or amendment by the Rights
      Agent.

     

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

     

    
      
        
        

      

      
        -
          53
          -

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -
          54
          -

        
          

        

      

      
        
        

      

    

     

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

     

    Section
      34. Administration.
      The
      Board of Directors of the Company shall have the exclusive power and authority
      to administer and interpret the provisions of this Agreement and to exercise
      all
      rights and powers specifically granted to the Board of Directors or the Company
      or as may be necessary or advisable in the administration of this Agreement.
      All
      such actions, calculations, determinations and interpretations which are done
      or
      made by the Board of Directors in good faith shall be final, conclusive and
      binding on the Company, the Rights Agent, the holders of the Rights and all
      other parties and shall not subject the Board of Directors to any liability
      to
      the holders of the Rights.

     

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

     

    
      
        
        

      

      
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          55
          -

        
          

        

      

      
        
        

      

    

     

    
      	
              Attest:

            	 	
              THE
                EXPLORATION COMPANY OF

              DELAWARE,
                INC.

            
	 	 	 	 
	 	 	
              By:

            	
               

            
	
              

            	 	 	
              

            
	Title:	 	 	Title:

    

     

    
      	
              Attest:

            	 	
              
                FLEET
                  NATIONAL BANK,

                
                  as
                    Rights Agent

                

              

            
	 	 	 	 
	 	 	
              By:

            	
               

            
	
              

            	 	 	
              

            
	Title:	 	 	Title:

    

     

    
      
        
        

      

      
        -
          56
          -

        
          

        

      

      
        
        

      

    

     

    ________________________________________________________

    

    THE
      EXPLORATION COMPANY OF DELAWARE, INC.

    

    and

    

    FLEET
      NATIONAL BANK

    

    Rights
      Agent

    

    Rights
      Agreement

    

    Dated
      as
      of June 29, 2000

    

    ________________________________________________________

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
               TABLE
                OF CONTENTS

            

    

     

    
      	 	 	
              Page

            
	
              Section 1.

            	
              Certain
                Definitions

            	
              2

            
	 	 	 
	
              Section 2.

            	
              Appointment
                of Rights Agent

            	
              8

            
	 	 	 
	
              Section 3.

            	
              Issue
                of Right Certificates

            	
              8

            
	 	 	 
	
              Section 4.

            	
              Form
                of Right Certificates

            	
              11

            
	 	 	 
	
              Section 5.

            	
              Countersignature
                and Registration

            	
              11

            
	 	 	 
	
              Section 6.

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

            	
              12

            
	 	 	 
	
              Section 7.

            	
              Exercise
                of Rights; Purchase Price; Expiration Date of Rights

            	
              13

            
	 	 	 
	
              Section 8.

            	
              Cancellation
                and Destruction of Right Certificates

            	
              15

            
	 	 	 
	
              Section 9.

            	
              Status
                and Availability of Preferred Shares

            	
              16

            
	 	 	 
	
              Section 10.

            	
              Preferred
                Shares Record Date

            	
              17

            
	 	 	 
	
              Section 11.

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

            	
              18

            
	 	 	 
	
              Section 12.

            	
              Certificate
                of Adjustment

            	
              30

            
	 	 	 
	
              Section 13.

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

            	
              31

            
	 	 	 
	
              Section 14.

            	
              Fractional
                Rights and Fractional Shares

            	
              32

            
	 	 	 
	
              Section 15.

            	
              Rights
                of Action

            	
              34

            
	 	 	 
	
              Section 16.

            	
              Agreement
                of Right Holders

            	
              34

            
	 	 	 
	
              Section 17.

            	
              Right
                Certificate Holder Not Deemed a Stockholder

            	
              35

            
	 	 	 
	
              Section 18.

            	
              Concerning
                the Rights Agent

            	
              36

            

    

     

    
      
        
        

      

      
        A-i

        
          

        

      

      
        
        

      

    

     

    
      	
              Section 19.

            	
              Merger
                or Consolidation or Change of Name of Rights Agent

            	
              37

            
	 	 	 
	
              Section 20.

            	
              Duties
                of Rights Agent

            	
              39

            
	 	 	 
	
              Section 21.

            	
              Change
                of Rights Agent

            	
              44

            
	 	 	 
	
              Section 22.

            	
              Issuance
                of New Right Certificates

            	
              45

            
	 	 	 
	
              Section 23.

            	
              Redemption

            	
              45

            
	 	 	 
	
              Section 24.

            	
              Exchange

            	
              47

            
	 	 	 
	
              Section 25.

            	
              Notice
                of Certain Events

            	
              50

            
	 	 	 
	
              Section 26.

            	
              Notices

            	
              51

            
	 	 	 
	
              Section 27.

            	
              Supplements
                and Amendments

            	
              53

            
	 	 	 
	
              Section 28.

            	
              Successors

            	
              53

            
	 	 	 
	
              Section 29.

            	
              Benefits
                of this Agreement

            	
              54

            
	 	 	 
	
              Section 30.

            	
              Severability

            	
              54

            
	 	 	 
	
              Section 31.

            	
              Governing
                Law

            	
              54

            
	 	 	 
	
              Section 32.

            	
              Counterparts

            	
              54

            
	 	 	 
	
              Section 33.

            	
              Descriptive
                Headings

            	
              55

            
	 	 	 
	
              Section
                34.

            	
              Administration

            	
              55

            
	 	 	 
	
              Exhibit
                A

            	
              Form
                of Certificate of Designation of Series A Junior Participating Preferred
                Stock

            	
              A-1

            
	 	 	 
	
              Exhibit
                B

            	
              Form
                of Right Certificate

            	
              B-1

            
	 	 	 
	
              Exhibit
                C

            	
              Summary
                of Rights to Purchase Preferred Shares

            	
              C-1

            

    

    

    
      
        
        

      

      
        A-ii

        
          

        

      

      
        
        

      

    

    

    Exhibit
      A

    

    FORM

    

    of

    

    CERTIFICATE
      OF DESIGNATION

    

    of

    

    SERIES
      A
      JUNIOR PARTICIPATING PREFERRED STOCK

    

    of

    

    THE
      EXPLORATION COMPANY OF DELAWARE, INC.

    _______________________________________________

    

    (Pursuant
      to Section 151 of the

    Delaware
      General Corporation Law)

     

    ________________________________________________

    

    The
      Exploration Company of Delaware, Inc., a Delaware corporation (hereinafter
      called the "Corporation"), hereby certifies that the following resolution was
      adopted by the Board of Directors of the Corporation as required by Section
      151
      of the General Corporation Law at a meeting duly called and held on June 29,
      2000:

    

    RESOLVED,
      that pursuant to the authority granted to and vested in the Board of Directors
      of this Corporation (hereinafter called the "Board
      of Directors"
      or the
      "Board")
      in
      accordance with the provisions of the Certificate of Incorporation of the
      Corporation (the "Certificate
      of Incorporation"),
      the
      Board of Directors hereby creates a series of Preferred Stock, par value $0.01
      per share (the "Preferred
      Stock"),
      of
      the Corporation and hereby states the designation and number of shares, and
      fixes the relative rights, preferences, and limitations thereof as
      follows:

    

    Section
      1. Designation
      and Amount.
      The
      shares of this series shall be designated as "Series A Junior Participating
      Preferred Stock" (the "Series
      A Preferred Stock")
      and
      the number of shares constituting the Series A Preferred Stock shall be 30,000.
      Such number of shares may be increased or decreased by resolution of the Board
      of Directors; provided,
      that no
      decrease shall reduce the number of shares of Series A Preferred Stock to a
      number less than the number of shares then outstanding plus the number of shares
      reserved for issuance upon the exercise of outstanding options, rights or
      warrants or upon the conversion of any outstanding securities issued by the
      Corporation convertible into Series A Preferred Stock.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      2. Dividends
      and Distributions.

     

    (A) Subject
      to the rights of the holders of any shares of any series of Preferred Stock
      (or
      any other stock) ranking prior and superior to the Series A Preferred Stock
      with
      respect to dividends, the holders of shares of Series A Preferred Stock shall
      be
      entitled to receive, when, as and if declared by the Board of Directors out
      of
      funds legally available for the purpose, quarterly dividends payable in cash
      on
      the last day of March, June, September and December in each year (each such
      date
      being referred to herein as a "Quarterly
      Dividend Payment Date"),
      commencing on the first Quarterly Dividend Payment Date after the first issuance
      of a share or fraction of a share of Series A Preferred Stock, in an amount
      (if
      any) per share (rounded to the nearest cent), subject to the provision for
      adjustment hereinafter set forth, equal to 1000 times the aggregate per share
      amount of all cash dividends, and 1000 times the aggregate per share amount
      (payable in kind) of all non-cash dividends or other distributions, other than
      a
      dividend payable in shares of Common Stock, par value $0.01 per share (the
      "Common
      Stock"),
      of
      the Corporation or a subdivision of the outstanding shares of Common Stock
      (by
      reclassification or otherwise), declared on the Common Stock since the
      immediately preceding Quarterly Dividend Payment Date or, with respect to the
      first Quarterly Dividend Payment Date, since the first issuance of any share
      or
      fraction of a share of Series A Preferred Stock. In the event the Corporation
      shall at any time declare or pay any dividend on the Common Stock payable in
      shares of Common Stock, or effect a subdivision or combination or consolidation
      of the outstanding shares of Common Stock (by reclassification or otherwise
      than
      by payment of a dividend in shares of Common Stock) into a greater or lesser
      number of shares of Common Stock, then in each such case the amount to which
      holders of shares of Series A Preferred Stock were entitled immediately prior
      to
      such event under the preceding sentence shall be adjusted by multiplying such
      amount by a fraction, the numerator of which is the number of shares of Common
      Stock outstanding immediately after such event and the denominator of which
      is
      the number of shares of Common Stock that were outstanding immediately prior
      to
      such event.

    

    (B) The
      Corporation shall declare a dividend or distribution on the Series A Preferred
      Stock as provided in paragraph (A) of this Section immediately after it declares
      a dividend or distribution on the Common Stock (other than a dividend payable
      in
      shares of Common Stock).

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

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

    

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

     

    (A) Subject
      to the provision for adjustment hereinafter set forth, each share of Series
      A
      Preferred Stock shall entitle the holder thereof to 1000 votes on all matters
      submitted to a vote of the stockholders of the Corporation. In the event the
      Corporation shall at any time declare or pay any dividend on the Common Stock
      payable in shares of Common Stock, or effect a subdivision or combination or
      consolidation of the outstanding shares of Common Stock (by reclassification
      or
      otherwise than by payment of a dividend in shares of Common Stock) into a
      greater or lesser number of shares of Common Stock, then in each such case
      the
      number of votes per share to which holders of shares of Series A Preferred
      Stock
      were entitled immediately prior to such event shall be adjusted by multiplying
      such number by a fraction, the numerator of which is the number of shares of
      Common Stock outstanding immediately after such event and the denominator of
      which is the number of shares of Common Stock that were outstanding immediately
      prior to such event.

     

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

    

     

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

    

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

    

    Section
      4. Certain
      Restrictions.

     

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

     

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

    

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

    

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

     

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

     

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

    

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

    

    Section
      6. Liquidation,
      Dissolution or Winding Up.
      Upon
      any liquidation, dissolution or winding up of the Corporation the holders of
      shares of Series A Preferred Stock shall be entitled to receive an aggregate
      amount per share, subject to the provision for adjustment hereinafter set forth,
      equal to 1000 times the aggregate amount to be distributed per share to holders
      of shares of Common Stock plus an amount equal to any accrued and unpaid
      dividends. In the event the Corporation shall at any time declare or pay any
      dividend on the Common Stock payable in shares of Common Stock, or effect a
      subdivision or combination or consolidation of the outstanding shares of Common
      Stock (by reclassification or otherwise than by payment of a dividend in shares
      of Common Stock) into a greater or lesser number of shares of Common Stock,
      then
      in each such case the aggregate amount to which holders of shares of Series
      A
      Preferred Stock were entitled immediately prior to such event under the
      preceding sentence shall be adjusted by multiplying such amount by a fraction
      the numerator of which is the number of shares of Common Stock outstanding
      immediately after such event and the denominator of which is the number of
      shares of Common Stock that were outstanding immediately prior to such
      event.

     

    
      
        
        

      

      
        A-5

        
          

        

      

      
        
        

      

    

     

    Section
      7. Consolidation,
      Merger, etc.
      In case
      the Corporation shall enter into any consolidation, merger, combination or
      other
      transaction in which the shares of Common Stock are exchanged for or changed
      into other stock or securities, cash and/or any other property, then in any
      such
      case each share of Series A Preferred Stock shall at the same time be similarly
      exchanged or changed into an amount per share, subject to the provision for
      adjustment hereinafter set forth, equal to 1000 times the aggregate amount
      of
      stock, securities, cash and/or any other property (payable in kind), as the
      case
      may be, into which or for which each share of Common Stock is changed or
      exchanged. In the event the Corporation shall at any time declare or pay any
      dividend on the Common Stock payable in shares of Common Stock, or effect a
      subdivision or combination or consolidation of the outstanding shares of Common
      Stock (by reclassification or otherwise than by payment of a dividend in shares
      of Common Stock) into a greater or lesser number of shares of Common Stock,
      then
      in each such case the amount set forth in the preceding sentence with respect
      to
      the exchange or change of shares of Series A Preferred Stock shall be adjusted
      by multiplying such amount by a fraction, the numerator of which is the number
      of shares of Common Stock outstanding immediately after such event and the
      denominator of which is the number of shares of Common Stock that were
      outstanding immediately prior to such event.

    

    Section
      8. Amendment.
      The
      Certificate of Incorporation shall not be amended in any manner, including
      in a
      merger or consolidation, which would alter, change, or repeal the powers,
      preferences or special rights of the Series A Preferred Stock so as to affect
      them adversely without the affirmative vote of the holders of at least
      two-thirds of the outstanding shares of Series A Preferred Stock, voting
      together as a single class.

    

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

    

    IN
      WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the
      Corporation by its duly authorized officer this 29th
      day of
      June, 2000.

     

    
      	 	
              THE
                EXPLORATION COMPANY OF

            
	 	
              DELAWARE,
                INC.

            
	 	 
	 	 
	 	
              By:

            	 
	 	
               James
                E. Sigman

            
	 	
               President

            

    

     

    
      
        
        

      

      
        A-6

        
          

        

      

      
        
        

      

    

     

    Exhibit
      B

    

    Form
      of
      Right Certificate

    

    
      	
              Certificate
                No. R-

            	
              _______
                Rights

            

    

    

    NOT
      EXERCISABLE AFTER JUNE 29, 2010 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
      THE
      RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT AND TO EXCHANGE ON THE
      TERMS
      SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS THAT
      ARE
      OR WERE ACQUIRED OR BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY ASSOCIATES
      OR AFFILIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR
      ANY
      SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

     

    Right
      Certificate

    THE
      EXPLORATION COMPANY OF DELAWARE, 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 June 29, 2000 the "Rights
      Agreement"),
      between The Exploration Company of Delaware, Inc., a Delaware corporation (the
      "Company"),
      and
      Fleet National Bank (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., San Antonio
      time, on June 29, 2010, at the principal office of the Rights Agent, or at
      the
      office of its successor as Rights Agent, one one-thousandth of a fully paid
      non-assessable share of Series A Junior Participating Preferred Stock, par
      value
      $0.01 per share (the "Preferred
      Shares"),
      of
      the Company, at a purchase price of $12.00 per one one-thousandth of a Preferred
      Share (the "Purchase
      Price"),
      upon
      presentation and surrender of this Right Certificate with the certification
      and
      the Form of Election to Purchase duly executed. The number of Rights evidenced
      by this Right Certificate (and the number of one one-thousandths of a Preferred
      Share which may be purchased upon exercise hereof) set forth above, and the
      Purchase Price set forth above, are the number and Purchase Price as of June
      29,
      2000, based on the Preferred Shares as constituted at such date. As provided
      in
      the Rights Agreement, the Purchase Price and the number of one one-thousandths
      of a Preferred Share which may be purchased upon the exercise of the Rights
      evidenced by this Right Certificate are subject to modification and adjustment
      upon the happening of certain events.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

       From
      and
      after the occurrence of an event described in Section 11(a)(ii) of the Rights
      Agreement, if the Rights evidenced by this Right Certificate are or were at
      any
      time on or after the earlier of (x) the date of such event and (y) the
      Distribution Date (as such term is defined in the Rights Agreement) acquired
      or
      beneficially owned by an Acquiring Person or an Associate or Affiliate of an
      Acquiring Person (as such terms are defined in the Rights Agreement), such
      Rights shall become void, and any holder of such Rights shall thereafter have
      no
      right to exercise such Rights.

    

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

    

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

    

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

    

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

     

    
      
        
        

      

      
        B-2

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

    

      
        	
                Attest:

              	 	
                THE
                  EXPLORATION COMPANY OF

              
	 	 	
                DELAWARE,
                  INC.

              
	 	 	 
	 	 	 
	 	 	
                By:
                  

              	 
	
                Title:

              	 	 	
                Title:

              
	
                Countersigned:

              	 	 
	 	 	 
	
                FLEET
                  NATIONAL BANK

              	 	 
	
                Rights
                  Agent

              	 	 
	 	 	 
	 	 	 
	
                By:

              	 	 	 
	 	
                Authorized
                  Signature

              	 	 

      

    

    
      
        
        

      

      
        B-3

        
          

        

      

      
        
        

      

    

    Form
      of
      Reverse Side of Right Certificate

    FORM
      OF ASSIGNMENT

    (To
      be
      executed by the registered holder if such

    holder
      desires to transfer the Right Certificate.)

    FOR
      VALUE
      RECEIVED _________________________________ hereby sells, assigns and transfers
      unto _____________________
      ______________________________________________________________

    (Please
      print name and address of transferee) 

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

     

    Dated:
      _____________ ___, _____

    

    

    
      	 	 
	 	
              Signature

            

    

    

    Signature
      Guaranteed:

    

    Signatures
      must be guaranteed by a member firm of a registered national securities
      exchange, a member of the National Association of Securities Dealers, Inc.,
      or a
      commercial bank or trust company having an office or correspondent in the United
      States.

    

    
      
        

      

    

    

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

    
      
        

        
          	 	 
	 	
                  Signature

                

        

         

      

      
        

      

    

    
      
        
        

      

      
        B-4

        
          

        

      

      
        
        

      

    

    Form
      of
      Reverse Side of Right Certificate — continued

     

    FORM
      OF ELECTION TO PURCHASE

     

    (To
      be
      executed if holder desires to

    exercise
      the Right Certificate.)

     

    To
      THE
      EXPLORATION COMPANY OF DELAWARE, INC.:

    

    The
      undersigned hereby irrevocably elects to exercise ________________ Rights
      represented by this Right Certificate to purchase the Preferred Shares issuable
      upon the exercise of such Rights and requests that certificates for such
      Preferred Shares be issued in the name of:

    

    Please
      insert social security

    or
      other
      identifying number

     

    

    
      
        

      

    

    (Please
      print name and address)

     

    
      
        

      

    

    

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

    

    Please
      insert social security

    or
      other
      identifying number

     

    

    
      

    

     (Please
      print name and address)

     

    
      

    

    
 

    
      

    

    

    Dated:
      _____________ ___, _____

    

    
      	 	 
	 	
              Signature

            

    

     

    
      
        
        

      

      
        B-5

        
          

        

      

      
        
        

      

    

    

    Signature
      Guaranteed:

    

    Signatures
      must be guaranteed by a member firm of a registered national securities
      exchange, a member of the National Association of Securities Dealers, Inc.,
      or a
      commercial bank or trust company having an office or correspondent in the United
      States.

    
      
        
        

      

      
        B-6

        
          

        

      

      
        
        

      

    

    

    Form
      of
      Reverse Side of Right Certificate — continued

    

    
      

    

    

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

    
 

    
      	 	 
	 	
              Signature

            

    

    

    
      

    

     

    NOTICE

     

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

    

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

    

    
      
        
        

      

      
        B-7

        
          

        

      

      
        
        

      

    

     

    Exhibit
      C

     

    
      SUMMARY
        OF RIGHTS TO PURCHASE

      PREFERRED
        SHARES

       

      On
        June
        29, 2000, the Board of Directors of The Exploration Company of Delaware,
        Inc.
        (the "Company")
        declared a dividend of one preferred share purchase right (a "Right")
        for
        each outstanding share of Common Stock, par value $0.01 per share (the
        "Common
        Shares")
        outstanding on July 19, 2000 (the "Record
        Date")
        to the
        stockholders of record on that date. Each Right entitles the registered holder
        to purchase from the Company one one-thousandth of a share of Series A Junior
        Participating Preferred Stock, par value $0.01 per share (the "Preferred
        Shares"),
        of
        the Company, at a price of $12.00 per one one-thousandth of a Preferred Share
        (the "Purchase
        Price"),
        subject to adjustment. The description and terms of the Rights are set forth
        in
        a Rights Agreement (the "Rights
        Agreement")
        between the Company and Fleet National Bank, as Rights Agent (the "Rights
        Agent").

      

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

      

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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      The
        Rights are not exercisable until the Distribution Date. The Rights will expire
        on June 29, 2010 (the "Final Expiration Date"),
        unless the Final Expiration Date
        is
        extended or unless the Rights are earlier redeemed by the Company, in each
        case,
        as described below.

      

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

      

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

      

      Preferred
        Shares purchasable upon exercise of the Rights will not be redeemable. Each
        Preferred Share will be entitled to a quarterly dividend payment of 1000
        times
        the dividend declared per Common Share. In the event of liquidation, the
        holders
        of the Preferred Shares will be entitled to an aggregate payment of 1000
        times
        the aggregate payment made per Common Share. Each Preferred Share will have
        1000
        votes, voting together with the Common Shares. In the event of any merger,
        consolidation or other transaction in which Common Shares are exchanged,
        each
        Preferred Share will be entitled to receive 1000 times the amount received
        per
        Common Share. These rights are protected by customary antidilution
        provisions.

       

      
        
          
          

        

        
          C-2

          
            

          

        

        
          
          

        

      

       

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

      

      From
        and
        after the occurrence of an event described in Section 11(a)(ii) of the Rights
        Agreement, if the Rights evidenced by this Right Certificate are or were
        at any
        time on or after the earlier of (x) the date of such event and (y) the
        Distribution Date (as such term is defined in the Rights Agreement) acquired
        or
        beneficially owned by an Acquiring Person or an Associate or Affiliate of
        an
        Acquiring Person (as such terms are defined in the Rights Agreement), such
        Rights shall become void, and any holder of such Rights shall thereafter
        have no
        right to exercise such Rights.

      

      In
        the
        event that, at any time after a Person becomes an Acquiring Person, the Company
        is acquired in a merger or other business combination transaction or 50%
        or more
        of its consolidated assets or earning power are sold, proper provision will
        be
        made so that each holder of a Right will thereafter have the right to receive,
        upon the exercise thereof at the then current exercise price of the Right,
        that
        number of shares of common stock of the acquiring company which at the time
        of
        such transaction will have a market value of two times the exercise price
        of the
        Right. In the event that any person becomes an Acquiring Person, proper
        provision shall be made so that each holder of a Right, other than Rights
        beneficially owned by the Acquiring Person and its Affiliates and Associates
        (which will thereafter be void), will thereafter have the right to receive
        upon
        exercise that number of Common Shares having a market value of two times
        the
        exercise price of the Right. If the Company does not have sufficient Common
        Shares to satisfy such obligation to issue Common Shares, or if the Board
        of
        Directors so elects, the Company shall deliver upon payment of the exercise
        price of a Right an amount of cash or securities equivalent in value to the
        Common Shares issuable upon exercise of a Right; provided that, if the Company
        fails to meet such obligation within 30 days following the date a Person
        becomes
        an Acquiring Person, the Company must deliver, upon exercise of a Right but
        without requiring payment of the exercise price then in effect, Common Shares
        (to the extent available) and cash equal in value to the difference between
        the
        value of the Common Shares otherwise issuable upon the exercise of a Right
        and
        the exercise price then in effect. The Board of Directors may extend the
        30-day
        period described above for up to an additional 60 days to permit the taking
        of
        action that may be necessary to authorize sufficient additional Common Shares
        to
        permit the issuance of Common Shares upon the exercise in full of the
        Rights.

       

      
        
          
          

        

        
          C-3

          
            

          

        

        
          
          

        

      

       

      At
        any
        time after any Person becomes an Acquiring Person and prior to the acquisition
        by any person or group of a majority of the outstanding Common Shares, the
        Board
        of Directors of the Company may exchange the Rights (other than Rights owned
        by
        such person or group which have become void), in whole or in part, at an
        exchange ratio of one Common Share per Right (subject to
        adjustment).

      

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

      

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

      

      The
        terms
        of the Rights may be amended by the Board of Directors of the Company without
        the consent of the holders of the Rights, except that from and after such
        time
        as any person becomes an Acquiring Person no such amendment may adversely
        affect
        the interests of the holders of the Rights (other than the Acquiring Person
        and
        its Affiliates and Associates).

      

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

       

      A
        copy of
        the Agreement has been filed with the Securities and Exchange Commission
        as an
        Exhibit to a Registration Statement on Form 8-A dated June __, 2000. A copy
        of
        the Agreement is available free of charge from the Company. This summary
        description of the Rights does not purport to be complete and is qualified
        in
        its entirety by reference to the Agreement, which is hereby incorporated
        herein
        by reference.

       

      
        
          
          

        

        
          C-4

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