Document:

Exhibit
4.1

 

RIGHTS AGREEMENT

 

Dated as of
November  16, 2004

 

between

 

DIGIMARC
CORPORATION

 

and

 

EQUISERVE TRUST
COMPANY, N.A.,

 

as Rights Agent

 

 

TABLE OF
CONTENTS

 

	
  Section
  1.

  	
  Certain
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.

  	
  Appointment
  of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.

  	
  Issuance
  of Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.

  	
  Form
  of Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  5.

  	
  Countersignature
  and Registration

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.

  	
  Exercise
  of Rights; Purchase Price; Expiration Date of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.

  	
  Cancellation
  and Destruction of Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.

  	
  Reservation
  and Availability of Capital Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Preferred Stock Record Date

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted Purchase Price or
  Number of Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional Rights and Fractional Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Rights Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Rights Certificate Holder Not Deemed a
  Stockholder

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger or Consolidation or Change of Name
  of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New Rights Certificates

  	
   

  

 

i

 

	
  Section 23.

  	
  Redemption and Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 24.

  	
  Notice of Certain Events

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Supplements and Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Determinations and Actions by the Board of
  Directors, etc

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Benefits of this Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Descriptive Headings

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Exchange

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 35.

  	
  Force Majeure

  	
   

  

 

 

	
  Exhibit A.

  	
  Form of Rights Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B.

  	
  Form of Summary of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  Certificate of Designation

  	
   

  

 

ii

 

RIGHTS AGREEMENT

 

RIGHTS
AGREEMENT, dated as of November  16, 2004  (the “Agreement”), between Digimarc Corporation, a Delaware
corporation (the “Company”), and EquiServe Trust Company, N.A, as rights
agent (the “Rights Agent”).

 

WHEREAS,
effective November  16, 2004 (the “Rights
Dividend Declaration Date”), the Board of Directors of the Company (the “Board
of Directors”) (i) authorized and declared a dividend of one right (“Right”)
for each share of Common Stock, par value $.001 per share, of the Company (the “Company
Common Stock”) outstanding at the Close of Business on November  29, 2004 (the “Record Date”), and (ii) authorized
the issuance of one Right (as such number may hereinafter be adjusted pursuant
hereto) for each share of Company Common Stock issued between the Record Date
and the earlier of the Distribution Date and the Expiration Date and, in
certain circumstances, for each share of Company Common Stock issued after the
Distribution Date but before the Expiration Date; and

 

WHEREAS,
each Right initially represents the right to purchase, upon the terms and
subject to the conditions hereinafter set forth, one Unit of Series A Preferred
Stock;

 

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

 

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

 

(a)           “Acquiring
Person” shall mean any Person who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 15% or more of the
shares of Company Common Stock then outstanding.  Notwithstanding the foregoing:

 

(i)            an “Acquiring
Person” shall not include:

 

(A)          the
Company;

 

(B)           any
Subsidiary of the Company;

 

(C)           any
employee benefit plan maintained by the Company or any of its Subsidiaries;

 

(D)          any trustee
or fiduciary with respect to such employee benefit plan acting in such capacity
or a trustee or fiduciary holding shares of Company Common Stock for the purpose
of funding any such plan;

 

(E)           Mazama
Capital Management, Inc. (“Mazama”) and its Affiliates and Associates,
for so long as the number of shares of Company Common Stock beneficially owned
by Mazama and its Affiliates and Associates does not exceed (other than as a
result of the acquisition after the date hereof of beneficial ownership of
shares of Company Common Stock pursuant to a dividend or distribution paid or
made by the Company on the outstanding shares

 

1

 

of Company Common Stock or pursuant to a split or
subdivision of the Company Common Stock) 24.57% of the number of shares of
Company Common Stock outstanding on the date hereof;

 

(F)           Kopp
Investment Advisors, LLC (“Kopp”) and its Affiliates and Associates, for so long as
the number of shares of Company Common Stock beneficially owned by Kopp and its
Affiliates and Associates does not exceed (other than as a result of the acquisition after the
date hereof of beneficial ownership of shares of Company Common Stock pursuant
to a dividend or distribution paid or made by the Company on the outstanding
shares of Company Common Stock or pursuant to a split or subdivision of
the Company Common Stock) 17.06% of the number of shares of Company Common
Stock outstanding on the date hereof;

 

(G)           any Person
if:

 

(1)              the
Board of Directors determines in good faith that such Person who would otherwise
be an “Acquiring Person” became such inadvertently (including, without
limitation, because (x) such Person was unaware that it beneficially owned
a percentage of Company Common Stock that would otherwise cause such Person to
be an “Acquiring Person” or (y) such Person was aware of the extent of its
Beneficial Ownership of Company Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing or influencing control of the Company;

 

(2)              such
Person does not become the Beneficial Owner of any additional shares of Company
Common Stock after such Person becomes aware that such Person would be an
Acquiring Person (but for the operation of this clause (G)); and

 

(3)              such
Person as promptly as practicable (as determined in good faith by the Board of
Directors) divested or divests itself of Beneficial Ownership of a sufficient number
of shares of Company Common Stock so that such Person would no longer be an “Acquiring
Person;”

 

or

 

(H)          any Person
who becomes the Beneficial Owner of 15% or more of the then-outstanding shares
of Company Common Stock as a result of the acquisition of shares of Company
Common Stock directly from the Company in one or more transactions approved by a
majority of  the Board of Directors,

 

and

 

2

 

(ii)           no Person
shall be deemed an “Acquiring Person” as a result of the acquisition of shares
of Company Common Stock by the Company which, by reducing the number of shares
of Company Common Stock outstanding, increases the proportional number of
shares beneficially owned by such Person; provided, however, that
if (x) a Person would become an Acquiring Person (but for the operation of
this subclause (ii)) as a result of the acquisition of shares of Company
Common Stock by the Company and (y) after such share acquisition by the
Company, such Person becomes the Beneficial Owner of any additional shares of
Company Common Stock (other than pursuant to the grant or exercise of an option
under a Company stock option plan or pursuant to a dividend or distribution
paid or made by the Company on the outstanding shares of Company Common Stock
or pursuant to a split or subdivision of the Company Common Stock), then such
Person shall be deemed an Acquiring Person unless, upon becoming the Beneficial
Owner of such additional shares, such Person is the Beneficial Owner of less
than 15% of the outstanding shares of Company Common Stock.

 

Each
Person identified in subclauses (A), (B), (C) and (D) of this Section (1)(a)
is individually an “Exempt Person” and collectively “Exempt Persons.”

 

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

 

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

 

(i)            which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership” of
under Rule 13d-3 of the General Rules and Regulations under the
Exchange Act (the “Exchange Act Regulations”) as in effect on the date
hereof; provided, however, that a Person shall not be deemed the “Beneficial
Owner” of, to have “Beneficial Ownership” of or to “beneficially own”, any
securities under this subparagraph (i) as a result of an agreement,
arrangement or understanding to vote such securities if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy or consent
given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the Exchange Act and the
Exchange Act Regulations, and (B) is not reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report);

 

(ii)           which are
beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate of such other Person) with which such Person (or any of
such Person’s Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy or consent as described
in the proviso to subparagraph (i) of this paragraph (c)) or disposing
of such securities; or

 

(iii)          which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is

 

3

 

exercisable immediately or only after the passage of
time or upon the satisfaction of conditions) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or otherwise;

 

provided,
however, that under this paragraph (c) a Person shall not be deemed
the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially
own”, any securities:

 

(A)          tendered
pursuant to a tender or exchange offer made in accordance with Exchange Act
Regulations by such Person or any of such Person’s Affiliates or Associates
until such tendered securities are accepted for purchase or exchange,

 

(B)           that may
be issued upon exercise of Rights at any time prior to the occurrence of a Triggering
Event, or

 

(C)           that may
be issued upon exercise of Rights from and after the occurrence of a Triggering
Event, which Rights were acquired by such Person or any of such Person’s
Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(c)
or Section 22 hereof (the “Original Rights”) or pursuant to Section 11(i)
hereof in connection with an adjustment made with respect to any Original
Rights; and

 

further
provided, however, that:

 

(x)            nothing
in this paragraph (c) shall cause a Person engaged in business as an
underwriter of securities to be the “Beneficial Owner” of, to have “Beneficial
Ownership” of, or to “beneficially own” any securities acquired through such
Person’s participation in good faith in a firm commitment underwriting until
the expiration of forty days after the date of such acquisition,

 

(y)           no
decision reached, or action taken, by the Board of Directors or any committee
thereof shall cause any Person (or any Affiliate or Associate of such Person)
who is a member of the Board of Directors or such committee to be deemed, for
the purposes of this Agreement, to be a Beneficial Owner of any securities
beneficially owned by any other Person (or any Affiliate or Associate of such
Person) who is a member of the Board of Directors or any committee thereof
solely by reason of such membership of the Board of Directors or any committee
thereof or participation in the decisions or actions thereof on the part of
either or both of such Persons, and

 

(z)            no Person
who is an officer, director or employee of an Exempt Person shall be deemed,
solely by reason of such Person’s status or authority as such, to be the “Beneficial
Owner” of, to have “Beneficial Ownership” of, or to “beneficially own” any
securities that are “beneficially owned” (as defined in this paragraph (c)),
including, without limitation, in a fiduciary capacity, by an Exempt Person or
by any other such officer, director or employee of an Exempt Person.

 

4

 

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

 

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

 

(f)            “Common
Stock” of any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or, if such Person shall have no
capital stock, the equity securities or other equity interest having power to
control or direct the management of such Person.

 

(g)           “Company”
has the meaning given it in the first paragraph of this Agreement, and also
means a Principal Party to the extent provided in Section 13(a).

 

(h)           “Person”
shall mean any individual, partnership, firm, limited liability company,
corporation, association, trust, unincorporated organization or other entity,
as well as any syndicate or group deemed to be a person under Section 14(d)(2)
of the Exchange Act as in effect on the date hereof.

 

(i)            “Preferred
Stock” shall mean the Series A Preferred Stock, par value $.001 per share, of the Company having the
voting powers, designation, preferences and relative, participating, optional
or other special rights and qualifications, limitations and restrictions
described in the Certificate of Designation set forth as Exhibit C hereto
and as amended from time to time.

 

(j)            “Stock
Acquisition Date” shall mean the first date of public announcement
(including, without limitation, the filing of any report, or any amendment to
any report, pursuant to Section 13(d) of the Exchange Act (or any
comparable or successor report)) by the Company or an Acquiring Person that an
Acquiring Person has become such; provided, however, that if such
Person is determined not to have become an Acquiring Person pursuant to
Section 1(a) hereof, then no Stock Acquisition Date shall be deemed to
have occurred.

 

(k)           “Subsidiary”
shall mean, with reference to any Person, any other Person of which an amount
of voting securities or equity interests sufficient to elect at least a
majority of the directors or equivalent governing body of such other Person is
beneficially owned, directly or indirectly, by such Person, or any other Person
otherwise controlled by such first-mentioned Person.

 

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

 

In
addition, the following terms are defined in the Sections indicated below:

 

5

 

	
  Defined Term

  	
   

  	
  Section
  Number

  
	
   

  	
   

  	
   

  
	
  Adjustment Shares

  	
   

  	
  11(a)(ii)

  
	
  Committee

  	
   

  	
  28(b)

  
	
  common stock
  equivalents

  	
   

  	
  11(a)(iii)

  
	
  Company Common Stock

  	
   

  	
  Whereas clause

  
	
  current market price

  	
   

  	
  11(d)

  
	
  Current Value

  	
   

  	
  11(a)(iii)

  
	
  Distribution Date

  	
   

  	
  3(a)

  
	
  Equivalent Preferred
  Stock

  	
   

  	
  11(b)

  
	
  Exchange Act

  	
   

  	
  1(b)

  
	
  Exchange Act
  Regulations

  	
   

  	
  1(c)

  
	
  Exchange Ratio

  	
   

  	
  34(a)

  
	
  Exempt Person

  	
   

  	
  1(a)

  
	
  Expiration Date

  	
   

  	
  7(a)

  
	
  Final Expiration Date

  	
   

  	
  7(a)

  
	
  Kopp

  	
   

  	
  1(a)(i)F)

  
	
  Mazama

  	
   

  	
  1(a)(i)(E)

  
	
  Nasdaq

  	
   

  	
  11(d)(i)

  
	
  Original Rights

  	
   

  	
  1(c)

  
	
  Purchase Price

  	
   

  	
  7(b)

  
	
  Record Date

  	
   

  	
  Whereas clause

  
	
  Redemption Price

  	
   

  	
  23(a)

  
	
  Registered Common Stock

  	
   

  	
  13(b)(ii)

  
	
  Registration Date

  	
   

  	
  9(c)

  
	
  Registration Statement

  	
   

  	
  9(c)

  
	
  Right

  	
   

  	
  Whereas clause

  
	
  Rights Certificates

  	
   

  	
  3(a)

  
	
  Rights Dividend
  Declaration Date

  	
   

  	
  Whereas clause

  
	
  Section 11(a)(ii) Event

  	
   

  	
  11(a)(ii)(C)

  
	
  Section 11(a)(iii)
  Trigger Date

  	
   

  	
  11(a)(iii)

  
	
  Section 13 Event

  	
   

  	
  13(a)

  
	
  Securities Act

  	
   

  	
  9(c)

  
	
  Spread

  	
   

  	
  11(a)(iii)

  
	
  Summary of Rights

  	
   

  	
  3(b)

  
	
  Trading Day

  	
   

  	
  11(d)(i)

  
	
  Unit

  	
   

  	
  7(b)

  

 

Section 2.               Appointment
of Rights Agent.  The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such appointment.  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.               Issuance
of Rights Certificates.

 

(a)           Until
the earlier of (i) the Close of Business on the tenth Business Day after
the Stock Acquisition Date, and (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of a majority  of the Board of Directors prior to the occurrence of a Section
11(a)(ii) Event) after the date that a tender or exchange offer by any

 

6

 

Person (other than an
Exempt Person) is first published or sent or given within the meaning of
Rule 14d-4(a) of the Exchange Act Regulations or any successor rule, if
upon consummation thereof such Person would be an Acquiring Person (including,
in the case of both clause (i) and (ii), any such date which is after the
date of this Agreement and prior to the issuance of the Rights) (the earlier of
(i) and (ii) above being the “Distribution Date”):

 

(x)            the
Rights will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for shares of Company Common Stock
registered in the names of the holders of shares of Company Common Stock as of
and subsequent to the Record Date (which certificates for shares of Company
Common Stock shall be deemed also to be certificates for Rights) and not by
separate certificates, and

 

(y)           the Rights
will be transferable only in connection with the transfer of the underlying
shares of Company Common Stock including a transfer to the Company;

 

provided,
however, that if a tender or exchange offer is terminated prior to the
occurrence of a Distribution Date, then no Distribution Date shall occur as a
result of such tender or exchange offer. 
As soon as practicable after the Company has notified the Rights Agent
of the occurrence of the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of shares of
Company Common Stock as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or more
rights certificates, in substantially the form of Exhibit A hereto (the “Rights
Certificates”), evidencing one Right for each share of Company Common Stock
so held, subject to adjustment as provided herein.

 

In the
event that an adjustment in the number of Rights per share of Company Common
Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company may make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights.  As of and after the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates.

 

(b)           As
promptly as practicable following the Record Date, the Company will send a copy
of a Summary of Rights to Purchase Preferred Stock, in substantially the form
attached hereto as Exhibit B (the “Summary of Rights”), by first-class,
postage prepaid mail, to each record holder of shares of Company Common Stock
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 Company Common Stock outstanding as of
the Record Date or issued subsequent to the Record Date but prior to the earlier
of the Distribution Date and the Expiration Date, until the Distribution Date
the Rights will be evidenced by such certificates registered in the names of
the holders thereof.  Until the
Distribution Date (or, if earlier, the Expiration Date), the surrender for
transfer of any such certificate for Company Common Stock outstanding as of the
Record Date shall also constitute the transfer of the Rights associated with
the Company Common Stock represented thereby.

 

7

 

(c)           Rights
shall, without any further action, be issued in respect of all shares of
Company Common Stock which are issued (including any shares of Company Common
Stock held in treasury) after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date.  In addition, Rights shall be issued with
respect to all shares of Company Common Stock described in the second sentence
of Section 22 hereof, subject to the provisions thereof.  Certificates representing such
shares of Company Common Stock issued after the Record Date shall bear the
following legend:

 

This
certificate also evidences and entitles the holder hereof to certain Rights as
set forth in the Rights Agreement between Digimarc Corporation (the “Company”)
and EquiServe Trust Company, N.A. (the “Rights Agent”) dated as of November 16,
2004, as amended from time to time (the “Rights Agreement”), the terms of which
are hereby incorporated herein by reference and a copy of which is on file at
the office of the Rights Agent.  Under
certain circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced by this
certificate.  The Company will mail to
the holder of this certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of a written request
therefor.  UNDER CERTAIN CIRCUMSTANCES
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO
IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY
OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND
VOID.

 

With
respect to certificates representing shares of Company Common Stock that bear
the foregoing legend, until the earlier of the Distribution Date and the Expiration
Date, the Rights associated with the shares of Company Common Stock represented
by such certificates shall be evidenced by such certificates alone and
registered holders of the shares of Company Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the shares of Company Common Stock represented by such certificates.

 

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

 

(e)           Notwithstanding
anything to the contrary contained herein, shares of Company Common Stock and
Rights (and any securities issuable on their exercise) may be issued and
transferred by book-entry and not represented by physical certificates.  Where shares of Company Common Stock and
Rights (and any securities issuable on their exercise) are held in
uncertificated form, the Company and the Rights Agent shall cooperate in all
respects to give effect to the intent of the provisions contained herein.

 

8

 

Section 4.               Form
of Rights Certificates.

 

(a)           The
Rights Certificates (and the forms of election to purchase and of assignment and
the certificates to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A 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 any rule or regulation thereunder or with any
rule or regulation of any stock exchange or automated quotation system on which
the Rights may from time to time be listed or to conform to usage.  Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date (or in the case of Rights issued with respect to
Common Stock issued by the Company after the Record Date, as of the date of
issuance of such Common Stock) and on their face shall entitle the holders
thereof to purchase such number of Units of Preferred Stock as shall be set
forth therein at the price set forth therein, provided, however,
that the amount and type of securities, cash or other assets that may be
acquired upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.

 

(b)           Any
Rights Certificate that represents Rights which are null and void pursuant to
Section 7(e) of this Agreement and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:

 

The
Rights represented by this Rights Certificate are or were beneficially owed by
a Person who was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person (as such terms are defined in the Rights Agreement).  Accordingly, this Right Certificate and the
Rights represented hereby are null and void.

 

The
provisions of Section 7(e) hereof shall be operative whether or not the
foregoing legend is contained on any such Right Certificate.

 

Section 5.               Countersignature
and Registration.

 

(a)           Any
Rights Certificates shall be executed on behalf of the Company by its Chairman,
its Chief Executive Officer, its President or one of its Vice Presidents and
shall be attested by its Secretary, Treasurer or one of its Assistant
Secretaries and shall have affixed thereto the Company’s seal (if any) or a
facsimile thereof.  The signature of any
of these officers on the Rights Certificates may be manual or facsimile.  Rights Certificates bearing the manual or
facsimile signatures of the individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at
the date of such Rights Certificates.  No
Rights Certificate shall be entitled to any benefit under this Agreement or be
valid for any purpose unless there appears on such Rights Certificate a
countersignature duly executed by the Rights Agent by manual signature of an
authorized signatory, and such countersignature upon any Rights Certificate
shall be conclusive evidence, and the only evidence, that such Rights
Certificate has been duly countersigned as required hereunder.

 

9

 

(b)           Following
the Distribution Date, the Rights Agent will keep or cause to be kept, at its
office designated for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder.  Such books shall show the
name and address of each holder of the Rights Certificates, the number of
Rights evidenced on its face by each Rights Certificate and the date of each
Rights Certificate.

 

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

 

(a)           Subject
to the provisions of Sections 4, 7(e) and 14 hereof, at any time after the
Close of Business on the Distribution Date, and at or prior to the Close of
Business on the Expiration Date, any Rights Certificate or Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of
Units of Preferred Stock (or, following a Triggering Event, other securities,
cash or other assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder, in the case of a
transfer) to purchase.  Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose.  Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and executed the certificate set
forth in the form of assignment on the reverse side of such Rights Certificate
and shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) of the Rights represented by such
Rights Certificate or Affiliates or Associates thereof as the Company shall
reasonably request.  Thereupon the Rights
Agent shall, subject to the provisions of Section 7(e), Section 14 and
Section 34 hereof, countersign and deliver to the Person entitled thereto
a Rights Certificate or Rights Certificates, as the case may be, as so
requested.  The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.

 

(b)           Subject
to Section 7(e) hereof, if a Rights Certificate shall be mutilated, lost,
stolen or destroyed, upon request by the registered holder of the Rights
represented thereby and upon payment to the Company and the Rights Agent of all
reasonable expenses incident thereto, there shall be issued, in exchange for
and upon cancellation of the mutilated Rights Certificate, or in substitution
for the lost, stolen or destroyed Rights Certificate, a new Rights Certificate,
in substantially the form of the prior Rights Certificate, of like tenor and
representing the equivalent number of Rights, but, in the case of loss, theft
or destruction, only upon receipt of evidence satisfactory to the Company and
the Rights Agent of such loss, theft or destruction of such Rights Certificate
and, if requested by the Company or the Rights Agent, indemnity also
satisfactory to it.

 

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

 

(a)           Prior
to the earlier of (i) the Close of Business on the tenth anniversary hereof
(the “Final Expiration Date”), (ii) the time at which the Rights are
redeemed as provided

 

10

 

in Section 23 hereof,
and (iii) the time at which the Rights are exchanged as provided in Section 34
hereof, at which time the Rights are deemed terminated (the earlier of (i),
(ii), and (iii) being the “Expiration Date”), the registered holder of
any Rights Certificate may, subject to the other provisions hereof, including
without limitation Sections 7(e), 7(f), 9(c), 11(a) and 23 hereof,
exercise the Rights evidenced thereby, in whole or in part, at any time after
the Distribution Date upon surrender of the Rights Certificate, with the form
of election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price (as
hereinafter defined) for the number of Units of Preferred Stock (or, following
a Triggering Event, other securities, cash or other assets, as the case may be)
for which such surrendered Rights are then exercisable.

 

(b)           The
purchase price for each one one-hundredth  of a share
(each such one one-hundredth of a share being a “Unit”) of Preferred
Stock upon exercise of Rights shall be $100.00,
subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof (such purchase price, as so adjusted, being the “Purchase Price”),
and shall be payable in accordance with paragraph (c) below.

 

(c)           Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase and the certificate duly executed, accompanied by
payment, with respect to each Right so exercised, of the Purchase Price for the
Units of Preferred Stock (or, following a Triggering Event, other securities,
cash or other assets, as the case may be) to be purchased thereby as set forth
below and an amount equal to any applicable transfer tax or evidence
satisfactory to the Company of payment of such tax, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly:

 

(i)            (A) requisition
from any transfer agent of the Preferred Stock (or make available, if the
Rights Agent is the transfer agent for the Preferred Stock) a certificate or
certificates for the number of Units of Preferred Stock to be purchased, and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the
total number of Units of Preferred Stock issuable upon exercise of the Rights hereunder
with a depositary agent, requisition from the depositary agent depositary
receipts representing interests in such number of Units of Preferred Stock as
are to be purchased (in which case certificates for the Units of Preferred
Stock 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)           after
receipt of such certificates or depositary receipts, cause the same to be delivered
to or, upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder,

 

(iii)          requisition
from the Company the amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 14 hereof, and

 

(iv)          after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate.

 

11

 

In the
event that the Company is obligated to issue Company Common Stock or other
securities of the Company, pay cash and/or distribute other property pursuant
to Section 11(a) hereof, the Company will make all arrangements necessary
so that such Company Common Stock, other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.  The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made
in cash or by certified or bank check or money order payable to the order of
the Company.

 

(d)           In
case the registered holder of any Rights Certificate shall exercise less than
all the Rights evidenced thereby, a new Rights Certificate evidencing the
Rights remaining unexercised shall be issued by the Rights Agent and delivered
to, or upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder, subject
to the provisions of Sections 6 and 14 hereof.

 

(e)           Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of any Section 11(a)(ii) Event, any Rights beneficially owned by:

 

(i)            an
Acquiring Person or an Associate or Affiliate of an Acquiring Person,

 

(ii)           a
transferee of an Acquiring Person (or of any such Associate or Affiliate) which
becomes a transferee after the Acquiring Person becomes such, or

 

(iii)          a
transferee of an Acquiring Person (or of any such Associate or Affiliate) which
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and which receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person (or any
such Associate or Affiliate) to holders of equity interests in such Acquiring
Person (or any such Associate or Affiliate) or to any Person with whom the
Acquiring Person (or such Associate or Affiliate) has any continuing agreement,
arrangement or understanding regarding the transferred Rights, shares of
Company Common Stock or the Company or (B) a transfer which the Board of
Directors has determined to be part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),

 

shall
be null and void without any further action, and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise.  The Company shall use all reasonable efforts
to ensure that the provisions of this Section 7(e) and Section 4(b) hereof
are complied with, but shall have no liability to any holder of Rights or any
other Person as a result of the Company’s failure to make or delay in making any
determinations with respect to an Acquiring Person or its Affiliates or Associates
or any transferee or any of them hereunder.

 

(f)            Notwithstanding
anything in this Agreement or any Rights Certificate 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 by such registered holder unless such registered holder shall have (i) completed
and executed the

 

12

 

certificate following the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, (ii) not indicated an affirmative
response to clause 1 or 2 thereof, and (iii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
of the Rights represented by such Rights Certificate or Affiliates or
Associates thereof as the Company shall reasonably request.

 

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

 

Section 9.               Reservation
and Availability of Capital Stock.

 

(a)           The
Company shall at all times prior to the occurrence of a Section 11(a)(ii)
Event cause to be reserved and kept available, out of its authorized and
unissued shares of preferred stock or its authorized and issued shares of
preferred stock held in its treasury, and after the occurrence of a
Section 11(a)(ii) Event, to the extent reasonably practical, cause to be
reserved and kept available, out of its authorized but unissued shares of preferred
stock, Company Common Stock and/or other securities or its authorized and
issued shares held in its treasury, the number of shares of Preferred Stock (and,
following the occurrence of a Section 11(a)(ii) Event, Company Common
Stock and/or other securities) that, as provided in this Agreement, will be
sufficient to permit the exercise in full of all outstanding Rights.  Upon the occurrence of any events resulting in
an increase in the aggregate number of shares of Preferred Stock (or other
equity securities of the Company) issuable upon exercise of all outstanding
Rights above the number then reserved, the Company shall make appropriate
increases in the number of shares so reserved to the extent reasonably practicable.

 

(b)           If
the shares of Preferred Stock (and, following the occurrence of a
Section 11(a)(ii) Event, Company Common Stock and/or other securities) to
be issued and delivered upon the exercise of the Rights may be listed on any
national securities exchange or automated quotation system, the Company shall
use its best efforts to cause, from and after the time that the Rights become
exercisable, all securities reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.

 

(c)           The
Company shall use its best efforts:

 

(i)            as soon
as practicable following the earliest date after the occurrence of a Section 11(a)(ii)
Event and a determination by the Company in accordance with Section 11(a)(iii)
hereof of the consideration to be delivered by the Company upon exercise of the
Rights or, if so required by law, as soon as practicable

 

13

 

following the Distribution Date (such date being the “Registration
Date”), to file a registration statement on an appropriate form under the
Securities Act of 1933, as amended (the “Securities Act”), with respect
to the securities that may be acquired upon exercise of the Rights (the “Registration
Statement”),

 

(ii)           to cause
the Registration Statement to become effective as soon as practicable after
such filing,

 

(iii)          to
cause the Registration Statement to continue to be effective (and to include a
prospectus complying with the requirements of the Securities Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable
for the securities covered by the Registration Statement, and (B) the
Expiration Date, and

 

(iv)          to take as
soon as practicable following the Registration Date such action as may be
required to ensure that any acquisition of securities upon exercise of the
Rights complies with any applicable state securities or “blue sky” laws.

 

The
Company may temporarily suspend, for a period of time not to exceed one hundred
twenty (120) days after the Registration Date, the exercisability of the Rights
in order to prepare and file such registration statement and permit it to
become effective.  Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.  In addition, if the Company shall determine
that a registration statement is required following the Distribution Date, but
before the Registration Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective.  Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained, the exercise thereof shall not be
permitted under applicable law or a registration statement shall not have been
declared effective.

 

(d)           The
Company shall take all such action as may be necessary to ensure that all
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
any other securities that may be delivered upon exercise of Rights) shall be,
at the time of delivery of the certificates or depositary receipts for such
securities (subject to payment of the Purchase Price), duly and validly
authorized and issued and fully paid and nonassessable.

 

(e)           The
Company shall pay any documentary, stamp or other tax or charge imposed in
connection with the issuance or delivery of the Rights Certificates or of any
Preferred Stock (or any other securities or assets, as the case may be) upon
the exercise of Rights; provided, however, the Company shall not
be required to pay any such tax or charge imposed in connection with the
issuance or delivery of Units of Preferred Stock, or any certificates or
depositary receipts for such Units of Preferred Stock (or, following the
occurrence of a Triggering Event, any other securities, cash or assets, as the
case may be) to any Person other than the registered holder of the Rights
Certificates evidencing the Rights surrendered for exercise.  The Company shall not be required to issue or
deliver any certificates or depositary receipts for Units of Preferred Stock
(or, following the occurrence of a Triggering Event, any other securities, cash
or assets, as the case may be) to, or in a name other than that of, the

 

14

 

registered holder upon the
exercise of any Rights until any such tax or charge shall have been paid (any
such tax or charge being payable by the holder of such Rights Certificate at
the time of surrender) or until it has been established to the Company’s
satisfaction that no such tax or charge is due.

 

Section 10.             Preferred
Stock Record Date.  Each Person in
whose name any certificate or depositary receipt for Units of Preferred Stock
(or other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Units of Preferred Stock (or other securities) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable taxes or charges) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record
holder of such securities on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Stock (or other securities)
transfer books of the Company are open; further  provided, however,
that if delivery of Units of Preferred Stock (or other securities, as the case
may be) is delayed pursuant to Section 9(c) hereof, such Persons shall be
deemed to have become the record holders of such Units of Preferred Stock (or other
securities) only when such Units (or other securities) first become
deliverable.  Prior to the exercise of
the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to
securities for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.

 

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

 

(a)           (i)            In
the event the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide
the outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (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 for herein, including this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or other
capital stock, as the case may be, issuable on such date upon exercise of the
Rights, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Stock or other capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when the transfer
books of the Company were still open, such holder would have owned

 

15

 

upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification.  If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii)
hereof.

 

(ii)           In the
event any Person, alone or together with its Affiliates and Associates, shall
become an Acquiring Person, other than pursuant to any transaction set forth in
Section 13(a) hereof, then, immediately upon the occurrence of such event
(a “Section 11(a)(ii) Event”), each holder of a Right (except as otherwise
provided herein, including Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise of such Right at the then-current Purchase
Price in accordance with the terms of this Agreement, in lieu of the number of
Units of Preferred Stock for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event (whether or not such
Right was then exercisable), such number of Units of Preferred Stock as shall
equal the result obtained by:

 

(A)          multiplying
the then-current Purchase Price by the number of Units of Preferred Stock for
which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event (whether or not such Right was then exercisable) (such product thereafter
being, for all purposes of this Agreement, other than Section 13 hereof,
the “Purchase Price”), and

 

(B)           dividing that
product by 50% of the current market price (determined pursuant to Section 11(d)
hereof) per Unit of Preferred Stock on the date of such first occurrence

 

(such
Units of Preferred Stock being the “Adjustment Shares”); provided,
however, that the Purchase Price and the number of Units of Preferred
Stock so receivable upon exercise of a Right shall, following the Section 11(a)(ii)
Event, be subject to further adjustment as appropriate in accordance with this Section 11.
 Notwithstanding
the foregoing, the Rights shall not be exercisable until the time period during
which the Rights may be redeemed pursuant to Section 23 hereof shall have
expired.  From and after the occurrence of a Section 13(a)
Event, any Rights that have not theretofore been exercised pursuant to this
Section 11(a)(ii) shall thereafter be exercisable only in connection with
Section 13 and not pursuant to this Section 11(a)(ii).

 

(iii)          The
Company, by the vote of a majority of the Board of Directors, may at its option
substitute for a Unit of Preferred Stock issuable upon the exercise of Rights
in accordance with the foregoing subparagraph (ii), shares of Company Common
Stock or fractions thereof having a current market price (as determined by
Section 11(d) hereof) equal to the current market price of a Unit of Preferred
Stock on the date of the Section 11(a)(ii) Event.  In the event that the number of shares of
Preferred Stock (or, if the Company shall have determined to substitute shares of
Company Common Stock for Units of Preferred Stock pursuant to the preceding
sentence, Company Common Stock)  which
are authorized by the Company’s Certificate of Incorporation, but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights, is not

 

16

 

sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a),
the Company shall, to the extent permitted by applicable law:

 

(A)          determine
the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the “Current Value”) over (2) the Purchase
Price (such excess being the “Spread”), and

 

(B)           with
respect to each Right (other than Rights which have become void pursuant to Section 7(e)),
make adequate provision to substitute, in whole or in part, for such Adjustment
Shares, upon exercise of a Right and payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) shares of Company Common
Stock or other equity securities of the Company (including, without limitation,
shares, or units of shares, of preferred stock (such other shares being “common
stock equivalents”)), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate value
which, when added to the value of the Units of Preferred Stock actually issued
upon exercise of such Right, shall have an aggregate value equal to the Current
Value (less the amount of any reduction in such Purchase Price), where such
aggregate value has been determined by a majority of  the
Board of Directors, after receiving advice from a nationally recognized
investment banking firm;

 

provided,
however, that if the Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within thirty days following the later
of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the
date on which the Company’s right of redemption pursuant to Section 23(a)
expires (such thirty day period, as it may be extended hereunder, being
referred to herein as the “Substitution Period,” and the later of (x)
and (y) being referred to herein as the “Section 11(a)(iii) Trigger
Date”), then, subject to Section 34 hereof, the Company shall be
obligated (to the extent permitted by applicable law) to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, Units of Preferred Stock (to the extent available) and then, if
necessary, shares (or fractions of shares, at the discretion of the Board of
Directors) of Company Common Stock and cash, or a combination thereof, which
Units of Preferred Stock, shares (or fractions of shares) of Company Common
Stock and/or cash shall have an aggregate value equal to the Spread.  If a majority of  the
Board of Directors determines in good faith that it is likely that sufficient
additional shares of Preferred Stock or Company Common Stock could be
authorized for issuance upon exercise in full of the Rights, then the Substitution
Period may be extended to the extent necessary, but not more than ninety days
after the Section 11(a)(iii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares.

 

To the extent that the Company determines that some
action need be taken pursuant to the second and/or third sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such
action shall apply uniformly to all outstanding Rights and (y) may suspend the
exercisability of the Rights until the

 

17

 

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 second sentence and to determine the value thereof.  If any such suspension occurs, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at the time
such suspension is no longer in effect.  For
purposes of this Section 11(a)(iii), the value of a Unit of Preferred
Stock or share of Company Common Stock shall be the current market price (as
determined pursuant to Section 11(d) hereof) per Unit of Preferred Stock
or share of Company Common Stock, as the case may be, on the Section 11(a)(iii)
Trigger Date and the value of any common stock equivalent shall be deemed to
have the same value as a Unit of Preferred Stock on such date.

 

(b)           In
case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them to subscribe for or
purchase (for a period expiring within forty-five calendar days after
such record date) shares of Preferred Stock (or shares having substantially the
same rights, privileges and preferences as shares of Preferred Stock (“Equivalent
Preferred Stock”)) or securities convertible into Preferred Stock or
Equivalent Preferred Stock at a price per share of Preferred Stock or per share
of Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the current market price (as determined pursuant to Section l1(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying:

 

(i)            the
Purchase Price in effect immediately prior to such record date, by

 

(ii)           a
fraction, (A) the numerator of which shall be the sum of the number of
shares of Preferred Stock outstanding on such record date, plus the number of
shares of Preferred Stock which the aggregate offering price of the total
number of shares of Preferred Stock and/or Equivalent Preferred Stock 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 (B) the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or Equivalent Preferred Stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible).

 

In case such subscription price may be paid by
delivery of consideration, part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by a
majority of the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.  Shares of Preferred Stock owned by or held
for the account of the Company or any Subsidiary 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.

 

18

 

(c)           In
case the Company shall fix a record date for a distribution to all holders of
shares of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness, cash (other than a regular
periodic cash dividend paid out of funds legally available therefor), assets
(other than a dividend payable in shares of Preferred Stock, but including any
dividend payable in stock other than Preferred Stock) or subscription rights,
options 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:

 

(i)            the
Purchase Price in effect immediately prior to such record date, by

 

(ii)           a
fraction, (A) the numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock
on such record date, less the fair market value (as determined in good faith by
a majority of  the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes) of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights, options or
warrants distributable in respect of a share of Preferred Stock and (B) the
denominator of which shall be such current market price per share of Preferred
Stock.

 

Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.

 

(d)           (i)            For
the purpose of any computation hereunder, the “current market price” per
share of Company Common Stock or Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such shares for the ten
consecutive Trading Days immediately prior to such date; provided, however,
if prior to the expiration of such requisite ten Trading Day period the issuer
announces either (A) a dividend or distribution on such shares payable in
such shares or securities convertible into such shares (other than the Rights),
or (B) any subdivision, combination or reclassification of such shares, and
the ex-dividend date for such dividend or distribution or the record date
for such subdivision, combination or reclassification, as the case may be, shall
not have occurred prior to the commencement of the requisite ten Trading Day
period, then, and in each such case, the “current market price” shall be
properly adjusted to take into account such event.  The closing price for each day shall be:

 

(x)            if the
shares are listed or admitted to trading on a national securities exchange or
interdealer quotation system, the last sale price, regular way, or, in the 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 on the principal
national securities exchange or interdealer quotation system on which such
shares are listed or admitted to trading, or

 

19

 

(y)           if such
shares are not listed or admitted to trading on any national securities
exchange or interdealer quotation system, 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 Nasdaq National Market (“Nasdaq”) or such
other system then in use, or

 

(z)            if on any
such date such shares are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in such shares selected by a majority of the  Board of Directors.

 

If on any such date no market maker is making a market
in such shares, or if such shares are not publicly held or so listed or traded,
“current market price” per share shall mean the fair value per share as
determined in good faith by a majority of the Board of Directors, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.  The term “Trading
Day” shall mean, if such shares are listed or admitted to trading on any
national securities exchange, a day on which the principal national securities
exchange on which such shares are listed or admitted to trading is open for the
transaction of business or, if such shares are not so listed or admitted, a
Business Day.

 

(ii)           For the
purpose of any computation hereunder, the “current market price” per
share of Preferred Stock shall be determined in the same manner as set forth
for Company Common Stock in clause (i) of this Section 11(d) (other
than the penultimate sentence thereof).  If
the current market price per share of Preferred Stock cannot be determined in
the manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section 11(d),
the “current market price” per share of Preferred Stock shall be conclusively
deemed to be an amount equal to (A) 100 (as
such amount may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to Company Common Stock
occurring after the date of this Agreement) multiplied by (B) the current
market price per share of Company Common Stock.  If neither Company Common Stock nor Preferred
Stock is publicly held or so listed or traded, “current market price” per share
of the Preferred Stock shall mean the fair value per share as determined in
good faith by a majority of  the Board of
Directors, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.  For all purposes of this Agreement, the “current
market price” of a Unit of Preferred Stock shall be equal to (A) the
current market price of one share of Preferred Stock divided by (B) 100.

 

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

 

20

 

may be.  Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which mandates
such adjustment and (ii) the Expiration Date.

 

(f)            If
as a result of an adjustment made pursuant to Section 11(a)(ii) or 13(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Preferred Stock, thereafter the
number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (d),
(e), (g), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7,
9, 10, 13 and 14 hereof with respect to the Preferred Stock 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 Units of Preferred Stock (or other
securities or amount of cash or combination thereof) that may be acquired from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.

 

(h)           Unless
the Company shall have exercised its election as provided in Section 11(i),
upon each adjustment of the Purchase Price as a result of the calculations made
in 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 Units of Preferred Stock
(calculated to the nearest one ten-thousandth of a Unit) obtained by (i) multiplying
(x) the number of Units of Preferred Stock 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 lieu of any adjustment in the number of
Units of Preferred Stock that may be acquired upon the exercise of a Right.  Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of Units
of Preferred Stock for which a Right was exercisable immediately prior to such
adjustment.  Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by
dividing (x) the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the (y) Purchase Price in effect immediately after
adjustment of the Purchase Price.  The
Company shall make a public announcement of its election to adjust the number
of Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. 
This record date may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Rights Certificates have been issued, shall
be at least ten days later than the date of such public announcement.  If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of

 

21

 

the Company, shall cause
to be distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such adjustment.  Rights Certificates to be so distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

 

(j)            Irrespective
of any adjustment or change in the Purchase Price or the number of Units of
Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price
per Unit and the number of Units of Preferred Stock which were expressed in the
initial Rights Certificates issued hereunder.

 

(k)           Before
taking any action that would cause an adjustment reducing the Purchase Price
below the par or stated value, if any, of the number of Units of Preferred
Stock or other shares of capital stock 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
such fully paid and nonassessable number of Units of Preferred Stock or other
shares at such adjusted Purchase Price.

 

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

 

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

 

(n)           The
Company shall not, at any time after the Distribution Date, (i) consolidate
with any other Person (other than a wholly owned Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), (ii) merge
with or into any other Person

 

22

 

(other than a wholly
owned Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of transactions, assets or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its wholly owned Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if:

 

(x)            at
the time of or immediately after such consolidation, merger, sale or transfer there
are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, or

 

(y)           prior
to, simultaneously with or immediately after such consolidation, merger, sale
or transfer, the Person which constitutes, or would constitute, the “Principal
Party” for purposes of Section 13(a) hereof shall have distributed or
otherwise transferred to its stockholders or other persons holding an equity
interest in such Person Rights previously owned by such Person or any of its
Affiliates and Associates.

 

(o)           After
the Distribution Date, the Company shall not, except as permitted by Section 23,
Section 26 or Section 34 hereof, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.

 

(p)           Anything
in this Agreement to the contrary notwithstanding, in the event that the
Company shall at any time after the Rights Dividend Declaration Date and prior
to the Distribution Date (i) declare a dividend on the outstanding shares
of Company Common Stock payable in shares of Company Common Stock, (ii) subdivide
the outstanding shares of Company Common Stock or (iii) combine the
outstanding shares of Company Common Stock into a smaller number of shares,  the number of Rights associated with each share of Company
Common Stock then outstanding, or issued or delivered thereafter prior to the
Distribution Date or in accordance with Section 22 hereof, shall be
proportionately adjusted so that the number of Rights thereafter associated
with each share of Company Common Stock following any such event shall equal
the result obtained by multiplying:

 

(x)            the
number of Rights associated with each share of Company Common Stock immediately
prior to such event, by

 

(y)           a
fraction, (A) the numerator of which shall be the total number of shares
of Company Common Stock outstanding immediately prior to the occurrence of the
event and (B) the denominator of which shall be the total number of shares
of Company Common Stock outstanding immediately following the occurrence of
such event.

 

Section 12.             Certificate
of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in
Section 11 or Section 13 hereof, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief statement of
the facts

 

23

 

accounting for such
adjustment, (b) promptly file with the Rights Agent and with each transfer
agent for the Preferred Stock and the Company Common Stock, a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Company Common Stock) in accordance with Section 25
hereof.  Notwithstanding the foregoing
sentence, the failure of the Company to make such certification or give such
notice shall not affect the validity of such adjustment or the force or effect
of the requirement for such adjustment.  The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.

 

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

 

(a)           In
the event that, following the first occurrence of a Section 11(a)(ii)
Event, directly or indirectly, either:

 

(x)            the
Company shall consolidate with, or merge with and into, any other Person (other
than a wholly owned Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger,

 

(y)           any Person
(other than a wholly owned Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with
or into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Company
Common Stock shall be changed into or exchanged for stock or other securities
of the Company or any other Person or cash or any other property, or

 

(z)            the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer) to any Person or Persons (other than the
Company or any of its wholly owned Subsidiaries in one or more transactions
each of which complies with Section 11(o) hereof), 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)

 

(any such event being a “Section 13 Event”),
then, and in each such case:

 

(i)            each
holder of a Right (other than Rights which have become void as provided in Section 7(e)
hereof) shall thereafter have the right to receive, upon the exercise thereof
at the then-current Purchase Price, in accordance with this Agreement and in
lieu of Units of Preferred Stock or shares of Company Common Stock, such number
of validly authorized and issued, fully paid, nonassessable and freely
tradeable shares of Common Stock of the Principal Party, which shares shall not
be subject to any liens, encumbrances, rights of call or first refusal,
transfer restrictions or other adverse claims, as shall be equal to the result
obtained by:

 

(A)          multiplying
(x) the then-current Purchase Price by (y) the number of Units of Preferred
Stock for which a Right is exercisable immediately

 

24

 

prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying (x) the number of such Units
for which a Right would be exercisable hereunder but for the occurrence of such
Section 11(a)(ii) Event by (y) the Purchase Price which would be in effect
hereunder but for such first occurrence), and

 

(B)           dividing
that product (which, following the first occurrence of a Section 13 Event,
shall be the “Purchase Price” for all purposes of this Agreement) by 50% of the
current market price (determined pursuant to Section 11(d) hereof) per
share of the Common Stock of such Principal Party on the date of consummation
of such Section 13 Event;

 

provided,
however, that the Purchase Price (as theretofore adjusted in accordance
with Section 11(a)(ii) hereof) and the number of shares of Common Stock of
such Principal Party so receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with Section 11(f) hereof
to reflect any events occurring in respect of the Common Stock of such
Principal Party after the occurrence of such Section 13 Event;

 

(ii)           such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement;

 

(iii)          the
term “Company” shall thereafter be deemed to refer to such Principal Party in
all respects, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event;

 

(iv)          such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock in accordance
with Section 9 hereof) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions of this Agreement
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its shares of Common Stock thereafter deliverable upon the exercise of the
Rights;

 

(v)           such
Principal Party shall take such steps as may be necessary to assure that, upon
the subsequent occurrence of any merger, consolidation, sale of all or
substantially all of the assets, recapitalization, reclassification of shares,
reorganization or other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to receive, upon
exercise of a Right and payment of the Purchase Price, such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had it, at the time of such transaction, owned the shares of Common
Stock of the Principal Party purchasable upon the exercise of a Right, and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property; and

 

25

 

(vi)          the
provisions of Section 11(a)(ii) hereof shall be of no further effect
following the first occurrence of any Section 13 Event.

 

(b)           “Principal
Party” shall mean:

 

(i)            in the
case of any transaction described in clause (x) or (y) of the first
sentence of Section 13(a) hereof, (A) the Person that is the issuer
of any securities into which shares of Company Common Stock are converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer of Common Stock that has the highest aggregate current market price
(determined pursuant to Section 11(d) hereof) and (B) if no
securities are so issued, the Person that is the other party to such merger or
consolidation, or, if there is more than one such Person, the Person the Common
Stock of which has the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and

 

(ii)           in the
case of any transaction described in clause (z) of the first sentence of Section 13(a)
hereof, the Person that is the party receiving the largest portion of the
assets or earning power transferred pursuant to such transaction or
transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power
transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest
aggregate current market price (determined pursuant to Section 11(d)
hereof);

 

provided,
however, that in any such case:

 

(1)           if the
Common Stock of such Person is not at such time and has not been continuously
over the preceding twelve-month period registered under Section 12 of the
Exchange Act (“Registered Common Stock”) or such Person is not a
corporation, and such Person is a direct or indirect Subsidiary of another
Person that has Registered Common Stock outstanding, “Principal Party” shall
refer to such other Person;

 

(2)           if the
Common Stock of such Person is not Registered Common Stock or such Person is
not a corporation, and such Person is a direct or indirect Subsidiary of
another Person but is not a direct or indirect Subsidiary of another Person
which has Registered Common Stock outstanding, “Principal Party” shall refer to
the ultimate parent entity of such first-mentioned Person;

 

(3)           if such
Person is directly or indirectly controlled by more than one Person, and one or
more of such other Persons has Registered Common Stock outstanding, “Principal
Party” shall refer to whichever of such Persons is the issuer of the Registered
Common Stock having the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and

 

(4)           if such
Person is directly or indirectly controlled by more than one Person, and none
of such other Persons have Registered Common Stock outstanding, “Principal
Party” shall refer to whichever ultimate parent entity is the corporation
having

 

26

 

the greatest stockholders equity or, if no such
ultimate parent entity is a corporation, shall refer to whichever ultimate
parent entity is the entity having the greatest net assets.

 

(c)           The
Company shall not consummate any such consolidation, merger, sale or transfer
unless the Principal Party shall have a sufficient number of authorized shares
of its Common Stock which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13,
and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that the Principal Party, as soon as practicable after
the date of such Section 13 Event at its own expense, shall:

 

(i)            (A) file
on an appropriate form a registration statement under the Securities Act with
respect to the Rights and the Common Stock that may be acquired upon exercise
of the Rights, (B) use its best efforts to cause such registration
statement to become effective as soon as practicable after filing and remain
effective (and to include a prospectus complying with the requirements of the
Securities Act) until the Expiration Date, and (C) take such action as may
be required to assure that any acquisition of such Common Stock upon the
exercise of the Rights complies with any applicable state securities or “blue
sky” laws; and

 

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

 

(d)           In
case the Principal Party which is to be a party to a transaction referred to in
this Section 13 has a provision in any of its authorized securities or in
its certificate of incorporation or by-laws or other instrument governing
its corporate affairs, which provision would have the effect of (i) causing
such Principal Party to issue, in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then current market price
per share (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such Principal Party at
less than such then current market price (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special
payment, tax or similar provisions in connection with the issuance of the
Common Stock of such Principal Party pursuant to the provisions of this Section 13;
then, in such event, the Company shall not consummate any such transaction
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been cancelled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction.

 

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

 

27

Section 14.                                      Fractional
Rights and Fractional Shares.

 

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

 

(x)                                   if
the Rights are listed or admitted to trading on a national securities exchange
or interdealer quotation system, the last sale price, regular way, or, in the
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 on
the principal national securities exchange or interdealer quotation system on
which the Rights are listed or admitted to trading, or

 

(y)                                 if
the Rights are not listed or admitted to trading on any national securities
exchange or interdealer quotation system, 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

 

(z)                                   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 a majority of the Board
of Directors.

 

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 a majority of  the  Board of Directors shall be used and such determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.

 

(b)                                 The
Company shall not be required to issue fractions of shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of
a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence such fractional shares of Preferred Stock (other
than fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock); provided, however, that in lieu of fractions of
shares of Preferred Stock which are integral multiples of
one one-hundredth  of a share of
Preferred Stock, the Company may provide for the issuance of depositary
receipts pursuant to Section 7(c) hereof. 
In lieu of such fractional shares of Preferred Stock that are not
integral multiples of one one-hundredth of a share, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the then current market price of a share of Preferred Stock on the day of
exercise, determined in accordance with Section 11(d) hereof.

 

28

 

(c)                                  The
Company shall not be required to issue fractions of shares of Company Common
Stock upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Company Common Stock. 
In lieu of such fractional shares of Company Common Stock, the Company
may pay to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Company Common
Stock.  For purposes of this Section
14(c), the current market value of one share of Company Common Stock shall be
the closing price per share of Company Common Stock (as determined pursuant to
Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of
such exercise.

 

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

 

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

 

Section 16.                                      Agreement
of Rights Holders.  Every 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 Company Common Stock;

 

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

 

(c)                                  subject
to Section 6(a) and Section 7(f) hereof, the Company and the Rights
Agent may deem and treat the Person in whose name a Rights Certificate (or,
prior to the Distribution Date, the associated Company Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of

 

29

 

ownership or writing on
the Rights Certificates or the associated Company Common Stock certificate made
by any Person other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 7(e) hereof, shall be affected by any notice to the
contrary; and

 

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

 

Section 17.                                      Rights
Certificate Holder Not Deemed a Stockholder.  No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of the number of shares of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action,
or, except as provided in Section 24 hereof, to receive notice of meetings
or other actions affecting stockholders, or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.  This Section 17 shall also
apply to holders, as such, of Rights prior to the issuance of Rights
Certificates.

 

Section 18.                                      Concerning
the Rights Agent.

 

(a)                                  The
Company agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable out-of-pocket expenses, including reasonable fees and
disbursements of its counsel, incurred in connection with the execution and
administration of this Agreement and the exercise and performance of its duties
hereunder.  The Company shall indemnify
the Rights Agent for, and 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 or the
exercise or performance of its duties hereunder, including, without limitation,
the reasonable costs and expenses of defending against a claim of liability
hereunder.

 

(b)                                 The
Rights Agent shall be protected and shall incur no liability for or in respect
of any action taken or omitted by it in connection with its administration of
this Agreement in reliance upon any Rights Certificate or certificate for
Preferred Stock or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement or other paper or document

 

30

 

reasonably believed by it
to be genuine and to have been signed, executed and, where necessary, verified
or acknowledged by the proper Person or Persons.

 

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

 

(a)                                  Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust or
stockholder services businesses 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 document or any further act on the part of any
of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof.  In
case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or
in the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

 

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

 

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

 

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

 

(b)                                 Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of
“current market price”) be proved or established by the Company prior to taking
or omitting any action hereunder, such fact or matter (unless other evidence in
respect thereof be specified herein) may be deemed to be conclusively proved
and established by a certificate signed by the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company
and delivered to the Rights

 

31

 

Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

 

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

 

(d)                                 The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Rights Certificates or
be required to verify the same (except as to its countersignature on such
Rights Certificates), 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 responsible for the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or for the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or failure by the Company to satisfy conditions
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any adjustment required under the provisions of Section 11
or Section 13 hereof or for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it
by any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock or any other
securities to be issued pursuant to this Agreement or any Rights Certificate or
as to whether any shares of Preferred Stock or any other securities will, when
so issued, be validly authorized and issued, fully paid and nonassessable.

 

(f)                                    The
Company shall perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may reasonably be required by the Rights Agent
for the performance by the Rights Agent of its duties under this Agreement.

 

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

 

(h)                                 The
Rights Agent and any stockholder, director, officer or employee of the Rights
Agent may buy, sell or deal in any of the Rights or other securities of the
Company or have a pecuniary interest 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 Person.

 

32

 

(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.

 

(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 or in the exercise of its rights hereunder if the Rights
Agent shall have reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.

 

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

 

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 thirty days’ prior notice in writing mailed to the Company
and to each transfer agent for the Company Common Stock or Preferred Stock, by
registered or certified mail, and, if such resignation occurs after the
Distribution Date, to the holders of the Rights Certificates by first-class
mail.  In the event the transfer agency
relationship in effect between the Company and the Rights Agent terminates, the
Rights Agent will be deemed to resign automatically on the effective date of
such termination; and any required notice will be sent by the Company.  The Company may remove the Rights Agent or
any successor Rights Agent upon thirty days’ prior notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent for the Company Common Stock or Preferred Stock, by registered
or certified mail, and, if such removal occurs after the Distribution Date, to
the holders of the Rights Certificates by first-class mail.  If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of
thirty 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 Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a corporation organized
and doing business under the laws of the United States or any state of the
United States in good standing, shall be authorized under applicable laws to
exercise corporate trust or stock transfer or stockholder service powers and
shall be subject to supervision or examination by federal or state authorities
and which has at the time of its appointment as Rights Agent a combined capital
and surplus of at least $50,000,000 or (b) an Affiliate of a corporation
described in clause (a).  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

 

33

 

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 Company Common Stock or
Preferred Stock, and, if such appointment occurs after the Distribution Date,
mail a notice thereof in writing to the registered holders of the Rights
Certificates.  Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent.

 

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

 

In addition, in
connection with the issuance or sale of shares of Company Common Stock
following the Distribution Date and prior to the Expiration Date, the Company
(a) shall, with respect to shares of Company Common Stock so issued or
sold pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if
deemed necessary or appropriate by a majority of the Board of Directors, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment shall
otherwise have been made in lieu of the issuance thereof.

 

Section 23.                                      Redemption
and Termination.

 

(a)                                  Subject
to Section 30 hereof, the Company may, at its option, by action of a
majority of the Board of Directors, at any time prior to the earlier of
(i) the Close of Business on the tenth Business Day following the Stock
Acquisition Date or (ii) the Final Expiration Date, redeem all but not
less than all of the then-outstanding Rights at a redemption price of $.0001
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being the “Redemption Price”).  The Company may, at its option, by action of
a majority of  the Board of Directors, pay the
Redemption Price either in shares of Company Common Stock (based on the
“current market price”, as defined in Section 11(d) hereof, of the shares
of Company Common Stock at the time of redemption) or cash or any other form of
consideration deemed appropriate by the Board of Directors and the redemption
of the Rights shall be effective at such time and on the basis and with such
conditions as the Board of Directors may in its sole discretion establish.  Notwithstanding anything in this Agreement to
the contrary, the Rights shall not be exercisable until such time as the
Company’s right of redemption has expired.

 

34

 

(b)                                 Immediately
upon the action of the Board of Directors ordering the redemption of the Rights
as provided in Section 23(a) above (or at such later time as the Board of
Directors may establish for the effectiveness of such redemption), and without
any further action and without any notice, the right to exercise the Rights
will terminate and the only right thereafter of the holders of Rights shall be
to receive the Redemption Price for each Right so held.  The Company shall promptly give notice of
such redemption to the Rights Agent and the holders of the then-outstanding
Rights by mailing such notice to all such holders at each holder’s last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Company
Common Stock, provided, however, that the failure to give, or any
defect in, any such notice shall not affect the validity of such
redemption.  Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.

 

(c)                                  The
Company may, at its option, discharge all of its obligations with respect to
the Rights by (i) issuing a press release announcing the manner of
redemption of the Rights in accordance with this Agreement, and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights as their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution date, on the registry books of the
transfer agent of the Company Common Stock, and upon such action, all
outstanding Rights and Rights Certificates shall be null and void without any
further action by the Company.

 

Section 24.                                      Notice
of Certain Events.

 

(a)                                  In
case the Company shall propose, at any time after the Distribution Date:

 

(i)                                     to
pay any dividend payable in stock of any class to the holders of Preferred
Stock or to make any other distribution to the holders of Preferred Stock
(other than a regular periodic cash dividend paid out of funds legally
available therefor),

 

(ii)                                  to
offer to the holders of Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options,

 

(iii)                               to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock),

 

(iv)                              to
effect any consolidation or merger into or with any other Person (other than a
wholly owned Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), 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 more than 50% of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its wholly owned Subsidiaries in
one or more transactions each of which complies with Section 11(o)
hereof), or

 

(v)                                 to
effect the liquidation, dissolution or winding up of the Company,

 

35

 

then,
in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, 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 twenty (20) days prior
to the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier; provided, however, no such notice
shall be required pursuant to this Section 24, if any wholly owned
Subsidiary of the Company effects a consolidation or merger with or into, or
effects a sale or other transfer of assets or earnings power to, any other
wholly owned Subsidiary of the Company.

 

(b)                                 In
case any Triggering Event shall occur, then, in any such case, (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under
Section 11(a)(ii) or Section 13 hereof, as the case may be, and (ii)
all references in the preceding paragraph (a) to Preferred Stock shall be
deemed thereafter to refer also to Company Common Stock and/or, if appropriate,
other securities of the Company.

 

Section 25.                                      Notices.  All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
by telex, telegram or cable) and mailed or sent or delivered, if to the
Company, at its address at:

 

Digimarc
Corporation

9405 SW Gemini
Drive

Beaverton, OR
97008

Attention:  Secretary

 

and if to the Rights
Agent, at its address at:

 

EquiServe Trust
Company, N.A.

250 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 Rights Certificate (or, if prior to the
Distribution Date, to the holder of certificates representing shares of Company
Common Stock) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Company.

 

Section 26.                                      Supplements
and Amendments.  Prior to the
Distribution Date, and subject to the other provisions of this Section 26,
the Company may, in its sole and absolute discretion,

 

36

 

and the Rights Agent
shall, if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of certificates
representing Rights or shares of Company Common Stock.  From and after the Distribution Date, subject
to the other provisions of this Section 26, the Company may, in its sole
and absolute discretion, and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of
Rights Certificates in order:

 

(i)                                     to
cure any ambiguity,

 

(ii)                                  to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein,

 

(iii)                               to shorten or lengthen
any time period hereunder, or

 

(iv)                              to
change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person);

 

provided,
however, that this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) subject to
Section 30 hereof, a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights (other than Acquiring Person or an Associate or Affiliate of an
Acquiring Person).

 

Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the
terms of this Section 26, the Rights Agent shall execute such supplement
or amendment.

 

Prior
to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Company Common Stock.

 

Section 27.                                      Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

 

Section 28.                                      Determinations
and Actions by the Board of Directors, etc.

 

(a)                                  For
all purposes of this Agreement, any calculation of the number of shares of
Company Common Stock outstanding at any particular time, including for purposes
of determining the particular percentage of such outstanding shares of Company
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange
Act Regulations as in effect on the date hereof.  Except as otherwise specifically provided
herein, the Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power (i) to

 

37

 

interpret the provisions of this Agreement, and
(ii) to make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a
determination whether to redeem or not redeem the rights or to amend this
Agreement and whether any proposed amendment adversely affects the interest of
the holders of Rights Certificates.  All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors in good faith shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board
of Directors or any member thereof to any liability to the holders of the
Rights.

 

(b)                                 An independent committee of the Board of
Directors (the “Committee”) (as described below) shall review and
evaluate this Agreement in order to consider whether the maintenance of this
Agreement continues to be in the best interests of the Company and its
stockholders, following the fifth anniversary of the date hereof, or sooner if
a majority of the members of the Committee shall deem such review and
evaluation appropriate after giving due regard to all relevant
circumstances.  Following each such
review, the Committee will communicate its conclusions to the full Board of
Directors, including any recommendation in light thereof as to whether this
Agreement should be modified or the Rights should be redeemed.

 

(c)                                  The
members of the Committee shall be appointed by the Board of Directors and
comprised of members of the Board of Directors who are not officers, employees
or Affiliates of the Company.  The
Committee shall have the power to set its own agenda and to retain, at the
expense of the Company, independent legal, accounting or other professional
consultants selected by the Committee, for any matters relating to the purpose
of the Committee.  The Company shall
cause its employees to make themselves available to cooperate with the Committee
for any matters related to its purpose. The Committee shall have the authority
to review all information of the Company and to consider any and all factors
they deem relevant to an evaluation of whether to maintain or modify the
Agreement or redeem the Rights.

 

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

 

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;
provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant or restriction
is held by such court or authority to be invalid, void or unenforceable and a
majority of the Board of Directors determines in its good faith judgment that
severing the invalid language from this Agreement would adversely affect the
purpose or effect of this Agreement and the Rights shall not then be
redeemable, the right of redemption set forth in Section 23 hereof shall
be reinstated and shall not expire until the Close

 

38

 

of Business on the tenth
Business Day following the date of such determination by a majority of  the Board of Directors.

 

Section 31.                                      Governing
Law.  This Agreement, each Right and
each Rights Certificate issued hereunder shall be governed by, and construed in
accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely in such State.

 

Section 32.                                      Counterparts.  This Agreement may be executed (including by
facsimile) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original, but all of which taken together shall constitute one and the same
instrument.

 

Section 33.                                      Descriptive
Headings.  The headings contained in
this Agreement are for descriptive purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.

 

Section 34.                                      Exchange.

 

(a)                                  The
Company, upon resolution of a majority of the Board of Directors, may, at its
option, at any time after the first occurrence of a Section 11(a)(ii)
Event, exchange all or part of the then-outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to
Section 7(e) hereof) for Units of Preferred Stock or shares of Company
Common Stock (at the election of the Board of Directors) at an exchange ratio
of one Unit of Preferred Stock or one share of Company Common Stock, as the
case may be, per Right, as appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being 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 an Exempt Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of shares of Company
Common Stock aggregating 50% or more of the shares of Company Common Stock then
outstanding.  From and after the
occurrence of a Section 13(a) Event, any Rights that theretofore have not
been exchanged pursuant to this Section 34(a) shall thereafter be
exercisable only in accordance with Section 13 and may not be exchanged
pursuant to this Section 34(a).  The
exchange of the Rights by the Board of Directors may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish.

 

(b)                                 Immediately
upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to Section 34(a), and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of Units
of Preferred Stock or shares of Company Common Stock, as the case may be, equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio.  The Company shall promptly 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; provided,
however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. 
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 shall state the
method by which the exchange of Units of Preferred

 

39

 

Stock or shares of
Company Common Stock, as the case may be, for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be
exchanged.  Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) held by
each holder of Rights.

 

(c)                                  In
the event that the number of shares of Preferred Stock or Company Common Stock,
as the case may be, which are authorized by the Company’s Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit any exchange of
Rights as contemplated in accordance with this Section 34, the Company, at
the election of a majority of the Board of Directors, shall take all such
action as may be necessary to authorize additional shares of Preferred Stock or
Company Common Stock, as the case may be, for issuance upon exchange of the
Rights or shall make adequate provision to substitute, in whole or in part,
(1) cash, (2) other equity securities of the Company, (3) debt
securities of the Company, (4) other assets, or (5) any combination
of the foregoing, having an aggregate value for each Right to be exchanged
equal to the per share market price of one Unit of Preferred Stock or share of
Company Common Stock, as the case may be (determined pursuant to
Section 11(d) hereof) as of the date of a Section 11(a)(ii) Event,
where such aggregate value has been determined by a majority of the Board of
Directors.  To the extent that the
Company determines that action must be taken pursuant to the foregoing clauses
of this Section 34(c), the Board of Directors may suspend the exercisability
of the Rights for a period of up to sixty days following the date on which the
event described in Section 34(a) shall have occurred, in order to seek any
authorization of additional shares of Company Common Stock and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof.

 

(d)                                 The
Company shall not be required to issue fractions of Units of Preferred Stock or
fractions of shares of Company Common Stock or to distribute certificates which
evidence fractional Units or fractional shares. 
In lieu of issuing fractional Units or fractional shares, the Company
may pay to the registered holders of Rights Certificates at the time such
Rights are exchanged as herein provided an amount in cash equal to the same
fraction of the current market price (determined pursuant to Section 11(d)
hereof) of one Unit of Preferred Stock or one share of Company Common Stock, as
the case may be, on the Trading Day immediately prior to the date of exchange
pursuant to this Section 34.

 

Section 35.                                      Force
Majeure.

 

Notwithstanding anything to
the contrary contained herein, the Rights Agent shall not be liable for any
delays or failures in performance resulting from acts beyond its reasonable
control including, without limitation, acts of God, terrorist acts, shortage of
supply, breakdowns or malfunctions, interruptions or malfunction of computer
facilities, or loss of data due to power failures or mechanical difficulties
with information storage or retrieval systems, labor difficulties, war, or
civil unrest.

 

40

 

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

 

 

	
  DIGIMARC
  CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
  /s/
  Robert P. Chamness

  	
   

  
	
  Name:

  	
  Robert
  P. Chamness

  	
   

  
	
  Title:

  	
  VP, General Counsel,
  CLO & Secretary

  	
   

  
	
   

  
	
   

  
	
  EQUISERVE
  TRUST COMPANY, N.A.

  
	
   

  
	
   

  
	
  By:

  	
  /s/
  Dennis V. Moccia

  	
   

  
	
  Name:

  	
  Dennis
  V. Moccia

  	
   

  
	
  Title:

  	
  Managing
  Director

  	
   

  
							

 

41

 

EXHIBIT A

TO RIGHTS AGREEMENT

 

FORM OF RIGHTS CERTIFICATE

 

	
  Certificate No.

  	
   

  	
   

  	
   

  	
  Rights

  

 

NOT
EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT
REFERRED TO BELOW).  THE RIGHTS ARE
SUBJECT TO REDEMPTION OR EXCHANGE, AT THE OPTION OF THE COMPANY, ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT.  UNDER
CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR
HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE
OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT),
WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT
HOLDER, MAY BECOME NULL AND VOID.

 

Rights Certificate

 

DIGIMARC CORPORATION

 

This
certifies
that                             ,
or registered assigns, is the registered holder of the number of Rights set
forth above, each of which entitles the registered holder thereof, subject to
the terms and conditions of the Rights Agreement dated as of November 16, 2004,
as amended from time to time (the “Rights Agreement”) (terms defined therein
being used herein with the same meaning unless otherwise defined herein),
between Digimarc Corporation, a Delaware corporation (the “Company”), and
EquiServe Trust Company, N.A., as Rights Agent (which term shall include any
successor Rights Agent under the Rights Agreement), to purchase from the
Company at any time after the Distribution Date and prior to the Expiration
Date, at the office of the Rights Agent, one one-hundredth of a fully paid and
nonassessable share of Series A Preferred Stock, par value $.001 per share (the
“Preferred Stock”), of the Company at the Purchase Price initially of $100.00 per one one-hundredth  share of Preferred Stock (each such one one-hundredth of a
share being a “Unit”), upon presentation and surrender of this Rights
Certificate with the Election to Purchase and related certificate duly
executed.  The number of Rights evidenced
by this Rights Certificate (and the number and kind of shares which may be
purchased upon exercise thereof) and the Purchase Price per Unit set forth
above, are the number and Purchase Price as
of                 ,
20     , based on the Preferred Stock as constituted
at such date.

 

Upon
the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced by
this Rights Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person or (ii) under certain
circumstances described in the Rights Agreement, a direct or indirect
transferee of any such Acquiring Person, Associate or Affiliate, including a
transferee of any person who, after such transfer, becomes an Acquiring Person
or an Affiliate or Associate of an Acquiring Person, such Rights shall become
null and void and no holder hereof

 

A-1

 

shall have any right with respect to such Rights from
and after the occurrence of such Section 11(a)(ii) Event.

 

In
certain circumstances described in the Rights Agreement, the Rights evidenced
hereby may entitle the registered holder thereof to purchase capital stock of
an entity other than the Company or receive common stock, cash or other assets,
all as provided in the Rights Agreement.

 

As
provided in the Rights Agreement, the Purchase Price and the number and kind of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including a
Triggering Event.

 

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

 

This
Rights Certificate, with or without other Rights Certificates, upon surrender
at the office of the Rights Agent designated for such purpose, may be exchanged
for another Rights Certificate or Rights Certificates of like tenor and date
evidencing an aggregate number of Rights equal to the aggregate number of Rights
evidenced by the Rights Certificate or Rights Certificates surrendered.  If this Rights Certificate shall be exercised
in part, the registered holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.

 

Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company under certain circumstances at its
option at a redemption price of $.0001 per Right (as such amount may be
adjusted pursuant to the Rights Agreement), at any time prior to the earlier of
the close of business on (i) the tenth business day following the Stock
Acquisition Date and (ii) the Final Expiration Date.  The Rights will not be exercisable until such
time as the Company’s right of redemption has expired.  In addition, subject to the provisions of the
Rights Agreement, the Rights may be exchanged, in whole or in part, for Units
of Preferred Stock or shares of the Common Stock of the Company.  Immediately upon the action of the Board of
Directors of the Company authorizing any such exchange, and without any further
action or any notice, the Rights (other than Rights which are not subject to
such exchange) will terminate and the Rights will only enable holders to
receive the shares issuable upon such exchange.

 

No
fractional shares of Preferred Stock will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth  of a share of
Preferred Stock, which may, at the election of the Company be evidenced by

 

A-2

 

depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

 

No
holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Preferred Stock or
of any other securities 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 of subscription rights, or otherwise, until
the Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.

 

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

 

WITNESS
the facsimile signature of the proper officers of the Company.  Dated as
of                 
     , 20     

 

 

	
   

  	
  Digimarc Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:
  Secretary

  

 

 

	
  Countersigned:

  
	
   

  
	
  EquiServe Trust Company, N.A.,

  
	
  as Rights Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  

 

A-3

 

(Form of Reverse Side of Rights
Certificate)

 

FORM OF ASSIGNMENT

 

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

transfer the Rights Certificate.)

 

FOR
VALUE
RECEIVED                                                                hereby
sells, assigns and transfers unto: 
                                                                                                       
                                                                                                       
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and
appoint                                          Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.

 

Dated:                  
      ,        

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes in (1) and
(2) that:

 

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

 

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

 

Dated:                  
      ,        

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

A-4

 

NOTICE

 

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

 

Signatures
must be guaranteed by an approved eligible financial institution acceptable to
the Rights Agent in its sole discretion or by a participant in the Securities
Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the
New York Stock Exchange Medallion Program.

 

In the
event the certification set forth above is not completed, the Company will deem
the Beneficial Owner of the Rights evidenced by this Rights Certificate to be
an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and, in the case of an Assignment, will affix
a legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.

 

A-5

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if the registered
holder desires to exercise

Rights represented by the Rights Certificate.)

 

To Digimarc Corporation:

 

The
undersigned hereby irrevocably elects to
exercise                                          
Rights represented by this Rights Certificate to purchase the Units of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person or other property which may be
issuable upon the exercise of the Rights) and requests that certificates for
such Units (or such other securities) be issued in the name of and delivered
to:                                                        (Please print name and address)                                                                                                                             (Please insert social security or other identifying number).

 

If
such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:                                                                                                                                      
(Please print name and address)                                                                             (Please insert social security or other identifying number).

 

Dated:                  
      ,        

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

A-6

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes in (1) and
(2) that:

 

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

 

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

 

Dated:                  
      ,        

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

 

NOTICE

 

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

 

Signatures
must be guaranteed by an approved eligible financial institution acceptable to
the Rights Agent in its sole discretion or by a participant in the Securities
Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the
New York Stock Exchange Medallion Program.

 

In the
event the certification set forth above is not completed, the Company will deem
the Beneficial Owner of the Rights evidenced by this Rights Certificate to be
an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and the election to purchase will not be
honored.

 

A-7

 

EXHIBIT B

TO RIGHTS AGREEMENT

 

UNDER CERTAIN
CIRCUMSTANCES

SET FORTH IN THE RIGHTS AGREEMENT,

RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN

ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF

(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT),

WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY

SUBSEQUENT HOLDER,

MAY BECOME NULL AND VOID.

 

SUMMARY
OF RIGHTS TO PURCHASE PREFERRED STOCK

 

On November
16, 2004, the Board of Directors of Digimarc Corporation (the “Company”)
authorized and declared a dividend of one right (“Right”) for each outstanding
share of its Common Stock, par value $.001 per share (the “Company Common
Stock”), to stockholders of record at the close of business on November 29,
2004 (the “Record Date”), and authorized the issuance of one Right for each
share of Company Common Stock by the Company (except as otherwise provided in
the Rights Agreement, as defined below) between the Record Date and the
Distribution Date (as defined below). 
Each Right entitles the registered holder, subject to the terms of the
Rights Agreement (as defined below), to purchase from the Company one
one-hundredth of a share (a “Unit”) of Series A  Preferred
Stock, par value $.001 per share (the “Preferred Stock”), at a purchase
price of $100.00 per Unit, subject to
adjustment.  The purchase price is
payable in cash or by certified or bank check or money order payable to the
order of the Company.  The description
and terms of the Rights are set forth in a Rights Agreement between the Company
and EquiServe Trust Company, N.A., as Rights Agent, dated as of November  16, 2004, as amended from time to time (the “Rights
Agreement”).

 

Copies
of the Rights Agreement and the Certificate of Designation for the Preferred
Stock have been filed with the Securities and Exchange Commission as exhibits
to a Current Report on Form 8-K dated November 16, 2004.  Copies of the Rights Agreement and the
Certificate of Designation are available free of charge from the Company.  This summary description of the Rights and
the Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Rights Agreement and the
Certificate of Designation, including the definitions therein of certain terms,
which Rights Agreement and Certificate of Designation are incorporated herein
by reference.

 

The
Rights Agreement

 

Certificates;
Distribution Date.  Initially,
the Rights will attach to all certificates representing shares of outstanding
Company Common Stock, and no separate Rights Certificates will be
distributed.  Subject to the provisions
of the Rights Agreement, the Rights will separate from the Company Common Stock
and the “Distribution Date” will occur upon the earlier of (i) ten
business days following a public announcement (the date of such announcement
being the

 

B-1

 

“Stock Acquisition Date”) that a person or group of
affiliated or associated persons (an “Acquiring Person”) has acquired or
otherwise obtained beneficial ownership of 15% or more of the then-outstanding
shares of Company Common Stock, and (ii) ten 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 a
tender offer or exchange offer that would result in a person or group becoming
an Acquiring Person.  Until the
Distribution Date, (i) the Rights will be evidenced by Company Common
Stock certificates and will be transferred with and only with such Company
Common Stock certificates, (ii) new Company Common Stock certificates
issued after the Record Date (also including shares distributed from Treasury)
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates representing
outstanding Company Common Stock will also constitute the transfer of the
Rights associated with the Company Common Stock represented by such
certificates.

 

An
“Acquiring Person” does not include certain persons specified in the Rights
Agreement.

 

The Rights are not exercisable until the Distribution
Date and will expire at the close of business on the tenth anniversary of the
Rights Agreement unless earlier redeemed or exchanged by the Company as
described below.  Under certain
circumstances the exercisability of the Rights may be suspended.  In no event, however,
will the Rights be exercisable prior to the expiration of the period in which
the Rights may be redeemed as described below.

 

As
soon as practicable after the Distribution Date, Rights Certificates will be
mailed to holders of record of Company Common Stock as of the close of business
on the Distribution Date (and to each initial holder of certain shares of
Company Common Stock issued after the Distribution Date) and, thereafter, the
separate Rights Certificates alone will represent the Rights.

 

Flip-In.  In the event that a person becomes an
Acquiring Person, then, in such case, each holder of a Right will thereafter
have the right to receive, upon exercise, Units of Preferred Stock or, at the
option of the Company, shares of Company Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a
value equal to two times the exercise price of the Right.  The exercise price is the purchase price
multiplied by the number of Units of Preferred Stock issuable upon exercise of
a Right prior to the event described in this paragraph.  Notwithstanding any of the foregoing,
following the occurrence of the event set forth in this paragraph, all Rights
that are, or (under certain circumstances specified in the Rights Agreement)
were, beneficially owned by any Acquiring Person or any affiliate or associate
thereof (or certain transferees of any thereof) will be null and void.

 

Flip-Over.  In the event that, at any time following the
date that any person becomes an Acquiring Person, (i) the Company is
acquired in a merger or other business combination transaction and the Company
is not the surviving corporation, (ii) any person merges with the Company
and all or part of the Company Common Stock is converted or exchanged for
securities, cash or property of the Company or any other person or
(iii) 50% or more of the Company’s assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as described above) shall thereafter have the right to receive,

 

B-2

 

upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right.

 

Redemption.  At any time until ten business days following
the Stock Acquisition Date, the Board of Directors may redeem the Rights in
whole, but not in part, at a price of $.0001 per Right (subject to adjustment
in certain events) (the “Redemption Price”) payable, at the election of the
Board of Directors, in cash, shares of Company Common Stock or other consideration
considered appropriate by the Board of Directors.  Immediately upon the action of the Board of
Directors ordering the redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.

 

Exchange.  The Company may at any time after there is an
Acquiring Person, by action of the Board of Directors, until the time specified
in the Rights Agreement, exchange all or part of the then-outstanding and
exercisable Rights (other than Rights that shall have become null and void) for
Units of Preferred Stock or shares of Company Common Stock pursuant to a
one-for-one exchange ratio, subject to adjustment.

 

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

 

Amendment.  Any of the provisions of
the Rights Agreement may be amended without the approval of the holders of the
Rights or Company Common Stock at any time prior to the Distribution Date.  After such date, the provisions of the Rights
Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to shorten or lengthen any time period under the Rights
Agreement, or to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person); provided,
that no amendment shall be made to lengthen (i) the time period
governing redemption at such time as the Rights are not redeemable or
(ii) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights.

 

Description
of Preferred Stock

 

The
Units of Preferred Stock that may be acquired upon exercise of the Rights will
be nonredeemable and subordinate to any other shares of preferred stock that
may be issued by the Company.

 

If, as
and when declared by the Board of Directors, each Unit of Preferred Stock will
have a minimum preferential quarterly dividend of $0.01 per Unit or any
higher per share dividend declared on the Company Common Stock.

 

B-3

 

In the
event of liquidation, the holder of a Unit of Preferred Stock will receive a
preferred liquidation payment equal to the greater of $0.01 per Unit and
the per share amount paid in respect of a share of the Company Common Stock.

 

Each
Unit of Preferred Stock will have one vote, voting together with the Company
Common Stock.

 

In the
event of any merger, consolidation or other transaction in which shares of
Company Common Stock are exchanged, each Unit of Preferred Stock will be
entitled to receive the per share amount paid in respect of each share of
Company Common Stock.

 

The
rights of holders of the Preferred Stock with respect to dividends, liquidation
and voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.

 

Because
of the nature of the Preferred Stock’s dividend, liquidation and voting rights,
the economic value of one Unit of Preferred Stock that may be acquired upon the
exercise of each Right should approximate the economic value of one share of
Company Common Stock.

 

B-4

EXHIBIT C

TO RIGHTS AGREEMENT

 

CERTIFICATE OF DESIGNATION

OF THE

SERIES A PREFERRED STOCK

OF

DIGIMARC CORPORATION

 

The
undersigned officers of Digimarc Corporation, a Delaware corporation (the “Corporation”),
DO HEREBY CERTIFY:

 

That,
pursuant to the authority conferred upon the Board of Directors of the
Corporation by its Second Amended and Restated Certificate of Incorporation, as
amended (the “Certificate of Incorporation”), the said Board of
Directors, at a duly called meeting held on November 16, 2004, at which a
quorum was present and acted throughout, adopted the following resolution,
which resolution remains in full force and effect on the date hereof, creating
a series of Preferred Stock having a par value of $.001  per
share, designated as Series A Preferred Stock (the “Series A Preferred Stock”),
out of the Corporation’s shares of preferred stock of the par value of
$.001 per share (the “Preferred Stock”):

 

RESOLVED,
that pursuant to the authority vested in the Board of Directors in accordance
with the provisions of its Certificate of Incorporation, the Board of Directors
does hereby create, authorize and provide for 300,000 shares of its authorized
Preferred Stock to be designated and issued as the “Series A Preferred Stock”,
having the voting powers, designation, relative, participating, optional and
other special rights, preferences and qualifications, limitations and
restrictions that are set forth as follows:

 

1.                                       Dividends
and Distributions.

 

(A)                              Subject
to the prior and superior rights of the holders of any shares of any other
series of Preferred Stock or any other shares of stock of the Corporation
ranking prior and superior to the shares of Series A Preferred Stock with
respect to dividends, each holder of one one-hundredth (1/100) of a share (a “Unit”)
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 that purpose, (i) quarterly dividends payable in
cash on the last day of February, May, August and November in each year (each
such date being a “Quarterly Dividend Payment Date”), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a Unit of
Series  A  Preferred
Stock, in an amount per Unit (rounded to the nearest cent) equal to the greater
of (a) $0.01 or (b) subject to the provision for adjustment
hereinafter set forth, the aggregate per share amount of all cash dividends
declared on shares of 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 a Unit of Series A Preferred
Stock, and (ii) subject to the provision for adjustment hereinafter set
forth, quarterly distributions (payable in kind) on each Quarterly Dividend
Payment Date in an amount per Unit equal to the aggregate per share amount of
all non-cash dividends or other distributions (other than a dividend payable

 

C-1

 

in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock, by reclassification
or otherwise) declared on shares of 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 a Unit of Series A  Preferred Stock.  In
the event that the Corporation shall at any time after November 16, 2004  (the “Rights Declaration Date”) (i) declare any
dividend on outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock or
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, then in each such case the amount to which the holder of a Unit of
Series A  Preferred Stock was entitled immediately
prior to such event under clause (b) or clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction (y) the
numerator of which shall be the number of shares of Common Stock that are
outstanding immediately after such event and (z) the denominator of which shall
be 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 Units of Series A  Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the shares of
Common Stock (other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock, by reclassification or otherwise);
provided, however, that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $0.01 per Unit on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.

 

(C)                                Dividends
shall begin to accrue and shall be cumulative on each outstanding Unit of
Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of a Unit of Series A  Preferred
Stock, unless the date of issuance of such Unit is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such Unit
shall begin to accrue from the date of issuance of such Unit, or unless the
date of issuance is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of Units 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 Units of Series A Preferred Stock in an amount less
than the aggregate amount of all such dividends at the time accrued and payable
on such Units shall be allocated pro rata on a Unit-by-Unit basis among all
Units of Series A  Preferred Stock at the time
outstanding.  The Board of Directors may
fix a record date for the determination of holders of Units of Series A  Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than
30 days prior to the date fixed for the payment thereof.

 

2.                                       Voting
Rights.  The holders of Units of
Series A Preferred Stock shall have the following voting rights:

 

(A)                              Subject
to the provision for adjustment hereinafter set forth, each Unit of Series A
Preferred Stock shall entitle the holder thereof to one vote on all matters
submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall, at any
time after

 

C-2

 

the Rights Declaration
Date, (i) declare any dividend on outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide outstanding shares of
Common Stock or (iii) combine the outstanding shares of Common Stock into
a smaller number of shares, then in each such case the number of votes per Unit
to which holders of Units of Series A  Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction (y) the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such event
and (z) the denominator of which shall be the number of shares of Common
Stock that were outstanding immediately prior to such event.

 

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

 

3.                                       Certain
Restrictions.

 

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

 

(i)                                     declare
or pay dividends on, or make any other distributions on, or redeem or purchase
or otherwise acquire for consideration any shares of junior stock;

 

(ii)                                  declare
or pay dividends on, or make any other distributions on, any shares of parity
stock, except dividends paid ratably on Units of Series A  Preferred
Stock and shares of all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of such Units
and all such shares are then entitled;

 

(iii)                               redeem
or purchase or otherwise acquire for consideration shares of any parity stock, provided,
however, that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
junior stock; or

 

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

 

(B)                                The
Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation,
unless the Corporation could, under paragraph (A) of this Section 3,
purchase or otherwise acquire such shares at such time and in such manner.

 

C-3

 

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

 

5.                                       Liquidation,
Dissolution or Winding Up.

 

(A)                              Upon
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation,
no distribution shall be made (i) to the holders of shares of junior
stock, unless the holders of Units of Series A  Preferred
Stock shall have received, subject to adjustment as hereinafter provided in
paragraph (B), the greater of either (a) $0.01  per
Unit plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not earned or declared, to the date of such payment, or
(b) the amount equal to the aggregate per share amount to be distributed
to holders of shares of Common Stock, or (ii) to the holders of shares of
parity stock, unless simultaneously therewith distributions are made ratably on
Units of Series A Preferred Stock and all other shares of such parity stock in
proportion to the total amounts to which the holders of Units of Series A  Preferred Stock are entitled under clause (i)(a) of
this sentence and to which the holders of shares of such parity stock are
entitled, in each case upon such liquidation, dissolution or winding up.

 

(B)                                In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock,
or (iii) combine outstanding shares of Common Stock into a smaller number
of shares, then in each such case the aggregate amount to which holders of
Units of Series A  Preferred Stock were entitled
immediately prior to such event pursuant to clause (i)(b) of
paragraph (A) of this Section 5 shall be adjusted by multiplying such
amount by a fraction (y) the numerator of which shall be the number of
shares of Common Stock that are outstanding immediately after such event and
(z) the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.

 

6.                                       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 converted into other stock or securities, cash and/or any
other property, then in any such case Units of Series A  Preferred
Stock shall at the same time be similarly exchanged for or converted into an
amount per Unit (subject to the provision for adjustment hereinafter set forth)
equal to 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 converted or exchanged.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on
outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivide outstanding shares of Common Stock, or (iii) combine
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the immediately preceding sentence with respect to
the exchange or conversion of Units of Series A  Preferred
Stock shall be adjusted by multiplying such amount by a fraction (y) the
numerator of which shall be the number of shares of Common Stock that are
outstanding immediately after

 

C-4

 

such event and
(z) the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.

 

7.                                       Redemption.  The Units of Series A Preferred Stock and
shares of Series A Preferred Stock shall not be redeemable.

 

8.                                       Ranking.  The Units of Series A Preferred Stock and
shares of Series A Preferred Stock shall rank junior to all other series of the
Preferred Stock and to any other class of Preferred Stock that hereafter may be
issued by the Corporation as to the payment of dividends and the distribution
of assets, unless the terms of any such series or class shall provide
otherwise.

 

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

 

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

 

11.                                 Certain
Definitions.  As used in this
resolution with respect to the Series A  Preferred
Stock, the following terms shall have the following meanings:

 

(A)                              The
term “Common Stock” shall mean the class of stock designated as the common
stock, par value $.001 per share, of the Corporation at the date hereof or any
other class of stock resulting from successive changes or reclassification of
the common stock.

 

(B)                                The
term “junior stock” (i) as used in Section 3, shall mean the Common
Stock and any other class or series of capital stock of the Corporation
hereafter authorized or issued over which the Series  A  Preferred Stock has preference or priority as to the
payment of dividends or in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation and (ii) as used in
Section 5, shall mean the Common Stock and any other class or series of
capital stock of the Corporation over which the Series A  Preferred
Stock has preference or priority in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation.

 

(C)                                The
term “parity stock” (i) as used in Section 3, shall mean any class or
series of stock of the Corporation hereafter authorized or issued ranking pari passu with the Series  A
Preferred Stock as to the payment of dividends and (ii) as used in
Section 5, shall mean any class or series of capital stock of the Corporation
ranking pari passu with the Series A  Preferred Stock in the distribution of assets on any
liquidation, dissolution or winding up.

 

C-5

 

IN
WITNESS WHEREOF, Digimarc Corporation has caused this Certificate of
Designation to be signed by its Chairman and Chief Executive Officer and its
Secretary this      day of
November, 2004.

 

 

	
   

  	
  DIGIMARC CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Bruce W. Davis

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive

  Officer

  
					

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert P. Chamness

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
					

 

C-6Exhibit 10.1

 

 

 

September 20, 2004

 

Laird Cagan

Chairman

Natural Gas Systems, Inc.

By email: laird@cmcp.com

 

Re:                               Letter
Agreement to Amend the Terms of the Promissory Note Dated August 10, 2004

 

Dear Laird,

 

This letter is to evidence our agreement to
modify the terms of the secured promissory note dated August 10, 2004 in the
amount of $475,000 (the “Note”).

 

1.                                       Maturity.  The Maturity Date shall remain February 10,
2005, provided that in the event that the financial advisor/agent of the
Company fails to secure at least $1 million of equity gross funding after
August 10, 2004, then the Maturity Date shall be extended until the earlier of
July 1, 2005 or the date on which the minimum equity gross funding after August
10, 2004 reaches $1 million.

 

2(b)                           Mandatory
Prepayment.  The Parties agree that
Mandatory Prepayments shall begin only after the Company has received at least
$500,000 of equity gross fundings after August 10, 2004.  At such point, the Mandatory Prepayment
Amount shall be one hundred percent (100%) of the incremental equity net
fundings.  After February 10, 2005, the
Mandatory Prepayment Amount shall be increased by an amount equal to fifty
percent (50%) of the sum of net revenues less direct Tullos operating expenses
and capital expenditures.

 

All other terms and conditions remain in full
force and effect.

 

IN WITNESS WHEREOF, the parties have executed
this Amendment as of the date above written.

 

	
   

  	
  Natural Gas Systems, Inc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert S. Herlin

  	
   

  	
   

  
	
   

  	
   

  	
  President & CEO

  	
   

  
					

 

AGREED TO AND ACCEPTED this 20th
day of September, 2004.

 

 

 

/s/ Laird Q. Cagan

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