Exhibit 10.2

 
AMENDED AND RESTATED RIGHTS AGREEMENT
 
HANCOCK FABRICS, INC.
 
and
 
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
 
Rights Agent
 

 
Rights Agreement
Dated as of March 23, 1987 as
Amended and Restated
through
March 20, 2006
 
 

 

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TABLE OF CONTENTS

Section 1.
 
Certain Definitions
 
3
 
Section 2.
 
Rights Agent
 
6
 
Section 3.
 
Issue of Right Certificates
 
9
 
Section 4.
 
Form of Right Certificates
 
10
 
Section 5.
 
Countersignature and Registration
 
11
 
Section 6.
 
Transfer, Split-Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates; Cancellation and Destruction of
Right Certificates
 
11
 
Section 7.
 
Exercise of Rights; Purchase Price; Expiration Date or Rights; Fractional Rights
and Fractional Shares of Stock
 
11
 
Section 8.
 
Reservation and Availability of Shares of Common Stock
 
13
 
Section 9.
 
Right Holders
 
14
 
Section 10.
 
Adjustment of Number of Shares; Exchange Option
 
15
 
Section 11.
 
Consolidation, Merger or Sale or Transfer of Assets or Earning Power
 
16
 
Section 12.
 
Adjustments of Purchase Price, Number of Shares or Number of Rights
 
17
 
Section 13.
 
Redemption
 
21
 
Section 14.
 
Notice of Certain Events
 
21
 
Section 15.
 
Notices
 
22
 
Section 16.
 
Supplements and Amendments
 
22
 
Section 17.
 
Determinations and Actions by the Board of Directors
 
22
 
Section 18.
 
Successors
 
23
 
Section 19.
 
Benefits of this Agreement
 
23
 
Section 20.
 
Severability
 
23
 
Section 21.
 
Governing Law
 
24
 
Section 22.
 
Counterparts
 
24
 
Section 23.
 
Descriptive Headings
 
24
 

 
 
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RIGHTS AGREEMENT
 
Agreement, dated as of March 23, 1987, between Hancock Fabrics, Inc., a Delaware
corporation (the “Company”), and Continental Stock Transfer & Trust Company, as
Rights Agent (the “Rights Agent”), as amended and restated through March 20,
2006.
 
The Board of Directors of the Company (the “Board”) has authorized and declared
a dividend of one right (a “Right”) for each share of Common Stock (as
hereinafter defined) of the Company and has authorized the issuance of one Right
with respect to each share of Common Stock that shall become outstanding between
May 4, 1987 and the earliest of the Distribution Date, the Redemption Date and
the Expiration Date (as such terms are hereinafter herein), each Right initially
representing the right to purchase one share of Common Stock.
 
Accordingly, in consideration of the premises and the mutual agreements herein
set forth, the parties hereby agree as follows:
 
Section 1.  Certain Definitions.
 
For purposes of this Agreement, the following terms have the meanings indicated:
 
(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 20%
or more of the Common Stock then outstanding (other than as a result of a
Permitted Offer), but shall not include the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any entity holding shares of capital stock of the Company for or
pursuant to the terms of any such plan in its capacity as an agent or trustee
for any such plan. Notwithstanding the foregoing, no Person shall become an
“Acquiring Person” as the result of an acquisition of Common Stock by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of the Common Stock of the Company then outstanding; provided, however, that if
a Person shall become the Beneficial Owner of 20% or more of the Common Stock of
the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional shares of Common Stock of the Company, then such Person shall be
deemed to be an “Acquiring Person.” Notwithstanding the foregoing, if the Board
of Directors of the Company determines in good faith that a Person who would
otherwise be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares of Common Stock
so that such Person would no longer be an Acquiring Person, as defined pursuant
to the foregoing provisions of this paragraph (a), then such Person shall not be
deemed to be an “Acquiring Person” for any purposes of this Agreement.
 
(b)  “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations, as in effect on
the date of this Agreement, under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).
 
(c)  A Person shall be deemed the “beneficial owner” of and shall be deemed to
“beneficially own” any securities:
 
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(i)  that such Person or any Affiliate or Associate of such Person beneficially
owns, directly or indirectly;
 
(ii)  that such Person or any Affiliate or Associate of such Person has (A) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or understanding
(whether or not in writing) (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the beneficial owner of
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any Affiliate or Associate of such Person until such tendered
securities are accepted for purchase or exchange; or (B) the right to vote or to
dispose of pursuant to any agreement, arrangement or understanding (whether or
not in writing); provided, however, that a Person shall not be deemed the
beneficial owner of any security if the agreement, arrangement or understanding
to vote such security (1) arises solely from a revocable proxy or consent given
to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations of the
Exchange Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
 
(iii)  that are beneficially owned, directly or indirectly, by any other Person
with which such Person or any Affiliate or Associate of such Person has any
agreement, arrangement or understanding (whether or not in writing) (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
clause (B) of subparagraph (ii) of this paragraph) or disposing of any
securities of the Company.
 
(d)  “Business Day” shall mean any day other than a Saturday, Sunday, or a day
on which banking institutions in either the State of New York or Mississippi are
authorized or obligated to close by law or executive order.
 
(e)  With respect to any given date, “close of business” shall mean 5:00 p.m.,
Central Time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Central Time, on the next succeeding
Business Day.
 
(f)  The “closing price” of the Common Stock or of the Rights, as applicable,
for any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock or the Rights are
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Stock or the Rights are listed or admitted to trading or, if the Common
Stock or the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotations System
(“NASDAQ”) or such other system then in use, or, if on any such date the Common
Stock or 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 Common Stock or the Rights selected by the Board.
 
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(g)  “Common Stock” shall mean the shares of common stock, $.01 par value, of
the Company. When used with reference to any Person other than the Company,
“common stock” shall mean the capital stock (or equity interest) with the
greatest voting power of such other Person or, if such Person is a Subsidiary of
another Person, the Person or Persons that ultimately control such
first-mentioned Person.
 
(h)  “Distribution Date” shall mean the earlier of (i) the tenth day after the
Stock Acquisition Date, or (ii) the tenth day (or such later date as may be
determined by an action of the Company’s Board of Directors) after the date of
the commencement of, or first public announcement of the intention of any Person
(other than the Company, a Subsidiary of the Company, an employee benefit plan
of the Company or of a Subsidiary of the Company, or any entity holding shares
of capital stock of the Company for or pursuant to the terms of any such plan in
its capacity as an agent or trustee for any such plan) to commence, a tender or
exchange offer (other than a Permitted Offer) the consummation of which would
result in beneficial ownership by a Person of 30% or more of the outstanding
Common Stock.
 
(i)  “Expiration Date” shall mean March 4, 2011.
 
(j)  “Permitted Offer” shall mean a tender or exchange offer which is for all
outstanding Common Stock at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by at least a majority
of the members of the Board of Directors who are not Acquiring Persons,
Affiliates or Associates of an Acquiring Person or, nominees or representatives
of any of them, to be adequate (taking into account all factors that such
Directors deem relevant including, without limitation, prices that could
reasonably be achieved if the Corporation or its assets were sold on an orderly
basis designed to realize maximum value) and otherwise in the best interests of
the Company and its stockholders (other than the Person or any Affiliate or
Associate thereof on whose basis the offer is being made) taking into account
all factors that such directors may deem relevant.
 
(k)  “Person” means any individual, partnership, firm, corporation, company,
association, trust, unincorporated organization, syndicate or group (the
existence of a “group” being determined in accordance with Rule 13d-5 under the
Exchange Act, as the Rule is in effect on the date of this Agreement including,
but not limited to, a Person having any agreement, arrangement or understanding
[whether formal or informal and whether or not in writing] with any other Person
to act together to acquire, offer to acquire, hold, vote or dispose of any
Common Shares of the Company).
 
(l)  “Purchase Price” shall mean the price of a share of Common Stock pursuant
to the exercise of a Right under the terms of this Agreement.
 
(m)  “Redemption Date” shall mean the date on which the Rights are redeemed
pursuant to Section 13 hereof.
 
(n)  “Stock Acquisition Date” shall mean the first date of public announcement
by the Company or any Acquiring Person that an Acquiring Person has become such.
 
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(o)  “Subsidiary” of any Person shall mean any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interests is owned, directly or indirectly, by such Person.
 
(p)  “Trading Day” shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, a Business Day.
 
Section 2.  Rights Agent.
 
(a)  The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of the Common Shares)
in accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable. Contemporaneously with
such appointment, if any, the Company shall notify the Rights Agent thereof.
 
(b)  The Company agrees to pay to the Rights Agent reasonable compensation for
all services rendered by it hereunder in accordance with a fee schedule to be
mutually agreed upon and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder.
 
(c)  The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, and the Company and the
holders of Right Certificates, by their acceptance thereof, shall be bound by
all such terms and conditions:
 
(i)  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 of the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
 
(ii)  Whenever in the performance of its duties under this Agreement the Rights
Agent shall deem it necessary or desirable that any fact or matter be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the Chairman of the Board, the President, any
Executive Vice President, any Senior Vice President, the Treasurer, or the
Secretary of the Company and delivered to the Rights Agent, and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
 
(iii)  The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct. The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance upon any
Right Certificate, certificate for shares of Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified, acknowledged
or attested by the proper person or persons, or otherwise upon the advice of
counsel as set forth in this Section.
 
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The Company agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without negligence, bad faith
or willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and administration
of this Agreement, including the costs and expenses of defending against any
claim of liability in the premises.
 
(iv)  The Rights Agent shall not be liable for, or by reason of, any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
 
(v)  The Rights Agent shall not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or execution
of any Right Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Right Certificate; nor shall it be responsible for
any change in the exercisability of the Rights or any adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for in
Sections 3, 10, 11, 12 or 13, or the ascertaining of the existence of facts that
would require any such adjustment or determination (except with respect to the
exercise of Rights evidenced by Right Certificates after actual notice that such
adjustment or determination is required); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock to be issued pursuant to this
Agreement or any Right Certificate or as to whether any shares of Common Stock
will, when so issued, be validly authorized and issued, fully paid and
non-assessable.
 
(vi)  The Company agrees that it will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such further
and other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
 
(vii)  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 President, any Executive Vice President, any Senior Vice President,
the Treasurer, or the Secretary of the Company, and to apply to such officers
for advice or instructions in connection with its duties under this Rights
Agreement, and it shall not be liable for any action taken or suffered to be
taken by it in good faith in accordance with instructions of any such officer or
for any delay while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on or after which such action shall be taken or omitted
and the Rights Agent shall not be liable for any action taken or omitted in
accordance with a proposal included in any such application on or after the date
specified therein (which date shall not be less than three business days after
the date any such officer actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking or omitting any such action, the Rights Agent has received written
instructions in response to such application specifying the action to be taken
or omitted.
 
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(viii)  The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
 
(ix)  The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
 
(x)  At any time and from time to time after the Distribution Date, upon the
request of the Company, the Rights Agent shall promptly deliver to the Company a
list, as of the most recent practicable date (or as of such earlier date as may
be specified by the Company), of the holders of record of Rights.
 
(d)  The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon 30 days’ notice in writing mailed to
the Company and to each transfer agent of the Common Stock by registered or
certified mail and to the holders of the Right Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon 30
days’ notice in writing mailed to the Rights Agent or successor Rights Agent, as
the case may be, and to each transfer agent of the Common Stock by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, it shall remit to the Company, or to any successor Rights
Agent designated by the Company, all books, records, funds, certificates or
other documents or instruments of any kind then in its possession that it
acquired in connection with its services as Rights Agent hereunder, and shall
thereafter be discharged from all duties and obligations hereunder. Following
notice of such removal, resignation or incapacity, the Company shall appoint a
successor to such Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by a holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of any state of the United States, in good standing, that either has a
combined capital and surplus of at least $50 million or is otherwise financially
sufficient, in the judgement of the Board, to enable it to serve as Rights
Agent, that has an office in the State of New York or an affiliate with an
office in the State of New York and that is subject to supervision or
examination by Federal or state authority. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities without further act or deed as if it had been originally named
as Rights Agent; but the predecessor Rights Agent shall deliver and transfer to
the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this paragraph, 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.
 
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(e)  Any corporation with which the Rights Agent or any successor Rights Agent
is merged or consolidated, or any corporation resulting from any such merger or
consolidation, or any corporation succeeding to the corporate trust business of
the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of paragraph (d) of this Section. If any of the Right
Certificates shall have been countersigned but not delivered at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
such successor Rights Agent may adopt the countersignature of the predecessor
Right Agent and deliver such Right Certificates so countersigned; if at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in its own name; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
 
(f)  If the name of the Rights Agent is changed and at such time any of the
Right Certificates shall have been countersigned but not delivered, the Rights
Agent may adopt the countersignature under its prior name and deliver Right
Certificates so countersigned; and if at that time any of the Right Certificates
shall not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
 
Section 3.  Issue of Right Certificates.
 
(a)  Until the Distribution Date, the Rights shall be evidenced (subject to the
provisions of paragraph (b) of this Section) by the certificates for shares of
Common Stock registered in the names of the holders thereof (which Certificates
for Common Shares shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Stock. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will send or cause to be sent (and the Rights Agent will, if
requested, send), by first-class, insured, postage-prepaid mail, to each record
holder of Common Stock as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit A hereto, evidencing one Right
for each share of Common Stock so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
 
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(b)  The Company will send or cause to be sent a copy of a Summary of Rights to
Purchase Common Stock, in substantially the form attached hereto as Exhibit B
(the “Summary of Rights”), by first-class, postage-prepaid mail, to each holder
of a share of Common Stock that shall become outstanding between May 4, 1987 and
the earliest of the Distribution Date, the Redemption Date and the Expiration
Date. Until the Distribution Date, the Rights shall be evidenced by certificates
for Common Stock registered in the names of the holders thereof (together with a
copy of the Summary of Rights), registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the surrender for transfer
of any certificate for Common Stock, with or without a copy of the Summary of
Rights attached thereto, shall also constitute the transfer of the associated
Rights. Certificates issued for Common Stock (including, without limitation,
certificates issued upon transfer or exchange of Common Stock) prior to the
earliest of the Distribution Date, the Redemption Date or the Expiration Date
shall have impressed on, printed on, written on or otherwise affixed to them the
following legend:
 
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in a Rights Agreement between Hancock Fabrics, Inc. and Continental
Stock Transfer & Trust Company, dated as of March 23, 1987, as from time to time
amended, (the “Rights Agreement”), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal executive
offices of Hancock Fabrics, Inc. 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. Hancock Fabrics, Inc. will mail
to the holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain circumstances, Rights
issued to Acquiring Persons or Associates or Affiliates thereof (as defined in
the Rights Agreement) may become null and void.
 
(c)  In the event that the Company purchases or acquires any shares of Common
Stock prior to the Distribution Date, any Rights associated with such shares of
Common Stock shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with shares of Common Stock that
are no longer outstanding.
 
Section 4.  Form of Right Certificates.
 
(a)  The Right Certificates (and the form of election to purchase shares,
certification and assignment to be printed on the reverse thereof) shall be
substantially in the form of 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 with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. The Right Certificates shall be in
machine printable form and in a format reasonably satisfactory to the Rights
Agent. Subject to the provisions of paragraph (b) of this Section, the Right
Certificates, whenever issued, shall be dated as of March 23, 1987, and shall
show the date of countersignature by the Rights Agent, and on their face shall
entitle the holders thereof to purchase such number of shares of Common Stock as
shall be set forth therein at the Purchase Price set forth therein, but the
number and kind of such shares and the Purchase Price shall be subject to
adjustment as provided herein.
 
(b)  Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.
 
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Section 5.  Countersignature and Registration.
 
The Right Certificates shall be executed on behalf of the Company by the
Chairman of the Board, President or any Vice President and by its Secretary or
an Assistant Secretary, either manually or by facsimile signature, and shall
have affixed thereto the Company’s seal or a facsimile thereof. The Right
Certificates shall be manually countersigned by an authorized signatory of the
Rights Agent, but it shall not be necessary for the same signatory to
countersign all of the Right Certificates hereunder. No Right Certificate shall
be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, may nevertheless
be countersigned by the Rights Agent, and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company.
 
Following the Distribution Date, the Rights Agent will keep or cause to be kept,
at its principal office in the Borough of Manhattan in the City of New York,
books for registration and transfer of the Right Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders of the
Right Certificates, the number of Rights evidenced on its face by each of the
Right Certificates and the date of each of the Right Certificates.
 
Section 6.  Transfer, Split-Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates; Cancellation and
Destruction of Right Certificates.
 
(a)  Subject to the provisions of Section 7(f) and (g) hereof, at any time after
the close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Redemption Date or the Expiration Date, any Right
Certificate or Right Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of shares of Common Stock as the
Right Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender such Right Certificate or Right
Certificates at the principal office of the Rights Agent. Thereupon the Rights
Agent shall countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment from the holders of Right Certificates 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 such Right
Certificates.
 
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company’s request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company shall execute and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
 
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All Right Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or to any
of its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of the Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
 
Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights;
Fractional Rights and Fractional Shares of Stock.
 
(a)  The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase and certification on the reverse side
thereof duly executed, to the Rights Agent at the principal office of the Rights
Agent in the Borough of Manhattan in the City of New York, together with payment
of the Purchase Price for each share of Common Stock as to which the Rights are
exercised, at or prior to the earlier of (i) the close of business on the
Expiration Date or (ii) the Redemption Date.
 
(b)  The Purchase Price for each share of Common Stock purchased pursuant to the
exercise of a Right shall be $24, shall be subject to adjustment from time to
time as hereinafter provided and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) of this Section.
 
(c)  Upon receipt of a Right Certificate representing exercisable Rights, with
the form of election to purchase and certification duly executed, accompanied by
payment of the Purchase Price for the shares of Common Stock to be purchased and
an amount equal to any applicable transfer tax required to be paid by the holder
of such Right Certificate in accordance with Section 8 hereof, in cash, or by
certified check or cashier’s check payable to the order of the Company, the
Rights Agent shall thereupon promptly (i) requisition from any transfer agent of
the Common Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the number of shares of Common Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares of Common Stock in
accordance with paragraph (g) of this Section, (iii) promptly after receipt of
such certificates, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder, and (iv) when appropriate, after receipt,
promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate.
 
(d)  In case the registered holder of any Right Certificate shall exercise less
than all the Rights evidenced thereby, a new Right Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of paragraph (f) of this Section.
 
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(e)  Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section unless the certification contained in the appropriate
form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise shall have been completed and signed
by the registered holder thereof and the Company shall have been provided with
such additional evidence of the identity of the beneficial owner (or former
beneficial owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
 
(f)  The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates that evidence fractional Rights. In lieu of
fractional Rights, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this paragraph, the current market
value of a whole Right shall be the closing price (as defined in Section 1(f))
of the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. If the Rights are not
publicly held or not so listed or traded, the “current market value of a whole
Right” shall mean the fair value of a Right on such date as determined in good
faith by the Board.
 
(g)  The Company shall not be required to issue fractions of shares of Common
Stock upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one share of Common Stock. For purposes
of this paragraph, the current market value of the Common Stock shall be the
closing price (as defined in Section 1(f)) of a share of Common Stock for the
Trading Day immediately prior to the date of such exercise.
 
Section 8.  Reservation and Availability of Shares of Common Stock.
 
The Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Common Stock, or any authorized and
issued Common Stock held in its treasury, the number of shares of Common Stock
that will be sufficient to permit the exercise in full of all outstanding
Rights. In the event that there shall not be sufficient treasury stock or
authorized but unissued Common Stock to permit the exercise in full of the
Rights in accordance with the provisions of this Agreement, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exercise of the Rights.
 
So long as the Common Stock issuable upon the exercise of Rights may be listed
on any national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all shares of
Common Stock reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
 
The Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Common Stock delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such stock (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and non-assessable stock.
 
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The Company further covenants and agrees that it will pay when due and payable
any and all Federal and state transfer taxes and charges which may be payable in
respect of the issuance or delivery of the Right Certificates or of any Common
Stock upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates for Common Stock in a name other than that of, the
registered holder of the Right Certificate evidencing the Rights surrendered for
exercise or to issue or deliver any certificates for Common Stock upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company’s satisfaction that so such tax
is due.
 
Section 9.  Right Holders.
 
(a)  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:
 
(i)  prior to the Distribution Date, the Rights shall be transferable only in
connection with the transfer of Common Stock;
 
(ii)  after the Distribution Date, the Right Certificates shall be transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer;
 
(iii)  the Company and the Rights Agent may deem and treat the person in whose
name the Right Certificate (or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right Certificates or the associated Common Stock certificate made my
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary; and
 
(iv)  he has waived his right to receive any fractional Rights or any fractional
shares of stock upon exercise of a Right.
 
(b)  No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of Common 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 Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 14 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
 
(c)  Each person in whose name any certificate for Common Stock is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Common Stock represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Stock transfer books of
the Company are closed, such person shall be deemed to have become the record
holder of such stock on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Stock transfer books of the Company
are open.
 
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(d)  All rights of action in respect of this Agreement, except the rights of
action given to the Rights Agent under Section 2 (b) and (c) hereof, are vested
in each registered holder of a Right Certificate (and, prior to the Distribution
Date, each registered holder of Common Stock); and any such holder, without the
consent of the Rights Agent or of the holder of any other Right Certificate (or,
prior to the Distribution Date, of the Common 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 to enforce, this Agreement, or otherwise enforce
or act in respect of his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
 
Section 10.  Adjustment of Number of Shares; Exchange Option.
 
(a)  Subject to the provisions of paragraph (b) of this Section, in the event
any Person shall become an Acquiring Person, proper provision shall be made so
that each holder of a Right, except as provided below, shall thereafter have a
right to receive, upon exercise thereof in accordance with the terms of this
Agreement, such number of shares of Common Stock as shall equal the result
obtained by (x) multiplying the then-current Purchase Price by the number of
shares of Common Stock for which a Right is then exercisable and (y) dividing
that product by 50% of the current per share market price of the Common Stock
(determined pursuant to Section 12(d)), on the date such Person became an
Acquiring Person. In the event that any Person shall become an Acquiring Person
and the Rights shall then be outstanding, the Company shall not take any action
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.
 
(b)  The Board of Directors of the Company may, at its option, at any time after
any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of paragraph (c) of this Section) for
Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time that a majority of the members of the Board of Directors shall be Acquiring
Persons, Affiliates or Associates of an Acquiring Person, or nominees or
representatives of any of them. Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to this
paragraph (b) and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights that
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights that have become void pursuant to the
provisions of paragraph (c) of this Section) held by each holder of Rights. In
the event that there shall not be sufficient shares of Common Stock issued but
not outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this paragraph (b), the Company shall take all
such action as may be necessary to authorize additional shares of Common Stock
for issuance upon exchange of the Rights.
 
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(c)  Anything in this Agreement to the contrary notwithstanding, from and after
the time any Person becomes an Acquiring Person, 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 Affiliate or Associate
thereof) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any Affiliate or Associate
thereof) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has a primary purpose or effect the avoidance of this paragraph (c), shall
become null and void without any further action and no holder of such Rights
shall have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. No Right Certificate shall be issued
pursuant to the provisions of this Agreement that represents any Rights
beneficially owned by any Person whose Rights are void pursuant to the
provisions of this paragraph (c). The Company shall use all reasonable effortsto
ensure that the provisions of this paragraph (c) are complied with, but shall
have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
 
Section 11.  Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
 
At any time after a Person shall have become an Acquiring Person, in the event
that, directly or indirectly, (a) the Company shall consolidate with, or merge
with and into, any Person, (b) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the continuing or
surviving corporation of such merger and, in connection with such merger, all or
part of the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property,
or (c) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or more transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person,
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof in accordance with the terms of
this Agreement, such number of shares of common stock of such other Person
(including the Company as successor thereto or as the surviving corporation) as
shall be equal to the result obtained by (x) multiplying the then-current
Purchase Price by the number of shares of Common Stock for which a Right is then
exercisable (without taking into account any adjustment previously made pursuant
to Section 10) and (y) dividing that product by 50% of the current per share
market price of the shares of common stock of such other Person (determined
pursuant to Section 12(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Person shall thereafter be
liable for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such
Person; and (iv) such Person 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 8 hereof) in connection with such consummation as may be
necessary to ensure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its common stock thereafter
deliverable upon the exercise of the Rights. The Company shall not consummate
any such consolidation, merger, sale or transfer unless prior thereto the
Company and such Person shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights. The provisions of
this Section shall similarly apply to successive mergers or consolidations or
sales or other transfers.
 
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Section 12.  Adjustments of Purchase Price, Number of Shares or Number of
Rights.
 
(a)  In the event the Company shall at any time after the date of this Agreement
(A) declare a dividend on the Common Stock payable in shares of Common Stock,
(B) subdivide the outstanding shares of Common Stock, (c) combine the
outstanding shares of Common Stock into a smaller number of shares or (D) issue
any shares of its capital stock in a reclassification of the Common 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 in Section 10 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 capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect and in compliance
with other applicable conditions, the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Common Stock transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. If an
event occurs that would require an adjustment under both this paragraph and
Section 10 hereof, the adjustment provided for in this paragraph shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 10 hereof.
 
(b)  In case the Company shall fix a record date for the issuance of rights or
warrants to all holders of Common Stock entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) at a price per share
of Common Stock (or having a conversion price per share of Common Stock, if a
security convertible into Common Stock) less than the current per share market
price of the Common Stock (as defined in paragraph (d) of this Section) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on such record date plus the number of shares of
Common Stock that the aggregate offering price of the total number of shares of
Common 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 the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common 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 in a consideration part or all of which is
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent. Common Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
 
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(c)  In case the Company shall fix a record date for the making of a
distribution to all holders of Common 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 or assets
(other than a regular periodic cash dividend at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid or a
dividend payable in shares of Common Stock) or subscription rights or warrants
(excluding those referred to in paragraph (b) of this Section), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current per share market price of
the Common Stock (as defined in paragraph (d) of this Section) on such record
date, less the fair market value (as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Common Stock and the denominator of which shall be such current per share
market price of the Common 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 again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
 
(d)  For the purpose of any computation hereunder, the “current per share market
price” of the Common Stock on any date shall be deemed to be the average of the
daily closing prices (as defined in Section 1(f) hereof) per share of such
Common Stock for the 30 consecutive Trading Days immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Common Stock is determined during a period following the announcement by the
issuer of such Common Stock of (i) a dividend or distribution on such Common
Stock payable in such Common Stock or securities convertible into such Common
Stock or (ii) any subdivision, combination or reclassification of such Common
Stock, and prior to the expiration of 30 Trading Days after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the “current
market price” shall be appropriately adjusted to reflect the current market
price per share of Common Stock equivalent. If the Common Stock is not publicly
held or not so listed or traded, the “current per share market price” shall mean
the fair value per share of Common Stock as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent.
 
(e)  An adjustment in the Purchase Price requiring an increase or decrease of
less than 1% in such price shall not be required immediately following a
transaction, but any such adjustment shall be carried forward and made not later
than the earlier of the Expiration Date and three years after the date of the
transaction or shall be taken into account in any subsequent adjustment if prior
to the earlier of such dates. All calculations under this Section and under
Section 10 shall be made to the nearest cent or to the nearest ten-thousandth of
a share as the case may be.
 
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(f)  If as a result of an adjustment made pursuant to paragraph (a) of this
Section or Section 10(a), the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Company other than
shares of Common Stock, thereafter the number of such other shares of stock so
receivable upon exercise of any Right shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in paragraphs (a) through
(c), inclusive, of this Section, and the provisions of Sections 7, 8, 9(c) and
11 hereof with respect to the Common Stock shall apply on like terms to any such
other shares of stock.
 
(g)  All Rights issued by the Company subsequent to any adjustment to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of shares of Common Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
 
(h)  Unless the Company shall have exercised its election as provided in
paragraph (i) of this Section, upon each adjustment of the Purchase Price as a
result of the calculations made in paragraphs (b) and (c) of this Section, 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 shares of stock (calculated to the nearest ten-thousandth) obtained by
(i) multiplying (x) the number of shares of 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 substitution for any
adjustment in the number of shares of Common Stock issuable upon the exercise of
a Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of shares of Common 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 ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least 10 days later than
the date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this paragraph, the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 7(f) hereof, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall be
issued, executed and countersigned in the manner provided for herein and shall
be registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
 
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(j)  Irrespective of any adjustment or change in the Purchase Price or the
number of shares of Common Stock issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share of stock and the number of shares of stock that were
expressed in the initial Right Certificates issued hereunder.
 
(k)  Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the Common 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 fully paid and nonassessable shares of Common Stock at
such adjusted Purchase Price.
 
(l)  In any case in which this Section or Section 10 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the Common Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Common Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder’s right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
 
(m)  Anything in this Section or Section 10 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 or Section 10,
as and to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the shares of the
Common Stock, issuance wholly for cash of any shares of Common Stock at less
than the current market price, issuance wholly for cash of Common Stock or
securities which by their terms are convertible into or exchangeable for Common
Stock, stock dividends or issuance of rights, options or warrants referred to
hereinabove in this Section, hereafter made by the Company to holders of its
Common Stock shall not be taxable to such stockholders.
 
(n)  Whenever an adjustment is made as provided in Sections 10, 11 or 12 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Common Stock a copy of such certificate, and (c) mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 15 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such certificate.
 
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Section 13.  Redemption.
 
(a)  The Board may, at its option, at any time prior to such time as any Person
becomes an Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 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 amount being hereinafter
referred to as the “Redemption Price”).
 
(b)  Immediately upon the action of the Board ordering the redemption of the
Rights, and without any further action and without any notice, the right to
exercise the Rights shall terminate and the only right of the holders of Rights
shall be to receive the Redemption Price. Within 10 days after the action of the
Board ordering the redemption of the Rights, the Company shall give notice of
such redemption to the holders of the then outstanding Rights by mailing such
notice to each such holder at its 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 Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made. Neither the Company nor
any of its Affiliates or Associates may redeem, acquire or purchase for value
any Rights at any time in any manner other than that specifically set forth in
this Section or in connection with the purchase of Common Stock prior to the
Distribution Date.
 
Section 14.  Notice of Certain Events.
 
In case the Company shall propose, at any time after the Distribution Date, (a)
to pay any dividend payable in stock of any class to the holders of Common Stock
or to make any other distribution to the holders of Common Stock (other than a
regular periodic cash dividend at a rate not in excess of 125% of the rate of
the last regular periodic cash dividend theretofore paid), (b) to offer to the
holders of Common Stock rights or warrants to subscribe for or to purchase any
additional Common Stock or shares of stock of any class or any other securities,
rights or options, (c) to effect any reclassification of its Common Stock (other
than a reclassification involving only the subdivision of outstanding shares of
Common Stock), (d) to effect any consolidation or merger into or with, or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one or more transactions, of more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to, any other Person, or (e) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
the Rights Agent and to each holder of a Right Certificate, in accordance with
Section 15 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 Common 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 (a) or (b) above at least 10 days prior to the record date for
determining holders of the Common Stock for purposes of such action, and in the
case of any such other action, at least 10 days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the Common Stock whichever shall be the earlier.
 
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In case any of the events set forth in Section 10(a) or (b) of this Agreement
shall occur, then, in any such case, the Company shall as soon as practicable
thereafter give to the Rights Agent and to each holder of a Right Certificate,
in accordance with Section 15 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 10(a) or (b) hereof.
 
Section 15.  Notices.
 
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Right Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
 
Hancock Fabrics, Inc.
P.O. Box 2400
Tupelo, Mississippi 38803-2400
Attention: Secretary
 
Subject to the provisions of Section 2(d) hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
 
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Investor Services Department
 
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
 
Section 16.  Supplements and Amendments.
 
The Company and the Rights Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Right Certificates, so long as
the interests of the holders of the Right Certificates are not adversely
affected thereby, in order to cure any ambiguity, to correct or supplement any
provision contained herein that the Board may, upon the advice of counsel, from
time to time determine to be defective or inconsistent with any other provisions
herein or with applicable law, or to make any other provisions in regard to
matters or questions arising hereunder, which the Company and the Rights Agent
may deem necessary or desirable, including but not limited to extending the
Expiration Date and, provided that at the time of such amendment there is no
Acquiring Person, the period of time during which or the conditions under which
the Rights may be redeemed.
 
Section 17.  Determinations and Actions by the Board of Directors.
 
(a)  The Board shall have the exclusive power and authority to exercise all
rights and powers specifically granted to the Board or to the Company,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable to carry out the intent of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations done or made by
the Board in good faith shall be final, conclusive and binding on the Company,
the Rights Agent, the holders of the Rights, and all other parties and shall not
subject the Board to any liability to the holders of the Rights.
 
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(b)  It is understood that the TIDE Committee (as described below) of the Board
of Directors shall review and evaluate this Agreement in order to consider
whether the maintenance of this Agreement continues to be in the best interests
of the Company, its stockholders and other relevant constituencies of the
Company at least once every three years, or sooner than that if any Person shall
have made a proposal to the Company or its stockholders, or taken any other
action that, if effective, could cause such Person to become an Acquiring Person
hereunder, if a majority of the members of the TIDE Committee shall deem such
review and evaluation appropriate after giving due regard to all relevant
circumstances. Following each such review, the TIDE Committee shall 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. If the Company has a non-executive chairman, the TIDE
Committee shall be chaired by the non-executive chairman and comprised of all
members of the Board of Directors who are not officers, employees or Affiliates
of the Company. If the Company does not have a non-executive chairman, the TIDE
Committee shall be comprised of the members of the Corporate Governance and
Nominating Committee of the Board of Directors (or any successor committee) who
are not officers, employees or Affiliates of the Company .
 
(c)  The TIDE Committee and the Board of Directors, when considering whether
this Agreement should be modified or the Rights should be redeemed, shall have
the power to set their own agenda and to retain at the expense of the Company
their choice of legal counsel, investment bankers and other advisors. The TIDE
Committee and the Board of Directors, when considering whether this Agreement
should be modified or the Rights should be redeemed, 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 this Agreement should be modified or
the Rights should be redeemed.
 
Section 18.  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 19.  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 Right
Certificates (and, prior to the Distribution Date, the 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 Right Certificates (and, prior to the Distribution
Date, the Common Stock).
 
Section 20.  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.
 
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Section 21.  Governing Law.
 
This Agreement and each Right Certificate issued hereunder shall be deemed to be
a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
 
Section 22.  Counterparts.
 
This Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
 
Section 23.  Descriptive Headings.
 
Descriptive headings of the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed, all as of
the day and year first above written.
 
HANCOCK FABRICS, INC.
 
By: /s/ Larry G. Kirk
Larry G. Kirk
Chief Executive Officer
 
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
 
By: /s/ Steven Nelson
Steven Nelson
Chairman, President, Secretary
 

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EXHIBIT A
 
[Form of Right Certificate]
 
Certificate No. R- ______________Rights
 
NOT EXERCISABLE AFTER MARCH 4, 2011 OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
 
Right Certificate
 
HANCOCK FABRICS, INC.
 
This certifies that _________________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of March 23, 1987 between Hancock Fabrics, Inc., a Delaware
corporation (the “Company”), and Continental Stock Transfer & Trust Company, as
Rights Agent (the “Rights Agent”), and as amended and restated most recently on
March 4, 2001 (the “Rights Agreement”), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 p.m. (Central Time) on March 4, 2011, at the principal office
of the Rights Agent, or its successors as Rights Agent, in the Borough of
Manhattan in the City of New York, one fully paid, non-assessable share of
common stock of the Company (the “Common Stock”), at a purchase price of $24 per
share (the “Purchase Price”), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase and certification duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of shares of Common Stock that may be purchased upon exercise thereof)
set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of March 4, 2001, based on the Common Stock as constituted at
such date.
 
As provided in the Rights Agreement, the Purchase Price and the number of shares
of Common Stock which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
 
This Right Certificate is subject to all of the terms, provisions and conditions
of the Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal offices of the Company and the
Rights Agent.
 
This Right Certificate, with or without other Right Certificates, upon surrender
at the principal office of the Rights Agent, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of shares of Common
Stock as the Rights evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Right Certificates for the
number of whole Rights not exercised.
 
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Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.01 per Right.
 
No fractional shares of Common Stock shall be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof of a cash payment will be
made, as provided in the Rights Agreement.
 
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Stock or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon to 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
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
 
The Company and the Rights Agent may from time to time supplement or amend the
Rights Agreement without the approval of any holders of Right Certificates, so
long as the interests of the holders of Right Certificates are not adversely
affected thereby, in order to cure any ambiguity, to correct or supplement any
provision contained therein that the Board may from time to time determine to be
defective or inconsistent with any other provisions therein or with applicable
law, or to make any other provisions in regard to matters or questions arising
thereunder that the Company and the Rights Agent may deem necessary or
desirable, including but not limited to extending the Expiration Date (as such
term is defined in the Rights Agreement) and, providing that at the time of such
amendment there is no Acquiring Person (as such term is defined in the Rights
Agreement), extending the period during which or the conditions under which the
Rights may be redeemed.
 
If any term, provision, covenant or restriction of the Rights 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 the Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
 
This Right Certificate shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Rights Agent.
 
WITNESS the facsimile signature of the proper officers of the Company and its
corporate seal. Dated as of ________________.
 
HANCOCK FABRICS, INC.
 
By_______________________________
Title
 
By_______________________________
Title
 
Countersigned:
 
 
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CONTINENTAL STOCK TRANSFER & TRUST COMPANY
 
By_____________________________ Date: _____________________________
    Authorized Signature
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
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[Form of Reverse Side of Right Certificate]
 
FORM OF ASSIGNMENT
 
(To be executed by the registered holder if such holder desires to transfer the
Right Certificates.)
 
FOR VALUE RECEIVED _______________________________________ hereby sells, assigns
and transfers unto______________________________________________________
________________________________________________________________________________
 
(Please print name and address of transferee)
 
this Right Certificate and the Rights evidenced thereby, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full power of
substitution.
 
Dated: _____________________________
 
 
 
 
 
 
 
 
 
 
 
 
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