Exhibit 10.3

 

 

 

XERIUM TECHNOLOGIES, INC.

and

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

as Rights Agent

Rights Agreement

Dated as of May 25, 2010

 

 

 

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TABLE OF CONTENTS

 

        

Page

Section 1   Certain Definitions    1 Section 2   Appointment of Rights Agent   
4 Section 3   Issue of Right Certificates    5 Section 4   Form of Right
Certificates    7 Section 5   Countersignature and Registration    7 Section 6  
Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates    8 Section 7   Exercise of
Rights; Purchase Price; Expiration Date of Rights    8 Section 8   Cancellation
and Destruction of Right Certificates    9 Section 9   Availability of Preferred
Shares    9 Section 10   Preferred Shares Record Date    10 Section 11  
Adjustment of Purchase Price, Number of Shares or Number of Rights    10 Section
12   Certificate of Adjusted Purchase Price or Number of Shares    16 Section 13
  Consolidation, Merger or Sale or Transfer of Assets or Earning Power    16
Section 14   Fractional Rights and Fractional Shares    17 Section 15   Rights
of Action    18 Section 16   Agreement of Right Holders    18 Section 17   Right
Certificate Holder Not Deemed a Stockholder    19 Section 18   Concerning the
Rights Agent    19 Section 19   Merger or Consolidation or Change of Name of
Rights Agent    20 Section 20   Duties of Rights Agent    20 Section 21   Change
of Rights Agent    22 Section 22   Issuance of New Right Certificates    22
Section 23   Redemption    23 Section 24   Exchange    23 Section 25   Notice of
Certain Events    25 Section 26   Notices    25 Section 27   Supplements and
Amendments    26 Section 28   Successors    26 Section 29   Benefits of this
Rights Agreement    27

 

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Section 30   Severability    27 Section 31   Governing Law    27 Section 32  
Counterparts    27 Section 33   Descriptive Headings    27 Exhibit A —   Terms,
Designations, Powers and Preferences of Series A Junior Participating Preferred
Stock    Exhibit B —   Form of Right Certificate    Exhibit C —   Summary of
Rights to Purchase Preferred Shares   

 

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RIGHTS AGREEMENT

Rights Agreement, dated as of May 25, 2010, between Xerium Technologies, Inc., a
Delaware corporation (the “Company”), and American Stock Transfer & Trust
Company, LLC (the “Rights Agent”).

WHEREAS, on May 25, 2010, pursuant to that certain joint prepackaged plan of
reorganization confirmed by the United States Bankruptcy Court for the District
of Delaware on May 12, 2010, the Company authorized and declared a dividend of
one preferred share purchase right (a “Right”) for each Common Share of the
Company outstanding as of the Close of Business on May 25, 2010 (the “Record
Date”), each Right representing the right to purchase one one-thousandth
(subject to adjustment) of a Preferred Share, upon the terms and subject to the
conditions herein set forth, and the Company further authorized and directed the
issuance of one Right (subject to adjustment as provided herein) with respect to
each Common Share that shall become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Expiration Date;
provided, however, that Rights may be issued with respect to Common Shares that
shall become outstanding after the Distribution Date and prior to the earlier of
the Redemption Date and the Expiration Date in accordance with the provisions of
Section 22 hereof.

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 Rights 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 Common Shares then outstanding, but shall not include (i) the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any entity or trustee holding Common
Shares for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company, (ii) any Person who or which
becomes the Beneficial Owner of 15% or more of the Common Shares then
outstanding as the result of a reduction in the outstanding Common Shares
resulting from acquisition of Common Shares by the Company approved by the Board
of Directors, unless and until such Person becomes the Beneficial Owner of any
additional Common Shares (other than pursuant to a stock split, stock dividend
or similar transaction) and immediately thereafter becomes the Beneficial Owner
of 15% or more of the Common Shares, (iv) any Person who or which the Board of
Directors of the Company determines, in good faith, became an Acquiring Person
inadvertently, if such Person divests as promptly as practicable a sufficient
number of Common Shares so that such Person would no longer be an Acquiring
Person, (v) any Person who or which the Board of Directors of the Company
determines, prior to the time such Person would otherwise be an Acquiring
Person, should be exempted from the definition of Acquiring Person, provided
that the Board of Directors may make such exemption subject to such conditions,
if any, which the Board may

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determine or (vi) AS Investors, LLC, Carl Marks Strategic Investments, L.P.,
Carl Marks Strategic Opportunities Fund, L.P., Cerberus Series Four Holdings,
LLC and Saberasu Japan Investments II B.V. (each, an “Exempt Person”) or any
Affiliate or Associate of an Exempt Person; provided that any Exempt Person who
shall become Beneficial Owner of 20% or more of the Common Shares then
outstanding shall become an Acquiring Person; provided, however, that in no
event shall any Exempt Person become an Acquiring Person solely as a result of a
reduction in the outstanding Common Shares resulting from acquisition of Common
Shares by the Company approved by the Board of Directors, unless and until such
Exempt Person becomes the Beneficial Owner of any additional Common Shares
(other than pursuant to a stock split, stock dividend or similar transaction)
and immediately thereafter becomes the Beneficial Owner of 20% or more of the
Common Shares.

(b) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 under the Exchange Act.

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

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

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

(iii) which are beneficially owned, directly or indirectly, by any other Person
with which such Person or any of such Person’s Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding, voting
(except to the extent contemplated by the proviso to Section 1(c)(ii)(B)) or
disposing of any securities of the Company; or

 

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(iv) which are the subject of a derivative transaction entered into by such
Person, or derivative security acquired by such Person, which gives such Person
the economic equivalent of ownership of an amount of such securities due to the
fact that the value of the derivative is explicitly determined by reference to
the price or value of such securities, without regard to whether (A) such
derivative conveys any voting rights in such securities to such Person, (B) the
derivative is required to be, or capable of being, settled through delivery of
such securities, or (C) such Person may have entered into other transactions
that hedge the economic effect of such derivative. In determining the number of
Common Shares deemed Beneficially Owned by virtue of the operation of this
subparagraph (iv) of this paragraph (c), the subject Person shall be deemed to
Beneficially Own (without duplication) the number of Common Shares that are
synthetically owned pursuant to such derivative transactions or such derivative
securities.

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

(d) “Business Day” shall mean any day other than a Saturday, a Sunday, or a day
on which banking institutions in 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., New York City
time, on such date, provided, however, that, if such date is not a Business Day,
it shall mean 5:00 p.m., New York City time, on the next succeeding Business
Day.

(f) “Common Shares” shall mean the shares of common stock, par value $.001 per
share, of the Company, except that “Common Shares” when used with reference to
any Person other than the Company shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.

(g) “Company” shall have the meaning set forth in the preamble hereof.

(h) “Current per share market price” shall have the meaning set forth in
Section 11(d) hereof.

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

(j) “Equivalent preferred shares” shall have the meaning set forth in
Section 11(b) hereof.

(k) “Exchange Act” shall mean the Securities Exchange Act of 1934.

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

 

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(m) “Expiration Date” shall mean the Close of Business on May 25, 2013.

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

(o) “Preferred Shares” shall mean shares of Series A Junior Participating
Preferred Stock, par value $.001 per share, of the Company having the terms,
designations, powers and preferences set forth in Exhibit A.

(p) “Purchase Price” shall initially be $60.00 for each one one-thousandth of a
Preferred Share purchasable pursuant to the exercise of a Right, and shall be
subject to adjustment from time to time as provided in Section 11 or 13 hereof.

(q) “Record Date” shall have the meaning set forth in the second paragraph
hereof.

(r) “Redemption Date” shall mean the time at which the Rights are redeemed as
provided in Section 23 hereof.

(s) “Redemption Price” shall have the meaning set forth in Section 23(a) hereof.

(t) “Right” shall have the meaning set forth in the second paragraph hereof.

(u) “Right Certificate” shall have the meaning set forth in Section 3(a) hereof.

(v) “Rights Agent” shall have the meaning set forth in the preamble hereof.

(w) “Security” shall have the meaning set forth in Section 11(d)(i) hereof.

(x) “Stock Acquisition Date” shall mean the first date of public announcement
(including, without limitation, by a filing under the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such or such
earlier date as a majority of the Board shall become aware of the existence of
an Acquiring Person.

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

(z) “Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.

Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights
Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof, shall prior to the Distribution Date also be
the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.

 

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Section 3. Issue of Right Certificates. (a) Until the earlier of the Close of
Business on (i) the tenth day after the Stock Acquisition Date or (ii) such
date, if any, as may be determined by action of the Board of Directors of the
Company after the date of the commencement by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any entity or trustee holding Common
Shares for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company) of, or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity or trustee holding Common Shares for or
pursuant to the terms of any such plan or for the purpose of funding any such
plan or funding other employee benefits for employees of the Company or of any
Subsidiary of the Company) to commence, a tender or exchange offer the
consummation of which would result in any Person becoming an Acquiring Person
(including any such date which is after the date of this Rights Agreement and
prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the “Distribution Date”), (x) the Rights will attach to (subject
to the provisions of Section 3(b) hereof) the Common Shares (whether in
book-entry, certificated or uncertificated form) issued and outstanding, and the
Rights will be owned by the registered holder of the Common Shares and will not
be evidenced by separate Right Certificates and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing
one Right for each Common Share so held, subject, in the case of Common Shares
held in uncertificated form on the Distribution Date, to the rights provided by
law to a registered pledgee whose security interest has been duly registered
with the Company. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.

(b) The Company will make available, as promptly as practicable following the
Record Date, a Summary of Rights to Purchase Preferred Shares, in substantially
the form of Exhibit C hereto, to any holder of Rights who may so request from
time to time prior to the Expiration Date. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates and the registered holders of
the Common Shares shall also be the registered holders of the associated Rights.
Until the Distribution Date (or the earlier of the Redemption Date or the
Expiration Date), the surrender for transfer of any certificate for Common
Shares in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with such Common Shares.

(c) Rights shall be issued in respect of all Common Shares which are issued in
certificated form (whether originally issued or from the Company’s treasury)
after the Record Date but prior to the earliest of the Distribution Date, the
Redemption Date or the Expiration Date, and certificates representing such
Common Shares shall have impressed on, printed on, written on or otherwise
affixed to them substantially the following legend:

This certificate also evidences and entitles the holder hereof to certain rights
as set forth in a Rights Agreement between Xerium Technologies, Inc. (the
“Company”) and the Rights Agent thereunder (the “Rights Agreement”), the terms
of which are hereby incorporated herein by reference and a copy of which is on
file at the principal offices of the Company. 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
without charge after receipt of a written request therefor. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO ANY PERSON
WHO BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT), INCLUDING
SUCH RIGHTS HELD BY A SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

 

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With respect to such certificates of Common Shares containing the foregoing
legend, until the earliest of the Distribution Date, the Redemption Date or the
Expiration Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.

(d) Rights shall be issued in respect of all Common Shares which are issued in
book-entry or uncertificated form (whether originally issued or from the
Company’s treasury) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Expiration Date, and confirmations
and account statements sent to holders of Common Shares in book-entry form and
initial transaction statements relating to the registration, pledge or release
from pledge of Common Shares in uncertificated form shall have impressed on,
printed on, written on or otherwise affixed to them substantially the following
legend:

The Common Stock, par value $0.001 per share, of Xerium Technologies, Inc. (the
“Company”) to which this statement relates also evidences and entitles the
holder thereof to certain rights as set forth in a Rights Agreement between the
Company and the Rights Agent thereunder (the “Rights Agreement”), the terms of
which are hereby incorporated herein by reference and a copy of which is on file
at the principal offices of the Company. 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 the shares to which this
statement relates. The Company will mail to the holder of the shares to which
this statement relates and any registered pledgee of uncertificated shares a
copy of the Rights Agreement without charge after receipt of a written request
therefor. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS

 

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AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT), INCLUDING SUCH RIGHTS HELD BY A SUBSEQUENT
HOLDER, MAY BECOME NULL AND VOID.

With respect to Common Shares in book-entry form for which there has been sent a
confirmation or account statement and Common Shares in uncertificated form for
which there has been sent an initial transaction statement containing the
foregoing legend, until the earliest of the Distribution Date, the Redemption
Date or the Expiration Date, the Rights associated with such Common Shares shall
be evidenced by such Common Shares alone, and the registration of transfer or
pledge, or the release from pledge, of any such Common Shares shall also
constitute the registration of transfer or pledge, or the release from pledge,
as the case may be, of the Rights associated with such Common Shares.

(e) In the event that the Company purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed cancelled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common Shares
which are no longer outstanding.

Section 4. Form of Right Certificates. Subject to the provisions of Section 22
hereof, the Right Certificates (and the forms of election to purchase Preferred
Shares and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Rights Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or automated quotation system
on which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Sections 11 and 22 hereof, the Right Certificates
shall entitle the holders thereof to purchase such number of one one-thousandths
of a Preferred Share as shall be set forth therein at the price per one
one-thousandth of a Preferred Share set forth therein, but the number of one
one-thousandths of a Preferred Share and the Purchase Price shall be subject to
adjustment as provided herein.

Section 5. Countersignature and Registration. (a) The Right Certificates shall
be executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, any of its Vice Presidents, or its Treasurer,
either manually or by facsimile signature, shall have affixed thereto the
Company’s seal or a facsimile thereof, and shall be attested by the Secretary or
an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be countersigned by the Rights Agent,
either manually or by facsimile signature, and shall not 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, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the Person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by

 

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any Person who, at the actual date of the execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate although
at the date of the execution of this Rights Agreement any such Person was not
such an officer.

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

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

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

Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein), in whole or in part, at
any time after the Distribution Date, upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the principal office of the Rights Agent, together with
payment of the Purchase Price for each one one-thousandth of a Preferred Share
as to which the Rights are exercised, at or prior to the earliest of (i) the
Expiration Date, (ii) the Redemption Date or (iii) the time at which such Rights
are exchanged as provided in Section 24 hereof.

 

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(b) The Purchase Price shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.

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

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

Section 9. Availability of Preferred Shares. (a) The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7. The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all securities delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such securities (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable.

 

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

(c) The Company will use its best efforts to ensure that any securities issued
pursuant hereto are issued in compliance with all applicable laws.

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

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

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

 

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capital stock issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be entitled to receive
the aggregate number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.

(ii) Subject to Section 24 of this Rights Agreement, in the event any Person
becomes an Acquiring Person, each holder of a Right shall thereafter have a
right to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-thousandths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Rights Agreement and in lieu of Preferred Shares, such number of Common
Shares as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable and dividing that product by (B) 50% of the
then current per share market price of the Company’s Common Shares (determined
pursuant to Section 11(d) hereof) on the date of the occurrence of such event.
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 which would
eliminate or diminish the benefits intended to be afforded by the Rights.

Notwithstanding anything in this Agreement to the contrary, from and after the
time when any Person first becomes an Acquiring Person, any Rights that are or
were acquired or Beneficially Owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this Rights Agreement. No Right Certificate shall be issued pursuant to
Section 3 that represents Rights Beneficially Owned by an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof; no Right Certificate shall be issued at any time upon the
transfer of any Rights to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence shall be
cancelled.

(iii) If there shall not be sufficient Common Shares issued but not outstanding
or authorized but unissued to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Company shall take all such
action as may be necessary to authorize additional Common Shares for issuance
upon exercise of the Rights. If the Company shall, after good faith effort, be
unable to take all such action as may be necessary to authorize such additional
Common Shares, the Company shall substitute, for each Common Share that would
otherwise be issuable upon exercise of a Right, a number of Preferred Shares or
fraction thereof (or a security with substantially similar rights, privileges,
preferences, voting power and economic rights) such that the

 

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current per share market price of one Preferred Share (or such other security)
multiplied by such number or fraction is equal to the current per share market
price of one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof (or other security).

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

(c) In case the Company shall fix a record date for the making of a distribution
to all holders of the Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness or assets (other than a
regular quarterly cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the then current per
share market price of the Preferred Shares on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and holders of the Rights)
of the portion of the assets or evidences of indebtedness so to be distributed
or of such subscription rights or warrants applicable to one Preferred Share and
the denominator of which

 

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shall be such current per share market price of the Preferred Shares; provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company to be issued upon exercise of one Right. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.

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

(ii) For the purpose of any computation hereunder, the “current per share market
price” of the Preferred Shares shall be determined in accordance with the method
set forth in Section 11(d)(i). If the Preferred Shares are not publicly traded,
the “current per share market price” of the Preferred Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares as determined pursuant to Section 11(d)(i) (appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof), multiplied by one thousand. If neither the

 

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Common Shares nor the Preferred Shares are publicly held or so listed or traded,
“current per share market price” shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.

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

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

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

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

(i) The Company may elect on or after the date of any adjustment of the Purchase
Price to adjust the number of Rights in substitution for any adjustment in the
number of one one-thousandths of a Preferred Share purchasable upon the exercise
of a Right. Each of the Rights outstanding after such adjustment of the number
of Rights shall be exercisable for the number of one one-thousandths of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the

 

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

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

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

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

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

 

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wholly for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares, dividends on Preferred
Shares payable in Preferred Shares or issuance of rights, options or warrants
referred to hereinabove in Section 11(b), hereafter made by the Company to
holders of its Preferred Shares shall not be taxable to such stockholders.

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

Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever
an adjustment is made as provided in Sections 11 or 13 hereof, the Company shall
promptly (a) prepare a certificate setting forth such adjustment, and a brief
statement of the facts accounting for such adjustment, (b) file with the Rights
Agent and with each transfer agent for the Common Shares or the Preferred Shares
a copy of such certificate and (c) if a Distribution Date has occurred, mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof.

Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other 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 Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property or (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 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that

(i) each holder of a Right (other than Rights which have become void pursuant to
Section 11(a)(ii)) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the then current Purchase Price multiplied by the
number of one one-thousandths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Rights Agreement and in lieu
of Preferred Shares, such number of

 

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Common Shares of such other Person (including the Company as successor thereto
or as the surviving corporation) as shall equal the result obtained by
(A) multiplying the then current Purchase Price by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer;

(ii) the issuer of such Common Shares shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Rights Agreement;

(iii) the term “Company” shall thereafter be deemed to refer to such issuer; and

(iv) such issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9 hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares thereafter deliverable upon
the exercise of the Rights.

The Company shall not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Company and such issuer shall have executed
and delivered to the Rights Agent a supplemental agreement so providing. The
Company shall not enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.

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

 

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average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.

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

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

Section 15. Rights of Action. All rights of action in respect of this Rights
Agreement, except the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in such holder’s own behalf and
for such holder’s own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder’s right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this Rights
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 Rights 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 Rights Agreement.

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

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

 

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

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

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

Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Rights Agreement and the exercise and performance of its
duties hereunder. The Company also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability or expense incurred without
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 Rights Agreement, including the costs and expenses of
defending against any claim of liability in the premises.

(b) The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Rights Agreement in reliance upon any Right Certificate
or certificate for the Preferred Shares or Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.

 

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

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

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

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

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

 

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(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own negligence, bad faith or willful misconduct.

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

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

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

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

(h) The Rights Agent and any 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
Rights Agreement. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other legal entity.

(i) The Rights Agent may execute and exercise any of the rights or powers hereby
vested in it or perform any duty hereunder either itself or by or through its
attorneys or agents, and the Rights Agent shall not be answerable or accountable
for any act, default, neglect

 

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or misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided reasonable
care was exercised in the selection and continued employment thereof.

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

Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Rights 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 of Directors of the Company 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 Rights Agreement. In
addition, in connection with the issuance or sale of Common Shares following the
Distribution Date and

 

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prior to the earlier of the Redemption Date and the Expiration Date, the Company
(a) shall with respect to Common Shares so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement in existence
prior to the Distribution Date, or upon the exercise, conversion or exchange of
any securities, notes or debentures (pursuant to the terms thereof) issued by
the Company and in existence prior to the Distribution Date, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) the
Company shall not be obligated to issue any such Right Certificates 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 Right Certificate would be issued or would
create a significant risk of such options or employee plans or arrangements
failing to qualify for otherwise available special tax treatment, and (ii) no
such Right 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. (a) The Board of Directors of the Company may, at its
option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.001 per Right, appropriately adjusted to reflect any stock
split, stock combination, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
“Redemption Price”). The redemption of the Rights by the Board of Directors of
the Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors of the Company, in its sole discretion, may
establish. The Company may, at its option, pay the Redemption Price in cash,
Common Shares (based on the current market price at the time of redemption) or
any other form of consideration deemed appropriate by the Board of Directors.

(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, 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. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors of the
Company ordering the redemption of the Rights, the Company shall mail a notice
of redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.

Section 24. Exchange. (a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the

 

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then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any adjustment in the number of Rights pursuant to
Section 11(i) (such exchange ratio being hereinafter referred to as the
“Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors of the
Company shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any entity
or trustee holding Common Shares for or pursuant to the terms of any such plan
or for the purpose of funding any such plan or funding other employee benefits
for employees of the Company or of any Subsidiary of the Company), together with
all Affiliates and Associates of such Person, becomes the Beneficial Owner of
50% or more of the Common Shares then outstanding.

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

(c) In the event that there shall not be sufficient Common Shares issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional Common Shares for issuance
upon exchange of the Rights. In the event the Company shall, after good faith
effort, be unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common Share
that would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof (or a security with substantially similar rights,
privileges, preferences, voting power and economic rights) such that the current
per share market price of one Preferred Share (or other such security)
multiplied by such number or fraction is equal to the current per share market
price of one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof (or other such security).

(d) The Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares. In lieu of such
fractional Common Shares, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the

 

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purposes of this paragraph (d), the current market value of a whole Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.

Section 25. Notice of Certain Events. (a) In case the Company, at any time after
the Distribution Date, shall propose (i) to pay any dividend payable in stock of
any class to the holders of its Preferred Shares or to make any other
distribution to the holders of its Preferred Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 10 days
prior to the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least 10
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier.

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

Section 26. Notices. Notices or demands authorized by this Rights 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:

Xerium Technologies, Inc.

8537 Six Forks Road, Suite 300

Raleigh, North Carolina 27615

Attention: Chief Financial Officer

 

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

American Stock Transfer & Trust Company, LLC

59 Maiden Lane

New York, NY 10038

Attention: Reorganization Department

Notices or demands authorized by this Rights 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 or the registry books of the holders of the Rights
maintained by the Rights Agent after the Distribution Date as herein provided.
Any notice or demand given prior to the Distribution Date by the Company or the
Rights Agent to the holders of the Rights shall also be given to any registered
pledgee of any uncertificated Common Share by first-class mail, postage prepaid,
addressed to such registered pledgee at the address of such registered pledgee
as shown on the registry books of the Company.

Section 27. Supplements and Amendments. Other than with respect to the
definition of “Exempt Person” and the 20% Beneficial Ownership threshold
applicable to Exempt Persons, the Board of Directors of the Company may from
time to time supplement or amend this Rights Agreement without the approval of
any holders of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or to make any other provisions with respect
to the Rights which the Board of Directors of the Company may deem necessary or
desirable, any such supplement or amendment to be evidenced by a writing signed
by the Company and the Rights Agent, provided, however, after any Person becomes
an Acquiring Person, this Rights Agreement shall not be amended in any manner
which would adversely affect the interests of the holders of Rights (other than
an Acquiring Person or Affiliate or Associate thereof). Without limiting the
foregoing, the Company may, except (for the avoidance of doubt) with respect to
any Exempt Person and the 20% Beneficial Ownership threshold applicable to
Exempt Persons, at any time prior to such time as any Person becomes an
Acquiring Person amend this Agreement to lower the thresholds set forth in
Section 1(a) to not less than the greater of (i) the sum of 0.001% and the
largest percentage of the outstanding Common Shares then known by the Company to
be beneficially owned by any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of any
such plan) and (ii) 10%. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment.

Section 28. Successors. All the covenants and provisions of this Rights
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.

 

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

Section 30. Severability. If any term, provision, covenant or restriction of
this 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 this Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

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

Section 32. Counterparts. This Rights Agreement may be executed in one or more
counterparts (including by means of facsimile or other electronic transmission),
each of which shall be deemed an original but all of which together will
constitute one and the same instrument. The exchange of copies of this Rights
Agreement and of signature pages by facsimile transmission (whether directly
from one facsimile device to another by means of a dial-up connection or whether
otherwise transmitted via electronic transmission), by electronic mail in
“portable document format” (“.pdf”) form, or by any other electronic means
intended to preserve the original graphic and pictorial appearance of a
document, or by a combination of such means, shall constitute effective
execution and delivery of this Rights Agreement as to the parties and may be
used in lieu of an original Rights Agreement for all purposes. Signatures of the
parties transmitted by facsimile or other electronic transmission shall be
deemed to be original signatures for all purposes.

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

 

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

 

XERIUM TECHNOLOGIES, INC. By:  

/s/ David Maffucci

  Name: David Maffucci   Title: Executive Vice President, Chief Financial  
Officer and Assistant Secretary

 

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AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, as Rights Agent By:  

/s/ Geraldine M. Zarbo

  Name: Geraldine M. Zarbo   Title: Vice President

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Exhibit A

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

XERIUM TECHNOLOGIES, INC.

Section 1. Designation and Amount. There is hereby created a series of preferred
stock of Xerium Technologies, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
“Corporation”), par value $.001 per share, designated as the “Series A Junior
Participating Preferred Stock” (the “Series A Preferred Stock”) and the number
of shares constituting the Series A Preferred Stock shall be 20,000; provided,
however, that, if more than a total of 20,000 shares of Series A Preferred Stock
shall be issuable upon the exercise of Rights (the “Rights”) issued pursuant to
the Rights Agreement, dated as of May 25, 2010, between the Corporation and
American Stock Transfer & Trust Company, LLC, as Rights Agent, the Board of
Directors of the Corporation (the “Board of Directors”), pursuant to
Section 151(g) of the General Corporation Law of the State of Delaware, shall
direct by resolution or resolutions that a certificate be properly executed,
acknowledged, filed and recorded, in accordance with the provisions of
Section 103 thereof, providing for the total number of shares of Series A
Preferred Stock authorized to be issued to be increased (to the extent that the
Certificate of Incorporation then permits) to the largest number of whole shares
(rounded up to the nearest whole number) issuable upon exercise of such Rights.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of any series of
preferred stock of the Corporation (the “Preferred Stock”) (or any similar
stock) ranking prior and superior to the Series A Preferred Stock with respect
to dividends, the holders of shares of Series A Preferred Stock, in preference
to the holders of Common Stock, par value $.001 per share (the “Common Stock”),
of the Corporation, and of any other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a “Quarterly Dividend Payment Date”), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock (the “Issue Date”), in an amount
per share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 1,000 times
the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any time after
the Issue Date declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such

 

Exh. A-1

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case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

(B) The Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (A) of this Section 2 immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.

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

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

(A) Subject to the provision for adjustment hereinafter set forth, each share of
Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all
matters submitted to a vote of the stockholders of the Corporation. In the event
the Corporation shall at any time after the Issue Date declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

Exh. A-2

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

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

Section 4. Certain Restrictions.

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

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

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

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

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

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

 

Exh. A-3

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

Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made
(1) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received $1,000 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock, or (2) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time after the Issue Date
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

Neither the merger or consolidation of the Corporation into or with another
entity nor the merger or consolidation of any other entity into or with the
Corporation (nor the sale of all or substantially all of the assets of the
Corporation) shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this Section 6.

Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of

 

Exh. A-4

--------------------------------------------------------------------------------

Common Stock is changed or exchanged. In the event the Corporation shall at any
time after the Issue Date declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.

Section 8. No Redemption. The shares of Series A Preferred Stock shall not be
redeemable from any holder.

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

Section 10. Amendment. The Certificate of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.

Section 11. Fractional Shares. The Series A Preferred Stock may be issued in
fractions of a share that shall entitle the holder, in proportion to such
holder’s fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.

 

Exh. A-5

--------------------------------------------------------------------------------

Exhibit B

Form of Right Certificate

Certificate No. R-

                              Rights

NOT EXERCISABLE AFTER MAY 25, 2013 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.

Rights Certificate

XERIUM TECHNOLOGIES, 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 May 25, 2010 (the “Rights Agreement”), between Xerium
Technologies, Inc., a Delaware corporation (the “Company”), and American Stock
Transfer & Trust Company, LLC (the “Rights Agent”), to purchase from the Company
at any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 p.m., New York time, on May 25, 2013 at the
principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-thousandth of a fully paid non-assessable share of Series
A Junior Participating Preferred Stock of the Company, par value $.001 per share
(the “Preferred Shares”), at a purchase price of $60.00 per one one-thousandth
of a Preferred Share (the “Purchase Price”), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of May 25, 2010, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-thousandths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.

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

This Right Certificate, with or without other Right Certificates, upon surrender
at the principal office of the Rights Agent, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like

 

Exh. B-1

--------------------------------------------------------------------------------

aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Right Certificate (i) may be redeemed by the Company at a redemption price of
$.001 per Right or (ii) may be exchanged, in whole or in part, for Preferred
Shares or shares of the Company’s Common Stock, par value $.001 per share.

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

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

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

 

Exh. B-2

--------------------------------------------------------------------------------

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

Dated: as of .

 

XERIUM TECHNOLOGIES, INC.

By:  

 

 

Name:

    Title:  

 

COUNTERSIGNED:

By:

 

 

 

Name:

   

Title:

 

 

Exh. B-3

--------------------------------------------------------------------------------

[Form of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder

if such holder desires to transfer the Right Certificate.)

FOR VALUE RECEIVED

                                                              hereby sells,
assigns and transfers unto

 

 

(Please print name and address of transferee)

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

 

Dated:  

 

 

Signature  

 

 

Signature Guaranteed:  

 

Signatures must be guaranteed by an “eligible guarantor institution” as defined
in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as
amended.

Certificate

The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement). After due inquiry and to
the best knowledge of the undersigned, the Rights evidenced by this Right
Certificate were not acquired or beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof.

 

Dated:  

 

 

Signature  

 

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

 

Exh. B-4

--------------------------------------------------------------------------------

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise Rights represented by the Right
Certificate.)

To:

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

 

 

Please insert social security or other identifying number:

 

 

(Please print name and address)

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

 

 

Please insert social security or other identifying number:

(Please print name and address)

Dated:

 

Dated:  

 

 

Signature  

 

 

Signature Guaranteed:  

 

Signatures must be guaranteed by an “eligible guarantor institution” as defined
in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as
amended.

Certificate

The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement). After due inquiry and to
the best knowledge of the undersigned, the Rights evidenced by this Right
Certificate were not acquired or beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof.

 

Dated:  

 

 

Signature  

 

 

Exh. B-5

--------------------------------------------------------------------------------

The signature in the Form of Assignment or Form of Election to Purchase, as the
case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.

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

 

Exh. B-6

--------------------------------------------------------------------------------

Exhibit C

SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES

On May 25, 2010, pursuant to that certain joint prepackaged plan of
reorganization confirmed by the United States Bankruptcy Court for the District
of Delaware on May 12, 2010, Xerium Technologies, Inc. (the “Company”) adopted a
Rights Agreement (the “Rights Agreement”) with American Stock Transfer & Trust
Company, LLC, as Rights Agent (the “Rights Agent”) and, in connection therewith,
declared a dividend of one preferred share purchase right (a “Right”) for each
outstanding share of common stock, par value $0.001 per share (the “Common
Shares”), of the Company. The dividend is payable on May 25, 2010 to the
stockholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock of the Company, par value $0.001 per share (the
“Preferred Shares”), at a price of $60.00 per one one-thousandth of a Preferred
Share (the “Purchase Price”), subject to adjustment. The description and terms
of the Rights are set forth in the Rights Agreement.

Distribution Date; Exercisability

Initially, the Rights will be attached to all Common Shares (whether in
book-entry, certificated or uncertificated form) issued and outstanding and the
Rights will be owned by the registered holder of the Common Shares, and no
separate Rights certificates will be issued. Separate certificates evidencing
the Rights (“Right Certificates”) will be mailed to holders of record of all
Common Shares as of the close of business on the earlier to occur of (i) a
public announcement that an Acquiring Person (as discussed below) has acquired
beneficial ownership of 15% or more of the outstanding Common Shares or
(ii) such date as may be determined by action of the Board of Directors of the
Company following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
Common Shares (the earlier of such dates being the “Distribution Date”).

The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), (i) the Rights will be transferred with
and only with the Common Shares, (ii) certificates or book-entry statements with
respect to new Common Share certificates issued after the Record Date upon
transfer or new issuance of Common Shares will contain a notation incorporating
the Rights Agreement by reference and (iii) the surrender for transfer of any
certificates for Common Shares outstanding as of the Record Date will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate.

The Rights are not exercisable until the Distribution Date. The Rights will
expire on May 25, 2013 (the “Expiration Date”), unless the Expiration Date is
extended or unless the Rights are earlier redeemed or exchanged by the Company,
in each case, as described below.

 

Exh. C-1

--------------------------------------------------------------------------------

Acquiring Person

The Rights Agreement defines the term “Acquiring Person” generally to mean any
person who, together with all affiliates and associates of such person, is the
beneficial owner of 15% or more of the Common Shares then outstanding. However,
that definition does not generally include (i) the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity or trustee holding Common Shares for or pursuant to the
terms of any such plan, (ii) any person who or which becomes the beneficial
owner of 15% or more of the Common Shares then outstanding as the result of a
reduction in the outstanding Common Shares resulting from acquisition of Common
Shares by the Company approved by the Board of Directors, (iv) any person who or
which the Board of Directors of the Company determines, in good faith, became an
Acquiring Person inadvertently, if such person divests as promptly as
practicable a sufficient number of Common Shares so that such person would no
longer be an Acquiring Person, (v) any person who or which the Board of
Directors of the Company determines, prior to the time such person would
otherwise be an Acquiring Person, should be exempted from the definition of
Acquiring Person, provided that the Board of Directors may make such exemption
subject to such conditions, if any, which the Board may determine or (vi) AS
Investors, LLC, Carl Marks Strategic Investments, L.P., Carl Marks Strategic
Opportunities Fund, L.P., Cerberus Series Four Holdings, LLC and Saberasu Japan
Investments II B.V. (each, an “Exempt Person”) or any affiliate or associate of
an Exempt Person. However, any Exempt Person who becomes the beneficial owner of
20% or more of the Common Shares then outstanding shall become an Acquiring
Person.

Flip-In

If a person or group becomes an Acquiring Person, each holder of a Right will
thereafter have the right to receive, upon exercise, Common Shares (or, in
certain circumstances, Preferred Shares or other similar securities of the
Company) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the existence of an Acquiring
Person, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void.

Flip-Over

In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will be void), will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right.

Exchange

At any time after any person or group becomes an Acquiring Person and prior to
the acquisition by such person or group of 50% or more of the outstanding Common
Shares, the

 

Exh. C-2

--------------------------------------------------------------------------------

Board of Directors of the Company may exchange the Rights (other than Rights
owned by such person or group which will have become void), in whole or in part,
at an exchange ratio of one Common Share, or one one-thousandth of a Preferred
Share (or of a share of a class or series of the Company’s preferred stock
having equivalent rights, preferences and privileges), per Right (subject to
adjustment).

Redemption

At any time prior to the existence of an Acquiring Person, the Board of
Directors of the Company may redeem the Rights, in whole but not in part, at a
price of $0.001 per Right (the “Redemption Price”). The redemption of the Rights
may be made effective at such time on such basis with such conditions as the
Board of Directors, in its sole discretion, may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.

Amendment

The terms of the Rights may be amended by the Board of Directors of the Company
without the consent of the holders of the Rights, except that from and after the
existence of an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights (other than the Acquiring Person).

Adjustment

The number of outstanding Rights and the number of one one-thousandths of a
Preferred Share issuable upon exercise of each Right are subject to adjustment
under certain circumstances.

Preferred Stock

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

Rights of Holders

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.

Further Information

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

 

Exh. C-3