Exhibit 4.1



 





Exhibit 4.1




NATIONAL HEALTHCARE CORPORATION




and




COMPUTERSHARE TRUST COMPANY, N.A.




as Rights Agent




 






RIGHTS AGREEMENT




Dated as of August 2, 2007




 







 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	PAGE
	SECTION 1.

	 	CERTAIN DEFINITIONS
	 	 	1	 
	SECTION 2.

	 	APPOINTMENT OF RIGHTS AGENT
	 	 	4	 
	SECTION 3.

	 	ISSUANCE OF RIGHTS CERTIFICATES
	 	 	4	 
	SECTION 4.

	 	FORM OF RIGHTS CERTIFICATES
	 	 	7	 
	SECTION 5.

	 	COUNTERSIGNATURE AND REGISTRATION
	 	 	7	 
	SECTION 6.

	 	TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES
	 	 	8	 
	SECTION 7.
SECTION 8.

	 	EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS

CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES
	 	 	9

11	 
	SECTION 9.

	 	RESERVATION AND AVAILABILITY OF CAPITAL STOCK
	 	 	11	 
	SECTION 10.

	 	PREFERRED STOCK RECORD DATE
	 	 	13	 
	SECTION 11.

	 	ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR

NUMBER OF RIGHTS
	 	 	13	 
	SECTION 12.

	 	CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES
	 	 	21	 
	SECTION 13.

	 	CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR

EARNING POWER
	 	 	21	 
	SECTION 14.

	 	FRACTIONAL RIGHTS AND FRACTIONAL SHARES
	 	 	24	 
	SECTION 15.

	 	RIGHTS OF ACTION
	 	 	25	 
	SECTION 16.

	 	AGREEMENT OF RIGHTS HOLDERS
	 	 	26	 
	SECTION 17.

	 	RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER
	 	 	26	 
	SECTION 18.

	 	CONCERNING THE RIGHTS AGENT
	 	 	26	 
	SECTION 19.

	 	MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
	 	 	27	 






 









 






	 	 	 	 	 	 	 
	 	 	 	 	PAGE
	SECTION 20.

	 	RIGHTS AND DUTIES OF RIGHTS AGENT
	 	 	28	 
	SECTION 21.

	 	CHANGE OF RIGHTS AGENT
	 	 	30	 
	SECTION 22.

	 	ISSUANCE OF NEW RIGHTS CERTIFICATES
	 	 	31	 
	SECTION 23.

	 	REDEMPTION
	 	 	31	 
	SECTION 24.

	 	EXCHANGE
	 	 	32	 
	SECTION 25.

	 	NOTICE OF CERTAIN EVENTS
	 	 	34	 
	SECTION 26.

	 	NOTICES
	 	 	35	 
	SECTION 27.

	 	SUPPLEMENTS AND AMENDMENTS
	 	 	36	 
	SECTION 28.

	 	SUCCESSORS
	 	 	36	 
	SECTION 29.

	 	DETERMINATIONS AND ACTIONS BY THE
BOARD OF DIRECTORS, ETC
	 	 	36	 
	SECTION 30.

	 	BENEFITS OF THIS AGREEMENT
	 	 	37	 
	SECTION 31.

	 	SEVERABILITY
	 	 	37	 
	SECTION 32.

	 	GOVERNING LAW
	 	 	37	 
	SECTION 33.

	 	COUNTERPARTS
	 	 	37	 
	SECTION 34.

	 	DESCRIPTIVE HEADINGS
	 	 	37	 
	SECTION 35.

	 	FORCE MAJEURE.
	 	 	37	 






EXHIBITS




Exhibit A Form of Certificate of Designation

Exhibit B Form of Rights Certificate

Exhibit C Summary of Rights to Purchase Preferred Stock




 









 





RIGHTS AGREEMENT




     This Rights Agreement, dated as of August 2, 2007 (the “Agreement”), is made by and between
National Healthcare Corporation, a Delaware corporation (the “Company”), and Computershare Trust
Company, N.A., a federally chartered trust company, as Rights Agent (the “Rights Agent”).



WITNESSETH:




     WHEREAS, on August 2, 2007 (the “Rights Dividend Declaration Date”), the Board of Directors of
the Company authorized and declared a dividend distribution of one Right (as hereinafter defined)
for each share of Common Stock, par value $0.01 per share, of the Company outstanding at the Close
of Business on August 2, 2007 (the “Record Date”), and has authorized the issuance of one Right (as
such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each share of Common Stock of the Company issued between the Record Date (whether originally issued
or delivered from the Company’s treasury) and the Distribution Date (as defined in Section 3
hereof), each Right initially representing the right to purchase one ten-thousandth of a share of
Series B Junior Participating Preferred Stock of the Company, $0.01 par value, having the rights,
powers and preferences set forth in the Form of Certificate of Designation, Preferences and Rights
attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth
(the “Rights”);



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



AGREEMENT:




     SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings
indicated:



          (a) “Acquiring Person” shall mean any Person who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of twenty percent (20%) or more of the
shares of Common Stock then outstanding, but shall not include the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or pursuant to the terms of
any such employee benefit plan. In addition, notwithstanding the foregoing, no Person shall be
deemed to be an Acquiring Person if (i) the Board of Directors of the Company determines in good
faith that a person who would otherwise be an “Acquiring Person,” but for the operation of this
clause (i), has become such inadvertently, and such person divests as promptly as practicable (or
in such a period of time the Board of Directors and Company determine is practicable) a sufficient
number of shares of Common Stock so that such person would no longer be an “Acquiring Person,” (ii)
as the result of an acquisition of Common Stock by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially owned by such Person
to twenty percent (20%) or more of the Common Stock of the Company then outstanding; provided,
however, that if a Person shall become the Beneficial Owner of twenty percent (20%) or more of the
Common Stock of the Company then outstanding by reason of share purchases by the Company and shall,



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after such share purchases by the Company, become the Beneficial Owner (other than by way of a
stock dividend or stock split) of additional shares of Common Stock representing one-half of one
percent (.50%) of the then outstanding shares of Common Stock of the Company, then such Person
shall be deemed to be an Acquiring Person, or (iii) a Person enters into an agreement or
transaction or understanding with the Company whereby, solely as a consequence of that agreement or
transaction or understanding, such Person would become an “Acquiring Person” (but for the operation
of this clause (iii)), and such agreement, transaction or understanding is approved by a majority
of the Board of Directors of the Company; provided, however, that if such Person subsequently
becomes the Beneficial Owner of any additional shares of Common Stock in a manner not specifically
approved by a majority of the Board of Directors, such Person shall be deemed to be an Acquiring
Person.




          (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of
this Agreement; provided, however, that no Person who is a director or officer of
the Company shall be deemed an Affiliate or Associate of any other officer or director of the
Company solely as a result of his or her position as officer or director of the Company.



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



               (i) that such Person or any of such Person’s Affiliates or Associates beneficially owns (as
determined pursuant to Rule 13d-3 of the Rules under the Exchange Act), directly or indirectly;



               (ii) that such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of Company Series A Convertible Preferred Stock conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall
not be deemed the “Beneficial Owner” of, or to “beneficially own,” (A) securities tendered pursuant
to a tender or exchange offer made by such person or any of such Person’s Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, or (B) securities which a
Person or any of such Person’s Affiliates or Associates may be deemed to have the right to acquire
pursuant to any merger or other acquisition agreement between the Company and such Person (or one
or more of its Affiliates or Associates) if such agreement has been approved by the Board of
Directors of the Company prior to there being an Acquiring Person, or (C) securities issuable upon
exercise of Rights at any time prior to the occurrence of a Triggering Event, or (D) securities
issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights
were acquired by such Person or any of such Person’s Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the “Original Rights”) or
pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original
Rights; or



               (iii) that such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or “beneficial ownership” of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange



2









 




Act), including pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to
“beneficially own,” any security under this subparagraph (iii) as a result of an agreement,
arrangement or understanding to vote such security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions of the General
Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or




               (iv) that are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or
Associates) has any agreement, arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the
proviso to subparagraph (iii) of this paragraph (c)) or disposing of any voting securities of the
Company; provided, however, that nothing in this paragraph (c) shall cause a person engaged in
business as an underwriter of securities to be the “Beneficial Owner” of, or to “beneficially own,”
any securities acquired through such person’s participation in good faith in a firm commitment
underwriting until the expiration of forty (40) days after the date of such acquisition; and
provided further, however, that in no case shall an officer or director of the Company be deemed
(x) the Beneficial Owner of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their capacity as officers or
directors of the Company or (y) the Beneficial Owner of securities held of record by the trustee of
any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any
employee of the Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting of the securities
held in the plan.



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



          (e) “Close of Business” on any given date shall mean 5:00 P.M., New York City, New York 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 Stock” shall mean the Common Stock, par value $0.01 per share, of the Company,
except that “Common Stock” when used with reference to any Person other than the Company shall mean
the capital stock of such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such Person.



          (g) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended to date.



          (h) “Expiration Date” shall mean the earliest of (i) the Close of Business on the Final
Expiration Date, (ii) the time at which the Rights are redeemed as provided in Section



3









 




23 hereof, or (iii) the time at which the Board of Directors orders the exchange of the Rights
as provided in Section 24 hereof.




          (i) “Final Expiration Date” shall mean the Close of Business on the tenth anniversary of the
Record Date.



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



          (k) “Preferred Stock” shall mean shares of Series B Junior Participating Preferred Stock, par
value $0.01 per share, of the Company, having the rights and preferences set forth in the form of
Certificate of Designation, Preferences and Rights attached hereto as Exhibit A.



          (l) “Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii) (A), (B) or
(C) hereof.



          (m) “Section 13 Event” shall mean any event described in clauses (x), (y) or (z) of Section
13(a) hereof.



          (n) “Stock Acquisition Date” shall mean the first date of public announcement (which, for
purposes of this definition, shall include, without limitation, a report filed pursuant to Section
13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.



          (o) “Subsidiary” shall mean, with reference to any Person, any corporation of which an amount
of voting securities sufficient to elect at least a majority of the directors of such corporation
is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.



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



     SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for
the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts
such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten (10) days prior written notice to the Rights Agent. The Rights
Agent shall have no duty to supervise, and in no event shall be liable for, the acts or omissions
of any such co-Rights Agent.



     SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.



          (a) Until the earlier of (i) the Close of Business on the tenth day (or such later date as may
be determined by action of a majority of the Board of Directors) after the Stock Acquisition Date
(or, if the tenth day after the Stock Acquisition Date occurs before the Record



4









 




Date, the Close of Business on the Record Date), or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of a majority of the Board of
Directors then in office) after the date that a tender or exchange offer 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 Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such employee benefit plan) is commenced within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of twenty percent (20%) or more of
the shares of Common Stock then outstanding (the earlier of (i) and (ii) being herein referred to
as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of
paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names
of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of Common Stock (including a transfer
to the Company). The Company shall promptly notify the Rights Agent in writing upon the occurrence
of the Distribution Date and, if such notification is given orally, the Company shall confirm in
writing on or prior to the Business Day next following. Until such notice is received by the
Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date
has not occurred. As soon as practicable after the Distribution Date, and receipt by the Rights
Agent of notice of such occurrence, the Rights Agent, if requested and provided with all necessary
information and documentation, will send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more rights certificates, in
substantially the form of Exhibit B hereto (the “Rights Certificates”), duly executed and
countersigned in the manner provided for in Section 5(a) hereof, evidencing one Right for each
share of Common Stock so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that
Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates and may be transferred by the transfer of the Rights
Certificates as permitted hereby, separately and apart from any transfer of one or more shares of
Common Stock, and the holders of such Rights Certificates as listed in the records of the Company
or any transfer agent or registrar for the Rights shall be the record holders thereof.




          (b) As promptly as practicable following the Record Date, the Company will send a copy of a
Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of
Rights”), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the
Close of Business on the Record Date, at the address of such holder shown on the records of the
Company. With respect to certificates for the Common Stock outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such certificates for the Common Stock
and the registered holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration Date, the transfer
of any certificates representing shares of Common Stock in



5









 




respect of which Rights have been issued shall also constitute the transfer of the Rights
associated with such shares of Common Stock.




          (c) Unless the Board of Directors by resolution adopted at or before the time of the issuance
(including pursuant to the exercise of rights under the Company’s employee benefit plans) of any
Common Stock specifies to the contrary, Rights shall be issued in respect of all shares of Common
Stock that are issued after the Record Date but prior to the earlier of the Distribution Date or
the Expiration Date. Certificates representing such shares of Common Stock shall also be deemed to
be certificates for Rights, and shall bear the following legend:




     This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between
National Healthcare Corporation, a Delaware corporation (the
“Company”) and Computershare Trust Company, N.A., as Rights Agent
(the “Rights Agent”), dated as of August 2, 2007 (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. The Rights are not exercisable prior to the occurrence
of certain events specified in the Rights Agreement. Under certain
circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder
of this certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who
is, was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.


With respect to such certificates containing the foregoing legend, until the earlier of (i) the
Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such certificates alone and registered
holders of Common Stock also shall be the registered holders of the associated Rights, and the
transfer of any of such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates. In the event that the Company purchases or
acquires any Common Stock after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Stock shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Stock which are no longer
outstanding.




6









 








     SECTION 4. FORM OF RIGHTS CERTIFICATES.



          (a) The Rights Certificates (and the forms of election to purchase and of assignment to be
printed on the reverse thereof) shall each be substantially in the form set forth in 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 which are not inconsistent with
the provisions of this Agreement and which do not affect the rights, duties and responsibilities of
the Rights Agent, or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as
of the Record Date and on their face shall entitle the holders thereof to purchase such number of
one ten-thousandths of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one ten-thousandth of a share, the “Purchase Price”), but
the amount and type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.



          (b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that
represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has determined is part of a plan, arrangement
or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any
Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:




     The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and
void in the circumstances specified in Section 7(e) of such
Agreement.



     SECTION 5. COUNTERSIGNATURE AND REGISTRATION.



          (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or any Vice President, either manually or by facsimile signature, and shall
have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The
Rights Certificates shall be manually countersigned by the Rights



7









 




Agent 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 Rights Certificates shall cease to be such officer of
the Company before countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights 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 Rights
Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be
signed on behalf of the Company by any Person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such Rights 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, and receipt by the Rights Agent of notice of such
occurrence, and of all other necessary information and documentation, as provided in Section 3(a)
hereof, the Rights Agent will keep or cause to be kept, at its office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates, the Rights Certificate number and the
date of each of the Rights Certificates.



     SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED,
DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.



          (a) Subject to the provisions of Section 4(b), Section 7(e), Section 14 and Section 24 hereof,
at any time after the Close of Business on the Distribution Date, and at or prior to the Close of
Business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split
up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered
holder to purchase a like number of one ten-thousandths of a share of Preferred Stock (or following
a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Certificates surrendered then entitled such holder (or former holder in
the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine
or exchange any Rights Certificate or Certificates shall make such request in writing delivered to
the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the principal office or offices of the Rights Agent designated
for such purpose. The Rights Certificates shall be transferable only on the registry books of the
Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof and of the
Rights evidenced thereby or of the Affiliates or Associates of such Beneficial Owner (or former
Beneficial Owner) as the Company or the Rights Agent shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24 hereof, countersign
and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be



8









 




imposed in connection with any transfer, split up, combination or exchange of Rights
Certificates, registered in such name or names as may be designated by the surrendering registered
holder. If and to the extent the Company does require payment of any such taxes or governmental
charges, the Rights Agent shall not deliver the Rights Certificate(s) unless and until it is
satisfied that all such payments have been made, and the Rights Agent shall promptly forward any
such sum collected by it to the Company or to such persons as the Company may specify by written
notice.




          (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 Rights Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them, and 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 Rights Certificate if mutilated, the Company
will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.



     SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.



          (a) Subject to Section 7(e) hereof, the registered holder of any Rights Certificate may
exercise the Rights evidenced thereby (except as otherwise provided herein including, without
limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of
the Rights Certificate, with the form of election to purchase and the certificate on the reverse
side thereof duly and properly executed, to the Rights Agent at the office or offices of the Rights
Agent designated for such purpose, together with payment of the aggregate Purchase Price with
respect to the total number of one ten-thousandths of a share of Preferred Stock (or other
securities or property, as the case may be) as to which such surrendered Rights are then
exercisable, and an amount equal to any applicable transfer tax or charge required to be paid under
Section 9(e) hereof, at or prior to the Expiration Date. Except for those provisions herein which
expressly survive the termination of this Agreement, this Agreement shall terminate at such time as
the Rights are no longer exercisable hereunder.



          (b) The Purchase Price for each one ten-thousandths of a share of Preferred Stock pursuant to
the exercise of a Right shall initially be Two Hundred Fifty Dollars ($250), and shall be subject
to adjustment from time to time as provided in Section 11 hereof and shall be payable in accordance
with paragraph (c) below.



          (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of
election to purchase and the certificate duly and properly executed, accompanied by payment, with
respect to each Right so exercised, of the Purchase Price per one ten-thousandths of a share of
Preferred Stock (or other shares, securities or property, as the case may be) to be purchased as
set forth below and an amount equal to any applicable transfer tax or charge required to be paid
under Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such shares) certificates for



9









 




the total number of one ten-thousandths of a share of Preferred Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B)
if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one ten-thousandths of a share of Preferred
Stock as are to be purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the depositary agent),
and the Company will direct the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 11 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the registered holder
of such Rights Certificate, registered in such name or names as may be designated by such holder,
and (iv) when appropriate, after receipt thereof, deliver such cash, if any, to or upon the order
of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) and an amount equal to any applicable
transfer tax or charge required to be paid under Section 9(e) hereof, may be made (x) in cash or by
certified bank check, cashier’s check, bank draft or money order payable to the order of the
Company, or (y) by delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of shares of Common Stock equal to the sum
of the then Purchase Price and an amount equal to any applicable transfer tax or charge required to
be paid under Section 9(e) hereof, divided by the closing market price (as determined pursuant to
Section 11(d) hereof) per share of Common Stock on the Trading Date immediately preceding the date
of such exercise. In the event that the Company is obligated to issue other securities (including
Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when appropriate.




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



          (e) Notwithstanding anything in this Agreement to the contrary, from and after the first
occurrence of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such (a
“Post Transferee”), or (iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person had any continuing agreement, arrangement or understanding regarding
the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined
is part of a plan, arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e) (a “Prior Transferee”), or (iv) any subsequent transferee receiving
transferred Rights



10









 




from a Post Transferee or a Prior Transferee, either directly or through one or more
intermediate transferees, shall become null and void without any further action and no holder of
such Rights shall have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure
that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have
no liability to any holder of Rights Certificates or other person as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates, Associates or
transferees hereunder.




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



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



     SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.



          (a) The Company covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a
Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities
or out of its authorized and issued shares held in its treasury), the number of shares of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities)
that, as provided in this Agreement including Section 11(a)(iii) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights.



          (b) So long as the shares of Preferred Stock (and following the occurrence of a Triggering
Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the
Rights may be listed on any national securities exchange or the NMS, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange or the NMS upon official notice of issuance upon
such exercise.



11









 





          (c) The Company shall use its best efforts to (i) file, as soon as practicable following the
earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to
be delivered by the Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933, as amended (the “Act”),
with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus at all times meeting
the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with, the securities or
“blue sky” laws of the various states in connection with the exercisability of the Rights. The
Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date
set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. The Company shall notify the Rights Agent in
writing whenever it makes a public announcement pursuant to this Section 9(c) and give the Rights
Agent a copy of such announcement(s). Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite
qualification in such jurisdiction shall have been obtained and until a registration statement (if
required) has been declared effective.



          (d) The Company covenants and agrees that it will take all such action as may be necessary to
ensure that all one ten-thousandths of a share of Preferred Stock (and, following the occurrence of
a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and nonassessable.



          (e) 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 Rights Certificates and of any certificates for shares of Preferred Stock (or
Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax or charge which may be payable in respect
of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one ten-thousandths of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in respect of a name other than that of, the registered
holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of one ten-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the registered holder
upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has been established to
the Company’s satisfaction that no such tax is due.



12









 





     SECTION 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any certificate for a number of one
ten-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and all applicable transfer taxes or charges) was duly made; provided, however,
that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares (fractional or otherwise)
on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred
Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a stockholder of the Company with respect to 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 AND KIND OF SHARES OR NUMBER OF RIGHTS. The Purchase
Price, the number and kind of shares covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.



          (a) (i) In the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise provided in this Section
11(a) or in Section 7 hereof, the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right exercised after such time
shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate
number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when the Preferred Stock
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. If
an event occurs which would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.



               (ii) In the event:



13









 





                    (A) any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time
after the date of this Agreement, directly or indirectly, (1) shall merge into the Company or
otherwise combine with the Company or any subsidiary of the Company and the Company shall be the
continuing or surviving corporation of such merger or combination and the Common Stock of the
Company shall remain outstanding and unchanged, (2) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of its Subsidiaries in exchange (in
whole or in part) for shares of Common Stock, for shares of other equity securities of the Company,
or for securities exercisable for or convertible into shares of equity securities of the Company
(Common Stock or otherwise) or otherwise obtain from the Company, with or without consideration,
any additional shares of such equity securities or securities exercisable for or convertible into
shares of such equity securities (other than pursuant to a pro rata distribution to all holders of
Common Stock), (3) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise
acquire or dispose of, in the transaction or a series of transactions, to, from or with (as the
case may be) the Company or any of its Subsidiaries, assets on terms and conditions less favorable
to Company than the Company would be able to obtain in arm’s length negotiation with an
unaffiliated third party, other than pursuant to a transaction set forth in Section 13(a) hereof,
(4) shall receive any compensation from the Company or any of the Company’s Subsidiaries other than
compensation for full time employment as a regular employee at rates in accordance with the
Company’s (or its Subsidiaries’) past practices, or (5) shall receive the benefit, directly or
indirectly (except proportionately as a stockholder and except if resulting from a requirement of
law or governmental regulation), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantage provided by the Company or any of its
Subsidiaries, or



                    (B) any Person shall become an Acquiring Person, other than pursuant to any transaction set
forth in Section 13(a) hereof, or



                    (C) during such time as there is an Acquiring Person, there shall be any reclassification of
securities (including any reverse stock split), or recapitalization of the Company, or any merger
or consolidation of the Company with any of its Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries, other than a transaction or
transactions to which the provisions of Section 13(a) apply (whether or not with or into or
otherwise involving an Acquiring Person) which has the effect, directly or indirectly, of
increasing by more than one percent (1%) the proportionate share of the outstanding shares of any
class of equity securities of the Company or any of its Subsidiaries which is directly or
indirectly beneficially owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, then, promptly following ten (10) days after the date of the occurrence of an
event described in Section 11(a)(ii)(B) hereof and promptly following the occurrence of any event
described in Section 11(a)(ii)(A) or (C) hereof, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of
this Agreement, in lieu of shares of Preferred Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by
the then number of one ten-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and dividing
that product (which, following such first occurrence, shall thereafter



14









 




be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement)
by (y) fifty percent (50%) of the current market price (determined pursuant to Section 11(d)
hereof) per share of Common Stock on the date of such first occurrence (such number of shares, the
“Adjustment Shares”).




               (iii) In the event that the number of shares of Common Stock which are authorized by the
Company’s charter but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a
Right (the “Current Value”) over (2) the Purchase Price (such excess, the “Spread”), and (B) with
respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Stock or other equity securities of the Company (including, without limitation, shares, or
units of shares, of preferred stock which the Board of Directors of the Company has deemed to have
the same value as shares of Common Stock (such shares of preferred stock, “common stock
equivalents”)), (4) debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such aggregate value has
been determined by the Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors of the Company; provided,
however, if the Company shall not have made adequate provision to deliver value pursuant to clause
(B) above within thirty (30) days following the later of (x) the first occurrence of a Section
11(a)(ii) Event and (y) the date on which the Company’s right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right
and without requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which in the aggregate are equal to the Spread. If the
Board of Directors of the Company shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not
more than ninety (90) days following the first occurrence of a Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the authorization of such additional
shares (such period, as it may be extended, the “Substitution Period”). To the extent that the
Company determines that some action need be taken pursuant to the first and/or second sentences of
this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such
action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the
current market price (as determined pursuant to Section 11(d) hereof) per share of the Common Stock
on the date of the first occurrence of a Section 11(a)(ii) Trigger Date and the value of any
“common stock equivalent” shall be deemed to have the same value as the Common Stock on such date.



15









 





          (b) In case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a
period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or
shares having the same rights, privileges and preferences as the shares of Preferred Stock
(“equivalent preferred stock”)) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of equivalent preferred stock
(or having a conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which
the aggregate offering price of the total number of shares of Preferred Stock and/or equivalent
preferred stock so to be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be offered are initially
convertible); 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 the exercise of one Right. In case such subscription price may be paid by
delivery of consideration part or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by 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. Shares of Preferred Stock 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 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 a distribution to all holders of Preferred
Stock (including any such distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular
cash dividend out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) 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 current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants applicable to a share
of Preferred Stock and the denominator of which shall be such current market price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock; provided, however, that in no event
shall the consideration to be paid upon the exercise of one



16









 




Right be less than the aggregate par value of the shares of capital stock of the Company
issuable upon the 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 be adjusted to be the Purchase Price which would have been in effect if such record date had
not been fixed.




          (d) (i) For the purpose of any computation hereunder, other than computations made pursuant to
Section 11(a)(iii) hereof, the “current market price” per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior to
such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the
“current market price” per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days
immediately following such date; provided, however, that in the event that the current market price
per share of the Common Stock is determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common Stock (other than
the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and
prior to the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as
set forth above, after the dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in each such case, the “current market
price” shall be properly adjusted to take into account the effect of such dividend, distribution,
subdivision, combination or reclassification. 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
American Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on
the American 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 shares
of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed
or admitted to trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated Quotation System
(“NASDAQ”) or such other system then in use, or, if on any such date the shares of Common Stock are
not quoted by any such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected by the Board of
Directors of the Company. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares 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 shares of Common Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Common Stock are not listed
or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, “current market price” per share 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 and shall be conclusive
for all purposes.



17









 





               (ii) For the purpose of any computation hereunder, the “current market price” per share of
Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in
clause (i) of this Section 11(d) (other than the last sentence thereof). If the current market
price per share of Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of
this Section 11(d), the “current market price” per share of Preferred Stock shall be conclusively
deemed to be an amount equal to 10,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the current market price per share of the
Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or
traded, “current market price” per share of the Preferred Stock shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For
all purposes of this Agreement, the “current market price” of one ten-thousandth of a share of
Preferred Stock shall be equal to the “current market price” of one share of Preferred Stock
divided by ten thousand (10,000).



          (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall
be required unless such adjustment would require an increase or decrease of at least one percent
(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 ten-thousandths of a share of Common Stock or other share or one-millionth of a share of
Preferred Stock, 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 (3)
years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date.



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



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



          (h) Unless the Company shall have exercised its election as provided in 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



18









 




number of one ten-thousandths of a share of Preferred Stock (calculated to the nearest one
millionth) obtained by (i) multiplying (x) the number of one ten-thousandths of a share covered by
a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.




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



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



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



19









 





          (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
(with prompt written notice thereof to the Rights Agent) until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number of one
ten-thousandths of a share of Preferred Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the number of one ten-thousandths of a share of
Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing
such holder’s right to receive such additional shares (fractional or otherwise) or securities upon
the occurrence of the event requiring such adjustment.



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



          (n) The Company covenants and agrees that it shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof),
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a
series of related transactions, assets or earning power aggregating more than fifty percent (50%)
of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Company and or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the stockholders of
the Person who constitutes, or would constitute, the “Principal Party” for the purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of
its Affiliates and Associates.



          (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as
permitted by Section 23, Section 24 or Section 27 hereof, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.



20









 





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



     SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as
provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate
setting forth such adjustment and a brief, reasonably detailed statement of the facts, computations
and methodology accounting for such adjustment, (b) promptly file with the Rights Agent, and with
each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the
Distribution Date, to each holder of a certificate representing shares of Common Stock) in
accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the
Company to make such certification or give such notice shall not affect the validity of such
adjustment or the force or effect of the requirement for such adjustment. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment therein contained and
shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any
adjustment unless and until it shall have received any such certificate.



     SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER.



          (a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall
not be the continuing or surviving corporation of such consolidation or merger, (y) any Person
(other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof)
shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing
or surviving corporation of such consolidation or merger and, in connection with such consolidation
or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged
for stock or other securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or earning power
aggregating more than fifty percent (50%) of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary
of the Company in one or more transactions each of which complies with Section 11(o) hereof),



21









 




then, and in each such case, proper provision shall be made so that: (i) each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, nonassessable and freely tradable shares
of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the
result obtained by (1) multiplying the then current Purchase Price by the number of one
ten-thousandths of a share of Preferred Stock for which a Right is exercisable immediately prior to
the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of such one ten-thousandths of a
share for which a Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and
(2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be
referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by fifty
percent (50%) of the current market price (determined pursuant to Section 11(d)(i) hereof) per
share of the Common Stock of such Principal Party on the date of consummation of such Section 13
Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply only to such Principal
Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be,
in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights;
provided, however, that upon the subsequent occurrence of any merger, consolidation, sale of all or
substantially all assets, recapitalization, reclassification of shares, reorganization or other
extraordinary transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the Purchase Price, such
cash, shares, rights, warrants and other property which such holder would have been entitled to
receive had he, at the time of such transaction, owned the shares of Common Stock of the Principal
Party purchasable upon the exercise of a Right, and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be necessary to permit the
subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares,
rights, warrants and other property; and (v) the provisions of Section 11(a)(ii) hereof shall be of
no effect following the first occurrence of any Section 13 Event.




          (b) “Principal Party” shall mean:



               (i) in the case of any transaction described in clause (x) or (y) of the first sentence of
Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of
the Company are converted in such merger or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or consolidation; and



22









 





               (ii) in the case of any transaction described in clause (z) of the first sentence of Section
13(a), the Person that is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;


provided, however, that in any such case, (1) if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary
of another Person the Common Stock of which is and has been so registered, “Principal Party” shall
refer to such other Person whose Common Stock is so registered; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of
which are and have been so registered, “Principal Party” shall refer to whichever of such Persons
is the issuer of the Common Stock having the greatest aggregate market value.




          (c) If, for any reason, the Rights cannot be exercised for Common Stock of such Principal
Party as provided in Section 13(a), then each holder of Rights shall have the right to exchange its
Rights for cash from such Principal Party in an amount equal to the number of shares of Common
Stock that it would otherwise be entitled to purchase times fifty percent (50%) of the current per
share market price, as determined pursuant to Section 11(d) hereof, of such Common Stock of such
Principal Party. If, for any reason, the foregoing formulation cannot be applied to determine the
cash amount into which the Rights are exchangeable, then the Board of Directors, based upon the
advice of one or more nationally recognized investment banking firms, and based upon the total
value of the Company, shall determine such amount reasonably and with good faith to the holders of
Rights. Any such determination shall be final and binding on the Rights Agent.



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



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



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



               (iii) use its best efforts, if the Common Stock of the Principal Party shall become listed on
a national securities exchange, to list (or continue the listing of) the Rights and the securities
purchasable upon exercise of the Rights on such securities exchange and, if the



23









 




Common Stock of the Principal Party shall not be listed on a national securities exchange, to
cause the Rights and the securities purchasable upon exercise of the Rights to be reported by
NASDAQ or such other system then in use; and




               (iv) obtain waivers of any rights of first refusal, warrants, or rights in respect of the
shares of Common Stock of the Principal Party subject to purchase upon exercise of outstanding
Rights and which would have the effect of eliminating or significantly diminishing the benefits
intended to be afforded by the Rights.



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



     SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.



          (a) The Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which
evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights 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 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 of the Rights 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 American Stock Exchange or, if the Rights are not listed or admitted to trading
on the American Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional market maker making a
market in the Rights selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be used.



          (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other
than fractions which are integral multiples of one ten-thousandths of a share of Preferred Stock)
upon exercise of the Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one ten-thousand of a share
of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral
multiples of one ten-thousandths of a share of Preferred Stock, the Company may



24









 




pay to the registered holders of Rights Certificates at the time such Rights are exercised as
herein provided an amount in cash equal to the same fraction of the current market value of one
ten-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the current
market value of one ten-thousandth of a share of Preferred Stock shall be one ten-thousandth of the
closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof)
for the Trading Day immediately prior to the date of such exercise.




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



          (d) Whenever a payment for fractional Rights or any fractional shares is to be made by the
Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate
setting forth in reasonable detail the facts related to such payments and the prices and/or
formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights
Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully
protected in relying upon such a certificate and shall have no duty with respect to, and shall not
be deemed to have knowledge of any payment for fractional Rights or fractional shares unless and
until the Rights Agent shall have received such a certificate and sufficient monies.



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



     SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, excepting the rights of
action given to the Rights Agent under Section 18 and Section 20 hereof, are vested in the
respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of
the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available
to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have
an adequate remedy at law for any breach by the Company of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against actual or
threatened violations by the Company of the obligations hereunder of any Person subject to this
Agreement. Notwithstanding anything in this Agreement to the contrary, neither the Company nor the
Rights Agent shall have any liability to any holder



25









 




of a Right or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or other order, judgment
decree or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by
a governmental, regulatory, self-regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided, however, the Company
must use all reasonable efforts to have any such injunction, order, judgment, decree or ruling
lifted or otherwise overturned as soon as possible.




     SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by accepting the same consents and
agrees with the Company and the Rights Agent and with every other holder of a Right that:



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



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



          (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem
and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates
or the associated Common Stock 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 required
to be affected by any notice to the contrary.



     SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Rights
Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of
the number of one ten-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed to confer upon the holder
of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or 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 Rights
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 disbursements and other disbursements incurred in



26









 




the preparation, delivery, amendment, administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty,
claim, demand, settlement, cost or expense (including, without limitation, the reasonable fees and
expenses of legal counsel) for any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance, administration, exercise and performance of its duties under this
Agreement, including the costs and expenses of defending against any claim of liability in the
premises and of enforcing this rights of indemnification; provided, however, that the Company shall
not be liable under this Section 18(a) to the extent a court of competent jurisdiction shall have
determined by a final, non-appealable order, judgment, decree or ruling that such loss, liability,
damage, judgment, fine, penalty, claim, demand, settlement, cost or expense resulted from any
action taken, suffered or omitted by the Rights Agent through its gross negligence, bad faith or
willful misconduct. The provisions of this Section 18 and Section 20 hereof shall survive the
termination of this Agreement, the exercise or expiration of the Rights and the resignation,
replacement or removal of the Rights Agent.




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



     SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.



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



27









 





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



     SECTION 20. RIGHTS AND DUTIES OF RIGHTS AGENT. The Rights Agent undertakes to perform only the duties and
obligations expressly imposed by this Agreement (and no implied duties) upon the following terms
and conditions, by all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:



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



          (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem
it necessary or desirable that any fact or matter (including, without limitation, the identity of
any Acquiring Person and the determination of “current market price”) be proved or established by
the Company prior to taking, suffering or omitting to take any action hereunder such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman of the Board, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be
full and complete authorization and protection to the Rights Agent for, and the Rights Agent shall
incur no liability for or in respect of, any action taken, suffered or omitted by it in good faith
under the provisions of this Agreement in reliance upon such certificate.



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



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



          (e) The Rights Agent shall not have any liability for or be under any responsibility with
respect to the validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or with respect to the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights (including the
Rights becoming null and void pursuant to Section 11 hereof) or any change or



28









 




adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for
the manner, method or amount of any such change or adjustment 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 Rights Certificates after receipt of the certificate described in Section 12
hereof, upon which the Rights Agent may rely); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any shares of Common Stock
or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to
whether any shares of Common Stock or Preferred Stock will, when so 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 Agreement.



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



          (h) The Rights Agent and any stockholder, affiliate, 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 the
Rights Agent were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent or any such stockholder, affiliate, director, officer or employee from acting in any other
capacity for the Company or for any other Person.



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



29









 




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




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



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



     SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days’ notice in writing, mailed to
the Company, and to each transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock, by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. In the event the transfer agency relationship in
effect between the Company and the Rights Agent terminates, the Rights Agent will be deemed to
resign automatically on the effective date of such termination; and any required notice will be
sent by the Company. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company
shall fail to make such appointment within a period of thirty (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 Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for an appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a Person organized and doing business under the law of the United States or of the
State of California (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 California), in good standing,
having a principal office in the State of California, which is authorized under such laws to
exercise stock transfer or corporate trust powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $50,000,000, or (b) an Affiliate of such a Person. 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



30









 




hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary
for the purpose. Not later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common
Stock and the Preferred Stock, and mail a notice thereof in writing to the registered holders of
the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may be.




     SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the provisions of this Agreement
or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or sale of shares of
Common Stock following the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with such issuance or
sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent
that, the Company shall be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that
appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.



     SECTION 23. REDEMPTION.



          (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier
of (i) the Close of Business on the tenth (10th) day following the Stock Acquisition Date, or such
later date as may be determined by action of a majority of the Board of Directors then in office
and publicly announced by the Company (or, if the Stock Acquisition Date shall have occurred prior
to the Record Date, the Close of Business on the tenth (10th) day following the Record Date, or
such later date as may be determined by action of a majority of the Board of Directors then in
office and publicly announced by the Company), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $0.01 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being hereinafter referred to as
the “Redemption Price”). Notwithstanding anything contained in this Agreement to the contrary, a
Distribution Date shall not occur and the Rights shall not be exercisable until such time as the
Company’s right of redemption hereunder has expired.



          (b) Immediately upon the action of the Board of Directors of the Company ordering the
redemption of the Rights pursuant to subparagraph (a) of this Section 23, and without any further
action and without any notice, the right to exercise the Rights will terminate



31









 




and the only right thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. Promptly after the action of the Board of Directors or stockholders,
as applicable, ordering the redemption of the Rights, the Company shall give public notice of such
redemption (with prompt written notice thereof to the Rights Agent); provided, however, that the
failure to give, or any defect in, any such notice shall not affect the legality or validity of
such redemption. The Company shall promptly mail a notice of any such 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 Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of redemption 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, acquisition or redemption of shares of
Common Stock prior to the Distribution Date.




          (c) The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the “current market value” as defined in Section 11(d)(i) hereof) of the Common Stock as
of the time of redemption) or any other form of consideration deemed appropriate by the Board of
Directors.



          (d) The Board of the Directors of the Company shall establish a Shareholder Rights Plan
Committee that shall periodically consider whether the maintenance of this Agreement continues to
be in the best interests of the Company and its shareholders. The Shareholder Rights Plan
Committee shall conduct such review when, as and in such manner as such committee deems
appropriate, after giving due regard to all relevant circumstances; provided, however, that the
committee shall take such action at least once every five years. Following each such review, the
Shareholder Rights Plan Committee will report its conclusions to the full Board of Directors of the
Company, including any recommendation in light thereof as to whether this Agreement should be
modified, terminated or the Rights redeemed. The Shareholder Rights Plan Committee is authorized
to retain such legal counsel, financial advisors and other advisors as such committee deems
appropriate in order to assist the Shareholder Rights Plan Committee in carrying out its foregoing
responsibilities under this Agreement. The Shareholder Rights Plan Committee shall consist of
non-management directors who are otherwise eligible to serve on the committee in accordance with
the Company’s bylaws.



     SECTION 24. EXCHANGE.



          (a) Subject to applicable laws, rules and regulations, and subject to subsection (c) below,
the Company may, at its option, by majority vote of the Board of Directors, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become null and void pursuant to the provisions of
Section 7(e) hereof) for Common Stock at an exchange ratio of one (1) share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Ratio of
Exchange”). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect
such exchange at any time after any Person (other than the Company,



32









 




any Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty
percent (50%) or more of the Common Stock then outstanding.




          (b) Immediately upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder
of such rights shall be to receive that number of shares of Common Stock equal to the number of
such Rights held by such holder multiplied by the Ratio of Exchange. The Company shall promptly
give public notice of any such exchange (with prompt written notice thereof to the Rights Agent);
provided, however, that the failure to give, or any defect in, such notice shall not affect the
legality or validity of such exchange. The Company shall promptly mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. 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 Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.



          (c) In the event that there shall not be sufficient shares of Common Stock issued but not
outstanding or authorized but unissued to permit any exchange of Rights as contemplated in
accordance with Section 24(a), the Company shall either take such action as may be necessary to
authorize additional Common Stock for issuance upon exchange of the Rights or alternatively, at the
option of a majority of the Board of Directors, with respect to each Right (i) pay cash in an
amount equal to the Current Value (as hereinafter defined), in lieu of issuing Common Stock in
exchange therefor, or (ii) issue debt or equity securities or a combination thereof, having a value
equal to the Current Value (as defined below), in lieu of issuing Common Stock in exchange for each
such Right, where the value of such securities shall be determined by a nationally recognized
investment banking firm selected by the Board of Directors by majority vote of the Board of
Directors, or (iii) deliver any combination of cash, property, Common Stock and/or other securities
having a value equal to the Current Value in exchange for each Right. For purposes of this Section
24(c) only, the Current Value shall mean the product of the current per share market price of
Common Stock (determined pursuant to Section 11(d) on the date of the occurrence of the event
described above in subparagraph (a)) multiplied by the number of shares of Common Stock for which
the Right otherwise would be exchangeable if there were sufficient shares available. To the extent
that the Company determines that some action need be taken pursuant to clauses (i), (ii) or (iii)
of this Section 24(c), the Board of Directors may temporarily suspend the exercisability of the
Rights for a period of up to sixty (60) days following the date on which the event described in
Section 24(a) shall have occurred, in order to seek any authorization of additional shares of
Common Stock and/or to decide the appropriate form of distribution to be made pursuant to the above
provision and to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights has been
temporarily suspended.



33









 





          (d) The Company shall not be required to issue fractions of shares of Common Stock or to
distribute certificates which evidence fractional shares of Common Stock. In lieu of such
fractional shares of Common Stock, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional shares of Common Stock would otherwise be
issuable, an amount in cash equal to the same fraction of the current per share market value of a
whole share of Common Stock (as determined pursuant to the second sentence of Section 11(d)
hereof).



          (e) The Company may, at its option, by majority vote of the Board of Directors, at any time
before any Person has become an Acquiring Person, exchange all or part of the then outstanding
Rights for rights of substantially equivalent value, as determined reasonably and with good faith
by the Board of Directors, based upon the advice of one or more nationally recognized investment
banking firms.



          (f) Immediately upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection (e) 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 rights in exchange therefor as has been
determined by the Board of Directors in accordance with subsection (e) above. The Company shall
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 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 transfer agent for the Common Stock of the Company. 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 Rights
will be effected.



     SECTION 25. NOTICE OF CERTAIN EVENTS.



          (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of Preferred Stock or to make any other
distribution to the holders of Preferred Stock (other than a regular cash dividend out of earnings
or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or
warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of
stock of any class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or
more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of
related transactions, of more than fifty percent (50%) of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company,
or (vi) to declare or pay any dividend on the Common Stock payable in Common Stock or to effect a
subdivision, consolidation or combination of the Common Stock (by reclassification or otherwise
than by payment in dividends in Common Stock), then, in each such case, the Company shall



34









 




give to the Rights Agent and to the extent feasible to each holder of a Rights 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, distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or
winding up is to take place and the date of participation therein by the holders of the shares of
Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least ten (10) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such action, and in the case
of any such other action, at least ten (10) days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the shares of Preferred Stock
whichever shall be the earlier.




          (b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to the Rights Agent and to
each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.



     SECTION 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights
Agent or by the holder of any Rights 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:


National HealthCare Corporation

100 Vine Street, Suite 1400

Murfreesboro, Tennessee 37130

Attn: General Counsel



Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be
given or made by the Company or by the holder of any Rights 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:



Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

Attn: Client Services



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




35









 








     SECTION 27. SUPPLEMENTS AND AMENDMENTS. This Agreement may be supplemented or amended at the times and
for the purposes set forth below. Prior to the Distribution Date, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates in order (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time
period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, however, this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period
unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of,
and/or the benefits to, the holders of Rights. 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; provided, that, the Rights Agent may, but shall not be obligated to enter into any
supplement or amendment that effects the Rights Agents’ own rights, duties, obligation or
immunities under this Agreement. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common Stock.



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



     SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all purposes of this
Agreement, any calculation of the number of shares of Common Stock outstanding at any particular
time, including for purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii)
make all determinations deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend the Agreement). All such
actions, calculations, interpretations and determinations (including, for purposes of clause (y)
below, all omissions with respect to the foregoing) which are done or made by the Board in good
faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board to any liability to the holders of
the Rights. The Rights Agent shall be entitled to assume the Board of Directors of the Company
acted in good faith and shall be fully protected and incur no liability in the Rights Agent’s
reliance thereon.



36









 





     SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any
person other than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) any
legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock).



     SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated; provided, however,
that notwithstanding anything in this Agreement to the contrary, if any such term, provision,
covenant or restriction is held by such court or authority to be invalid, void or unenforceable and
the Board of Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the Close of Business on the tenth day following the date of such determination by the
Board of Directors.



     SECTION 32. GOVERNING LAW. This Agreement, each Right and each Rights 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 made
and to be performed entirely within such State.



     SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each such
counterpart shall for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.



     SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or construction of any of
the provisions hereof.



     SECTION 35. FORCE MAJEURE. Notwithstanding anything to the contrary contained herein, neither
the Company nor the Rights Agent shall be liable for any delays or failures in performance
resulting directly from acts beyond its reasonable control that causes a sudden, substantial or
widespread disruption in business activities, including, without limitation, acts of God, terrorist
acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer
facilities, or loss of data due to power failures or mechanical difficulties with information
storage or retrieval systems, labor difficulties, war, or civil unrest (each, a “Force Majeure
Condition”); provided, that such delayed or non-performing party shall use reasonable commercial
efforts to resume performance as soon as practicable. If any Force Majeure Condition occurs that
effects a party to this Agreement, the party delayed or unable to perform shall give notice to the
other party as soon as practicable, stating the nature of the Force Majeure Condition and any
action being taken to avoid or minimize its effect.



37









 





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



	 	 	 	 	 
	 	National HealthCare Corporation,

a Delaware corporation

 	 
	 	By:  	/s/ Robert G. Adams
 	 
	 	 	Its:      CEO 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	Computershare Trust Company, N.A., as Rights

Agent, a federally chartered trust company

 	 
	 	By:  	/s/
Dennis V. Moccia
 	 
	 	 	Its:      Managing Director 	 
	 	 	 	 



38









 






	 	 	 	 	 



FORM OF DESIGNATION OF PREFERENCES




CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES

AND PRIVILEGES OF

SERIES B JUNIOR PARTICIPATING PREFERRED STOCK




OF




NATIONAL HEALTHCARE CORPORATION.




Pursuant to Section 151 of the General Corporation Law

of the State of Delaware





     Robert G. Adams, the President and Chief Executive Officer, and John K. Lines, Senior Vice
President and General Counsel, of National HealthCare Corporation, a corporation organized and
existing under the General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DO HEREBY CERTIFY:



     That pursuant to the authority conferred upon the Board of Directors by the Certificate of
Incorporation of said Corporation, as amended, the Board of Directors on August 2, 2007, adopted
the following resolution creating a series of 3,000 shares of Preferred Stock designated as Series
B Junior Participating Preferred Stock:



     “RESOLVED, that pursuant to the authority vested in the Board of Directors of the corporation
by the Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock, $0.01 par value, of the Corporation, to be designated “Series B Junior
Participating Preferred Stock,” initially consisting of 3,000 shares and to the extent that the
designations, powers, preferences and relative and other special rights and the qualifications,
limitations and restrictions of the Series B Junior Participating Preferred Stock are not stated
and expressed in the Certificate of Incorporation, does hereby fix and herein state and express
such designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms used herein which are
defined in the Certificate of Incorporation shall be deemed to have the meanings provided therein):



     Section 1. Designation and Amount. The shares of such series shall be designated as “Series B
Junior Participating Preferred Stock,” par value $0.01 per share, and the number of shares
constituting such series shall be 3,000.



     Section 2. Dividends and Distributions.



     (A) Subject to the prior and superior right of the holders of any shares of any series of
Preferred Stock ranking prior and superior to the shares of Series B Junior Participating Preferred
Stock with respect to dividends, the holders of shares of Series B Junior Participating Preferred
Stock shall be entitled to receive when, as and if declared by the Board of Directors out of funds



 









 




legally available for the purpose, quarterly dividends payable in cash on the last day of
March, June, September and December in each year (each such date being referred to herein as a
“Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series B Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to, subject to the provision for
adjustment hereinafter set forth, 10,000 times the aggregate per share amount of all cash
dividends, and 10,000 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 of the Corporation (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 B Junior Participating
Preferred Stock. In the event the Corporation shall at any time after August 2, 2007 (the “Rights
Declaration Date”) (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case, the amount to which holders of shares of Series B
Junior Participating Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately
prior to such event.




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



     (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Junior
Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series B Junior Participating Preferred Stock, 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 B Junior Participating 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 B Junior Participating 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 B Junior Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared thereon, which record date
shall be no more than thirty (30) days prior to the date fixed for the payment thereof.



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



2









 





     (A) Subject to the provision for adjustment hereinafter set forth, each share of Series B
Junior Participating Preferred Stock shall entitle the holder thereof to 10,000 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 Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such case the number of
votes per share to which holders of shares of Series B Junior Participating 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.



     (B) Except as otherwise provided herein or by law, the holders of shares of Series B Junior
Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.



     (C) Except as required by law, holders of Series B Junior Participating 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) The Corporation shall not declare any dividend on, make any distribution on, or redeem or
purchase or otherwise acquire for consideration any shares of Common Stock after the first issuance
of a share or fraction of a share of Series B Junior Participating Preferred Stock unless
concurrently therewith it shall declare a dividend on the Series B Junior Participating Preferred
Stock as required by Section 2 hereof.



     (B) Whenever quarterly dividends or other dividends or distributions payable on the Series B
Junior Participating 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 B
Junior Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:




	 	(i)	 	declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series B Junior Participating Preferred Stock;
	 
	 	(ii)	 	declare or pay dividends on, 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 Series B Junior Participating
Preferred Stock, except dividends paid ratably on the Series B Junior
Participating Preferred stock and all such parity stock on which




3









 











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 on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Junior Participating
Preferred Stock, provided that the Corporation may at any time redeem purchase
or otherwise acquire shares of any such parity 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 B Junior Participating
Preferred Stock; or
	 
	 	(iv)	 	purchase or otherwise acquire for consideration any shares of
Series B Junior Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series B Junior Participating 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.





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



     Section 5. Reacquired Shares. Any shares of Series B Junior Participating 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 to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth herein.



     Section 6. Liquidation, Dissolution or Winding Up.



     (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series B Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Series B Junior
Participating Preferred Stock shall have received an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment, plus an amount
equal to the greater of (1) $10,000.00 per share, provided that in the event the Corporation does
not have sufficient assets, after payment of its liabilities and distribution to holders of
Preferred Stock ranking prior to the Series B Junior Participating Preferred Stock,



4









 




available to permit payment in full of the $10,000.00 per share amount, the amount required to
be paid under this Section 6(A)(1) shall, subject to Section 6(B) hereof, equal the value of the
amount of available assets divided by the number of outstanding shares of Series B Junior
Participating Preferred Stock or (2) subject to the provisions for adjustment hereinafter set
forth, 10,000 times the aggregate per share amount to be distributed to the holders of Common Stock
(the greater of (1) or (2), the “Series B Liquidation Preference”). In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such case the amount to
which holders of shares of Series B Junior Participating Preferred Stock were entitled immediately
prior to such event under clause (2) 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 that were
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) In the event, however, that there are not sufficient assets available to permit
payment in full of the Series B Liquidation Preference and the liquidation preferences of
all other series of Preferred Stock, if any, which rank on a parity with the Series B Junior
Participating Preferred Stock, then such remaining assets shall be distributed ratably to
the holders of such parity shares in proportion to their respective liquidation preferences.



     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 the shares of Series B Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 10,000 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
Common Stock is changed or exchanged. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series B Junior Participating 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. Redemption. The shares of Series B Junior Participating Preferred Stock shall not
be redeemable.



     Section 9. Ranking. The Series B Junior Participating Preferred Stock shall rank junior to all
other series of the Corporation’s Preferred Stock as to the payment of dividends and the



5









 




distribution of assets, unless the terms of any such series shall provide otherwise. The
Series B Junior Participating Preferred Stock shall rank senior to the Corporation’s Common Stock.




     Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be
further amended in any manner which would materially alter or change the powers, preference or
special rights of the Series B Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the outstanding shares of
Series B Junior Participating Preferred Stock, voting separately as a class.



     Section 11. Fractional Shares. Series B Junior Participating Preferred Stock may be issued in
fractions of a share which 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 B Junior Participating Preferred Stock.



     IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the
foregoing as true under the penalties of perjury this 3rd day of August 2007.



	 	 	 	 	 
	 	 	 
	 	     /s/ Robert G. Adams
 	 
	 	Robert G. Adams 	 
	 	President and Chief Executive Officer 	 
	 



	 	 	 	 	 
	 	 	 
	 	     /s/ John K. Lines
 	 
	 	John K. Lines 	 
	 	Sr. Vice President and General Counsel 	 



6









 






	 	 	 	 	 



EXHIBIT B

Form of Rights Certificate




	 	 	 
	Certificate No. R-_________


	 	_________ Rights






     NOT EXERCISABLE AFTER AUGUST 2, 2017, OR EARLIER IF TERMINATED BY THE COMPANY OR AS OTHERWISE
PROVIDED IN THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID.] [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS AGREEMENT.]*




	 	*	 	The portion of the legend in bracket shall be inserted only if applicable and shall
replace the preceding sentence.





RIGHTS CERTIFICATE

NATIONAL HEALTHCARE CORPORATION




     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 August 2, 2007, as such
agreement may be amended from time to time in accordance with its terms (the “Rights Agreement”),
between National HealthCare Corporation, a Delaware corporation (the “Company”), and Computershare
Trust Company, N.A., a federally chartered trust company (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 City Time, on August 3, 2017, at the office of the
Rights Agent designated for such purpose, or at the office of its successor as Rights Agent, one
ten-thousandth of a fully paid non-assessable share of Series B Junior Participating Preferred
Stock, $0.01 par value (the “Preferred Shares”), of the Company, at a purchase price of $250 per
one ten-thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of
this Rights Certificate with the form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the number of one
ten-thousandths of a Preferred Share which may be purchased upon exercise hereof) set forth above,
are the number and Purchase Price as of August 2, 2007, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number
and kind of Preferred Shares or other securities that may be purchased upon the exercise of the
Rights



 









 




evidenced by this Rights Certificate are subject to modification and adjustment upon the
happening of certain events.




     This Rights 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 Rights Certificates, which limitations of
rights include the temporary suspension of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the above-mentioned office of the Rights Agent.



     Subject to the provisions of the Rights Agreement, the Rights evidenced by this Rights
Certificate (i) may be redeemed by the Company, at its option, at a redemption price of $0.01 per
Right or (ii) may be exchanged by the Company in whole or in part for Common Shares, substantially
equivalent rights or other consideration as determined by the Company.



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



     No
fractional portion less than integral multiples of one ten-thousandth of a Preferred Share
will be issued upon the exercise of any Right or Rights evidenced hereby but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.



     No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of the Preferred Shares or 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 Rights Certificate shall have been exercised as
provided in the Rights Agreement.



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



2









 





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



	 	 	 	 	 
	ATTEST:

	 	NATIONAL HEALTHCARE CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	[Secretary]
	 	 	 	 





Countersigned:




______________________

as Rights Agent




By:


______________________

Authorized Officer




3









 








Form of Reverse Side of Rights Certificate




FORM OF ASSIGNMENT




(To be executed by the registered holder if such holder desires to transfer the Rights Certificate)




     FOR VALUE RECEIVED ___________________________________________________________________________

hereby sells, assigns and transfers unto
_____________________________________________________________________

(Please print name and address of transferee)



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




Dated: _____________________________




	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 
	 


Signature Guaranteed:





     The signature should be guaranteed by an eligible guarantor institution (banks, stock brokers,
savings and loan associations and credit unions with members in an approved signature guarantee
medallion program) pursuant to Rule17Ad-15 under the Securities Exchange Act of 1934, as amended.



4









 





CERTIFICATE




     The undersigned hereby certifies by checking the appropriate boxes that:



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



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



Dated: ______________________




	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 
	 




     Signature Guaranteed:



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



5









 








FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise the Rights Certificate)




To: _______________________________________




     The
undersigned hereby irrevocable elects to exercise ____________ Rights represented by
this Rights Certificate to purchase the number of one ten-thousandths of a Preferred Share issuable
upon the exercise of such Rights and requests that certificates for such number of one
ten-thousandths of a Preferred Share 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 Rights Certificate, a new
Rights Certificate for the balance remaining of such Rights shall be registered in the name of and
delivered to: ____________.




Please insert social security or other identifying number _______________



________________________

________________________

________________________

(Please print name and address)




Dated: ___________________




	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 
	 


Signature Guaranteed:





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



6









 





CERTIFICATE




     The undersigned hereby certifies by checking the appropriate boxes that:



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



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



Dated: ____________________




	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 
	 




     Signature Guaranteed:



The signature should be guaranteed by an eligible guarantor institution (banks, stock
brokers, savings and loan associations and credit unions with members in an approved
signature guarantee medallion program) pursuant to Rule 17Ad-15 under the Securities
Exchange Act of 1934.



NOTICE




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


In the event the certification set forth on the foregoing 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 the Rights 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.




7









 








Exhibit C




SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK




     On August 2, 2007, the Board of Directors of National HealthCare Corporation (the “Company”)
approved the adoption of a Stockholder Rights Plan and declared a dividend distribution of one
right (a “Right”) for each outstanding share of the Company’s Common Stock to stockholders of
record at the close of business on August 2, 2007 (the “Dividend Date”). Each Right entitles the
registered holder to purchase from the Company a unit consisting of one ten-thousandth of a share
(a “Unit”) of Series B Junior Participating Preferred Stock, $0.01 par value (the “Preferred
Stock”), at a purchase price of $250 per Unit, subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement between the Company and Computershare Trust Company,
N.A., as Rights Agent, dated as of August 2, 2007, as may be amended, restated or otherwise
modified from time to time (the “Rights Agreement”).



     Certificates. Initially, the Rights will not be exercisable, the Rights will be attached to
all Common Stock certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to extension by the Board of Directors in certain
circumstances, the Rights will separate from the Common Stock and a distribution date (the
“Distribution Date”) will occur upon the earlier of (i) ten (10) days following a public
announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has
acquired, or obtained the right to acquire, beneficial ownership of twenty percent (20%) or more of
the outstanding shares of Common Stock (the “Stock Acquisition Date”), or (ii) ten (10) business
days following the commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning twenty percent (20%) or more of the outstanding shares of Common
Stock. Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock certificates, (ii) new
Common Stock certificates issued will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Common Stock outstanding
will also constitute the transfer of the Rights associated with the Common Stock represented by
such certificate.



     Expiration and Exercise. The Rights are not exercisable until the Distribution Date, if any
such date shall occur, and will expire at the close of business on tenth anniversary of the record
date of the plan (August 2, 2017), unless previously redeemed or exchanged by the Company as
described below.



     As soon as practicable after a Distribution Date, if any such date shall occur, the Rights
Certificates will be mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the
Rights. Except as otherwise determined by the Board of Directors, only shares of Common Stock
issued prior to the Distribution Date will be issued with Rights.



     “Flip-In” Events. In the event that (i) the Company is the surviving Company in a merger with
an Acquiring Person and its Common Stock is not changed or exchanged, (ii) an Acquiring Person
becomes the beneficial owner of more than twenty percent (20%) of the outstanding



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shares of Common Stock, (iii) an Acquiring Person engages in one or more “self-dealing”
transactions as set forth in the Rights Agreement, or (iv) during such time as there is an
Acquiring Person, an event occurs which results in such Acquiring Person’s ownership interest being
increased by more than one percent (1%) (e.g., a reverse stock split), each holder of a Right will
thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two (2) times the
exercise price of the Right. However, the Rights are not exercisable following the occurrence of
any of the events set forth above until such time as the Rights are no longer redeemable as set
forth below. Notwithstanding any of the foregoing, following the occurrence of any of the events
set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will become null and void.




     For example, at an exercise price of $250 per Right, each Right not owned by an Acquiring
Person (or by certain related parties) following an event set forth in the preceding paragraph
would entitle its holder to purchase $500 worth of Common Stock (or other consideration, as noted
above) for $250. Assuming that the Common Stock had a per share value of $50 at such time, the
holder of each valid Right would be entitled to purchase ten shares of Common Stock for $250.



     “Flip-Over” Events. In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in which the Company
is not the surviving Company, or (ii) fifty percent (50%) or more of the Company’s assets or
earning power is sold or transferred, each holder of a Right (except Rights which previously have
been voided as set forth above) shall thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two (2) times the exercise price of the
Right.



     Exchange Feature. At any time after any person becomes an Acquiring Person and prior to the
acquisition by such person or group of fifty percent (50%) or more of the outstanding Common Stock,
the Board of Directors 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 rate of one share of Common Stock
(or a combination of cash, property, Common Stock or other securities having an equal value) per
Right (subject to adjustment).



     Adjustment for Dilution. The purchase price payable, and the number of Units of Preferred
Stock or other securities or property issuable upon exercise of the Rights, are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if holders of the
Preferred Stock are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the Preferred Stock, or (iii) upon
the distribution to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular cash dividends) or of subscription rights or warrants (other than those referred
to above).



     With certain exceptions, no adjustment in the purchase price will be required until cumulative
adjustments amount to at least one percent (1%) of the purchase price. No fractional



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Units will be issued and, in lieu thereof, an adjustment in cash will be made based on the market
price of the Preferred Stock on the last trading date prior to the date of exercise.




     Redemption. At any time until ten (10) days following the Stock Acquisition Date or such later
date as may be determined by action of the Board of Directors then in office and publicly announced
by the Company, the Company may redeem the Rights in whole, but not in part, at a price of $0.01
per Right (the “Redemption Price”). Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.



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



     Amendments. Any of the provisions of the Rights Agreement may be amended by the Board of
Directors prior to the Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by the Board of Directors in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall be made at such
time as the Rights are not redeemable.



     Five-Year Independent Director Review of Rights Plan. Under Rights Plan, the Board of the
Directors will establish a Shareholder Rights Plan Committee (which shall consist of non-management
directors) that will periodically consider whether the maintenance of the Rights Plan continues to
be in the best interests of the Company and its shareholders. The Shareholder Rights Plan
Committee will conduct such review when and in such manner as such committee deems appropriate and
will conduct its review at least once every five years.



     Availability of Rights Agreement. A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to Registration Statement on Form 8-A dated August
3, 2007. A copy of the Rights Agreement is available free of charge from the Company. This Summary
of Rights does not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.




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