exv4w1





Exhibit
4.1


 

 






Rights Agreement




Dated as of January 22, 2009,




By and Between

KB Home

and




Mellon Investor Services LLC,

as Rights Agent




 

 






 









 






TABLE OF CONTENTS








	 	 	 	 	 	 	 
	1.

	 	Certain Definitions
	 	 	1	 
	 
	 	 	 	 	 	 
	2.

	 	Appointment of Rights Agent
	 	 	6	 
	 
	 	 	 	 	 	 
	3.

	 	Issue of Right Certificates
	 	 	6	 
	 
	 	 	 	 	 	 
	4.

	 	Form of Right Certificates
	 	 	8	 
	 
	 	 	 	 	 	 
	5.

	 	Countersignature and Registration
	 	 	8	 
	 
	 	 	 	 	 	 
	6.

	 	Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates
	 	 	9	 
	 
	 	 	 	 	 	 
	7.

	 	Exercise of Rights; Purchase Price; Expiration Date of Rights
	 	 	9	 
	 
	 	 	 	 	 	 
	8.

	 	Cancellation and Destruction of Right Certificates
	 	 	11	 
	 
	 	 	 	 	 	 
	9.

	 	Company Covenants Concerning Securities and Rights
	 	 	11	 
	 
	 	 	 	 	 	 
	10.

	 	Record Date
	 	 	13	 
	 
	 	 	 	 	 	 
	11.

	 	Adjustment of Purchase Price, Number and Kind of Securities or Number of Rights	 	 	13	 
	 
	 	 	 	 	 	 
	12.

	 	Certificate of Adjusted Purchase Price or Number of Securities
	 	 	21	 
	 
	 	 	 	 	 	 
	13.

	 	Consolidation, Merger or Sale or Transfer of Assets or Earning Power
	 	 	21	 
	 
	 	 	 	 	 	 
	14.

	 	Fractional Rights and Fractional Securities
	 	 	24	 
	 
	 	 	 	 	 	 
	15.

	 	Rights of Action
	 	 	26	 
	 
	 	 	 	 	 	 
	16.

	 	Agreement of Rights Holders
	 	 	26	 
	 
	 	 	 	 	 	 
	17.

	 	Right Certificate Holder Not Deemed a Stockholder
	 	 	27	 
	 
	 	 	 	 	 	 
	18.

	 	Concerning the Rights Agent
	 	 	27	 
	 
	 	 	 	 	 	 
	19.

	 	Merger or Consolidation or Change of Name of Rights Agent
	 	 	28	 
	 
	 	 	 	 	 	 
	20.

	 	Duties of Rights Agent
	 	 	28	 
	 
	 	 	 	 	 	 
	21.

	 	Change of Rights Agent
	 	 	30	 
	 
	 	 	 	 	 	 
	22.

	 	Issuance of New Right Certificates
	 	 	31	 
	 
	 	 	 	 	 	 
	23.

	 	Redemption
	 	 	32	 
	 
	 	 	 	 	 	 
	24.

	 	Exchange
	 	 	32	 
	 
	 	 	 	 	 	 
	25.

	 	Notice of Certain Events
	 	 	33	 
	 
	 	 	 	 	 	 
	26.

	 	Notices
	 	 	34	 
	 
	 	 	 	 	 	 
	27.

	 	Supplements and Amendments
	 	 	35	 
	 
	 	 	 	 	 	 
	28.

	 	Successors; Certain Covenants
	 	 	36	 
	 
	 	 	 	 	 	 
	29.

	 	Benefits of This Agreement
	 	 	36	 
	 
	 	 	 	 	 	 
	30.

	 	Governing Law
	 	 	36	 






i









 






	 	 	 	 	 	 	 
	31.

	 	Severability
	 	 	36	 
	 
	 	 	 	 	 	 
	32.

	 	Descriptive Headings, Etc.
	 	 	36	 
	 
	 	 	 	 	 	 
	33.

	 	Determinations and Actions by the Board
	 	 	36	 
	 
	 	 	 	 	 	 
	34.

	 	Effective Time
	 	 	37	 
	 
	 	 	 	 	 	 
	35.

	 	Force Majeure
	 	 	37	 
	 
	 	 	 	 	 	 
	36.

	 	Counterparts
	 	 	37	 
	 
	 	 	 	 	 	 
	Exhibit A

	 	 	A-1	 
	 
	 	 	 	 	 	 
	Exhibit B

	 	 	B-1	 






ii









 






RIGHTS AGREEMENT




     This Rights Agreement, dated as of January 22, 2009 (this “Agreement”), is made and entered
into by and between KB Home, a Delaware corporation, and Mellon Investor Services LLC, a New Jersey
limited liability company, as Rights Agent.



RECITALS




     WHEREAS, on January 22, 2009, the Board of Directors of the Company (as hereinafter defined)
authorized and declared a dividend distribution of one right (a “Right”) for each share of Common
Stock, par value $1.00 per share, of the Company (a “Common Share”) outstanding as of the Close of
Business (as hereinafter defined) on March 5, 2009 (the “Record Date”), each Right initially
representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined),
on the terms and subject to the conditions herein set forth, and further authorized and directed
the issuance of one Right (subject to adjustment as provided herein) with respect to each Common
Share issued or delivered by the Company (whether originally issued or delivered from the Company’s
treasury) after the Record Date but prior to the earlier of the Distribution Date (as hereinafter
defined) and the Expiration Date (as hereinafter defined) or as provided in Section 22.



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



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



     (a) “Acquiring Person” means any Person (other than the Company, any Related Person or any
Exempt Person) who or which, together with all Affiliates and Associates of such Person, is or
becomes the Beneficial Owner of 4.9% or more of the then-outstanding Common Shares;
provided, however, that (i) any Person who would otherwise qualify as an Acquiring
Person as of the Effective Time will not be deemed to be an Acquiring Person for any purpose of
this Agreement unless and until such time as (A) such Person or any Affiliate or Associate of such
Person thereafter becomes the Beneficial Owner of any additional Common Shares, other than (1)
pursuant to any agreement or regular-way purchase order for Common Shares that is in effect on or
prior to the Effective Time and consummated in accordance with its terms after the Effective Time
or (2) as a result of a stock dividend, rights dividend, stock split or similar transaction
effected by the Company in which all holders of Common Shares are treated equally, or (B) any other
Person who is the Beneficial Owner of Common Shares becomes an Affiliate or Associate of such
Person, provided that the exclusion in this clause (i) shall cease to apply with respect to
any Person at such time as such Person, together with all Affiliates and Associates of such Person,
ceases to Beneficially Own 4.9% or more of the then-outstanding Common Shares, (ii) a Person will
not be deemed to have become an Acquiring Person solely as a result of a reduction in the number of
Common Shares outstanding unless and until such time as (A) such Person or any Affiliate or
Associate of such Person thereafter becomes the Beneficial Owner of any additional Common Shares,
other than as a result of a stock dividend, rights dividend, stock
split or similar transaction effected by the Company in which all holders of Common Shares are
treated equally, or (B) any other Person who is the Beneficial Owner of Common Shares



 









 







thereafter becomes an Affiliate or Associate of such Person, and (iii) a Person will not be deemed to have
become an Acquiring Person solely as a result of an Exempt Transaction unless and until such time
as (A) such Person or any Affiliate or Associate of such Person thereafter becomes the Beneficial
Owner of any additional Common Shares, other than as a result of a stock dividend, rights dividend,
stock split or similar transaction effected by the Company in which all holders of Common Shares
are treated equally, or (B) any other Person who is the Beneficial Owner of Common Shares
thereafter becomes an Affiliate or Associate of such Person. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person who would otherwise be an
“Acquiring Person” as defined pursuant to the foregoing provisions of this Section 1(a), has become
such inadvertently, and such Person divests as promptly as practicable or agrees in writing with
the Company to divest, a sufficient number of Common Shares so that such Person would no longer be
an “Acquiring Person” as defined pursuant to the foregoing provisions of this Section 1(a), then
such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement.



     (b) “Affiliate” and “Associate” will 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, and to the extent not included within the foregoing clause of this Section 1(b),
will also include, with respect to any Person, any other Person (other than a Related Person or an
Exempt Person) whose Common Shares would be deemed constructively owned by such first Person, owned
by a single “entity” as defined in Section 1.382-3(a)(1) of the Treasury Regulations, or otherwise
aggregated with Common Shares owned by such first Person pursuant to the provisions of the Code or
the Treasury Regulations, provided, however, that a Person will not be deemed to be
the Affiliate or Associate of another Person solely because either or both Persons are or were
Directors of the Company.



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




     (i) which such Person or any of such Person’s Affiliates or Associates is deemed to
beneficially own, directly or indirectly, within the meaning of Rule 13d-3 of the General
Rules and Regulations under the Exchange Act as in effect on the date of this Agreement;




     (ii) the beneficial ownership of which 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 conversion
rights, exchange rights, warrants, options or other rights (in each case, other than upon
exercise or exchange of the Rights); provided, however, that a Person will
not be deemed the Beneficial Owner of, or to Beneficially Own, securities tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any of such Person’s
Affiliates or Associates until such tendered securities are accepted for purchase or
exchange; or



2









 






     (iii) which such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has or shares the right to vote or dispose of, including pursuant to any
agreement, arrangement or understanding (whether or not in writing); or




     (iv) of which any other Person is the Beneficial Owner, if such Person or any of such
Person’s Affiliates or Associates has any agreement, arrangement or understanding (whether
or not in writing) with such other Person (or any of such other Person’s Affiliates or
Associates) with respect to acquiring, holding, voting or disposing of any securities of the
Company;


provided, however, that a Person will not be deemed the Beneficial Owner of, or to
Beneficially Own, any security (A) if such Person has the right to vote such security pursuant to
an agreement, arrangement or understanding (whether or not in writing) which (1) arises solely from
a revocable proxy or consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the
Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report), or (B) if such beneficial ownership arises solely as a result of
such Person’s status as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act;
provided further, however, that nothing in this Section 1(c) will 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 an
underwriting syndicate until the expiration of 40 calendar days after the date of such acquisition,
or such later date as the Directors of the Company may determine in any specific case.
Notwithstanding anything in this Agreement to the contrary, to the extent not included within the
foregoing provisions of this Section 1(c), a Person shall be deemed the “Beneficial Owner” of, and
shall be deemed to “beneficially own” or have “beneficial ownership” of, any securities which such
Person would be deemed to constructively own or which otherwise would be aggregated with securities
owned by such Person pursuant to Section 382 of the Code, or any successor provision or replacement
provision.




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



     (e) “Close of Business” on any given date means 5:00 p.m., California time, on such date;
provided, however, that if such date is not a Business Day, it means 5:00 p.m.,
California time, on the next succeeding Business Day.



     (f) “Code” means the Internal Revenue Code of 1986, as amended.



     (g) “Common Shares” when used with reference to the Company means the shares of Common Stock,
par value $1.00 per share, of the Company; provided, however, that if the Company
is the continuing or surviving corporation in a transaction described in Section 13(a)(ii), “Common
Shares” when used with reference to the Company means shares of the capital stock or units of the
equity interests with the greatest aggregate voting power of the Company. “Common Shares” when
used with reference to any corporation or other legal entity other than the Company, including an
Issuer, means shares of the capital stock or units of the
equity interests with the greatest aggregate voting power of such corporation or other legal
entity.



3









 





     (h) “Company” means KB Home, a Delaware corporation.



     (i) “Distribution Date” means the earlier of: (i) the Close of Business on the tenth calendar
day following the Share Acquisition Date (or, if the tenth calendar day after the Share Acquisition
Date occurs before the Record Date, the Close of Business on the Record Date), or (ii) the Close of
Business on the tenth Business Day (or, unless the Distribution Date shall have previously
occurred, such later date as may be specified by the Board of Directors of the Company) after the
commencement of a tender or exchange offer by any Person (other than the Company, any Related
Person or any Exempt Person), if upon the consummation thereof such Person would be the Beneficial
Owner of 4.9% or more of the then-outstanding Common Shares.



     (j) “Effective Time” means immediately prior to the Close of Business on March 5, 2009.



     (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     (l) “Exempt Person” means a Person whose Beneficial Ownership (together with all Affiliates
and Associates of such Person) of 4.9% or more of the then-outstanding Common Shares will not, as
determined by the Board of Directors of the Company in its sole discretion, jeopardize or endanger
the availability to the Company of any Tax Benefit, provided, however, that such a
Person will cease to be an Exempt Person if the Board of Directors of the Company makes a contrary
determination in its sole discretion with respect to the effect of such Person’s Beneficial
Ownership (together with all Affiliates and Associates of such Person), regardless of the reason
for such contrary determination.



     (m) “Exempt Transaction” means any transaction that the Board of Directors of the Company
determines, in its sole discretion, is exempt for purposes of this Agreement.



     (n) “Expiration Date” means the earliest of (i) the Close of Business on the tenth anniversary
of the Record Date, (ii) the time at which the Rights are redeemed as provided in Section 23, (iii)
the time at which all exercisable Rights are exchanged as provided in Section 24, (iv) the Close of
Business on the effective date of the repeal of Section 382 of the Code or any successor provision
or replacement provision if the Board of Directors of the Company determines that this Agreement is
no longer necessary for the preservation of Tax Benefits, (v) the Close of Business on the first
day of a taxable year of the Company to which the Board of Directors of the Company determines that
no Tax Benefits may be carried forward, and (vi) the Close of Business on March 5, 2010, if
Shareholder Approval has not been obtained prior to such date.



     (o) “Flip-in Event” means any event described in clauses (A), (B) or (C) of Section 11(a)(ii).



     (p) “Flip-over Event” means any event described in clauses (i), (ii) or (iii) of Section
13(a).



4









 





     (q) “Issuer” has the meaning set forth in Section 13(b).



     (r) “Person” means any individual, firm, corporation, partnership, limited liability company,
limited liability partnership, trust or other legal entity, group of persons making a “coordinated
acquisition” of shares or otherwise treated as an entity within the meaning of Section
1.382-3(a)(1) of the Treasury Regulations or otherwise, and includes any successor (by merger or
otherwise) of such entity.



     (s) “Preferred Shares” means shares of Series A Participating Cumulative Preferred Stock, par
value $1.00 per share, of the Company.



     (t) “Purchase Price” means initially $85.00 per one one-hundredth of a Preferred Share,
subject to adjustment from time to time as provided in this Agreement.



     (u) “Record Date” has the meaning set forth in the Recitals to this Agreement.



     (v) “Redemption Price” means $0.001 per Right, subject to adjustment by resolution of the
Board of Directors of the Company to reflect any stock split, stock dividend or similar transaction
occurring after the Record Date.



     (w) “Related Person” means (i) any Subsidiary of the Company or (ii) any employee benefit or
stock ownership plan of the Company or of any Subsidiary of the Company or any entity holding
Common Shares for or pursuant to the terms of any such plan.



     (x) “Right” has the meaning set forth in the Recitals to this Agreement.



     (y) “Right Certificates” means certificates evidencing the Rights, in substantially the form
attached as Exhibit A.



     (z) “Rights Agent” means Mellon Investor Services LLC, unless and until a successor Rights
Agent has become such pursuant to the terms of this Agreement, and thereafter, “Rights Agent” means
such successor Rights Agent.



     (aa) “Securities Act” means the Securities Act of 1933, as amended.



     (bb) “Share Acquisition Date” means the first date of public announcement by the Company (by
press release, filing made with the Securities and Exchange Commission or otherwise) that an
Acquiring Person has become such.



     (cc) “Shareholder Approval” means the approval of this Agreement by the affirmative vote of
the holders of a majority of the voting power of the outstanding Common Shares of the Company
entitled to vote (excluding the vote of any Acquiring Person), and that are present in person or
represented by proxy, and are voted on the proposal to approve this Agreement, at a duly called
meeting of shareholders of the Company (or any adjournment or postponement thereof) at which a
quorum is present.



     (dd) “Subsidiary” when used with reference to any Person means any corporation or other legal
entity of which a majority of the voting power of the voting equity securities or equity



5









 







interests is owned, directly or indirectly, by such Person; provided, however,
that for purposes of Section 13(b), “Subsidiary” when used with reference to any Person means any
corporation or other legal entity of which at least 20% of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by such Person.



     (ee) “Tax Benefits” means the net operating loss carry-overs, capital loss carry-overs,
general business credit carry-overs, alternative minimum tax credit carry-overs and foreign tax
credit carry-overs, as well as any “net unrealized built-in loss” within the meaning of Section 382
of the Code or any successor provision or replacement provision, of the Company or any direct or
indirect subsidiary thereof.



     (ff) “Trading Day” means any day on which the principal national securities exchange or
quotation system on which the Common Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Shares are not listed or admitted to trading on any
national securities exchange or quotation system, a Business Day.



     (gg) “Treasury Regulations” means final, temporary and proposed income tax regulations
promulgated under the Code, including any amendments thereto.



     (hh) “Triggering Event” means any Flip-in Event or Flip-over Event.



     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 of this Agreement, and the
Rights Agent hereby accepts such appointment. The Company may from time to time act as Co-Rights
Agent or appoint such Co-Rights Agents as it may deem necessary or desirable. Any actions which
may be taken by the Rights Agent pursuant to the terms of this Agreement may be taken by any such
Co-Rights Agent; provided that the respective duties of the Rights Agent and any Co-Rights
Agent shall be as the Company shall determine and the Company shall provide written notice thereof
to the Rights Agent. To the extent that any Co-Rights Agent takes any action pursuant to this
Agreement, such Co-Rights Agent will be entitled to all of the rights and protections of, and
subject to all of the applicable duties and obligations imposed upon, the Rights Agent pursuant to
the terms of this Agreement.



     3. Issue of Right Certificates. (a) Until the Distribution Date, (i) the Rights will
be evidenced by the certificates representing Common Shares registered in the names of the record
holders thereof, which certificates representing Common Shares will also be deemed to be Right
Certificates (or, if the Common Shares are uncertificated, by the registration of the associated
Common Shares on the stock transfer books of the Company), (ii) the Rights will be transferable
only in connection with the transfer of the underlying Common Shares, and (iii) the transfer of any
Common Shares in respect of which Rights have been issued will also constitute the transfer of the
Rights associated with such Common Shares. Commencing as promptly as practicable after the Record
Date, the Company will make available a copy of a Summary of Rights to Purchase Preferred Stock in
substantially the form attached as Exhibit B to any holder of Rights who may request it
from time to time prior to the Expiration Date.



     (b) Rights will be issued by the Company in respect of all Common Shares (other than Common
Shares issued upon the exercise or exchange of any Right) issued or delivered by



6









 







the Company (whether originally issued or delivered from the Company’s treasury) after the
Record Date but prior to the earlier of the Distribution Date and the Expiration Date.
Certificates evidencing such Common Shares will have stamped on, impressed on, printed on, written
on, or otherwise affixed to them the following legend or such similar legend as the Company may
deem appropriate and as is not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or quotation system on which the Common Shares
may from time to time be listed or quoted, or to conform to usage:




This Certificate also evidences and entitles the holder hereof to certain Rights as
set forth in a Rights Agreement between KB Home and Mellon Investor Services LLC,
dated as of January 22, 2009 (the “Rights Agreement”), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the principal
executive offices of KB Home. 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 may be redeemed,
may be exchanged, may expire, may be amended, or may be evidenced by separate
certificates and no longer be evidenced by this Certificate. KB Home 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 as set forth in the Rights Agreement, Rights
that are or were beneficially owned by an Acquiring Person or any Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights Agreement)
may become null and void.



     (c) Any Right Certificate issued pursuant to this Section 3 that represents Rights
beneficially owned by an Acquiring Person or any Associate or Affiliate thereof and any Right
Certificate issued at any time upon the transfer of any Rights to an Acquiring Person or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate
and any Right Certificate issued pursuant to Section 6 or 11 hereof upon transfer, exchange,
replacement or adjustment of any other Right Certificate referred to in this sentence, shall be
subject to and contain the following legend or such similar legend as the Company may deem
appropriate and as is not inconsistent with the provisions of this Agreement, or as may be required
to comply with any applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage:




The Rights represented by this Right Certificate are or were beneficially owned by a
Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring
Person (as such terms are defined in the Rights Agreement). This Right Certificate
and the Rights represented hereby may become null and void in the circumstances
specified in Section 11(a)(ii) or Section 13 of the Rights Agreement.



     (d) As promptly as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the
Rights Agent will, if requested, send), by first class, postage prepaid mail, to each



7









 







record holder of Common Shares as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Right Certificate evidencing one
Right for each Common Share so held, subject to adjustment as provided herein. As of and after the
Distribution Date, the Rights will be evidenced solely by such Right Certificates. The Company
shall promptly notify the Rights Agent upon the occurrence of the Distribution Date. 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.



     (e) In the event that the Company purchases or otherwise acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such Common Shares will
be deemed canceled and retired so that the Company will not be entitled to exercise any Rights
associated with the Common Shares so purchased or acquired.



     4. Form of Right Certificates. The Right Certificates (and the form of election to
purchase and the form of assignment to be printed on the reverse thereof) will be substantially in
the form attached as Exhibit B with such changes and marks of identification or
designation, and such legends, summaries or endorsements printed thereon, as the Company may deem
appropriate (but which do not affect the rights, duties or responsibilities of the Rights Agent)
and as are not inconsistent with the provisions of this Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or quotation system on which the Rights may from time to time be
listed or quoted, or to conform to usage. Subject to the provisions of Section 22, the Right
Certificates, whenever issued, on their face will entitle the holders thereof to purchase such
number of one one-hundredths of a Preferred Share as are set forth therein at the Purchase Price
set forth therein, but the Purchase Price, the number and kind of securities issuable upon exercise
of each Right and the number of Rights outstanding will be subject to adjustment as provided
herein.



     5. Countersignature and Registration. (a) The Right Certificates will 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 will have affixed thereto the Company’s seal or a facsimile
thereof which will be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates will be countersigned by the Rights
Agent, either manually or by facsimile signature, and will not be valid for any purpose unless so
countersigned. In case any officer of the Company who signed any of the Right Certificates ceases
to be such an officer of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same force and effect as though the person
who signed such Right Certificates had not ceased to be such an officer of the Company; and any
Right Certificate may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Right Certificate, is a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such person was not such
an officer.



     (b) Following the Distribution Date, receipt by the Rights Agent of notice to that effect and
all other relevant information referred to in Section 3, the Rights Agent will keep or cause to be
kept, at the office of the Rights Agent designated for such purpose and at such other



8









 







offices as may be required to comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange or any quotation system
on which the Rights may from time to time be listed or quoted, books for registration and transfer
of the Right Certificates issued hereunder. Such books will show the names and addresses of the
respective holders of the Right Certificates, the number of Rights evidenced on its face by each of
the Right Certificates and the date of each of the Right Certificates.



     6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates. (a) Subject to the provisions of Sections 7(d)
and 14, at any time after the Close of Business on the Distribution Date and prior to the
Expiration Date, any Right Certificate or Right Certificates representing exercisable Rights may be
transferred, split up, combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths of a Preferred
Share (or other securities, as the case may be) as the Right Certificate or Right 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 such Right
Certificate or Right Certificates must make such request in a writing delivered to the Rights Agent
and must surrender the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office of the Rights Agent designated for such purpose. The Rights
Certificates are transferable only on the registry books of the Rights Agent. Thereupon or as
promptly as practicable thereafter, subject to the provisions of Sections 7(d) and 14, the Company
will prepare, execute and deliver to the Rights Agent, and the Rights Agent will countersign and
deliver, a Right Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of Right Certificates.
The Rights Agent shall promptly forward any such sum collected by it to the Company or to such
Persons as the Company shall specify by written notice. The Rights Agent shall have no duty or
obligation under any Section of this Agreement requiring the payment of taxes and/or charges unless
and until it is satisfied that all such taxes and/or charges have been paid.



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



     7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered
holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date and prior to the
Expiration Date, upon surrender of the Right Certificate, with the form of election to purchase on
the reverse side thereof properly completed and duly executed, to the Rights Agent at the office



9









 







or offices of the Rights Agent designated for such purpose, together with payment in cash, in
lawful money of the United States of America by certified check or bank draft payable to the order
of the Company, equal to the sum of (i) the exercise price for the total number of securities as to
which such surrendered Rights are exercised and (ii) an amount equal to any applicable transfer tax
required to be paid by the holder of such Right Certificate in accordance with the provisions of
Section 9(d).



     (b) Upon receipt of a Right Certificate representing exercisable Rights with the form of
election to purchase properly completed and duly executed, accompanied by payment as described
above, the Rights Agent will promptly (i) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent) certificates representing the
number of one one-hundredths of a Preferred Share to be purchased or, in the case of uncertificated
shares or other securities, requisition from any transfer agent therefor a notice setting forth
such number of shares or other securities to be purchased for which registration will be made on
the stock transfer books of the Company (and the Company hereby irrevocably authorizes and directs
its transfer agent to comply with all such requests), or, if the Company elects to deposit
Preferred Shares issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (and the Company hereby irrevocably
authorizes and directs such depositary agent to comply with all such requests), (ii) after receipt
of such certificates (or notices or depositary receipts, as the case may be), cause the same to be
delivered to or upon the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder, (iii) when necessary to comply with this
Agreement, requisition from the Company or any transfer agent therefor (or make available, if the
Rights Agent is the transfer agent) certificates representing the number of equivalent common
shares (or, in the case of uncertificated shares, a notice of the number of equivalent common
shares for which registration will be made on the stock transfer books of the Company) to be issued
in lieu of the issuance of Common Shares in accordance with the provisions of Section 11(a)(iii),
(iv) when necessary to comply with this Agreement, after receipt of such certificates or notices,
cause the same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such holder, (v) when
necessary to comply with this Agreement, requisition from the Company the amount of cash to be paid
in lieu of the issuance of fractional shares in accordance with the provisions of Section 14 or in
lieu of the issuance of Common Shares in accordance with the provisions of Section 11(a)(iii), (vi)
when necessary to comply with this Agreement, after receipt, deliver such cash to or upon the order
of the registered holder of such Right Certificate, and (vii) when necessary to comply with this
Agreement, deliver any due bill or other instrument provided to the Rights Agent by the Company for
delivery to the registered holder of such Right Certificate as provided by Section 11(l).



     (c) In case the registered holder of any Right Certificate exercises less than all the Rights
evidenced thereby, the Company will prepare, execute and deliver a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised and the Rights Agent will countersign and
deliver such new Right Certificate to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14.




10











 





     (d) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor
the Company will be obligated to undertake any action with respect to any purported transfer, split
up, combination or exchange of any Right Certificate pursuant to Section 6 or exercise of a Right
Certificate as set forth in this Section 7 unless the registered holder of such Right Certificate
has (i) properly completed and duly signed the certificate following the form of assignment or the
form of election to purchase, as applicable, set forth on the reverse side of the Right Certificate
surrendered for such transfer, split up, combination, exchange or exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company may reasonably request.



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



     9. Company Covenants Concerning Securities and Rights. The Company covenants and
agrees that:



     (a) It will cause to be reserved and kept available out of its authorized and unissued
Preferred Shares or any Preferred Shares held in its treasury, a number of Preferred Shares that
will be sufficient to permit the exercise pursuant to Section 7 of all outstanding Rights.



     (b) So long as the Preferred Shares (and, following the occurrence of a Triggering Event,
Common Shares and/or other securities) issuable upon the exercise of the Rights may be listed on a
national securities exchange or quoted on a quotation system, it will endeavor to cause, from and
after such time as the Rights become exercisable, all securities reserved for issuance upon the
exercise of Rights to be listed on such exchange or quoted on such system, upon official notice of
issuance upon such exercise.



     (c) It will take all such action as may be necessary to ensure that all Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other securities) delivered
(or evidenced by registration on the stock transfer books of the Company) upon exercise of Rights,
at the time of delivery of the certificates for (or registration of) such securities, will be
(subject to payment of the Purchase Price and compliance with all other applicable provisions of
this Agreement) duly authorized, validly issued, fully paid and nonassessable securities.



     (d) It will pay when due and payable any and all taxes and charges that may be payable in
respect of the issuance or delivery of the Right Certificates and of any certificates representing
securities issued upon the exercise of Rights (or, if such securities are



11









 







uncertificated, the registration of such securities on the stock transfer books of the
Company); provided, however, that the Company will not be required to pay any tax
or charge which may be payable in respect of any transfer or delivery of Right Certificates to a
person other than, or the issuance or delivery of certificates or depositary receipts representing
(or the registration of) securities issued upon the exercise of Rights in a name other than that
of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise, or
to issue or deliver any certificates, depositary receipts or notices representing securities issued
upon the exercise of any Rights until any such tax or charge has been paid (any such tax or charge
being payable by the holder of such Right Certificate at the time of surrender) or until it has
been established to the Company’s or the Rights Agent’s reasonable satisfaction that no such tax is
due.



     (e) It will use its best efforts (i) to file on an appropriate form, as soon as practicable
following the later of the Share Acquisition Date and the Distribution Date, a registration
statement under the Securities Act with respect to the securities issuable upon exercise of the
Rights, (ii) to cause such registration statement to become effective as soon as practicable after
such filing, and (iii) to cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and (B) the Expiration Date. The
Company will also take such action as may be appropriate under, or to ensure compliance with, the
applicable state securities or “blue sky” laws in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time after the date set forth in clause (i)
of the first sentence of this Section 9(e), the exercisability of the Rights in order to prepare
and file such registration statement and to permit it to become effective. Upon any such
suspension, the Company will issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company determines that a registration
statement should be filed under the Securities Act or any state securities laws following the
Distribution Date, the Company may temporarily suspend the exercisability of the Rights in each
relevant jurisdiction until such time as a registration statement has been declared effective and,
upon any such suspension, the Company will 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
whenever it makes a public announcement pursuant to this Section 9(e) and give the Rights Agent a
copy of such announcement. Notwithstanding anything in this Agreement to the contrary, the Rights
will not be exercisable in any jurisdiction if the requisite registration or qualification in such
jurisdiction has not been effected or the exercise of the Rights is not permitted under applicable
law.



     (f) Notwithstanding anything in this Agreement to the contrary, after the later of the Share
Acquisition Date and the Distribution Date the Company will not 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 eliminate or otherwise diminish the benefits intended to be afforded by the Rights.



     (g) In the event that the Company is obligated to issue other securities of the Company and/or
pay cash pursuant to Section 11, 13, 14 or 24, it will make all arrangements
necessary so that such other securities and/or cash are available for distribution by the
Rights Agent, if and when appropriate.



12









 





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



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




(a) (i) In the event that the Company at any time after the Record Date (A) declares a
dividend on the Preferred Shares payable in Preferred Shares, (B) subdivides the outstanding
Preferred Shares, (C) combines the outstanding Preferred Shares into a smaller number of
Preferred Shares, or (D) issues any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the record date
for such dividend or of the effective date of such subdivision, combination or
reclassification and/or the number and/or kind of shares of capital stock issuable on such
date upon exercise of a Right, will be proportionately adjusted so that the holder of any
Right exercised after such time is entitled to receive upon payment of the Purchase Price
then in effect the aggregate number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time when the transfer books of
the Company for the Preferred Shares were open, the holder of such Right would have owned
upon such exercise (and, in the case of a reclassification, would have retained after giving
effect to such reclassification) and would have been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of



13









 







capital stock issuable upon exercise of one Right. If an event occurs which would require
an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) or Section 13, the
adjustment provided for in this Section 11(a)(i) will be in addition to, and will be made
prior to, any adjustment required pursuant to Section 11(a)(ii) or Section 13.




     (ii) Subject to the provisions of Section 24, if:



     (A) any Person becomes an Acquiring Person; or



     (B) any Acquiring Person or any Affiliate or Associate of any Acquiring Person, directly
or indirectly, (1) merges into the Company or otherwise combines with the Company and the
Company is the continuing or surviving corporation of such merger or combination (other than in
a transaction subject to Section 13), (2) merges or otherwise combines with any Subsidiary of
the Company, (3) in one or more transactions (otherwise than in connection with the exercise,
exchange or conversion of securities exercisable or exchangeable for or convertible into shares
of any class of capital stock of the Company or any of its Subsidiaries) transfers cash,
securities or any other property to the Company or any of its Subsidiaries in exchange (in whole
or in part) for shares of any class of capital stock of the Company or any of its Subsidiaries
or for securities exercisable or exchangeable for or convertible into shares of any class of
capital stock of the Company or any of its Subsidiaries, or otherwise obtains from the Company
or any of its Subsidiaries, with or without consideration, any additional shares of any class of
capital stock of the Company or any of its Subsidiaries or securities exercisable or
exchangeable for or convertible into shares of any class of capital stock of the Company or any
of its Subsidiaries (otherwise than as part of a pro rata distribution to all holders of shares
of any class of capital stock of the Company, or any of its Subsidiaries), (4) sells, purchases,
leases, exchanges, mortgages, pledges, transfers or otherwise disposes (in one or more
transactions) to, from, with or of, as the case may be, the Company or any of its Subsidiaries
(otherwise than in a transaction subject to Section 13), any property, including securities, on
terms and conditions less favorable to the Company than the Company would be able to obtain in
an arm’s-length transaction with an unaffiliated third party, (5) receives any compensation from
the Company or any of its Subsidiaries other than compensation as a director or a regular
full-time employee, in either case at rates consistent with the Company’s (or its Subsidiaries’)
past practices, or (6) receives the benefit, directly or indirectly (except proportionately as a
stockholder), 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



     (C) during such time as there is an Acquiring Person, there is any reclassification of
securities of the Company (including any reverse stock split), or any 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
(whether or not with or into or otherwise involving an Acquiring Person), other than a
transaction subject to Section 13, which has the effect, directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries, or of securities exercisable or
exchangeable for or convertible into equity securities of the Company or any of its



14









 







Subsidiaries, of which an Acquiring Person, or any Affiliate or Associate of any Acquiring
Person, is the Beneficial Owner;


then, and in each such case, from and after the latest of the Distribution Date, the
Share Acquisition Date and the date of the occurrence of such Flip-in Event, proper
provision will be made so that each holder of a Right, except as provided below, will
thereafter have the right to receive, upon exercise thereof in accordance with the terms
of this Agreement at an exercise price per Right equal to the product of the
then-current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to the date of the
occurrence of such Flip-in Event (or, if any other Flip-in Event shall have previously
occurred, the product of the then-current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable immediately prior
to the date of the first occurrence of a Flip-in Event), in lieu of Preferred Shares,
such number of Common Shares as equals the result obtained by (x) multiplying the
then-current Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right was exercisable immediately prior to the date of the occurrence of such
Flip-in Event (or, if any other Flip-in Event shall have previously occurred,
multiplying the then-current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to the date of the
first occurrence of a Flip-in Event), and dividing that product by (y) 50% of the
current per share market price of the Common Shares (determined pursuant to Section
11(d)) on the date of the occurrence of such Flip-in Event. Notwithstanding anything in
this Agreement to the contrary, from and after the first occurrence of a Flip-in Event,
any Rights that are Beneficially Owned by (A) any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), (B) a transferee of any Acquiring Person (or any
such Affiliate or Associate) who becomes a transferee after the occurrence of a Flip-in
Event, or (C) a transferee of any Acquiring Person (or any such Affiliate or Associate)
who became a transferee prior to or concurrently with the occurrence of a Flip-in Event
pursuant to either (1) a transfer from an Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (2) a transfer which the Directors of
the Company have determined is part of a plan, arrangement or understanding which has
the purpose or effect of avoiding the provisions of this Section 11(a)(ii), and
subsequent transferees of any of such Persons, will be void without any further action
and any holder of such Rights will thereafter have no rights whatsoever with respect to
such Rights under any provision of this Agreement. The Company will use all reasonable
efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but
will have no liability to any holder of Right Certificates or any 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. Upon the occurrence of a Flip-in
Event, no Right Certificate that represents Rights that are or have become null and void
pursuant to the provisions of this Section 11(a)(ii) will thereafter be issued pursuant
to Section 3 or Section 6, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become null and void pursuant to the provisions of


15









 






 this Section 11(a)(ii) will be canceled. Upon the occurrence of a Flip-over Event, any
Rights that shall not have been previously exercised pursuant to this Section 11(a)(ii)
shall thereafter be exercisable only pursuant to Section 13 and not pursuant to this
Section 11(a)(ii). The Company shall notify the Rights Agent of the identity of any
such Acquiring Person, Associate or Affiliate, or any nominee of the foregoing, and the
Rights Agent may rely on such notice in carrying out its duties under this Agreement and
shall be deemed not to have any knowledge of the identity of any such Acquiring Person,
Associate, Affiliate, or the nominee of any of the foregoing unless and until it shall
have received such notice.




     (iii) Upon the occurrence of a Flip-in Event, if there are not sufficient Common Shares
authorized but unissued or issued but not outstanding to permit the issuance of all the Common
Shares issuable in accordance with Section 11(a)(ii) upon the exercise of a Right, the Board of
Directors of the Company will use its best efforts promptly to authorize and, subject to the
provisions of Section 9(e), make available for issuance additional Common Shares or other equity
securities of the Company having equivalent voting rights and an equivalent value (as determined
in good faith by the Board of Directors of the Company) to the Common Shares (for purposes of
this Section 11(a)(iii), “equivalent common shares”). In the event that equivalent common
 shares are so authorized, upon the exercise of a Right in accordance with the provisions of
Section 7, the registered holder will be entitled to receive (A) Common Shares, to the extent
any are available, and (B) a number of equivalent common shares, which the Board of Directors of
the Company has determined in good faith to have a value equivalent to the excess of (x) the
aggregate current per share market value on the date of the occurrence of the most recent
Flip-in Event of all the Common Shares issuable in accordance with Section 11(a)(ii) upon the
exercise of a Right (the “Exercise Value”) over (y) the aggregate current per share market value
on the date of the occurrence of the most recent Flip-in Event of any Common Shares available
for issuance upon the exercise of such Right; provided, however, that if at any
time after 90 calendar days after the latest of the Share Acquisition Date, the Distribution
Date and the date of the occurrence of the most recent Flip-in Event, there are not sufficient
Common Shares and/or equivalent common shares available for issuance upon the exercise of a
Right, then the Company will be obligated to deliver, upon the surrender of such Right and
without requiring payment of the Purchase Price, Common Shares (to the extent available),
equivalent common shares (to the extent available) and then cash (to the extent permitted by
applicable law and any agreements or instruments to which the Company is a party in effect
immediately prior to the Share Acquisition Date), which securities and cash have an aggregate
value equal to the excess of (1) the Exercise Value over (2) the product of the then-current
Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a
Right was exercisable immediately prior to the date of the occurrence of the most recent Flip-in
Event (or, if any other Flip-in Event shall have previously occurred, the product of the
then-current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share
for which a Right would have been exercisable immediately prior to the date of the occurrence of
such Flip-in Event if no other Flip-in Event had previously occurred). To the extent that any
legal or contractual restrictions prevent the Company from paying the full amount of cash
payable in accordance with the foregoing sentence, the Company will pay to holders of the Rights
as to which such payments are being made all amounts which are not then



16









 







restricted on a pro rata basis and will continue to make payments on a pro rata basis as
promptly as funds become available until the full amount due to each such Rights holder has been
paid.



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



     (c) In the event that the Company fixes a record date for the making of a distribution to all
holders of Preferred Shares (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness, cash (other than a regular periodic cash dividend), assets, stock (other
than a dividend payable in Preferred Shares) or subscription rights, options or warrants (excluding
those referred to in Section 11(b)), the Purchase Price to be in effect after such record date will
be determined by multiplying the Purchase Price in effect immediately prior to such record date by
a fraction, the numerator of which is the current per share market price of the Preferred Shares
(as determined pursuant to Section 11(d)) on such record date or, if earlier, the date on which
Preferred Shares begin to trade on an ex-dividend or when issued basis for such distribution, less
the fair market value (as determined in good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights Agent) of the portion of the
evidences of indebtedness, cash, assets or stock so to be distributed or of



17









 







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




(d) (i) For the purpose of any computation hereunder, the “current per share market price”
of Common Shares on any date will be deemed to be the average of the daily closing prices
per share of such Common Shares for the 30 consecutive Trading Days immediately prior to
such date; provided, however, that in the event that the current per share
market price of the Common Shares is determined during a period following the announcement
by the issuer of such Common Shares of (A) a dividend or distribution on such Common Shares
payable in such Common Shares or securities convertible into such Common Shares (other than
the Rights) or (B) any subdivision, combination or reclassification of such Common Shares,
and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or reclassification,
then, and in each such case, the current per share market price will be appropriately
adjusted to take into account ex-dividend trading or to reflect the current per share market
price per Common Share equivalent. The closing price for each day will 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 quotation system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Common Shares are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated quotation system
with respect to securities listed on the principal national securities exchange on which the
Common Shares are listed or admitted to trading or, if the Common Shares 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 such market then in use, or, if on any such date the Common Shares are not
quoted by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Shares selected by
the Board of Directors of the Company. If the Common Shares are not publicly held or not so
listed or traded, or are not the subject of available bid and asked quotes, “current per
share market price” will mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination will be described in a statement
filed with the Rights Agent.




     (ii) For the purpose of any computation hereunder, the “current per share market price”
of the Preferred Shares will be determined in the same manner as set forth above for Common
Shares in Section 11(d)(i), other than the last sentence thereof. If the current per share
market price of the Preferred Shares cannot be determined in the manner provided above, the
“current per share market price” of the Preferred Shares will be conclusively deemed to be
an amount equal to the current per share market price of the



18









 







Common Shares multiplied by one hundred (as such number may be appropriately adjusted
to reflect events such as stock splits, stock dividends, recapitalizations or similar
transactions relating to the Common Shares occurring after the date of this Agreement). If
neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded,
or the subject of available bid and asked quotes, “current per share market price” of the
Preferred Shares will mean the fair value per share as determined in good faith by the Board
of Directors of the Company, whose determination will be described in a statement filed with
the Rights Agent. For all purposes of this Agreement, the current per share market price of
one one-hundredth of a Preferred Share will be equal to the current per share market price
of one Preferred Share divided by one hundred.



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



     (f) If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right
thereafter exercised becomes entitled to receive any securities of the Company other than Preferred
Shares, thereafter the number and/or kind of such other securities so receivable upon exercise of
any Right (and/or the Purchase Price in respect thereof) will be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to
the Preferred Shares (and the Purchase Price in respect thereof) contained in this Section 11, and
the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares (and the
Purchase Price in respect thereof) will apply on like terms to any such other securities (and the
Purchase Price in respect thereof).



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



     (h) Unless the Company has exercised its election as provided in Section 11(i), upon each
adjustment of the Purchase Price pursuant to Section 11(b) or Section 11(c), each Right outstanding
immediately prior to the making of such adjustment will thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated
to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-hundredths of a Preferred Share issuable upon exercise of a Right immediately prior to
such adjustment of the Purchase Price 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.



19









 





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



     (j) Without respect to any adjustment or change in the Purchase Price and/or the number and/or
kind of securities issuable upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the number and kind of securities
which were expressed in the initial Right Certificate issued hereunder.



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



     (l) In any case in which this Section 11 otherwise requires that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company may elect to defer
until the occurrence of such event the issuance to the holder of any Right exercised after such
record date the number of Preferred Shares or other securities of the Company, if any, issuable
upon such exercise over and above the number of Preferred Shares or other 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 delivers to such holder a due
bill
or other appropriate instrument evidencing such holder’s right to receive such additional
Preferred Shares or other securities upon the occurrence of the event requiring such adjustment.



20









 





     (m) Notwithstanding anything in this Agreement to the contrary, the Company will 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 its good faith judgment the Board of Directors of
the Company determines to be advisable in order that any (i) consolidation or subdivision of the
Preferred Shares, (ii) issuance wholly for cash of Preferred Shares at less than the current per
share market price therefor, (iii) issuance wholly for cash of Preferred Shares or securities which
by their terms are convertible into or exchangeable for Preferred Shares, (iv) stock dividends, or
(v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Preferred Shares is not taxable to such stockholders.



     (n) Notwithstanding anything in this Agreement to the contrary, in the event that the Company
at any time after the Record Date prior to the Distribution Date (i) pays a dividend on the
outstanding Common Shares payable in Common Shares, (ii) subdivides the outstanding Common Shares,
(iii) combines the outstanding Common Shares into a smaller number of shares, or (iv) issues any
shares of its capital stock in a reclassification of the outstanding Common Shares (including any
such reclassification in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), the number of Rights associated with each Common Share then
outstanding, or issued or delivered thereafter but prior to the Distribution Date, will be
proportionately adjusted so that the number of Rights thereafter associated with each Common Share
following any such event equals the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction the numerator of which is the
total number of Common Shares outstanding immediately prior to the occurrence of the event and the
denominator of which is the total number of Common Shares outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11(n) will be made
successively whenever such a dividend is paid or such a subdivision, combination or
reclassification is effected.



     12. Certificate of Adjusted Purchase Price or Number of Securities. Whenever an
adjustment is made or any event affecting the Rights or their exercisability (including without
limitation an event which causes Rights to become null and void) occurs as provided in Section 11
or Section 13, the Company will promptly (a) prepare a certificate setting forth such adjustment or
describing such event, and a brief, reasonably detailed statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the Preferred Shares
and the Common Shares a copy of such certificate, and (c) if such adjustment is made after the
Distribution Date, mail a brief summary of such adjustment to each holder of a Right Certificate in
accordance with Section 26. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment or statement therein contained and shall have no duty or
liability with respect to, and shall not be deemed to have knowledge of, any adjustment or any such
event unless and until it shall have received such a certificate.



     13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the
event that:



21









 






     (i) at any time after a Person has become an Acquiring Person, the Company consolidates
with, or merges with or into, any other Person and the Company is not the continuing or
surviving corporation of such consolidation or merger; or




     (ii) at any time after a Person has become an Acquiring Person, any Person consolidates
with the Company, or merges with or into the Company, and the Company is the continuing or
surviving corporation of such merger or consolidation and, in connection with such merger or
consolidation, all or part of the Common Shares is changed into or exchanged for stock or
other securities of any other Person or cash or any other property; or




     (iii) at any time after a Person has become an Acquiring Person, the Company, directly
or indirectly, sells or otherwise transfers (or one or more of its Subsidiaries sells or
otherwise transfers), in one or more transactions, assets or earning power (including
without limitation securities creating any obligation on the part of the Company and/or any
of its Subsidiaries) representing in the aggregate more than 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 one or more of its wholly owned Subsidiaries;


then, and in each such case, proper provision will be made so that from and after the latest of the
Share Acquisition Date, the Distribution Date and the date of the occurrence of such Flip-over
Event (A) each holder of a Right thereafter has the right to receive, upon the exercise thereof in
accordance with the terms of this Agreement at an exercise price per Right equal to the product of
the then-current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share
for which a Right was exercisable immediately prior to the Share Acquisition Date, such number of
duly authorized, validly issued, fully paid, nonassessable and freely tradeable Common Shares of
the Issuer, free and clear of any liens, encumbrances and other adverse claims and not subject to
any rights of call or first refusal, as equals the result obtained by (x) multiplying the
then-current Purchase Price by the number of one one-hundredths of a Preferred Share for which a
Right is exercisable immediately prior to the Share Acquisition Date and dividing that product by
(y) 50% of the current per share market price of the Common Shares of the Issuer (determined
pursuant to Section 11(d)), on the date of the occurrence of such Flip-over Event; (B) the Issuer
will thereafter be liable for, and will assume, by virtue of the occurrence of such Flip-over
Event, all the obligations and duties of the Company pursuant to this Agreement; (C) the term
“Company” will thereafter be deemed to refer to the Issuer; and (D) the Issuer will take such steps
(including without limitation the reservation of a sufficient number of its Common Shares to permit
the exercise of all outstanding Rights) in connection with such consummation as may be necessary to
assure that the provisions hereof are thereafter applicable, as nearly as reasonably may be
possible, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights.




     (b) For purposes of this Section 13, “Issuer” means (i) in the case of any Flip-over Event
described in Sections 13(a)(i) or (ii) above, the Person that is the continuing, surviving,
resulting or acquiring Person (including the Company as the continuing or surviving corporation of
a transaction described in Section 13(a)(ii) above), and (ii) in the case of any Flip-over Event
described in Section 13(a)(iii) above, the Person that is the party receiving the greatest portion
of the assets or earning power (including without limitation securities creating any obligation on
the



22









 







part of the Company and/or any of its Subsidiaries) transferred pursuant to such transaction
or transactions; provided, however, that, in any such case, (A) if (1) no class of
equity security of such Person is, at the time of such merger, consolidation or transaction and has
been continuously over the preceding 12-month period, registered pursuant to Section 12 of the
Exchange Act, and (2) such Person is a Subsidiary, directly or indirectly, of another Person, a
class of equity security of which is and has been so registered, the term “Issuer” means such other
Person; and (B) in case such Person is a Subsidiary, directly or indirectly, of more than one
Person, a class of equity security of two or more of which are and have been so registered, the
term “Issuer” means whichever of such Persons is the issuer of the equity security having the
greatest aggregate market value. Notwithstanding the foregoing, if the Issuer in any of the
Flip-over Events listed above is not a corporation or other legal entity having outstanding equity
securities, then, and in each such case, (x) if the Issuer is directly or indirectly wholly owned
by a corporation or other legal entity having outstanding equity securities, then all references to
Common Shares of the Issuer will be deemed to be references to the Common Shares of the corporation
or other legal entity having outstanding equity securities which ultimately controls the Issuer,
and (y) if there is no such corporation or other legal entity having outstanding equity securities,
(I) proper provision will be made so that the Issuer creates or otherwise makes available for
purposes of the exercise of the Rights in accordance with the terms of this Agreement, a kind or
kinds of security or securities having a fair market value at least equal to the economic value of
the Common Shares which each holder of a Right would have been entitled to receive if the Issuer
had been a corporation or other legal entity having outstanding equity securities; and (II) all
other provisions of this Agreement will apply to the issuer of such securities as if such
securities were Common Shares.



     (c) The Company will not consummate any Flip-over Event if, (i) at the time of or immediately
after such Flip-over Event, there are or would be any rights, warrants, instruments or securities
outstanding or any agreements or arrangements in effect which would eliminate or substantially
diminish the benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or
immediately after such Flip-over Event, the stockholders of the Person who constitutes, or would
constitute, the Issuer for purposes of Section 13(a) shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates, or (iii) the form or nature
of the organization of the Issuer would preclude or limit the exercisability of the Rights. In
addition, the Company will not consummate any Flip-over Event unless the Issuer has a sufficient
number of authorized Common Shares (or other securities as contemplated in Section 13(b) above)
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 to such consummation the Company and the Issuer
have duly executed and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in subsections (a) and (b) of this Section 13 and further providing that as
promptly as practicable after the consummation of any Flip-over Event, the Issuer will:




     (A) prepare and file a registration statement under the Securities Act with respect to the
Rights and the securities issuable upon exercise of the Rights on an appropriate form, and use
its best efforts to cause such registration statement to (1) become effective as soon as
practicable after such filing and (2) remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Expiration Date;



23









 






     (B) take all such action as may be appropriate under, or to ensure compliance with, the
applicable state securities or “blue sky” laws in connection with the exercisability of the
Rights; and




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



     (d) The provisions of this Section 13 will similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Flip-over Event occurs at any time
after the occurrence of a Flip-in Event, except for Rights that have become null and void pursuant
to Section 11(a)(ii), Rights that shall not have been previously exercised will cease to be
exercisable in the manner provided in Section 11(a)(ii) and will thereafter be exercisable in the
manner provided in Section 13(a).



     14. Fractional Rights and Fractional Securities. (a) The Company will not be required
to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights.
In lieu of such fractional Rights, the Company will pay as promptly as practicable to the
registered holders of the Right Certificates with regard to which such fractional Rights otherwise
would be issuable, an amount in cash equal to the same fraction of the current market value of one
Right. For the purposes of this Section 14(a), the current market value of one Right is the
closing price of the Rights for the Trading Day immediately prior to the date on which such
fractional Rights otherwise would have been issuable. The closing price for any day is 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 quotation
system with respect to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal quotation 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 such market 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 the
Rights are not publicly held or are not so listed or traded, or are not the subject of available
bid and asked quotes, the current market value of one Right will mean the fair value thereof as
determined in good faith by the Board of Directors of the Company, whose determination will be
described in a statement filed with the Rights Agent.



     (b) The Company will not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of
the Rights or to distribute certificates which evidence fractional Preferred Shares or to register
fractional Preferred Shares on the stock transfer books of the Company (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares
in integral multiples of one one-hundredth of a Preferred Share may, at the election of the
Company, be evidenced by depositary receipts pursuant to an appropriate agreement between the
Company and a depositary selected by it, provided that such agreement



24









 







provides that the holders of such depositary receipts have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred Shares represented by
such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples
of one one-hundredth of a Preferred Share, the Company may pay to any Person to whom or which such
fractional Preferred Shares would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For purposes of this Section 14(b),
the current market value of one Preferred Share is the closing price of the Preferred Shares (as
determined in the same manner as set forth for Common Shares in the second sentence of Section
11(d)(i)) for the Trading Day immediately prior to the date of such exercise; provided,
however, that if the closing price of the Preferred Shares cannot be so determined, the
closing price of the Preferred Shares for such Trading Day will be conclusively deemed to be an
amount equal to the closing price of the Common Shares (determined pursuant to the second sentence
of Section 11(d)(i)) for such Trading Day multiplied by one hundred (as such number may be
appropriately adjusted to reflect events such as stock splits, stock dividends, recapitalizations
or similar transactions relating to the Common Shares occurring after the date of this Agreement);
provided further, however, that if neither the Common Shares nor the
Preferred Shares are publicly held or listed or admitted to trading on any national securities
exchange, or the subject of available bid and asked quotes, the current market value of one
Preferred Share will mean the fair value thereof as determined in good faith by the Board of
Directors of the Company, whose determination will be described in a statement filed with the
Rights Agent.



     (c) Following the occurrence of a Triggering Event, the Company will not be required to issue
fractions of Common Shares or other securities issuable upon exercise or exchange of the Rights or
to distribute certificates which evidence any such fractional securities or to register any such
fractional securities on the stock transfer books of the Company. In lieu of issuing any such
fractional securities, the Company may pay to any Person to whom or which such fractional
securities would otherwise be issuable an amount in cash equal to the same fraction of the current
market value of one such security. For purposes of this Section 14(c), the current market value of
one Common Share or other security issuable upon the exercise or exchange of Rights is the closing
price thereof (as determined in the same manner as set forth for Common Shares in the second
sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date of such exercise or
exchange; provided, however, that if neither the Common Shares nor any such other
securities are publicly held or listed or admitted to trading on any national securities exchange,
or the subject of available bid and asked quotes, the current market value of one Common Share or
such other security will mean the fair value thereof as determined in good faith by the Board of
Directors of the Company, whose determination will mean the fair value thereof as will be described
in a statement filed with the Rights Agent.



     (d) Whenever a payment for fractional Rights or 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 under any Section of
this Agreement relating to the payment of fractional Rights or
fractional shares unless and until the Rights Agent shall have received such a certificate and
sufficient monies.



25









 





     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, are vested in the
respective registered holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or
of the holder of any other Right Certificate (or, prior to the Distribution Date, of the holder of
any Common Shares), 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 Right Certificate in the manner provided in
such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies
available to the holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach by the Company of this Agreement and will
be entitled to specific performance of the obligations under this Agreement, and injunctive relief
against actual or threatened violations of the obligations of any Person subject to this Agreement.



     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 are transferable only in connection with the
transfer of the Common Shares;



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



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



     (d) Such holder expressly waives any right to receive any fractional Rights and any fractional
securities upon exercise or exchange of a Right, except as otherwise provided in Section 14.



     (e) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the
Rights Agent will have any liability to any holder 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



26









 







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, that the Company
will use its best efforts to have any such injunction, order, decree, judgment or ruling lifted or
otherwise overturned as soon as possible.



     17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any
Right Certificate will be entitled to vote, receive dividends, or be deemed for any purpose the
holder of Preferred Shares or any other securities of the Company which may at any time be issuable
upon the exercise of the Rights represented thereby, nor will anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election of Directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to
any corporate action, or to receive notice of meetings or other actions affecting stockholders
(except as provided in Section 25), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions of this Agreement or exchanged pursuant to the provisions of Section
24.



     18. Concerning the Rights Agent. (a) The Company will pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time to time, on demand
of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in
the preparation, delivery, amendment, administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The Company will also indemnify the Rights Agent
for, and hold it harmless against, any loss, liability, suit, action, damage, judgment, fine,
penalty, claim, demand, settlement, proceeding, cost or expense (including, without limitation, the
reasonable fees and expenses of legal counsel) incurred without gross negligence, bad faith, or
willful misconduct (which gross negligence or bad faith must be determined by a final,
non-appealable judgment of a court of competent jurisdiction) on the part of the Rights Agent, for
any action taken, suffered or omitted to be taken 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 arising therefrom, directly or
indirectly. The provisions of this Section 18 and Section 20 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 will be authorized and protected and will 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 Right Certificate or certificate or other notice evidencing Preferred Shares or
Common Shares or 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. The Rights Agent shall not be deemed to have



27









 







knowledge of any event of which it was supposed to have received notice thereof hereunder, and
the Rights Agent shall be fully protected and shall incur no liability for failing to take action
in connection therewith unless and until it has received such notice in writing.



     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 is a party, or any Person succeeding to the shareholder services
business of the Rights Agent or any successor Rights Agent, will be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. If at the time such successor Rights
Agent succeeds to the agency created by this Agreement any of the Right Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and if at that time any of the Right Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates will have the full force provided in the Right Certificates and in this
Agreement.



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



     20. 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 Right Certificates, by their
acceptance thereof, will 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 will be full and
complete authorization and protection to the Rights Agent and the Rights Agent shall incur no
liability for or in respect of any action taken, suffered, or omitted by it in accordance with such
advice or opinion.



     (b) Whenever in the performance of its duties under this Agreement the Rights Agent deems it
necessary or desirable that any fact or matter 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 any one of the Chairman of the Board, the
President, any Vice President, the Secretary or the Treasurer of the Company and delivered to the
Rights Agent, and such certificate will be full and complete authorization and



28









 







protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect
of any action taken, suffered or omitted by it under the provisions of this Agreement in reliance
upon such certificate.



     (c) The Rights Agent will be liable hereunder only for its own negligence, bad faith or
willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a
final, non-appealable judgment of a court of competent jurisdiction). Anything to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special, punitive, indirect,
consequential or incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage.
Any liability of the Rights Agent under this Agreement will be limited to the amount of annual
fees paid by the Company to the Rights Agent.



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



     (e) The Rights Agent will not have any liability for or be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except the due execution
and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor will it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor
will it be responsible for any change in the terms or exercisability of the Rights or adjustment of
the Rights (including any adjustment required under the provisions of Sections 11 or 13 hereof or
any adjustment which results in Rights becoming null and void) 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 Right Certificates after actual notice of any such adjustment); nor will it by any act
hereunder be deemed to make any representation or warranty as to the authorization or reservation
of any shares of stock or other securities to be issued pursuant to this Agreement or any Right
Certificate or as to whether any shares of stock or other securities will, when issued, be duly
authorized, validly issued, fully paid and nonassessable.



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



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



29









 






     (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 it were
not Rights Agent under this Agreement. Nothing herein will 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, officers and employees) or by
or through its attorneys or agents, and the Rights Agent will not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the
Company or any other Person resulting from any such act, default, neglect or misconduct, absent
gross negligence, bad faith, or willful misconduct (which gross negligence, bad faith, or willful
misconduct must be determined by a final, non-appealable judgment of a court of competent
jurisdiction) in the selection and continued employment thereof. The Rights Agent will not be
under any duty or responsibility to ensure compliance with any applicable federal or state
securities laws in connection with the issuance, transfer or exchange of Right Certificates.



     (j) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise,
transfer, split up, combination or exchange, either (i) the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not been properly
completed or indicates an affirmative response to clause 1 or 2 thereof, or (ii) any other actual
or suspected irregularity exists, the Rights Agent will not take any further action with respect to
such requested exercise, transfer, split up, combination or exchange without first consulting with
the Company, and will thereafter take further action with respect thereto only in accordance with
the Company’s written instructions.



     (k) 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
(other than internal costs incurred by the Rights Agent in providing services to the Company in the
ordinary course of its business as Rights Agent) or in the exercise of its rights if it believes
that repayment of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.



     21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign
and be discharged from its duties under this Agreement upon 30 calendar days’ notice in writing
mailed to the Company and to each transfer agent of the Preferred Shares or the Common Shares by
registered or certified mail, and to the holders of the Right Certificates by first class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon 30 calendar 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 Preferred Shares and the Common Shares by registered or certified mail, and
to the holders of the Right Certificates by first class mail. If the



30









 







Rights Agent resigns or is removed or otherwise becomes incapable of acting, the Company will
appoint a successor to the Rights Agent. If the Company fails to make such appointment within a
period of 30 calendar days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the
holder of a Right Certificate (who will, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, will (a) be a Person organized and
doing business under the laws of the United States or of any state of the United States, in good
standing, which is authorized under such laws to exercise corporate trust, shareholder services or
stock transfer powers and is subject to supervision or examination by federal or state authority
and which has at the time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million, or (b) an Affiliate of such a Person. After appointment, the successor Rights
Agent will 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 will
deliver and transfer to the successor Rights Agent any property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.
Not later than the effective date of any such appointment, the Company will file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the Preferred Shares or the
Common Shares, and mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21, however, or any defect
therein, will 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.



     22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by the Board of Directors of the
Company to reflect any adjustment or change in the Purchase Price per share and the number or kind
of securities issuable upon exercise of the Rights made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale by the Company of Common Shares
following the Distribution Date and prior to the Expiration Date, the Company (a) will, with
respect to Common Shares so issued or sold pursuant to the exercise, exchange or conversion of
securities (other than Rights) issued prior to the Distribution Date which are exercisable or
exchangeable for, or convertible into Common Shares, and (b) may, in any other case, if deemed
necessary, appropriate or desirable by the Board of Directors of the Company, issue Right
Certificates representing an equivalent number of Rights as would have been issued in respect of
such Common Shares if they had been issued or sold prior to the Distribution Date, as appropriately
adjusted as provided herein as if they had been so issued or sold; provided,
however, that (i) no such Right Certificate will be issued if, and to the extent that, in
its good faith judgment the Board of Directors of the Company determines that the issuance of such
Right Certificate could have a material adverse tax consequence to the Company or to the Person to
whom or which such Right Certificate otherwise would be issued and (ii) no such Right Certificate
will be issued if, and to the extent that, appropriate adjustment otherwise has been made in lieu
of the issuance thereof.



31









 





     23. Redemption. (a) Prior to the Expiration Date, the Board of Directors of the
Company may, at its option, redeem all but not less than all of the then-outstanding Rights at the
Redemption Price at any time prior to the Close of Business on the later of (i) the Distribution
Date and (ii) Share Acquisition Date. Any such redemption will be effective immediately upon the
action of the Board of Directors of the Company ordering the same, unless such action of the Board
of Directors of the Company expressly provides that such redemption will be effective at a
subsequent time or upon the occurrence or nonoccurrence of one or more specified events (in which
case such redemption will be effective in accordance with the provisions of such action of the
Board of Directors of the Company).



     (b) Immediately upon the effectiveness of the redemption of the Rights as provided in Section
23(a), and without any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights will be to receive the Redemption
Price, without interest thereon. Promptly after the effectiveness of the redemption of the Rights
as provided in Section 23(a), the Company will publicly announce such redemption (with prompt
notice thereof to the Rights Agent) and, within 10 calendar days thereafter, will give notice of
such redemption to the holders of the then-outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the Company;
provided, however, that the failure to give, or any defect in, any such notice will
not affect the validity of the redemption of the Rights. Any notice that is mailed in the manner
herein provided will be deemed given, whether or not the holder receives the notice. The notice of
redemption mailed to the holders of Rights will state the method by which the payment of the
Redemption Price will be made. The Company may, at its option, pay the Redemption Price in cash,
Common Shares (based upon the current per share market price of the Common Shares (determined
pursuant to Section 11(d)) at the time of redemption), or any other form of consideration deemed
appropriate by the Board of Directors of the Company (based upon the fair market value of such
other consideration, determined by the Board of Directors of the Company in good faith) or any
combination thereof. The Company may, at its option, combine the payment of the Redemption Price
with any other payment being made concurrently to holders of Common Shares and, to the extent that
any such other payment is discretionary, may reduce the amount thereof on account of the concurrent
payment of the Redemption Price. If legal or contractual restrictions prevent the Company from
paying the Redemption Price (in the form of consideration deemed appropriate by the Board of
Directors of the Company) at the time of redemption, the Company will pay the Redemption Price,
without interest, promptly after such time as the Company ceases to be so prevented from paying the
Redemption Price.



     24. Exchange. (a) The Board of Directors of the Company may, at its option, at any
time after the later of the Share Acquisition Date and the Distribution Date, exchange all or part
of the then-outstanding and exercisable Rights (which will not include Rights that have become null
and void pursuant to the provisions of Section 11(a)(ii)) for Common Shares at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the Record Date (such exchange ratio being hereinafter referred
to as the “Exchange Ratio”). Any such exchange will be effective immediately upon the action of
the Board of Directors of the Company ordering the same, unless such action of the Board of
Directors of the Company expressly provides that such exchange will be effective at a subsequent
time or upon the occurrence or nonoccurrence of one or more



32









 







specified events (in which case such exchange will be effective in accordance with the
provisions of such action of the Board of Directors of the Company). Notwithstanding the
foregoing, the Board of Directors of the Company will not be empowered to effect such exchange at
any time after any Person (other than the Company or any Related Person), who or which, together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of
the then-outstanding Common Shares.



     (b) Immediately upon the effectiveness of the exchange of any Rights as provided in Section
24(a), and without any further action and without any notice, the right to exercise such Rights
will terminate and the only right with respect to such Rights thereafter of the holder of such
Rights will be to receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. Promptly after the effectiveness of the exchange of
any Rights as provided in Section 24(a), the Company will publicly announce such exchange (with
prompt notice thereof to the Rights Agent) and, within 10 calendar days thereafter, will give
notice of such exchange to all of the holders of such Rights at their last addresses as they appear
upon the registry books of the Rights Agent; provided, however, that the failure to
give, or any defect in, such notice will not affect the validity of such exchange. Any notice that
is mailed in the manner herein provided will be deemed given, whether or not the holder receives
the notice. Each such notice of exchange will state the method by which the exchange of the Common
Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange will be effected pro rata based on the number of
Rights (other than Rights which have become null and void pursuant to the provisions of Section
11(a)(ii)) held by each holder of Rights.



     (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute
for any Common Share exchangeable for a Right (i) equivalent common shares (as such term is used in
Section 11(a)(iii)), (ii) cash, (iii) debt securities of the Company, (iv) other assets, or (v) any
combination of the foregoing, in any event having an aggregate value, as determined in good faith
by the Board of Directors of the Company (whose determination will be described in a statement
filed with the Rights Agent), equal to the current market value of one Common Share (determined
pursuant to Section 11(d)) on the Trading Day immediately preceding the date of the effectiveness
of the exchange pursuant to this Section 24.



     25. Notice of Certain Events. (a) If, after the Distribution Date, the Company
proposes (i) to pay any dividend payable in stock of any class to the holders of Preferred Shares
or to make any other distribution to the holders of Preferred Shares (other than a regular periodic
cash dividend), (ii) to offer to the holders of Preferred Shares rights, options or warrants to
subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares
(other than a reclassification involving only the subdivision of outstanding Preferred Shares),
(iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of assets or earning power (including, without limitation, securities creating any
obligation on the part of the Company and/or any of its Subsidiaries) representing more than 50% of
the assets and earning power of the Company and its Subsidiaries, taken as a whole, to any other
Person or Persons other than the Company or one or more of its wholly owned



33









 







Subsidiaries, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi)
to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or reclassification of the Common Shares then, in each such case, the
Company will give to the Rights Agent and to each holder of a Right Certificate, to the extent
feasible and in accordance with Section 26, a notice of such proposed action, which specifies the
record date for the purposes of such stock dividend, distribution or offering of rights, options or
warrants, or the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of participation therein by
the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such
notice will be so given, in the case of any action covered by clause (i) or (ii) above, at least 10
calendar days prior to the record date for determining holders of the Preferred Shares for purposes
of such action, and, in the case of any such other action, at least 10 calendar days prior to the
date of the taking of such proposed action or the date of participation therein by the holders of
the Common Shares and/or Preferred Shares, whichever is the earlier.



     (b) In case any Triggering Event occurs, then, in any such case, the Company will as soon as
practicable thereafter give to the Rights Agent and each holder of a Right Certificate, in
accordance with Section 26, a notice of the occurrence of such event, which specifies the event and
the consequences of the event to holders of Rights.



     (c) Notwithstanding anything in this Agreement to the contrary, prior to the Distribution
Date, a filing by the Company with the Securities and Exchange Commission shall constitute
sufficient notice to the holders of any Rights or of any Common Shares for purposes of this
Agreement.



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


KB Home

10990 Wilshire Boulevard

Los Angeles, California 90024

Attention: General Counsel




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


Mellon Investor Services LLC

400 S. Hope St., 4th Floor

Los Angeles CA 90071

Attention: Relationship Manager




34









 







with a copy to:



Mellon Investor Services

Newport Office Center VII

480 Washington Blvd.

Jersey City, NJ 07310

Attention: Legal Department




     (c) Notices or demands authorized by this Agreement to be given or made by the Company or the
Rights Agent to the holder of any Right Certificate (or, if prior the Distribution Date, to the
holder of any Common Shares) will be sufficiently given or made if made in writing and 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.



     27. Supplements and Amendments. Prior to the time at which the Rights cease to be
redeemable pursuant to Section 23, and subject to the penultimate sentence of this Section 27, the
Company may in its sole and absolute discretion, and the Rights Agent will if the Company so
directs, supplement or amend any provision of this Agreement in any respect without the approval of
any holders of Rights or Common Shares. From and after the time at which the Rights cease to be
redeemable pursuant to Section 23, and subject to the penultimate sentence of this Section 27, the
Company may, and the Rights Agent will if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights or Common Shares 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 supplement or amend the provisions hereunder in any manner which the Company
may deem desirable; provided, however, that no such supplement or amendment shall
adversely affect the interests of the holders of Rights as such (other than an Acquiring Person or
an Affiliate or Associate of an Acquiring Person), and no such supplement or amendment shall cause
the Rights again to become redeemable or cause this Agreement again to become supplementable or
amendable otherwise than in accordance with the provisions of this sentence. Without limiting the
generality or effect of the foregoing, this Agreement may be supplemented or amended to provide for
such voting powers for the Rights and such procedures for the exercise thereof, if any, as the
Board of Directors of the Company may determine to be appropriate. Any supplement or amendment
must be evidenced by a writing to be signed by the Company and the Rights Agent. Upon the delivery
of a certificate from an 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 will execute such
supplement or amendment. Notwithstanding anything in this Agreement to the contrary, (a) no
supplement or amendment may be made which decreases the stated Redemption Price to an amount less
than $0.0005 per Right, and (b) the Rights Agent may, but shall not be obligated to, enter into any
supplement or amendment that affects the Rights Agent’s own rights, duties, obligations, or
immunities under this Agreement. Notwithstanding anything in this Agreement to the contrary, the
limitations on the ability of the Board of Directors of the Company to amend this Agreement set
forth in this Section 27 shall not affect the power or ability of the Board of Directors of the
Company to take any other action that is consistent with its fiduciary duties under Delaware law,
including without limitation accelerating or extending the Expiration Date or making any other



35









 







amendment to this Agreement that is permitted by this Section 27 or adopting a new stockholder
rights plan with such terms as the Board of Directors of the Company determines in its sole
discretion to be appropriate.



     28. Successors; Certain Covenants. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent will be binding on and inure to the
benefit of their respective successors and assigns hereunder.



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



     30. Governing Law. This Agreement, each Right and each Right Certificate issued
hereunder will be deemed to be a contract made under the internal substantive laws of the State of
Delaware and for all purposes will be governed by and construed in accordance with the internal
substantive laws of such State applicable to contracts to be made and performed entirely within
such State, provided, however, that all provisions regarding the rights, duties,
and obligations of the Rights Agent shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed entirely within such
State.



     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
will remain in full force and effect and will in no way be affected, impaired or invalidated;
provided, however, that if such excluded provision shall effect the rights, immunities, duties or
obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately. Nothing
contained in this Section 31 will affect the ability of the Company under the provisions of Section
27 to supplement or amend this Agreement to replace such invalid, void or unenforceable term,
provision, covenant or restriction with a legal, valid and enforceable term, provision, covenant or
restriction.



     32. Descriptive Headings, Etc. Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and will not control or affect the meaning or
construction of any of the provisions hereof. Unless otherwise expressly provided, references
herein to Articles, Sections and Exhibits are to Articles, Sections and Exhibits of or to this
Agreement.



     33. Determinations and Actions by the Board. For all purposes of this Agreement, any
calculation of the number of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common Shares of which any
Person is the Beneficial Owner, will be made in accordance with, as the Board of Directors of the
Company deems to be applicable, the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act or the provisions of Section 382 of the



36









 







Code, or any successor provision or replacement provision. The Board of Directors of the
Company will have the exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board of Directors of the Company 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 (including
without limitation Section 27, this Section 33 and other provisions hereof relating to its powers
or authority hereunder) and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including without limitation any determination contemplated by
Section 1(a) or any determination as to whether particular Rights shall have become null and void).
All such actions, calculations, interpretations and determinations (including, for purposes of
clause (y) below, any omission with respect to any of the foregoing) which are done or made by the
Board of Directors of the Company in good faith will (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties and (y) not subject the
Board of Directors of the Company to any liability to any Person, including without limitation the
Rights Agent and the holders of the Rights. The Rights Agent is entitled always to assume that the
Company’s Board of Directors acted in good faith and shall be fully protected and incur no
liability in reliance thereon.



     34. Effective Time. Notwithstanding anything in this Agreement to the contrary, this
Agreement will not be effective until the Effective Time.



     35. Force Majeure. Notwithstanding anything to the contrary contained herein, the
Rights Agent shall not be liable for any delays or failures in performance resulting from acts
beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage
of supply, breakdowns or malfunctions, interruptions or malfunctions 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.



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



37









 





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



	 	 	 	 	 
	 	KB HOME


 	 
	 	By:  	/s/ Wendy C. Shiba
 	 
	 	 	Name:  	Wendy C. Shiba 	 
	 	 	Title:  	Executive Vice President,

General Counsel and Corporate Secretary 	 
	 
	 	MELLON INVESTOR SERVICES LLC

 	 
	 	 	 
	 	By:  	/s/ James Kirkland
 	 
	 	 	Name:  	James Kirkland 	 
	 	 	Title:  	Assistant Vice President and Relationship Manager 	 
	 




38











 





EXHIBIT A




FORM OF RIGHT CERTIFICATE




			
	Certificate No. R-                    
	 	                     Rights





NOT EXERCISABLE AFTER MARCH 5, 2019 OR EARLIER IF REDEEMED, EXCHANGED OR AMENDED, OR IN CERTAIN
OTHER CIRCUMSTANCES. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION OF
THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED
IN THE RIGHTS AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) OR A TRANSFEREE THEREOF MAY BECOME NULL AND VOID.




Right Certificate




KB HOME




     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 January 22, 2009 (the “Rights
Agreement”), between KB Home, a Delaware corporation (the “Company”), and Mellon Investor Services
LLC (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as
such term is defined in the Rights Agreement) and prior to 5:00 p.m. (New York City time) on the
Expiration Date (as such term is defined in the Rights Agreement) at the office or offices of the
Rights Agent designated for such purpose, one one-hundredth of a fully paid nonassessable share of
Series A Participating Cumulative Preferred Stock, par value $1.00 per share (the “Preferred
Shares”), of the Company, at a purchase price of $85.00 per one one-hundredth of a Preferred Share
(the “Purchase Price”), upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase and related Certificate duly executed. If this Right Certificate is exercised
in part, the holder will be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised. The number of Rights evidenced by
this Right Certificate (and the number of one one-hundredths of a Preferred Share which may be
purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the
number and Purchase Price as of the date of the Rights Agreement, based on the Preferred Shares as
constituted at such date.



     As provided in the Rights Agreement, the Purchase Price and/or the number and/or kind of
securities issuable upon the exercise of the Rights evidenced by this Right Certificate are subject
to adjustment upon the occurrence of certain events.



     This Right Certificate is subject to all of the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and
made a part hereof and to which Rights Agreement reference is hereby made for a



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full description of the rights, limitations of rights, obligations, duties and immunities of
the Rights Agent, the Company and the holders of the Right Certificates, which limitations of
rights include the temporary suspension of the exercisability of the Rights under the circumstances
specified in the Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and can be obtained from the Company without charge upon
written request therefor. Terms used herein with initial capital letters and not defined herein
are used herein with the meanings ascribed thereto in the Rights Agreement.



     Pursuant to the Rights Agreement, from and after the occurrence of a Flip-in Event, any Rights
that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate or Associate of any
Acquiring Person), (ii) a transferee of any Acquiring Person (or any such Affiliate or Associate)
who becomes a transferee after the occurrence of a Flip-in Event, or (iii) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee prior to or
concurrently with the Flip-in Event pursuant to either (a) a transfer from an Acquiring Person to
holders of its equity securities or to any Person with whom it 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
the purpose or effect of avoiding certain provisions of the Rights Agreement, and subsequent
transferees of any of such Persons, will be void without any further action and any holder of such
Rights will thereafter have no rights whatsoever with respect to such Rights under any provision of
the Rights Agreement. From and after the occurrence of a Flip-in Event, no Right Certificate will
be issued that represents Rights that are or have become null and void pursuant to the provisions
of the Rights Agreement, and any Right Certificate delivered to the Rights Agent that represents
Rights that are or have become null and void pursuant to the provisions of the Rights Agreement
will be canceled.



     This Right Certificate, with or without other Right Certificates, may be transferred, split
up, combined or exchanged for another Right Certificate or Right Certificates entitling the holder
to purchase a like number of one one-hundredths of a Preferred Share (or other securities, as the
case may be) as the Right Certificate or Right Certificates surrendered entitled such holder (or
former holder in the case of a transfer) to purchase, upon presentation and surrender hereof at the
office of the Rights Agent designated for such purpose, with the Form of Assignment (if
appropriate) and the related Certificate duly executed.



     Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
may be redeemed by the Company at its option at a redemption price of $0.0005 per Right or may be
exchanged in whole or in part. The Rights Agreement may be supplemented and amended by the
Company, as provided therein.



     The Company is not required to issue fractions of Preferred Shares (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share, which may, at the option of the
Company, be evidenced by depositary receipts) or other securities issuable upon the exercise of any
Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares or other
securities, the Company may make a cash payment, as provided in the Rights Agreement.



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



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



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



	 	 	 	 	 	 
	ATTEST: 	 	KB HOME

 	 
	 	 	By:  	
 	 
	 	 	 	Name:  	 	 
	 	 	 	Title:  	 	 




	 	 	 	 	 	 
	Countersigned:


MELLON INVESTOR SERVICES LLC
 	 	 	 
	 
	By:  	 	 	 	 
	 	Authorized Signature 	 	 	 
	 	 	 	 	 



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Form of Reverse Side of Right Certificate




FORM OF ASSIGNMENT




(To be executed by the registered holder if such

holder desires to transfer the Right Certificate)





     FOR VALUE RECEIVED,                      hereby sells, assigns and transfers unto



 
(Please print name and address of transferee)




      

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



Dated:                     , ____




	 	 	 	 	 
	 	 	 
	 	  	
 	 
	 	 	Signature 	 
	Signature Guaranteed:  _____________________________ 	 	 	 



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CERTIFICATE





     The undersigned hereby certifies by checking the appropriate boxes that:




     (1) the Rights evidenced by this Right Certificate [   ] 
are [   ] are not being sold, assigned,
transferred, split up, combined or exchanged 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 Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.



Dated:                     , ____




	 	 	 	 	 
	 	 	 
	 	  	 	 
	 	 	Signature 	 
	 	 	 	 



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FORM OF ELECTION TO PURCHASE




(To be executed if holder desires to

exercise the Right Certificate)



To KB Home:





     The undersigned hereby irrevocably elects to exercise                      Rights represented by this
Right Certificate to purchase the one one-hundredths of a Preferred Share or other securities
issuable upon the exercise of such Rights and requests that certificates for such securities be
issued in the name of and delivered to:


Please insert social security
or other identifying number:






 
(Please print name and address)





 

If such number of Rights is not all the Rights evidenced by this Right Certificate, a new Right
Certificate for the balance remaining of such Rights will 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:  _____________________________ 	 	 	 



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CERTIFICATE





     The undersigned hereby certifies by checking the appropriate boxes that:



     (1) the Rights evidenced by this Right Certificate [ ] are [ ] are not being exercised 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 pursuant to 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 Right Certificate from any Person who is, was, or became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.



Dated:                     , ____




	 	 	 	 	 
	 	 	 
	 	  	 	 
	 	 	Signature 	 
	 	 	 	 
	 



NOTICE





     Signatures on the foregoing Form of Assignment and Form of Election to Purchase and in the
related Certificates must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.



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



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EXHIBIT B




SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK




     On January 22, 2009, the Board of Directors of KB Home adopted a rights plan and declared a
dividend of one preferred share purchase right for each outstanding share of KB Home’s Common
Stock, par value $1.00 per share. The dividend is payable on March 5, 2009 to our stockholders of
record on that date. The terms of the rights and the rights plan are set forth in a Rights
Agreement, dated as of January 22, 2009, by and between KB Home and Mellon Investor Services LLC,
as rights agent.



     Our Board adopted the rights plan in an effort to protect stockholder value by attempting to
protect against a possible limitation on our ability to use our deferred tax
assets in reducing potential future federal income tax obligations. We have experienced and continue
to experience substantial operating losses, and under the Internal Revenue Code and rules
promulgated by the Internal Revenue Service, we may “carry forward” these losses in certain
circumstances to offset any current and future earnings and thus reduce our federal income tax
liability, subject to certain requirements and restrictions. To the extent that the losses do not
otherwise become limited, we believe that we will be able to carry forward a significant amount of
losses, and therefore these losses could be a substantial asset to us. However, if we experience
an “ownership change,” as defined in Section 382 of the Internal Revenue Code, our ability to use
our deferred tax assets will be substantially limited, and the timing of the usage of could be
substantially delayed, which could significantly impair the value of that asset.



     In general terms, the rights plan imposes a significant penalty upon any person or group that
acquires 4.9% or more of our outstanding common stock without the prior approval of our Board. A
person or group that acquires a percentage of our common stock in excess of that threshold is
called an “acquiring person.” Any rights held by an acquiring person are void and may not be
exercised.



     This summary of rights provides a general description of the rights plan. Because it is only
a summary, this description should be read together with the entire rights plan, which we
incorporate in this summary by reference. We have filed the rights plan with the Securities and
Exchange Commission as an exhibit to our registration statement on Form 8-A. Upon written request,
we will provide a copy of the rights plan free of charge to any stockholder.


The Rights. Our Board authorized the issuance of one right per each outstanding share of our
common stock on March 5, 2009. If the rights become exercisable, each right would allow its holder
to purchase from us one one-hundredth of a share of our Series A Participating Cumulative Preferred
Stock for a purchase price of $85.00. Each fractional share of preferred stock would give the
stockholder approximately the same dividend, voting and liquidation rights as does one share of our
common stock. Prior to exercise, however, a right does not give its holder any dividend, voting or
liquidation rights.




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Exercisability. The rights will not be exercisable until the earlier of:





	•	 	10 days after a public announcement by KB Home that a person or group has become an
acquiring person; and
	 
	•	 	10 business days (or a later date determined by our Board) after a person or group begins a
tender or exchange offer that, if completed, would result in that person or group becoming an
acquiring person.




We refer to the date that the rights become exercisable as the “distribution date.” Until the
distribution date, our common stock certificates will also evidence the rights and will contain a
notation to that effect. Any transfer of shares of common stock prior to the distribution date
will constitute a transfer of the associated rights. After the distribution date, the rights will
separate from the common stock and be evidenced by right certificates, which we will mail to all
holders of rights that have not become null and void.




     Flip-in Event. After the distribution date, if a person or group already is or becomes an
acquiring person, all holders of rights, except the acquiring person, may exercise their rights
upon payment of the purchase price to purchase shares of our common stock (or other securities or
assets as determined by the Board) with a market value of two times the purchase price.



     Flip-over Event. After the distribution date, if a flip-in event has already occurred and KB
Home is acquired in a merger or similar transaction, all holders of rights except the acquiring
person may exercise their rights upon payment of the purchase price, to purchase shares of the
acquiring corporation with a market value of two times the purchase price of the rights.



     Rights may be exercised to purchase our preferred shares only after the distribution date
occurs and prior to the occurrence of a flip-in event as described above. A distribution date
resulting from the commencement of a tender offer or exchange offer described in the second bullet
point above could precede the occurrence of a flip-in event, in which case the rights could be
exercised to purchase our preferred shares. A distribution date resulting from any occurrence
described in the first bullet point above would necessarily follow the occurrence of a flip-in
event, in which case the rights could be exercised to purchase shares of common stock or other
securities as described above.


Expiration. The rights will expire on the earliest of (i) March 5, 2019, (ii) the time at which
the rights are redeemed, (iii) the time at which the rights are exchanged, (iv) the effective time
of the repeal of Section 382 of the Code or any successor statute if the Board determines that the
rights plan is no longer necessary for the preservation of our tax assets, (v) the first day of a
taxable year of the Company to which the Board determines that no NOLs or other tax assets may be
carried forward, and (v) March 5, 2010, if stockholder approval of the rights plan has not been
obtained prior to that date.



Redemption. Our Board may redeem all (but not less than all) of the rights for a redemption price
of $0.0005 per right at any time before the later of the distribution date and the date of the
first public announcement or disclosure by KB Home that a person or group has become an acquiring
person. Once the rights are redeemed, the right to exercise rights will terminate, and the only
right of the holders of rights will be to receive the redemption price. The redemption price will
be adjusted if we declare a stock split or issue a stock dividend on our common stock.




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Exchange. After the later of the distribution date and the date of the first public announcement
by KB Home that a person or group has become an acquiring person, but before an acquiring person
owns 50% or more of our outstanding common stock, our Board may exchange each right (other than
rights that have become null and void) for one share of common stock or an equivalent security.



Anti-Dilution Provisions. Our Board may adjust the purchase price of the preferred shares, the
number of preferred shares issuable and the number of outstanding rights to prevent dilution that
may occur as a result of certain events, including among others, a stock dividend, a stock split or
a reclassification of the preferred shares or our common stock. No adjustments to the purchase
price of less than 1% will be made.



Amendments. Before the time rights cease to be redeemable, our Board may amend or supplement the
rights plan without the consent of the holders of the rights, except that no amendment may decrease
the redemption price below $0.0005 per right. At any time thereafter, our Board may amend or
supplement the rights plan only to cure an ambiguity, to alter time period provisions, to correct
inconsistent provisions or to make any additional changes to the rights plan, but only to the
extent that those changes do not impair or adversely affect any rights holder and do not result in
the rights again becoming redeemable. The limitations on our Board’s ability to amend the rights
plan does not affect our Board’s power or ability to take any other action that is consistent with
its fiduciary duties, including without limitation accelerating or extending the expiration date of
the rights, making any amendment to the rights plan that is permitted by the rights plan or
adopting a new rights plan with such terms as our Board determines in its sole discretion to be
appropriate.




* * *





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