Exhibit 4.1


 






 


RIGHTS AGREEMENT


 


WALTER INDUSTRIES, INC.


 


and


 


MELLON INVESTOR SERVICES LLC


 


as Rights Agent


 


Dated as of November 21,
2008


 






 

















 


TABLE
OF CONTENTS


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  Section 1. Certain Definitions

  	
  1

  
	
   

  	
   

  
	
  Section 2. Appointment of Rights Agent

  	
  8

  
	
   

  	
   

  
	
  Section 3. Issuance of Right Certificates

  	
  9

  
	
   

  	
   

  
	
  Section 4. Form of Right Certificates

  	
  11

  
	
   

  	
   

  
	
  Section 5. Countersignature and Registration

  	
  11

  
	
   

  	
   

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

  	
  12

  
	
   

  	
   

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

  	
  13

  
	
   

  	
   

  
	
  Section 8. Cancellation and Destruction of Right Certificates

  	
  14

  
	
   

  	
   

  
	
  Section 9. Reservation and Availability of Shares of Common
  Stock

  	
  15

  
	
   

  	
   

  
	
  Section 10. Common Stock Record Date

  	
  16

  
	
   

  	
   

  
	
  Section 11. Adjustment of Purchase Price, Number and Kind of
  Shares and Number of Rights

  	
  16

  
	
   

  	
   

  
	
  Section 12. Certificate of Adjusted Purchase Price or Number of
  Shares

  	
  23

  
	
   

  	
   

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

  	
  23

  
	
   

  	
   

  
	
  Section 14. Fractional Rights and Fractional Shares

  	
  27

  
	
   

  	
   

  
	
  Section 15. Rights of Action

  	
  28

  
	
   

  	
   

  
	
  Section 16. Agreement of Right Holders

  	
  28

  
	
   

  	
   

  
	
  Section 17. Right Certificate Holder Not Deemed a Stockholder

  	
  29

  
	
   

  	
   

  
	
  Section 18. Concerning the Rights Agent

  	
  29

  
	
   

  	
   

  
	
  Section 19. Merger or Consolidation or Change of Rights Agent

  	
  30

  
	
   

  	
   

  
	
  Section 20. Duties of Rights Agent

  	
  30

  
	
   

  	
   

  
	
  Section 21. Change of Rights Agent

  	
  33

  
	
   

  	
   

  
	
  Section 22. Issuance of New Right Certificates

  	
  33

  



 


i

















 


	
   

  	
  Page

  
	
   

  	
   

  
	
  Section 23. Redemption

  	
  34

  
	
   

  	
   

  
	
  Section 24. Exchange

  	
  36

  
	
   

  	
   

  
	
  Section 25. Notice of Certain Events

  	
  37

  
	
   

  	
   

  
	
  Section 26. Notices

  	
  37

  
	
   

  	
   

  
	
  Section 27. Supplements and Amendments

  	
  38

  
	
   

  	
   

  
	
  Section 28. Successors

  	
  39

  
	
   

  	
   

  
	
  Section 29. Benefits of this Rights Agreement

  	
  39

  
	
   

  	
   

  
	
  Section 30. Determinations and Actions by the Board of Directors

  	
  39

  
	
   

  	
   

  
	
  Section 31. Severability

  	
  39

  
	
   

  	
   

  
	
  Section 32. Governing Law

  	
  40

  
	
   

  	
   

  
	
  Section 33. Counterparts

  	
  40

  
	
   

  	
   

  
	
  Section 34. Descriptive Headings

  	
  40

  
	
   

  	
   

  



 


EXHIBITS


 


Exhibit A – Form of Right
Certificate


 


Exhibit B – Form of Summary of
Rights


 


ii

















 


INDEX OF DEFINED
TERMS


 


	
   

  	
  Page

  
	
  Acquiring Person

  	
  1

  
	
  Affiliate

  	
  2

  
	
  Associate

  	
  2

  
	
  Authorized Officer

  	
  31

  
	
  Beneficial Owner

  	
  2

  
	
  Beneficial Ownership

  	
  2

  
	
  beneficially own

  	
  2

  
	
  Book-Entry

  	
  4

  
	
  Business Day

  	
  4

  
	
  close of business

  	
  4

  
	
  Common Stock

  	
  4

  
	
  Common Stock equivalents

  	
  17

  
	
  Company

  	
  1

  
	
  Current Value

  	
  18

  
	
  Definitive Acquisition Agreement

  	
  4

  
	
  Derivative Common Shares

  	
  4

  
	
  Distribution Date

  	
  9

  
	
  Exchange Act

  	
  2

  
	
  Exchange Ratio

  	
  35

  
	
  Exempted Entity

  	
  5

  
	
  Expiration Date

  	
  13

  
	
  Final Expiration Date

  	
  5

  
	
  fully financed

  	
  8

  
	
  invalidation time

  	
  17

  
	
  Nasdaq

  	
  5

  
	
  NYSE

  	
  5

  
	
  Original Rights

  	
  3

  
	
  Outside Meeting Date

  	
  35

  
	
  Person

  	
  5

  
	
  Principal Party

  	
  25

  
	
  Purchase Price

  	
  13

  
	
  Qualified Offer

  	
  5

  
	
  Record Date

  	
  1

  
	
  Redemption Date

  	
  13

  
	
  Redemption Price

  	
  34

  
	
  Redemption Resolution

  	
  34

  
	
  Right

  	
  1

  
	
  Right Certificate

  	
  9

  
	
  Rights Agent

  	
  1

  
	
  Rights Agreement

  	
  1

  
	
  Section 11(a)(ii) Trigger
  Date

  	
  18

  
	
  Securities Act

  	
  8

  
	
  Security

  	
  19

  
	
  Special Meeting

  	
  34

  
	
  Special Meeting Notice

  	
  34

  
	
  Special Meeting Period

  	
  34

  
	
  Spread

  	
  18

  
	
  Stock Acquisition Date

  	
  8

  
	
  Stockholder Approval

  	
  8

  
	
  Subsidiary

  	
  8

  
	
  Substitution Period

  	
  18

  
	
  Summary of Rights

  	
  10

  
	
  then outstanding

  	
  2

  
	
  Trading Day

  	
  20

  



 


iii

















 


RIGHTS AGREEMENT


 


Rights
Agreement, dated as of November 21, 2008 (as amended, supplemented or
otherwise modified from time to time, the “Rights Agreement”) between
Walter Industries, Inc., a Delaware corporation (the “Company”),
and Mellon Investor Services LLC, a New Jersey limited liability company, as
Rights Agent (the “Rights Agent”).


 


W I T N E S S E T H


 


WHEREAS,
the Board of Directors of the Company has on November 21, 2008 authorized
and declared a dividend of one share purchase right (a “Right”) for each
share of Common Stock (as defined below) of the Company outstanding as of the
close of business (as defined below) on November 21, 2008 (the “Record
Date”), each Right representing the right to purchase one share (subject to
adjustment as provided herein) of Common Stock, upon the terms and subject to
the conditions herein set forth, and the Board of Directors has further
authorized and directed the issuance of one Right (subject to adjustment as
provided herein) with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earlier of the Distribution Date
and the Expiration Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to shares of Common
Stock that shall become outstanding after the Distribution Date and prior to
the Expiration Date in accordance with Section 22.


 


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


 


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


 


(a)   “Acquiring
Person” shall mean any Person (as defined below) who or which shall be the
Beneficial Owner (as defined below) of shares of Common Stock having 20% or
more of the total voting power of all shares of Common Stock then outstanding,
but shall not include an Exempted Entity (as defined below); provided, however,
that if the Board of Directors of the Company determines in good faith that a
Person who would otherwise be an “Acquiring Person” has become such
inadvertently (including, without limitation, because (A) such Person was
unaware that it beneficially owned Common Stock having a percentage of the
total voting power of all shares of Common Stock then outstanding that would
otherwise cause such Person to be an “Acquiring Person” or (B) such Person
was aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Rights Agreement) and without any intention of changing or influencing control
of the Company, then such Person shall not be deemed to be or to have become an
“Acquiring Person” for any purposes of this Rights Agreement unless and until
such Person shall have failed to divest itself, as soon as practicable, if the
Company so requests, of Beneficial Ownership of a sufficient number of shares
of Common Stock (or, in the case solely of Derivative Common Shares (as such
term is hereinafter defined), such Person terminates the subject derivative transaction or transactions or
disposes of the subject derivative security or securities, or establishes to
the satisfaction of


 

















 


the Board of Director that such Derivative
Common Shares are not held with any intention of changing or influencing
control of the Company) so that such Person would no longer otherwise qualify
as an “Acquiring Person”. 
Notwithstanding the foregoing, (x) if a Person would be deemed an
Acquiring Person upon the adoption of this Rights Agreement because of
Beneficial Ownership of shares of Common Stock having 20% or more of the total
voting power of all shares of Common Stock then outstanding, such Person will
not be deemed an Acquiring Person for any purposes of this Rights Agreement
unless and until such Person acquires Beneficial Ownership of additional shares
of Common Stock after the date hereof (other than pursuant to a dividend or
distribution paid in shares of Common Stock or pursuant to a split or subdivision
of the outstanding Common Stock), unless upon becoming the Beneficial Owner of
such additional shares of Common Stock, such person is not then the Beneficial
Owner of shares of Common Stock having 20% or more of the total voting power of
all shares of Common Stock then outstanding, and (y) no Person shall be
deemed an “Acquiring Person” as the result of an acquisition of shares of
Common Stock by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person such that such Person beneficially owns shares of Common Stock
having 20% or more of the total voting power of all shares of Common Stock then
outstanding; provided, however, that if a Person shall become the
Beneficial Owner of shares of Common Stock having 20% or more of the total
voting power of all shares of Common Stock then outstanding by reason of such
share acquisitions by the Company and thereafter becomes the Beneficial Owner
of any additional shares of Common Stock (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common Stock or
pursuant to a split or subdivision of the outstanding Common Stock), then such
Person shall be deemed to be an “Acquiring Person,” subject to the proviso set
forth in the first sentence of this Section 1(a), unless upon the
consummation of the acquisition of such additional shares of Common Stock such
Person does not beneficially own shares of Common Stock having 20% or more of
the total voting power of all shares of Common Stock then outstanding.  The phrase “then outstanding”, when
used with reference to a Person’s Beneficial Ownership of securities of the
Company, shall mean the number of such securities then issued and outstanding
together with the number of such securities not then actually issued and
outstanding which such Person would be deemed to own beneficially hereunder.


 


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


 


(c)   A Person shall be deemed the “Beneficial
Owner” of, shall be deemed to have “Beneficial Ownership” of and
shall be deemed 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 Rights Agreement;


 


(ii)        which such Person or any of such Person’s
Affiliates or Associates has (A) the right to acquire (whether such right
is exercisable immediately or only after the


 


2

















 


passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), written or otherwise, or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own, (x) 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, (y) securities which
such Person has a right to acquire on the exercise of Rights at any time prior
to the time a Person becomes an Acquiring Person or (z) securities
issuable upon exercise of Rights from and after the time a Person becomes an
Acquiring Person if such Rights were acquired by such Person or any of such
Person’s Affiliates or Associates prior to the 
Distribution Date or pursuant to Section 3 or Section 22
hereof (the “Original Rights”) or pursuant to Section 11(i) or
Section 11(n) with respect to an adjustment to the Original Rights;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding, written or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own, any
security by reason of such agreement, arrangement or understanding if the
agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations promulgated under the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or


 


(iii)       which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person’s Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except to the extent contemplated by the
proviso to this Section 1(c)(ii)(B)) or disposing of such securities of
the Company;


 


(iv)       which are the subject of a derivative
transaction entered into by such Person, or derivative security acquired by such
Person, which gives such Person the economic equivalent of ownership of an
amount of such securities due to the fact that the value of the derivative is
explicitly determined by reference to the price or value of such securities,
without regard to whether (a) such derivative conveys any voting rights in
such securities to such Person, (b) the derivative is required to be, or
capable of being, settled through delivery of such securities, or (c) such
Person may have entered into other transactions that hedge the economic effect
of such derivative. In determining the number of shares of Common Stock deemed
Beneficially Owned by virtue of the operation of this Section 1(c)(iv),
the subject Person shall be deemed to Beneficially Own (without duplication)
the number of shares of Common Stock that are synthetically owned pursuant to
such derivative transactions or such derivative securities. Such shares of
Common Stock that are deemed so Beneficially Owned pursuant to the operation of
this Section 1(c)(iv) shall be referred to herein as “Derivative
Common Shares.”


 


3

















 


provided, however, that (x) that
nothing in this Section 1(c) shall cause a Person engaged in business
as an underwriter of securities to be the “Beneficial Owner” of, or to “beneficially
own,” any securities acquired through such Person’s participation in good faith
in a firm commitment underwriting until the expiration of forty days after the
date of such acquisition, and then only if such securities continue to be owned
by such Person at such expiration of forty days; (y) no Person who is an
officer, director, or employee of an Exempted Entity shall be deemed, solely by
reason of such Person’s status or authority as such, to be the “Beneficial
Owner” of, to have “Beneficial Ownership” of or to “beneficially own” any
securities that are “beneficially owned” (as defined in this Section 1(c)),
including, without limitation, in a fiduciary capacity, by an Exempted Entity
or by any other such officer, director or employee of an Exempted Entity; and (z) a
Person shall not be deemed the Beneficial Owner of, to have “Beneficial
Ownership” of or to beneficially own, shares of Common Stock (or securities
convertible into, exchangeable into or exercisable for Common Stock) held by
such Person in trust accounts, managed accounts and the like, or otherwise held
in a fiduciary capacity, that are Beneficially Owned by third Persons who are
not Affiliates or Associates of such Person.


 


(d)   “Book-Entry” shall mean an uncertificated
book-entry for the Company’s Common Stock.


 


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


 


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


 


(g)   “Common Stock” when used with
reference to the Company shall mean, the common stock, par value $0.01 of the
Company.  “Common Stock” when used with
reference to any Person other than the Company shall mean the capital stock
(or, in the case of an unincorporated entity, the equivalent equity interest)
with the greatest voting power of such other Person or, if such other Person is
a subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.


 


(h)   “Definitive Acquisition Agreement”
shall mean any agreement entered into by the Company that is conditioned on the
approval by the holders of not less than a majority of the voting power of the
outstanding shares of Common Shock, at a meeting of stockholders with respect
to (i) a merger, consolidation, recapitalization, reorganization, share
exchange, business combination or similar transaction involving the Company or (ii) the
acquisition in any manner, directly or indirectly, of more than 50% of the
consolidated total assets (including, without limitation, equity securities of
its subsidiaries) of the Company.


 


(i)    “Exempted Entity” shall mean (1) the
Company, (2) any Subsidiary (as defined below) of the Company (in the case
of subclauses (1) and (2) including, without limitation, in its
fiduciary capacity), (3) any employee benefit plan of the Company or of
any Subsidiary of the Company, or (4) any entity or trustee holding Common
Stock for or pursuant


 


4

















 


to the terms of any such plan or for the
purpose of funding any such plan or funding other employee benefits for
employees of the Company or of any Subsidiary of the Company.


 


(j)    “Final Expiration Date” shall mean
the earlier of (i) November 21, 2011, or (ii) November 21,
2009, if the Stockholder Approval has not been received by that date.


 


(k)   “Nasdaq” shall mean The Nasdaq Stock
Market’s National Market.


 


(l)    “NYSE” shall mean the New York Stock
Exchange, Inc.


 


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


 


(n)   “Qualified Offer” shall mean an offer
determined by a majority of the Independent Directors to have each of following
characteristics:


 


(i)           a fully-financed, all-cash tender offer, or an exchange
offer offering shares of common stock of the offeror, or a combination thereof,
in each such case for all of the outstanding shares of Common Stock at the same
per-share consideration;


 


(ii)         an offer that has commenced within the meaning of Rule 14d-2(a) under
the Exchange Act;


 


(iii)        an offer whose per-share offer price (A) exceeds the
greatest of (x) the highest reported market price per share of the Common
Stock, in the immediately preceding 24 months, (y) $90.75 per share and (z) the
highest price per share of the Common Stock paid by the Person making the
tender offer or any of its Affiliates during the 24 months immediately
preceding the commencement of the tender offer or prior to the expiration of
the tender offer, and (B) represents a reasonable premium over the current
market price for a period of thirty (30) trading days immediately preceding the
date on which the offer commenced, with, in the case of an offer that includes
shares of common stock of the offeror, such per-share offer price being
determined using the lowest reported market price for common stock of the
offeror during the five trading days immediately preceding and the five trading
days immediately following the commencement of such offer within the meaning of
Rule 14d-2(a) under the Exchange Act;


 


(iv)        an offer that, within twenty Business
Days after the commencement date of the offer (or within ten Business Days
after any increase in the offer consideration), does not result in a nationally
recognized investment banking firm retained by the Board of Directors of the
Company rendering an opinion to the Board of Directors of the Company that the
consideration being offered to the stockholders of the Company is either unfair
or inadequate;


 


(v)         if the offer includes shares of common
stock of the offeror, an offer pursuant to which (A) the offeror shall
permit representatives of the Company (including a nationally-recognized
investment banking firm retained by the Board of Directors of the


 


5

















 


Company and legal counsel and an accounting
firm designated by the Company) to have access to such offeror’s books,
records, management, accountants, financial advisors, counsel and any other
appropriate outside advisors for the purposes of permitting such
representatives to conduct a due diligence review of the offeror in order to
permit the Board of Directors of the Company to evaluate the offer and make an
informed decision and, if requested by the Board of Directors of the Company,
to permit such investment banking firm (relying as appropriate on the advice of
such legal counsel) to be able to render an opinion to the Board of Directors
of the Company with respect to whether the consideration being offered to the
stockholders of the Company is fair from a financial point of view and (B) within
ten Business Days after such representatives of the Company (including a
nationally-recognized investment banking firm retained by the Board of
Directors of the Company and legal counsel and an accounting firm designated by
the Company) shall have notified the Company and the offeror that it had
completed such due diligence review to its satisfaction (or, following
completion of such due diligence review, within ten Business Days after any
increase in the consideration being offered), such investment banking firm does
not render an opinion to the Board of Directors of the Company that the
consideration being offered to the stockholders of the Company is either unfair
or inadequate and such investment banking firm does not, after the expiration
of such ten Business Day period, render an opinion to the Board of Directors of
the Company that the consideration being offered to the stockholders of the
Company has become either unfair or inadequate based on a subsequent disclosure
or discovery of a development or developments that have had or are reasonably
likely to have an adverse effect on the value of the common stock of the
offeror;


 


(vi)       an offer that is subject to only the
minimum tender condition described below in Section 1(n)(ix) and
other customary terms and conditions, which conditions shall not include any
financing, funding or similar conditions or any requirements with respect to
the offeror or its agents being permitted any due diligence with respect to the
books, records, management, accountants or other outside advisors of the
Company;


 


(vii)      an offer pursuant to which the Company has
received an irrevocable written commitment of the offeror that the offer will
remain open for at least 120 Business Days and, if a Special Meeting is duly
requested in accordance with Section 23(b), for at least ten Business Days
after the date of the Special Meeting or, if no Special Meeting is held within
ninety Business Days following receipt of the Special Meeting Notice in
accordance with Section 23(b), for at least ten Business Days following
such ninety Business Day period;


 


(viii)     an offer pursuant to which the Company has
received an irrevocable written commitment of the offeror that, in addition to
the minimum time periods specified above in Section 1(n)(vii), the offer,
if it is otherwise to expire prior thereto, will be extended for at least
twenty Business Days after any increase in the consideration being offered or
after any bona fide alternative offer is commenced within the meaning of Rule 14d-2(a) under
the Exchange Act; provided, however, that such offer need not
remain open, as a result of Section 1(n)(vii) and this Section 1(n)(viii),
beyond (A) the time that any other offer satisfying the criteria for a
Qualified Offer is then required to be kept open under such Section 1(n)(vii) and
this Section 1(n)(viii) or (B) the expiration date, as


 


6
















 


such date may be extended by public
announcement (with prompt written notice to the Rights Agent) in compliance
with Rule 14e–1 under the Exchange Act, of any other tender offer for the
Common Stock with respect to which the Board of Directors of the Company has
agreed to redeem the Rights immediately prior to acceptance for payment of
Common Stock thereunder (unless such other offer is terminated prior to its
expiration without any Common Stock having been purchased thereunder) or (C) one
Business Day after the stockholder vote with respect to approval of any
Definitive Acquisition Agreement has been officially determined and certified
by the inspectors of elections;


 


(ix)           an offer that is conditioned on a
minimum of at least two-thirds of the outstanding shares of the Common Stock
not held by the Person making such offer (and such Person’s Affiliates and
Associates) being tendered and not withdrawn as of the offer’s expiration date,
which condition shall not be waivable;


 


(x)            an offer pursuant to which the
Company has received an irrevocable written commitment of the offeror to
consummate, as promptly as practicable upon successful completion of the offer,
a second step transaction whereby all shares of the Common Stock not tendered
into the offer will be acquired at the same consideration per share actually
paid pursuant to the offer, subject to stockholders’ statutory appraisal
rights, if any;


 


(xi)           an offer pursuant to which the
Company and its stockholders have received an irrevocable, legally binding written
commitment of the offeror that no amendments will be made to the offer to
reduce the consideration being offered or to otherwise change the terms of the
offer in a way that is adverse to a tendering stockholder;


 


(xii)          an offer (other than an offer consisting
solely of cash consideration) pursuant to which the Company has received the
written representation and certification of the offeror and the written
representations and certifications of the offeror’s Chief Executive Officer and
Chief Financial Officer, acting in such capacities, that (A) all facts
about the offeror that would be material to making an investor’s decision to
accept the offer have been fully and accurately disclosed as of the date of the
commencement of the offer within the meaning of Rule 14d-2(a) under
the Exchange Act, (B) all such new facts will be fully and accurately
disclosed on a prompt basis during the entire period during which the offer
remains open, and (C) all required Exchange Act reports will be filed by
the offeror in a timely manner during such period; and


 


(xiii)         if the offer includes non-cash
consideration, (A) the non-cash portion of the consideration offered must
consist solely of common stock of a Person that is a publicly-owned United
States corporation, (B) such common stock must be freely tradable and
listed or admitted to trading on either the NYSE or Nasdaq, (C) no
stockholder approval of the issuer of such common stock is required to issue
such common stock, or, if such approval is required, such approval has already
been obtained, (D) no Person (including such Person’s Affiliates and
Associates) beneficially owns 20% or more of the shares of common stock of the
issuer then outstanding at the time of commencement of the offer or at any time
during the term of the offer, (E) such issuer of


 


7

















 


such common stock has no other class of
voting stock or other voting securities and (F) the issuer of such common
stock meets the registrant eligibility requirements for use of Form S-3
for registering securities under the Securities Act, including the filing of
all required Exchange Act reports in a timely manner during the twelve calendar
months prior to the date of commencement of such offer.


 


For the purposes
of this definition of “Qualified Offer,” “fully financed” shall
mean that the offeror has sufficient funds for the offer and related expenses
which shall be evidenced by (1) firm, unqualified, legally binding,
written commitments from responsible financial institutions having the
necessary financial capacity, accepted by the offeror, to provide funds for
such offer subject only to customary terms and conditions (for the avoidance of
doubt it being understood that a provision relating to the sharing with a
financing source of any break-up or termination fee shall be considered
customary), (2) cash or cash equivalents then available to the offeror,
set apart and maintained solely for the purpose of funding the offer with an
irrevocable, legally binding, written commitment being provided by the offeror
to the Board of Directors of the Company to maintain such availability until
the offer is consummated or withdrawn or (3) a combination of the
foregoing; which evidence has been provided to the Company prior to, or upon, commencement
of the offer.  If an offer becomes a
Qualified Offer in accordance with this definition, but subsequently ceases to
be a Qualified Offer as a result of the failure at a later date to continue to
satisfy any of the requirements of this definition, such offer shall cease to
be a Qualified Offer and the provisions of Section 23(b) shall no
longer be applicable to such offer, provided that the actual redemption of the
Rights pursuant to Section 23(b) shall not have already occurred.


 


(o)   “Securities Act” shall mean the
Securities Act of 1933, as amended.


 


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


 


(q)   “Stockholder Approval” shall mean the
approval of this Rights Agreement by the affirmative vote of the holders of a
majority of the voting power of the outstanding shares of Common Stock of the
Company entitled to vote and that are present, or represented by proxy, and are
voted on the proposal to approve this Rights Agreement, at the meeting of
Stockholders of the Company duly held in accordance with applicable law.


 


(r)    “Subsidiary” of any Person shall mean
any corporation or other entity of which securities or other ownership
interests having ordinary voting power sufficient to elect a majority of the
board of directors or other persons performing similar functions are
beneficially owned, directly or indirectly, by such Person, and any corporation
or other entity that is otherwise controlled by such Person.


 


Section 2.       Appointment of Rights Agent.  The Company hereby appoints the Rights Agent
to act as rights agent for the Company in accordance with the terms and
conditions


 


8

















 


hereof, and the Rights Agent hereby accepts
such appointment.  The Company may from
time to time appoint such co-Rights Agents as it may deem necessary or
desirable upon ten days’ prior notice to the Rights Agent.  The Rights Agent shall have no duty to
supervise, and shall in no event be liable for the acts or omissions of any
such co-Rights Agent.


 


Section 3.       Issuance of Right Certificates.  (a)  Until the close of business on the
earlier of (i) the tenth day after the Stock Acquisition Date or (ii) the
tenth Business Day (or such later date as may be determined by action of the
Company’s Board of Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement by any Person (other than
an Exempted Entity) of, or of the first public announcement of the intention of
such Person (other than an Exempted Entity) to commence, a tender or exchange
offer the consummation of which would result in any Person (other than an
Exempted Entity) becoming the Beneficial Owner of shares of Common Stock having
20% or more of the total voting power of all shares of Common Stock then
outstanding (including, in the case of both clause (i) and (ii), any such
date which is after the date of this Rights Agreement and prior to the issuance
of the Rights) (the earlier of such dates being herein referred to as the “Distribution
Date”), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the balances indicated in the Book-Entries registered in the names of the
holders of Common Stock (which Book-Entries shall be deemed also to be
Book-Entries for Rights) and not by separate Book-Entries or Right Certificates
(as defined below) and the record holders of Common Stock represented by such
Book-Entries shall be the record holders of Rights represented thereby, and (y) the
Rights will be transferable only in connection with the transfer of Common
Stock.  Until the earlier of the
Distribution Date or the Expiration Date, the transfer on the registry books of
the Rights Agent of any Common Stock represented by a Book-Entry shall also
constitute the transfer of Rights associated with such shares of Common
Stock.  As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested and provided with all necessary information, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Stock as of the close of business on the Distribution Date (other than any
Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the
address of such holder shown on the records of the Company or the transfer
agent or registrar for the Common Stock, a Right Certificate, in substantially
the form of Exhibit A hereto (a “Right Certificate”), evidencing one Right
(subject to adjustment as provided herein) for each share of Common Stock so
held.  As of and after the Distribution
Date, the Rights will be evidenced solely by such Right Certificates, and the
Rights will be transferable only separately from the transfer of Common
Stock.  The Company shall promptly notify
the Rights Agent in writing upon the occurrence of the Distribution Date and,
if such notification is given orally, the Company shall confirm same in writing
on or prior to the third Business Day next following.  Until such notice is received by the Rights
Agent, the Rights Agent may presume conclusively for all purposes that the Distribution
Date has not occurred.


 


(b)   As promptly as practicable following the
Record Date, the Company will send a copy of a Summary of Rights to Purchase
Common Stock, in substantially the form of Exhibit B hereto (the “Summary
of Rights”), by electronic mail or such other means as the Company may
determine, to each record holder of Common Stock as of the close of business on
the Record Date (other than any Acquiring Person or any Associate or Affiliate
of any Acquiring Person), at the address (including any electronic mail
address) of such holder shown


 


9

















 


on the records of the Company; provided,
however, the Company will send a copy of the Summary of Rights by
first-class, postage-prepaid mail to each record holder who so requests upon
receipt of the electronic mail.  With
respect to shares of Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights associated with such shares will be evidenced by
the balances indicated in the Book-Entries registered in the names of the
holders of the Common Stock and not by separate Book-Entries or Rights
Certificates, and registered holders of Common Stock represented by such
Book-Entries shall also be registered holders of the associated Rights.  Until the Distribution Date (or, if earlier,
the Expiration Date), the transfer of any shares of Common Stock outstanding on
the Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Stock
represented thereby.


 


(c)   Rights shall be issued in respect of all
shares of Common Stock issued or disposed of (including, without limitation,
upon disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares) after the
Record Date but prior to the earlier of the Distribution Date and the
Expiration Date, or in certain circumstances provided in Section 22
hereof, after the Distribution Date.  If
confirmations or written notices are sent to holders of shares of Common Stock
in book-entry form, or if the Company issues certificated shares of Common
Stock (including, without limitation, upon transfer of outstanding Common
Stock, disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares) after the
Record Date but prior to the earlier of the Distribution Date and the
Expiration Date, such confirmations, written notices or certificates, as
applicable, shall have impressed on, printed on, written on or otherwise
affixed to them a legend in substantially the following form:


 


“The shares to which this
certificate or written notice relates also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement between Walter
Industries, Inc. and Mellon Investor Services LLC, as Rights Agent, dated
as of November 21, 2008, as the same may be amended, supplemented or
otherwise modified from time to time (the “Rights Agreement”), the terms
of which are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of Walter Industries, Inc.  Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by the shares to which this statement
relates.  Walter Industries, Inc.
will mail to the holder of shares to which this statement relates a copy of the
Rights Agreement without charge after receipt of a written request
therefor.  Under certain circumstances,
as set forth in the Rights Agreement, Rights owned by or transferred to any
Person who is or becomes an Acquiring Person or any Affiliate or Associate
thereof (as each such term is defined in the Rights Agreement) and certain
transferees thereof will become null and void and will no longer be
transferable.”


 


10

















 


With respect to shares of Common Stock in
Book-Entry form for which there has been sent a confirmation or written notice
containing the foregoing legend, until the earlier of (i) the Distribution
Date or (ii) the Expiration Date, the Rights associated with such shares
of Common Stock shall be evidenced by the balances indicated in the
Book-Entries registered in the names of the holders of the Common Stock and not
by separate Book-Entries or Rights Certificates, and registered holders of such
shares of Common Stock shall also be registered holders of the associated
Rights, and the transfer of any such shares of Common Stock shall also constitute
the transfer of the Rights associated with such shares of Common Stock. With
respect to certificated shares, if any, such certificates containing the
foregoing legend, until the earlier of (i) the Distribution Date or (ii) the
Expiration Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby.  In the
event that the Company purchases or otherwise acquires any Common Stock after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Stock shall be deemed cancelled and retired so that the Company
shall not be entitled to exercise any Rights associated with the shares of
Common Stock which are no longer outstanding.


 


Notwithstanding
this paragraph (c), the omission of a legend shall not affect the enforceability
of any part of this Rights Agreement or the rights of any holder of the Rights.


 


Section 4.       Form of Right Certificates.  The Right Certificates (and the forms of
election to purchase shares and of assignment to be printed on the reverse
thereof) shall be substantially in the form set forth in Exhibit A hereto
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
(but which do not affect the rights, duties or responsibilities of the Rights
Agent) and as are not inconsistent with the provisions of this Rights
Agreement, or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of NYSE or
of any other stock exchange or automated quotation system on which the Rights
may from time to time be listed, or to conform to usage.  Subject to the provisions of Sections 11 and
22 hereof, the Right Certificates shall entitle the holders thereof to purchase
such number of shares of Common Stock as shall be set forth therein at the
Purchase Price (as determined pursuant to Section 7), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.


 


Section 5.       Countersignature and Registration.  (a)  The Right Certificates shall be
executed on behalf of the Company by the Chief Executive Officer, the
President, any of the Vice Presidents or the Treasurer of the Company, either
manually or by facsimile signature, shall have affixed thereto the Company’s
seal or a facsimile thereof and shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.  The Right Certificates shall be countersigned
by the Rights Agent, either manually or by facsimile signature, and shall not
be valid for any purpose unless countersigned. 
In case any officer of the Company who shall have signed any of the
Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as
though the


 


11

















 


Person who signed such Right Certificates had
not ceased to be such officer of the Company; and any Right Certificate may be
signed on behalf of the Company by any Person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company
to sign such Right Certificate, although at the date of the execution of this
Rights Agreement any such Person was not such an officer.


 


(b)   Following the Distribution Date, receipt by
the Rights Agent of notice to that effect and all other relevant information
referred to in Section 3(a), the Rights Agent will keep or cause to be
kept, at an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses
of the respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates and the date of each of
the Right Certificates.


 


Section 6.       Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.  (a)  Subject to the provisions of this
Rights Agreement, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become null and void pursuant to Section 11(a)(ii) hereof
or that have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder thereof to purchase a like
number of shares of Common Stock (or, following such time, other securities,
cash or assets as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office or agency of the Rights Agent designated
for such purpose.  The Right Certificates
are transferable only on the registry books of the Rights Agent.  Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer
of any such surrendered Right Certificate or Certificates until the registered
holder thereof shall have (i) completed and signed the certificate
contained in the form of assignment set forth on the reverse side of each such
Right Certificate, (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof and of the Rights
evidenced thereby and the Affiliates and Associates of such Beneficial Owner
(or former Beneficial Owner) as the Company or the Rights Agent shall
reasonably request, and (iii) paid a sum sufficient to cover any tax or
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates as required by Section 9(e) hereof.  Thereupon the Rights Agent, subject to the
provisions of this Rights Agreement, shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested, registered in such name or names as may be designated
by the surrendering registered holder. 
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 Rights Agreement which requires the payment of
taxes or charges unless and until it is satisfied that all such taxes and/or
charges have been paid.


 


12

















 


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


 


(c)   Notwithstanding any other provision of this
Rights Agreement to the contrary, the Company and the Rights Agent may amend
this Rights Agreement to provide for uncertificated Rights in addition to or in
place of Rights evidenced by Rights Certificates.


 


Section 7.       Exercise of Rights, Purchase Price; Expiration Date of
Rights.  (a)  Except as
otherwise provided herein, the Rights shall become exercisable on the
Distribution Date, and thereafter the registered holder of any Right
Certificate may, subject to Section 11(a)(ii) hereof and except as
otherwise provided herein, exercise the Rights evidenced thereby in whole or in
part 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 or agency of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each share of
Common Stock (or other securities, cash or assets, as the case may be) as to
which the Rights are exercised, and an amount equal to any tax or charge
required to be paid under Section 9(e) hereof, by certified check,
cashier’s check, bank draft or money order payable to the order of the Company,
at any time which is both after the Distribution Date and at or prior to the
time (the “Expiration Date”) that is the earliest of (i) the close of
business on the Final Expiration Date, (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof (the “Redemption Date”) or (iii) the
time at which such Rights are exchanged as provided in Section 24
hereof.  Except for those provisions
herein which expressly survive the termination of this Rights Agreement, this
Rights Agreement shall terminate at such time as the Rights are no longer
exercisable hereunder.


 


(b)   The purchase price (the “Purchase Price”)
shall be initially $150 for each share of Common Stock purchasable upon the
exercise of a Right.  The Purchase Price
and the number of shares of Common Stock or other securities or property to be
acquired upon exercise of a Right shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) of
this Section 7.


 


(c)   Except as otherwise provided herein, upon
receipt of a Right Certificate representing exercisable Rights, with the form
of election to purchase properly completed and duly executed, accompanied by
payment of the aggregate Purchase Price for the number of shares of Common
Stock to be purchased and an amount equal to any applicable tax or charge
required to be paid under Section 9(e) hereof, in cash or by
certified check, cashier’s check, bank draft or money order payable to the
order of the Company, subject to Section 20(j) hereof, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer
agent


 


13

















 


of the Common Stock or make available if the Rights Agent is the transfer agent for the Common
Stock certificates (or make any entries in the book-entry account system
of the transfer agent) for the number of shares of Common Stock to be purchased
(and the Company hereby irrevocably authorizes each such transfer agent to
comply with all such requests), or (B) requisition from the depositary
agent appointed by the Company depositary receipts representing interests in
such number of shares of Common Stock as are to be purchased, in which case
certificates for the Common Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent (and the Company
hereby directs each such depositary agent to comply with such request), (ii) when
necessary to comply with this Rights Agreement, requisition from the Company
the amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts (or confirmation or written notice that an
entry has been made in the book-entry account system of the transfer agent),
cause the same to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be designated
by such holder and (iv) when necessary to comply with this Rights
Agreement, after receipt, promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.


 


(d)   Except as otherwise provided herein, in case
the registered holder of any Right Certificate shall exercise less than all the
Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent
to the exercisable Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.


 


(e)   Notwithstanding anything in this Rights
Agreement to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder of Rights
or other securities upon the occurrence of any purported transfer or exercise
of Rights pursuant to Section 6 hereof or this Section 7 unless such
registered holder shall have (i) properly completed and signed the
certificate contained in the form of assignment or election to purchase set
forth on the reverse side of the Right Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) thereof and the
Rights evidenced thereby and of the Affiliates and Associates of such
Beneficial Owner (or former Beneficial Owner) as the Company or the Rights
Agent shall reasonably request.


 


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


 


14

















 


Section 9.       Reservation and Availability of Shares of Common Stock.  (a)  The Company covenants and agrees
that it will cause to be reserved and kept available out of its authorized and
unissued shares of Common Stock or any shares of Common Stock held in its
treasury, the number of shares of Common Stock that will be sufficient to
permit the exercise in full of all outstanding Rights in accordance with this
Rights Agreement.


 


(b)   So long as the shares of Common Stock (and,
following the time that a Person becomes an Acquiring Person, other securities)
issuable and deliverable upon the exercise of Rights may be listed or admitted
to trading on the NYSE or listed on any other national securities exchange or
quotation system, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed or admitted to trading on the NYSE or listed on any other
exchange or quotation system upon official notice of issuance upon such
exercise.


 


(c)   From and after such time as the Rights become
exercisable, the Company shall use its best efforts, if then necessary to
permit the issuance of shares of Common Stock (and following the time that a
Person first becomes an Acquiring Person, other securities) upon the exercise
of Rights, to register and qualify such shares of Common Stock (and following
the time that a Person first becomes an Acquiring Person, other securities)
under the Securities Act and any applicable state securities or “Blue Sky” laws
(to the extent exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as possible after such
filing and keep such registration and qualifications effective until the
earlier of (x) the date as of which the Rights are no longer exercisable
for such securities and (y) the Expiration Date.  The Company may temporarily suspend, for a
period of time not to exceed ninety days, the exercisability of the Rights in
order to prepare and file a registration statement under the Securities Act and
permit it to become effective.  Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.  The Company shall notify the Rights Agent
whenever it makes a public announcement pursuant to this Section 9(c) and
give the Rights Agent a copy of such announcement.  Notwithstanding any provision of this Rights
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification or exemption in such
jurisdiction shall have been obtained and until a registration statement under
the Securities Act (if required) shall have been declared effective.


 


(d)   The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all shares of Common
Stock (and, following the time that a Person becomes an Acquiring Person, other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates therefor (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable shares.


 


(e)   The Company further covenants and agrees that
it will pay when due and payable taxes and charges which may be payable in
respect of the issuance or delivery of the Right Certificates or of any shares
of Common Stock (or other securities) upon the exercise of Rights.  The Company shall not, however, be required
to pay any transfer tax or charge which may be payable in respect of any
transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts (or entry in the
book-entry


 


15

















 


account system of the transfer agent) for the
Common Stock (or other securities) 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 or depositary receipts (or enter in the
book-entry account system of the transfer agent) for the Common Stock (or other
securities) upon the exercise of any Rights until any such tax or charge shall
have been paid (any such tax or charge being payable by that 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 satisfaction that no such tax or charge is
due.


 


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


 


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


 


(a)   (i)  In the event the Company shall at
any time after the date of this Rights Agreement (A) declare a dividend on
the Common Stock payable in shares of Common Stock, (B) subdivide the
outstanding shares of Common Stock, (C) combine the outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (D) issue
any shares of its capital stock in a reclassification of the shares of Common
Stock (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in 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, as the case may be,
and the number and kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive the aggregate number and kind of shares
of capital stock which, if such Right had been exercised immediately prior to
such date and at a time when the Common Stock transfer books of the Company
were open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.


 


16
















 


(ii)           Subject to Section 24 of this
Rights Agreement and except as otherwise provided in this Section 11(a)(ii) and
Section 11(a)(iii), in the event that any Person becomes an Acquiring
Person, each holder of a Right shall thereafter have the right to receive, upon
exercise thereof at a price equal to the then-current Purchase Price, in
accordance with the terms of this Rights Agreement, such number of shares of
Common Stock as shall equal the result obtained by (x) multiplying the
then-current Purchase Price by the number of shares of Common Stock for which a
Right is then exercisable and dividing that product by (y) 50% of the
then-current per share market price of the Common Stock (determined pursuant to
Section 11(d) hereof) on the date of the occurrence of such event; provided,
however, that the Purchase Price (as so adjusted) and the number of
shares of Common Stock so receivable upon exercise of a Right shall thereafter
be subject to further adjustment as appropriate in accordance with Section 11(f) hereof.  Notwithstanding anything in this Rights
Agreement to the contrary, however, from and after the time (the “invalidation
time”) when any Person first becomes an Acquiring Person, any Rights that
are beneficially owned by (x) any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), (y) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who becomes a transferee after the
invalidation time or (z) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who became a transferee prior to or concurrently with
the invalidation time pursuant to either (I) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom it has
any continuing agreement, arrangement or understanding, written or otherwise,
regarding the transferred Rights or (II) a transfer that the Board of
Directors has determined is part of a plan, arrangement or understanding,
written or otherwise, which has the purpose or effect of avoiding the provisions
of this paragraph, and subsequent transferees of such Persons, shall be null
and void without any further action and any holder of such Rights shall
thereafter have no rights whatsoever with respect to such Rights under any
provision of this Rights Agreement.  The
Company shall use all reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.  From and after the
invalidation time, no Right Certificate shall be issued pursuant to Section 3
or Section 6 hereof that represents Rights that are or have become null
and void pursuant to the provisions of this paragraph, 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 this paragraph shall be
cancelled.  From and after the occurrence
of an event specified in Section 13(a) hereof, any Rights that
theretofore have not been exercised pursuant to this Section 11(a)(ii) shall
thereafter be exercisable only in accordance with Section 13 and not
pursuant to this Section 11(a)(ii). 
The Company shall give the Rights Agent written notice of the identity
of any such Acquiring Person, Associate or Affiliate, or the nominee of any of
the foregoing, and the Rights Agent may rely on such notice in carrying out its
duties under this Rights Agreement and shall be deemed not to have any
knowledge of the identity of any such Acquiring Person, Associate or Affiliate,
or the nominee of any of the foregoing unless and until it shall have received
such notice.


 


(iii)          In the event that there shall be an
insufficient number of shares of Common Stock authorized but unissued (and
unreserved) to permit the exercise in full of


 


17

















 


the Rights in accordance with the foregoing
subparagraph (ii), the Board of Directors shall, with respect to such
deficiency, to the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party (A) determine
the excess of (x) the value of the shares of Common Stock issuable upon
the exercise of a Right in accordance with the foregoing subparagraph (ii) (the
“Current Value”) over (y) the then-current Purchase Price
multiplied by the number of shares of Common Stock for which a Right was
exercisable immediately prior to the time that the Acquiring Person became such
(such excess, the “Spread”), and (B) with respect to each Right
(other than Rights which have become null and void pursuant to Section 11(a)(ii)),
make adequate provision to substitute for the shares of Common Stock issuable
in accordance with subparagraph (ii) upon exercise of the Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction
in such Purchase Price, (3) other equity securities of the Company
(including, without limitation, shares or fractions of shares of preferred
stock which, by virtue of having dividend, voting and liquidation rights
substantially comparable to those of the shares of Common Stock, are deemed in
good faith by the Board of Directors to have substantially the same value as
the shares of Common Stock (such shares or fractions of shares of preferred
stock or other equity securities are hereinafter referred to as “Common
Stock equivalents”), (4) debt securities of the Company, (5) other
assets or (6) any combination of the foregoing, having a value which, when
added to the value of the shares of Common Stock actually issued upon exercise
of such Right, shall have an aggregate value equal to the Current Value (less
the amount of any reduction in such Purchase Price), where such aggregate value
has been determined by the Board of Directors upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board of
Directors; provided, however, if the Company shall not make
adequate provision to deliver value pursuant to clause (B) above within
thirty days following the date that the Acquiring Person became such (the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread.  If
within the thirty  day period referred to
above the Board of Directors shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, then, if the Board of Directors
so elects, such thirty day period may be extended to the extent necessary, but
not more than ninety days after the Section 11(a)(ii) Trigger Date,
in order that the Company may seek stockholder approval for the authorization
of such additional shares (such thirty day period, as it may be extended, is
hereinafter called the “Substitution Period”).  To the extent that the Company determines
that some action need be taken pursuant to the first and/or second sentence of
this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof
and the last sentence of this Section 11(a)(iii) hereof, that such
action shall apply uniformly to all outstanding Rights and (y) may suspend
the exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares and/or to decide
the appropriate form of distribution to be made pursuant to such first sentence
and to determine the value thereof.  In
the event of any such suspension, the Company shall


 


18

















 


issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii),
the value of the shares of Common Stock shall be the current per share market
price (as determined pursuant to Section 11(d) on the Section 11(a)(ii) Trigger
Date and the per share or fractional value of any Common Stock equivalent shall
be deemed to equal the current per share market price of the Common Stock (as
determined pursuant to Section 11(d)). 
The Board of Directors of the Company may, but shall not be required to,
establish procedures to allocate the right to receive shares of Common Stock
upon the exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).


 


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


 


(c)   In case the Company shall fix a record date
for the making of a distribution to all holders of the Common Stock (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Common Stock) or subscription rights or warrants (excluding
those referred to in


 


19

















 


Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then-current per share market
price of the Common Stock (determined pursuant to Section 11(d) hereof)
on such record date, less the fair market value (as determined in good faith by
the Board of Directors of the Company whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights
Agent) of the portion of such assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Common Stock, and the denominator of which shall be such current per share
market price of the Common Stock; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company to
be issued upon exercise of one Right. 
Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.


 


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


 


20

















 


faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent.


 


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


 


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


 


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


 


(h)   Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the
Purchase Price as a result of the calculations made in Section 11(b) and
(c), each Right outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted Purchase
Price, that number of shares of Common Stock (calculated to the nearest ten-thousandth
of a share) obtained by (i) multiplying (x) the number of shares of
Common Stock purchasable upon the exercise of a Right immediately prior to such
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.


 


(i)    The Company may elect on or after the date
of any adjustment of the Purchase Price pursuant to Sections 11(b) or 11(c) hereof
to adjust the number of Rights, in substitution for any adjustment in the
number of shares of Common Stock purchasable upon the exercise of a Right.  Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of
shares of Common Stock for which a Right was exercisable immediately prior to
such adjustment.  Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment


 


21

















 


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


 


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


 


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


 


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


 


(m)  Notwithstanding anything in this Section 11
to the contrary, the Company shall be entitled to make such adjustments in the
Purchase Price, in addition to those adjustments expressly required by this Section 11,
as and to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the


 


22

















 


Common Stock, issuance (wholly for cash) of
any shares of Common Stock at less than the current market price, issuance
(wholly for cash) of Common Stock or securities which by their terms are
convertible into or exchangeable for Common Stock, dividends on Common Stock
payable in shares of Common Stock or issuance of rights, options or warrants
referred to hereinabove in Section 11(b), hereafter made by the Company to
holders of its Common Stock shall not be taxable to such stockholders.


 


(n)   Notwithstanding anything in this Rights
Agreement to the contrary, in the event that at any time after the date of this
Rights Agreement and prior to the Distribution Date, the Company shall (i) declare
or pay any dividend on the Common Stock payable in Common Stock or (ii) effect
a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of a dividend payable in Common
Stock) into a greater or lesser number of shares of Common Stock, then in any
such case, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter, shall be proportionately
adjusted so that the number of Rights thereafter associated with each share of
Common Stock following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of Common Stock
immediately prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately following the occurrence of
such event.


 


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


 


Section 12.     Certificate of Adjusted Purchase Price or Number of Shares.  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 13 hereof, the Company shall promptly (a) prepare a certificate setting
forth such adjustment or describing such event, and a brief, reasonably
detailed statement of the facts, computations and methodology accounting for
such adjustment, (b) file with the Rights Agent and with each transfer
agent for the Common Stock a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section 25
hereof (if so required under Section 25 hereof) and Section 26
hereof.  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.


 


Section 13.     Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power.  (a)  In the
event, directly or indirectly, at any time after any Person has become an
Acquiring Person, (i) the Company shall merge with and into any other
Person (other than one


 


23

















 


or more of its wholly-owned Subsidiaries), (ii) any
Person (other than one or more of its wholly-owned Subsidiaries), shall consolidate
with the Company, or any Person (other than one or more of its wholly-owned
Subsidiaries), shall merge with and into the Company and the Company shall be
the continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the Common Stock shall be changed into or exchanged
for stock or other securities of any other Person (or of the Company) or cash
or any other property, or (iii) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one or more transactions, assets or earning power aggregating to 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person (other than the Company or one or more of its
wholly-owned Subsidiaries), then, and in each such case, proper provision shall
be made so that:


 


(A) each holder of record
of a Right (other than Rights which have become null and void pursuant to Section 11(a)(ii))
shall thereafter have the right to receive, upon the exercise thereof at a
price equal to the then-current Purchase Price multiplied by the number of
shares of Common Stock for which a Right was exercisable (whether or not such
Right was then exercisable) immediately prior to the time that any Person first
became an Acquiring Person (each as subsequently adjusted thereafter pursuant
to Section 11(a)(i), 11(b), 11(c), 11(f), 11(h), 11(i) and 11(m)), in
accordance with the terms of this Rights Agreement, such number of validly
issued, fully paid and non-assessable and freely tradeable shares of Common
Stock of the Principal Party (as defined below) not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be
equal to the result obtained by (1) multiplying the then-current Purchase
Price by the number of shares of Common Stock for which a Right was exercisable
immediately prior to the time that any Person first became an Acquiring Person
(as subsequently adjusted thereafter pursuant to Section 11(a)(i), 11(b),
11(c), 11(f), 11(h), 11(i) and 11(m)) and (2) dividing that product
by 50% of the then-current per share market price of the Common Stock of such
Principal Party (determined pursuant to Section 11(d) hereof) on the
date of consummation of such consolidation, merger, sale or transfer; provided
that the Purchase Price and the number of shares of Common Stock of such
Principal Party issuable upon exercise of each Right shall be further adjusted
as provided in Section 11(f) of this Rights Agreement to reflect any
events occurring in respect of such Principal Party after the date of such
consolidation, merger, sale or transfer;


 


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


 


(C) the term “Company” as
used herein shall thereafter be deemed to refer to such Principal Party; and


 


(D) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of its shares of its Common Stock) in connection with such
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock thereafter deliverable upon
the exercise of the Rights; provided that, upon the subsequent
occurrence of any consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party, each holder of a
Right shall thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price as provided in this Section 13(a), such
cash, shares, rights, warrants and other property which such


 


24

















 


holder would have been entitled to receive
had such holder, at the time of such transaction, owned the Common Stock of the
Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a),
and such Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.


 


(b)   “Principal Party” shall mean:


 


(i)          in the case of any transaction described in clauses (i) or
(ii) of the first sentence of Section 13(a) hereof:  (A) the Person that is the issuer of the
securities into which the shares of Common Stock are converted in such merger
or consolidation, or, if there is more than one such issuer, the issuer of the
shares of Common Stock of which have the greatest aggregate market value of
shares outstanding, or (B) if no securities are so issued, (x) the
Person that is the other party to the merger, if such Person survives said
merger, or, if there is more than one such Person, the Person the shares of
Common Stock of which have the greatest aggregate market value of shares
outstanding or (y) if the Person that is the other party to the merger
does not survive the merger, the Person that does survive the merger (including
the Company if it survives) or (z) the Person resulting from the
consolidation; and


 


(ii)         in the case of any transaction described in clause (iii) of
the first sentence in Section 13(a) hereof, the Person that is the
party receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions, or, if each Person that is a
party to such transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, whichever of such
Persons is the issuer of Common Stock having the greatest aggregate market
value of shares outstanding;


 


provided, however,
that in any such case described in the foregoing clause (b)(i) or (b)(ii),
if the Common Stock of such Person is not at such time or has not been
continuously over the preceding 12-month period registered under Section 12
of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, the term “Principal Party” shall refer to such other Person, or (2) if
such Person is a Subsidiary, directly or indirectly, of more than one Person,
and the Common Stock of all of such persons have been so registered, the term “Principal
Party” shall refer to whichever of such Persons is the issuer of Common Stock
having the greatest aggregate market value of shares outstanding, or (3) if
such Person is owned, directly or indirectly, by a joint venture formed by two
or more Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in clauses (1) and (2) above shall apply to
each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to
the total of such interests.


 


(c)   The Company shall not consummate any
consolidation, merger, sale or transfer referred to in Section 13(a) hereof
unless prior thereto the Company and the Principal


 


25

















 


Party involved therein shall have executed
and delivered to the Rights Agent an agreement confirming that the requirements
of Sections 13(a) and (b) hereof shall promptly be performed in
accordance with their terms and that such consolidation, merger, sale or
transfer of assets shall not result in a default by the Principal Party under
this Rights Agreement as the same shall have been assumed by the Principal
Party pursuant to Sections 13(a) and (b) hereof and providing that,
as soon as practicable after executing such agreement pursuant to this Section 13,
the Principal Party will:


 


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


 


(ii)           use its best efforts, if the Common
Stock of the Principal Party shall be listed or admitted to trading on the NYSE
or on another national securities exchange, to list or admit to trading (or
continue the listing of) the Rights and the securities purchasable upon exercise
of the Rights on the NYSE or such securities exchange, or, if the Common Stock
of the Principal Party shall not be listed or admitted to trading on the NYSE
or a national securities exchange, to cause the Rights and the securities
receivable upon exercise of the Rights to be reported by such other system then
in use;


 


(iii)          deliver to holders of the Rights
historical financial statements for the Principal Party which comply in all
respects with the requirements for registration on Form 10 (or any successor
form) under the Exchange Act; and


 


(iv)          obtain waivers of any rights of first
refusal or preemptive rights in respect of the Common Stock of the Principal
Party subject to purchase upon exercise of outstanding Rights.


 


(d)   In case the Principal Party has a provision
in any of its authorized securities or in its certificate of incorporation or
by-laws or other instrument governing its affairs, which provision would have
the effect of (i) causing such Principal Party to issue (other than to
holders of Rights pursuant to this Section 13), in connection with, or as
a consequence of, the consummation of a transaction referred to in this Section 13,
shares of Common Stock or Common Stock equivalents of such Principal Party at
less than the then-current market price per share thereof (determined pursuant
to Section 11(d) hereof) or securities exercisable for, or
convertible into, Common Stock or Common Stock equivalents of such Principal
Party at less than such then-current market price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of
the Common Stock of such Principal Party pursuant to the provisions of Section 13,
then, in such event, the Company hereby agrees with each holder of Rights that
it shall not consummate any such transaction unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent
a supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed,


 


26
















 


so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.


 


(e)   The Company covenants and agrees that it shall not, at any time
after a Person first becomes an Acquiring Person enter into any transaction of
the type contemplated by Sections 13(a)(i)-(iii) hereof if (x) at the
time of or immediately after such consolidation, merger, sale, transfer or
other transaction there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, (y) prior
to, simultaneously with or immediately after such consolidation, merger, sale,
transfer or other transaction, the stockholders of the Person who constitutes,
or would constitute, the Principal Party for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (z) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights.


 


Section 14.     Fractional Rights and Fractional Shares.  (a)  The Company shall not be required
to issue fractions of Rights (except prior to the Distribution Date in
accordance with Section 11(n) hereof) or to distribute Right
Certificates which evidence fractional Rights. 
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. 
For the purposes of this Section 14(a), the current market value of
a whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable.  The closing price
for any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported by (w) the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NYSE or, (x) if the Rights are not listed or admitted to
trading on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or, (y) if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by Nasdaq
or such other system then in use or, (z) if on any such date the Rights
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company.  If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be
used.


 


(b)   The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock upon the exercise or exchange of Rights.  In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of the Right
Certificates at the time such Rights are exercised or exchanged for shares of
Common Stock as herein provided an amount in cash equal to the same fraction of
the current market value of a whole share of Common Stock (as determined in
accordance with Section 11(d) hereof) for the Trading Day immediately
prior to the date of such exercise or exchange.


 


27

















 


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


 


(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 Rights 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.


 


Section 15.     Rights of Action.  All rights of action in respect of this
Rights Agreement, excepting the rights of action given to the Rights Agent
under Section 18 and Section 20 hereof, are vested in the respective
registered holders of the Right Certificates (and, prior to the Distribution
Date, the registered holders of the Common Stock); and any registered holder of
any Right Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the Rights Agent or of the holder of any other
Right Certificate (or, prior to the Distribution Date, of the Common Stock), on
such holder’s own behalf and for such holder’s own benefit, may enforce, and
may institute and maintain any suit, action or proceeding against the Company
to enforce, or otherwise act in respect of, such holder’s right to exercise the
Rights evidenced by such Right Certificate (or, prior to the Distribution Date,
such Common Stock) in the manner provided in such Right Certificate and in this
Rights Agreement.  Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach by the Company of this Rights Agreement and will
be entitled to specific performance of the obligations under, and injunctive
relief against actual or threatened violations by the Company of the
obligations of any Person subject to, this Rights Agreement.


 


Notwithstanding
anything in this Rights Agreement to the contrary, neither the Company nor the
Rights Agent shall have any liability to any holder of a Right or other Person
as a result of the Company’s or the Rights Agent’s inability to perform any of
their respective obligations under this Rights Agreement by reason of any
preliminary or permanent injunction or other order, judgment, decree or ruling
(whether interlocutory or final) issued by a court 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.


 


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


 


(i)            prior to the Distribution Date, the Rights shall be
evidenced by the Book-Entries representing shares of Common Stock registered in
the name of the holders of 


 


28

















 


Common Stock, which Book-Entries
representing shares of Common Stock shall also constitute certificates for
Rights, and not by separate Rights Certificates, and each Right will be
transferable only in connection with the transfer of shares of the Common
Stock;


 


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


 


(iii)          the Company and the Rights Agent may deem and treat the
Person in whose name the Right Certificate (or,
prior to the Distribution Date, the Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Right Certificates or the Common
Stock certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent, subject
to Section 7(e) hereof, shall be affected by any notice to the
contrary.


 


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


 


Section 18.     Concerning the Rights Agent.  (a)  The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the preparation, delivery,
amendment, administration and execution of this Rights Agreement and the
exercise and performance of its duties hereunder.  The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense (including,
without limitation, the reasonable fees and expenses of legal counsel),
incurred without gross negligence, bad faith or willful misconduct on the part
of the Rights Agent (which gross negligence, bad faith or willful misconduct
must be determined by a final, non-appealable order, judgment, decree or ruling
of a court of competent jurisdiction), for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance, administration,
exercise and performance of its duties under this Rights Agreement.  The costs and expenses incurred in enforcing
this right of indemnification shall be paid by the Company.  The provisions of this Section 18 and Section 20
below shall survive the termination of this Rights Agreement, the exercise or
expiration of the Rights and the resignation, replacement or removal of the
Rights Agent.


 


29

















 


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


 


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


 


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


 


Section 20.     Duties of Rights Agent.  The Rights Agent undertakes to perform only
the duties and obligations expressly imposed by this Rights 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,
shall be bound:


 


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


 


30

















 


(b)   Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including without limitation, the identity of an Acquiring Person
and the determination of the current per share market price of any security) 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 Chief
Executive Officer, President, any Vice President, the Treasurer or the
Secretary of the Company (each, an “Authorized Officer”) and delivered
to the Rights Agent; and such certificate shall 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 under the provisions of this Rights Agreement in reliance upon such
certificate.


 


(c)   The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct
(which gross negligence, bad faith or willful misconduct must be determined by
a final, non-appealable order, judgment, decree or ruling 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
Rights Agreement will be limited to the amount of annual fees paid by the
Company to the Rights Agent.


 


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


 


(e)   The Rights Agent shall not have any liability for or be under any
responsibility in respect of the validity of this Rights Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Rights
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming null
and void pursuant to Section 11(a)(ii) hereof) or any change or
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, 23 and 24, or the ascertaining of
the existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right Certificates after
receipt of the certificate described in Section 12 hereof, upon which the
Rights Agent may rely); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or other securities to be issued pursuant to this Rights
Agreement or any Right Certificate or as to whether any shares of Common Stock
or other securities will, when issued, be validly authorized and issued, fully
paid and nonassessable.


 


(f)    The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other 


 


31

















 


acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Rights Agreement.


 


(g)   The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be one of the Authorized
Officers, and to apply to such Authorized Officers for advice or instructions
in connection with its duties, such instructions shall be full authorization
and protection to the Rights Agent and the Rights Agent shall not be liable for
or in respect of any action taken, suffered or omitted by it in accordance with
instructions of any such Authorized 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 Authorized Officer.  Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken, suffered or omitted by
the Rights Agent under this Rights Agreement and the date on and/or after which
such action shall be taken or suffered or such omission shall be
effective.  The Rights Agent shall not be
liable for any action taken or suffered by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any Authorized Officer of the Company actually receives
such application, unless any such Authorized Officer shall have consented in
writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the
action to be taken, suffered or omitted.


 


(h)   The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though the Rights
Agent were not Rights Agent under this Rights Agreement.  Nothing herein shall preclude the Rights Agent
or any such stockholder, affiliate, director, officer or employee from acting
in any other capacity for the Company or for any other Person.


 


(i)    The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself (through
its directors, officers and employees) or by or through its attorneys or
agents, and the Rights Agent shall not be answerable or accountable for any
act, default, neglect or misconduct of any such attorneys or agents or for any
loss to the Company or any other Person resulting from any such act, default,
neglect or misconduct, absent gross negligence, bad faith or willful misconduct
in the selection and continued employment thereof (which gross negligence, bad
faith or willful misconduct must be determined by a final, non-appealable
order, judgment, decree or ruling of a court of competent jurisdiction).


 


(j)    If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse
thereof, as the case may be, has not been completed to certify the holder is
not an Acquiring Person (or an Affiliate or Associate thereof) or a 


 


32

















 


transferee thereof, the Rights Agent
shall not take any further action with respect to such requested exercise or
transfer without first consulting with the Company.


 


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


 


Section 21.     Change of Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Rights Agreement
upon thirty days’ notice in writing mailed to the Company and to each transfer
agent of the Common Stock known to the Rights Agent by registered or certified
mail, and, following the Distribution Date, to the holders of the Right
Certificates by first-class mail.  The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
days’ notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Stock by
registered or certified mail, and, following the Distribution Date, to the
holders of the Right Certificates by first-class mail.  If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of
thirty days after giving notice of such removal or after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (A) a Person organized and
doing business under the laws of the United States or any State thereof, which
is authorized under such laws to exercise 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 Person described in
clause (A) of this sentence.  After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock, and,
following the Distribution Date, mail a notice thereof in writing to the
registered holders of the Right Certificates. 
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.


 


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


 


33

















 


with
the issuance or sale of Common Stock following the Distribution Date and prior
to the Expiration Date, the Company may with respect to shares of Common Stock
so issued or sold pursuant to (i) the exercise of stock options, (ii) under
any employee plan or arrangement, (iii) the exercise, conversion or
exchange of securities, notes or debentures issued by the Company or (iv) a
contractual obligation of the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale.


 


Section 23.     Redemption.  (a)  The Board of Directors of the
Company may, at any time prior to such time as any Person first becomes an Acquiring
Person, redeem all but not less than all the then-outstanding Rights at a
redemption price of $0.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (the “Redemption Price”).  The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish.  The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the
current market price of the Common Stock at the time of redemption as
determined pursuant to Section 11(d) hereof) or any other form of
consideration deemed appropriate by the Board of Directors.


 


(b)   If the Company receives a Qualified Offer and the Board of
Directors of the Company has not redeemed the outstanding Rights or exempted
such offer from the terms of this Rights Agreement or called a special meeting
of stockholders for the purpose of voting on whether or not to exempt such
Qualified Offer from the terms of this Rights Agreement, in each case by the
end of the ninety Business Days following the commencement of such Qualified
Offer, and if the Company receives, not earlier than ninety Business Days nor
later than 120 Business Days following the commencement of such Qualified
Offer, a written notice complying with the terms of this Section 23(b) (the
“Special Meeting Notice”), properly executed by the holders of record
outstanding shares of Common Stock having 10% or more of the total voting power
of all shares of Common Stock then outstanding (or their duly authorized proxy)
(excluding shares of Common Stock beneficially owned by the Person making the
Qualified Offer and such Person’s Affiliates and Associates), directing the
Board of Directors of the Company to submit to a vote of stockholders at a
special meeting of the stockholders of the Company (a “Special Meeting”)
a resolution authorizing the redemption of all, but not less than all, of the
then outstanding Rights at the Redemption Price (the “Redemption Resolution”),
then the Board of Directors of the Company shall take such actions as are
necessary or desirable to cause the Redemption Resolution to be submitted to a
vote of stockholders within ninety Business Days following receipt by the
Company of the Special Meeting Notice (the “Special Meeting Period”),
including by including a proposal relating to adoption of the Redemption
Resolution in the proxy materials of the Company for the Special Meeting;
provided, however, that if the Company, at any time during the Special Meeting
Period and prior to a vote on the Redemption Resolution, enters into a
Definitive Acquisition Agreement, the Special Meeting Period may be extended
(and any Special Meeting called in connection therewith may be cancelled) if
the Redemption Resolution will be separately submitted to a vote at the same
meeting as the Definitive Acquisition Agreement.  For purposes of a Special Meeting Notice, to
the full extent permitted by applicable law, the record date for determining
eligible holders of record of the Common Stock shall be the ninetieth Business
Day following the commencement of a Qualified Offer. 


 


34

















 


Any Special Meeting Notice must be
delivered to the Secretary of the Company at the principal executive offices of
the Company and must set forth, as to the stockholders of record executing such
Special Meeting Notice, (i) the name and address of such stockholders, as
they appear on the Company’s books and records, (ii) the number of shares
of Common Stock that are owned of record by each of such stockholders and (iii) in
the case of Common Stock that is owned beneficially by another Person, an
executed certification by the holder of record that such holder has executed
such Special Meeting Notice only after obtaining instructions to do so from
such beneficial owner.  Subject to the
requirements of applicable law, the Board of Directors of the Company may take
a position in favor of or opposed to the adoption of the Redemption Resolution,
or no position with respect to the Redemption Resolution, as it determines to
be appropriate in the exercise of its fiduciary duties.  In the event that (A) no Person has
become an Acquiring Person prior to the effective date of redemption referred
to below in this sentence, (B) the Qualified Offer continues to be a
Qualified Offer prior to the last day of the Special Meeting Period (the “Outside
Meeting Date”) and (C) either (1) the Special Meeting is not held
on or prior to the ninetieth Business Day following receipt of the Special
Meeting Notice or (2) at the Special Meeting at which a quorum is present,
the holders of shares of Common Stock outstanding as of the record date for the
Special Meeting selected by the Board of Directors of the Company (excluding
shares of Common Stock beneficially owned by the Person making the Qualified
Offer and such Person’s Affiliates and Associates) having a majority of the
total voting power of all such shares of Common Stock, shall vote in favor of
the Redemption Resolution, then all of the Rights shall be deemed redeemed at
the Redemption Price by such failure to hold the Special Meeting or as a result
of the adoption of the Redemption Resolution by the stockholders of the Company
(or the Board of Directors of the Company shall take such other action as may
be necessary to prevent the existence of the Rights from interfering with the
consummation of the Qualified Offer), such redemption to be effective, as the
case may be, (x) as of the close of business on the Outside Meeting Date
if a Special Meeting is not held on or prior to such date or (y) if a
Special Meeting is held on or prior to the Outside Meeting Date, as of the date
on which the results of the vote adopting the Redemption Resolution at the
Special Meeting are certified as official by the appointed inspectors of
election for the Special Meeting.


 


(c)   Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to Section 23(a) or the
effectiveness of a redemption of the Rights pursuant to Section 23(b), in
either case, without any further action and without any notice, the right to
exercise the Rights will terminate and each Right will thereafter represent
only the right to receive the Redemption Price. 
The Company shall promptly give public notice of any such redemption
(with prompt written notice to the Rights Agent); provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption.  Within
ten days after such action of the Board of Directors ordering the redemption of
the Rights pursuant to Section 23(a) or Section 23(b), the
Company shall mail a notice of redemption to all the holders of the
then-outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of redemption
shall state the method by which the payment of the Redemption Price will be
made. The failure to give notice required by this Section 23(c) or
any defect therein shall not affect the validity of the action taken by the
Company.


 


35

















 


(d)   In the case of a redemption under Section 23(a) hereof,
the Company may, at its option, discharge all of its obligations with respect
to the Rights by (i) issuing a press release announcing the manner of
redemption of the Rights and (ii) mailing payment of the Redemption Price
to the registered holders of the Rights at their last addresses as they appear
on the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent of the Common Stock, and upon such
action, all outstanding Rights Certificates shall be null and void without any
further action by the Company.


 


Section 24.     Exchange.  (a)  The Board of Directors of the
Company may, at its option, at any time after any Person first becomes an
Acquiring Person, exchange all or part of the then-outstanding and exercisable
Rights (which shall not include Rights that have not become effective or that
have become null and void pursuant to the provisions of Section 11(a)(ii) hereof)
for shares of Common Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such amount per Right
being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after an
Acquiring Person becomes the Beneficial Owner of shares of Common Stock having
50% or more of the total voting power of all shares of Common Stock then
outstanding.  From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights
that theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with Section 13 and may not
be exchanged pursuant to this Section 24(a).  The exchange of the Rights by the Board of
Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.


 


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


 


(c)   The Company may at its option substitute and, in the event that
there shall not be sufficient shares of Common Stock issued but not outstanding
or authorized but unissued (and unreserved) to permit an exchange of Rights as
contemplated in accordance with this Section 24, the Company may, in its
discretion, take such action as may be necessary


 


36
















 


to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.  In the event that the Company shall determine
not to take such action or shall, after good faith effort, be unable to take
such action as may be necessary to authorize such additional shares of Common
Stock, the Company shall substitute, to the extent of such insufficiency, for
each share of Common Stock that would otherwise be issuable upon exchange of a
Right, other securities of the Company or cash, having an aggregate value equal
to the current per share market price of one share of Common Stock (determined
pursuant to Section 11(d) hereof) as of the date of issuance or
payment of such securities or cash.


 


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


 


(b)   In case any event described in Section 11(a)(ii) or Section 13
shall occur then the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate (or if occurring prior to the Distribution
Date, the holders of the Common Stock) in accordance with Section 26
hereof, a notice of the occurrence of such event, which notice shall describe
such event and the consequences of such event to holders of Rights under Section 11(a)(ii) and
Section 13 hereof.


 


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


 


Walter Industries, Inc.


4211 W. Boy Scout Boulevard


Tampa, Florida 33607 


Attention:  General Counsel


 


37

















 


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


 


Mellon Investor Services LLC


480 Washington Boulevard, 29th
Floor


Jersey City, NJ 07310 


Attention:  Kayur D. Patel


 


with a copy to:


 


Mellon Investor Services LLC


480 Washington Boulevard


Jersey City, NJ 07310


Attention:  General Counsel


Facsimile:  (201) 680-4610


 


Notices or demands authorized by this Rights Agreement to be given or
made by the Company or the Rights Agent to the holder of any Right Certificate
shall be sufficiently given or made if sent by next-day courier or first-class
mail, postage prepaid, addressed to such holder at the address of such holder
as shown on the registry books of the Company.


 


Section 27.     Supplements and Amendments.  Except as otherwise provided in this Section 27,
for so long as the Rights are then redeemable, the Company (by action of its
Board of Directors) may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of
this Rights Agreement in any respect without the approval of any holders of the
Rights.  At any time when the Rights are
no longer redeemable, except as otherwise provided in this Section 27, the
Company (by action of its Board or Directors) may, and the Rights Agent shall,
if the Company so directs, supplement or amend this Rights Agreement without
the approval of any holders of Rights in order to (i) cure any ambiguity, (ii) correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen
any time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or 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 an
Affiliate or Associate of an Acquiring Person, or any person whose Rights have
become null and void pursuant to Section 11(a)(ii)), and no such amendment
may cause the Rights again to become redeemable or cause this Rights Agreement
again to become amendable other than in accordance with this sentence.  Notwithstanding anything contained in this
Rights Agreement to the contrary, no supplement or amendment shall be made
which decreases the Redemption Price. 
Upon the delivery of a certificate from an appropriate officer of the
Company and, if requested by the Rights Agent, an opinion of counsel, that
states that the proposed 


 


38

















 


supplement
or amendment complies with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. 
Notwithstanding anything contained in this Rights Agreement to the
contrary, 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 Rights Agreement.  Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.


 


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


 


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


 


Section 30.     Determinations and Actions by the Board
of Directors.  The Board of Directors
of the Company shall have the exclusive power and authority to administer this
Rights Agreement and to exercise the 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 Rights Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Rights Agreement and (ii) make all determinations deemed necessary or
advisable for the administration of this Rights Agreement (including, without
limitation, a determination to redeem or not redeem the Rights, to exchange or
not exchange the Rights, or to amend this Rights Agreement).  All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors of the Company in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights, as
such, and all other parties, and (y) not subject the Board of Directors to
any liability to the holders of the Rights. 
The Rights Agent is entitled always to assume the Company’s Board of
Directors acted in good faith and shall be fully protected and incur no
liability in reliance thereon.


 


Section 31.     Severability.  If any term, provision, covenant or
restriction of this Rights Agreement or applicable to this Rights Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated; provided, however,
that notwithstanding anything in this Rights Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or
authority to be invalid, void or unenforceable and the Board determines in its
good faith judgment that severing the invalid language from this Rights
Agreement would adversely affect the purpose or effect of this Rights
Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated (with prompt notice to the Rights Agent) and shall not expire until
the close of business on the tenth Business Day 


 


39

















 


following
the date of such determination by the Board. 
Without limiting the foregoing, if any provision requiring a specific
group of Directors of the Company to act is held to by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the Board in accordance with applicable law
and the Company’s Amended and Restated Certificate of Incorporation and Amended
and Restated By-laws.


 


Section 32.     Governing Law.  This Rights Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State, 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, without regard to the
principles or rules concerning conflicts of laws which might otherwise
require application of the substantive laws of another jurisdiction.


 


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


 


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


 


40

















 


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


 


 


	
   

  	
  WALTER
  INDUSTRIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest: 

  	
  /s/ Catherine C. Bona

  	
   

  	
  By:

  	
  /s/ Victor P. Patrick

  
	
   

  	
   

  	
   

  	
  Name:

  	
   Victor P. Patrick

  
	
   

  	
   

  	
   

  	
  Title:

  	
   Vice Chairman, Chief Financial
  Officer
  and General Counsel

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  MELLON INVESTOR SERVICES LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest: 

  	
  /s/ Sherri J. Shenkin

  	
   

  	
  By:

  	
  /s/ Kayur D. Patel

  
	
   

  	
  Name:

  	
   Kayur D. Patel

  
	
   

  	
  Title:

  	
   Relationship Manager

  
							



 
















 


EXHIBIT A


 


FORM OF RIGHT CERTIFICATE


 


	
  Certificate
  No. R-

  	
   

  	
  Rights

  



 


NOT EXERCISABLE AFTER NOVEMBER 21, 2011 OR
EARLIER IF REDEMPTION OR EXCHANGE OCCURS. 
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF
WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.


 


Right Certificate


 


WALTER INDUSTRIES, INC.


 


This certifies that
                      
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of November 21,
2008 as the same may be amended from time to time (the “Rights Agreement”),
between Walter Industries, Inc., a Delaware corporation (the “Company”),
and Mellon Investor Services LLC, a New Jersey limited liability company, as
Rights Agent (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 November 21,
2011 at the office or agency of the Rights Agent designated for such purpose,
or of its successor as Rights Agent, one fully paid non-assessable share of
Common Stock, par value $0.01 per share (the “Common Stock”), of the Company,
at a purchase price of $150 per share (the “Purchase Price”), upon
presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.  The
number of Rights evidenced by this Right Certificate (and the number of shares
of Common Stock which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
November 21, 2008, based on the Common Stock as constituted at such date.


 


As provided in the Rights Agreement, the Purchase
Price and the number of shares of Common Stock (or other securities or
property) which may be purchased upon the exercise of the Rights and the number
of Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.


 


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


 


A-1

















 


full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Rights Agreement are on file at
the principal executive offices of the Company. 
The Company will mail to the holder of this Right Certificate a copy of
the Rights Agreement without charge after receipt of a written request
therefor.


 


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


 


Subject to the provisions of the Rights Agreement,
the Rights evidenced by this Certificate (i) may be redeemed by the
Company at a redemption price of $0.01 per Right or (ii) may be exchanged
in whole or in part for shares of Common Stock.


 


No fractional shares of Common Stock will be issued
upon the exercise or exchange of any Right or Rights evidenced hereby, but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.


 


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


 


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


 


A-2

















 


WITNESS the facsimile signature of the proper
officers of the Company and its corporate seal. 
Dated as of
                          
    , 2008.


	
   

  	
   

  
	
  ATTEST:

  	
  WALTER
  INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
                                                        ,

  	
   

  	
   

  	
   

  
	
  MELLON
  INVESTOR SERVICES LLC,

  	
   

  	
   

  	
   

  
	
  as
  Rights Agent

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  



 


A-3

















 


Form of Reverse Side of Right
Certificate


 


FORM OF ASSIGNMENT


 


(To be
executed by the registered holder if such


holder
desires to transfer the Right Certificate)


 


	
  FOR
  VALUE RECEIVED

  	
   

  	
  hereby sells, assigns and
  transfer unto

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Please print name and address of transferee)

  
	
   

  	
   

  	
   

  	
   

  
							



 


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


 


 


	
  Dated:
  

  	
                            ,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  



 


Signature Guaranteed:


 


Signatures must be guaranteed by a bank, trust
company, broker, dealer or other eligible institution participating in a
recognized signature guarantee medallion program.


 


The undersigned hereby certifies that the Rights
evidenced by this Right Certificate are not beneficially owned by, were not
acquired by the undersigned from, and are not being sold, assigned or
transferred to, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).


 


	
   

  	
   

  
	
   

  	
  Signature

  



 


A-4

















 


Form of Reverse Side of Right
Certificate — continued


 


FORM OF ELECTION TO PURCHASE


 


(To be
executed if holder desires to exercise


Rights
represented by the Rights Certificate)


 


To the Rights Agent:


 


The undersigned hereby irrevocably elects to
exercise                                     
Rights represented by this Right Certificate to purchase the shares of Common
Stock (or other securities or property) issuable upon the exercise of such
Rights and requests that certificates for such shares of Common Stock (or other
securities or property) be issued in the name of:


 


	
   

  	
   

  
	
  (Please print name and address)

  	
   

  
	
   

  	
   

  



 


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


 


	
  Please insert social
  security

  	
   

  	
   

  
	
  or other identifying
  number:

  	
   

  	
   

  
	
   

  	
   

  
	
  (Please print name and address)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:
  

  	
                                 ,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
  (Signature must conform to holder

  
	
   

  	
  specified on Right Certificate)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature
  Guaranteed:

  	
   

  
					



 


Signatures must be guaranteed by a bank, trust
company, broker, dealer or other eligible institution participating in a
recognized signature guarantee medallion program.


 


The undersigned hereby certifies that the Rights
evidenced by this Right Certificate are not beneficially owned by, were not acquired
by the undersigned from, and are not being sold, assigned or transferred to, an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement).


 


	
   

  	
   

  
	
   

  	
  Signature

  



 


A-5

















 


Form of Reverse Side of Right
Certificate — continued


 


NOTICE


 


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


 


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


	
   

  	
   

  	
   

  



A-6

















 


UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR
BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.


 


SUMMARY OF RIGHTS TO PURCHASE


COMMON STOCK


 


On November 21, 2008 the Board of Directors of
Walter Industries, Inc., a Delaware corporation (the “Company”),
declared a dividend of one share purchase right (a “Right”) for each
outstanding share of common stock, par value $0.01 per share, of the Company
(the “Common Stock”).  The
dividend is payable on December 1, 2008 to the stockholders of record as
of the close of business on December 1, 2008 (the “Record Date”).  Each Right entitles the registered holder to
purchase from the Company one share of Common Stock at a price of $150 per
share (as the same may be adjusted, the “Purchase Price”).  The description and terms of the Rights are
set forth in a Rights Agreement, dated as of November 21, 2008 (as the
same may be amended from time to time, the “Rights Agreement”), between
the Company and Mellon Investor Services LLC, a New Jersey limited liability
company, as Rights Agent (the “Rights Agent”). Capitalized terms used
herein and not otherwise defined herein shall have the meanings given to them
in the Rights Agreement.


 


Until the close of business on the earlier of (i) the
tenth day after the first date of a public announcement that a person (other
than an Exempted Entity (as defined below)) or group of affiliated or
associated persons (an “Acquiring Person”) has acquired beneficial
ownership of shares of Common Stock (which includes for this purpose stock
referenced in derivative transactions and securities) having 20% or more of the
total voting power of all shares of Common Stock then outstanding or (ii) the
tenth business day (or such later date as may be determined by action of the
Board of Directors prior to such time as any person or group of affiliated persons
becomes an Acquiring Person) after the date of commencement of, or the first
public announcement of an intention to commence, a tender offer or exchange
offer the consummation of which would result in the beneficial ownership by a
person (other than an Exempted Entity) or group of shares of Common Stock
having 20% or more of the total voting power of all shares of Common Stock then
outstanding (the earlier of such dates being herein referred to as the “Distribution
Date”), the Rights will be evidenced by the
balances indicated in the book-entry account system of the transfer agent for
the Common Stock registered in the names of the holders of the Common
Stock.  A Person who beneficially owns shares
of Common Stock having 20% or more of the total voting power of all shares of
Common Stock then outstanding upon the adoption
of the Rights Agreement will not be considered an Acquiring Person unless and
until such Person acquires beneficial ownership of additional shares of Common
Stock after the date of adoption of the Rights Agreement (other than pursuant
to a dividend or distribution paid in shares of Common Stock or pursuant to a
split or subdivision of the outstanding Common Stock), unless upon becoming
beneficial owner of such additional shares of Common Stock, such person is not
then beneficial owner of shares of Common Stock having 20% or more of the total
voting power of all shares of Common Stock then outstanding.


 


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“Exempted Entity” shall mean (1) the
Company, (2) any Subsidiary (as defined below) of the Company (in the case
of subclauses (1) and (2) including, without limitation, in its
fiduciary capacity), (3) any employee benefit plan of the Company or of
any Subsidiary of the Company, or (4) any entity or trustee holding Common
Stock for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company.


 


The
Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferable only
in connection with the transfer of Common Stock.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
shares of Common Stock outstanding as of the Record Date, even without a
notation incorporating the Rights Agreement by reference or a copy of this
Summary of Rights, will also constitute the transfer of the Rights associated
with the shares of Common Stock as evidenced by the balances indicated in the
book-entry account system of the transfer agent for Common Stock registered in
the names of holders of Common Stock.  As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights (“Right Certificates”) will be mailed to holders
of record of the Common Stock as of the close of business on the Distribution
Date and such separate Right Certificates alone will evidence the Rights.


 


The Rights are not exercisable until the
Distribution Date.  The Rights will
expire on the earlier of (i) November 21, 2011 or (ii) November 21,
2009 if stockholder approval of the Rights Agreement has not been received by
that date (the “Final Expiration Date”), unless the Rights are earlier
redeemed or exchanged by the Company, in each case as described below.


 


The Purchase Price payable, and the number of shares
of Common Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Common Stock, (ii) upon the grant to holders of
the Common Stock of certain rights or warrants to subscribe for or purchase
Common Stock at a price, or securities convertible into Common Stock with a
conversion price, less than the then-current market price of the Common Stock
or (iii) upon the distribution to holders of the Common Stock of evidences
of indebtedness or assets (excluding regular periodic cash dividends or
dividends payable in Common Stock) or of subscription rights or warrants (other
than those referred to above).


 


In the event that any person or group of affiliated
or associated persons becomes an Acquiring Person, each holder of a Right,
other than Rights that have become void (as described below), will thereafter
have the right to receive upon exercise of a Right and payment of the Purchase
Price, that number of shares of Common Stock having a market value of two times
the Purchase Price.  Notwithstanding the
foregoing, following the time any person or group of affiliated or associated
persons becomes an Acquiring Person, all Rights that are, or under certain
circumstances specified in the Rights Agreement were, beneficially owned by any
Acquiring Person or its affiliates or associates will be null and void.


 


In the event that, after a person or group has
become an Acquiring Person, the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold, proper provision will be made so that each 


 


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holder of a Right (other
than Rights that have become void) will thereafter have the right to receive,
upon the exercise thereof at the then-current exercise price of the Right, that
number of shares of common stock of the person with whom the Company has
engaged in the foregoing transaction (or its parent), which number of shares at
the time of such transaction will have a market value of two times the Purchase
Price.


 


At any time after any person or group becomes an
Acquiring Person and prior to the acquisition by such person or group of
beneficial ownership of shares of Common Stock having 50% or more of the total
voting power of all shares of Common Stock then outstanding or the occurrence
of an event described in the prior paragraph, the Board of Directors of the
Company may exchange the Rights (other than Rights that have become void), in
whole or in part, at an exchange ratio of one share of Common Stock per Right
(subject to adjustment).


 


With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price.  No fractional shares of Common Stock will be
issued and in lieu thereof, an adjustment in cash will be made based on the
market price of the Common Stock on the last trading day prior to the date of
exercise.


 


At
any time prior to the time an Acquiring Person becomes such, the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right (the “Redemption Price”).  The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. In addition, if a Qualified
Offer (as described below) is made, the holders of record of outstanding shares
of Common Stock having 10% or more of the total voting power of all shares of
Common Stock then outstanding (or their duly authorized proxy) may direct the
Board of Directors of the Company to call a special meeting of stockholders to
consider a resolution authorizing a redemption of all Rights.  If the special meeting is not held within
ninety Business Days of being called or if, at the special meeting, the holders
of outstanding shares of Common Stock having a majority of the total voting
power of all shares of Common Stock outstanding as of the record date of the
special meeting (other than shares held by the offeror and its affiliated and
associated persons) vote in favor of the redemption of the Rights, then the
Rights shall be redeemed at the Redemption Price (or the Board will take such other
action as may be necessary to prevent the Rights from interfering with the
consummation of the Qualified Offer).


 


A
Qualified Offer, among other things, is an offer determined by the Board of
Directors of the Company to be a fully-financed offer for all outstanding
shares of Common Stock whose per share offer price (A) exceeds the
greatest of (x) the highest reported market price per share of the Common
Stock, in the immediately preceding 24 months, (y) $90.75 per share and (z) the
highest price per share of the Common Stock paid by the Person making the
tender offer or any of its Affiliates during the 24 months immediately
preceding the commencement of the tender offer or prior to the expiration of
the tender offer, and (B) represents a reasonable premium over the current
market price for a period of thirty (30) trading days immediately preceding the
date on which the offer commenced, that the Board of Directors of the Company,
upon the advice of a nationally recognized investment banking firm, does not deem
to be either unfair or inadequate.  A
Qualified Offer is, among other things, conditioned 


 


B-3

















 


upon
a minimum of at least two-thirds of the outstanding shares of Common Stock not
held by the offeror (and its affiliated and associated persons) being tendered
and not withdrawn, with a commitment to acquire all shares of Common Stock not
tendered for the same consideration.  If
the Qualified Offer includes non-cash consideration, such consideration must
consist solely of freely-tradeable common stock of a publicly traded company,
and the board and its representatives must be given access to conduct a due
diligence review of the offeror to determine whether the consideration is fair
and adequate.  A Qualified Offer must
also remain open for at least 120 Business Days following commencement.


 


Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price.


 


For so long as the Rights are then redeemable, the
Company may, except with respect to a decrease in the Redemption Price, amend
the Rights Agreement in any manner. 
After the Rights are no longer redeemable, the Company may, except with
respect to a decrease in the Redemption Price, amend the Rights Agreement in
any manner that does not adversely affect the interests of holders of the
Rights (other than an Acquiring Person, the affiliates or associates of an
Acquiring Person, or a holder whose Rights have become void).


 


Until a Right is exercised or exchanged, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.


 


A copy of the Rights Agreement has been filed with
the Securities and Exchange Commission as an Exhibit to a Registration
Statement on Form 8-A dated November 21, 2008.  A copy of the Rights Agreement is available
free of charge from the Company.  This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, as the same may
be amended from time to time, which is hereby incorporated herein by reference.


 


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