exv4w1






Exhibit 4.1




     EXECUTION COPY



RIGHTS AGREEMENT




FLOW INTERNATIONAL CORPORATION




and




MELLON INVESTOR SERVICES LLC,




as Rights Agent




Dated as of September 1, 2009





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	Section 1. Certain Definitions
	 	 	1	 
	Section 2. Appointment of Rights Agent
	 	 	4	 
	Section 3. Issuance of Right Certificates
	 	 	5	 
	Section 4. Form of Right Certificates
	 	 	6	 
	Section 5. Countersignature and Registration
	 	 	7	 
	Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates
	 	 	7	 
	Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights
	 	 	8	 
	Section 8. Cancellation and Destruction of Right Certificates
	 	 	9	 
	Section 9. Availability of Shares of Common Stock
	 	 	10	 
	Section 10. Common Stock Record Date
	 	 	11	 
	Section 11. Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights
	 	 	11	 
	Section 12. Certificate of Adjusted Purchase Price or Number of Shares
	 	 	18	 
	Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earnings Power
	 	 	18	 
	Section 14. Fractional Rights and Fractional Shares
	 	 	21	 
	Section 15. Rights of Action
	 	 	22	 
	Section 16. Agreement of Right Holders
	 	 	23	 
	Section 17. Right Certificate Holder Not Deemed a Shareholder
	 	 	23	 
	Section 18. Concerning the Rights Agent
	 	 	23	 
	Section 19. Merger or Consolidation or Change of Rights Agent
	 	 	24	 
	Section 20. Duties of Rights Agent
	 	 	25	 
	Section 21. Change of Rights Agent
	 	 	27	 
	Section 22. Issuance of New Right Certificates
	 	 	28	 
	Section 23. Redemption
	 	 	28	 
	Section 24. Exchange
	 	 	29	 
	Section 25. Notice of Certain Events
	 	 	30	 
	Section 26. Notices
	 	 	30	 
	Section 27. Supplements and Amendments
	 	 	31	 
	Section 28. Successors
	 	 	32	 
	Section 29. Benefits of this Rights Agreement
	 	 	32	 
	Section 30. Determinations and Actions by the Board of Directors
	 	 	32	 
	Section 31. Severability
	 	 	32	 
	Section 32. Governing Law
	 	 	33	 
	Section 33. Counterparts
	 	 	33	 
	Section 34. Descriptive Headings
	 	 	33	 
	Section 35. Force Majeure
	 	 	33	 






EXHIBITS




Exhibit A — Form of Right Certificate

Exhibit B — Form of Summary of Rights





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INDEX OF DEFINED TERMS




	 	 	 	 	 
	Acquiring Person
	 	 	1	 
	Affiliate
	 	 	2	 
	Associate
	 	 	2	 
	Authorized Officer
	 	 	24	 
	Beneficial Owner
	 	 	2	 
	Beneficial Ownership
	 	 	2	 
	beneficially own
	 	 	2	 
	Business Day
	 	 	4	 
	Close of Business
	 	 	4	 
	Common Stock
	 	 	4, 1	 
	Common Stock equivalents
	 	 	12	 
	Company
	 	 	1	 
	Current Value
	 	 	12	 
	Derivative Common Stock
	 	 	3	 
	Distribution Date
	 	 	1	 
	equivalent common shares
	 	 	13	 
	Exchange Ratio
	 	 	27	 
	Exempted Entity
	 	 	4,1	 
	Expiration Date
	 	 	8	 
	Final Expiration Date
	 	 	8, 2	 
	invalidation time
	 	 	11	 
	Nasdaq
	 	 	4	 
	Person
	 	 	4	 
	Principal Party
	 	 	19	 
	Purchase Price
	 	 	8,1	 
	Record Date
	 	 	1	 
	Redemption Date
	 	 	8	 
	Redemption Price
	 	 	27, 3	 
	Right
	 	 	1	 
	Right Certificates
	 	 	2	 
	Rights Agent
	 	 	1	 
	Rights Agreement
	 	 	1	 
	Section 11(a)(ii) Trigger Date
	 	 	13	 
	Securities Act
	 	 	4	 
	Security
	 	 	14	 
	Spread
	 	 	12	 
	Stock Acquisition Date
	 	 	4	 
	Subsidiary
	 	 	4	 
	Substitution Period
	 	 	13	 
	Trading Day
	 	 	15	 







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RIGHTS AGREEMENT




     Rights Agreement, dated as of September 1, 2009 (as amended, supplemented or otherwise
modified from time to time, the “Rights Agreement”) between Flow International Corporation,
a Washington corporation (the “Company”), and Mellon Investor Services LLC, a New Jersey
limited liability company (the “Rights Agent”).



WITNESSETH




     WHEREAS, the Board of Directors of the Company has on August 28, 2009, authorized and declared
a dividend of one common 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
September 1, 2009 (the “Record Date”), each Right representing the right to purchase one
share (subject to adjustment) of Common Stock (as defined below), 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 15% or more of the 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 (i) such Person was unaware that it beneficially owned a percentage of
Common Stock that would otherwise cause such Person to be an “Acquiring Person”, as defined
pursuant to this Section 1(a) (or, in the case solely of Derivative Common Stock (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 that such Derivative Common Stock are not held with any intention of changing or
influencing control of the Company) or (ii) 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 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 Agreement because of Beneficial Ownership of 15% or more of the shares of Common
Stock outstanding, such Person will not be deemed an Acquiring Person for any purposes of this
Agreement unless and until such Person acquires Beneficial Ownership of any 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 15% or more of the 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 to 15% or more of the shares of
Common Stock then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 15% or more of the 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 after the date hereof (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 15% or more of the 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 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



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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);



     (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; or



     (iv) that 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 Stock”; 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.



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     (d) “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.



     (e) “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.



     (f) “Common Stock” when used with reference to the Company shall mean the common
stock, $0.01 par value per share, 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.



     (g) “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, and (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.



     (i) “Nasdaq” shall mean The NASDAQ Stock Market Inc.



     (j) “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.



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



     (l) “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.



     (m) “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 hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten (10) days’ prior 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.



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     Section 3. Issuance of Right Certificates. (a) Until the close of business on the earlier of (i) the tenth Business Day after the
Stock Acquisition Date 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 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 15% or more of the 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 certificates for Common Stock
registered in the names of the holders thereof and not by separate Right Certificates (as defined
below), and (y) the Rights will be transferable only in connection with the transfer of Common
Stock. As soon as practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will 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 the 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 the same in writing on or prior to the Business Day next
following. Until such notice is received by the Rights Agent, the Rights Agent may presume
conclusively for all purposes that the Distribution Date has not occurred.



     (b) As promptly as practicable following the Record Date, the Company will send a copy of a
Summary of Rights to Purchase Shares of Common Stock, in substantially the form of Exhibit B hereto
(the “Summary of Rights”), by electronic mail, 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 of such holder shown on the records of the
Company or the transfer agent or registrar for the Common Stock; provided, however,
the Company will send a copy of the Summary of Rights by first-class, postage-prepaid mail (or by
other carrier mail service that the Company may select) to each record holder who so requests.
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 share
certificate for such shares of Common Stock registered in the names of the holders thereof
together with the Summary of Rights. Until the Distribution Date (or, if earlier, the Expiration
Date), the surrender for transfer of any certificate for 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.



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     (c) Rights shall be issued in respect of all shares of Common Stock issued or disposed of
(including, without limitation, 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. Certificates issued for Common Stock (including, without limitation, upon transfer of
outstanding Common 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 shall have impressed on, printed on, written on or otherwise affixed to them substantially the
following legend:




“This certificate also evidences and entitles the holder hereof to certain rights as
set forth in a Rights Agreement between Flow International Corporation and Mellon
Investor Services LLC, as Rights Agent, dated as of September 1, 2009, 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 Flow
International Corporation. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. Flow International Corporation will deliver to
the holder of this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances, as set forth in
the Rights Agreement, Rights 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.”


With respect to such certificates containing the foregoing legend, until the Distribution 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 Nasdaq or of any other stock exchange or automated quotation



-6-









 







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 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 its office 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 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 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 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



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action whatsoever with respect to the transfer of any such surrendered Right Certificate or Right
Certificates until the registered holder thereof shall have (i) properly completed and duly 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 Company may require payment of 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. The Rights Agent shall have no duty or
obligation under this Section or any Section of this Rights Agreement unless and until it is
satisfied that all such taxes and/or charges have been paid.



     (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
satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in
case of loss, theft or destruction, of indemnity or security satisfactory to them, and
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.



     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 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 Company, at any time which is both after the Distribution Date and prior to the time (the
“Expiration Date”) that is the earliest of (i) the close of business on September 1, 2019
(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 $18.00 for each share
of Common Stock purchasable upon the exercise of a Right. The Purchase Price and the number of



-8-









 







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 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 transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9(e) hereof, 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 of the Common Stock or make
available if the Rights Agent is the transfer agent for the Common Stock certificates for the
number of shares of Common Stock to be purchased (and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests), 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 the depositary agent to comply with such request), (ii) when necessary, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 14 hereof, (iii) promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by such holder and (iv)
when necessary, 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 duly 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 of 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 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,



-9-









 







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.



     Section 9. 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 (i.e., as authorized but unissued
shares), the number of shares of Common Stock that will be sufficient to permit the exercise in
full of all outstanding Rights.



     (b) So long as the shares of Common Stock and other securities issuable upon the exercise of
Rights may be listed or admitted to trading on Nasdaq 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 Nasdaq 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 other securities
upon the exercise of Rights, to register and qualify such shares of Common Stock and 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, by issuing a public
announcement, temporarily suspend, for a period of time not to exceed ninety (90) 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 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.



-10-









 





     (e) The Company further covenants and agrees that it will pay when due and payable any and all
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 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 for the shares of 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 for shares of 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
reasonable satisfaction that no such tax or charge is due.



     Section 10. Common Stock Record Date. Each Person in whose name any certificate for Common Stock is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of the shares of Common
Stock represented thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any
applicable 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 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 (without duplication, taking into
account any adjustments previously made pursuant to this Section 11).



     (a) (i) In the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the 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,



-11-









 







combination or reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right.



     (ii) Subject to Section 24 of this Rights Agreement 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
Company’s 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.



-12-









 





     (iii) In the event that there shall be an insufficient number of Common Stock authorized but
unissued (and unreserved) to permit the exercise in full of 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 common 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 of common stock and shares or fractions of shares of common stock 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 (30) days following but not including 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 (30) 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 (30) day period may be extended to the extent necessary, but not more than
ninety (90) days after but not including the Section 11(a)(ii) Trigger Date, in order that the
Company may seek shareholder approval for the authorization of such additional shares (such thirty
(30) 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 second sentence of this Section
11(a)(iii) and to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights has been
temporarily



-13-









 







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



     (c) In case the Company shall fix a record date for the making of a distribution to all
holders of the 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 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



-14-









 







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) (i) 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)(i)) on any date shall be deemed to be the average of the daily closing prices per
share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to but not including such date; provided, however, that in the
event that the current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security, and prior to the expiration of 30
Trading Days after but not including 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 Nasdaq or,
(x) if the Security is not listed or admitted to trading on Nasdaq, 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, 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.



     (ii) For the purpose of any computation hereunder, if the Common Stock is not publicly traded,
“current per share market price” shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent.



-15-









 





     (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 one ten-thousandth of a share of Common
Stock or other share or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such adjustment or (ii) the
Expiration Date.



     (f) If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any
Right thereafter exercised shall become entitled to receive any shares of capital stock of the
Company other than 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 share of Common Stock) 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 whole number)
obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement (with prompt written notice thereof to the Rights Agent)
of its election to adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter, but, if the Right



-16-









 







Certificates have
been issued, shall be at least 10 days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company may, 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 securities
issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of securities 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 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 shareholders.



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     (n) 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 Sections 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) deliver a
brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof.
The Rights Agent shall be fully authorized and 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 such adjustment or any such event unless and until
it shall have received such 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 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



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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)(i) 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 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



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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 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 Nasdaq 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 Nasdaq or such securities exchange, or, if the Common Stock of the Principal Party
shall not be listed or admitted to trading on Nasdaq 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



-20-









 





     (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, 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 shareholders 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 Nasdaq or, (x) if the Rights are
not listed or admitted to trading on Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national securities exchange on



-21-









 







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, 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)(i) hereof) for the Trading Day immediately prior to the date of such exercise or exchange.



     (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 or other securities of the
Company 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 payment
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 authorized and protected in relying on such a certificate and shall have no
duty with respect to, and shall not be deemed to have knowledge of any payment for fractional
Rights or fractional shares unless and until the Rights Agent shall have received such a
certificate and sufficient monies.



     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



-22-









 







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



     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 will be transferable only in connection with
the transfer 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 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 Shareholder. 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 shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions
affecting shareholders (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



-23-









 







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 judgment of a court of competent jurisdiction), for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance, exercise, performance and
administration of this Rights Agreement, including the costs and expenses of defending against any
claim of liability arising therefrom, directly or indirectly. The costs and expenses of 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.



     (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. The Rights Agent shall not be deemed to have knowledge of any event of which it was
supposed to receive notice thereof hereunder, and the Rights Agent shall be fully authorized and
protected and shall incur no liability for failing to take action in connection therewith unless
and until it has received such notice in writing.



     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, 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



-24-









 







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 in accordance with such
advice or opinion.



     (b) Whenever in the performance of its duties under this Rights Agreement the Rights Agent
shall deem it necessary or desirable that any fact or matter (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 off 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 judgment of a court of competent jurisdiction).
Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees
paid by the Company to the Rights Agent. Notwithstanding anything in this Rights Agreement to the
contrary, in no event shall the Rights Agent be liable for special, punitive, indirect or
consequential 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 damage and regardless of
the form of action.



     (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



-25-









 







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 a certificate furnished pursuant to Section 12, upon which the Rights
Agent may rely, describing such change or adjustment); 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 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 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, and 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 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 shareholder, affiliate, director, officer or employee of the
Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or
become pecuniarily interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely as though it were
not Rights Agent under this Rights Agreement. Nothing herein shall preclude the Rights Agent or
any shareholder, affiliate, director, officer or employee from acting in any other capacity for the
Company or for any other Person.



-26-









 





     (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, willful misconduct or bad faith in the selection and continued employment thereof
(which gross negligence, willful misconduct or bad faith must be determined by a final,
non-appealable judgment 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 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 30 days’ notice in writing mailed to the Company 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. In the event the transfer
agency relationship in effect between the Company and the Rights Agent terminates, the Rights Agent
will be deemed to resign automatically on the effective date of such termination; and any required
notice will be sent by the Company. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Stock by registered or certified mail,
and, 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 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or incapacitated Rights
Agent or by the holder of a Right Certificate (who 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 corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $75 million or (B) an
affiliate of a 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



-27-









 







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, deliver 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 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)(i) hereof) or
any other form of consideration deemed appropriate by the Board of Directors.



     (b) Immediately upon the action of the Board of Directors ordering the redemption of the
Rights pursuant to paragraph (a) of this Section 23 (or at such later time as the Board of
Directors may establish for the effectiveness of such redemption), and without any further action
and without any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price. The Company
shall promptly give public notice of any such redemption (with prompt written notice thereof to the
Rights Agent); provided, however, that the failure to give, or any defect in, any
such notice shall not affect the validity of such redemption. Within 10 days after such action of
the Board of Directors ordering the redemption of the Rights (or such later time as the Board of
Directors may establish for the effectiveness of such redemption), the Company shall deliver 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



-28-









 







books of the transfer agent for the Common Stock. Any notice which is delivered in the
manner herein provided or as provided for in the Company’s By-Laws 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.



     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 effectuate such exchange at any time after an
Acquiring Person becomes the Beneficial Owner of shares of Common Stock aggregating 50% or more of
the 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 deliver 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 delivered in the manner herein provided or as provided for in the Company’s By-Laws 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 substitute to the extent of such insufficiency, for each share of Common Stock that
would otherwise be issuable upon exchange of a Right, equivalent common shares (as such term is
used in Section 11(a)(iii)), cash, debt securities of the Company, other assets, or any combination
of the foregoing, in any event having an aggregate value, as determined in good



-29-









 







faith by the Board
of Directors of the Company (whose determination shall be described in a statement filed with the
Rights Agent), equal to the current market value of one Common Share (determined pursuant to
Section 11(d)) on the Trading Day immediately preceding the date of the effectiveness of the
exchange pursuant to this Section 24.



     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 and 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 the Rights Agent and 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 10 days prior to the record date for determining holders of the
Common Stock for purposes of such action, and in the case of any such other action, at least 10
days prior to the date of the taking of such proposed action or the date of participation therein
by the holders of the Common Stock, whichever shall be the earlier.



     (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 first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:




Flow International Corporation

23500 64th Avenue South

Kent, Washington 98032

Attention: General Counsel



-30-









 




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





Mellon Investor Services LLC

520 Pike Street, Suite 1220

Seattle, WA 98101

Attention: Relationship Manager




with a copy to:




Mellon Investor Services LLC

Newport Office Center VII

480 Washington Boulevard

Jersey City, New Jersey 07310

Attention: General Counsel



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



     Section 27. Supplements and Amendments. Except as otherwise provided in this Section 27, for so long as the Rights are then
redeemable, the Company 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 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 or an Affiliate or Associate of an
Acquiring Person), 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 which states that the supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent shall promptly
execute such supplement or amendment. Notwithstanding anything contained in this 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
Agreement.



-31-









 





     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 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 Board of Director’s 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
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 Agreement would adversely affect the purpose
or effect of this 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 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 Articles of Incorporation and By-laws; provided
further, however, that if such excluded provision shall effect the rights,
immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign
immediately.



-32-









 









     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 Washington 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, obligations and liabilities 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.



     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.



     Section 35. Force Majeure. Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be
liable for any delays or failures in performance resulting from acts beyond its reasonable control
including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or
malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power
failures or mechanical difficulties with information storage or retrieval systems, labor
difficulties, war, or civil unrest.



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



	 	 	 
	FLOW INTERNATIONAL CORPORATION


	Attest:

	 	/s/ John S. Leness 
	 

	 	 
	By:

	 	John S. Leness
	Title:    General Counsel and Corporate Secretary
	 
	 	 
	MELLON INVESTOR SERVICES LLC,

as Rights Agent
	 
	 	 
	By:

	 	/s/ Thomas L. Cooper
	 

	 	 
	Name: 
	 	Thomas L. Cooper
	Title:


	 	Vice Prisident







-33-









 








EXHIBIT A




FORM OF RIGHT CERTIFICATE




			
	 	 	 
	Certificate No. R-                     
	 	                     Rights





NOT EXERCISABLE AFTER SEPTEMBER 1, 2019 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


FLOW INTERNATIONAL CORPORATION




     This certifies that                      or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Rights Agreement, dated as of September 1, 2009, as the
same may be amended from time to time (the “Rights Agreement”), between Flow International
Corporation, a Washington corporation (the “Company”), and Mellon Investor Services LLC, a
New Jersey limited liability company (the “Rights Agent”), to purchase from the Company at
any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., New York City time, on September 1, 2019 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, $0.01 par value per share(the “Common Stock”), of the Company, at a
purchase price of $18.00 per share of Common Stock (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 September 1, 2009, based on the Common
Stock as constituted at such date. As provided in the Rights Agreement, the Purchase Price, 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 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



A-1









 







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 the 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 shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or other actions
affecting shareholders (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.



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



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	FLOW INTERNATIONAL CORPORATION
	 
	 	 	 	 	 	 	 	 
	Attest:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Countersigned	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	MELLON INVESTOR SERVICES LLC,

as Rights Agent	 	 	 	 	 	 





	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Authorized Signatory	 	 	 	 	 	 






A-2









 





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-3









 





Form of Reverse Side of Right Certificate — continued




FORM OF ELECTION TO PURCHASE 




(To be executed by the registered holder if such

holder desires to transfer the Right 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
such other securities) be issued in the name of:



 




(Please print name and address of transferee)




 






     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 of transferee)



 





     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-4









 





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, such Assignment or Election to Purchase
will not be honored.




A-5









 








EXHIBIT B




     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

Shares of Common Stock




     On August 28, 2009, the Board of Directors of Flow International Corporation, a Washington
corporation (the “Company”), declared a dividend of one common share purchase right (a
“Right”) for each outstanding share of common stock, $0.01 par value per share, of the
Company (the “Common Stock”). The dividend is payable on September 1, 2009, to the
shareholders of record as of the close of business on September 1, 2009 (the “Record
Date”). Each Right entitles the registered holder to purchase from the Company one share of
common stock, $0.01 par value per share (the “Common Stock”), of the Company at a price of
$18.00 per share of Common Stock (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 September 1,
2009 (as the same may be amended from time to time, the “Rights Agreement”), between the
Company and Mellon Investor Services LLC, as Rights Agent (the “Rights Agent”).



     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 15% or more of the 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 15% or more of the 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 shares of Common Stock represented by certificates for Common Stock outstanding
as of the Record Date, together with a copy of the summary of rights disseminated in connection
with the original dividend of Rights. A Person who beneficially owns more than 15% of the
outstanding shares of Common Stock on the date hereof will not be considered an Acquiring Person
unless and until such Person acquires beneficial ownership of any 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).



     “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, and (4) any entity or trustee
holding Common Stock for or pursuant to the terms of any such plan



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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 certificates for 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 represented by such certificate. 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
September 1, 2019 (the “Final Expiration Date”), unless the Final Expiration Date is
extended or unless the Rights are earlier redeemed or exchanged by the Company, in each case as
described below. The Rights Agreement is effective as of September 1, 2009.



     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 beneficially owned by the Acquiring Person (which
will thereupon become null and void), 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.



     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 holder of a Right
(other than Rights beneficially owned by an Acquiring Person which will have become null and 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 50% or more of the outstanding shares of Common Stock



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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 owned by such person or group which will have become null and void),
in whole or in part, at an exchange ratio of one share of Common Stock, (or of a share of a similar
class or series of the Company’s common stock having similar rights, preferences and privileges) of
equivalent value, 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.
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 the
Redemption Price, amend the Rights Agreement in any manner. After the Rights are no longer
redeemable, the Company may, except with respect to the Redemption Price, amend the Rights
Agreement in any manner that does not adversely affect the interests of holders of the Rights.



     Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a
shareholder 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 August 31, 2009. 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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