Document:

exv4w2

 

Exhibit 4.2

NEENAH PAPER, INC.

and

EQUISERVE TRUST COMPANY, N.A.

Rights Agent

FORM OF

RIGHTS AGREEMENT

Dated as of               , 2004

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page

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

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Table of Contents
(continued)

	 	 	 	 	 
	 	 	Page

	Section 23. Redemption and Termination
	 	 	30	 
	Section 24. Exchange
	 	 	30	 
	Section 25. Notice of Certain Events
	 	 	32	 
	Section 26. Notices
	 	 	32	 
	Section 27. Supplements and Amendments
	 	 	33	 
	Section 28. Successors
	 	 	34	 
	Section 29. Determination and Actions by the Board of Directors, etc.
	 	 	34	 
	Section 30. Benefits of this Agreement
	 	 	34	 
	Section 31. Severability
	 	 	34	 
	Section 32. Governing Law
	 	 	34	 
	Section 33. Counterparts
	 	 	35	 
	Section 34. Descriptive Headings
	 	 	35	 

	 
	Exhibit A   -   Certificate of Designations

	Exhibit B   -   Form of Rights Certificate

	Exhibit C   -   Summary of Rights to Purchase Preferred Stock

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FORM OF

RIGHTS AGREEMENT

          RIGHTS AGREEMENT, dated as of    , 2004 (the “Agreement”), between
Neenah Paper, Inc., a Delaware corporation (the “Company”), and EquiServe Trust
Company, N.A., a nationally chartered trust company, organized and existing
under the laws of the United States (the “Rights Agent”).

W I T N E S S E T H:

          WHEREAS, on    , 2004 (the “Rights Dividend Declaration Date”),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of Common
Stock (as hereinafter defined) of the Company outstanding at the Close of
Business on    , 2004, after giving effect to the distribution of
shares of Common Stock by Kimberly-Clark Corporation to its stockholders (the
“Record Date”), each Right initially representing the right to purchase one
one-thousandth of a share of Series A Junior Participating Preferred Stock of
the Company having the rights, powers and preferences set forth in the form of
the Certificate of Designation attached hereto as Exhibit A, upon the terms and
subject to the conditions hereinafter set forth (the “Rights”), and has further
authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p)) for each share of Common
Stock of the Company issued between the Record Date (whether originally issued
or delivered from the Company’s treasury) and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined) or, in
certain circumstances provided in Section 22, after the Distribution Date;

          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 Agreement, the
following terms have the meanings indicated:

     (a) “Acquiring Person” shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary
of the Company, (iii) any employee benefit plan of the Company or of any
Subsidiary of the Company, or (iv) any Person organized, appointed or
established by the Company for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall become 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, other than those Persons excepted in clauses
(i), (ii), (iii) or (iv) of the preceding sentence, shall become the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding by reason of purchases of Common Stock by the Company and
shall, after such purchases by the Company, become the Beneficial Owner
of any additional shares of Common Stock (other than pursuant to a
dividend or

 

 

distribution paid or made by the Company on the outstanding Common
Stock or pursuant to a split or subdivision of the outstanding Common
Stock), then such Person shall be deemed to be an “Acquiring Person”.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an
“Acquiring Person” (as defined pursuant to the foregoing provisions of
this paragraph (a)) has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an “Acquiring Person”
(as defined pursuant to the foregoing provisions of this paragraph (a)),
then such Person shall not be deemed to be an “Acquiring Person” for any
purposes of this Agreement.

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

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

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

     (i) which such Person or any of such Person’s
Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
“Beneficial Owner” of, or to “beneficially own,” (A)
securities tendered pursuant to a tender or exchange offer
made by such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange, or (B) securities issuable upon
exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering
Event which Rights were acquired by such Person or any such
Person’s Affiliates or Associates prior to the Distribution
Date or pursuant to Section 3(a) or Section 22 (the
“Original Rights”) or pursuant to Section 11(i) in
connection with an adjustment made with respect to any
Original Rights;

     (ii) which such Person or any of such Person’s
Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has “beneficial ownership” of
(as determined pursuant to Rule 13d-3 of the General Rules
and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or
not in writing; provided, however, that a Person shall not
be deemed the “Beneficial Owner” of, or to “beneficially
own,” any security under this subparagraph (ii) as a result
of an agreement, arrangement or

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understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange
Act (or any comparable or successor report); or

     (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
pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (d)) or disposing of any
voting securities of the Company;

provided, however, that nothing in this paragraph (d) 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.

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

     (f) “Close of Business” on any given date shall mean 5:00 P.M.,
Eastern Standard time, on such date, provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Easter Standard time, on
the next succeeding Business Day.

     (g) “Common Stock” shall mean the common stock, par value $0.01 per
share, of the Company, except that “Common Stock” when used with
reference to any Person other than the Company shall mean the capital
stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such Person.

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

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

     (j) “Preferred Stock” shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company,
and, to the extent that there is not a sufficient number of shares of
Series A Junior Participating Preferred Stock authorized to permit the
full exercise of the Rights, any other series of preferred stock, par
value $   

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per share, of the Company designated for such purpose containing
terms substantially similar to the terms of the Series A Junior
Participating Preferred Stock.

     (k) “Section 11(a)(ii) Event” shall mean the event described in
Section 11(a)(ii).

     (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) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.

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

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

          In addition, for purposes of this Agreement, the following terms have the
meanings indicated in specified sections of this Agreement: (i) “Adjustment
Shares” shall have the meaning set forth in Section 11(a)(ii); (ii) “common
stock equivalents” shall have the meaning set forth in Section 11(a)(iii);
(iii) “current market price” shall have the meaning set forth in Section
11(d)(i); (iv) “Current Value” shall have the meaning set forth in Section
11(a)(iii); (v) “Distribution Date” shall have the meaning set forth in Section
3(a); (vi) “equivalent preferred stock” shall have the meaning set forth in
Section 11(b); (vii) “Exchange Ratio” shall have the meaning set forth in
Section 24(a); (viii) “Expiration Date” shall have the meaning set forth in
Section 7(a); (ix) “Final Expiration Date” shall have the meaning set forth in
Section 7(a); (x) “Nasdaq” shall have the meaning set forth in Section
11(d)(i); (xi) “Principal Party” shall have the meaning set forth in Section
13(b); (xii) “Purchase Price” shall have the meaning set forth in Section
4(a)(ii); (xiii) “Record Date” shall have the meaning set forth in the recitals
of this Agreement; (xiv) “Redemption Price” shall have the meaning set forth in
Section 23(a); (xv) “Rights” shall have the meaning set forth in the recitals
of this Agreement; (xvi) “Rights Agent” shall have the meaning set forth in the
parties clause of this Agreement; (xvii) “Rights Certificates” shall have the
meaning set forth in Section 3(a); (xviii) “Rights Dividend Declaration Date”
shall have the meaning set forth in the first recital of this Agreement; (xix)
“Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section
11(a)(iii); (xx) “Section 13 Event” shall have the meaning set forth in Section
13; (xxi) “Spread” shall have the meaning set forth in Section 11(a)(iii);
(xxii) “Substitution Period” shall have the meaning set forth in Section
11(a)(iii); (xxiii) “Summary of Rights” shall have the meaning set forth in
Section 3(b); and (xxiv) “Trading Day” shall have the meaning set forth in
Section 11(d)(i).

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

4

 

as it may deem necessary or desirable, upon ten (10) days’ prior written
notice to the Rights Agent. The Rights Agent shall have no duty to supervise,
and in no event shall be liable for, the acts or omissions of any such
co-Rights Agent.

          Section 3. Issue of Rights Certificates.

          (a) Until the earlier of (i) the Close of Business on the tenth day after
the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition
Date occurs before the Record Date, the Close of Business on the Record Date)
or (ii) the Close of Business on the tenth Business Day (or such later date as
may be determined by action of the Board of Directors of the Company prior to
such time as any Person becomes an Acquiring Person) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, or any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would become an Acquiring Person (the earlier of (i) and (ii) being herein
referred to as the “Distribution Date”), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). The Company must
promptly notify the Rights Agent of a Distribution Date and request its
transfer agent to give the Rights Agent a stockholder list together with all
other relevant information. As soon as practicable after the Rights Agent is
notified of the Distribution Date and receives such information, the Rights
Agent will send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the Close of Business on the Distribution
Date, at the address of such holder shown on the records of the Company, one or
more Rights certificates, in substantially the form of Exhibit B (the “Rights
Certificates”), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that any adjustment in
the number of Rights per share of Common Stock has been made pursuant to
Section 11, at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a)) so that Rights Certificates representing only whole numbers
of Rights are distributed and cash is paid in lieu of any fractional Rights.
As of and after the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates.

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

5

 

          (c) Rights shall be issued in respect of all shares of Common Stock which
are issued (whether originally issued or from the Company’s treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date or, in certain circumstances provided in Section 22, after the
Distribution Date. Certificates representing such shares of Common Stock shall
also be deemed to be certificates for Rights, and shall bear a legend
substantially in the following form:

     This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement
between Neenah Paper, Inc. (the “Company”) and EquiServe Trust
Company, N.A. (the “Rights Agent”) dated as of    , 2004,
as the same may be amended 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 offices
of the Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing, without
charge promptly after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Person or by any subsequent holder, may
become null and void.

With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates. In the
event the Company purchases or acquires any shares of its Common Stock after
the Record Date but prior to the Distribution Date, any Rights associated with
such shares shall be deemed cancelled and retired so that the Company shall not
be entitled to exercise any Rights associated with shares of Common Stock that
are not outstanding.

          Section 4. Form of Rights Certificates.

          (a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each be substantially in
the form set forth in Exhibit B and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
or, in the case of Rights with respect to shares of Common Stock issued or
becoming outstanding after the Record Date, the same date as the date

6

 

of the stock certificate evidencing such shares, and on their face shall
entitle the holders thereof to purchase such number of one one-thousandths of a
share of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per one one-thousandth of a share, the “Purchase
Price”), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment from
time to time as provided in Sections 11 and 13(a).

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

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

          The absence of the foregoing legend on any Rights Certificate shall in no
way affect any of the other provisions of this Agreement, including, without
limitation, the provisions of Section 7(e).

          Section 5. Countersignature and Registration.

          (a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its Chief Executive Officer, its President or any
Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company’s seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned manually or by facsimile signature by the Rights Agent and shall
not be valid for any purpose unless so countersigned. In case any officer of
the Company who shall have signed any of the Rights Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights

7

 

Certificates, nevertheless, may be countersigned by the Rights Agent and
issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificates may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.

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

          Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a)
Subject to the provisions of Section 4(b), Section 7(e) and Section 14, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the Expiration Date, any Rights Certificate or
Certificates (other than Rights Certificates representing Rights that have
become null and void pursuant to Section 7(e) or that have been exchanged
pursuant to Section 24) may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of one one-thousandths of a share of Preferred Stock
(or, following a Triggering Event, Common Stock, other securities, cash or
other assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e),
Section 14 and Section 24, countersign and deliver to the Person entitled
thereto a Rights Certificate or Rights Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.

          (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights 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

8

 

thereto, and upon surrender to the Rights Agent and cancellation of the
Rights Certificates if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.

          Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e), the registered holder of any Rights Certificate
may exercise the Rights evidenced thereby (except as otherwise provided herein
including, without limitation, the restrictions on exercisability set forth in
Section 9(c), Section 11(a)(iii) and Section 23(a)) in whole or in part at any
time after the Distribution Date upon surrender of the Rights Certificate, with
the form of election to purchase and the certificate on the reverse side
thereof duly executed, to the Rights Agent at the principal office or offices
of the Rights Agent designated for such purpose, together with payment of the
aggregate Purchase Price with respect to the total number of one
one-thousandths of a share of Preferred Stock (or Common Stock, other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
Close of Business on    , 2014 (the “Final Expiration Date”), (ii) the
time at which the Rights are redeemed as provided in Section 23 or (iii) the
time at which such Rights are exchanged pursuant to Section 24 (the earliest of
(i), (ii) and (iii) being herein referred to as the “Expiration Date”).

          (b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $   ,
and shall be subject to adjustment from time to time as provided in Sections 11
and 13(a) and shall be payable in accordance with paragraph (c) below.

          (c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the
Purchase Price per one one-thousandth of a share of Preferred Stock (or other
shares, securities, cash or other assets, as the case may be) to be purchased
as set forth below and an amount equal to any applicable transfer tax required
to be paid by the holder of the Rights Certificate in accordance with Section
9(e), the Rights Agent shall, subject to Section 20(k), thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-thousandths of a share of
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company
shall have elected to deposit the total number of shares of Preferred Stock
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if
any, to be paid in lieu of fractional shares in accordance with Section 14,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the

9

 

registered holder of such Rights Certificate. The payment of the Purchase
Price (as such amount may be reduced pursuant to Section 11(a)(iii)) shall be
made in cash or by certified bank check or bank draft payable to the order of
the Company. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a), the Company will make all
arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
necessary to comply with the terms of this Agreement. The Company reserves the
right to require prior to the occurrence of a Triggering Event that, upon any
exercise of Rights, a number of Rights be exercised so that only whole shares
of Preferred Stock would be issued.

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

          (e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a) (ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person (or
any Affiliate or Associate thereof) to holders of equity interests in such
Acquiring Person (or any Affiliate or Associate thereof) or to any Person with
whom the Acquiring Person (or any Affiliate or Associate thereof) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of an agreement, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall notify the Rights Agent when
this Section 7(e) applies and shall use all reasonable efforts to ensure that
the provisions of this Section 7(e) and Section 4(b) are complied with, but
neither the Company nor the Rights Agent shall have any liability to any holder
of Rights Certificates or other Person as a result of the Company’s failure to
make any determinations with respect to an Acquiring Person or any of its
Affiliates, Associates or transferees hereunder.

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

10

 

identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request.

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

          Section 9. Reservation and Availability of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement, including
Section 11(a)(iii), will be sufficient to permit the exercise in full of all
outstanding Rights.

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

          (c) The Company shall use its best efforts to (i) prepare and file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii), a registration statement under the Act with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance
with, the securities or “blue sky” laws of the various states in connection
with the exercisability of the Rights. The Company may temporarily suspend,
for a period of time not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of
the Rights in order to prepare and file such registration statement and permit
it to become effective. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the

11

 

Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. In addition, if the
Company shall determine that a registration statement is required following the
Distribution Date, and a Section 11(a)(ii) Event has not occurred, the Company
may temporarily suspend (and shall give the Rights Agent prompt notice thereof)
the exercisability of Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification or exemption in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted under applicable law or a
registration statement shall not have been declared effective.

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

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

          Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record
holder of such shares (fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights

12

 

evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
or other securities for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.

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

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

     (ii) Subject to Section 24, in the event any Person becomes
an Acquiring Person, then each holder of a Right (except as
provided below and in Section 7(e)) 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
Agreement, in lieu of a number of one one-thousandths of a share
of Preferred Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the then number of one
one-thousandths of a share of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event and (y) dividing that product (which,
following such first occurrence shall thereafter be referred to as
the “Purchase Price” for each Right and for all purposes of this
Agreement) by 50% of the current market price (determined pursuant
to Section 11(d)) per share of Common Stock on the date of such
first occurrence (such number of shares, the “Adjustment Shares”).

13

 

     (iii) In the event that the number of shares of Common Stock
which are authorized by the Company’s certificate of incorporation
but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights, is not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the value of the Adjustment Shares issuable upon the
exercise of a Right (the “Current Value”), and (B) with respect to
each Right, make adequate provision to substitute for the
Adjustment Shares, upon the exercise of a Right and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of preferred stock, such as the Preferred Stock, which the
Board of Directors of the Company has deemed to have substantially
the same value or economic rights as shares of Common Stock (such shares or units of shares of preferred stock, “common stock
equivalents”)), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value (less the amount of any
reduction in the Purchase Price), where such aggregate value has
been determined by the Board of Directors of the Company based
upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; provided,
however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the first occurrence of a Section
11(a)(ii) Event and (y) the date on which the Company’s right of
redemption pursuant to Section 23(a) expires (the later of (x) and
(y) being referred to herein as the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of
the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash
have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term “Spread” shall mean the excess of (i)
the Current Value over (ii) the Purchase Price. If the Board of
Directors of the Company shall determine in good faith that it is
likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the
thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, the
“Substitution Period”). To the extent the Company determines that
action should be taken pursuant to the first and/or third
sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e), 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 such stockholder approval for
such authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the event of any
such suspension, the Company

14

 

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 (with prompt notice of such announcements to the
Rights Agent). For purposes of this Section 11(a)(iii), the value
of each Adjustment Share shall be the current market price (as
determined pursuant to Section 11(d)) per share of Common Stock on
the Section 11(a)(ii) Trigger Date and the value of any “common
stock equivalent” shall be deemed to equal the current market
price (as determined pursuant to Section 11(d)) per share of the
Common Stock on such date.

          (b) In case the Company shall fix a record date for the issuance of rights
(other than the Rights), options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or
shares having the same rights, privileges and preferences as the shares of
Preferred Stock (“equivalent preferred stock”)) or securities convertible into
Preferred Stock or equivalent preferred stock at a price per share of Preferred
Stock or per share of equivalent preferred stock (or having a conversion price
per share, if a security convertible into Preferred Stock or equivalent
preferred stock) less than the current market price (as determined pursuant to
Section 11(d)) per share of Preferred Stock on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible).
In case such subscription price may be paid by delivery of consideration part
or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and the holders of
the Rights. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed, and in the event that such rights, 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 a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular periodic
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those

15

 

referred to in Section 11(b)), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section
11(d)) per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights)
of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d)) per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed,
and in the event that such distribution is not so made, the Purchase Price
shall be adjusted to be the Purchase Price which would have been in effect if
such record date had not been fixed.

     (d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii), the “current market
price” per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days immediately prior to but not
including such date, and for purposes of computations made pursuant to
Section 11(a)(iii), the “current market price” per share of Common Stock
on any date shall be deemed to be the average of the daily closing prices
per share of such Common Stock for the ten (10) consecutive Trading Days
immediately following but not including such date; provided, however,
that in the event that the current market price per share of the Common
Stock is determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities
convertible into shares of such Common Stock (other than the Rights), or
(B) any subdivision, combination or reclassification of such Common
Stock, and the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification shall
not have occurred prior to the commencement of the requisite thirty (30)
Trading Day or ten (10) Trading Day period, as set forth above, then, and
in each such case, the “current market price” shall be properly adjusted
to take into account any trading during the period prior to such
ex-dividend date or record date. The closing price for each day shall be
the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading
on the New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if
the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System (“Nasdaq”) or such other quotation system
then in use, or, if on any such date the shares of Common

16

 

Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of Directors of
the Company. If on any such date no market maker is making a market in
the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall
be used. The term “Trading Day” shall mean a day on which the principal
national securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or,
if the shares of Common Stock are not listed or admitted to trading on
any national securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, “current market price” per
share shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.

     (ii) For the purpose of any computation hereunder, the
“current market price” per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof). If the current market price per share of
Preferred Stock cannot be determined in the manner provided above,
or if the Preferred Stock is not publicly held or listed or traded
in a manner described in clause (i) of this Section 11(d), the
“current market price” per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 1000 (as such number
may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common
Stock occurring after the date of this Agreement) multiplied by
the current market price per share of the Common Stock. If
neither the Common Stock nor the Preferred Stock is publicly held
or so listed or traded, “current market price” per share of the
Preferred Stock shall mean the fair value per share as determined
in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. For all purposes of this Agreement, the
“current market price” of one one-thousandth of a share of
Preferred Stock shall be equal to the “current market price” of
one share of Preferred Stock divided by 1000.

          (e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be
made to the nearest cent or to the nearest one ten-thousandth of a share of
Common Stock or one one-millionth of a share of Preferred Stock or one
ten-thousandth of any other share or security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.

17

 

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

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

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

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

18

 

Rights Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

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

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

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

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

          (n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
(ii) merge with or into any other Person

19

 

(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related transactions,
assets, cash flow or earning power aggregating more than 50% of the assets,
cash flow or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o)), if (x) at the time of or immediately after such consolidation, merger,
sale or transfer there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger, sale or transfer, the stockholders of the Person who
constitutes, or would constitute, the “Principal Party” for purposes of Section
13(a) shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.

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

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

          Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts and computations accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) if a Distribution Date has occurred, mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 26. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of such
adjustment unless and until it shall have received such certificate.

20

 

          Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow
or Earning Power.

          (a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o)) shall engage in a share exchange with or shall consolidate with, or
merge with or into, the Company, and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection with
such share exchange, consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets, cash flow or earning power aggregating more than 50% of
the assets, cash flow or earning power of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons (other than the Company or any
Subsidiary of the Company in one or more transactions each of which complies
with Section 11(o)) (any event described in clauses (x), (y) or (z) of this
Section 13(a) following the Stock Acquisition Date, a “Section 13 Event”),
then, and in each such case, proper provision shall be made so that: (i) each
holder of a Right, except as provided in Section 7(e), shall thereafter have
the right to receive upon the exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, in lieu of a number of
one one-thousandths of a share of Preferred Stock, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (l) multiplying the then
current Purchase Price by the number of one one-thousandths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence
of a Section 13 Event, shall be referred to as the “Purchase Price” for each
Right and for all purposes of this Agreement) by (2) 50% of the current market
price (determined pursuant to Section 11(d)(i)) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its shares of Common Stock thereafter

21

 

deliverable upon the exercise of the Rights; and (v) the provisions of
Section 11(a)(ii) shall be of no effect following the first occurrence of any
Section 13 Event.

     (b) “Principal Party” shall mean:

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

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

provided, however, that in any such case described in the foregoing clause (i)
or (ii) of this Section 13(b), (1) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding twelve (12) month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, “Principal Party” shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stock of two or more of which are and have been so
registered, “Principal Party” shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.

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

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

     (ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under blue sky laws of
such jurisdiction, as may be necessary or appropriate; and

22

 

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

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

          Section 14. Fractional Rights and Fractional Shares.

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

          (b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-thousandth of a share may, at the election of the Company,
be evidenced by depositary receipts pursuant to an appropriate agreement
between the Company and a depositary selected by it; provided, however, that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the shares represented by such depositary receipts. In
lieu of fractional shares of Preferred Stock that are not integral multiples of
one one-thousandth of a share of

23

 

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

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

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

          (e) Whenever a payment for fractional Rights or fractional shares is to be
made by the Rights Agent, the Company shall (i) promptly prepare and deliver to
the Rights Agent a certificate setting forth in reasonable detail the facts
related to such 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.

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

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

24

 

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

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

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

     (d) notwithstanding anything in this 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, decree, judgment or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use commercially reasonable efforts
to have any such order, decree, judgment or ruling lifted or otherwise
overturned as soon as possible.

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

          Section 18. Concerning the Rights Agent.

          (a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and disbursements
and other disbursements incurred in the

25

 

preparation, execution, delivery and amendment of this Agreement and the
exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or
expense incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent for any action taken, suffered or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the reasonable costs and expenses of defending against any
claim of liability in the premises.

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

          Section 19. Merger or Consolidation or Change of Name of Rights Agent.

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

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

          Section 20. Duties of Rights Agent. The Rights Agent undertakes only the
duties and obligations expressly imposed by this Agreement upon the following
terms and

26

 

conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:

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

     (b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring
Person and the determination of “current market price”) be proved or
established by the Company prior to taking, suffering or omitting to take
any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the President, any
Vice President, the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full 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 to be taken by it in
good faith by it under the provisions of this Agreement in reliance upon
such certificate.

     (c) The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.

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

     (e) The Rights Agent shall not be under any responsibility in
respect of the validity of this 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 Rights Certificate (except
its countersignature thereof); nor shall it be responsible for any breach
by the Company of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor shall it be responsible for any
adjustment required under the provisions of Section 11, Section 13 or
Section 24 or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after actual notice of any such
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 Preferred Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common
Stock

27

 

     or Preferred Stock will, when so issued, be validly authorized and
issued, fully paid and nonassessable.

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

     (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary, any Assistant Secretary, the Treasurer
or any Assistant Treasurer of the Company, and to apply to such officers
for advice or instructions in connection with its duties, and it shall
incur no liability for or in respect of any action taken, suffered or
omitted by it in good faith in accordance with instructions of any such
officer.

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

     (i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself 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 resulting
from any such act, default, neglect or misconduct; provided, however,
that reasonable care was exercised in the selection and continued
employment thereof.

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

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

          Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days’

28

 

notice in writing mailed to the Company, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. In the event that 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 shall be sent by the Company. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to
make such appointment within a period of thirty (30) days after giving notice
of such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by any registered
holder of a Rights Certificate (who shall, with such notice, submit such
holder’s Rights Certificate for inspection by the Company), then any registered
holder of any Rights 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 (i) a
Person organized and doing business under the laws of the United States or of
the or of any other state of the United States or the District of Columbia, in
good standing, which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (ii) an
Affiliate of such Person. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and responsibilities as if it
had been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further reasonable assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21 or any defect
therein shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.

          Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded prior to the Distribution Date, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if

29

 

deemed necessary or appropriate by the Board of Directors of the Company,
issue Rights Certificates representing an appropriate number of Rights in
connection with such issuance or sale; provided, however, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall
be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.

          Section 23. Redemption and Termination.

          (a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the Close of Business on the tenth day following
the Stock Acquisition Date (or, if the Stock Acquisition Date shall have
occurred prior to the Record Date, the Close of Business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.001
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the “Redemption
Price”). Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company’s right of redemption hereunder
has expired. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the “current market price”, as defined in
Section 11(d)(i), of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of Directors. The
redemption 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 action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent 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 for each
Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to the Rights Agent and to all such holders at each holder’s last
address as it appears upon the registry books of the Rights Agent or, prior to
the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.

          Section 24. Exchange.

          (a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 7(e)) for shares of
Common Stock at an exchange ratio of one share of

30

 

Common Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the “Exchange Ratio”).
Notwithstanding the foregoing, the Board of Directors of the Company shall not
be empowered to effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person organized,
appointed or established by the Company for or pursuant to the terms of any
such plan), together with all Affiliates and Associates of such Person, becomes
the Beneficial Owner of fifty percent (50%) or more of the Common Stock then
outstanding.

          (b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of any
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 (with prompt notice thereof to
the Rights Agent) of any exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common 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
will be effected pro rata based on the number of Rights (other than Rights
which have become null and void pursuant to the provisions of Section 7(e))
held by each holder of Rights.

          (c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Preferred Stock (or equivalent preferred
stock, as such term is defined in paragraph (b) of Section 11) for shares of
Common Stock exchangeable for Rights, at the initial rate of one one-thousandth
of a share of Preferred Stock (or equivalent preferred stock) for each share of
Common Stock, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of
Common Stock shall have the same voting rights as one share of Common Stock.

          (d) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such actions as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.

          (e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall
be paid to the registered holders of the Rights Certificates with regard to
which such fractional shares of Common Stock would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value

31

 

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

          Section 25. Notice of Certain Events.

          (a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular periodic cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o)), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to the Rights Agent and to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least twenty (20) days prior to the record date
for determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.

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

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

32

 

	 	 	 
	

	 	EquiServe Trust Company, N.A.
	

	 	250 Royall Street
	

	 	Canton, Massachusetts 02021
	

	 	Attention: Client Administration
	

	 	Facsimile No.: (781) 575-2420

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

	 	 	 
	

	 	Neenah Paper, Inc.
	

	 	Preston Ridge III
	

	 	3460 Preston Ridge Road, Suite 600
	

	 	Alpharetta, Georgia 30005
	

	 	Attention: General Counsel
	

	 	Facsimile No.: (678) 566-0464

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

          Section 27. Supplements and Amendments. The Company may from time to time
supplement or amend this Agreement without the approval of any holders of
Rights Certificates in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect to the
Rights which the Company may deem necessary or desirable, any such supplement
or amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that from and after such time as any Person becomes
an Acquiring Person, this Agreement shall not be amended in any manner which
would adversely affect the interests of the holders of Rights. Without
limiting the foregoing, the Company may at any time prior to such time as any
Person becomes an Acquiring Person amend this Agreement to lower the thresholds
set forth in Sections 1(a) and 3(a) to a percentage that (subject to exceptions
for specified Persons or groups excepted from the definition of “Acquiring
Person”) is not less than the greater of (i) 0.001% more than the largest
percentage of the outstanding shares of Common Stock then known by the Company
to be beneficially owned by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, any Person organized, appointed or established by the Company
for or pursuant to the terms of any such plan or, to the extent excepted from
the definition of “Acquiring Person”, other specified Persons or groups) and
(ii) 10.0%.

33

 

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

          Section 29. Determination and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial Owner,
shall be made in accordance with the last sentence of Rule 13d-3(d)(l)(i) of
the General Rules and Regulations under the Exchange Act. The Board of
Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, but not limited to, a
determination to redeem or not redeem the Rights or to amend this Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board 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 and all other Persons, and (y) not subject the Board
of Directors of the Company to any liability to the holders of the Rights.

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

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

          Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of

34

 

Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts made and to be
performed entirely within such State.

          Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each 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 Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

35

 

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

	 	 	 	 	 	 	 
	Attest:	 	NEENAH PAPER, INC.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	

	 	

	 	 	 	

	

	 	Name:
	 	 	 	Name:
	

	 	Title:
	 	 	 	Title:
	 
	 	 	 	 	 	 
	Attest:	 	EQUISERVE TRUST COMPANY, N.A.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	

	 	

	 	 	 	

	

	 	Name:
	 	 	 	Name:
	

	 	Title:
	 	 	 	Title:

36

 

Exhibit A

FORM OF

CERTIFICATE OF DESIGNATION

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

NEENAH PAPER, INC.

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware

          The undersigned do hereby certify that the following resolution was duly
adopted by the Board of Directors of Neenah Paper, Inc., a Delaware corporation
(the “Corporation”), on
       , 2004:

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

A-1

 

          Section 1. Designation and Amount. The shares of such series shall be
designated as “Series A Junior Participating Preferred Stock” and the number of
shares constituting such series shall be                    . Such number of shares may
be increased or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series A Preferred Stock
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights
or warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.

          Section 2. Dividends and Distributions.

          (A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking prior and
superior to the shares of Series A Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock in preference to the holders
of Common Stock, par value $0.01 per share (the “Common Stock”), shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the first business day of March, June, September and December in each year
(each such date being referred to herein as a “Quarterly Dividend Payment
Date”), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$1.00 or (b) subject to the provision for adjustment hereinafter set forth,
1000 times the aggregate per share amount of all cash dividends, plus 1000
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time after    , 2004 (the “Rights Declaration Date”) (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

          (B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, however, that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, subject to the prior and superior
rights of the holders of any shares of any series of Preferred Stock ranking
prior to and superior to the shares of Series A Preferred Stock with respect to
dividends, a dividend of
$        per share on the Series

A-2

 

A Preferred Stock shall
nevertheless by payable on such subsequent Quarterly Dividend Payment Date.

          (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Preferred Stock,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
Series A Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than 60
days prior to the date fixed for the payment thereof.

          Section 3. Voting Rights.

          The holders of shares of Series A Preferred Stock shall have the following
voting rights:

          (A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1000
votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

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

     (C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a
period (herein called a “default period”) which shall extend until such
time when all accrued and unpaid dividends for all previous

A-3

 

quarterly
dividend periods and for the current quarterly dividend period on all shares of Series A Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period,
all holders of Preferred Stock (including holders of the Series A
Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class, irrespective
of series, shall have the right to elect two (2) Directors.

     (ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be exercised
unless the holders of ten percent (10%) in number of shares of Preferred
Stock outstanding shall be present in person or by proxy. The absence of
a quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting rights. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, to elect Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two (2) Directors or, if
such right is exercised at an annual meeting, to elect two (2) Directors.
If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of Directors as shall
be necessary to permit the election by them of the required number.
After the holders of the Preferred Stock shall have exercised their right
to elect Directors in any default period and during the continuance of
such period, the number of Directors shall not be increased or decreased
except by vote of the holders of Preferred Stock as herein provided or
pursuant to the rights of any equity securities ranking senior to or pari
passu with the Series A Preferred Stock.

     (iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding, irrespective
of series, may request, the calling of special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the Chairman
of the Board, the Chief Executive Officer, the President, a Vice
President or the Secretary of the Corporation. Notice of such meeting
and of any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this paragraph (C)(iii) shall be given to
each holder of record of Preferred Stock by mailing a copy of such notice
to him or her at his or her last address as the same appears on the books
of the Corporation. Such meeting shall be called for a time not earlier
than 10 days and not later than 50 days after such order or request, or
in default of the calling of such meeting within 50 days after such order
or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (C)(iii),
no such special

A-4

 

meeting shall be called during the period within 50 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.

     (iv) In any default period, the holders of Common Stock, and, if
applicable, other classes of capital stock of the Corporation, shall
continue to be entitled to elect the whole number of Directors until the
holders of Preferred Stock shall have exercised their right to elect two
(2) Directors voting as a class, after the exercise of which right (x)
the Directors
so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
Board of Directors may (except as provided in paragraph (C)(ii) of this
Section 3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of capital stock which
elected the Director whose office shall have become vacant. References
in this paragraph (C) to Directors elected by the holders of a particular
class of stock shall include Directors appointed by such Directors to
fill vacancies as provided in clause (y) of the foregoing sentence.

     (v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of
Directors shall be such number as may be provided for in the certificate
of incorporation or by-laws irrespective of any increase made pursuant to
the provisions of paragraph (C)(ii) of this Section 3 (such number being
subject, however, to change thereafter in any manner provided by law or
in the certificate of incorporation or by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in
the preceding sentence may be filled by a majority of the remaining
Directors.

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

          Section 4. Certain Restrictions.

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

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

     (ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except dividends

A-5

 

paid ratably
on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;

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

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

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

          Section 5. Reacquired Shares.

          Any shares of Series A Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and may
be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.

          Section 6. Liquidation, Dissolution or Winding Up.

          (A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares
of capital stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$1000 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment
(the “Series A Liquidation Preference”). Following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series A Preferred Stock unless,
prior thereto, the holders of shares of Common Stock shall have received

A-6

 

an
amount per share (the “Common Adjustment”) equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 1000 (as appropriately
adjusted as set forth in subparagraph (C) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii), the “Adjustment Number”). Following the payment
of the full amount of the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Preferred Stock and
Common Stock, respectively, and the payment of liquidation preferences of all
other shares of capital stock which rank prior to or on a parity with Series A
Preferred Stock, holders of Series A Preferred Stock and holders of shares of
Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock
and Common Stock, on a per share basis, respectively.

          (B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences. In the event, however, that there
are not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.

          (C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

          Section 7. Consolidation, Merger, etc.

          In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series A Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 1000
times the aggregate amount of capital stock, securities, cash and/or any other
property (payable in kind), as the case may be, for which or into which each
share of Common Stock is exchanged or changed. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock

A-7

 

outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

          Section 8. No Redemption.

          The shares of Series A Preferred Stock shall not be redeemable.

          Section 9. Ranking.

          The Series A Preferred Stock shall rank junior to all other series of the
Corporation’s Preferred Stock as to the payment of dividends and the
distribution of assets,
whether or not upon the dissolution, liquidation or winding up of the
Corporation, unless the terms of any such series shall provide otherwise.

          Section 10. Amendment.

          The Charter shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority of the outstanding shares of Series A Preferred
Stock, voting separately as a class.

          Section 11. Fractional Shares.

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

A-8

 

          IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this certificate to be signed by    
                   
       , its          
         , and the same to be
attested to by              
                 , its                    , this                     day of                    , 2004.

	 	 	 	 	 
	 	NEENAH PAPER, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

(Corporate Seal)

Attest:

A-9

 

Exhibit B

[Form of Rights Certificate]

			
	Certificate No. R-
	 	                   Rights

     NOT EXERCISABLE AFTER                                        , 2014 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.   PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]*

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

B-1

 

Rights Certificate

NEENAH PAPER, INC.

          This certifies that                    , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of                        , 2004 (the “Rights Agreement”),
between Neenah Paper, Inc., a Delaware corporation (the “Company”), and
EquiServe Trust Company, N.A., a nationally chartered trust company, organized
and existing under the laws of the United States (the “Rights Agent”), to
purchase from the Company at any time prior to 5:00 P.M. (Eastern Standard
time) on                        , 2014 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one
one-thousandth of a fully paid, nonassessable share of Series A Junior
Participating Preferred Stock, par value $0.01 per share (the “Preferred
Stock”), of the Company, at a purchase price of
$             per one one-thousandth of
a share (the “Purchase Price”), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of                        ,    , based on the Preferred Stock as constituted at
such date. The Company reserves the right to require prior to the occurrence
of a Triggering Event (as such term is defined in the Rights Agreement) that,
upon any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.

          Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate
are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate
of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person or an Affiliate or Associate of such Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.

          As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are
subject to modification and adjustment upon the happening of certain events,
including Triggering Events.

          This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific

B-2

 

circumstances set forth in the Rights Agreement. Copies of the Rights
Agreement are on file at the office of the Company and are also available upon
written request to the Company.

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

          Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may, in each case at the option of the Company, be (i)
redeemed by the Company at its option at a redemption price of $.001 per Right
or (ii) exchanged in whole or in part for shares of Common Stock or other
securities of the Company. Immediately upon the action of the Board of
Directors of the Company authorizing redemption, the Rights will terminate and
the only right of the holders of Rights will be to receive the redemption
price.

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

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

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

B-3

 

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

Dated as of    
                                   ,                    

	 	 	 	 	 	 	 
	ATTEST:	 	NEENAH PAPER, INC.
	 
	 

	 	 	 	By:	 	 
	
	 	 	 	

	Secretary	 	 	 	Name:
	

	 	 	 	 	 	Title:
	 
	 	 	 	 	 	 
	Countersigned:	 	 	 	 
	 
	 	 	 	 	 	 
	EQUISERVE TRUST COMPANY, N.A.	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	

	 	
	 	 	 	 
	

	 	Authorized Signature	 	 	 	 

B-4

 

[Form of Reverse Side of Rights Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED                                                          hereby sells,
assigns and transfers unto                                   

__________________________________________________________________________________

(Please print name and address of transferee)

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

Dated:    
               ,                    

	 	 	 
	 

	 	______________________________________________
	

	 	Signature

Signature Guaranteed:

Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

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

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

	 	 	 
	Dated:                    ,                    

	 	                                      
	

	 	Signature
	 
	 	 
	Signature Guaranteed:
	 	 

B-5

 

NOTICE

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

FORM OF ELECTION TO PURCHASE

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

TO: NEENAH PAPER, INC.

          The
undersigned hereby irrevocably elects to exercise
          Rights
represented by this Rights Certificate to purchase the shares of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) be
issued in the name of and delivered to:

Please insert social security

or other identifying number:                                       

___________________________________________________________________________________________________

(Please print name and address)

___________________________________________________________________________________________________

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

Please insert social security

or other identifying number:                                       

___________________________________________________________________________________________________

(Please print name and address)

___________________________________________________________________________________________________

	 	 	 
	Dated:                    ,                    

	 	                                      
	

	 	Signature
	 
	 	 
	Signature Guaranteed:
	 	 

B-6

 

Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);

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

	 	 	 
	Dated:                    ,                    

	 	                                      
	

	 	Signature
	 
	 	 
	Signature Guaranteed:
	 	 
	 
	 	 
	 
	 	NOTICE

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

B-7

 

Exhibit C

FORM OF

SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK

          On                        ,    , the board of directors of Neenah Paper, Inc. adopted
a stockholders rights plan and declared a dividend distribution of one right
for each outstanding share of Neenah Paper’s common stock to stockholders of
record at the close of business on                        ,    . Each right entitles its
holder, under the circumstances described below, to purchase from us one
one-thousandth of a share of our Series A Junior Participating Preferred Stock
at an exercise price of $  per right, subject to adjustment. The description
and terms of the rights are set forth in a rights agreement between us and
Equiserve Trust Company, N.A., as rights agent.

          Initially, the rights are associated with our common stock and evidenced
by common stock certificates, which will contain a notation incorporating the
rights agreement by reference, and are transferable with and only with the
underlying shares of common stock. Subject to certain exceptions, the rights
become exercisable and trade separately from the common stock only upon the
“distribution date”, which occurs upon the earlier of:

	•	 	10 days following a public announcement that a person or group of
affiliated or associated persons (an “acquiring person”) has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more
of Neenah Paper’s outstanding shares of common stock (the “stock
acquisition date”), or
	 
	•	 	10 business days (or later date if determined by Neenah Paper’s
board of directors prior to such time as any person or group becomes an
acquiring person) following the commencement of a tender offer or
exchange offer which, if consummated, would result in a person or group
becoming an acquiring person.

          Until the distribution date, the surrender for transfer of any shares of
common stock outstanding will also constitute the transfer of the rights
associated with those shares.

          As soon as practicable after the distribution date, separate certificates
or book-entry statements will be mailed to holders of record of the common
stock as of the close of business on the distribution date. From and after the
distribution date, the separate rights certificates or book-entry statements
alone will represent the rights. Except as otherwise provided in the rights
agreement, only shares of common stock issued prior to the distribution date
will be issued with rights.

          The rights are not exercisable until the distribution date and will expire
at the close of business on    ,    , unless earlier redeemed or
exchanged by us as described below.

C-1

 

          In the event that a person or group becomes an acquiring person (a
“flip-in event”), each holder of a right (other than any acquiring person and
certain related parties, whose
rights automatically become null and void) will have the right to receive,
upon exercise, common stock having a value equal to two times the exercise
price of the right. If an insufficient number of shares of common stock is
available for issuance, then Neenah Paper’s board of directors would be
required to substitute cash, property or other securities of Neenah Paper for
the common stock. The rights may not be exercised following a flip-in event
while Neenah Paper has the ability to cause the rights to be redeemed, as
described later in this summary.

          For example, at an exercise price of $100 per right, each right not owned
by an acquiring person (or by certain related parties) following a flip-in
event would entitle its holder to purchase $200 worth of common stock (or other
consideration, as noted above) for $100. Assuming that the common stock had a
per share value of $50 at that time, the holder of each valid right would be
entitled to purchase four shares of common stock for $100.

          In the event (a “flip-over event”) that, at any time following the stock
acquisition date:

	•	 	Neenah Paper is acquired in a merger or other business combination
transaction in which Neenah Paper is not the surviving corporation,
	 
	•	 	Neenah Paper is acquired in a merger or other business combination
transaction in which it is the surviving entity and all or part of its
common stock is converted into securities of another entity, cash or
other property, or
	 
	•	 	50% or more of Neenah Paper’s assets, cash flow or earning power is
sold or transferred,

then each holder of a right (except rights which previously have been voided as
described above) will have the right to receive, upon exercise, common stock of
the acquiring company having a value equal to two times the exercise price of
the right. Flip-in events and flip-over events are collectively referred to as
“triggering events”.

          The exercise price payable, and the number of shares of preferred stock or
other securities or property issuable, upon exercise of the rights are subject
to adjustment from time to time to prevent dilution:

	•	 	in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the preferred stock,
	 
	•	 	if holders of the preferred stock are granted certain rights,
options or warrants to subscribe for preferred stock or convertible
securities at less than the current market price of the preferred
stock, or

C-2

 

	•	 	upon the distribution to holders of the preferred stock of
evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those
referred to above).

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

          In general, Neenah Paper may redeem the rights in whole, but not in part,
at a price of $.001 per right (subject to adjustment and payable in cash,
common stock or other consideration deemed appropriate by Neenah Paper’s board
of directors) at any time until ten days following the stock acquisition date.
Immediately upon the action of the board of directors authorizing any
redemption, the rights will terminate and the only right of the holders of
rights will be to receive the redemption price.

          At any time after there is an acquiring person and prior to the
acquisition by the acquiring person of 50% or more of the outstanding shares of
common stock, we may exchange the rights (other than rights owned by the
acquiring person which will have become void), in whole or in part, at an
exchange ratio of one share of common stock, or one one-thousandth of a share
of preferred stock (or of a share of a class or series of Neenah Paper’s
preferred stock having equivalent rights, preferences and privileges), per
right (subject to adjustment).

          Until a right is exercised, its holder will have no rights as a
stockholder of Neenah Paper, including, without limitation, the right to vote
or to receive dividends. While the distribution of the rights will not result
in the recognition of taxable income by Neenah Paper or its stockholders,
stockholders may, depending upon the circumstances, recognize taxable income
after a triggering event.

          The terms of the rights may be amended by Neenah Paper’s board of
directors without the consent of the holders of the rights, including an
amendment to lower certain thresholds described above to not less than the
greater of 10% or .001% more than the largest percentage of the outstanding
shares of common stock then known to us to be beneficially owned by any person
or group of affiliated or associated persons. Once there is an acquiring
person, however, no amendment can adversely affect the interests of the holders
of the rights.

          A copy of the rights agreement is available free of charge from Neenah
Paper. This description of the rights does not purport to be complete and is
qualified in its entirety by reference to the rights agreement, which is
incorporated herein by reference.

C-3exv10w1

 

EXHIBIT 10.1

FORM OF
TAX SHARING AGREEMENT

     This Tax Sharing Agreement (the “Agreement”) is dated as of                     , 2004
(the “Distribution Date”), by and between Kimberly-Clark Corporation, a
Delaware corporation (“KCC”), and Neenah Paper Inc., a Delaware corporation
(“NPI”).

     WHEREAS, KCC, through its Neenah Paper and Technical Paper divisions and
through certain Canadian subsidiaries, is engaged in the business of
manufacturing and distributing a range of premium and specialty paper grades
and more than 700,000 metric tons of bleached kraft pulp per year (the
“Business”);

     WHEREAS, the Board of Directors of KCC has determined that it would be
advisable and in the best interests of KCC and its stockholders for KCC to
transfer the Business to NPI and to thereafter distribute all of the
outstanding shares of NPI’s common stock on a pro rata basis to the holders of
KCC’s common stock (the “Distribution”) pursuant to an agreement, dated as of
the date hereof, between KCC and NPI (the “Distribution Agreement”);

     WHEREAS, KCC and NPI intend that the contribution of assets by KCC to NPI
(the “Contribution”) immediately prior to the Distribution will qualify as a
transfer made pursuant to a reorganization within the meaning of section
368(a)(1)(D) and the Distribution will qualify as a distribution described in
section 355 of the Code;

     WHEREAS, KCC and NPI believe that it is in their mutual best interests to
set forth in this Agreement the rights and duties of each party with respect to
various tax matters relating to NPI and its subsidiaries and the business which
may arise as a result of the Distribution;

     NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

     1. Definitions

     (a) Applicable Federal Rate. As used herein, the term “Applicable
Federal Rate” means a rate of interest equal to the Federal Long Term
Rate published pursuant to Section 1274(d) of the Code, compounded
annually.

     (b) Audit. As used herein, the term “Audit(s)” shall mean any audit
or examination undertaken by any Tax authority with respect to Taxes.

     (c) Code. As used herein, the term “Code” means the United States
Internal Revenue Code of 1986, as amended.

     (d) Controversy. As used herein, the term “Controversy(ies)” shall
mean any action involving a Tax authority before any administrative or
judicial body which results from a disagreed Tax adjustment proposed
during the course of an Audit.

 

 

     (e) Final Determination. As used herein, “Final Determination”
means (i) a decision, judgment, decree or other order by any court of
competent jurisdiction, which decision, judgment, decree or other order
has become final and not subject to further appeal; or (ii) a closing
agreement (whether or not entered into under Section 7121 or 7122 of the
Code) or any other binding settlement agreement (whether or not with the
Internal Revenue Service) entered into in connection with or in
contemplation of an administrative proceeding if a judicial contest is
not or is no longer available.

     (f) Incidental Costs. As used herein, “Incidental Costs” means
reasonable legal fees and costs or expense incurred by a party hereto
relating to the investigation and defense of a claim for Taxes by a Tax
authority.

     (g) KCC Company. As used herein, “KCC Company(ies)” shall mean, for
any period, KCC, or an entity that is an affiliate of KCC after the
Distribution Date. For purposes of the foregoing, “affiliate” means any
entity that directly or indirectly controls, is controlled by, or is
under common control with, KCC. For the purposes of this definition, the
term “control” means the power to direct the management of an entity,
directly or indirectly, whether through the ownership of voting
securities, by contract, or otherwise; and the term “controlled” has the
meaning correlative to the foregoing. Notwithstanding the foregoing, for
any period, NPI and KCC shall not be deemed to be under common control
for purposes hereof solely due to the fact that NPI and KCC have
(directly or indirectly) common stockholders.

     (h) KCC Tainting Act. As used herein, “KCC Tainting Act” shall mean:

          (i) any inaccuracy or breach of any representation, warranty, or
covenant that is made by KCC pursuant to Section 2(a) of this Agreement;

          (ii) any action (or failure to take any reasonably available action)
by any of the KCC Companies; or

          (iii) any acquisition or other transaction involving KCC’s capital
stock (other than the Distribution).

     (i) NPI Company. As used herein, “NPI Company (ies)” shall mean,
for any period, NPI, or an entity that is an affiliate of NPI after the
Distribution Date. For purposes of the foregoing, “affiliate” means any
entity that directly or indirectly controls, is controlled by, or is
under common control with, NPI. For the purposes of this definition, the
term “control” means the power to direct the management of an entity,
directly or indirectly, whether through the ownership of voting
securities, by contract, or otherwise; and the term “controlled” has the
meaning correlative to the foregoing. Notwithstanding the foregoing, for
any period, NPI and KCC shall not be deemed to be under common control
for purposes hereof solely due to the fact that NPI and KCC have
(directly or indirectly) common stockholders.

2

 

     (j) NPI Tainting Act. As used herein, “NPI Tainting Act” shall mean:

          (i) any inaccuracy or breach of any representation, warranty, or
covenant that is made by NPI pursuant to Section 2(b) of this Agreement;

          (ii) any action (or failure to take any reasonably available action)
by any of the NPI Companies; or

          (iii) any acquisition or other transaction involving NPI’s capital
stock (other than the Distribution).

     (k) Pre-Distribution Period. As used herein, “Pre-Distribution
Period” means any taxable year or other taxable period that ends on or
before the Distribution Date and, in the case of a Straddle Period, that
portion of the taxable period ending on the close of the Distribution
Date.

     (l) Restructuring Taxes. As used herein, “Restructuring Taxes” means
any Taxes imposed and any Incidental Costs incurred as a result of a
Final Determination that the Distribution fails to qualify as tax-free
due to the application of section 355(d) or 355(e) of the Code.

     (m) Ruling Request. As used herein, “Ruling Request” means the
original and supplemental requests or submissions filed by KCC with the
Internal Revenue Service with respect to the Distribution.

     (n) Straddle Period. As used herein, “Straddle Period” means any
taxable year or other tax period for an NPI Company that begins before
the Distribution Date and ends after the Distribution Date.

     (o) Tax or Taxes.

          (i) As used herein, “Tax” or “Taxes” shall mean all taxes, however
denominated, including any interest, penalties or other additions that
may become payable in respect thereof, imposed by any governmental
entity, or any agency or political subdivision of any such governmental
entity, including, but not limited to, all income or profits taxes
(including but not limited to any U.S. federal income taxes, state and
territorial income taxes and income taxes imposed by any governmental
entity other than the United States, its states, territories and local
jurisdictions), alternative or add on minimum tax, payroll and employee
withholding taxes, unemployment insurance, social security taxes,
production taxes, windfall profits taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, customs taxes, gross receipt taxes,
business license taxes, occupational taxes, real and personal property
taxes, workers’ compensation, and other obligations of the same or of a
similar nature to any of the foregoing.

3

 

          (ii) The term “Tax” or “Taxes” shall include any liability imposed
under Treas. Reg. §1.1502-6 of the Code (or any similar provision of
state, local or foreign law that imposes liability as a result of being a
member of a consolidated, combined or unitary group) or as a result of
any tax sharing or indemnity agreement.

     (p) Tax Return or Return. As used herein, “Tax Return” or “Return”
shall mean any return, filing, questionnaire, information report,
declaration or estimated tax, or other document required to be filed,
including amended returns and claims for refund that may be filed, for
any Tax period with any Tax authority in connection with any Tax or Taxes
(whether or not payment is required to be made with respect to such
filing).

     2. Representations and Warranties.

               (a) KCC hereby represents and warrants that: (i) it has examined the
Ruling Request, and (ii) the facts set forth therein, and the representations
made therein, to the extent such facts and representations are descriptive of
the KCC Companies or the businesses conducted by them, and the representations
made therein regarding the corporate business purpose for the Distribution and
stating that the Distribution is not used principally as a device for the
distribution of the earnings and profits of KCC or NPI or both, were true,
correct and complete in all material respects on the Distribution Date.

               (b) NPI hereby represents and warrants that: (i) it has examined the
Ruling Request; and (ii) the facts set forth therein, and the representations
made therein, to the extent descriptive of the NPI Companies or the Business
were, to its knowledge, information and belief, true, correct and complete in
all material respects on the Distribution Date.

     3. Preparation and Filing of Tax Returns, Payment of Taxes and
Audits and Controversies.

               (a) Preparation and Filing of Returns.

                     (i) The preparation and filing of any Tax Return for the NPI Companies
for a Tax period which ends on or prior to the Distribution Date shall be the
responsibility of KCC.

                     (ii) The preparation and filing of any Tax Return for the NPI Companies
for a period which ends after the Distribution Date shall be the responsibility
of NPI. Until the third anniversary of the Distribution Date, or unless
consented to by KCC in writing (which consent shall not be unreasonably
withheld), NPI shall prepare such Tax Returns in a manner consistent with the
past practices and methods used in preparing the Tax Returns for the Business
for periods ending on or prior to the Distribution Date (unless such practices
or methods are no longer permissible under the Code or any other applicable Tax
law). Said consistency shall include, but not be limited to, tax depreciation
method, tax useful life, tax accounting methods and other tax elections
previously made by KCC but shall not prohibit NPI from adopting a method
different from that utilized by KCC for determining its inventory.
Notwithstanding the foregoing, NPI is free to take Tax positions on its Tax
Returns, unless such positions might reasonably affect the Tax liability of KCC
for any Pre-

4

 

Distribution Period. The parties shall cooperate in accordance with
Section 6 below for purposes of determining whether a KCC Tax position would be
compromised by positions taken by NPI on a Tax Return that NPI has
responsibility for preparing and filing.

                     (iii) NPI shall prepare and deliver to KCC by overnight mail to KCC any
Straddle Period Tax Return for KCC’s review no later than twenty (20) days
prior to the due date or extended due date for filing such Straddle Period Tax
return. KCC shall provide any comments or objections to the draft Straddle
Period Tax Return to NPI no later than fifteen (15) days prior to the due date
or extended due date for filing such return. If KCC disagrees with any
material item to be reported or reflected in such Tax Return, such dispute
shall be resolved as provided for under Section 7.

                     (iv) NPI and KCC shall cooperate fully with respect to the preparation
and filing of any Tax Return hereunder, and each shall promptly make available
to the other, upon reasonable request, such records, documents, information and
other available data within each company’s possession or control which is
pertinent to such Return.

                     (v) All reasonable costs and expenses incurred in preparing and filing
such Straddle Period Tax Returns shall be paid by NPI, provided however, that
KCC shall reimburse NPI for the portion of such costs that are apportioned to
the Pre-Distribution Period. Such costs will be apportioned to the
Pre-Distribution Period by multiplying the total amount of such costs by a
fraction, the numerator of which is the number of days in the period covered by
the Tax Return falling within the Pre-Distribution Period and the denominator
of which is the total number of days in the period covered by the Tax Return.

                     (vi) If for any taxable year beginning on or after the Distribution Date,
the NPI Companies recognize a net operating loss or a net capital loss which
any member of the NPI Companies, under applicable law, is permitted or required
to carry back to a prior taxable year of KCC or a KCC Company, then, KCC (or a
KCC Company) shall, at NPI’s sole cost and expense, file appropriate refund
claims within a reasonable period after being requested to do so by NPI. KCC
(or the KCC Company receiving such refund) shall promptly remit to NPI any
refunds it receives with respect to any such net operating loss or net capital
loss carried back. Notwithstanding the foregoing, a loss that is permitted,
but not required, to be carried back, shall only be carried back with the prior
written consent of KCC (which consent may be given or denied in the sole
discretion of KCC).

               (b) Liability for Taxes.

                     (i) KCC shall be liable for and shall make payment of any Tax on account
of the NPI Companies for any period ending on or prior to the Distribution
Date. Except as otherwise provided in Section 3(a)(vi), KCC shall be entitled
to receive any refund of such Taxes for any such Tax periods. All reasonable
costs and expenses incurred in preparing and filing the Tax Returns reporting
such Tax shall be paid by KCC. Refunds of Taxes paid by KCC, if any, received
by NPI shall be remitted to KCC within thirty (30) days following receipt. KCC
shall indemnify and hold harmless NPI for the Taxes described in this paragraph
(i).

5

 

                     (ii) NPI shall be liable for and shall make payment of any Tax on account
of the NPI Companies for any period beginning after the Distribution Date. NPI
shall be entitled to receive any refund of such Taxes for any such Tax periods.
Refunds of Taxes paid by NPI, if any, received by KCC shall be remitted to NPI
within thirty (30) days following receipt. NPI shall indemnify and hold
harmless KCC for the Taxes described in this paragraph (ii).

                     (iii) NPI shall file all Straddle Period Tax Returns and pay any Tax shown
as due and owing thereon. In the case of any Straddle Period, KCC and NPI will
elect, to the extent permitted under applicable law, to treat the Distribution
Date as the last day of the taxable period of the relevant entity and the
liability for Taxes shall be apportioned to the Pre-Distribution Period based
on the “closing of the books” method described in Treas. Reg.
§1.1502-76(b)(2)(i) or any similar provision of state, local or foreign law.
In any case where applicable law does not permit the parties to treat the
Distribution Date as the last day of the taxable year or period, any Taxes
arising out of or relating to a Straddle Period will be apportioned to the
Pre-Distribution Period based on a closing of the books of the relevant entity;
provided, however, that (a) exemptions, allowances or deductions that are
calculated on an annualized basis (including depreciation, amortization and
depletion deductions) will be apportioned on a daily pro rata basis and (b)
solely for purposes of determining the marginal tax rate applicable to income
during such period in a jurisdiction in which such tax rate depends upon the
level of income, annualized income will be taken into account. Notwithstanding
the foregoing, Taxes imposed on a periodic basis (e.g., property taxes) will be
apportioned to the Pre-Distribution Period by multiplying the Taxes by a
fraction, the numerator of which is the number of days in the period falling
within the Pre-Distribution Period and the denominator of which is the total
number of days in the period upon which the Tax is imposed. KCC shall
indemnify NPI for those Taxes that are apportioned to the Pre-Distribution
Period, and shall be entitled to any refunds thereof. NPI shall pay the Tax
due on all Straddle Period Tax Returns, but will be entitled to receive any
refund of those Taxes to the extent they are not owed to KCC.

                     (iv) With respect to any Straddle Period Tax Returns to be filed by NPI
after the Distribution Date pursuant to Section 3(a)(iii), NPI shall provide
KCC with a written request showing in reasonable detail the calculation of the
amount of KCC’s Taxes (and any other amounts) owing by KCC to NPI pursuant to
this Agreement 30 days prior to the due date for filing the Return. KCC shall
provide its comments to NPI and shall pay to NPI any amount not in dispute at
least 15 days prior to the due date for filing the return. In the event that
KCC disagrees with a position taken on the Return, the parties shall resolve
their dispute in accordance with Section 7 of this Agreement; provided however
that any matter in dispute 10 days prior to filing the Return shall be
submitted to a third party in accordance with Section 7 for resolution before
the due date of the Return.

                     (v) Notwithstanding the foregoing, KCC shall be liable for Restructuring Taxes
imposed solely as a result of a KCC Tainting Act. NPI shall be liable for
Restructuring Taxes imposed solely as a result of an NPI Tainting Act. KCC and
NPI shall each bear 50% of the liability for Restructuring Taxes in the event
there is both a KCC Tainting Act and an NPI Tainting Act.

6

 

               (c) Tax Consequences of Payments. To the extent permitted by applicable
law, the parties hereto shall treat any payment made pursuant to this Agreement
as a capital contribution or a distribution, as the case may be, immediately
prior to the Distribution Date and, accordingly, as not includible in the
taxable income of the recipient. Notwithstanding the immediately preceding
sentence, if any such payment (or portion thereof) causes, directly or
indirectly, an increase in the taxable income of the recipient (or one of its
subsidiaries) the payor’s payment obligation (or portion thereof) shall be
grossed up to take into account the additional Tax owed by the recipient (or
any of its subsidiaries), assuming the highest aggregate marginal statutory
federal, state, local or foreign Tax rates in effect at the time of payment.

               (d) Audits and Controversies.

                     (i) All Audits with respect to Taxes for taxable periods ending on or
before the Distribution Date shall be under the exclusive control and direction
of KCC.

                     (ii) Except as provided in subsection (d)(iii) below, all Audits, with
respect to Taxes for a taxable period of an NPI Company which begins after the
Distribution Date, shall be under the exclusive control and direction of NPI.

                     (iii) With respect to Straddle Periods:

                          (A) NPI shall notify KCC of any such Audit and shall provide KCC with all
material information concerning such Audits as it may affect KCC within thirty
(30) days after such information becomes known to NPI; and

                          (B) No proposed resolution between the appropriate Tax authority and NPI
of any Audit adjustment relating to such Taxes shall be accepted by NPI unless
NPI shall have first notified KCC, in writing, of such proposed resolution if
the proposed resolution could affect KCC’s indemnification obligations under
this Agreement. KCC shall then have thirty (30) days from the date of receipt
of notice to object to the resolution in writing and to provide NPI with any
additional support or proof with respect to its portion of such adjustment or
be bound by the adjustment as agreed to by NPI. In the event KCC shall so
object, and NPI agrees, which agreement shall not be unreasonably withheld,
that such additional support and proof is relevant to the Audit adjustment, NPI
will use all reasonable efforts to resolve such Audit adjustment with the Tax
authority giving due regard to such additional support or proof.

                     (iv) Notwithstanding the foregoing, if the United States taxing
authorities assert on Audit of a KCC Tax Return that a Tax is due with respect
to the Distribution for which NPI may be obligated to indemnify KCC pursuant to
this Agreement, KCC shall notify NPI of any such Audit and shall provide NPI
with all material information concerning such Audit as it may affect NPI within
thirty (30) days after such information becomes known to KCC. The party that
is liable for such Tax with respect to the Distribution and acknowledges such
liability in writing shall control the Audit or the Controversy to the extent
it relates to such Tax. In the event that neither party acknowledges its
liability in writing or in the event that both parties are liable for the
aforementioned

7

 

Tax, KCC shall control the Audit or Controversy; provided however, that
KCC shall: (i) take reasonable steps to ensure that NPI is notified of any
developments in the Audit or Controversy to the extent it relates to such Tax,
(ii) provide NPI with copies of any written materials relating to such Audit or
Controversy as far as it relates to such Tax, (iii) consult with NPI and offer
NPI a reasonable opportunity to comment before submitting any written materials
to any Tax authority in connection with such Audit or Controversy to the extent
it relates to such Tax, and (iv) defend (or settle) such Audit or Controversy
in good faith.

               (e) Termination of Tax Sharing Agreements. Except as set forth in this
Agreement or the Distribution Agreement, and in consideration for the mutual
indemnities and other obligations of this Agreement, any and all Tax sharing
agreements between any of the KCC Companies, on the one hand, and the NPI
Companies, on the other hand, shall be terminated as of the Distribution Date.

     4. Certain Tax Adjustments.

     Notwithstanding anything herein to the contrary, the parties recognize
that during the course of an Audit or Controversy certain adverse Tax
adjustments imposed on KCC or NPI, in any Tax period, may have an unintended
beneficial effect with respect to NPI or KCC, respectively, in the same or
another Tax period. Accordingly, the parties agree it is appropriate to
provide for the following:

               (a) KCC’s Tax Detriment. If, during any twelve month period which ends on
December 31, as a result of one or more Audit(s) or Controversy(ies),
additional Taxes in excess of $50,000 are imposed upon KCC with respect to any
Tax period (a “Tax Detriment”) which causes less Tax to be incurred by NPI in
any Tax period for which NPI is liable under this Agreement which has not been
closed (a “Tax Benefit”), whether preceding or subsequent to or concurrent with
the Tax period in which KCC suffers the Tax Detriment, NPI shall pay to KCC,
upon thirty (30) days written notice and demand, in U.S. currency and subject
to the proviso set forth below, an amount equal to the value of such Tax
Benefit, based on the following assumptions:

                     (i) NPI will have sufficient income to use such Tax Benefit in the
earliest open Tax period or periods it otherwise would be entitled to use such
Tax Benefit whether or not NPI does in fact have such income;

                     (ii) the applicable Tax rates for NPI will equal the highest statutory
marginal Tax rates in effect for the Tax period in which the additional Taxes
were imposed upon KCC; and

                     (iii) any such Tax Benefit to NPI, if for a Tax period subsequent to the
date of demand by KCC, shall be discounted back to the date of payment using a
discount rate equal to the Applicable Federal Rate, compounded annually, as in
effect at the date of such demand by KCC; provided, however, NPI shall have the
right to elect to defer the payment of such Tax Benefit to KCC until the
earliest Tax period or periods (“KCC’s Tax Benefit Period”) in which KCC could
have used such Tax benefit had KCC not distributed NPI to its shareholders.
Such election by NPI

8

 

shall be in writing and transmitted to KCC within thirty (30) days
following written notice and demand from KCC for such payment. Payment shall
be made on or before April 15 of the year following KCC’s Tax Benefit Period.

               (b) NPI’s Tax Detriment. If, during any twelve month period which ends on
December 31, as a result of one or more Audit(s) or Controversy(ies), NPI
suffers a Tax Detriment in excess of $50,000 with respect to any Tax period
which provides KCC with a Tax Benefit in any Tax period which has not been
closed, whether preceding or subsequent to or concurrent with the Tax period in
which NPI suffers the Tax Detriment, KCC shall pay to NPI, upon thirty (30)
days written notice and demand, in U.S. currency and subject to the proviso set
forth below, an amount equal to the value of such Tax Benefit, based on the
following assumptions:

                     (i) KCC will have sufficient income to use such Tax Benefit in the
earliest open Tax period or periods it otherwise would be entitled to such Tax
Benefit whether or not KCC does in fact have such income;

                     (ii) the applicable Tax rates for KCC will equal the highest statutory
marginal Tax rates in effect for the Tax period in which the additional Taxes
were imposed upon NPI; and

                     (iii) any such Tax Benefit to KCC, if for a Tax period subsequent to the
date of demand by NPI, shall be discounted back to the date of payment using a
discount rate equal to the Applicable Federal Rate, compounded annually, as in
effect at the date of such demand by NPI; provided, however, KCC shall have the
right to elect to defer the payment of such Tax Benefit to NPI until the
earliest Tax period or periods (“NPI’s Tax Benefit Period”) in which NPI
suffered such Tax detriment. Such election by KCC shall be in writing and
transmitted to NPI within thirty (30) days following written notice and demand
from NPI for such payment. Payment shall be made on or before April 15 of the
year following NPI’s Tax Benefit Period.

     5. Tax Attributes.

     Any Tax attribute generated by the NPI Companies shall, to the extent
permitted by the applicable law of the Tax jurisdiction in question, remain
with the NPI Companies. In any case where the applicable law of the Tax
jurisdiction in question requires such Tax attribute to be allocated between
KCC and NPI, such allocation shall be made as provided by the law of such
jurisdiction.

     6. Cooperation between Parties.

     The parties to this Agreement recognize that cooperation must be
undertaken by them in numerous circumstances involving Tax matters, including
the preparation of Tax Returns, the filing thereof, the defense of Audits,
prosecution of Controversies with Tax authorities before administrative or
judicial bodies, Tax rulings regarding the Tax consequences of certain
transactions from appropriate Tax authorities, including the Internal Revenue
Service, and other efforts with respect to Tax consequences involving the
mutual interests of KCC and NPI, including

9

 

administrative and legislative matters. Accordingly, the parties hereby
agree that they will cooperate with one another with respect to the following:

               (a) Requests for Information. Upon request, a party shall assist the
other party with respect to books, records, information, documents and any
other appropriate data reasonably requested by one party in writing to the
other. Response to such request shall be accomplished within a reasonable
period of time, but in no event more than thirty (30) days after receipt of
such request unless unusual or special circumstances exist for such delay.

               (b) Availability of Personnel. The representatives of one party shall be
available to collect and interpret books, records, information, documents and
other appropriate data at the reasonable request of the other party. The
personnel of one party shall also be reasonably available to assist the other
party with respect to Audits and Controversies. Response to such request for
personnel assistance shall be accomplished within a reasonable period of time,
but in no event more than thirty (30) days after receipt of such request unless
unusual or special circumstances exist for such delay.

               (c) Notification of Adjustments. Notwithstanding the materiality of an
item or whether the other party participates in an Audit, written notification
of any adjustment in a Tax Return of the party responsible for an Audit, which
adjusts an item which affects the other party, shall be furnished to the other
party upon final resolution of the Audit.

               (d) Retention of Records. Unless an original is specifically requested in
writing and in good faith, KCC shall transfer to NPI copies of all books,
records, information, documents and any other appropriate data with respect to
Taxes which may affect NPI in subsequent Tax periods. NPI shall retain, in a
readily accessible location, all books, records, information, documents, and
any other appropriate data which relate to Taxes that may affect KCC for any
Tax period for as long as KCC may be subject to assessment for Tax for any such
Tax period for which it may be liable under this Agreement, unless NPI shall
have first obtained the written consent of KCC to destroy any such books,
records, information, documents and other appropriate data. KCC will notify
NPI of any Tax period for which it is no longer subject to assessment, within a
reasonable period of time after the statute of limitation and any extensions
thereof for the Tax period have lapsed.

     7. Disputes.

     If the parties disagree as to the interpretation of any Tax provision or
the requirements of any Tax law, the parties shall attempt in good faith to
resolve such dispute. If such dispute is not resolved within thirty (30) days,
the parties shall jointly retain the services of a nationally recognized
accounting or law firm (“Arbitrator”) acceptable to each of the parties to
resolve the dispute. The fees of the Arbitrator shall be borne equally by the
parties having the dispute, and the decision of the Arbitrator shall be final
and binding on all parties involved. Following the decision of the Arbitrator,
the parties shall each take or cause to be taken any action that is necessary
or appropriate to implement such decision of the Arbitrator, including, without
limitation, the prompt payment of Taxes as directed by the Arbitrator.

10

 

     8. NPI’s Assurances with Respect to Certain Undertakings.

     NPI covenants as follows:

               (a) Restrictions on Transfer. NPI shall not transfer its business
operations or transfer any subsidiary to any related or unrelated party until
the earliest of the first to occur:

                     (i) the second anniversary of the Distribution Date, or

                     (ii) a favorable ruling from the Internal Revenue Service to the effect
that such transfer will not adversely affect the tax free nature of the
Distribution, or

                     (iii) the receipt of a written consent from KCC with respect to such
transfer, which consent shall not be unreasonably withheld, or

                     (iv) an opinion of tax counsel chosen by KCC and paid for by NPI to the
effect that such transfer will not adversely affect the tax free nature of the
Distribution.

               (b) No Inconsistent Actions. Until the second anniversary of the
Distribution Date, NPI, and its subsidiaries and affiliates, shall take no
action inconsistent with Sections 351, 355 and 368(a)(1)(D) of the Code and the
Regulations thereunder which is ultimately held to cause the formation of NPI,
the contribution of KCC assets to NPI, or the Distribution to be a taxable
transaction; provided however, to the extent (a)(ii), (iii) or (iv) of this
Section has been complied with, this covenant shall not have been breached.

               (c) Breach of Covenants. NPI shall indemnify KCC against, the full amount
of any Taxes and Incidental Costs (on an after-Tax basis assuming the highest
aggregate marginal statutory federal and state Tax rates in effect at the time
of payment of such damages) suffered as a result of any breach by NPI
of any of the covenants set forth above in Section 8(a) or (b).

     9. Mutual Assurances with Respect to Certain Undertakings.

               (a) NPI shall indemnify KCC against the full amount of any Taxes and
Incidental Costs (on an after-Tax basis assuming the highest aggregate marginal
statutory federal and state Tax rates in effect at the time of payment of such
damages) suffered as a result of any breach by NPI of any representation made
by NPI in connection with any Tax opinion provided by Baker & McKenzie with
respect to the qualification of the Distribution as a distribution described in
section 355 of the Code.

               (b) KCC shall indemnify NPI against the full amount of any Taxes and
Incidental Costs (on an after-Tax basis assuming the highest aggregate marginal
statutory federal and state Tax rates in effect at the time of payment of such
damages) suffered as a result of any breach by KCC of any representation made
by KCC in connection with any Tax opinion provided by Baker & McKenzie with
respect to the qualification of the Distribution as a distribution described in
section 355 of the Code.

11

 

     10. Representation as to Present Intention.

     NPI represents to KCC that neither it nor any of its officers or directors
is aware of any negotiations or intentions to sell or otherwise dispose of all
or substantially all of NPI’s assets or business operations (including any
subsidiary or the assets or business operations thereof) in a transaction or
series of transactions which would give rise to a gain or loss for Tax
purposes. In the event of a breach of such representation by NPI, NPI shall
indemnify KCC against, the full amount of damages suffered as a result of such
breach on an after-Tax basis (assuming the highest aggregate marginal statutory
federal and state Tax rates in effect at the time of payment of such damages).

     11. Binding Effect.

               (a) Due Authorization. KCC and NPI acknowledge and agree that certain
rights and obligations are imposed by this Agreement on their respective
foreign subsidiaries and affiliates which are not direct parties to this
Agreement. KCC and NPI therefore respectively represent and warrant that they
are each:

                     (i) duly authorized to act on behalf of their respective subsidiaries
and affiliates for all purposes under this Agreement,

                     (ii) responsible for the rights and obligations of their respective
subsidiaries and affiliates under this Agreement, and

                     (iii) fully liable for any and all amounts due from their respective
subsidiaries and affiliates which may arise under this Agreement.

               (b) Binding Effect. This Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto and their respective successors and
assigns.

               (c) Governing Law. This Agreement shall be interpreted under and pursuant
to the laws of the State of Delaware.

     12. Notices.

     All notices, approvals, consents, or other communications required to be
given pursuant to this Agreement shall be addressed to the parties as follows:

	 	 	 	 	 
	
	If to KCC:	 	Kimberly-Clark Corporation	 
	 
	 	 	 	 
	

	 	 	Riverview Plaza	 
	

	 	 	Post Office Box 349	 
	

	 	 	Neenah, WI 54957-0349	 
	

	 	 	ATTN: Dave Bernard	 

12

 

	 	 	 	 	 
	

	 	 	Vice-President — Taxes	 
	 
	 	 	 	 
	

	 	 	and	 
	 
	 	 	 	 
	

	 	 	351 Phelps Drive	 
	

	 	 	Irving, Texas 75039	 
	

	 	 	ATTN: General Counsel	 
	 
	 	 	 	 
	

	If to NPI:
	 	Neenah Paper, Inc.	 
	

	 	 	Preston Ridge III	 
	

	 	 	3460 Preston Ridge Road, Suite 600	 
	

	 	 	Alpharetta, GA 30005	 
	

	 	 	ATTN: General Counsel	 
	 
	 	 	 	 
	

	 	 	and	 
	 
	 	 	 	 
	

	 	 	Preston Ridge III	 
	

	 	 	3460 Preston Ridge Road, Suite 600	 
	

	 	 	Alpharetta, GA 30005	 
	

	 	 	ATTN: John Herson, Vice-President — Taxes	 

     All notices, approvals, consents, or other communications shall be in
writing and shall be sent first class mail, postage prepaid, return receipt
requested, unless otherwise specified herein. All consents by KCC shall be
given only by KCC’s senior tax officer.

     13. Miscellaneous.

     (a) Entire Agreement. This Agreement constitutes the entire agreement of
the parties concerning the subject matter hereof and supersedes all other
agreements, whether or not written, in respect of any Tax between or among the
KCC Companies, on the one hand, or the NPI Companies, on the other hand. All
such agreements are hereby cancelled and any rights or obligations existing
thereunder are hereby fully and finally settled without any payment by any
party thereto.

     (b) Amendments. This Agreement may not be amended except by an agreement
in writing, signed by the parties hereto.

     (c) Transfer Taxes. Notwithstanding anything in this Agreement to the
contrary, the Distribution Agreement shall govern liabilities related to sales,
transfer, use or other taxes payable in connection with the transfer of assets
contemplated by the Distribution Agreement.

     (d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. The Agreement may be
delivered by facsimile transmission of a signed copy thereof.

     (e) Assignment. This Agreement and all of the provisions hereof shall be
binding upon

13

 

and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Except with respect to a merger of a party, neither
this Agreement nor any of the rights or obligations hereunder shall be assigned
by any party hereto without the prior written consent of the other parties,
which consent shall not be unreasonably withheld or delayed; provided, however,
that KCC and NPI may assign their respective rights, interests, duties
liabilities and obligations under this Agreement to any other KCC Company, or
NPI Company, respectively, but such assignment shall not relieve KCC or NPI of
its obligations hereunder.

     (f) Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

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     IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
effective as of the date first above written.

	 	 	 	 	 
	

	 	KIMBERLY-CLARK CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	 
	 	 	 	 
	

	 	Name:
	 	Rodney G. Olsen
	 
	 	 	 	 
	

	 	Title:
	 	Vice President — Finance
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	

	 	NEENAH PAPER, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	 
	 	 	 	 
	

	 	Name:
	 	Sean T. Erwin
	 
	 	 	 	 
	

	 	Title:
	 	Chief Executive Officer

15

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