Document:

Exhibit
10.2

CROCS, INC.

2007
EQUITY INCENTIVE PLAN

1.                                       Purpose.  The purpose of the Crocs, Inc.
2007 Equity Incentive Plan (the “Plan”) is to promote the interests of the
Company and its stockholders by aligning the interests of employees and others
who are selected to be Participants with those of the Company’s stockholders,
providing Participants with a strong incentive to put forth maximum effort for
the continued success and growth of the Company and its Affiliates, and
assisting the Company in attracting, motivating and retaining the best
available individuals for service to the Company.

2.                                       Definitions.  The capitalized terms used in
the Plan have the meanings set forth below.

(a)                                     “Affiliate” means any corporation that is a “parent
corporation” or “subsidiary corporation” of the Company, as those terms are
defined in Code Sections 424(e) and (f), or any successor provisions, and for
purposes other than the grant of Incentive Stock Options, any joint venture in
which the Company or any such “parent corporation” or “subsidiary corporation”
owns an equity interest.

(b)                                    “Agreement” means any written or electronic
agreement, instrument or document evidencing the grant of an Award in such form
as has been approved by the Committee, including all amendments thereto.

(c)                                     “Award” means a grant made under the Plan in
the form of Restricted Stock, Restricted Stock Units, Options, Stock
Appreciation Rights, Performance Units, Stock or any other stock-based
award.

(d)                                    “Board” means the Board of Directors of the
Company.

(e)                                     “Cause” means (i) the Participant’s material
breach of any confidentiality, non-disclosure, non-solicitation,
non-competition, invention assignment or similar agreement with the Company or
any Affiliate; (ii) an act or acts of dishonesty undertaken by the Participant
resulting in gain or personal enrichment of the Participant at the expense of
the Company; (iii) persistent failure by the Participant to perform the duties
of the Participant’s employment, which failure is demonstrably deliberate on
the part of the Participant and constitutes gross neglect of duties by the
Participant; (iv) any failure by the Participant to materially conform to the
Company’s Code of Business Conduct and Ethics; or (v) the indictment or
conviction of the Participant for a felony if the act or acts constituting the
felony are substantially detrimental to the Company or its reputation.

(f)                                    “Change of Control” means one of the
following:

(1)                               a majority of the directors of the Company shall be persons other than
persons

(i)                                         for whose election proxies shall have been
solicited by the Board, or

(ii)                                    who are then serving as directors appointed
by the Board to fill vacancies on the Board caused by death or resignation (but
not by removal) or to fill newly created directorships;

(2)                                 35% or more of (1) the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (“Outstanding Company Voting Securities”)
or (2) the then outstanding Shares of Stock (“Outstanding Company Common Stock”)
is acquired or beneficially owned (as defined in Rule 13d-3 under the Exchange
Act, or any successor rule thereto) by any individual, entity or group (within
the meaning of Section 13d(3) or 14(d)(2) of the Exchange Act), provided,
however, that the following acquisitions and beneficial ownership shall not
constitute Changes of Control pursuant to this Section 2(f)(2):

(i)                                       any acquisition or beneficial ownership by
the Company or a subsidiary of the Company, or

(ii)                                    any acquisition or beneficial ownership by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or one or more of its subsidiaries, or

(iii)                                 any acquisition or beneficial ownership by a
parent entity of the Company (after giving effect to the merger or statutory
shore exchange) or its wholly-owned subsidiaries, as long as they shall remain
wholly-owned subsidiaries, directly or indirectly of 100% of the Outstanding
Company Voting Securities as a result of a merger or statutory share exchange
that complies with Section 2(f)(3)(i)(A), (B) and (C) or the exception in
Section 2(f)(3)(ii) in all respects;

(3)                               the Company consummates

(i)                            a merger of the Company with or into another
entity, other than a merger in which:

(A)                              the persons who were the beneficial owners,
respectively, of the Outstanding Company Voting Securities and Outstanding
Company Common Stock immediately prior to such merger beneficially own,
directly or indirectly, immediately after the merger, more than 50% of,
respectively, the then outstanding common stock and the then outstanding voting
power of the voting securities (or comparable equity interests) of the
surviving entity in the merger or its direct or indirect parent entity in
substantially the same proportions (except for those exercising statutory
dissenters’ rights) as their ownership of the Outstanding Company Voting
Securities and Outstanding Company Common Stock immediately prior to the
merger,

(B)                                if voting securities of the direct or
indirect parent entity of the Company (after giving effect to the merger) are
exchanged for Outstanding Company Voting Securities in the merger, all holders
of any class or series of Outstanding Company Voting Securities immediately
prior to the merger have the right to receive substantially the same per share
consideration in exchange for their Outstanding Company Voting Securities as
all other holders of such class or series (except for those exercising
statutory dissenters’ rights), and

(C)                                no individual, entity or group (other than a
direct or indirect, parent entity that, after giving effect to the merger,
directly or indirectly through one or more wholly owned subsidiaries,
beneficially owns 100% of the

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outstanding voting
securities of the entity resulting from the merger) beneficially owns, directly
or indirectly, immediately after the merger, 35% or more of the voting power of
the outstanding voting securities or the outstanding common stock of the entity
(or comparable equity interests) resulting from the merger.

(ii)                                    an exchange, pursuant to a statutory exchange
of Outstanding Company Voting Securities held by stockholders of the Company
immediately prior to the exchange, of shares of one or more classes or series
of Outstanding Company Voting Securities for cash, securities or other
property, except for voting securities of a direct or indirect parent entity of
the Company (after giving effect to the statutory share exchange) owning
directly, or indirectly through wholly-owned subsidiaries, both beneficially
and of record 100% of the Outstanding Company Voting Securities immediately
after the statutory share exchange if (1) the persons who were the beneficial
owners, respectively, of the Outstanding Company Voting Securities and the
Outstanding Common Stock of the Company immediately before such statutory share
exchange own, directly or indirectly, immediately after the statutory share
exchange more than 50% of, respectively, the voting power of the then
outstanding voting securities and the then outstanding common stock (or comparable
equity interests) of such parent entity, and (2) all holders of any class or
series of Outstanding Company Voting Securities immediately prior to the
statutory share exchange have the right to receive substantially the same per
share consideration in exchange for their Outstanding Company Voting Securities
as all other holders of such class or series (except for those exercising
statutory dissenters’ rights), or

(iii)                                 a sale or other disposition of all or
substantially all of the assets of the Company (in one transaction or a series
of transactions); or

(4)                                 the stockholders of the Company approve a
definitive agreement or plan to liquidate or dissolve the Company.

Notwithstanding anything herein stated, no Change of
Control shall be deemed to occur unless it would be deemed to constitute a
change in ownership or effective control, or a change in the ownership of a
substantial portion of the assets, of a business under Section 409A of the
Code.

(g)                                    “Code” means the Internal Revenue Code of
1986, as amended and in effect from time to time or any successor statute, and
the regulations promulgated thereunder.

(h)                                    “Committee” means two or more Non-Employee
Directors designated by the Board to administer the Plan under Section 3.1,
each member of which shall be (i) an independent director within the meaning of
Rule 4200(15) of the Nasdaq Marketplace Rules, (ii) considered a non-employee
director within the meaning of Exchange Act Rule 16b-3, and (iii) an
outside director for purposes of Code Section 162(m).

(i)                                        “Company” means Crocs, Inc., a Delaware
corporation, or any successor to all or substantially all of its businesses by
merger, consolidation, purchase of assets or otherwise.

(j)                                        “Disability” means the disability of a
Participant such that the Participant is considered disabled under any
retirement plan of the Company which is qualified under Section 401 of the
Code, or as otherwise determined by the Committee.

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(k)                                     “Employee” means an employee (including an
officer or director who is also an employee) of the Company or an Affiliate.

(l)                                        “Exchange Act” means the Securities Exchange
Act of 1934, as amended and in effect from time to time or any successor
statute.

(m)                                  “Fair Market Value” as of any date means,
unless otherwise expressly provided in the Plan, the closing sale price of a
Share on the Nasdaq Global Select Market (or such other national securities
exchange as may at the time be the principal market for the Shares) on that
date or, if no sale of the Company’s Shares occurred on that date, on the next
preceding day on which a sale of Shares occurred.  If the Shares
are not then listed and traded upon the Nasdaq Global Select Market or other
national securities exchange, Fair Market
Value shall be what the Committee determines in good faith to be 100% of
the fair market value of a Share on that date, using such criteria as it shall
determine, in its sole discretion, to be appropriate for valuation.

(n)                                    “Fundamental Change” means a dissolution or
liquidation of the Company, a sale of substantially all of the assets of the
Company, a merger or consolidation of the Company with or into any other
corporation, regardless of whether the Company is the surviving corporation, or
a statutory share exchange involving capital stock of the Company.

(o)                                 “Grant Date” means the date on which the
Committee approves the grant of an Award under the Plan, or such later date as
may be specified by the Committee on the date the Committee approves the Award.

(p)                                    “Incentive Stock Option” means any Option
designated as such and granted in accordance with the requirements of Code
Section 422.

(q)                                    “Insider” as of a particular date means any
person who, as of that date is an officer of the Company as defined under
Exchange Act Rule 16a-1(f).

(r)                                       “Non-Employee Director” means a member
of the Board who is not an Employee.

(s)                                     “Non-Statutory Stock Option” means an
Option other than an Incentive Stock Option.

(t)                                       “Option” means a right to purchase a number
of Shares at a specified price.

(u)                                    “Participant” means a person to whom an Award
is or has been made in accordance with the Plan.

(v)                                    “Performance-Based Compensation” means an
Award to a “covered officer” (as defined in Section 162(m)(3) of the Code) that
is intended to constitute “performance-based compensation” within the meaning
of Section 162(m)(4)(c) of the Code.

(w)                                  “Performance Period” means the period of time
as specified in an Agreement over which Performance Units or any other Award
subject to Performance Measures are to be earned.

(x)                                      “Performance Measures” means any measures of performance
established by the Committee in connection with the grant of an Award.  In the case of any such grant intended to
constitute Performance-Based Compensation, the Performance Measures shall consist of one or a combination of two or
more of the following performance criteria: net sales; net earnings; earnings
before income taxes;

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earnings before interest and taxes; earnings
before interest, taxes, depreciation and amortization; earnings per share
(basic or diluted); profitability as measured by return ratios (including
return on assets, return on equity, return on investment and return on net
sales) or by the degree to which any of the foregoing earnings measures exceed
a percentage of net sales; cash flow; market share; margins (including one or more
of gross, operating and net earnings margins); stock price; total stockholder
return; asset quality; non-performing assets; revenue growth; operating income;
pre- or after-tax income; cash flow per share; operating assets; improvement in
or attainment of expense levels or cost savings; economic value added; and
improvement in or attainment of working capital levels. Any Performance Measure utilized may be
expressed in absolute amounts, on a per share basis, as a growth rate or change
from preceding periods, or as a comparison to the performance of specified
companies or other external measures, and may relate to one or any combination
of corporate, group, unit, division,
Affiliate or individual performance.

(y)                                    “Performance Unit” means the right to receive
the Fair Market Value of one Share upon the achievement of specified levels of
one or more Performance Measures in accordance with an Award granted under
Section 11.

(z)                                      “Plan” means this Crocs, Inc. 2007 Equity
Incentive Plan, as amended and in effect from time to time.

(aa)                               “Restricted Stock” means Shares issued in
accordance with an Award granted under Section 7 so long as the retention
and/or vesting of such Shares remains subject to conditions or restrictions.

(bb)                          “Restricted Stock Unit” means a derivative security provided in
accordance with an Award granted under Section 8 which represents the right to
receive, in cash and/or Stock as determined by the Committee, the Fair Market
Value of one Share, and the retention, vesting and/or settlement of which is
subject to conditions or restrictions.

(cc)                               “Retirement” means
termination of an Employee’s employment, other than for Cause, at or after age
65.

(dd)                             “Share” means a share of Stock.

(ee)                               “Stock” means the common stock, no par value,
of the Company.

(ff)                                   “Stock Appreciation Right” means a right, the
value of which is determined in relation to the appreciation in value of Shares
in accordance with an Award granted under Section 10.

(gg)                             “Subsidiary” means a “subsidiary corporation”
as that term is defined in Code Section 424(f) or any successor provision.

(hh)                             “Successor” means the legal representative of
an incompetent Participant, or if the Participant is deceased means the estate
of the Participant or the person or persons who may, by bequest or inheritance,
or pursuant to the terms of an Award, acquire the right to exercise an Option
or Stock Appreciation Right or to receive cash and/or Shares issuable in
satisfaction of an Award in the event of the Participant’s death.

(ii)                                     “Transferee” means any “family member” (as
defined by the general instructions to Form S-8 under the Securities Act of
1933) of the Participant.

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3.                                       Administration and Indemnification.

(a)                                     Administration.

(1)                                 The Committee shall administer the Plan.  The Committee shall have exclusive power to
(i) make Awards; (ii) determine when and to whom Awards will be granted, the
form of each Award, the amount of each Award, and any other terms or conditions
of each Award consistent with the Plan; (iii) prescribe and amend the terms of
Agreements evidencing Awards; and (iv) determine whether, to what extent and
under what circumstances, Awards may be settled, paid or exercised in cash,
Shares or other Awards, or other property or canceled, forfeited or suspended.  A majority of the members of the Committee
shall constitute a quorum for any meeting of the Committee, and acts of a
majority of the members present at any meeting at which a quorum is present or
the acts unanimously approved in writing by all members of the Committee shall
be the acts of the Committee. 
Notwithstanding the foregoing, the Board shall perform the duties and
have the responsibilities of the Committee with respect to Awards made to
Non-Employee Directors.

(2)                                 Solely for purposes of determining and
administering Awards to Participants who are not Insiders, the Committee may
delegate all or any portion of its authority under the Plan to one or more
persons who are not Non-Employee Directors.

(3)                                 To the extent within its discretion and
subject to Sections 16 and 17, the Committee may amend the terms and conditions
of any outstanding Award.

(4)                                 It is the intent that the Plan and all Awards
granted pursuant to it shall be administered by the Committee so as to permit
the Plan and Awards to comply with Exchange Act Rule 16b-3, except in such
instances as the Committee, in its discretion, may so provide.  If any provision of the Plan or of any Award
would otherwise frustrate or conflict with the intent expressed in this Section
3(a)(4), that provision to the extent possible shall be interpreted and deemed
amended in the manner determined by the Committee so as to avoid the
conflict.  To the extent of any remaining
irreconcilable conflict with this intent, the provision shall be deemed void as
applied to Insiders to the extent permitted by law and in the manner deemed
advisable by the Committee.

(5)                                 The Committee’s interpretation of the Plan
and of any Award or Agreement made under the Plan and all related decisions or
resolutions of the Board or Committee shall be final and binding on all parties
with an interest therein.  Consistent
with its terms, the Committee shall have the power to establish, amend or waive
regulations to administer the Plan.  In
carrying out any of its responsibilities, the Committee shall have
discretionary authority to construe the terms of the Plan and any Award or
Agreement made under the Plan.

(6)                                 In order to facilitate compliance with the
applicable provisions of the laws in other countries in which the Company or
its Affiliates operate or have Employees or non-employee consultants and
advisors, and notwithstanding any other provision of this Plan, the Committee
shall have the power and authority to (i) determine which (if any) individuals
rendering services or employed outside the United States are eligible to
participate in the Plan or to receive any type of Award hereunder; (ii)
determine which non-U.S.-based Affiliates or operations may participate in the
Plan; (iii) modify the terms and conditions of any Awards made to such
individuals or with respect to such non-U.S.-based Affiliates or operations;
and (iv) establish sub-plans, modify methods of exercise, modify payment
restrictions on sale or transfer 

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of Shares and other terms
and procedures to the extent deemed necessary or desirable by the Committee to
comply with applicable laws of the non-U.S. jurisdiction.

(b)                                 Indemnification.  Each
person who is or shall have been a member of the Committee, or of the Board,
and any other person to whom the Committee delegates authority under the Plan,
shall be indemnified and held harmless by the Company, to the extent permitted
by law, against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may
be a party or in which such person may be involved by reason of any action
taken or failure to act, made in good faith, under the Plan and against and
from any and all amounts paid by such person in settlement thereof, with the
Company’s approval, or paid by such person in satisfaction of any judgment in
any such action, suit or proceeding against such person, provided such person
shall give the Company an opportunity, at the Company’s expense, to handle and
defend the same before such person undertakes to handle and defend it on such
person’s own behalf.  The foregoing right
of indemnification shall not be exclusive of any other rights of
indemnification to which such person or persons may be entitled under the
Company’s Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.

4.                                       Shares Available Under the Plan.

(a)                                     Subject to adjustment pursuant to Section 17,
the number of Shares that may be granted under the Plan shall not exceed
4,500,000, of which not more than 1,500,000 Shares may be the subject of Awards
other than Options and Stock Appreciation Rights.  The
Shares issued under the Plan may come from authorized and unissued shares or
treasury shares.

(b)                                    Any Shares subject to that portion of an
Award which, for any reason, is forfeited or expires or terminates unexercised
or unearned may again be used for future Awards.

(c)                                     Any Shares subject to an Award settled in
cash or other property in lieu of Shares may again be used for future Awards.

(d)                                    For the purposes of computing the total
number of Shares granted under the Plan, the following rules shall apply to
Awards payable in Shares where appropriate:

(1)                                 Each
Award shall initially be deemed to involve the grant of the maximum number of
Shares in which the particular Award is denominated.

(2)                                 If a Stock Appreciation Right has been
exercised and settled in Shares, the gross number of Shares with respect to
which such exercise occurred shall be deemed granted and may not again be the
subject of Awards under the Plan.

(3)                                 To
the extent an Award is paid or settled in some other security, it shall be
deemed to have involved the grant of the number of Shares in which that portion
of the Award was denominated.

(4)                                 Where
the number of Shares available under the Award is variable on the Grant Date,
the number of Shares granted shall be deemed, prior to the settlement of the
Award, to be the maximum number of Shares that could be received under that
particular Award.

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(5)                                 Where
two or more types of Awards (all of which are payable in Shares) are granted to
a Participant in tandem with each other, such that the exercise of one type of
Award with respect to a number of Shares cancels at least an equal number of
Shares of the other, such joint Awards shall be deemed to involve the grant of
the maximum number of Shares available under the largest single Award.

(6)                                 Shares tendered or withheld in payment of an
Option exercise price or to satisfy any tax withholding obligation shall not be
added to the total number of Shares available for grant under the Plan.

(7)                                 Shares that are repurchased by the Company
with Option proceeds shall not be added to the total number of Shares available
for grant under the Plan.

(e)                                     No fractional Shares may be issued under the
Plan; however, cash shall be paid in lieu of any fractional Share in settlement
of an Award.

(g)                                    The maximum number of Shares that may be
issued pursuant to Incentive Stock Options shall be 4,500,000, which limit will
be subject to adjustment under Section 17 to the extent such adjustment is
consistent with adjustments permitted of a plan authorizing the grant of
incentive stock options under Code Section 422. 
The aggregate number of Shares subject to Options and/or Stock
Appreciation Rights granted during any calendar year to any one Participant
shall not exceed 500,000.  The aggregate
number of Shares subject to Restricted Stock and/or Restricted Stock Unit
Awards granted during any calendar year to any one Participant shall not exceed
500,000.  The foregoing limits shall be
subject to adjustment under Section 17, but only to the extent that such
adjustment will not affect the status of any Award intended to qualify as
performance-based compensation under Code Section 162(m).

5.                                       Eligibility.  Participation in the Plan
shall be limited to (i) Employees, (ii) individuals who are not Employees but
who provide services to the Company or an Affiliate, including services
provided in the capacity of a consultant, advisor or director, such as a
Non-Employee Director, and (iii) any individual the Company desires to induce
to become an Employee or Non-Employee Director, provided that any such grant
shall be contingent upon such individual becoming an Employee or Non-Employee
Director, as the case may be.  The
granting of Awards is solely at the discretion of the Committee, except that
Incentive Stock Options may only be granted to Employees.  References herein to “employed,” “employment”
or similar terms (except “Employee”) shall include the providing of services in
any capacity, including as a director.  Neither the transfer of employment of a
Participant between any of the Company or its Affiliates, nor a leave of
absence granted to such Participant and approved by the Committee, nor any
change in status from an Employee to a consultant of the Company shall be
deemed a termination of employment for purposes of the Plan.

6.                                       General Terms of Awards.

(a)                                  Amount of Award.  Each
Award shall be evidenced by an Agreement setting forth the number of Shares
subject to the Award together with such other terms and conditions applicable
to the Award (and not inconsistent with the Plan) as determined by the
Committee, which may include conditions on vesting, exercisability, lapsing of
restrictions or payment that are tied to Performance Measures.

(b)                                 Vesting and Term.  Each
Agreement, other than those relating solely to Awards of Shares without
restrictions, shall set forth the period until the applicable Award is scheduled
to expire, which shall not be more than ten years from the Grant Date, and any
applicable Performance Period. The 

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Committee may provide for such vesting conditions as it may determine,
subject to the following limitations:

(1)
an Award that is not subject to the satisfaction of Performance Measures may
not fully vest or become fully exercisable earlier than three years from the
Grant Date; and

(2)
the Performance Period of a Performance Unit or other Award subject to
Performance Measures may not be shorter than one year.

The limitations in clauses (1) and (2) above will not, however, apply
in the following situations: (i) an Award made to attract a key executive to
join the Company; (ii) upon a Change of Control; (iii) termination of
employment due to death, Disability or Retirement; (iv) Restricted Stock or
Restricted Stock Units issued in exchange for other compensation; (v) a
substitute Award granted pursuant to Section 20; and (vi) Awards issued to
Non-Employee Directors.

(c)                                  Transferability.  Except
as provided in this Section, (i) during the lifetime of a Participant, only
that Participant (or that Participant’s Successor) may exercise an Option or
Stock Appreciation Right, or receive payment with respect to any other Award,
and (ii) no Award may be sold, assigned, transferred, exchanged or otherwise
encumbered other than to a Successor in the event of a Participant’s death or
pursuant to a qualified domestic relations order as defined in the Code or
Title 1 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
or the rules thereunder.  Any attempted
transfer in violation of this Section 6(c) shall be of no effect.  The Committee may, however, provide in an
Agreement or otherwise that an Award (other than an Incentive Stock Option) may
be transferable, to the extent permitted by law, to a Transferee if the
Participant does not receive any consideration for the transfer.  Any Award held by a Transferee shall continue
to be subject to the same terms and conditions that were applicable to that
Award immediately before the transfer thereof to the Transferee.  For purposes of any provision of the Plan
relating to notice to a Participant or to acceleration or termination of an
Award upon the death or termination of employment of a Participant, the
references to “Participant” shall mean the original grantee of an Award and not
any Transferee.

(d)                                    Termination of Employment.  Except as otherwise determined by the Committee
or provided by the Committee in an Agreement, in case of a Participant’s
termination of employment with the Company and all of its Affiliates, the
following provisions shall apply:

(1)                                 Options and Stock
Appreciation Rights.

(i)                                     Death or Disability.  If a Participant’s employment terminates
because of death or Disability before an Award of an Option or Stock
Appreciation Right has expired, the portion of such Award that was exercisable
immediately prior to such termination shall remain exercisable for one year
after the date of such termination of employment (but not after the scheduled
expiration date of such Award).  The
unexercisable portion of such Award shall terminate at the date of termination
of employment.

(ii)                                  Retirement.  If the employment of a Participant who is an
Employee terminates because of Retirement before an Award of an Option or Stock
Appreciation Right has expired, the portion of such Award that was exercisable
immediately prior to such termination shall remain exercisable for one year
after the date of such termination of employment (but not after the scheduled
expiration date of such Award).  The
unexercisable portion of such Award shall terminate at the date of termination
of employment.

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(iii)                               Cause.  If a Participant’s employment is terminated
for Cause, all Awards to the Participant will terminate immediately upon such
termination.

(iv)                              Termination for Other
Reasons.  If a Participant’s employment terminates for
any reason other than death, Disability, Retirement or Cause, then the
unexercisable portion of any Award of an Option or Stock Appreciation Right
held by such Participant shall terminate at the date of termination of
employment, and any portion of such Award that was exercisable immediately
prior to such termination shall remain exercisable for three months after
termination of the Participant’s employment (but not after the scheduled
expiration date of such Award) if the Participant is not a Non-Employee
Director, and shall remain exercisable until the scheduled expiration of the
Award if the Participant is a Non-Employee Director.

(2)                                 Performance Units.  If a Participant’s employment with the
Company and all of its Affiliates terminates during a Performance Period
because of death, Disability or Retirement, the Participant shall be entitled
to a payment of Performance Units at the end of the Performance Period based
upon the extent to which achievement of Performance Measures was satisfied at
the end of such period and prorated for the portion of the Performance Period
during which the Participant was employed by the Company or any Affiliate.  Except as provided in this Section 6(d)(2) or
in the applicable Agreement, if a Participant’s employment terminates with the
Company and all of its Affiliates during a Performance Period, then such
Participant shall not be entitled to any payment with respect to that
Performance Period.

(3)                                 Restricted Stock and
Restricted Stock Unit Awards.  If a
Participant’s employment with the Company and all of its Affiliates terminates
because of death, Disability or Retirement, a pro rata portion of any outstanding
Award of Restricted Stock or Restricted Stock Units shall immediately
vest.  The portion of the Award that will
vest will involve that number of Shares or Units which, when combined with the
number of Shares or Units subject to the Award that have previously vested,
will represent the same ratio to the total number of Shares or Units subject to
the original Award as the portion of the scheduled vesting period of the Award
during which the Participant was employed by the Company and its Affiliates
bears to the scheduled vesting period. 
The portion of any Award of Restricted Stock or Restricted Stock Units
that does not vest as provided in the preceding sentence will terminate at the
date of the Participant’s termination of employment, and any Shares of Restricted
Stock will be forfeited to the Company.

(e)                                  Rights as Stockholder.  Each
Agreement shall provide that a Participant shall have no rights as a
stockholder with respect to any securities covered by an Award unless and until
the date the Participant becomes the holder of record of the Stock, if any, to
which the Award relates.

(f)                                    Performance-Based Awards.  Any
Award may be granted as a performance-based Award if the Committee establishes
one or more Performance Measures upon which vesting, the lapse of restrictions
or settlement in cash or Shares is contingent. 
With respect to any Award intended to be Performance-Based Compensation,
the Committee shall establish and administer Performance Measures in the manner
described in Section 162(m) of the Code and the then current regulations of the
Secretary of the Treasury.

7.                                       Restricted Stock Awards.

(a)                                     An Award of Restricted Stock under the Plan
shall consist of Shares subject to restrictions on transfer and conditions of
forfeiture, which restrictions and conditions shall be included in

 10
 

the applicable Agreement.  The
Committee may provide for the vesting of such Shares and the corresponding
lapse or waiver of any such restrictions or conditions based on such factors or
criteria as the Committee, in its sole discretion, may determine.

(b)                                    Except as otherwise provided in the
applicable Agreement, the Shares subject to an Award of Restricted Stock shall
be evidenced by a book-entry in the name of the Participant with the Company’s
transfer agent or by one or more Stock certificates issued in the name of the
Participant.  Any such Stock certificate
shall either be deposited with the Company or its designee, together with an
assignment separate from the certificate, in blank, signed by the Participant,
or bear such legend with respect to the restricted nature of the Restricted
Stock evidenced thereby as shall be provided for in the applicable
Agreement.  Any book-entry shall be
accompanied by a similar legend.

(c)                                     Upon the vesting of Restricted Stock and the
corresponding lapse of the restrictions and conditions, unrestricted Shares
shall be issued to the Participant or a Successor or Transferee.

(d)                                    Unless otherwise provided in an Agreement, a
Participant or a Transferee with a Restricted Stock Award shall have all the
other rights of a stockholder including, but not limited to, the right to
receive dividends and the right to vote the Shares of Restricted Stock.

8.                                       Restricted
Stock Unit Awards.  An Award of
Restricted Stock Units under the Plan shall be subject to restrictions on
transfer and conditions of forfeiture, which restrictions and conditions shall
be included in the applicable Agreement. 
The Committee may provide for the vesting of Restricted Stock Units and
the corresponding lapse or waiver of any such restrictions or conditions based
on such factors or criteria as the Committee, in its sole discretion, may
determine.  Following the vesting of a
Restricted Stock Unit Award, payment to the Participant or a Successor or
Transferee shall be made at such time or times as shall be provided in the
Agreement in the form of cash, Shares or a combination of cash and Shares as
determined by the Committee.

9.                                       Stock
Options.

(a)                                  Terms
of All Options.

(1)                                 An Option shall be
granted pursuant to an Agreement as either an Incentive Stock Option or a
Non-Statutory Stock Option.  The purchase
price of each Share subject to an Option shall be determined by the Committee
and set forth in the Agreement, but shall not be less than the Fair Market
Value of a Share as of the Grant Date (except as provided in Section 20).

(2)                                     The purchase price
of the Shares with respect to which an Option is exercised shall be payable in
full at the time of exercise, which may include, to the extent permitted by the
Committee, payment under a broker-assisted sale and remittance program
acceptable to the Committee.  The purchase price may be paid in cash or, if the
Committee so permits, by withholding Shares otherwise issuable to the
Participant upon exercise of the Option or by delivery to the Company of Shares
(by actual delivery or attestation) already owned by the Participant (in each
case, such Shares having a Fair Market Value as of the date the Option is
exercised equal to the purchase price of the Shares being purchased), or a
combination thereof, unless otherwise provided in the Agreement.  A Participant exercising an Option
shall not be permitted to pay any portion of the purchase price with Shares if,
in the opinion of the Committee, payment in such manner could have adverse
financial accounting consequences for the Company.

 11
 

(3)                                 Each Option shall be
exercisable in whole or in part on the terms provided in the Agreement. 
In no event shall any Option be exercisable at any time after its
scheduled expiration.  When an Option is
no longer exercisable, it shall be deemed to have terminated.

(4)                                 Options will not be granted under the Plan in
consideration for, and the grant of Options will not be conditioned on, the
delivery of Shares to the Company in payment of the exercise price and/or tax
withholding obligation under any other Option.

(b)                                 Incentive
Stock Options.  In addition to the
other terms and conditions applicable to all Options:

(1)                                     The
aggregate Fair Market Value (determined as of Option Grant Date) of the Shares
with respect to which Incentive Stock Options held by an individual first
become exercisable in any calendar year (under the Plan and all other incentive
stock option plans of the Company and its Affiliates) shall not exceed $100,000
(or such other limit as may be required by the Code) if this limitation is
necessary to qualify the Option as an Incentive Stock Option.  To the extent an Option granted to a
Participant exceeds this limit, the Option shall be treated as a Non-Statutory
Stock Option.

(2)                                     An
Incentive Stock Option shall not be exercisable more than 10 years after its
Grant Date (or such other limit as may be required by the Code) if this
limitation is necessary to qualify the Option as an Incentive Stock Option.

(3)                                     An
Incentive Stock Option shall not be exercisable more than one year after
termination of the Participant’s employment with the Company and its Affiliates
if such termination is due to the Participant’s death or Disability, or more
than three months after termination of the Participant’s employment if such
termination is due to any other reason.

(4)                                       The
Agreement covering an Incentive Stock Option shall contain such other terms and
provisions that the Committee determines necessary to qualify the Option as an
Incentive Stock Option.

(5)                                       No
Participant may receive an Incentive Stock Option under the Plan if,
immediately after the grant of such Award, the Participant would own (after
application of the rules contained in Code Section 424(d)) Shares possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or its Subsidiaries, unless (i) the option price for that Incentive
Stock Option is at least 110% of the Fair Market Value of the Shares subject to
that Incentive Stock Option on the Grant Date and (ii) that Option is not
exercisable after the date five years from its Grant Date.

10.                                 Stock
Appreciation Rights.  An Award of a
Stock Appreciation Right shall entitle the Participant (or a Successor or
Transferee), subject to terms and conditions determined by the Committee, to
receive upon exercise of the Stock Appreciation Right all or a portion of the
excess of (i) the Fair Market Value of a specified number of Shares as of the
date of exercise of the Stock Appreciation Right over (ii) a specified price
that shall not be less than 100% of the Fair Market Value of such Shares as of
the Grant Date of the Stock Appreciation Right. 
Each Stock Appreciation Right may be exercisable in whole or in part on
the terms provided in the Agreement.  No
Stock Appreciation Right shall be exercisable at any time after its scheduled
expiration.  When a Stock Appreciation
Right is no longer exercisable, it shall be deemed to have terminated.  Upon exercise of a Stock Appreciation Right,
payment to the Participant or a Successor or Transferee shall be made at such
time or times as shall be provided in the Agreement in the

 12
 

form of cash,
Shares or a combination of cash and Shares as determined by the Committee.  The Agreement may provide for a limitation
upon the amount or percentage of the total appreciation on which payment
(whether in cash and/or Shares) may be made in the event of the exercise of a
Stock Appreciation Right.

11.                                 Performance
Units.

(a)                                  Initial
Award.

(1)                                     An Award of
Performance Units under the Plan shall entitle the Participant (or a Successor
or Transferee) to future payments of cash, Shares or a combination thereof, as
determined by the Committee, based upon the achievement of specified levels of
one or more Performance Measures.  The
Agreement may provide that a portion of a Participant’s Award will be paid for
performance that exceeds the minimum target but falls below the maximum target
applicable to the Award.  The Agreement
shall also provide for the timing of the payment.

(2)                                 Following the
conclusion or acceleration of each Performance Period, the Committee shall
determine the extent to which (i) Performance Measures have been attained, (ii)
any other terms and conditions with respect to an Award relating to the
Performance Period have been satisfied and (iii) payment is due with respect to
an Award of Performance Units.

(3)                               No Participant may receive Awards of Performance
Units relating to more than 500,000 Shares in any year under this Plan.

(b)                                 Acceleration
and Adjustment.  The Agreement may
permit an acceleration of the Performance Period and an adjustment of
Performance Measures and payments with respect to some or all of the
Performance Units awarded to a Participant upon the occurrence of certain
events, which may include a Change of Control, a Fundamental Change, a recapitalization,
a change in the accounting practices of the Company, a change in the
Participant’s title or employment responsibilities, the Participant’s death,
Disability or Retirement or, with respect to payments in Shares, a
reclassification, stock dividend, stock split or stock combination as provided
in Section 17.  The Agreement also may
provide for a limitation on the value of an Award of Performance Units that a
Participant may receive.

12.                                 Other
Awards.  The Committee may from time
to time grant Stock and other Awards under the Plan including, without
limitation, those Awards pursuant to which Shares are or may in the future be
acquired, Awards denominated in Stock units, securities convertible into Stock
and phantom securities.  The Committee,
in its sole discretion, shall determine the terms and conditions of such Awards
provided that such Awards shall not be inconsistent with the terms and purposes
of the Plan.  The Committee may, in its
sole discretion, direct the Company to issue Shares subject to restrictive
legends and/or stop transfer instructions that are consistent with the terms
and conditions of the Award to which the Shares relate.

13.                                 Effective
Date and Duration of the Plan.

(a)                                  Effective
Date.  The Plan shall become
effective on the date it is approved by the requisite vote of Company’s
stockholders at the 2007 Annual Meeting of Stockholders or any adjournment
thereof.

(b)                                 Duration
of the Plan.  The Plan shall remain
in effect until all Shares subject to it shall be distributed, all Awards have
expired or terminated, the Plan is terminated pursuant to Section 16, or the

 13
 

tenth anniversary
of the date of stockholder approval of the Plan, whichever occurs first (the “Termination
Date”).  Awards made before the
Termination Date may be exercised, vested or otherwise effectuated beyond the
Termination Date unless limited in the Agreement or otherwise.

14.                                 Plan
Participation and Employment Status.

(a)                                  Status
as an eligible Employee shall not be construed as a commitment that any Award
will be made under the Plan to that eligible Employee or to eligible Employees
generally.

(b)                                    Nothing
in the Plan or in any Agreement or related documents shall confer upon any
Employee or Participant any right to continue in the employment of the Company
or any Affiliate or constitute any contract of employment or affect any right
that the Company or any Affiliate may have to change such person’s
compensation, other benefits, job responsibilities, or title, or to terminate
the employment of such person with or without cause.

15.                                 Tax
Withholding.  The Company shall have
the right to withhold from any cash payment under the Plan to a Participant or
other person (including a Successor or a Transferee) an amount sufficient to
cover any required withholding taxes. 
The Company shall have the right to require a Participant or other
person receiving Shares under the Plan to pay the Company a cash amount
sufficient to cover any required withholding taxes before actual receipt of
those Shares.  In lieu of all or any part
of a cash payment from a person receiving Shares under the Plan, the Committee
may permit the individual to cover all or any part of the required withholdings
through a reduction in the number of Shares delivered or a delivery or tender
to the Company of Shares held by the Participant or other person, in each case
valued in the same manner as used in computing the withholding taxes under
applicable laws.

16.                                 Amendment
and Termination of the Plan and Agreements.

(a)                                     Except
as limited in (b) below, (i) the Board may at any time and from time to time
terminate, suspend or amend the Plan and (ii) the Committee may at any time
alter or amend any or all Agreements under the Plan.  The Company shall submit any amendment of the
Plan to its stockholders for approval if the rules of the Nasdaq Global Select
Market or other applicable laws or regulations require stockholder approval of
such amendment.

(b)                                    No
termination, suspension, or amendment of the Plan will materially and adversely
affect any right acquired by any Participant or Successor or Transferee under
an Award granted before the date of termination, suspension, or amendment,
unless otherwise agreed to by the Participant in the Agreement or otherwise, or
required as a matter of law; but it will be conclusively presumed that any
adjustment for changes in capitalization provided for in Sections 11(b) or 17
does not adversely affect these rights. 
Except as provided in Section 17, no Option or Stock Appreciation Right
granted under the Plan may be amended to decrease the exercise price thereof,
or be cancelled in conjunction with the grant of any new Option or Stock
Appreciation Right with a lower exercise price, or otherwise be subject to any
action that would be treated under accounting rules or otherwise as a “repricing”
of such Option or Stock Appreciation Right, unless such action is approved by
the Company’s stockholders.

17.                                 Adjustment
for Changes in Capitalization.  In
the event of any equity restructuring (within the meaning of Statement of
Financial Accounting Standards No. 123 (revised 2004), referred to as “FAS 123R”)
that causes the per Share value of Shares to change, such as a stock dividend
or stock split, the Committee shall cause there to be made an equitable
adjustment to the number and kind of Shares or other securities issued or
reserved for issuance pursuant to the Plan and to outstanding Awards (including
but not limited to the number and kind of Shares to which such Awards are
subject, and the exercise or

 14
 

strike price of
such Awards) to the extent such other Awards would not otherwise automatically
adjust in the equity restructuring; provided, in each case, that with respect
to Incentive Stock Options, no such adjustment shall be authorized to the
extent that such adjustment would cause such Incentive Stock Options to violate
Section 422(b) of the Code or any successor provision; provided further, that
no such adjustment shall be authorized under this Section to the extent that
such adjustment would cause an Award to be subject to adverse
tax consequences under Section 409A of the Code.  In the event
of any other change in corporate capitalization, which may include a merger,
consolidation, any reorganization (whether or not such reorganization comes
within the definition of such term in Section 368 of the Code), or any partial
or complete liquidation of the Company to the extent such events do not
constitute equity restructurings or business combinations within the meaning of
FAS No. 123R, such equitable adjustments described in the foregoing sentence
may be made as determined to be appropriate and equitable by the Committee to
prevent dilution or enlargement of rights.  In either case, any such
adjustment shall be conclusive and binding for all purposes of the Plan. 
Unless otherwise determined by the Committee, the number of Shares subject to
an Award shall always be a whole number.

18.                                 Fundamental
Change.  In the event of a proposed
Fundamental Change, the Committee may, but shall not be obligated to:

(a)                                  if
the Fundamental Change is a merger or consolidation or statutory share
exchange, make appropriate provision for the protection of the outstanding
Options and Stock Appreciation Rights by the substitution of options, stock
appreciation rights and appropriate voting common stock of the corporation
surviving any merger or consolidation or, if appropriate, the parent
corporation of the Company or such surviving corporation; or

(b)                                    at
least ten days before the occurrence of the Fundamental Change, declare, and
provide written notice to each holder of an Option or Stock Appreciation Right
of the declaration, that each outstanding Option and Stock Appreciation Right,
whether or not then exercisable, shall be canceled at the time of, or
immediately before the occurrence of the Fundamental Change in exchange for
payment to each holder of an Option or Stock Appreciation Right, within ten
days after the Fundamental Change, of cash equal to (i) for each Share covered
by the canceled Option, the amount, if any, by which the Fair Market Value (as
defined in this Section) per Share exceeds the exercise price per Share covered
by such Option or (ii) for each Stock Appreciation Right, the price determined
pursuant to Section 10, except that Fair Market Value of the Shares as of the
date of exercise of the Stock Appreciation Right, as used in clause (i) of
Section 10, shall be deemed to mean Fair Market Value for each Share with
respect to which the Stock Appreciation Right is calculated determined in the
manner hereinafter referred to in this Section. 
At the time of the declaration provided for in the immediately preceding
sentence, each Stock Appreciation Right and each Option shall immediately
become exercisable in full and each person holding an Option or a Stock
Appreciation Right shall have the right, during the period preceding the time
of cancellation of the Option or Stock Appreciation Right, to exercise the
Option as to all or any part of the Shares covered thereby or the Stock
Appreciation Right in whole or in part, as the case may be.  In the event of a declaration pursuant to
Section 18(b), each outstanding Option and Stock Appreciation Right granted
pursuant to the Plan that shall not have been exercised before the Fundamental
Change shall be canceled at the time of, or immediately before, the Fundamental
Change, as provided in the declaration. 
Notwithstanding the foregoing, no person holding an Option or a Stock
Appreciation Right shall be entitled to the payment provided for in this
Section 18(b) if such Option or Stock Appreciation Right shall have terminated,
expired or been cancelled.  For purposes
of this Section only, “Fair Market Value” per Share means the cash plus the
fair market value, as determined in good faith by the Committee, of the non-cash
consideration to be received per Share by the stockholders of the Company upon
the occurrence of the Fundamental Change.

 15
 

19.                                 Dividends
and Dividend Equivalents.  An Award
may, if so determined by the Committee, provide the Participant with the right
to receive dividend payments or dividend equivalent payments with respect to
Shares subject to the Award (both before and after the Shares subject to the
Award are earned, vested or acquired), which payments may be either made
currently or credited to an account for the Participant, and may be settled in
cash or Shares, as determined by the Committee. 
Any such settlements, and any such crediting of dividends or dividend
equivalents or reinvestment in Shares, may be subject to such conditions,
restrictions and contingencies as the Committee shall establish, including the
reinvestment of such credited amounts in Share equivalents.

20.                                 Corporate
Mergers, Acquisitions, Etc.  The
Committee may also grant Awards under the Plan in substitution for, or in
connection with the assumption of, existing awards granted or issued by another
corporation and assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a Subsidiary is a party.  The terms and conditions of the substitute
Awards may vary from the terms and conditions set forth in the Plan to the
extent as the Board at the time of the grant may deem appropriate to conform,
in whole or in part, to the provisions of the awards in substitution for which
they are granted.

21.                                 Unfunded
Plan.  The Plan shall be unfunded and
the Company shall not be required to segregate any assets that may at any time
be represented by Awards under the Plan. 
Neither the Company, its Affiliates, the Committee, nor the Board of
Directors shall be deemed to be a trustee of any amounts to be paid under the
Plan nor shall anything contained in the Plan or any action taken pursuant to
its provisions create or be construed to create a fiduciary relationship
between the Company and/or its Affiliates, and a Participant or Successor or
Transferee.   To the extent any person
acquires a right to receive an Award under the Plan, this right shall be no
greater than the right of an unsecured general creditor of the Company.

22.                                 Limits
of Liability.

(a)                                  Any liability of the Company to any
Participant with respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Agreement.

(b)                                 Except
as may be required by law, neither the Company nor any member of the Board of
Directors or of the Committee, nor any other person participating (including
participation pursuant to a delegation of authority under Section 3(a)(2) of
the Plan) in any determination of any question under the Plan, or in the
interpretation, administration or application of the Plan, shall have any
liability to any party for any action taken, or not taken, in good faith under
the Plan.

23.                                 Compliance
with Applicable Legal Requirements. 
No Shares distributable pursuant to the Plan shall be issued and
delivered unless the issuance of the Shares complies with all applicable legal
requirements including, without limitation, compliance with the provisions of
applicable state securities laws, the Securities Act of 1933, as amended and in
effect from time to time or any successor statute, the Exchange Act and the
requirements of the exchanges on which the Company’s Shares may, at the time,
be listed.

24.                                 Deferrals
and Settlements.  The Committee may
require or permit Participants to elect to defer the issuance of Shares or the
settlement of Awards in cash under such rules and procedures as it may
establish under the Plan.  It may also
provide that deferred settlements include the payment or crediting of interest
on the deferral amounts.

 16
 

25.                                 Other
Benefit and Compensation Programs. 
Payments and other benefits received by a Participant under an Award
made pursuant to the Plan shall not be deemed a part of a Participant’s
regular, recurring compensation for purposes of the termination, indemnity or
severance pay laws of any country and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan,
contract or similar arrangement provided by the Company or an Affiliate unless
expressly so provided by such other plan, contract or arrangement, or unless
the Committee expressly determines that an Award or portion of an Award should
be included to accurately reflect competitive compensation practices or to
recognize that an Award has been made in lieu of a portion of competitive cash
compensation.

26.                                 Beneficiary
Upon Participant’s Death.  To the extent that the transfer of a Participant’s
Award at death is permitted by this Plan or under an Agreement, (i) a
Participant’s Award shall be transferable to the beneficiary, if any,
designated on forms prescribed by and filed with the Committee and (ii) upon
the death of the Participant, such beneficiary shall succeed to the rights of
the Participant to the extent permitted by law and this Plan.  If no such designation of a beneficiary has
been made, the Participant’s legal representative shall succeed to the Awards,
which shall be transferable by will or pursuant to laws of descent and distribution
to the extent permitted by this Plan or under an Agreement.

27.                                 Requirements
of Law.

(a)                                  To
the extent that federal laws do not otherwise control, the Plan and all
determinations made and actions taken pursuant to the Plan shall be governed by
the laws of the State of Delaware without regard to its conflicts-of-law
principles and shall be construed accordingly.

(b)                                 If
any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not effect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.

 17Exhibit 4.1

 

AAR CORP.

and

COMPUTERSHARE TRUST COMPANY, N.A.

Rights Agent

 

Rights Agreement

 

Dated as of July 11, 2007

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Appointment of Rights
  Agent

  	
   

  	
  3

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Issue of Right
  Certificates

  	
   

  	
  3

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Form of Right
  Certificates

  	
   

  	
  5

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Countersignature and
  Registration

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  Transfer,
  Split Up, Combination and Exchange of Right Certificates; 

  Mutilated, Destroyed, Lost or Stolen Right Certificates

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  Exercise of Rights;
  Purchase Price; Expiration Date of Rights

  	
   

  	
  7

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Cancellation and
  Destruction of Right Certificates

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Reservation and
  Availability of Shares of Common Stock

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Common Stock Record
  Date

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  Adjustment of Purchase
  Price, Number of Shares or Number of Rights

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Certificate of Adjusted
  Purchase Price or Number of Shares

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

  	
  Consolidation, Merger
  or Sale or Transfer of Assets or Earning Power

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  Additional Covenants

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 15.

  	
   

  	
  Fractional Rights and
  Fractional Shares

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 16.

  	
   

  	
  Rights of Action

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 17.

  	
   

  	
  Agreement of Right
  Holders

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 18.

  	
   

  	
  Right Certificate
  Holder Not Deemed a Stockholder

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 19.

  	
   

  	
  Concerning the Rights
  Agent

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 20.

  	
   

  	
  Merger or Consolidation
  or Change of Name of Rights Agent

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 21.

  	
   

  	
  Terms and Conditions to
  Duties of Rights Agent

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 22.

  	
   

  	
  Change of Rights Agent

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 23.

  	
   

  	
  Issuance of New Right
  Certificates

  	
   

  	
  24

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 24.

  	
   

  	
  Redemption

  	
   

  	
  24

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 25.

  	
   

  	
  Exchange

  	
   

  	
  25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 26.

  	
   

  	
  Notice of Certain
  Events

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 27.

  	
   

  	
  Notices

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 28.

  	
   

  	
  Supplements and
  Amendments

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 29.

  	
   

  	
  Determination and
  Actions by the Board of Directors, etc

  	
   

  	
  27

  	
   

  

 

 i
 

 

	
  Section 30.

  	
   

  	
  Successors

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 31.

  	
   

  	
  Benefits of this
  Agreement

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 32.

  	
   

  	
  Governing Law

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 33.

  	
   

  	
  Counterparts

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 34.

  	
   

  	
  Descriptive Headings

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 35.

  	
   

  	
  Severability

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  A

  	
   

  	
  Form of Rights
  Certificate

  	
   

  	
  A-1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Summary of Rights

  	
   

  	
  B-1

  	
   

  

 

 ii

RIGHTS AGREEMENT

This
Agreement, dated as of July 11, 2007, between AAR CORP., a Delaware corporation
(the “Company”), and Computershare Trust Company, N.A., a national banking
association (the “Rights Agent”).

W  I  T  N
E  S  S  E  T  H

WHEREAS,
the Board of Directors of the Company has authorized and declared a dividend
distribution (the “Distribution”) of one Right (as hereinafter defined) for
each share of Common Stock, $1.00 par value, of the Company outstanding at the
close of business on  August 6, 2007 (the
“Record Date”) and has further authorized the issuance of one Right in respect
of each share of Common Stock of the Company issued between such date and the
earlier of the Distribution Date or the Expiration Date (as such terms are
hereinafter defined), each Right initially representing the right to purchase
one share of Common Stock of the Company (the “Rights”), all upon the terms,
with the adjustments and subject to the conditions hereinafter set forth;

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, without prior approval of the Company shall be the Beneficial Owner of
a Substantial Block or who was such a Beneficial Owner at any time after the
date hereof, whether or not such Person continues to be the Beneficial Owner of
a Substantial Block, but shall not include the Company, any Subsidiary of or
other Person controlled by the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any Person appointed as trustee
by the Company or such Subsidiary pursuant to the terms of any such plan in
that Person’s capacity as trustee. 
Notwithstanding the foregoing, no Person shall become an “Acquiring
Person” (i) as a result of the acquisition of shares of Common Stock by the
Company which, by reducing the number of shares of Common Stock outstanding,
increases the proportional number of shares beneficially owned by such Person
together with all Affiliates and Associates of such Person; provided  however,
that if (1) a Person would become an Acquiring Person (but for the
operation of this subclause (i)) as a result of the acquisition of shares
of Common Stock by the Company, and (2) after such share acquisition by
the Company, such Person, or an Affiliate or Associate of such Person, becomes
the Beneficial Owner of any additional shares of Common Stock, then such Person
shall be deemed an Acquiring Person; or (ii) if the Board of Directors
determines that such Person became an Acquiring Person inadvertently, and such
Person promptly divests itself of a sufficient number of shares of Common Stock
so that such Person is the Beneficial Owner of such number of shares of Common
Stock so that such Person no longer would be an Acquiring Person.

(b)           “Affiliate” and “Associate” shall have
the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934 (the “Exchange
Act”), as in effect on the date of this Agreement, but shall not include the
Company, any Subsidiary of or other Person controlled by the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company or any
Person appointed as trustee by the Company or such Subsidiary pursuant to the
terms of any such plan in that Person’s capacity as trustee.

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

(i)            of which such Person or any of such
Person’s Affiliates or Associates directly or indirectly has “beneficial
ownership,” as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act, as in effect on the date of this
Agreement;

(ii)           which such Person or any of such
Person’s Affiliates or Associates directly or indirectly has (A) the right
to acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding
(whether or not in writing), or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to “beneficially own,” securities tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any of such
Person’s Affiliates or Associates until such tendered securities are accepted
for purchase; or (B) the right (whether sole or shared) to vote or dispose
of 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
clause (B) pursuant to an agreement, arrangement or understanding to vote
such security that (1) arises solely from a revocable proxy or consent
given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the Exchange Act and the rules and regulations
thereunder and (2) is not also then required to be reported as
beneficially owned on a 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 clause (B) of subparagraph (ii) of this
paragraph (c)) or disposing of any securities of the Company.

Notwithstanding
anything in this definition of Beneficial Ownership to the contrary, the phrase
“then outstanding,” when used with reference to a Person’s Beneficial Ownership
of securities of the Company, shall mean the number of such securities then
issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to own
beneficially hereunder.

 2
 

(d)           “Business Day” shall mean any day
other than a Saturday, Sunday or a legal holiday for banking institutions in
the State of Illinois.

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

(f)            “Common Stock” when used with
reference to the Company shall mean the Common Stock, $1.00 par value, of the
Company.  “Common Stock” when used with
reference to any Person other than the Company shall mean the capital stock
with the greatest aggregate voting power or the equity securities or other
equity interests having power to control or direct the management of such
Person or, if such Person is a subsidiary of or controlled by another Person,
the Person which ultimately controls such first-mentioned Person and
which has issued and outstanding such capital stock, equity securities or
equity interests.

(g)           “Person” shall mean any individual,
firm, corporation, partnership, trust, association, joint venture, syndicate or
other entity, and shall include any successor (by merger or otherwise) of such
entity.

(h)           “Stock Acquisition Date” shall mean
the first date of public announcement (which shall include, without limitation,
a report filed pursuant to the Exchange Act) by the Company or an Acquiring
Person of facts that show that an Acquiring Person has become such.

(i)            “Subsidiary” of any Person shall
mean any corporation or other Person of which a majority of the voting power of
the voting equity securities or equity interest is owned, directly or
indirectly, by such Person, or which is otherwise controlled by such Person.

(j)            “Substantial Block” shall mean a
number of shares of Common Stock of the Company which equals or exceeds 15% of
the number of shares of Common Stock of the Company then outstanding.

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 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint
such Co-Rights Agents as it may deem necessary or desirable.  In the event the Company appoints one or more
Co-Rights Agents, the respective duties of the Rights Agent and the Co-Rights
Agents shall be as the Company determines.

Section 3.               Issue of Right Certificates.

(a)           Until the earlier of  the close of business on (i) the tenth
business day after the Stock Acquisition Date (or, the Record Date, if the
tenth business day after the Stock Acquisition Date occurs before the Record
Date), or (ii) the tenth business day after the commencement of, or first
public announcement of, the intent of any Person (other than the Company or any
of its subsidiaries or any employee benefit plan of the Company or of any
subsidiary of the Company 

 3
 

or any Person appointed
as trustee by the Company or such subsidiary pursuant to the terms of any such
plan in such Person’s capacity as trustee) to commence (which intention to
commence remains in effect for five business days after such announcement) a
tender or exchange offer which would result in such Person becoming an Acquiring
Person (including any such day which is after the date of this Agreement and
prior to the issuance of the Rights, the earlier of such dates being herein
referred to as the “Distribution Date”), (x) the Rights will be evidenced
by the certificates for the Common Stock of the Company registered in the names
of the holders of the Common Stock (which certificates for Common Stock shall
be deemed also to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Stock.  As soon as practicable after the Distribution
Date, 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, a certificate for Rights, in substantially the form of Exhibit A
hereto (the “Rights Certificates”), evidencing one Right for each share of
Common Stock so held.  As of and after
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.

(b)           As soon as practicable after the
Record Date, the Company will send a copy of a Summary of Rights to Purchase
Common Stock, in substantially the form attached hereto as Exhibit B
(the “Summary of Rights”), by first-class, postage prepaid mail, to each
record holder of the Common Stock as of the close of business on the Record
Date, at the address of such holder shown on the records of the Company.  With respect to certificates for the Common
Stock outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates for the Common Stock registered
in the names of the holders of the Common Stock.  Until the Distribution Date (or earlier
Expiration Date), the surrender for transfer of any of the certificates for the
Common Stock outstanding on the Record Date shall also constitute the transfer
of the Rights associated with the Common Stock represented by such certificate.

(c)           Rights shall be issued in respect of
all shares of Common Stock which become outstanding after the Record Date but
prior to the earlier of the Distribution Date or the Expiration Date.  Certificates representing such shares shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:

This certificate also
evidences and entitles the holder hereof to certain Rights as set forth in a
Rights Agreement between AAR CORP. and Computershare Trust Company, N.A. dated
as of July 11, 2007 (the “Rights Agreement”), the terms of which are
hereby incorporated herein by reference and a copy of which is on file at the
principal executive offices of AAR CORP. 
Under certain circumstances, as set forth in the Rights Agreement, such
Rights may be redeemed, may expire or may be evidenced by separate certificates
and will no longer be evidenced by this certificate.  AAR CORP. will mail to the holder of this
certificate a copy of the Rights Agreement without charge promptly upon receipt
of a written request therefor.  Under
certain circumstances, Rights issued to, or held by, an Acquiring Person or
Associates or 

 4
 

Affiliates of an
Acquiring Person (as defined in the Rights Agreement) and any subsequent holder
of such Rights may become null and void.

With
respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate.

Section 4.               Form of Right Certificates.

(a)           The Right Certificates (and the forms
of election to purchase shares and of assignment to be printed on the reverse
thereof) shall be substantially the same as Exhibit A hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate 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 hereof, the Right Certificates, whenever issued, shall be
dated as of the Record Date, and on their face shall entitle the holders
thereof to purchase such number of shares of Common Stock as shall be set forth
therein at the price per share set forth therein (the “Purchase Price”), but
the number of such shares and the Purchase Price shall be subject to adjustments
as provided herein.

(b)           Any Right Certificate that represents
Rights beneficially owned by an Acquiring Person or any Associate or Affiliate
of an Acquiring Person and any Rights Certificate issued at any time upon the
transfer of any Rights to such an Acquiring Person or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate, 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 the following
legend:

The Rights represented by this Rights Certificate were
issued to a Person who was an Acquiring Person or an Affiliate or an Associate
of an Acquiring Person (as such terms are defined in the Rights Agreement,
dated as of July 11, 2007).  This Rights
Certificate and the Rights represented hereby may become void to the extent
provided by, and under certain circumstances as specified in, Section 7(e)
of the Rights Agreement.

The
provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights
Certificate.

 5
 

Section 5.               Countersignature
and Registration.

(a)           The Right Certificates shall be
executed on behalf of the Company by its Chairman of the Board or its President
or any Executive or Senior Vice President, either manually or by facsimile
signature, and 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 Right Certificates shall be countersigned
by the Rights Agent manually or by facsimile 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 Right Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent, issued and delivered
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.

(b)           Following the Distribution Date, the
Rights Agent will keep or cause to be kept, at one of its offices in Chicago,
Illinois, books for registration and transfer of the Right Certificates issued
hereunder.  Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and
the date of each of the Right Certificates.

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

(a)           Subject to the provisions of
Section 15 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Right Certificate or Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of shares of Common
Stock as the Right Certificate or Right Certificates surrendered then entitled
such holder to purchase.  Any registered
holder desiring to transfer, split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent.  Thereupon the Rights Agent
shall countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested.  The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.

(b)           Upon receipt by the Company and the
Rights Agent of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if 

 6
 

mutilated, the Company
will make and deliver a new Right Certificate of like tenor to the Rights Agent
for delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.

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

(a)           The registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date,
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights Agent at the principal
office of the Rights Agent in Chicago, Illinois, together with payment of the
Purchase Price for each share of Common Stock of the Company as to which the
Rights are exercised, at or prior to the close of business on the earlier of
the close of business on (i) August 6, 2017 (the “Final Expiration Date”),
or (ii) the date on which the Rights are redeemed pursuant to
Section 24 (such earlier date being herein referred to as the “Expiration
Date”).

(b)           The Purchase Price for each share of
Common Stock pursuant to the exercise of a Right shall initially be $140.00,
shall be subject to adjustment from time to time as provided in
Sections 11 and 13 and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.

(c)           Upon receipt of a Right Certificate
representing exercisable Rights, with the form of election to purchase duly
executed, accompanied by payment of the Purchase Price for the shares to be
purchased, and an amount equal to any applicable transfer tax in cash, or by
certified check or bank draft payable to the order of the Company, the Rights
specified in the election shall be exercised, and the Rights Agent shall,
subject to Section 21(j), thereupon promptly (i) (A) requisition
from any transfer agent of the Common Stock of the Company (or make available,
if the Rights Agent is the transfer agent) certificates for the number of
shares of Common Stock to be purchased (and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests), or (B) if the
Company, in its sole discretion, shall have elected to deposit the shares of
Common Stock issuable upon exercise of the Rights hereunder into a depositary,
requisition from the depositary agent depositary receipts representing such
number of shares of Common Stock as are to be purchased (in which case
certificates for the shares of Common Stock represented by such receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 15, (iii) promptly
after receipt of such certificates, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.  The payment of the Purchase Price may be made
(x) in cash or by certified bank check or bank draft payable to the order
of the Company, or (y) by delivery of a certificate or certificates (with
appropriate stock powers executed in blank attached thereto) evidencing a
number of shares of Common Stock equal to the then Purchase Price divided by
the closing price (as determined pursuant to Section 11(d) hereof) per share
of Common Stock on the Trading Day immediately preceding the date of such
exercise.  In the 

 7
 

event that the Company is
obligated to issue other securities (including shares of Common Stock) of the
Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.  In addition, in the case of an exercise of
the Rights by a holder pursuant to Section 11(a)(ii), the Rights Agent
shall return such Rights Certificate to the registered holder thereof after
imprinting, stamping or otherwise indicating thereon that the rights
represented by such Rights Certificate no longer include the rights provided by
Section 11(a)(ii) of the Rights Agreement and if less than all the Rights
represented by such Rights Certificate were so exercised, the Rights Agent
shall indicate on the Rights Certificate the number of Rights represented
thereby which continue to include the rights provided by
Section 11(a)(ii).

(d)           In case the registered holder of any
Right Certificate shall exercise (except pursuant to Section 11(a)(ii))
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 15.

(e)           Notwithstanding anything in this
Agreement to the contrary, from and after the first occurrence of an event
described in Section 11(a)(ii), any Rights beneficially owned (including
beneficial ownership that can be deemed to exist because of the transfer of
voting rights pursuant to a voting trust or similar arrangement) by an
Acquiring Person or an Associate or Affiliate of an Acquiring Person shall be
void and any holder of such Rights shall thereafter have no right to exercise
such Rights under any provision of this Agreement.  No Rights Certificate shall be issued
pursuant to Section 3 that represents Rights beneficially owned by an
Acquiring Person whose Rights are void pursuant to the preceding sentence or
any Associate or Affiliate thereof; no Rights Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Person whose Rights
are void pursuant to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Rights Certificate delivered to the Rights Agent for transfer to an
Acquiring Person (or Associate or Affiliate thereof) whose Rights are void
pursuant to the preceding sentence shall be cancelled.

(f)            Notwithstanding anything in this
Agreement to the contrary, the Rights shall not be effectively exercised and
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) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.

Section 8.               Cancellation and Destruction
of Right Certificates.  All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, 

 8
 

and no Right Certificates
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Rights Agreement.  The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any other Right Certificate
purchased or acquired by the Company otherwise than upon the exercise
thereof.  The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.

Section 9.               Reservation and Availability
of Shares of Common Stock.

(a)           The Company covenants and agrees that
after the occurrence of an event described in Section 11 it will cause to
be reserved and kept available, and not reserved for other purposes, out of its
authorized and unissued shares of Common Stock or its authorized and issued
shares of Common Stock held in its treasury, the number of shares of Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Rights.

(b)           So long as the Common Stock issuable
upon the exercise of Rights may be listed on any national securities exchange,
the Company shall use its best efforts to cause, from and after the
Distribution Date, all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.

(c)           The Company covenants and agrees that
it will take all such action as may be necessary to insure that all shares of
Common Stock 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
shares.

(d)           The Company further covenants and
agrees that it will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any shares of Common Stock 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 involved in the
transfer or delivery of Right Certificates or the issuance or delivery of
certificates for Common Stock in a name other than that of the registered
holder of the Right Certificate evidencing Rights surrendered for exercise or
to issue or deliver any certificates for shares of Common Stock upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company’s satisfaction that no such tax
is due.

(e)           The Company shall use its best
efforts to (i) file, as soon as practicable following the Distribution
Date, a registration statement under the Securities Act of 1933 (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 and the rules and regulations thereunder)
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 

 9
 

ensure compliance with,
the securities or “blue sky” laws of the various states in connection with the
exercisability of the Rights.

Section 10.             Common Stock Record Date.  Each person in whose name any certificate for
shares of Common Stock is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the Common Stock
represented thereby on, and such certificate shall be dated, the date upon
which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made in
accordance with Section 7; provided, however, that if the
date of such surrender and payment is a date upon which the Common Stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares on, and such certificate shall be
dated, the next succeeding business day on which the Common Stock transfer
books of the Company are open.  Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a stockholder of the Company with
respect to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.

Section 11.             Adjustment of Purchase Price,
Number of Shares or Number of Rights. 
The Purchase Price, the number 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 Common Stock payable in shares of Common
Stock, (B) subdivide the outstanding shares of Common Stock,
(C) combine the outstanding shares of Common Stock into a smaller number
of shares or (D) issue any shares of its capital stock in a reclassification
or recapitalization of the Common Stock (including any such reclassification or
recapitalization in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided this Section 11(a) and in 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, reclassification or recapitalization,
and the number and kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive the aggregate number and kind of shares
of capital stock, other securities and/or property which, if such Right had
been exercised immediately prior to such date and at a time when the Common
Stock transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination, reclassification or recapitalization; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon the exercise of one Right.  If an event occurs which would require an
adjustment under both 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).

 

 10

(ii)           In the event that at any time after
the date hereof, any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person then proper provision shall be
made so that each holder of a Right, except as provided in Section 7(e)
hereof, shall have a right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, 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 shares of Common Stock for which a Right is then exercisable and
dividing that product by (y) 50% of the current market price for one share
of Common Stock (determined pursuant to Section 11(d)) on the date of the
occurrence of the event set forth above in this subparagraph (ii) (such number
of shares being referred to as the “number of Adjustment Shares”); provided,
however, that if the transaction that would otherwise give rise to the
foregoing adjustment is also subject to the provisions of Section 13
hereof, then only the provisions of Section 13 hereof shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii).

(iii)          In the event that there shall not be
sufficient treasury shares or authorized but unissued shares of Common Stock to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) or, if any regulatory approvals for the issuance of such
Common Stock has not been obtained by the Company, and the Rights become so
exercisable, notwithstanding any other provision of this Agreement, to the
extent necessary and permitted by applicable law and any agreements in effect
on the date hereof to which it is a party, the Company shall, with respect to each
Right, make adequate provision to substitute upon exercise of such Right to the
extent necessary and on a pro rata or such other basis as the Company deems
appropriate, (1) cash, (2) a reduction in the Purchase Price,
(3) other equity securities of the Company (including without limitation
shares or units of shares of preferred stock or other securities),
(4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the “current
per share market price” (as determined pursuant to Section 11(d) hereof)
of the Common Stock for which such Right is otherwise exercisable, 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.

(b)           In case a record date is fixed by the
Company or otherwise established for the issuance of rights, options or
warrants to all holders of Common Stock entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) at a price per share
of Common Stock (or having a conversion price per share of Common Stock, if a
security convertible into Common Stock) less than the current market price (as
defined in Section 11(d)) per share of Common 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, of which the numerator shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares
of Common 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 of which the denominator shall be the number of 

 11
 

shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right.  In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent. 
Shares of Common 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 or established; 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 or established.

(c)           If the Company shall fix a record
date for the making of a distribution to all holders of Common 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), assets (other than a
dividend payable in Common Stock, but including any dividend payable in stock
other than Common Stock) or subscription rights or warrants (excluding those
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 defined in Section 11(d)) per
share of Common Stock on such record date, less the fair market value (as
determined reasonably and with good faith to the holders of Rights by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent)
of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants distributable in respect
of one share of Common Stock and the denominator of which shall be the current
market price per share of the Common Stock; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right.  Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution
is not so made, the Purchase Price shall again be adjusted to be the Purchase
Price which would be in effect if such record date had not been fixed.

(d)           For the purpose of any computation
hereunder, 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
Common Stock for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that
in the event that the current market price per share of Common Stock is
determined during a period following the announcement by the issuer of the
Common Stock of (i) a dividend or distribution on the Common Stock payable
in shares of Common Stock or securities convertible into shares of Common Stock
or (ii) any subdivision, combination or reclassification of the Common
Stock, and prior to the expiration of 30 Trading Days after the ex-dividend
date for such dividend or 

 12
 

distribution, or the
record date for such subdivision, combination or reclassification, as the case
may be, then, and in each such case, the “current market price” shall be appropriately
adjusted to reflect the current market price per common share equivalent.  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 Quotations System (“NASDAQ”) or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company, except that, 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.

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

(f)            If as a result of an adjustment made
pursuant to Section 11(a) or Section 13(a), the holder of any Right
thereafter exercised shall become entitled to receive any shares of capital
stock of the Company other than shares of Common Stock, thereafter the number
of such other shares so receivable upon exercise of any Right shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the shares contained in
Section 11(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10, 13 and 15 with respect to the shares of Common
Stock shall apply on like terms to any such other shares.

 13
 

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

(h)           Unless the Company shall have
exercised its election as provided in Section 11(i), upon each adjustment
of the Purchase Price as a result of the calculations made in
Section 11(b) and (c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of shares (calculated to the nearest
ten-thousandth) obtained by (i) multiplying (x) the number of
shares 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 substitution for any adjustment in the number of shares of Common
Stock purchasable upon the exercise of a Right. 
Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of shares of Common Stock for which
a Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price.  The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made.  Such record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, the record date shall be at
least 10 days later than the date of the public announcement.  If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders
of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 15, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. 
Right 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 Right Certificates on the record date specified in
the public announcement.

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

 14
 

(k)           Before taking any action that would
cause an adjustment reducing the per share Purchase Price below the then par
value per share, if any, of the shares of Common 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 such Common 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 issuing to the holder of any Right
exercised after such record date the shares of Common Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over
and above the shares of Common Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder’s right to receive such additional shares
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 it in its sole
discretion shall determine to be advisable in order that any consolidation or
subdivision of the Common Stock, issuance wholly for cash of any shares of
Common Stock at less than the current market price, issuance wholly for cash of
shares of Common Stock or securities which by their terms are convertible into
or exchangeable for shares of Common Stock, stock dividends or issuance of
rights, options or warrants referred to hereinabove in this Section 11,
hereafter made by the Company to holders of its Common Stock shall not be
taxable to such stockholders.

(n)           Anything in this Agreement to the
contrary notwithstanding, in the event that the Company shall at any time after
the date of this Agreement (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, (iii) combine the outstanding Common Stock
into a smaller number of shares or (iv) issue any shares of its capital
stock in a reclassification of the outstanding Common Stock, 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 (or, in the event that any adjustment
is made in connection with such event by reason of Section 11(i), after
such adjustment) 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 after 
the occurrence of the event.

(o)           Notwithstanding any other provision
of this Agreement, no adjustment to the Purchase Price, the number of shares of
Common Stock (or fractions of a share) for which a Right is exercisable or the
number of Rights outstanding (except as permitted by Section 23 

 15
 

hereof) or any similar
adjustment shall be made or be effective if such adjustment would have the
effect of reducing or limiting the benefits the holders of the Rights would
have had absent such adjustment, including, without limitation, the benefits
under Section 11(a)(ii) and Section 13, unless the terms of this
Agreement are amended so as to preserve such benefits.

(p)           The Company covenants and agrees
that, following the Distribution Date, except as permitted by Section 24
or Section 26 hereof, it will not, directly or indirectly, take any action
the purpose or effect of which is to eliminate or otherwise diminish the
benefits intended to be afforded by the Rights.

Section 12.             Certificate of Adjusted Purchase
Price or Number of Shares.  Whenever
an adjustment is made as provided in Section 11 or 13, the Company shall
(a) promptly prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Stock a
copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 26.  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment contained therein.

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

(a)           In the event that, on or after the
Stock Acquisition Date, directly or indirectly, (i) the Company shall
consolidate with, or merge with and into, any other Person, and the Company
shall not be the continuing or surviving corporation, (ii) any Person
shall consolidate with the Company, or merge with and into the Company, and the
Company shall be the continuing or surviving corporation and, in connection
therewith, all or part of the Common Stock of the Company shall be changed into
or exchanged for stock or other securities of any other Person or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or
one or more of its subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its subsidiaries (taken as a whole)
to any other Person or Persons, then, and in each such case, proper provision
shall be made so that (A) each holder of a Right, subject to 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, such number of validly authorized and issued, fully paid, non-assessable
and freely tradeable shares of Common Stock of the Principal Party (as
hereinafter defined), free and clear of any liens, encumbrances and adverse
claims and not subject to any rights of call, purchase or first refusal, as
shall be equal to the result obtained by (x) multiplying the then current
Purchase Price by the number of shares of Common Stock for which a Right is
then exercisable (without taking into account any adjustment previously made
pursuant to Section 11(a)(ii) hereof) and dividing that product by
(y) 50% of the current market price (determined pursuant to
Section 11(d)) per share of the Common Stock of the Principal Party on the
date of consummation of such consolidation, merger, sale or transfer;
(B) such Principal Party shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (C) the term “Company”
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply
only to such Principal Party following the first occurrence of an event set
forth 

 16
 

in Section 13(a)
hereof; and (D) 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 accordance with Section 9) in connection with such consummation
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the shares of its
Common Stock or cash, property or other securities thereafter deliverable upon
the exercise of the Rights.

(b)           “Principal Party” shall mean
(i) in the case of any transaction described in (i) or (ii) 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 (iii) of the first sentence in
Section 13(a), the Person that is the party receiving the greatest portion
of the assets or earning power transferred pursuant to such transaction or
transactions; provided, however, that in any such case,
(1) if the shares of Common Stock of such Person are not at such time and
have not been continuously over the preceding twelve month period registered
under Section 12 of the Exchange Act (“Registered Common Shares”) or such
Person is not a corporation, and such Person is directly or indirectly
controlled by another Person which has Registered Common Shares outstanding, “Principal
Party” shall refer to such other Person; (2) if the shares of Common Stock
of such Person are not Registered Common Shares or such Person is not a
corporation, and such Person is directly or indirectly controlled by another
Person which does not have Registered Common Shares outstanding, “Principal
Party” shall refer to the controlling Person of such first-mentioned
Person; (3) if the shares of Common Stock of such Person are not
Registered Common Shares or such Person is not a corporation, and such Person
is directly or indirectly controlled by more than one Person, and one or more
of such controlling Persons have Registered Common Shares outstanding, “Principal
Party” shall refer to whichever of such controlling Persons is the issuer of
the Registered Common Shares having the greatest aggregate market value; and
(4) if the shares of Common Stock of such Person are not Registered Common
Shares or such Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and none of such controlling
Persons have Registered Common Shares outstanding, “Principal Party” shall refer
to whichever controlling Person is the corporation having the greatest
stockholders equity or, if no such controlling Person is a corporation, shall
refer to whichever controlling Person has the greatest net assets.

(c)           The Company shall not consummate any
such consolidation, merger, sale or transfer unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent
a legally valid, binding and enforceable supplemental agreement in compliance
with the provisions set forth in Section 13(a) and (b), and if applicable
Section 13(d), and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in this
Section 13, such issuer 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; and (ii) use its best efforts to qualify or
register the Rights and the securities purchasable upon exercise of the Rights
under the blue sky laws of such jurisdictions as may be necessary or 

 17
 

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

(d)           Notwithstanding anything in
Section 13(b) and (c) to the contrary, if the Principal Party as
determined pursuant to paragraph (b) above is not a corporation or does
not have shares of Common Stock, proper provision shall be made so that such
Principal Party shall create or otherwise make available for purposes of the
exercise of the Rights in accordance with the terms of this Agreement, cash or
a type or types of securities having a fair market value (as determined by a
nationally recognized investment banking firm selected by the Board of
Directors of the Company) equal to at least the value of the shares of Common
Stock which each holder of a Right would have been entitled to receive if such Principal
Party had been a corporation or had shares of Common Stock.

(e)           The Company covenants and agrees
that, following the Distribution Date, it shall not consummate any of the
transactions described in clauses (i), (ii) and (iii) of the first
sentence of Section 13(a) if at the time of or after such consummation
there would be any charter or by-law provisions or any rights, warrants
or other instruments or securities outstanding or agreements in effect or any
other action taken which would diminish or eliminate the benefits intended to
be afforded by the Rights, unless prior thereto the Principal Party shall have
amended or repealed such charter or by-law provisions, instruments or
securities, agreements or actions or otherwise protected the holders of the
Rights from such diminution or elimination of benefits, and the Company and the
Principal Party shall have executed and delivered to the Rights Agent a legally
valid, binding and enforceable supplemental agreement providing for such
amendment, repeal or other protection.

(f)            The provisions of this
Section 13 shall similarly apply to successive mergers, consolidations,
sales or other transfers. 
Notwithstanding the occurrence of any transaction set forth in
Section 11(a)(ii), in the event that any transaction set forth in
Section 13 subsequently occurs, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in this
Section 13.

Section 14.             Additional Covenants.

(a)           After the Stock Acquisition Date, the
Company covenants and agrees that it shall not (i) consolidate with,
(ii) merge with or into, or (iii) sell or transfer to, in one or more
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its subsidiaries taken as a whole, any
other Person if at the time of or after such consolidation, merger or sale
there are any charter or by-law provisions or any rights, warrants or
other instruments outstanding or any other action taken which would diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.  The Company shall not consummate any such
consolidation, merger or sale unless prior thereto the Company and such other
Person shall have executed and delivered to the Rights Agent a supplemental
agreement evidencing compliance with this subsection.

 

 18

Section 15.             Fractional
Rights and Fractional Shares.

(a)           The Company shall not be required to
issue fractions of Rights or to distribute Right Certificates which evidence
fractional Rights.  In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right.  For the purposes
of this Section 15(a), the current market value of a whole Right shall be
the closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable.  The closing price for any day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported 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 in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as
reported by NASDAQ or such other system then in use or, if on any such date the
Rights are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Rights selected by the Board of Directors of the Company, except that, 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 upon exercise of the Rights or to distribute
certificates which evidence fractional shares. 
In lieu of fractional shares, the Company may pay to the registered
holders of Right Certificates at the time such Right Certificates are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a share of Common Stock. 
For purposes of this Section 15(b), the current market value of a
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)) for the
Trading Day immediately prior to the date of such exercise.

(c)           Each holder of a Right or Rights by
the acceptance of the Rights expressly waives his right to receive any
fractional Rights or any fractional shares upon exercise of a Right or Rights.

Section 16.             Rights of Action.  All rights of action in respect of this
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Stock), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner 

 19
 

provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.  Holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys’ fees, incurred
by them in any action to enforce the provisions of this Agreement.

Section 17.             Agreement of Right Holders.  Every holder of a Right by accepting the same
consents and agrees with the Company and the Rights Agent and with every other
holder of a Right that:

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

(b)           after the close of business on the
Distribution Date, the Rights will be transferable only by transfer of the
Right Certificates, which are transferable only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer; and

(c)           the Company and the Rights Agent may
deem and treat the person in whose name each Right 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 Right Certificate
or the associated Common Stock certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary.

Section 18.             Right Certificate Holder Not
Deemed a Stockholder.  No holder, as
such, of any Right Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of Common Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in Section 25), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.

Section 19.             Concerning the Rights Agent.

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

 20
 

Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.

(b)           The Rights Agent shall be protected
and shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this Agreement in
reliance upon any Right 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.

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

(a)           Any corporation into which the Rights
Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 22.  In case at the time
such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right 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 Right Certificates
shall have been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

Section 21.             Terms and Conditions to Duties
of Rights Agent.  The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:

 21
 

(a)           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 authorization to the Rights Agent for 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 be proved or established by the Company prior
to taking or omitting 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 Vice Chairman of the Board, the President or any Executive or
Senior Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or omitted by it in good faith under the provisions of this
Agreement in reliance upon such certificate.

(c)           The Rights Agent shall be liable
hereunder only for its own 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 Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.

(e)           The Rights Agent shall not 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 Right Certificate (except
its countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any adjustment required
under the provisions of Sections 11 or 13 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 Right 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 to be issued pursuant to this Agreement or any Right Certificate
or as to whether any shares of Common Stock will, when issued, be validly
authorized and issued, fully paid and nonassessable.

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

(g)           The Rights Agent is hereby authorized
and directed to accept determinations, interpretations and instructions with
respect to the performance of its duties hereunder from the Chairman of the
Board, the Vice Chairman of the Board, the President or any Executive or Senior
Vice President or the Secretary or any Assistant Secretary or the Treasurer or
any 

 22
 

Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with determinations,
interpretations and instructions of any such officer.

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

(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
reasonable care was exercised in the selection and continued employment
thereof.

(j)            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 of transfer without
first consulting with the Company.

Section 22.             Change of Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days’ notice in writing mailed to the Company and to each transfer agent of the
Common Stock by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. 
The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail.  If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting
or shall repeatedly fail or refuse to act, the Company shall appoint a
successor to the Rights Agent.  If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity or repeated failure or refusal to act by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by
the Company), then the registered holder of any Right Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights
Agent.  Any successor Rights Agent,
whether appointed by the Company or by such a court, shall be a corporation or
trust company organized and doing business under the laws of the United States,
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 individually or combined with an
affiliate at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100 million dollars. After appointment, the 

 23
 

successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock, and mail a notice thereof in writing to the
registered holders of the Right Certificates. 
Failure to give any notice provided for in this Section 22,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

Section 23.             Issuance of New Right
Certificates.  Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price per share and the number or kind or class of
shares of stock or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.

Section 24.             Redemption.

(a)           The Board of Directors of the Company
may, at its option, at any time prior to the earlier of (i) the close of
business on the tenth business day after the Stock Acquisition Date or
(ii) the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the “Redemption Price”).

(b)           Immediately upon the action of the
Board of Directors of the Company ordering the redemption of the Rights, and
without any further action and without any notice, the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price.  As soon as practicable
after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the holders of the
then outstanding Rights by mailing such notice to all such holders at their
last addresses as they appear upon the registry books of the 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.  Such notice
of redemption shall state the method by which the payment of the Redemption
Price will be made.  Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 24, and other than in connection with the repurchase
of Common Stock prior to the Distribution Date.

(c)           The Company may, at its option, discharge
all of its obligations with respect to the Rights by (i) issuing a press
release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the Rights Agent
or, prior to the Distribution 

 24
 

Date, on the registry
books of the Transfer Agent of the Common Stock, and upon such action, all
outstanding Rights Certificates shall be null and void without any further
action by the Company.

Section 25.             Exchange.

(a)           Subject to Section 15(b), the Board
of Directors of the Company may, at its option, at any time after the time that
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 void pursuant to the provisions of Section 7(e) and
Section 11(a)(ii) hereof) for shares of Common Stock of the Company at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such exchange ratio being hereinafter referred to as the
“Exchange Ratio”).  Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any subsidiary
of the Company, any employee benefit plan of the Company or any such
subsidiary, any entity holding shares of Common Stock for or pursuant to the terms
of any such plan or any trustee, administrator or fiduciary of such a plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of 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 25 and without any further action
and without any notice, the right to exercise such Rights shall terminate and
the only right thereafter of a holder of such Rights shall be to receive that
number of shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. 
The Company shall promptly give public notice of any such exchange; 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 shares of Common Stock for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) and Section 11(a)(ii)
hereof) held by each holder of Rights.

(c)           In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 25, the Company shall take all such action as may be
necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights; and, consistent with the provisions of Section 9(e)
and Section 11(a)(iii) hereof, in the event the Company is unable to cause
shares of Common Stock to be delivered in exchange for Rights for any reason
within 90 days after the announcement of the decision to exchange Rights
pursuant to Section (a) of this Section 25, the Company shall
substitute for each share of Common Stock otherwise issuable upon the exchange
of Rights, cash, other assets or other securities of the 

 25
 

Company (or any
combination of the foregoing) having an aggregate value equal to the “current
per share market price” (as determined pursuant to Section 11(d)(ii)
hereof), as determined by the Board of Directors of the Company.

Section 26.             Notice of Certain Events.  In case the Company shall propose (a) to
pay any dividend payable in stock of any class to the holders of its Common
Stock or to make any other distribution to the holders of its Common Stock
(other than a regular periodic cash dividend out of earnings or retained
earnings or other than a special cash dividend declared at a time when there is
no Acquiring Person out of earnings or retained earnings, or (b) to offer
to the holders of its Common Stock rights or warrants to subscribe for or to
purchase any additional shares of Common Stock or shares of stock of any class
or any other securities, rights or options, or (c) to effect any
reclassification of its Common Stock (other than a reclassification involving
only the subdivision of outstanding shares of Common Stock), or (d) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) to, any
other Person or Persons, or (e) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
each holder of a Right, 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 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 Common Stock, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by
clause (a) or (b) above at least twenty days prior to the record date
for determining holders of the Common Stock for purposes of such action, and in
the case of any such other action, at least twenty days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.

In
case any of the transactions set forth in Section 11(a)(ii) of this
Agreement shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Right, 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).

Section 27.             Notices.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:  

	
  

  	
  AAR CORP.

  1100 North Wood Dale Road

  Wood Dale, Illinois  60191

  Attention:  Secretary

  	
   

  

 

with
copy to the General Counsel at the same address.  Subject to the provisions of Section 22,
any notice or demand authorized by this Agreement to be given or made by the
Company or by 

 26
 

the
holder of any Right Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Company) as follows:  

	
  

  	
  Computershare Trust Company, N.A.

  2 North LaSalle Street

  Chicago, Illinois 60602

  Attention:  Corporate Actions

  	
   

  

 

Notices
or demands authorized by this Agreement to be given or made by the Company or
the Rights Agent to the holder of any Right Certificate 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 28.             Supplements and Amendments.  The Company and the Rights Agent may from
time to time supplement or amend this Agreement without approval of any holders
of Right Certificates in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, to extend the period of redemption provided for in
Section 24 hereof, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Rights Agent may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of Rights Certificates; provided, however, that this
Agreement may not be supplemented or amended in any way after an Acquiring
Person has become such.  Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the
terms of this Section 28, the Rights Agent shall execute such supplement
or amendment unless the Rights Agent shall have determined in good faith that
such supplement or amendment would adversely affect its interest under this
Agreement.  Prior to the Distribution
Date, the interests of the holders of Rights shall be deemed coincident with
the interests of the holders of Common Stock.

Section 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 outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock or any
other securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General
Rules and Regulations under the Exchange Act.  The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to
(i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are
done or made by the Board in good faith, shall (x) be final, conclusive
and binding on the 

 27
 

Company, the Rights
Agent, the holders of the Rights Certificates and all other parties, and
(y) not subject the Board to any liability to the holders of the Rights
Certificates.

Section 30.             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 31.             Benefits of this Agreement.  Nothing in this Agreement shall be construed
to give to any person or corporation other than the Company, the Rights Agent
and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders
of the Right Certificates.

Section 32.             Governing Law.  This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state.

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.

Section 35.             Severability.  If any term, provision, covenant or
restriction of this Agreement shall be held by a court of competent
jurisdiction or other authority to be invalid, void, illegal or unenforceable,
the validity or enforceability of the remainder of the terms, provisions,
covenants and restrictions shall not be affected thereby.

 28
 

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:

  	
   

  	
   

  	
   

  	
  AAR CORP.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Howard A. Pulsifer 

  	
   

  	
   

  	
  By:

  	
  /s/ David P. Storch 

  
	
   

  	
  Name:

  	
  Howard A. Pulsifer 

  	
   

  	
  Name:

  	
  David P. Storch 

  
	
   

  	
  Title:

  	
  Vice President, Secretary and 

  	
   

  	
  Title:

  	
  President and Chief Executive 

  
	
   

  	
  General Counsel

  	
   

  	
   

  	
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
  COMPUTERSHARE TRUST COMPANY, N.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Rosanna Garofalo

  	
   

  	
  By:

  	
  /s/ Tammie Marshall

  
	
   

  	
  Name:

  	
  Rosanna Garofalo

  	
   

  	
  Name:

  	
  Tammie Marshall

  
	
   

  	
  Title:

  	
  Senior Account Manager

  	
  Title:

  	
  Senior Account Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
																

 

 

 29

EXHIBIT A

FORM OF RIGHTS
CERTIFICATE

Certificate No. R-                                                                                                                                                       _____
Rights

NOT EXERCISABLE AFTER AUGUST 6, 2017, OR EARLIER IF
NOTICE OF REDEMPTION OR EXCHANGE IS GIVEN. 
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT BETWEEN AAR CORP.
AND COMPUTERSHARE TRUST COMPANY, N.A. (THE “RIGHTS AGREEMENT”).  [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE
OR AN ASSOCIATE OF AN ACQUIRING PERSON. 
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY HAVE BECOME
VOID TO THE EXTENT PROVIDED BY  SECTION
7(e) OF THE RIGHTS AGREEMENT.](1)

RIGHTS CERTIFICATE

AAR CORP.

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 July 11, 2007 (the “Rights Agreement”), between AAR
CORP., a Delaware corporation (the “Company”), and Computershare Trust Company,
N.A., a national banking association 
(the “Rights Agent”), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior
to 5:00 P.M. (Central time) on August 6, 2017, at the principal office of
the Rights Agent in Chicago, Illinois, one fully paid, non-assessable
share of the Common Stock, $1.00 par value (the “Common Stock”), of the
Company, at a purchase price of $140.00 per share (the “Purchase Price”), upon
presentation and surrender of this Rights Certificate with the appropriate Form
of Election to Purchase 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 set forth above, are the number and Purchase Price as of
August 6, 2017 based on the Common Stock of the Company as constituted at such
date.

*              The
portion of the legend in brackets shall be inserted only if applicable.  

 A-1
 

As
provided in the Rights Agreement, the Purchase Price and the number of shares
of Common 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.

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.  Copies of the Rights Agreement are on file at
the principal 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 office of the Rights Agent designated for such purpose, may be exchanged
for another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Rights evidenced by the Rights Certificate or
Rights Certificates surrendered shall have entitled such holder to
purchase.  If this Rights Certificate
shall be exercised (other than pursuant to Section 11(a)(ii) of the Rights
Agreement) 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.  If this
Rights Certificate shall be exercised in whole or in part pursuant to Section
11(a)(ii) of the Rights Agreement, the holder shall be entitled to receive this
Rights Certificate duly marked to indicate such exercise has occurred as set
forth in the Rights Agreement.

Subject
to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
may be redeemed by the Company at its option at a redemption price of $.01 per
Right.  Subject to the provisions of the
Rights Agreement, the Company, at its option, may elect to mail payment of the
redemption price to the registered holder of the Right at the time of
redemption, in which event this Certificate may become void without any further
action by the Company.

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

No
holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Common
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 shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

 A-2
 

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

WITNESS
the facsimile signature of the proper officers of the Company and its corporate
seal.   Dated as of August 6, 2007.

	
  [SEAL] ATTEST:

  	
   

  	
  AAR CORP.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMPUTERSHARE TRUST COMPANY, N.A.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 A-3
 

 

[Form of Reverse Side of Rights Certificate]

FORM OF
ASSIGNMENT

(To be executed by the 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:

  	
  _________________ 
  ___, 20___

  	
   

  	
  Signature

  	
   

  

 

 

Signature
Guaranteed:

Signatures
must be guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or
a commercial bank, savings association, credit union or trust company having an
office or correspondent in the United States or other eligible guarantor institution
which is a participant in a signature guarantee medallion program.

 A-4
 

Certificate

The
undersigned hereby certifies by checking the appropriate boxes that:

(1)           the Rights evidenced by this Rights
Certificate [    ] are [    ] are not being sold, assigned or
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such 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 or was or
subsequently became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person.  

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
  ________________ ____, _____

  	
   

  	
  Signature

  	
   

  

 

 A-5
 

[Form of Reverse Side of Rights Certificate —
continued]

FORM OF ELECTION TO PURCHASE

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

pursuant to Section 11(a)(ii) of the Rights Agreement.)

To:
         AAR CORP.

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

	
  

  
	
  (Please insert social security or other identifying
  number)

  

 

	
  

  
	
   

  
	
  (Please print name and address)

  

 

The
Rights Certificate indicating the balance, if any, of such Rights that may
still be exercised pursuant to Section 11(a)(ii) of the Rights Agreement shall
be returned to the undersigned unless such person requests that the Rights
Certificate be registered in the name of and delivered to:  

	
  

  
	
  (Please insert social security or other identifying
  number.)

  (Complete only if the Rights Certificate is to be registered in

  a name other than the undersigned’s.)

  

 

	
  

  
	
   

  
	
  (Please print name and address)

  

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated: 

  	
  _____________________ _____, _____

  	
   

  	
  Signature

  

 

 A-6
 

Signature Guaranteed:

Signatures
must be guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or
a commercial bank, savings association, credit union or trust company having an
office or correspondent in the United States or other eligible guarantor
institution which is a participant in a signature guarantee medallion program.

 A-7
 

Certificate

The undersigned hereby
certifies that 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
any such Acquiring Person (as such terms are defined pursuant to the Rights
Agreement);

(2)           this Rights Certificate [    ] is [   
] is not being sold, assigned and transferred by or on behalf of a
Person who is or was an Acquiring Person or an Affiliate or Associate of any
such Acquiring Person;

(3)           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

  

 

 

 A-8
 

NOTICE

The
signature on the foregoing Forms of Assignment and Election to Purchase and Certificates
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.

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

 

 A-9

EXHIBIT B

AAR CORP.

SUMMARY OF RIGHTS TO PURCHASE

COMMON STOCK

On
July 10, 2007, the Board of Directors of AAR CORP. (the “Company”) declared a
dividend distribution of one Right for each outstanding share of Common Stock,
$1.00 par value (the “Common Stock”), of the Company to the stockholders of
record on August 6, 2007 (the “Record Date”). 
Each Right entitles the registered holder to purchase from the Company
one share of Common Stock at a price of $140.00 per share (the “Purchase Price”),
subject to adjustment.  The description
and terms of the Rights are set forth in a Rights Agreement (the “Rights
Agreement”) between the Company and Computershare Trust Company, N.A., as
Rights Agent (the “Rights Agent”).  The
Rights replace the common stock purchase rights which were distributed to the
Company’s stockholders in 1997.

Until
the earlier to occur of (i) the tenth business day after a public
announcement that a person or group of affiliated or associated persons
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding shares of Common Stock of the Company (such person or group
being called an “Acquiring Person” and such date of first public announcement
being called the “Stock Acquisition Date”), or (ii) the tenth business day
after the commencement or announcement of an intention to make a tender offer
or exchange offer which would result in any person or group of affiliated or
associated persons becoming an Acquiring Person (the earlier of such dates
being called the “Distribution Date”), the Rights will be evidenced, with
respect to any of the Company’s Common Stock certificates outstanding as of the
Record Date, by such Common Stock certificate with a copy of this Summary of
Rights attached thereto.  The Rights Agreement
provides that, until the Distribution Date, the Rights will be transferred with
and only with the Company’s Common Stock. 
Until the Distribution Date (or earlier redemption or expiration of the
Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuance of the Company’s Common Stock will contain a notation
incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any of
the Company’s Common Stock certificates outstanding as of the Record Date will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.  As soon
as practicable following the Distribution Date, separate certificates
evidencing the Rights (“Rights Certificates”) will be mailed to holders of
record of the Company’s Common Stock as of the close of business on the
Distribution Date and, thereafter, such separate Rights Certificates alone will
evidence the Rights.

The
Rights are not exercisable until the Distribution Date.  The Rights will expire on August 6, 2017,
unless earlier redeemed by the Company as described below.

The
Purchase Price payable, and the number of shares of Common Stock or other securities
or property issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend
on, or a subdivision, combination or reclassification of the Common Stock,
(ii) upon the grant to holders of Common Stock of certain 

 B-1
 

rights, options or warrants to subscribe for shares of
Common Stock or convertible securities at less than the current market price of
the Common Stock or (iii) upon the distribution to holders of Common Stock
of evidences of indebtedness or assets (excluding (a) a regular periodic
cash dividend or (b) a dividend payable in Common Stock) or of
subscription rights, options or warrants (other than those referred to above).

In
the event that a person becomes the beneficial owner of 15% or more of the
outstanding shares of Common Stock (i.e.,
becomes an Acquiring Person), each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will be void),  will have the right to receive upon exercise
thereof, that number of shares of Common Stock 
having a market value of two times the exercise price of the Right (such
right being called the “Flip-In” right).

In
the event that, on or after the Stock Acquisition Date, the Company were
acquired in a merger or other business combination, or 50% or more of its
assets or earning power were sold, proper provision shall be made so that each
holder of a Right shall thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Right, that number of shares
of common stock of the acquiring company which at the time of such transaction
would have a market value of two times the exercise price of the Right.  In the event that the Company were the
surviving corporation in a merger involving the Acquiring Person and the Common
Stock were not changed or exchanged, proper provision shall be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will be void), will thereafter have the right to receive upon
exercise that number of shares of the Common Stock having a market value of two
times the exercise price of the Right (such right being called the “Flip-Over”
right).  The holder of a right will no
longer have a Flip-Over right if, and to the extent that, he has
exercised his Flip-In right.

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

At
any time prior to the tenth day after the time that there is an Acquiring
Person, the Company may, at its option, redeem the Rights in whole but not in
part, at a price of $0.01 per Right (the “Redemption Price”).  Immediately upon the authorization of the
redemption of the Rights by the Board of Directors of the Company, the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.

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

The
Board of Directors of the Company may amend the Rights Agreement from time to
time, provided that any such changes do not adversely affect the interest of
the holders of the Rights, and provided further that the Rights Agreement may
not be supplemented or amended in any way after an Acquiring Person has become
such.

 B-2
 

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

* * * * * * * * *

 

 B-3

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