Document:

exhibit41-012609.htm

    
       

      
        
          

        
EXHIBIT 4.1

      
        

      

       

       

      THE YORK
WATER COMPANY

       

      

       

      and

       

      

       

      AMERICAN
STOCK TRANSFER & TRUST COMPANY, LLC

       

      

       

      as Rights
Agent

       

      

       

      

       

      RIGHTS
AGREEMENT

       

      

       

      Dated as
of January 24, 2009

       

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      TABLE OF CONTENTS

       

      

      
        
          	
                  SECTION 1.

                	
                  CERTAIN DEFINITIONS

                
	
                  SECTION 2.

                	
                  APPOINTMENT OF RIGHTS AGENT

                
	
                  SECTION 3.

                	
                  ISSUE OF RIGHTS CERTIFICATES

                
	
                  SECTION 4.

                	
                  FORM OF RIGHTS CERTIFICATES

                
	
                  SECTION 5.

                	
                  COUNTERSIGNATURE AND REGISTRATION

                
	
                  SECTION 6.

                	
                  TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
      CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
      CERTIFICATES

                
	
                  SECTION 7.

                	
                  EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
      RIGHTS

                
	
                  SECTION 8.

                	
                  CANCELLATION AND DESTRUCTION OF RIGHTS
      CERTIFICATES

                
	
                  SECTION 9.

                	
                  RESERVATION AND AVAILABILITY OF CAPITAL STOCK;
      REGISTRATION OF SECURITIES

                
	
                  SECTION 10.

                	
                  CAPITAL STOCK RECORD DATE

                
	
                  SECTION 11.

                	
                  ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
      OR NUMBER OF RIGHTS

                
	
                  SECTION 12.

                	
                  CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
      SHARES

                
	
                  SECTION 13.

                	
                  CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
      EARNING POWER

                
	
                  SECTION 14.

                	
                  FRACTIONAL RIGHTS AND FRACTIONAL
    SHARES

                
	
                  SECTION 15.

                	
                  RIGHTS OF ACTION

                
	
                  SECTION 16.

                	
                  AGREEMENT OF RIGHTS HOLDERS

                
	
                  SECTION 17.

                	
                  RIGHTS CERTIFICATE HOLDER NOT DEEMED A
      SHAREHOLDER.

                
	
                  SECTION 18.

                	
                  CONCERNING THE RIGHTS AGENT

                
	
                  SECTION 19.

                	
                  MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
      AGENT

                
	
                  SECTION 20.

                	
                  DUTIES OF RIGHTS AGENT

                
	
                  SECTION 21.

                	
                  CHANGE OF RIGHTS AGENT

                
	
                  SECTION 22.

                	
                  ISSUANCE OF NEW RIGHTS
  CERTIFICATES

                
	
                  SECTION 23.

                	
                  REDEMPTION AND
TERMINATION

                

        

      

      
        
          
            
              
                
                  	
                          SECTION 24.

                        	
                          EXCHANGE

                        
	
                          SECTION 25.

                        	
                          NOTICE OF CERTAIN EVENTS

                        
	
                          SECTION 26.

                        	
                          NOTICES

                        
	
                          SECTION 27.

                        	
                          SUPPLEMENTS AND AMENDMENTS

                        
	
                          SECTION 28.

                        	
                          SUCCESSORS

                        
	
                          SECTION 29.

                        	
                          DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
      ETC

                        
	
                          SECTION 30.

                        	
                          BENEFITS OF THIS AGREEMENT

                        
	SECTION 31.	SEVERABILITY
	SECTION 32.	GOVERNING LAW
	SECTION 33.	COUNTERPARTS 
	SECTION 34. 	DESCRIPTIVE HEADINGS 
	
                          EXHIBIT A

                        	
                          FORM OF CERTIFICATE OF
DESIGNATIONS

                        
	
                          EXHIBIT B

                        	
                          FORM OF RIGHTS
CERTIFICATE

                        

                

              

            

          

        

      

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      RIGHTS
AGREEMENT

       

      
        RIGHTS
AGREEMENT, dated as of January 24, 2009 (the “Agreement”), between THE YORK
WATER COMPANY, a Pennsylvania corporation (the “Company”), and AMERICAN STOCK
TRANSFER & TRUST COMPANY, LLC (the “Rights Agent”).

         

      

      W I T N E
S S E T H

       

      WHEREAS,
on December 15, 2008 (the “Rights Dividend Declaration Date”), the Board of
Directors of the Company authorized and declared a dividend distribution of one
Right for each Common Share (as hereinafter defined) of the Company outstanding
at the close of business on January 24, 2009 (the “Record Date”) (subject to the
approval of the Pennsylvania Public Utility Commission and the right of the
Board to cancel such dividend) and has authorized the issuance of one Right (as
such number may hereafter be adjusted pursuant to the provisions of Section
11(p)(i) hereof) for each Common Share of the Company issued between the Record
Date (whether originally issued or delivered from the Company’s treasury) and
the Distribution Date (as hereinafter defined), each Right initially
representing the right to purchase one one-hundredth of a Preferred Share (as
hereinafter defined) of the Company having the rights, powers and preferences
set forth in the form of the Resolutions of the Board of Directors attached
hereto as Exhibit
A, upon the terms and subject to the conditions hereinafter set forth
(the “Rights”); and

       

      WHEREAS,
the Rights will be held by the Rights Agent under this Agreement as trustee for
the stockholders of the Company until the Distribution Date; and

       

      WHEREAS,
the Board of Directors of the Company has considered whether approval of the
distribution of the Rights is in the best interests of the Company and all other
pertinent factors; and

       

      WHEREAS,
the Board of Directors of the Company has concluded that approval of this
Agreement and the distribution of the Rights is in the best interests of the
Company because the existence of the Rights will help (i) reduce the risk of
coercive two-tiered, front-end loaded or partial offers that may not offer fair
value to all shareholders, (ii) mitigate against market accumulators who through
open market and/or private purchases may achieve a position of substantial
influence or control without paying to selling or remaining shareholders a fair
control premium, (iii) deter market accumulators who are simply interested in
putting the Company into “play,” (iv) restrict self-dealing by a substantial
shareholder, and (v) preserve the Board of Directors’ bargaining power and
flexibility to deal with third-party acquirors, to pursue the business
strategies of the Company and to otherwise seek to maximize long-term values for
all shareholders.

       

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

       

      Section
1. Certain
Definitions.      back to Table of Contents

       

      For
purposes of this Agreement, the following terms have the meanings
indicated:

      (a) “Acquiring
Person” shall mean any Person who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 20% or more of the
Common Shares then outstanding, but shall not include (i) the Company, (ii) any
Subsidiary of the Company, or (iii) any employee benefit plan of the Company or
of any Subsidiary of the Company, or any Person or entity organized, appointed
or established by the Company for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as
the result of an acquisition of Common Shares by the Company which, by reducing
the then number of Common Shares outstanding, increases the proportionate number
of Common Shares beneficially owned by such Person to 20% or more of the Common
Shares then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding by reason of  share purchases by the
Company  and shall, after such share purchase by the Company, become
the Beneficial Owner of any additional Common Shares, then such Person shall be
deemed to be an “Acquiring Person.” as of the date of such additional
purchase.  Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be an
“Acquiring Person”, as defined pursuant to the foregoing provisions of this
paragraph, has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an Acquiring Person, then such Person shall not be deemed to be an
“Acquiring Person” for purposes of this Agreement.

       

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

       

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

       

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

       

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

       

      (ii) that such
Person or any of such Person’s Affiliates or Associates, directly or indirectly,
has the right to vote or dispose of or has “beneficial ownership” of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), including without limitation pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided, however,
that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own,” any security under this subparagraph (ii) solely as a result of an oral or
written agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises exclusively from a revocable
proxy given in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or successor
report); or

       

      (iii) that are
beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement or understanding
(whether or not in writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (c)) or disposing of any voting securities
of the Company,

       

      provided,
however, that nothing in this paragraph (c) shall cause a person engaged in
business as an underwriter of securities to be the “Beneficial Owner” of, or to
“beneficially own,” any securities acquired through such Person’s participation
in good faith in a firm commitment underwriting until the expiration of forty
days after the date of such acquisition.

       

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

       

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

       

      (g) “Common
Share” shall mean, when used with reference to the Company, a share of common
stock, without par value, of the Company and, to the extent that there are not a
sufficient number of Common Shares authorized to permit the full exercise of the
Rights, shares of any other class or series of the Company designated for such
purpose containing terms substantially similar to the terms of the Common
Shares, except that “Common Share” when used with reference to any Person other
than the Company shall mean the shares of capital stock of such Person with the
greatest voting power, or the equity securities or other equity interest having
power to control or direct the management, of such Person.

       

      (h) “Distribution
Date” shall have the meaning set forth in Section 3 hereof.

       

      (i) “Expiration
Date” shall have the meaning set forth in Section 7(a) hereof.

       

      (j) “Person”
shall mean any individual, firm, corporation, partnership, limited liability
company, or other entity.

       

      (k) “Preferred
Share” shall mean a share of Series B Junior Participating Preferred Shares,
without par value, of the Company and, to the extent that there are not a
sufficient number of shares of Series B Junior Participating Preferred Shares
authorized to permit the full exercise of the Rights, shares of any other series
of Series Preferred Stock of the Company designated for such purpose containing
terms substantially similar to the terms of the Series B Junior Participating
preferred Shares.

       

      (l) “Preferred
Share Fraction” shall mean one one-hundredth of a Preferred Share.

       

      (m) “Section
11(a)(ii) Event” shall mean any event described in Section 11(a)(ii) (A), (B) or
(C) hereof.

       

      (n) “Section
13 Event” shall mean any event described in clauses (x), (y) or (z) of Section
13(a) hereof.

       

      (o) “Spread”
shall have the meaning set forth in Section 11 (a)(iii) hereof.

       

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

       

      (q) “Subsidiary”
shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act.

       

      (r) “Trading
Day” shall have the meaning set forth in Section 11(d)(i) hereof.

       

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

       

      Unless
otherwise specified, where reference is made in this Agreement to sections of,
and the General Rules and Regulations under, the Exchange Act, such reference
shall mean such sections and rules as amended from time to time and any
successor provisions thereto.

      

      Section
2. Appointment
of Rights Agent.    back to Table of
Contents

       

      The Company hereby appoints the Rights
Agent to act as agent for the Company and trustee for the beneficial owners of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holder of the Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable, upon ten (10) days’ prior written notice to
the Rights Agent. The Rights Agent shall have no duty to supervise, and in no
event be liable for, the acts or omissions of any such co-Rights
Agent.

       

      Section
3. Issue of
Rights Certificates.    back to Table of
Contents  

       

      (a) Until the
earlier of (i) the Close of Business on the tenth Business Day after a Stock
Acquisition Date involving an Acquiring Person that has become such in a
transaction as to which the Board of Directors has not made the determination
referred to in Section 11(a)(ii)(B) hereof, or (ii) the close of business on
such date as may be fixed by the Board of Directors of the Company by notice to
the Rights Agent and publicly announced by the Company, which date shall not be
later than 65 days) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of 20% or more
of the Common Shares then outstanding (the earlier of (i) and (ii) being herein
referred to as the “Distribution Date”), (x) beneficial interests in the Rights
will be evidenced (subject to the provisions of paragraph (b) of this Section 3)
by the certificates for the Common Shares registered in the names of the holders
of the Common Shares (which certificates for Common Shares shall be deemed also
to be certificates for beneficial interests in the Rights) and not by separate
certificates, and (y) the Rights and beneficial interests therein will be
transferable only in connection with the transfer of the underlying Common
Shares (including a transfer to the Company).  As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class, postage
prepaid mail, to each record holder of the Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in substantially the
form of Exhibit B hereto (the “Rights Certificates”), evidencing one Right for
each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.

       

      (b) With
respect to certificates for the Common Shares outstanding as of the Record Date,
until the Distribution Date, beneficial interests in the Rights will be
evidenced by such certificates for the Common Shares and the registered holders
of the Common Shares shall also be the registered holders of the beneficial
interests in the associated Rights. Until the earlier of the Distribution Date
or the Expiration Date (as such term is defined in Section 7 hereof), the
transfer of any certificates representing Common Shares in respect of which
Rights have been issued shall also constitute the transfer of the Rights
associated with such Common Shares. Certificates issued after the Record Date
but prior to the Distribution Date upon the transfer of Common Shares
outstanding on the Record Date shall bear the legend set forth in subsection
(c).

       

      (c) Except as
provided in Section 22 hereof, Rights shall be issued in respect of all Common
Shares that are issued (whether originally issued or delivered from the
Company’s treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such Common
Shares shall also be deemed to be certificates for beneficial interests in the
associated Rights, and shall bear the following legend:

       

      “This
certificate also evidences a beneficial interest in and entitles the holder
hereof to certain rights as set forth in the Rights Agreement
between  The York Water Company (the “Company”) and American Stock
Transfer & Trust Company, LLC (the “Rights Agent”) dated as of January 24,
2009 (the “Rights Agreement”), and as the same may be amended from time to time,
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and beneficial interests therein will no
longer be evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the date of
mailing, without charge promptly after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights issued to,
or held by, any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.”

       

      With respect to such certificates
containing the foregoing legend, until the earlier of (i) the Distribution Date
or (ii) the Expiration Date, beneficial interests in the Rights associated with
the Common Shares represented by such certificates shall be evidenced by such
certificates alone and registered holders of Common Shares shall also be the
registered holders of beneficial interests in the associated Rights, and the
transfer of any of such certificates shall also constitute the transfer of
beneficial interests in the Rights associated with the Common Shares represented
by such certificates.

       

      Section
4. Form of
Rights Certificates.     back to Table of
Contents 

       

      (a) The
Rights Certificates (and the forms of election to purchase and of assignment to
be printed on the reverse thereof) shall each be substantially in the form set
forth in Exhibit B 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 or the automated quotation system on which the Rights may
from time to time be listed or traded, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall entitle the holders thereof to purchase such number
of Preferred Share Fractions as shall be set forth therein at the price set
forth therein (such exercise price per Preferred Share Fraction, the “Purchase
Price”), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.

       

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

       

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

       

      Section
5. Countersignature and Registration.      back to Table of
Contents

       

      (a) The
Rights Certificates shall be executed on behalf of the Company by its Chairman
of the Board, its Chief Executive Officer, its President or any Vice President,
either manually or by facsimile signature, which signature shall be attested by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature.  The Rights Certificates shall be countersigned
by the Rights Agent, either manually or by facsimile signature, and shall not be
valid for any purpose unless so countersigned.  In case any officer of
the Company who shall have signed any of the Rights Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the Person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Agreement any such Person was not such an
officer.

       

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

       

      Section
6. Transfer,
Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates.      back to Table of
Contents

       

      (a) Subject
to the provisions of Section 4(b), Section 7 (e) and Section 14 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 Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates entitling the registered holder to purchase a
like number of Preferred Share Fractions (or, following a Triggering Event,
Common Shares or other securities, cash or other assets, as the case may be, as
the Rights Certificate or Certificates surrendered then entitled such holder or
former holder in the case of a transfer to purchase).  Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.  Thereupon the Rights Agent shall, subject
to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to
the Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.

       

      (b) Upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of a Rights Certificate,
and, in case of loss, theft or destruction, of indemnity or security 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 Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights Agent
for countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.

       

      Section
7. Exercise of
Rights; Purchase Price; Expiration Date of Rights.      back to Table of
Contents

       

      (a) Subject
to subsection (e), the registered holder of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein including,
without limitation, the restrictions on exercisability set forth in Section
9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any
time after the Distribution Date upon surrender of the Rights Certificate, with
the form of election to purchase and the certificate on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price (except
as provided in Section 11(q) hereof) with respect to the total number of
Preferred Share Fractions (or Common Shares, other securities, cash or other
assets, as the case may be) as to which such surrendered Rights are then
exercisable (except as provided in Section 11(q) hereof), at or prior to the
earliest of (i) the Close of Business on January 24, 2019 (the “Final Expiration
Date”), (ii) the consummation of a transaction contemplated by Section 13(d)
hereof, or (iii) the time at which the Rights are redeemed or terminated as
provided in Section 23 hereof (the earliest of (i), (ii) and (iii) being herein
referred to as the “Expiration Date”).

       

      (b) The
“Purchase Price” for each Preferred Share Fraction pursuant to the exercise of a
Right shall initially be $60.00, and shall be subject to adjustment from time to
time as provided in Sections 11 and 13(a) hereof and shall be payable in
accordance with subsection (c).

       

      (c) Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase and the certificate duly executed, accompanied by
payment, with respect to each Right so exercised, of the Purchase Price per
Preferred Share Fraction (or Common Shares, other securities, cash or other
assets, as the case may be) to be purchased as set forth below and an amount
equal to any applicable transfer tax, the Rights Agent shall, subject to Section
20(k) and Section 14(b) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent for the Common Shares) certificates for the total number
of Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Company shall have elected to deposit some or all of the total number of
Preferred Shares issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of Preferred Share Fractions as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
(as such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be
made, at the election of the holder of the Rights Certificate, (x) in cash or by
certified bank check or money order payable to the order of the Company or (y)
by delivery of Rights if and to the extent authorized by Section 11(q) hereof.
In the event that the Company is obligated to issue other securities of the
Company (including Common Shares) 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.

       

      (d) In case
the registered holder of any Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent
to the Rights remaining unexercised shall be issued by the Rights Agent and
delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 6 and Section 14
hereof.

       

      (e) Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of
an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing oral or written plan, agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of an oral or written plan, agreement,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise; provided, however, that the Rights held by an Acquiring Person, an
Affiliate or Associate of an Acquiring Person or the transferees of such Persons
referred to above shall not be voided unless the Acquiring Person in question or
an Affiliate or Associate of such Acquiring Person shall be involved in the
transaction giving rise to the Section 11(a)(ii) Event. The Company shall use
all reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.

       

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

       

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

       

      Section
9. Reservation
and Availability of Capital Stock; Registration of
Securities.      back to Table of
Contents

       

      (a) The
Company covenants and agrees that it will cause to be reserved and kept
available for issuance upon the exercise of outstanding Rights as many of its
authorized and unissued Preferred Shares (and, following the occurrence of a
Triggering Event, out of its authorized and unissued or treasury Common Shares
and/or other securities) or out of its authorized and issued shares held in its
treasury, which together, shall at all times after the Distribution Date be
sufficient to permit the exercise in full of all outstanding
Rights.

       

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

       

      (c) The
Company shall use its best efforts to (i) file, as soon as practicable following
the earliest date after the first occurrence of a Section 11(a)(ii) Event on
which the consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section 11(a)(iii) hereof, or as
soon as is required by law following the Distribution Date, as the case may be,
a registration statement or statements under the Act, with respect to the
securities purchasable upon exercise of the Rights on an appropriate form or
forms, (ii) cause such registration statement or statements to become effective
as soon as practicable after such filing, and (iii) cause such registration
statement or statements to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or “blue sky” laws of the
various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) days
after the date set forth in clause (i) of the first sentence of this subsection
(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may, by issuing a public
announcement, temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective. Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction unless the requisite qualification in such
jurisdiction shall have been obtained, nor shall the Rights be exercisable if
the exercise thereof shall not be permitted under applicable law or a
registration statement shall not have been declared effective.

       

      (d) The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares (and, following a Triggering
Event, Common Shares or other securities) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares or other
securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued and, with respect to Preferred Shares, Common Shares or
other shares of capital stock, fully paid and nonassessable.

       

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

       

      
        
          Section
10. Capital Stock Record
Date.      back to Table of
Contents

           

        

      

      (a) Each
Person in whose name any certificate for a number of Preferred Share Fractions
(or Common Shares or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such Preferred Share Fractions (or Common Shares or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the applicable transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the applicable transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
shareholder 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 and Kind of Shares or Number of
Rights.      back to Table of
Contents

       

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

       

      (ii) In the
event:

       

      (A)  any Acquiring Person or
any Associate or Affiliate of any Acquiring Person, at any time after the Stock
Acquisition Date, directly or indirectly, (1) shall merge into the Company or
otherwise combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Common Shares of the
Company or other equity securities of the Company shall remain outstanding, (2)
shall, in one transaction or a series of transactions, transfer any assets to
the Company or to any of its Subsidiaries in exchange (in whole or in part) for
Common Shares, for shares of other equity securities of the Company, or for
securities exercisable for or convertible into shares of equity securities of
the Company (Common Shares or otherwise) or otherwise obtain from the Company,
with or without consideration, any additional shares of such equity securities
or securities exercisable for or convertible into shares of such equity
securities (other than pursuant to a pro rata distribution to all holders of
Common Shares), (3) shall sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of assets in one transaction or a
series of transactions, to, from or with (as the case may be) the Company or any
of its Subsidiaries, on terms and conditions less favorable to the Company than
the Company would be able to obtain in arm’s-length negotiation with an
unaffiliated third party, other than pursuant to a Section 13 Event, (4) shall
sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise dispose
of assets having an aggregate fair market value of more than $5,000,000 in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of the Company’s Subsidiaries (other than incidental to the
lines of business, if any, engaged in as of the date hereof between the Company
and such Acquiring Person or Associate or Affiliate), other than pursuant to a
Section 13 Event, (5) shall receive any compensation from the Company or any of
the Company’s Subsidiaries other than compensation for full-time employment as a
regular employee at rates in accordance with the Company’s (or its
Subsidiaries’) past practices, or (6) shall receive the benefit, directly or
indirectly (except proportionately as a shareholder and except if resulting from
a requirement of law or governmental regulation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the Company or any of its Subsidiaries;
or

       

      (B) any Person, alone or together with
its Affiliates and Associates, shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person, unless the event causing such
Person to become an Acquiring Person is a Section 13 Event, or is an acquisition
of Common Shares pursuant to a tender offer or an exchange offer for all
outstanding Common Shares at a price and on terms that provide fair value to all
stockholders, as determined by at least a majority of the members of the Board
of Directors, after taking into consideration all factors that such members of
the Board of Directors deem relevant, including, without limitation, the
long-term prospects and value of the Company and the prices and terms that such
members of the Board of Directors believe, in good faith, could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value, or

       

      (C) during such time as there is an
Acquiring Person, there shall be any reclassification of securities (including
any reverse stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a Section 13 Event or series of such Section 13 Events
(whether or not with or into or otherwise involving an Acquiring Person) that
has the effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity securities
of the Company or any of its Subsidiaries that is directly or indirectly
beneficially owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person,

       

      then,
promptly following the first occurrence of a Section 11(a)(ii) Event, proper
provision shall be made so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of a number of Preferred Share Fractions, such number
of Common Shares of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of Preferred
Share Fractions for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the
“Purchase Price” for each Right and for all purposes of this Agreement) by 50%
of the current market price (determined pursuant to Section 11(d) hereof) per
Common Share on the date of such first occurrence (such number of shares, the
“Adjustment Shares”).

       

      (iii) In the
event that the number of Common Shares that are authorized by the Company’s
Amended and Restated Articles of Incorporation, as amended, but not outstanding
or reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section 11(a), The Company
shall:   (A) determine the excess of the value of the Adjustment
Shares issuable upon the exercise of a Right (the “Current Value”) over the
Purchase Price (such excess, the “Spread”), and (B) with respect to each Right,
make adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
(3) Common Shares of the same or a different class or other equity securities of
the Company (including, without limitation, preferred shares or units of
preferred shares that a majority of the members of the Board of Directors in
office at the time has deemed (based, among other things, on the dividend and
liquidation rights of such preferred shares) to have substantially the same
economic value as Common Shares (such preferred shares, hereinafter referred to
as “common share equivalents”)), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate value equal
to the Current Value, where such aggregate value has been determined by a
majority of the members of the Board of Directors in office at the time after
considering the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s
right of redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the “Section 11(a)(ii) Trigger Date”), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, Common Shares (to the
extent available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the Company
shall determine in good faith that it is likely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek shareholder approval for the
authorization of such additional shares (such period, as it may be extended, the
“Substitution Period”). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company shall provide, subject to Section 7(e) hereof,
that such action shall apply uniformly to all outstanding Rights, and may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect.  For purposes of this Section 11(a)(iii), the value of the
Common Shares shall be the current market price (as determined pursuant to
Section 11(d) hereof) per Common Share on the Section 11(a)(ii) Trigger Date and
the value of any “common share equivalent” shall be deemed to have the same
value as the Common Shares on such date.

       

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

       

      (c) In case
the Company shall fix a record date for a distribution to all holders of
Preferred Shares (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 quarterly dividend out of
the earnings or retained earnings of the Company), assets (other than a regular
quarterly dividend referred to above or dividend payable in Preferred Shares,
but including any dividend payable in stock other than Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per Preferred Share on
such record date, less the then fair market value (as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes) of the portion of the cash, assets or evidences of indebtedness so to
be distributed or of such subscription rights or warrants applicable to a
Preferred Share and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d) hereof) per Preferred Share. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.

       

      (d) 

       

      (i) For the
purpose of any computation hereunder, other than computations made pursuant to
Section 11(a)(iii) hereof, the “current market price” per Common Share on any
date shall be deemed to be the average of the daily closing prices per Common
Share for the thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to and not including such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the “current market
price” per Common Share on any date shall be deemed to be the average of the
daily closing prices per Common Share for the ten (10) consecutive Trading Days
immediately following and not including such date; provided, however, that in
the event that the current market price per Common Share is determined during a
period following the announcement by the issuer of such Common Share of (A) a
dividend or distribution on such Common Share payable in Common Shares or
securities convertible into Common Shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Shares, and prior to
the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the “current market price” shall
be properly adjusted to take into account ex-dividend trading. The closing price
for each Trading 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 Common Shares 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 Common Shares
are listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System (“NASDAQ”) or such other system then in
use, or, if on any such date the Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Shares selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Common Shares, 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 Common Shares are listed or admitted to trading
is open for the transaction of business or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, a Business Day. If
the Common Shares are not publicly held or not so listed or traded, “current
market price” per share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.

       

      (ii) For the
purpose of any computation hereunder, the “current market price” per Preferred
Share shall be determined in the same manner as set forth above for the Common
Shares in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the current market price per Preferred Share cannot be determined
in the manner provided above or if the Preferred Shares are not publicly held or
listed or traded in a manner described in clause (i) of this Section 11(d), the
“current market price” per Preferred Share shall be conclusively deemed to be an
amount equal to 100 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Shares occurring after the date of this Agreement) multiplied by the
current market price per Common Share. If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, “current market
price” per Preferred Share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes. For all purposes of this Agreement, the “current market price”
of a Preferred Share Fraction shall be equal to the “current market price” of
one Preferred Share divided by 100.

       

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

       

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

       

      (g) All
Rights originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of Preferred Share Fractions 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
subsections (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 Preferred Share Fractions (calculated to
the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying
(x) the number of Preferred Share Fractions covered by a Right immediately prior
to this adjustment, by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price, and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.

       

      (i) The
Company may elect on or after the date of any adjustment of the Purchase Price
to adjust the number of Rights, in lieu of any adjustment in the number of
Preferred Share Fractions purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Preferred Share Fractions 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 of a Preferred Share) 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. The record
date for the adjustment may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Rights Certificates have been issued, shall
be at least ten (10) days later than the date of the public announcement. If
Rights Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights Certificates
on such record date Rights Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.

       

      (j) Irrespective
of any adjustment or change in the Purchase Price or the number of Preferred
Share Fractions issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per Preferred Share Fraction and the number of Preferred Share
Fractions that were expressed in the initial Rights Certificates issued
hereunder.

       

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

       

      (l) In any
case in which this Section 11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the issuance to the holder
of any Right exercised after such record date the number of Preferred Share
Fractions and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the number of Preferred Share Fractions 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 (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.

       

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

       

      (n) The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related 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 (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect that would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the “Principal Party” for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.

       

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

       

      (p) Anything
in this Agreement to the contrary notwithstanding, in the event that the Company
shall at any time after the Rights Dividend Declaration Date and prior to the
Distribution Date (i) declare a dividend on the outstanding Common Shares
payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii)
combine the outstanding Common Shares into a smaller number of shares, the
number of Rights associated with each Common Share 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 Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event.

       

      (q) In the
event that the Rights become exercisable following a Section 11(a)(ii) Event,
the Company, by action of a majority of the members of the Board of Directors in
office at the time, may authorize that the Rights, subject to Section 7(e)
hereof, either (i) will only be, or (ii) may, at the option of the holder
entitled to exercise the Rights be, exercisable for, in either case 50% of the
Common Shares (or cash or other securities or assets to be substituted for the
Adjustment Shares pursuant to subsection (a)(iii)) that would otherwise be
purchasable under subsection (a), in consideration of the surrender to the
Company of the Rights so exercised and without other payment of the Purchase
Price. Rights exercised under this subsection (q) shall be deemed to have been
exercised in full and shall be canceled.

      
         

      

      Section
12. Certificate of Adjusted Purchase Price or Number of
Shares.      back to Table of
Contents

       

                 Whenever
an adjustment is made as provided in Section 11 or Section 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief, statement of the facts and computations accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Shares and the Common Shares, a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing Common Shares) in accordance with Section 25 hereof.
The Rights Agent shall be fully protected in relying on any such certificate and
on any adjustment therein contained.

       

      Section
13. Consolidation, Merger or
Sale or Transfer of Assets or Earning Power.      back to Table of
Contents

       

      (a) In the
event that, following the Stock Acquisition Date, directly or indirectly, (x)
the Company shall consolidate with, or merge with and into, any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding Common Shares shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (z) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets, cash flow or earning power aggregating more than 50% of
the assets, cash flow or earning power of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons (other than the Company or any
Subsidiary of the Company in one or more transactions each of which complies
with Section 11(o) hereof), then, and in each such case and except as
contemplated by subsection (d), proper provision shall be made so
that:

       

      (i) each
holder of a Right, except as provided in Section 7(e) hereof or subsection (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 Common Shares of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of Preferred Share
Fractions for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such shares for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and (2) dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the “Purchase Price” for each Right and for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to Section
11(d)(i) hereof) per Common Share of such Principal Party on the date of
consummation of such Section 13 Event;

       

      (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement;

       

      (iii) the term
“Company” shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply only
to such Principal Party following the first occurrence of a Section 13
Event;

       

      (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights; and

       

      (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.

       

      (b) “Principal
Party” shall mean

       

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

       

      (ii) in the
case of any transaction described in clause (z) of the first sentence of
subsection (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 the case of either (i) or (ii) above, (1) if the Common Shares
of such Person are not at such time and have not been continuously over the
preceding twelve (12) month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect Subsidiary of another Person the
Common Shares of which are and have been so registered, “Principal Party” shall
refer to such other Person, and (2) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Shares of two or
more of which are and have been so registered, “Principal Party” shall refer to
whichever of such Persons is the issuer of the Common Shares having the greatest
aggregate market value.

       

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

       

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

       

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

       

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

       

      (d) Notwithstanding
anything in this Agreement to the contrary, Section 13 (other than this
subsection (d)) shall not be applicable to, and the term “Section 13 Event”
shall not include, a transaction described in subparagraphs (x) and (y) of
Section 13(a) if (i) such transaction is consummated with a Person, or Persons
who acquired Common Shares pursuant to a tender offer or exchange offer for all
outstanding Common Shares that complies with the provisions of Section 11
(a)(ii)(B) hereof (or a wholly owned Subsidiary of any such Person or Persons),
(ii) the price per Common Share offered in such transaction is not less than the
price per Common Share paid to all holders of Common Shares whose shares were
purchased pursuant to such tender offer or exchange offer and (iii) the form of
consideration being offered to the remaining holders of Common Shares pursuant
to such transaction is the same as the form of consideration paid pursuant to
such tender or exchange offer. Upon consummation of any such transaction
contemplated by this subsection (d), all Rights hereunder shall
expire.

       

      (e) In the
event that the Rights become exercisable under subsection (a) (except as
provided in subsection (d)), the Company, by action of a majority of the members
of the Board of Directors in office at the time, may authorize that the Rights
either (i) will only be or (ii) may, at the option of the Principal Party be,
exercisable for, 50% of the Common Shares of the Principal Party that would
otherwise be purchasable under subsection (a), in consideration of the surrender
to the Principal Party, as the successor to the Company under subsection (a)
(ii), of the Rights so exercised and without other payment of the Purchase
Price. Rights exercised under this subsection (e) shall be deemed to have been
exercised in full and shall be canceled.

       

      Section
14. Fractional
Rights and Fractional Shares.      back to Table of
Contents

       

      (a) The
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to distribute Rights
Certificates that evidence fractional Rights. In lieu of such fractional Rights,
there shall be paid to the registered holders of the Rights Certificates with
regard to which such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole Right.
For purposes of this subsection (a), the current market value of a whole Right
shall be the closing price of the Rights for the Trading Day immediately prior
to the date on which such fractional Rights would have been otherwise issuable.
The closing price of the Rights for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported 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. 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 Preferred Shares upon
exercise of the Rights or to distribute certificates which evidence fractional
Preferred Shares, except in each case for fractions which are integral multiples
of Preferred Shares. In lieu of fractional Preferred Shares that are not
integral multiples of Preferred Shares, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a Preferred Share. For purposes of this subsection (b), the current
market value of one Preferred Share shall be the closing price of a Preferred
Share (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.

       

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

       

      (d) The
holder of a Right or a beneficial interest in a Right by the acceptance thereof
expressly waives his right to receive any fractional Rights or any fractional
Common Shares upon exercise of a Right, except as permitted by this Section
14.

       

      Section
15. Rights of
Action.      back to Table of
Contents

       

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

       

      Section
16. Agreement
of Rights Holders.      back to Table of
Contents

       

                 Every
holder of a Right or a beneficial interest in a Right by accepting the same
consents and agrees with the Company and the Rights Agent and with every other
such holder that:

       

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

       

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

       

      (c) subject
to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may
deem and treat the Person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Share certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the associated
Common Share certificate made by anyone other than the Company or the Rights
Agent), subject to the last sentence of Section 7(e) hereof, for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be required to be
affected by any notice to the contrary; and

       

      (d) notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or a beneficial interest
in a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree, judgment or ruling (whether interlocutory or
final) issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such order,
decree, judgment or ruling lifted or otherwise overturned as soon as
possible.

       

      Section 17. Rights Certificate Holder
Not Deemed a Shareholder.    back to Table of
Contents

       

                 No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Preferred
Share Fractions or any other securities of the Company (including the Common
Shares) that may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a 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 Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.

       

      Section
18. Concerning
the Rights Agent.      back to Table of
Contents

       

      (a) The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the preparation, execution, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder.  The Company also agrees to indemnify the
Rights Agent and its directors, officers, employees and agents, for and to hold
each of them harmless against, any loss, liability, damage, judgment, fine
penalty, claim, demand, settlement, cost or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent for
any action taken, suffered or omitted by the Rights Agent in connection with the
acceptance or administration of this Agreement or the exercise of its duties
hereunder, including without limitation 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 Rights Certificate or
certificate for Common Shares 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
19. Merger or
Consolidation or Change of Name of Rights Agent.      back to Table of
Contents

       

      (a) Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person succeeding to the shareholder services or stock transfer
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof.

       

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

       

      Section
20. Duties of
Rights Agent.      back to Table of
Contents

       

      The
Rights Agent undertakes the duties and obligations, and only the duties and
obligations, expressly imposed by this Agreement (and no implied duties or
obligations) upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates or beneficial interests in the
Rights, by their acceptance thereof, shall be bound:

       

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

       

      (b) Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of
“current market price”) be proved or established by the Company prior to taking,
suffering or omitting 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 President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization and
protection to the Rights Agent and the Rights Agent shall incur no liability for
or in respect of any action taken, suffered or omitted in good faith by it under
the provisions of this Agreement in reliance upon such certificate.

       

      (c) The
Rights Agent shall be liable hereunder only for its own negligence, bad faith or
willful misconduct; provided, however that the Rights Agent shall not be liable
for special, indirect, incidental or consequential loss or damage of any kind
whatsoever, even if the Rights Agent has been advised of the likelihood of such
loss or damage.

       

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

       

      (e) The
Rights Agent shall not be under any liability or responsibility in respect of
the validity of any provision of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
this Agreement or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Common Shares to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any Common Shares or
Preferred Shares will, when so issued, be validly authorized and issued, fully
paid and nonassessable.

       

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

       

      (g) The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any one of the Chairman
of the Board, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
such instructions shall be full authorization and protection for the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any
action taken, suffered or omitted to be taken by it in good faith in accordance
with instructions of any such officer. The Rights Agent may conclusively rely on
the most recent instructions provided to it by any such officer.

       

      (h) The
Rights Agent and any shareholder, affiliate, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not the Rights Agent under
this Agreement and none of such actions shall constitute a breach of
trust.  Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other Person or 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,
absent negligence, bad faith or willful misconduct in the selection and
continued employment thereof.

       

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

       

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

       

      Section
21. Change of
Rights Agent.      back to Table of
Contents

       

                 The
Rights Agent or any successor  Rights Agent may resign and be
discharged from its duties under this Agreement  upon thirty (30)
days’ prior written notice mailed to the Company and to each  transfer
agent of the Common Shares and Preferred Shares by registered
or  certified mail, and to the holders of the Rights Certificates by
first- class  mail. In the event the transfer agency relationship in
effect between the Company and the Rights Agent terminates, the Rights Agent
will be deemed to resign automatically on the effective date of such
termination; and any notice required to be provided pursuant to this Agreement
will be sent by the Company.  The Company may remove the Rights Agent
or any successor Rights Agent upon thirty (30) days’ prior written notice mailed
to the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Shares and Preferred Shares, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights
Agent.  If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in  writing of such resignation or incapacity by the
resigning or incapacitated  Rights Agent or by the holder of a Rights
Certificate (who shall, with such  notice, submit his Rights
Certificate for inspection by the Company), then any  registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor
Rights  Agent, whether appointed by the Company or by such a court,
shall be (a) a  Person organized, doing business and in good standing
under the laws of the  United States or of any state, having a
principal office in the State of New York or the Commonwealth of Pennsylvania,
that is authorized by law to exercise  shareholder services and stock
transfer powers and is subject to supervision or  examination by
federal or state authority and that has at the time of
its  appointment as Rights Agent a combined capital and surplus
adequate in the judgment of a majority of the members of the Board of Directors
in office at the time to assure the performance of its duties hereunder and the
protection of the interest of the Company and the holders of Rights or
beneficial interests therein, or (b) an Affiliate of a corporation described in
clause (a) of this sentence.  After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Shares and Preferred Shares and mail a notice
thereof in writing to the registered holders of the Rights Certificates or,
prior to the Distribution Date, to the registered holders of the Common Shares.
In case at the time such successor Rights Agent shall succeed to
the  agency and trust created by this Agreement, any of the Rights
Certificates shall  have been countersigned but not delivered, any
such successor Rights Agent may  adopt the countersignature of a
predecessor Rights Agent and deliver such Rights  Certificates so
countersigned; and in case at that time any of the
Rights  Certificates shall not have been countersigned, any successor
Rights Agent may  countersign such Rights Certificates either in the
name of the predecessor or in  the name of the successor Rights Agent;
and in all such cases such Rights  Certificates shall have the full
force provided in the Rights Certificates and  in this Agreement.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.

       

      Section
22. Issuance
of New Rights Certificates.      back to Table of
Contents

       

      Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance, sale or delivery of Common Shares following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to Common Shares so issued, sold or delivered pursuant to
the exercise of stock options, stock appreciation rights, grants or awards
outstanding on the Distribution Date under any benefit plan or arrangement for
employees or directors, or upon the exercise, conversion or exchange of
securities outstanding on the Record Date or hereinafter issued by the Company,
and (b) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance
thereof.

       

      Section
23. Redemption
and Termination.      back to Table of
Contents

       

      (a) The Board
of Directors of the Company may, at its option, at any time prior to the earlier
of (i) the Close of Business on the tenth day following a Stock Acquisition Date
(or, if the Stock Acquisition Date shall have occurred prior to the Record Date,
the Close of Business on the tenth day following the Record Date), or (ii) the
Close of Business on 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”) and the Company may, at
its option, pay the Redemption Price either in Common Shares (based on the
“current market price”, as defined in Section 11(d)(i) hereof, of the Common
Shares at the time of redemption) or cash; provided, however, that if, following
the occurrence of a Stock Acquisition Date and following the expiration of the
right of redemption hereunder but prior to any Triggering Event, (i) an
Acquiring Person shall have transferred or otherwise disposed of a number of
Common Shares in one transaction or series of transactions, not directly or
indirectly involving the Company or any of its Subsidiaries, which did not
result in the occurrence of a Triggering Event or the Company shall have issued
additional equity securities, in either instance such that such Person is
thereafter a Beneficial Owner of 10% or less of the outstanding Common Shares,
and (ii) there is no other Acquiring Person immediately following the occurrence
of the event described in clause (i), then the right of redemption shall be
reinstated thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company’s right of redemption hereunder has
expired.

       

      (b) Immediately
upon the action of the Board of Directors of the Company ordering the redemption
of the Rights, without any notice, or further action, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Promptly after
the action of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and the holders
of the then outstanding Rights by mailing such notice to all such holders at
each holder’s last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the Transfer
Agent for the Common Shares. Any notice that is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made.

       

      Section
24. Exchange.      back to Table of
Contents

       

      (a) The Board
of Directors of the Company may, at its option, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become null and
void pursuant to the provisions of Section 7(e) hereof) for a number of Common
Shares having a current market price equal to the Spread (such exchange ratio
being hereinafter referred to as the “Exchange
Ratio”).  Notwithstanding the foregoing, the Company’s 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, or any Person organized,
appointed or established by the Company for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of fifty percent (50%) or more of the Common Shares then
outstanding.

       

      (b) Immediately
upon the action of the Board of Directors of the Company ordering the exchange
of any Rights pursuant to Section 24(a) and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of the holders of such Rights shall be to receive that
number of Common Shares 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 shall promptly notify the Rights Agent of any
such exchange.  The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent.  Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice.  Each such notice of exchange will
state the method by which the exchange of the Common Shares for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged.  Any partial exchange 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) hereof) held by each holder of
Rights.

       

      (c) In the
event that there shall not be sufficient Common Shares issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company may substitute, to
the extent of the insufficiency, cash, shares of a class of other equity
securities of the Company, debt securities of the Company or any combination of
the foregoing.

       

      (d) The
Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares.  In
lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share.  For the purposes
of this Section 24(d), the current market value of a whole Common Share shall be
the closing price of a Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.

       

      Section
25. Notice of
Certain Events.      back to Table of
Contents

       

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

       

      (b) Upon the
occurrence of a Section 11(a)(ii) Event, (i) the Company shall as soon as
practicable thereafter give to each holder of a Right, to the extent feasible
and in accordance with Section 26 hereof, 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) hereof, and (ii) all references in the
preceding paragraph to Preferred Shares shall be deemed thereafter to refer to
Common Shares and/or, if appropriate, other securities.

       

      Section
26. Notices.      back to Table of
Contents

       

      Notices
or demands authorized by this Agreement to be given or made by the Rights Agent
or by the holder of any Rights Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage
prepaid.  Such notice shall be deemed given upon the earlier of the
date when received at, or the third Business Day after the date when sent by
first class mail, postage prepaid, to the address set forth below (unless such
address is changed by notice to the other parties hereto).

       

      To the Company:

       

      
        	
                The
      York Water Company

                130
      East Market Street

                York,
      Pennsylvania  17405

                Attention:
      Corporate Secretary

              

      

      To the Rights Agent:

       

      
        	
                American
      Stock Transfer & Trust Company, LLC

                59
      Maiden Lane

                New
      York, New York 10273-0923

                Attention:
      Corporate Trust Department

                 

              

      

      Section
27. Supplements and Amendments.      back to Table of
Contents

       

      (a) For as
long as the Rights are then redeemable and except as provided in the last
sentence of this Section 27(a), the Company may and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this Agreement
without the approval of any holders of certificates representing Common Shares.
From and after the date that the Rights are not redeemable, the Company may and
the Rights Agent shall, if the Company so  directs, supplement or
amend this Agreement without the approval of any holders of the Rights in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent  with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder, or
(iv) to change or supplement the provisions hereunder in any manner that the
Company may deem necessary or desirable and that shall not  adversely
affect the interests of the holders of the Rights (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person. Upon the delivery of
a certificate from an appropriate officer of the Company that states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment and shall be
fully protected hereunder by doing so. Notwithstanding the foregoing, no
supplement or amendment shall be made that reduces the Redemption Price, it
being understood that an adjustment of the Redemption Price pursuant to Section
23 shall not be deemed a supplement or amendment of this
Agreement.  

       

      Section
28. Successors.      back to Table of
Contents

       

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

       

      Section
29. Determinations and Actions by the Board of Directors,
etc.      back to Table of
Contents

       

                 For
all purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, 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 of Directors of the Company or to the
Company,   or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend or supplement the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors of the Company in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other Persons, and (y) not subject the Board of Directors of the Company to any
liability to the holders of the Rights. 

       

      Section
30. Benefits
of this Agreement.      back to Table of
Contents

       

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

       

      Section
31. Severability.      back to Table of
Contents

       

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

       

      Section
32. Governing
Law.      back to Table of
Contents

       

      This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed in accordance with the laws of such jurisdiction
applicable to contracts made and to be performed entirely within such
jurisdiction; except that all provisions regarding the rights, duties and
obligations of the Rights Agent shall by governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed entirely within such jurisdiction.

       

      Section
33. Counterparts.      back to Table of
Contents

       

      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.      back to Table of
Contents

       

      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.

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

       

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

      

      
        
          
            	 	THE
      YORK WATER COMPANY	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	      
                    /s/ Jeffrey R.
      Hines 

                  	 
	 	 	      
                    Jeffrey R. Hines

                  	 
	 	 	      
                    President
      & CEO

                  	 
	 	 	 	 

          

        

      

       

      
        
          
            	 	      
                    AMERICAN
      STOCK TRANSFER & TRUST COMPANY, LLC

                  	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	/s/ Herbert J.
      Lemmer 	 
	 	 	      
                    Herbert J. Lemmer

                  	 
	 	 	      
                    Vice
      President

                  	 
	 	 	 	 

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
A      back to Table of
Contents

       

      

       

      RESOLUTION
OF THE BOARD OF DIRECTORS OF

       

      THE YORK
WATER COMPANY

       

      ESTABLISHING
AND DESIGNATING SERIES B JUNIOR

       

      PARTICIPATING
PREFERRED SHARES AS A SERIES OF THE PREFERRED STOCK

       

      

       

      RESOLVED,
that pursuant to the authority expressly vested in the Board of Directors of The
York Water Company (the “Corporation”) by Article V of the Amended and Restated
Articles of Incorporation of the Corporation, the Board of Directors hereby
fixes and determines the number, voting rights, designations, preferences,
qualifications, privileges, limitations, restrictions, options, conversion
rights and other special or relative rights of the first series of the Preferred
Stock, without par value which shall consist of 250,000 shares and shall be
designated as Series B Junior Participating Preferred Shares (the “Series B
Preferred Shares”).

       

      Special Terms of the Series
B Preferred Shares

       

      Section
1. Dividends and
Distributions.

       

      (a) The rate
of dividends payable per share of Series B Preferred Shares on the first day of
January, April, July and October in each year or such other quarterly payment
date as shall be specified by the Board of Directors (each such date being
referred to herein as a “Quarterly Dividend Payment Date”), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of the Series B Preferred Shares, shall be (rounded to the
nearest cent) equal to the greater of (i) $10.00 or (ii) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in cash, based upon the fair market value at the time the non-cash
dividend or other distribution is declared or paid as determined in good faith
by the Board of Directors) of all non-cash dividends or other distributions
other than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, without par value of the Corporation since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of the Series B Preferred Shares.  Dividends on
the Series B Preferred Shares shall be paid out of funds legally available for
such purpose.  In the event the Corporation shall at any time after
December 15 ,2008 (the “Rights Declaration Date”) (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, or (iii) combine the outstanding shares of Common Stock
into a smaller number of shares, then in each such case the amounts to which
holders of Series B Preferred Shares were entitled immediately prior to such
event under clause (ii) of the preceding sentence shall be adjusted by
multiplying each such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

       

      (b) Dividends
shall begin to accrue and be cumulative on outstanding Series B Preferred Shares
from the Quarterly Dividend Payment Date next preceding the date of issue of
such Series B Preferred Shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of Series B
Preferred Shares entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such quarterly Dividend Payment
Date.  Accrued but unpaid dividends shall not bear
interest.  Dividends paid on the Series B Preferred Shares in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.

       

      Section
2. Voting
Rights.  

       

      In addition to any other voting rights
required by law, the holders of Series B Preferred Shares shall have the
following voting rights:

       

      (a) Subject
to the provision for adjustment hereinafter set forth, each Series B Preferred
Share shall entitle the holder thereof to 100 votes on all matters submitted to
a vote of the shareholders of the Corporation.  In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each such case the number
of votes per share to which holders of Series B Preferred Shares were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

       

      (b) In the
event that dividends upon the Series B Preferred Shares shall be in arrears to
an amount equal to six full quarterly dividends thereon, the holders of such
Series B Preferred Shares shall become entitled to the extent hereinafter
provided to vote noncumulatively at all elections of directors of the
Corporation, and to receive notice of all shareholders’ meetings to be held for
such purpose.  At such meetings, to the extent that directors are
being elected, the holders of such Series B Preferred Shares voting as a class
shall be entitled solely to elect two members of the Board of Directors of the
Corporation.  Notwithstanding the foregoing, if the holders of such
Series B Preferred Shares have elected two members of one class of the Board of
Directors, they shall not have the right to elect additional members of the
Board of Directors until the term of the two directors previously elected has
expired.  All other directors of the Corporation shall be elected by
the other shareholders of the Corporation entitled to vote in the election of
directors.  Such voting rights of the holders of such Series B
Preferred Shares shall continue until all accumulated and unpaid dividends
thereon shall have been paid or funds sufficient therefor set aside, whereupon
all such voting rights of the holders of shares of such series shall cease,
subject to being again revived from time to time upon the reoccurrence of the
conditions above described as giving rise thereto.

       

      At any time when such right to elect
directors separately as a class shall have so vested, the Corporation may, and
upon the written request of the holders of record of not less than 20% of the
then outstanding total number of shares of all the Series B Preferred Shares
having the right to elect directors in such circumstances shall, call a special
meeting of holders of such Series B Preferred Shares for the election of
directors.  In the case of such a written request, such special
meeting shall be held within 90 days after the delivery of such request, and, in
either case, at the place and upon the notice provided by law and in the By-laws
of the Corporation; provided, that the Corporation shall not be required to call
such a special meeting if such request is received less than 120 days before the
date fixed for the next ensuing annual or special meeting of shareholders of the
Corporation.  Upon the mailing of the notice of such special meeting
to the holders of such Series B Preferred Shares, or, if no such meeting be
held, then upon the mailing of the notice of the next annual or special meeting
of shareholders for the election of directors, the number of directors of the
Corporation shall, ipso facto, be increased to the extent, but only to the
extent, necessary to provide sufficient vacancies to enable the holders of such
Series B Preferred Shares to elect the two directors hereinabove provided for,
and all such vacancies shall be filled only by vote of the holders of such
Series B Preferred Shares as hereinabove provided.  Whenever the
number of directors of the Corporation shall have been increased, the number as
so increased may thereafter be further increased or decreased in such manner as
may be permitted by the By-laws and without the vote of the holders of Series B
Preferred Shares, provided that no such action shall impair the right of the
holders of Series B Preferred Shares to elect and to be represented by two
directors as herein provided.

       

      So long as the holders of Series B
Preferred Shares are entitled hereunder to voting rights, any vacancy in the
Board of Directors caused by the death or resignation of any director elected by
the holders of Series B Preferred Shares, shall, until the next meeting of
shareholders for the election of directors, in each case be filled by the
remaining director elected by the holders of Series B Preferred Shares having
the right to elect directors in such circumstances.

       

      Upon termination of the voting rights
of the holders of any series of Series B Preferred Shares the terms of office of
all persons who shall have been elected directors of the Corporation by vote of
the holders of Series B Preferred Shares or by a director elected by such
holders shall forthwith terminate.

       

      (c) Except as
otherwise provided herein, in the Articles of Incorporation of the Corporation
or by law, the holders of Series B Preferred Shares and the holders of Common
Stock (and the holders of shares of any other series or class entitled to vote
thereon) shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.

       

      Section
3. Reacquired
Shares.  

       

                 Any
Series B Preferred Shares purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof.  All such shares shall upon their cancellation
become authorized but unissued Series Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors.

       

      Section
4. Liquidation, Dissolution or
Winding Up.  

       

      In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the holders of Series B Preferred Shares shall be entitled to
receive the greater of (a) $100.00 per share, plus accrued dividends to the date
of distribution, whether or not earned or declared, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock.  In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of
shares, then in each such case the amount to which holders of Series B Preferred
Shares were entitled immediately prior to such event pursuant to clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

       

      Section
5. Consolidation, Merger,
etc.  

       

                 In
case the Corporation shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the Series B Preferred Shares shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged.  In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series B Preferred Shares
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

       

      Section
6. No
Redemption.  

       

                 The
Series B Preferred Shares shall not be redeemable.

       

      Section
7. Ranking.  

       

                 The
Series B Preferred Shares shall rank junior to all other series of the
Corporation’s Series Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.

       

      Section
8. Fractional
Shares.

       

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

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
B      back to Table of
Contents

       

       

      

       

      [Form of
Rights Certificate]

       

       

      

       

      Certificate
No.
R-                                                                           ____________
Rights

       

      

       

      NOT
EXERCISABLE AFTER JANUARY 24, 2019 OR SUCH LATER DATE AS THE BOARD OF DIRECTORS
OF THE COMPANY MAY DESIGNATE BY AMENDMENT OF THE RIGHTS AGREEMENT OR AFTER
EARLIER REDEMPTION BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.01 PER RIGHT (SUBJECT TO ADJUSTMENT AS PROVIDED IN
THE RIGHTS AGREEMENT) ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH
TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*

      
 

      
        * The
bracketed portion of the legend shall be inserted only if applicable
and

        shall
replace the preceding sentence.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      

      

       

      THE
YORK WATER COMPANY

       

      RIGHTS
CERTIFICATE

       

      This
certifies that _____________________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of January 24, 2009 (the “Rights Agreement”),
between  The York Water Company, a Pennsylvania corporation (the
“Company”), and  American Stock Transfer & Trust Company, LLC (the
“Rights Agent”), to purchase from the Company at any time prior to 5:00
P.M.(Philadelphia, Pennsylvania time) on January 24, 2019 (or such later date as
the Board of Directors of the Company may designate by amendment of the rights
Agreement) at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one one-hundredth of a fully paid,
nonassessable share of Series B Junior Participating Preferred Stock (the
“Preferred Share”) of the Company, at a purchase price (the “Purchase Price”) of
$__ per one one-hundredth of a Preferred Share (such fraction, a “Preferred
Share Fraction”), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate duly
executed.  Except as provided in Sections 11(q) and 13(e) of the
Rights Agreement, the Purchase Price shall be paid, in cash.  The
number of Rights evidenced by this Rights Certificate (and the number of
Preferred Share Fractions that may be purchased upon exercise thereof) set forth
above, and the Purchase Price per Preferred Share Fraction set forth above, are
the number and Purchase Price as of January 24, 2009, based on the Preferred
Shares as constituted at such date.

       

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

       

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

       

      This
Rights Certificate is subject to all of the terms, provisions and conditions of
the Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights
Agreement.  Copies of the Rights Agreement are on file at the office
of the Rights Agent and are also available upon written request to the
Company.

       

      This
Rights Certificate, with or without other Rights Certificates, upon surrender at
the principal office or offices of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Share Fractions 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 in
part, the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.

       

      Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.01 per Right (subject to adjustment as provided in the Rights Agreement) at
any time prior to the earlier of the Close of Business (as such term is defined
in the Rights Agreement) on (i) the tenth day following the Stock Acquisition
Date (as such time period may be extended pursuant to the Rights Agreement), and
(ii) the Final Expiration Date.

       

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

       

      No holder
of this Rights Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of Preferred Shares or of any other securities
of the Company (including Common Shares) that 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.

       

      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 ______________, 200__

       

      

       

      
        	
                ATTEST

                 

                 

                By:
      _____________________________

                Secretary

              	
                 THE
      YORK WATER COMPANY

                 

                 

                By:____________________________________

                Name:

                Title:

              

      

      

       

      Countersigned

       

       AMERICAN
STOCK TRANSFER & TRUST COMPANY, LLC

       

      

       

      

       

      By:_______________________________

       

           Authorized
Signature

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      [Form of
Reverse Side of Rights Certificate]

       

      FORM OF
ASSIGNMENT

       

      (To be
executed by the registered holder if such holder desires to transfer the Rights
Certificate.)

       

      FOR VALUE
RECEIVED ________________________________________ hereby sells, assigns and
transfers unto
______________________________________________________

       

      (Please print name and address of
transferee)

       

      ___________________________________________________________________________

       

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

       

      Dated:
________________, 20__

       

      _______________________________

       

      Signature

       

      Signature
Guaranteed:

       

      The
undersigned hereby certifies by checking the appropriate boxes
that:

      

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

      

       

      _______________________________

       

      Signature

       

      NOTICE

      

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

      

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      [Form of
Reverse Side of Rights Certificate -- Continued]

       

      FORM OF
ELECTION TO PURCHASE

       

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

       

      To:  THE
YORK WATER COMPANY

       

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

       

      Please
insert social security

       

      or other
identifying number

       

      ______________________________________________________________________________

       

      (Please
print name and address)

       

      ______________________________________________________________________________

       

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

       

      Please
insert social security

       

      or other
identifying number

       

      ______________________________________________________________________________

       

      (Please
print name and address)

       

      ______________________________________________________________________________

       

      Dated:
_____________, 200__

       

      _______________________________

       

      Signature

       

       

       

      Signature
Guaranteed:

       

      The
undersigned hereby certifies by checking the appropriate boxes
that:

       

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

      

      

      Dated
______________________, 20__

      

       

      _______________________________

       

      Signature

       

      NOTICE

       

      The
signatures to the foregoing Election to Purchase and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change
whatsoever.Exhibit 10.6

EXHIBIT 10.6

EXECUTIVE EMPLOYMENT AGREEMENT

     This EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) made as of January 1, 2006, by and between:
Penn Millers Mutual Holding Company, a Pennsylvania non- stock corporation (the “MHC”), Penn
Millers Holding Corporation, a Pennsylvania business corporation (the “Holding Corporation”) and
Penn Millers Insurance Company, a Pennsylvania property and casualty stock insurance company (the
“Insurance Company”) all with offices at 72 North Franklin Street, Wilkes-Barre, PA 18773-0016.
The MHC, the Holding Corporation and the Insurance Company, and their direct and indirect
subsidiaries, are sometimes referred to collectively herein as the “Penn Millers System”,

AND

     FRANK JOANLANNE, an individual domiciled at 7 Winding Way, Dallas, PA 18612 (“Executive”).

     Executive currently serves as Senior Vice President. Insurance Company desires to retain the
services of Executive. In reliance upon various oral and written representations, Insurance
Company is willing to employ Executive and Executive is willing to serve Insurance Company on the
terms and conditions provided in this Agreement. Accordingly, in consideration of the promises and
the respective covenants and agreements of the parties, and intending to be legally bound, the
parties agree as follows:

1. Employment. Insurance Company agrees to employ Executive, and Executive agrees to serve
Insurance Company on the terms and conditions set forth in this Agreement.

2. Term of Agreement. Executive’s term of employment under this Agreement shall commence on
January 1, 2006 (“Effective Date”) and shall continue for a period of three (3) years through
December 31, 2008. Commencing on January 1, 2008 and on each January 1st (“Anniversary
Date”) thereafter, this Agreement shall automatically be renewed for one additional year beyond the
term otherwise established, unless one party provides written notice to the other party, at least
90 days in advance of an Anniversary Date, of its intent not to renew this Agreement for an
additional one year term (“Non-Renewal Notice”). Nothing in this provision shall preclude
termination as otherwise provided or permitted under this Agreement.

3. Position and Duties. Executive shall devote substantially all of his working time to Insurance
Company to the exclusion of any other business activity. Executive shall serve as Senior Vice
President and shall report directly to the President and CEO of Insurance Company. Executive shall
submit such direct reports as are needed, from time to time, and shall be responsible for the
day-to-day operations as follows: will provide guidance, direction, training, and support for
related staff to assure business produced by the Insurance Company provides the Insurance Company
with desired profitable results.

 

 

The parties agree that the Company may change Executive’s job description from time to time, so
long as the duties that Company requires Executive to perform are of an executive or management
level consistent with his background, experience and skills. Insurance Company reserves the right
to re-assign the person or persons to whom Executive must directly report and said person shall
hold a higher or lateral level of responsibility with Insurance Company.

4. Covenant Not to Compete; Nonsolicitation; Confidential Information.

     4.1 During Executive’s employment with Company and for a two (2) year period thereafter (the
“Restricted Period”), Executive shall not directly or indirectly, either for his own account or as
an agent, consultant, employee, partner, officer, director, proprietor, investor (except as an
investor owning less than 5% of the stock of a publicly owned company) or otherwise, of any person,
firm, corporation, or enterprise:

	 	a.	 	solicit or hire any employees of Company or induce any of
such employees to terminate their employment relationship with Company; or
	 
	 	b.	 	solicit, induce or attempt to solicit or induce any
customer, supplier or other entity doing business with the Company to cease
doing business with the Company or, in the case of a customer, to do place
agribusiness insurance, as that term is commonly understood in the industry,
with any competitor of the Company.

     4.2 The limitations described in Section 4.1 shall be construed to prohibit Executive during
the Restricted Period, or if Section 7.3.b. applies, the lesser of the Restricted Period or the
period during which Executive continues to receive compensation under Section 7.3.b. from directly
or indirectly owning, managing, operating, rendering services for (as a consultant or an advisor)
or accepting any employment with (a) Nationwide Agribusiness Insurance Company, Michigan Millers
Insurance Company or Westfield Insurance Company, (b) the agribusiness insurance business of any
other insurance company, and (c) any other property and casualty insurance or reinsurance line of
business to the extent that such ownership, management, operating, rendering of services or
employment (and the activities necessarily incident thereto) have, or could reasonably be expected
to have, a material adverse effect on the Company’s business insurance business within a one
hundred (100) mile radius of Wilkes-Barre, Pennsylvania.

     4.3 Confidentiality. Executive agrees that he will not at any time during the Term of
this Agreement (as determined under Section 2 hereof) or at any time thereafter for any reason, in
any fashion, form or manner, either directly or indirectly, divulge, disclose or communicate to any
person, firm, corporation or other business entity, in any manner whatsoever, any confidential
information or trade secrets concerning the business of Company, including, without limiting the
generality of the foregoing, any customer lists or other customer identifying information, the
techniques, methods or systems of the Company’s operation or management, any information regarding
its financial matters, or any other material information concerning the business of Company, its
manner of operation, its plan or other material data. The provisions of this Section 4.3 shall not
apply to (i) information that is public knowledge other than as a result of disclosure by the
Executive in breach of this Section 4.3; (ii) information disseminated by

-2-

 

Company to third parties in the ordinary course of business; (iii) information lawfully
received by the Executive from a third party who, based upon inquiry by the Executive, is not bound
by a confidential relationship to Company, or (iv) information disclosed under a requirement of law
or as directed by applicable legal authority having jurisdiction over the Executive.

     4.4 Although Executive and Company consider the restrictions contained in Sections 4.1, 4.2
and 4.3 to be the minimum restriction reasonable for the purposes of preserving Company’s goodwill
and other proprietary rights, if a final determination is made by a court that the time or
territory, or any other restriction contained in Sections 4.1, 4.2 and 4.3 is an unreasonable or
otherwise unenforceable restriction against Executive, the provisions of Sections 4.1, 4.2 and 4.3
will not be rendered void, but will be deemed amended to apply as to such maximum time and
territory and to such other extent as the court may determine to be reasonable.

     4.5 Executive agrees that this Covenant may be assigned by Company, as needed, to effect its
purpose and intent and that Company’s Assignee shall be entitled to the full benefit of the
restrictions enjoyed by Company under the terms of this Covenant.

5. Compensation and Related Matters.

     5.1 Base Compensation. During the period of Executive’s employment, Insurance Company
shall pay to him annual base compensation of $181,324.41 (“Base Compensation”). The Board of
Directors of Insurance Company shall periodically review Executive’s employment performance, in
accordance with policies generally in effect from time to time, for possible merit or
cost-of-living increases in such Base Compensation. Except for a reduction which is proportionate
to an Insurance Company company-wide reduction in executive or senior management pay, not including
eliminated positions or unfilled positions, the annual Base Compensation paid to Executive in any
calendar year shall not be less than the annual Base Compensation paid to him in the immediately
preceding calendar year. The frequency and manner of payment of such Base Compensation shall be in
accordance with Insurance Company’s executive payroll practices, as in effect from time to time.
Nothing in this Agreement shall be construed as precluding Executive from entering into any salary
reduction or deferral plan or arrangement during the term of this Agreement. During the initial
calendar year of this Agreement, the amount set forth in the first sentence of this subsection
shall be pro rated to reflect the portion of such calendar year which follows the Effective Date.

     5.2 Incentive Compensation. During the period of Executive’s employment with
Insurance Company, he shall be eligible to participate in any incentive plans or programs such as
stock programs, options programs, long term cash plans, etc., that may be developed from time to
time for Insurance Company. Actual participation will be at the sole and final determination of
the Board of Directors of Insurance Company.

     5.3 Supplemental Executive Retirement Plan. Executive shall be entitled to
participate in the Penn Millers System’s Supplemental Executive Retirement Plan (the “SERP”) in
accordance with the terms of that Plan as they may be amended from time to time.

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     5.4 Employee Benefit Plans and Other Plans or Arrangements. Executive shall be
entitled to participate in any Penn Millers System benefit or incentive plans on the same basis as
other executive officers of Insurance Company. Insurance Company may provide Executive with those
perquisites that are reasonable and customary for similar positions.

     5.5 Expenses. During the period of Executive’s employment hereunder, he shall be
entitled to receive reimbursement for reasonable and necessary expenses related to the business of
Insurance Company, in accordance with the general policies and procedures established by insurance
Company.

     5.6 Annual Stipend. Executive shall be entitled to receive, in lieu of any other
reimbursement for or payment of country club or social club membership fees, dues or other fees and
any automobile allowance, an annual reimbursement allowance of $10,000 for 2006, and thereafter as
determined by the Insurance Company’s Board of Directors. This annual reimbursement allowance will
be paid quarterly, in arrears, provided that Executive provides the Insurance Company with such
verification of his actual expenses paid for the purposes described above or similar purposes as
approved by the Board in its discretion, as the Insurance Company shall reasonably request. For
purposes of any Company benefit plan, including, without limitation, retirement (including the
SERP), life insurance, accidental death or dismemberment insurance, disability insurance or
incentive compensation purposes, the annual stipend payable under this section shall not be
considered wages or other compensation.

6. Termination for Cause.

     6.1 In General. Insurance Company shall be entitled to terminate Executive’s
employment for Cause in any of the following circumstances:

	 	•	 	Breach of his fiduciary duty or his duty of loyalty
	 
	 	•	 	Material dishonesty
	 
	 	•	 	Material misuse or theft of corporate property
	 
	 	•	 	Finding of Sexual Harassment
	 
	 	•	 	Fraternization which affects his objectivity in the treatment of fellow
employees which occurs after being warned to cease
	 
	 	•	 	Abusive or threatening behavior which occurs after being warned to cease
	 
	 	•	 	Excessive Absenteeism having a material effect on corporate business
operations
	 
	 	•	 	Conviction of Felony charges
	 
	 	•	 	Conviction of any criminal charge involving moral turpitude

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	 	•	 	Conviction of any charge of DUI or substance abuse
	 
	 	•	 	Substance Abuse, or
	 
	 	•	 	Material neglect of management duties

     6.2 Compensation. Within a reasonable time after Termination for Cause, Insurance
Company shall pay Executive, in one lump sum, his accrued but unpaid Base Compensation earned
through the date of Executive’s termination and any accrued but unpaid or otherwise vested benefits
to which Executive is entitled under the terms of any Penn Millers System benefit or incentive
plan. Contingent upon his prior agreement with and signature to a complete release and hold
harmless agreement which shall completely release Penn Millers System, its parent, affiliates,
officers, directors and employees (collectively the “Released Parties” and individually a “Released
Party”) and which shall forever waive all claims of any nature that Executive may have against any
Released Party, Executive shall receive, in one lump sum payment, an amount equal to one year’s
premium for then current life, health and disability insurance coverage under the Penn Millers
System benefit plans. In the event of termination for Cause hereunder, Executive shall forfeit any
right to any unvested deferred incentive awards and shall be entitled to no Success Sharing Plan
awards for the year of his termination or for any award cycle that remains uncompleted at the date
of his termination.

7. Termination Without Cause.

     7.1 Termination by Employee on Voluntary Basis. In the event that Executive
voluntarily terminates his employment hereunder, without Good Reason, as defined below, Executive
shall be, subject to Section 7.4, entitled to be paid, within a reasonable time following his
termination:

	 	a.	 	His accrued but unpaid Base Compensation and any accrued
but unpaid or otherwise vested benefits under any Penn Millers System
benefit or incentive plan;
	 
	 	b.	 	If, but only if Executive’s voluntary termination of
employment is by reason of his normal retirement at or after age 65,
Executive shall be entitled to pro rata partial payments from the Penn
Millers System’s Success Sharing Plan based on actual performance, i.e., the
extent to which the targets set under such Plans are actually attained, and
pro-rated based on number of full months worked. Payments under this
Section 7.1.b. will be paid when such payments would have been made had
Executive remained employed; and
	 
	 	c.	 	Except as specified in 7.1.a. and b. Executive will be
entitled to no severance payments and no incentive plan payments that have
not become vested and payable prior to his termination of employment.

     7.2 Termination By Reason of Death or Permanent Disability: In the event Executive’s
employment is terminated by reason of death or permanent disability (defined for

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this purposes as a condition by reason of which Executive is entitled to and receiving
disability benefits under the U.S. Social Security Act) Executive, or his estate, shall be, subject
to Section 7.4, entitled to be paid:

	 	a.	 	His accrued but unpaid Base Compensation and any accrued
but unpaid or otherwise vested benefits under any Penn Millers System
benefit or incentive plan.

     7.3 Termination by Insurance Company Without Cause or by Executive With Good Reason:
In the event that Executive’s employment hereunder is terminated by the Insurance Company without
Cause (as defined in Section 6.1), whether before or after a Change in Control (as defined in
Section 7.6 below) or by the Executive with Good Reason (as defined in Section 7.5 below), whether
before or after a Change in Control, Executive shall be, subject to Section 7.4, entitled to be
paid or have provided:

	 	a.	 	His accrued but unpaid Base Compensation and any accrued
but unpaid or otherwise vested benefits under any Penn Millers System
benefit or incentive plan;
	 
	 	b.	 	Continuation of Executive’s Base Compensation for the
lesser of the remaining Term of this Agreement or two (2) years;
	 
	 	c.	 	Continuation of employer-provided healthcare benefits for
12 months at the levels in effect on the date of Executive’s termination,
and thereafter to elect COBRA continuation for the remainder of Executive’s
or his qualified dependents’ COBRA eligibility, it being understood that
Executive’s and his dependents’ COBRA eligibility period will include the
period during which the Company is providing benefits under this
Section 7.3.c.; and
	 
	 	d.	 	A Success Sharing Plan payment for year of termination
based on actual earned award pro-rated by number of full months worked; paid
when such benefit would have been paid had Executive remained employed.

     7.4 Requirement of Release; Cessation on Competition.

	 	a.	 	Notwithstanding anything to the contrary in Sections 7.1,
7.2 or 7.3, Executive’s entitlement to any payments other than Executive’s
accrued but unpaid Base Compensation and any accrued but unpaid or otherwise
vested benefits under any Penn Millers System benefit or incentive plan
determined at the time of Executive’s termination of employment shall be
contingent upon Executive’s prior agreement with and signature to a complete
release and hold harmless agreement which shall completely release Penn
Millers System, its parent, affiliates, officers, directors and employees
(collectively the “Released Parties” and individually a “Released Party”)
and which shall forever waive all claims of any nature that Executive may
have against any Released Party, including without

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	 	 	 	limitation all claims arising out of Executive’s employment within the Penn
Millers System or the termination of that employment.
	 
	 	b.	 	Notwithstanding anything to the contrary in Section 7.3,
in the event that the Executive breaches Sections 4.1 or 4.2 of this
Agreement, any remaining payments or benefits to be provided under
Section 7.3 shall not be paid or provided immediately upon such breach.

     7.5 Good Reason: Executive shall be considered to have terminated employment hereunder
for Good Reason if such termination of employment is on account of:

	 	a.	 	A material diminution of the Executive’s duties,
authority or responsibility or the assignment to the Executive of duties
materially inconsistent with Section 3 hereof;
	 
	 	b.	 	A reduction in Base Compensation (from current amount)
other than a reduction specifically contemplated by Section 5.1 hereof;
	 
	 	c.	 	Any change in employee’s principal place of work (other
than a temporary change occasioned by the Company’s business needs) that
would increase Executive’s commute by 45 miles or more; or
	 
	 	d.	 	A material breach by Insurance Company of its obligations
under this Agreement.

Notwithstanding the foregoing, a termination by Executive shall not be for “Good Reason,” whether
or not a Change in Control has occurred, unless the Executive shall have given the Company at least
ten business days written notice specifying the grounds upon which Executive intends to terminate
his employment hereunder for “Good Reason”. In addition, any action or inaction which is remedied
within ten business days following such written notice shall not constitute “Good Reason” for
termination hereunder.

     7.6 Change in Control: A Change in Control of the Insurance Company shall have
occurred if:

	 	a.	 	During any period of 24 months, individuals who
constitute the Board of Directors of the Insurance Company at the beginning
of such period, and any new director described in the sentence at the end of
this section, cease for any reason to constitute a majority of the Board;
	 
	 	b.	 	The Insurance Company merges or consolidates with any
other corporation, other than a merger or consolidation which would result
in the voting members of the Insurance Company immediately prior thereto
continuing to represent, either directly or indirectly, at least 51% of the
combined voting power of the members of the Insurance Company or of such
surviving entity immediately after such merger or consolidation; or

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	 	c.	 	The Board approves a plan of complete liquidation of the
Insurance Company, or there is consummated the sale or disposition by the
Insurance Company of all or substantially all of the Insurance Company’s
assets, or the Insurance Company is dissolved and its assets distributed in
a judicial proceeding.

A director is described in this sentence for purposes of 7.6.a. above, if both (1) his or her
initial assumption of office is not in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of directors of the
Insurance Company, and (2) his or her election by the Board or nomination for election by the
Insurance Company’s Board was approved by a majority vote of the Directors then still in office who
either were directors at the beginning of the period or whose elections met the conditions of this
sentence.

     7.7 Exclusive Remedy. Except for any explicit rights and remedies Executive may have
under any other contract, plan or arrangement with Insurance Company, the compensation and benefits
payable under this Agreement and the remedy for enforcement shall constitute Executive’s exclusive
rights and remedy in the event of the termination of his employment.

8. Withholding Taxes. All compensation and benefits provided in this Agreement shall, to the
extent required by law, be subject to federal, state, and local tax withholding.

9. Applicable Law and Jurisdiction. This Agreement shall be governed by and construed in
accordance with the domestic laws of the Commonwealth of Pennsylvania without regard to its
conflict of laws principles, unless and to the extent preempted by the laws of the United States of
America. Any controversy or dispute arising out of or relating to this Agreement, including an
alleged breach, shall be subject to the jurisdiction of Court of Common Pleas of Luzerne County.

10. Additional Equitable Remedy. Executive acknowledges and agrees that Insurance Company’s remedy
at law for a breach or a threatened breach of the provisions of this Agreement would be inadequate.
In recognition of this fact, in the event of such a breach or threatened breach by Executive, it
is agreed that Insurance Company shall be entitled to request equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent injunction, or any other
equitable remedy which may then be available. Nothing in this section shall be construed as
prohibiting Insurance Company from pursuing any other remedy available under this Agreement for
such a breach or threatened breach.

11. Officer Liability Insurance. Insurance Company shall provide Executive with coverage under a
standard directors and officers’ liability insurance policy, at Insurance Company’s expense, in
amounts consistent with amounts provided to the other officers and directors of Insurance Company.

12. Notices. Any notice required or permitted under this Agreement shall be sufficient if it is in
writing and shall be deemed given (i) at the time of personal delivery to the addressee, or (ii) at
the time sent First Class U.S. Mail, with form 3817 requested, addressed as follows:

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To Insurance Company:

72 North Franklin St.

Wilkes-Barre, PA 18773-0016

To Executive:

7 Winding Way

Dallas, PA 18612

13. No Waiver. The failure by any party to this Agreement at any time or times to require strict
performance by any other party of any of the provisions, terms, or conditions contained in this
Agreement shall not waive, affect, or diminish any right of the first party at any time or times to
demand strict performance therewith and with any other provision, term, or condition contained in
this Agreement. Any actual waiver of a provision, term, or condition contained in this Agreement
shall not constitute a waiver of any other provision, term, or condition, whether prior or
subsequent to such actual waiver and whether of the same or a different type. The failure of
Insurance Company to promptly terminate Executive’s employment for Cause shall not be construed as
a waiver of the right of termination, and such right may be exercised at any time following the
occurrence of the event giving rise to such right.

14. Survival. Notwithstanding the termination of this Agreement, the provisions which specify
continuing obligations, compensation and benefits, and rights shall remain in effect until such
time as all such obligations are discharged, all such compensation and benefits are received, and
no party or beneficiary has any remaining actual or contingent rights under this Agreement.

15. Severability. In the event any provision in this Agreement shall be held illegal or invalid
for any reason, such illegal or invalid provision shall not affect the remaining provisions and
this Agreement shall be construed, administered and enforced as though such illegal or invalid
provision were not contained in this Agreement.

16. Binding Effect and Benefit. The provisions of this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of Insurance Company and the executors, personal
representatives, surviving spouse, heirs, devisees, and legatees of Executive.

17. Entire Agreement. This Agreement embodies the entire agreement among the parties with respect
to the subject matter of this Agreement, and it supersedes all prior discussions and oral
understandings of the parties with respect thereto.

18. No Assignment. This Agreement, and the benefits and obligations under this Agreement, shall
not be assignable by any party except as provided in Section 4.5 and by operation of law.

19. No Attachment. Except as otherwise provided by law, no right to receive compensation or
benefits under this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to set off, execution, attachment,
levy, or similar process, and any attempt, voluntary or involuntary, to effect any such action
shall be null and void.

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20. Captions. The captions of the several sections and subsections of this Agreement have been
inserted for convenience of reference only. They constitute no part of this Agreement and are not
to be considered in the construction of this Agreement.

21. Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be deemed one and the same instrument which may be sufficiently evidenced by any one
counterpart.

22. Number. Wherever any words are used in the singular form, they shall be construed as though
they were used in the plural form, as the context requires, and vice versa.

     IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it to be executed, as
of the date first above written.

	 	 	 	 	 	 	 
	For:

	 	Penn Millers Insurance Company	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ J. Harvey Sproul, Jr.
 

J. Harvey Sproul, Jr., Chairman
	 	DATE: 5/17/06
	 	 
	 
	 	 	 	 	 	 
	 

	 	/s/ Frank Joanlanne	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Frank Joanlanne
	 	DATE: 5/1 /06	 	 

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