Document:

EX-4.1

 Exhibit 4.1 

RIGHTS AGREEMENT 
 by and
between 
 TEMPUR SEALY INTERNATIONAL, INC. 

and 
 AMERICAN STOCK
TRANSFER & TRUST COMPANY, LLC 
 as Rights Agent, 

Dated as of February 8, 2017 

 TABLE OF CONTENTS 

 

							
	 	  	 	  	Page	 
			
	 Section 1.
	  	 Certain Definitions
	  	 	1	  
			
	 Section 2.
	  	 Appointment of the Rights Agent
	  	 	9	  
			
	 Section 3.
	  	 Issuance of Rights Certificates
	  	 	9	  
			
	 Section 4.
	  	 Form of Rights Certificates
	  	 	11	  
			
	 Section 5.
	  	 Countersignature and Registration
	  	 	12	  
			
	 Section 6.
	  	 Transfer, Split-Up, Combination, and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates
	  	 	13	  
			
	 Section 7.
	  	 Exercise of Rights; Purchase Price; Expiration Date of Rights
	  	 	14	  
			
	 Section 8.
	  	 Cancellation and Destruction of Rights Certificates
	  	 	16	  
			
	 Section 9.
	  	 Reservation and Availability of Capital Stock
	  	 	16	  
			
	 Section 10.
	  	 Preferred Shares Record Date
	  	 	18	  
			
	 Section 11.
	  	 Adjustment of Purchase Price, Number and Kind of Shares, or Number of Rights
	  	 	18	  
			
	 Section 12.
	  	 Certificate of Adjusted Purchase Price or Number of Shares
	  	 	25	  
			
	 Section 13.
	  	 Consolidation, Merger, or Sale or Transfer of Assets, Cash Flow or Earning Power
	  	 	26	  
			
	 Section 14.
	  	 Fractional Rights and Fractional Shares
	  	 	29	  
			
	 Section 15.
	  	 Rights of Action
	  	 	30	  
			
	 Section 16.
	  	 Agreement of Rights Holders
	  	 	31	  
			
	 Section 17.
	  	 Rights Certificate Holder Not Deemed a Stockholder
	  	 	31	  
			
	 Section 18.
	  	 Concerning the Rights Agent
	  	 	32	  
			
	 Section 19.
	  	 Merger or Consolidation or Change of Name of the Rights Agent
	  	 	32	  
			
	 Section 20.
	  	 Duties of the Rights Agent
	  	 	33	  
			
	 Section 21.
	  	 Change of the Rights Agent
	  	 	35	  
			
	 Section 22.
	  	 Issuance of New Rights Certificates
	  	 	36	  
			
	 Section 23.
	  	 Redemption and Termination
	  	 	37	  
			
	 Section 24.
	  	 Exchange of Rights
	  	 	37	  
			
	 Section 25.
	  	 Notice of Certain Events
	  	 	39	  
			
	 Section 26.
	  	 Notices
	  	 	40	  
			
	 Section 27.
	  	 Supplements and Amendments
	  	 	41	  
			
	 Section 28.
	  	 Successors
	  	 	42	  
			
	 Section 29.
	  	 Determinations and Actions by the Board
	  	 	42	  

  
 i 

 TABLE OF CONTENTS (Cont.) 

 

							
	 	  	 	  	Page	 
			
	 Section 30.
	  	 Benefits of this Agreement
	  	 	42	  
			
	 Section 31.
	  	 Severability
	  	 	42	  
			
	 Section 32.
	  	 Governing Law
	  	 	43	  
			
	 Section 33.
	  	 Counterparts; Facsimiles and PDFs
	  	 	43	  
			
	 Section 34.
	  	 Descriptive Headings
	  	 	43	  
			
	 Section 35.
	  	 Force Majeure
	  	 	43	  
			
	 Section 36.
	  	 Further Assurance
	  	 	44	  

  

			
	 Exhibits
  

	Exhibit A:            	  	Form of Certificate of Designation of Series A Junior Participating Preferred Stock
	Exhibit B:	  	Form of Rights Certificate
	Exhibit C:	  	Summary of Rights to Purchase Preferred Stock

  
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 RIGHTS AGREEMENT 

RIGHTS AGREEMENT, dated as of February 8, 2017 (this “Agreement”), by and between Tempur Sealy International, Inc., a
Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agent”). 

RECITALS 
 WHEREAS, on
February 8, 2017 (the “Rights Dividend Declaration Date”), the Board of Directors of the Company (the “Board”) adopted this Agreement and authorized and declared a dividend distribution of one preferred share
purchase right (each, a “Right” and collectively, the “Rights”) for each Common Share outstanding at the Close of Business (as hereinafter defined) on February 20, 2017 (the “Record Date”),
each Right initially representing the right to purchase one one-thousandth of a Preferred Share (as such number may be adjusted pursuant to the provisions of this Agreement) and having the rights, preferences and privileges set forth in the form of
Certificate of Designation of Series A Junior Participating Preferred Stock attached hereto as Exhibit A, upon the terms and subject to the conditions set forth herein; and 

WHEREAS, the Board further authorized and directed the issuance of one Right (as such number may hereinafter be adjusted pursuant to the
provisions of Section 11(p) hereof) with respect to each Common Share that becomes outstanding between the Record Date (whether originally issued or delivered from the Company’s treasury) and, except as otherwise provided in
Section 22, the earlier of the Distribution Date and the Expiration Date, each Right initially evidencing the right to purchase one one-thousandth of a Preferred Share, upon the terms and subject to the conditions hereinafter set forth. 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties, intending to be legally bound
hereby, agree as follows: 
 Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the
meanings indicated: 
 (a) “Acquiring Person” shall mean any Person who or which, together with all Related Persons of such
Person, from and after the date of this Agreement, shall be the Beneficial Owner of twenty percent (20%) or more of the Common Shares then outstanding, but shall not include an Exempt Person or a Grandfathered Stockholder. Notwithstanding the
foregoing: (i) no Person shall become an “Acquiring Person” solely as a result of (A) the grant of any options, warrants, rights or similar interests (including restricted shares and restricted stock units) by the Company to its
directors, officers and employees pursuant to any employee benefit or stock ownership plan of the Company, or the exercise or conversion of any such securities so granted, (B) a reduction in the number of Common Shares outstanding due to the
repurchase of Common Shares by the Company, or (C) a dividend or distribution paid or made by the Company on the outstanding Common Shares or pursuant to a stock split, subdivision or similar transaction effected by the Company in which all
registered holders of Common Shares are treated substantially equally; and (ii) if the Board determines in good faith that a Person who would otherwise be an “Acquiring Person” has become such inadvertently (including, without
limitation, because (A) such Person was unaware that it beneficially owned a percentage of 

 
Common Shares that would otherwise cause such Person to be an Acquiring Person or (B) such Person was aware of the extent of its Beneficial Ownership of Common Shares but had no actual
knowledge of the consequences of such Beneficial Ownership under this Agreement and had no intention of changing or influencing control of the Company), and such Person divests as promptly as practicable (and in any event within five
(5) Business Days after being so requested by the Company) a sufficient number of Common Shares so that such Person is no longer the Beneficial Owner of twenty percent (20%) or more of the Common Shares then outstanding or, in the case
solely of Derivative Interests, such Person terminates as promptly as practicable (and in any event within five (5) Business Days after being so requested by the Company) the subject derivative transaction or transactions or disposes of the
subject derivative security or securities as promptly as practicable (and in any event within five (5) Business Days after being so requested by the Company), or establishes to the satisfaction of the Board that such Derivative Interests are
not held with any intention of changing or influencing control of the Company, then such Person shall not be deemed to be or ever to have been an “Acquiring Person” for any purposes of this Agreement as a result of such inadvertent
acquisition. 
 (b) “Act” shall mean the Securities Act of 1933, as amended. 

(c) A Person shall be deemed to be “Acting in Concert” with another Person if such Person knowingly acts (whether or not
pursuant to an express agreement, arrangement or understanding) at any time after the first public announcement of the adoption of this Agreement, in concert or in parallel with such other Person, or towards a common goal with such other Person,
relating to changing or influencing the control of the Company or in connection with or as a participant in any transaction having that purpose or effect, where (i) each Person is conscious of the other Person’s conduct and this awareness
is an element in their respective decision-making processes and (ii) at least one additional factor supports a determination by the Company’s Board of Directors that such Persons intended to act in concert or in parallel, which additional
factors may include, without limitation, exchanging information, attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided that, the additional factor required shall not include
actions by an officer or director of the Company acting in such capacities. A Person who is Acting in Concert with another Person shall also be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other Person.
No Person shall be deemed to be Acting in Concert with another Person solely as a result of (i) making or receiving a solicitation of, or granting or receiving, revocable proxies or consents given in response to a public proxy or consent
solicitation made to more than 10 holders of shares of a class of stock of the Company registered under Section 12 of the Exchange Act, or (ii) soliciting or being solicited for tenders of, or tendering or receiving tenders of, securities
in a public tender or exchange offer made pursuant to, and in accordance with, Section 14(d) of the Exchange Act by means of a tender offer statement filed on Schedule TO. 

(d) “Adjustment Shares” shall have the meaning set forth in Section 11(a)(ii) hereof. 

(e) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act; provided, however, that no director or officer of the Company shall be deemed an Affiliate or 

  
 2 

 
Associate of any other director or officer of the Company solely as a result of his or her being a director or officer of the Company. 

(f) “Agreement” shall have the meaning set forth in the preamble of this Agreement, as it may from time to time be
supplemented, amended, renewed, restated or extended pursuant to the applicable provisions hereof. 
 (g) “Amended and Restated
Certificate of Incorporation” shall mean the Company’s Amended and Restated Certificate of Incorporation, as such may be amended, modified or restated from time to time. 

(h) A Person shall be deemed the “Beneficial Owner” of, shall be deemed to have “Beneficial Ownership” of,
and shall be deemed to “beneficially own,” any securities: 
 (i) which such Person or any of such Person’s Related
Persons beneficially owns, directly or indirectly (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act); 

(ii) which such Person or any of such Person’s Related Persons, directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time or upon the satisfaction of one or more conditions (whether or not within the control of such Person), compliance with regulatory requirements or otherwise) pursuant to any agreement,
arrangement or understanding (whether or not in writing and other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) or upon the exercise of conversion rights,
exchange rights, other rights, warrants, or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially
own,” (A) securities tendered pursuant to a tender offer or exchange offer made in accordance with the General Rules and Regulations under the Exchange Act by or on behalf of such Person or any of such Person’s Related Persons until
such tendered securities are accepted for purchase or exchange, (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 Related Persons prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the “Original
Rights”) or pursuant to Section 11(i) or Section 11(p) hereof in connection with an adjustment made with respect to any Original Rights; 

(iii) which such Person or any of such Person’s Related Persons, directly or indirectly, has the right to vote or dispose of, including
pursuant to any agreement, arrangement, or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to
“beneficially own,” any security as a result of an agreement, arrangement or understanding (whether or not in writing) to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy or
consent (as such terms are defined in Regulation 14A under the Exchange Act) given in response to a public proxy or consent solicitation made to more than 10 holders of shares of a class of stock of the Company registered under Section 12 of
the Exchange Act, (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or 

  
 3 

 
any comparable or successor report); or (C) arises solely because such security has been tendered pursuant to a tender or exchange offer made by such Person or any Related Persons thereof
until such tendered security is accepted for payment or exchange; 
 (iv) which are beneficially owned, directly or indirectly, by any other
Person (or any Related Person thereof) with which such Person (or any of such Person’s Related Persons) 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 Section 1(h)(iii)), or disposing of any voting securities of the Company; provided, however, that nothing in this Section 1(h)(iv) shall cause a Person engaged in business
as an underwriter of securities to be the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially own,” any securities acquired or which such Person has the right to acquire through such
Person’s participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of
forty (40) days; or 
 (v) which are the subject of, or the reference securities for, or that underlie, any Derivative Interest of such
Person or any of such Person’s Related Persons, with the number of Common Shares deemed beneficially owned being the notional or other number of Common Shares specified in the documentation evidencing the Derivative Interest as being subject to
being acquired upon the exercise or settlement of the Derivative Interest or as the basis upon which the value or settlement amount of such Derivative Interest is to be calculated in whole or in part or, if no such number of Common Shares is
specified in such documentation, as determined by the Board in its sole discretion to be the number of Common Shares to which the Derivative Interest relates. 

Notwithstanding anything in this definition of Beneficial Ownership to the contrary, for all purposes of this Agreement, the phrase “then
outstanding,” when used with reference to a Person’s Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually
issued and outstanding that such Person, together with all Related Persons, would be deemed to Beneficially Own hereunder. The number of Common Shares not outstanding that such Person, together with all Related Persons of such Person, is otherwise
deemed to Beneficially Own for purposes of this Agreement shall be deemed to be outstanding for the purpose of computing the percentage of the outstanding number of Common Shares owned by such Person, together with all Related Persons of such
Person, but shall not be deemed to be outstanding for the purpose of computing the percentage of outstanding Common Shares owned by any other Person. 

No Person who is an officer, director or employee of an Exempt Person shall be deemed, solely by reason of such Person’s status or
authority as such, to be the “Beneficial Owner” of, to have “Beneficial Ownership” of or to “Beneficially Own” any securities that are “Beneficially Owned” (as defined in this Section 1(h)), including,
without limitation, in a fiduciary capacity, by an Exempt Person or by any other such officer, director or employee of an Exempt Person. 

Notwithstanding any of the foregoing, no Person shall be deemed to be the “Beneficial Owner” of, to have “Beneficial
Ownership” of or to “Beneficially Own” any securities which 

  
 4 

 
such Person or any of such Person’s Related Persons would otherwise be deemed to “Beneficially Own” pursuant to this Section 1(h) solely as a result of any merger or other
acquisition agreement between the Company and such Person (or one or more of such Person’s Related Persons), or any tender, voting or support agreement entered into by such Person (or one or more of such Person’s Related Persons) in
connection therewith, if, prior to such Person becoming an Acquiring Person, the Board has approved such merger or other acquisition agreement, or such tender, voting or support agreement. 

(i) “Board” shall have the meaning set forth in the recitals to this Agreement and also includes any duly authorized committee
thereof. 
 (j) “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in
the Commonwealth of Kentucky or the State of New York are authorized or obligated by law or executive order to close. 
 (k)
“Bylaws” shall mean the Company’s Sixth Amended and Restated Bylaws, as such may be amended, modified or restated from time to time. 

(l) “Close of Business” on any given date shall mean 5:00 p.m., New York City time, on such date; provided,
however, that if such date is not a Business Day, it shall mean 5:00 p.m., New York City time, on the next succeeding Business Day. 

(m) “Closing Price” of any security on any given day shall be the last sale price, regular way, of such security or, in case
no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on the principal trading market on which such security is then traded. 

(n) “Common Shares” shall mean the shares of common stock, par value $0.01 per share, of the Company or any other shares of
capital stock of the Company into which such shares shall be reclassified or changed, except that “Common Shares” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the
greatest voting power, or the equity securities or other equity interests having power to control or direct the management of such Person. 

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

(p) “Company” shall have the meaning set forth in the preamble hereto, except as otherwise provided in Section 13(a)
hereof. 
 (q) “Current Market Price” shall have the meaning set forth in Section 11(d) hereof. 

(r) “Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof. 

(s) “Derivative Interest” shall mean any derivative securities (as defined under Rule 16a-1 under the Exchange Act) that
increase in value as the value of the underlying 

  
 5 

 
equity increases, including, but not limited to, a long convertible security, a long call option and a short put option position, in each case, regardless of whether (i) such interest
conveys any voting rights in such security, (ii) such interest is required to be, or is capable of being, settled through delivery of such security or (iii) transactions hedging the economic effect of such interest. 

(t) “Distribution Date” shall mean the earlier of (i) the Close of Business on the 10th Business Day (or such later date
as may be determined from time to time by action of a majority of the Board prior to the Distribution Date that would otherwise have occurred) after the Shares Acquisition Date (or, if the 10th Business Day after the Shares Acquisition Date occurs
before the Record Date, then the Close of Business on the Record Date), or (ii) the Close of Business on the 10th Business Day (or such later date as may be determined from time to time by action of the Board prior to the Distribution Date that
would otherwise have occurred) after the date of the commencement of, or first public announcement of the intent of any Person (other than an Exempt Person) to commence (within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act) following the date hereof, a tender or exchange offer the consummation of which would result in any Person (other than an Exempt Person) becoming an Acquiring Person; provided, however, that if a tender or exchange offer is
terminated prior to the occurrence of a Distribution Date, then no Distribution Date shall occur as a result of such tender or exchange offer. The Board may, if deferral is allowed in clause (i) or (ii) of the preceding sentence, defer the
date set forth in such clause, as applicable, to a specified later date or an unspecified later date to be determined by a subsequent action or event. 

(u) “Equivalent Preferred Shares” shall have the meaning set forth in Section 11(b) hereof. 

(v) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 

(w) “Exchange Property” shall have the meaning set forth in Section 24(f) hereof. 

(x) “Exchange Ratio” shall have the meaning set forth in Section 24(a) hereof. 

(y) “Exchange Recipients” shall have the meaning set forth in Section 24(f) hereof. 

(z) “Exempt Person” shall mean (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee stock
ownership plan, employee benefit plan or other compensation program or arrangement of the Company or of any of its Subsidiaries, or any Person holding Common Shares for or pursuant to the terms of any such plan, program or arrangement or for the
purpose of funding any such plan, program or arrangement, and (iv) any Person organized, appointed or established by the Company or any of its Subsidiaries for or pursuant to the terms of any such plan, program or arrangement during the time
such Person acts in such capacity. 
 (aa) “Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

  
 6 

 (bb) “Final Expiration Date” shall have the meaning set forth in
Section 7(a) hereof. 
 (cc) “General Rules and Regulations” shall mean Part 240, Subpart A — Rules and
Regulations under the Securities Exchange Act of 1934, as amended. 
 (dd) “Grandfathered Stockholder” shall mean any Person
who or which would, as of the time of the first public announcement by the Company of the adoption of this Rights Agreement (including any shares Beneficial Ownership of which is acquired on the date of such announcement pursuant to orders placed
prior to such announcement), be deemed an “Acquiring Person,” unless and until such Person (together with all Related Persons) shall acquire after such announcement by the Company of the adoption of this Rights Agreement, without the prior
approval of the Board of Directors, Beneficial Ownership of any additional Common Shares (other than as a result of (i) a stock dividend, stock split, subdivision or similar transaction effected by the Company in which all registered holders of
Common Shares are treated substantially equally, (ii) the grant or issuance by the Company to its directors, officers and employees of options, warrants, rights or similar interests to acquire Common Shares by the Company pursuant to any
employee benefit, stock incentive plan, stock option plan or stock ownership plan of the Company adopted by the Board, and the subsequent exercise or conversion of such options, warrants, rights or similar interests, or (iii) the grant or
issuance by the Company to its directors, officers and employees of restricted Common Shares or restricted stock units and the subsequent vesting of such shares or stock units, pursuant to a restricted stock or other compensation plan or arrangement
adopted by the Board) while such Person (together with all Related Persons) is the Beneficial Owner of twenty percent (20%) or more of the Common Shares then outstanding. 

(ee) “NYSE”shall mean The New York Stock Exchange. 

(ff) “Original Rights” shall have the meaning set forth in Section 1(h)(ii) hereof. 

(gg) “Ownership Statement” shall have the meaning set forth in Section 3(a) hereof. 

(hh) “Person” shall mean any individual, firm, corporation, partnership, limited liability company, limited liability
partnership, trust, association, syndicate or other entity, and shall include any successor (by merger or otherwise) of such entity. 
 (ii)
“Preferred Shares” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company having the rights and preferences set forth in the form of Certificate of Designation attached to this
Agreement as Exhibit A, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the
Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock. 

(jj) “Principal Party” shall have the meaning set forth in Section 13(b) hereof. 

  
 7 

 (kk) “Purchase Price” shall have the meaning set forth in Section 7(b)
hereof. 
 (ll) “Record Date” shall have the meaning set forth in the recital hereto. 

(mm) “Redemption Period” shall have the meaning set forth in Section 23(a) hereof. 

(nn) “Redemption Price” shall have the meaning set forth in Section 23(a) hereof. 

(oo) “Related Person” shall mean, as to any Person, any Affiliates or Associates of such Person, and any other Person with
whom such Person or such Person’s Affiliates or Associates is Acting in Concert (or any Affiliate or Associate of such other Person). 

(pp) “Right” shall have the meaning set forth in the recital to this Agreement. 

(qq) “Rights Agent” shall have the meaning set forth in the preamble of this Agreement, except as otherwise provided in
Section 19 and Section 21 hereof. 
 (rr) “Rights Certificate” shall have the meaning set forth in
Section 3(a) hereof. 
 (ss) “Rights Dividend Declaration Date” shall have the meaning set forth in the recital to this
Agreement. 
 (tt) “Section 11(a)(ii) Event” shall have the meaning set forth in Section 11(a)(ii) hereof. 

(uu) “Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof. 

(vv) “Section 13 Event” shall mean any event described in Section 13(a)(i), Section 13(a)(ii) or
Section 13(a)(iii) hereof. 
 (ww) “Shares Acquisition Date” shall mean the first date of public announcement (which,
for purposes of this definition, shall include, without limitation, a report filed or amended pursuant to Section 13(d) or Section 13(g) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such
or that discloses information which reveals the existence of an Acquiring Person. 
 (xx) “Spread” shall have the meaning
set forth in Section 11(a)(iii) hereof. 
 (yy) “Subsidiary” shall mean, with reference to any Person, any corporation
or other entity of which an amount of voting securities (or other ownership interests having ordinary voting power) sufficient to elect at least a majority of the directors (or other Persons performing similar functions) of such corporation or other
entity is beneficially owned, directly or indirectly, by such first mentioned Person, or otherwise controlled by such first mentioned Person. 

  
 8 

 (zz) “Substitution Period” shall have the meaning set forth in
Section 11(a)(iii) hereof. 
 (aaa) “Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.

 (bbb) “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. 

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

Section 2. Appointment of the Rights Agent. The Company hereby appoints the Rights Agent to act as rights agent for the Company in
accordance with the express terms and conditions hereof (and not implied terms and conditions), 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) calendar days’ prior written notice to the Rights Agent. In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents under the provisions of
this Agreement shall be as the Company reasonably determines, and the Company shall notify, in writing, the Rights Agent and any co-Rights Agents of such duties. The Rights Agent shall have no duty to supervise, and shall in no event be liable for,
the acts or omissions of any such co-rights agent. 
 Section 3. Issuance of Rights Certificates. 

(a) Until the Distribution Date (i) the Rights will be evidenced (subject to Section 3(b) and Section 3(c) hereof) 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 Rights) or by the book entry Common Shares registered in the name of the
holders, evidenced by current ownership statements issued with respect to uncertificated Common Shares in lieu of such certificates (“Ownership Statements”) (which Ownership Statements shall be deemed also to be certificates for
Rights) and not by separate certificates, and the registered holders of the Common Shares shall also be the registered holders of the associated Rights, and (ii) the Rights 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 Company shall prepare and execute, and upon the written request of the Company, the Rights Agent shall countersign and the
Company will send or cause to be sent (and the Rights Agent will, if so requested and provided with all necessary information and documents will, at the expense of the Company) send, in accordance with Section 26 hereof, to each record holder
of the Common Shares as of the Close of Business on the Distribution Date (other than an Acquiring Person or any Related Person of an Acquiring Person), one or more rights certificates, in substantially the form of Exhibit B attached 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(i) or Section 11(p) hereof, at the time of 

  
 9 

 
distribution of the Rights Certificates, the Company shall not be required to issue Rights Certificates evidencing fractional Rights but may, in lieu thereof, make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates evidencing 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. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date. Until such written notice is received by the Rights Agent, the Rights Agent may
presume conclusively for all purposes that the Distribution Date has not occurred. 
 (b) As promptly as practicable following the Record
Date, the Company shall make available a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”), to each record holder of Common Shares as of the Close of Business on the
Record Date who may so request a copy from time to time prior to the Expiration Date. With respect to Common Shares outstanding as of the Record Date, or issued subsequent to the Record Date, until the earlier of the Distribution Date and the
Expiration Date, the Rights associated with such Common Shares will be evidenced by the certificate or Ownership Statement for such Common Shares registered in the names of the holders thereof, in each case together with the Summary of Rights. Until
the earlier of the Distribution Date and the Expiration Date, the surrender for transfer of any certificate or Ownership Statement for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Shares evidenced by such certificate or Ownership Statement. 
 (c) Rights
shall without any further action, be issued in respect of all Common Shares that are issued (whether originally issued or from the Company’s treasury) after the Record Date but prior to the earlier of the Distribution Date and the Expiration
Date and, to the extent provided in Section 22 hereof, in respect of Common Shares issued after the Distribution Date. Certificates and Ownership Statements evidencing such Common Shares shall have printed or otherwise affixed to them a legend
in substantially the following form: 
 “This [certificate/statement] also evidences and entitles the registered holder hereof to
certain Rights as set forth in the Rights Agreement between Tempur Sealy International, Inc. (the “Company”) and American Stock Transfer & Trust Company, LLC, dated as of February 8, 2017 (the “Rights
Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this [certificate/statement]. The Company will mail to the registered holder of this [certificate/statement] 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 beneficially owned by any Person who is, was, or becomes an Acquiring Person or any Related Person thereof
(as such 

  
 10 

 
capitalized terms are defined in the Rights Agreement), whether currently beneficially owned by or on behalf of such Person or by any subsequent beneficial owner, may become null and void.”

 With respect to such certificates or Ownership Statements containing the foregoing legend, until the earlier of the Distribution Date and
the Expiration Date, the Rights associated with the Common Shares evidenced by such certificates or Ownership Statements shall be evidenced by such certificates or Ownership Statements alone and the surrender for transfer of any certificate or
Ownership Statement for Common Shares shall also constitute the transfer of the Rights associated with the Common Shares evidenced by such certificate or Ownership Statement. Notwithstanding this Section 3(c) or anything to the contrary that
may be contained elsewhere in this Agreement, the omission of a legend shall not affect the enforceability of any part of this Agreement or the rights of any registered holder of Rights Certificates. In the event the Company purchases or otherwise
acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with
such Common Shares that are no longer outstanding. 
 After the Record Date but prior to the earlier of the Distribution Date and the
Expiration Date, if new certificate(s) representing Common Shares are issued in connection with the transfer, split-up, combination or exchange of certificate(s) representing Common Shares or if new certificate(s) representing Common Shares are
issued to replace any certificate(s) that have been mutilated, destroyed, lost, or stolen, then such new certificate(s) shall bear a legend in substantially the form of the foregoing. 

Section 4. Form of Rights Certificates. 

(a) The Rights Certificates (and the forms of election to purchase and of assignment and the certificates contained therein to be printed on
the reverse thereof) shall each be substantially in the form attached hereto as Exhibit B and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate
(but which do not affect the rights, duties, liabilities or responsibilities of the Rights Agent) 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 national securities exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the registered holders thereof to purchase such number of one one-thousandths of a Preferred Share as shall be set forth therein at the Purchase
Price, but the amount and type of securities, cash or other assets that may be acquired 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 hereto that represents Rights beneficially owned by: (i) an Acquiring Person or any Related
Person of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Related Person) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person

  
 11 

 
(or of any such Related Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether
or not for consideration) from the Acquiring Person (or any such Related Person) to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding
(whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board, in its sole discretion, has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the 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, and only if the Company has provided specific written instructions to the Rights Agent) a legend in substantially the following form: 

“The Rights evidenced by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or a
Related Person of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights evidenced hereby may become null and void in the circumstances specified in Section 7(e) of the
Rights Agreement.” 
 The Company shall give written notice to the Rights Agent promptly after it becomes aware of the existence and
identity of any Acquiring Person or any Related Person thereof. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that no Person has become an Acquiring Person or a Related Person of an
Acquiring Person. The Company shall instruct the Rights Agent in writing of the Rights which should be so legended. 
 Notwithstanding this
Section 4(b) or anything to the contrary that may be contained elsewhere in this Agreement, the omission of the foregoing legend or any legend substantially similar thereto shall not affect the enforceability of any part of this Agreement or
the rights of any registered holder of Rights Certificates. 
 Section 5. Countersignature and Registration. 

(a) The Rights Certificates shall be duly executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its
President or any Vice President of the Company, and by the Secretary, an Assistant Secretary, the Treasurer/Chief Financial Officer or an Assistant Treasurer, either manually or by facsimile or portable document format signature. The Rights
Certificates shall be countersigned by an authorized signatory of the Rights Agent, either manually or by facsimile or portable document format 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 an authorized signatory of the Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by an authorized signatory of 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

  
 12 

 
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, and receipt by the Rights Agent of written notice to that effect and all other relevant and necessary
information and documents referred to in Section 3(a), the Rights Agent will keep, or cause to be kept, at its office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates,
and the date of each of the Rights Certificates. 
 Section 6. Transfer, Split-Up, Combination, and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates. 
 (a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 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 (other than Rights Certificates representing Rights
that have become null and void pursuant to Section 7(e) hereof, or evidencing Rights that have been redeemed or exchanged pursuant to Section 23 or Section 24 hereof) may be transferred, split-up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares, other securities, cash or other assets, as
the case may be) as the Rights Certificate or Certificates surrendered then entitles 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, together with any required form of assignment duly executed and properly completed, the Rights Certificate or Certificates to be
transferred, split-up, combined, or exchanged, with the form of assignment and certificate contained therein properly completed and duly executed and with all signatures guaranteed, at the 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 properly completed and duly executed
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) of the Rights represented by
such Rights Certificate or Related Persons thereof as the Company or the Rights Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24 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 from a registered holder of a Rights Certificate 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. If and to the extent the Company does require payment of any such taxes or charges, the Company shall give
the Rights Agent prompt written notice thereof and the Rights Agent shall not deliver any Rights 

  
 13 

 
Certificate unless and until it is satisfied that all such payments have been made, and the Rights Agent shall forward any such sum collected by it to the Company or to such Persons as the
Company specifies by written notice. The Rights Agent shall have no duty or obligation to take any action with respect to a holder of a Rights Certificate under any Section of this Agreement which requires the payment by such holder of a Rights
Certificate of applicable taxes and/or charges unless and until it is satisfied that all such taxes and/or charges have been paid. 
 (b)
Subject to the provisions of this Agreement, at any time after the Distribution Date and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a 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 holder in
lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. 
 Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights. 
 (a) Subject to Section 7(e) hereof, at any time after the Distribution Date 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 upon surrender of the Rights Certificate, with the form of election to purchase and the certificate contained therein properly completed and duly executed, to the Rights Agent at the office or offices of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares, other securities, cash or other
assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the Close of Business on February 7, 2018 (the “Final Expiration Date”), (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof, and (iii) the time at which the Rights are exchanged in full as provided in Section 24 hereof (the earliest of (i), (ii), and (iii) being herein referred to as the
“Expiration Date”). 
 (b) The purchase price for each one one-thousandth of a Preferred Share pursuant to the exercise of a
Right initially shall be $90.00, shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof, and shall be payable in accordance with Section 7(c) hereof (such purchase price, as so adjusted,
the “Purchase Price”). 
 (c) Upon receipt of a Rights Certificate evidencing exercisable Rights, with the form of election
to purchase and the certificate contained therein properly completed and duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price (as such amount may be adjusted as provided herein) per one one-thousandth
of a Preferred Share (or, following the occurrence of a Triggering Event, 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 tax or charge, the Rights
Agent shall, subject to Section 7(f) and Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the 

  
 14 

 
Preferred Shares (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-thousandths of a Preferred Share to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if, subject to Section 14 hereof, the Company shall have elected to deposit the total number of Preferred Shares issuable upon exercise
of the Rights hereunder with a depositary agent, requisition from the depositary agent of depositary receipts evidencing such number of one one-thousandths of a Preferred Share as are to be purchased (in which case certificates for the Preferred
Shares evidenced 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) if necessary to comply with this Agreement, 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, subject to Section 7(f) below, 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) if necessary to comply with this Agreement, after receipt thereof, subject
to Section 7(f) below, 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) shall be
made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Shares) of the Company, pay cash or distribute other property pursuant
to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash or other property are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement, and until
so received, the Rights Agent shall have no duties or obligations with respect to such securities, cash and/or other property. The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole Preferred Shares would be issued. 
 (d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing 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 Sections 6 and 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 a Related Person of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Related Person) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Related Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person (or any such Related Person) to holders of equity interests in such Acquiring Person (or any such Related Person) or to any Person with whom the Acquiring Person (or any such Related Person) has any
continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer that the Board, in its sole discretion, has determined is part of a plan, arrangement or understanding (whether or
not in writing) that 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

  
 15 

 
whatsoever with respect to such Rights, whether under any provision of this Agreement, the Rights Certificates or otherwise (including, without limitation, the rights and preferences pursuant to
Sections 7, 11, 13, 23 and 24 hereof). The Company shall use all reasonable efforts to ensure 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 any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its Related Persons or transferees hereunder. 

(f) Notwithstanding anything in this Agreement or any Rights Certificate to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder of a Rights Certificate upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and
duly executed 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) of the Rights represented by the Rights Certificate or Related Persons of such Beneficial Owner as the Company shall reasonably request. 

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

Section 9. Reservation and Availability of Capital Stock. 

(a) The Company covenants and agrees that at all times prior to the Expiration Date it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares (and, following the occurrence of a Triggering Event, out of its authorized and unissued Common Shares or other securities as may be issuable upon exercise of the Rights and/or out of its securities held in
treasury, as the case may be), the number of Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares or other securities, as the case may be) that, as provided in this Agreement, including, but not limited to,
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all of the outstanding Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of Preferred Shares (or other equity securities of
the Company) issuable upon exercise of all outstanding Rights above the number then reserved, the Company shall make appropriate increases in the number of shares so reserved. 

(b) So long as the Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares or other securities, as the case may
be) issuable and 

  
 16 

 
deliverable upon the exercise of the Rights may be listed on any national securities exchange or quoted on a quotation system, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable through the Expiration Date, all shares reserved for such issuance to be listed on such exchange or quoted on such quotation system, as the case may be, 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) hereof, a registration statement on an appropriate form under the Act, with
respect to the securities purchasable upon exercise of the Rights, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the Expiration Date. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement (with prompt written notice thereof to the Rights Agent; and until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively that no such suspension has
occurred) stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect (with prompt written notice thereof to the Rights Agent; and until such
written notice is received by the Rights Agent, the Rights Agent may presume conclusively that such suspension is still in effect). In addition, if the Company shall determine that a registration statement is required following the Distribution
Date, the Company similarly may 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 if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law, or a registration statement shall not have been declared effective.

 (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-thousandths of a
Preferred Share (and, following the occurrence of a Triggering Event, Common Shares or other securities, as the case may be) delivered upon exercise of the Rights shall, at the time of delivery of the certificates or depositary receipts for such
shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable. 
 (e) The
Company further covenants and agrees that it will pay when due and payable any and all federal and state taxes and charges that may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates, entries in the
book entry account system of the transfer agent, or depositary receipts for a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or other assets, as the
case may be) upon the exercise of Rights. The 

  
 17 

 
Company shall not, however, be required to pay any tax or charge that may be payable in respect of any transfer or delivery of Rights Certificates or depositary receipts or entries in the book
entry account system of the transfer agent to a Person other than, or the issuance or delivery of a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or
other assets, as the case may be) in 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 or depositary receipts or entries in the book entry
account system of the transfer agent for a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or other assets as the case may be) in a name other than that
of the registered holder upon the exercise of any Rights until such tax or charge shall have been paid (any such tax or charge being payable by the registered holder of such Rights Certificates at the time of surrender) or until it has been
established to the Company’s or to the Rights Agent’s satisfaction that no such tax or charge is due. 
 Section 10.
Preferred Shares Record Date. Each Person in whose name any certificate or entry in the book entry account system of the transfer agent for a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering
Event, Common Shares or other securities, cash or other assets, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional Preferred Shares (or, following the
occurrence of a Triggering Event, Common Shares or other securities, cash, or other assets as the case may be) evidenced thereby on, and such certificate or entry 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 taxes and charges) was made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Shares (or, following the
occurrence of a Triggering Event, Common Shares or other securities, cash or other assets, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or
otherwise) on, and such certificate or entry shall be dated, the next succeeding Business Day on which the Preferred Shares (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash, or other assets as the case may
be) transfer books of the Company are open and provided further, that if delivery of the Preferred Shares is delayed pursuant to Section 9(c), when such Preferred Shares first becomes deliverable. Prior to the exercise of the Rights evidenced
thereby, the registered holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions, or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. 

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

(a)(i) In the event the Company shall at any time after the date of this Agreement (A) declare or pay a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide or split the outstanding Preferred Shares, (C) combine or consolidate the 

  
 18 

 
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, split, combination, consolidation, or reclassification, and the number and kind of Preferred Shares or fractions thereof (or other capital stock, as the case may be),
issuable on such date, shall be proportionately adjusted so that the registered holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of Preferred
Shares or fractions thereof (or other capital stock, as the case may be), which, if such Right had been exercised immediately prior to such date (whether or not such Right was then exercisable) and at a time when the Preferred Share (or other
capital stock, as the case may be) transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, split, combination, consolidation, or reclassification.
If an event occurs that 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 any Person shall become an Acquiring Person (a
“Section 11(a)(ii) Event”), then, promptly following the occurrence of such Section 11(a)(ii) Event, proper provision shall be made so that, upon expiration of the Redemption Period, each registered holder of a Right (except as
provided below in Section 11(a)(iii) and in Sections 7(e), 13 and 24 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 one one-thousandths of a Preferred Share, such number of Common Shares of the Company as shall equal the result obtained by (A) multiplying the then current Purchase Price by the then number of one one-thousandths of a Preferred Share
for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (B) 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 fifty percent (50%) of the Current Market Price per Common Share on the date of such first occurrence (such number of shares, the “Adjustment Shares”).

 (iii) In the event that (A) the number of Common Shares authorized by the Amended and Restated Certificate of Incorporation, but not
outstanding or reserved for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit the exercise in full of the Rights in accordance with Section 11(a)(ii) hereof or (B) the Board otherwise shall determine
to do so in its sole discretion, the Company, acting by resolution of the Board, shall (1) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), and (2) with respect to
each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of such Right and payment of the applicable Purchase Price, (u) cash, (v) a reduction in the Purchase
Price, (w) Common Shares or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock, such as the Preferred Shares, which the Board has deemed to have essentially the same value or
economic rights as Common Shares (such shares of preferred stock being referred to as “Common Stock Equivalents”)), (x) debt securities of the 

  
 19 

 
Company, (y) other assets, or (z) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board
based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that, if, under the circumstances set forth in clause (A) above, the Company shall not have made adequate provision
to deliver value pursuant to clause (2) above within thirty (30) days following the later of (I) the first occurrence of a Section 11(a)(ii) Event and (II) the date on which the Company’s right of redemption pursuant to
Section 23(a) hereof expires (the later of (I) and (II) 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 cash have an aggregate value equal to the Spread. For purposes of the preceding sentence, the term
“Spread” shall mean the excess of the Current Value over the Purchase Price. If the Board determines 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 30 day period set forth above may be extended to the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such
additional shares (such 30 day period, as it may be extended, is herein called the “Substitution Period”). To the extent that action is to be taken pursuant to the first or third 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 the Company may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to
seek such stockholder approval for such authorization of additional shares 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 (with prompt written notice thereof to the Rights Agent) stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement (with prompt written notice thereof to
the Rights Agent) at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per Common Share on the Section 11(a)(ii) Trigger Date
and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per Common Share on such date. 

(b) In case the Company shall fix a record date for the issuance of rights, options, or warrants to all registered holders of Preferred Shares
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 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 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 or Equivalent Preferred Shares so to be offered (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 

  
 20 

 
plus the number of additional Preferred Shares 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, whose determination
shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on 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 adjustments shall be made successively whenever such a record date is fixed, and in the event that such rights, options, or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price 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 registered holders of Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of cash (other than a
regular cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Shares, but including any dividend payable in stock other than Preferred Shares) or evidences of indebtedness, or of
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 per Preferred Share on such record date, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding and 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 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 that would then be 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 immediately prior to 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 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 Shares payable in Common Shares or securities convertible into such Common Shares (other than the
Rights), or (B) any subdivision, combination, consolidation, reverse stock split or reclassification of such Common Shares, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination,
consolidation, reverse stock split or reclassification shall not have occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the Current
Market Price shall be properly adjusted 

  
 21 

 
to take into account ex-dividend trading. The Closing Price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Common Shares are not listed or admitted to
trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the 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 on a quotation system
then in use, or, if on any such date the Common Shares are not so quoted, 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. If on any such date the
Common Shares are not publicly held and are not so listed, admitted to trading, or quoted, and no market maker is making a market in the Common Shares, the “Current Market Price” per Common Share shall mean the fair value per share
on such date as determined in good faith by the Board, which determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders of the Rights. 

(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 Section 11(d)(i) hereof (other than the penultimate 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, admitted to trading, or quoted in a manner described in Section 11(d)(i) hereof, the Current Market Price per Preferred Share shall be conclusively deemed to be an amount equal to 1000 (as such number may
be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common 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 listed, admitted to trading, or quoted, the “Current Market Price” per Preferred Share shall mean the fair value per share as determined in good faith by a majority of the
Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders of the Rights. For all purposes of this Agreement, the Current Market
Price of one one-thousandth of a Preferred Share shall be equal to the Current Market Price of one Preferred Share divided by 1000. 
 (e)
Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest thousandth of a Common Share or other share or one-millionth of a Preferred Share, as the case may be. 

(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the registered 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 

  
 22 

 
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), (d), (e), (g), (h), (i), (j), (k), (l) and (m), 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 one one-thousandths of a Preferred Share (or other securities or amount of cash or combination thereof) 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) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and Section 11(c) hereof, each Right outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a Preferred Share (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number
of one one-thousandths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the Purchase Price. 
 (i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-thousandths of a Preferred Share purchasable upon the exercise of a Right pursuant to Section 11(h) hereof. Each of the Rights
outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one one-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement, and notify the Rights Agent in writing, of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later
than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 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 delivered by the Company, and countersigned and delivered by the Rights Agent, in the
manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase 

  
 23 

 
Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. 

(j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a Preferred Share issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandth of a share and the number of one one-thousandths of a share 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 par
value, if any, of the number of one one-thousandths of a Preferred Share 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, fully paid and nonassessable, such number of one one-thousandths of a Preferred Share 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 (and shall notify the Rights Agent in writing of any such election) until the occurrence of such event the issuance to the registered holder of any Right exercised after such record date of the
number of one one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a Preferred Share 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, prior to the Distribution Date, the Company shall be entitled to make
such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board, in its good faith judgment, 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 of Preferred Shares or securities that 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 registered holders of its Preferred
Shares shall not be taxable to such stockholders or shall reduce the taxes payable by such holders. 
 (n) The Company covenants and agrees
that in the event that a Section 11(a)(ii) Event occurs and the Rights shall then be outstanding, it shall not, (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 otherwise transfer (or permit any Subsidiary to
sell or otherwise transfer), in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating fifty percent (50%) or more of the assets, cash flow or earning power of the Company and its Subsidiaries
(taken as a whole 

  
 24 

 
and calculated on the basis of the Company’s most recent regularly prepared financial statements) to any other Person or Persons (other than the Company 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, sale or transfer there are any charter or bylaw provisions, 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,
sale or transfer the stockholders 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 Related Persons; provided, however, that this Section 11(n) shall not affect the ability of any Subsidiary of the Company to consolidate with, merge with or into, or sell or transfer assets or earning power to, any other
Subsidiary of the Company. 
 (o) The Company covenants and agrees that after the Distribution Date and so long as any Rights shall then be
outstanding (other than Rights that have become null and void pursuant to Section 7(e) hereof), it will not, except as permitted by Section 23, Section 24, 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 or pay a dividend on the outstanding Common Shares payable in Common Shares, (ii) subdivide or split the outstanding Common Shares, (iii) combine or consolidate the
outstanding Common Shares into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of Common Shares (including any such reclassification in connection with a consolidation or merger in which the
Company is a continuing or surviving corporation), the number of Rights associated with each Common Share then outstanding, or issued or delivered thereafter but prior to the Distribution Date (or issued or delivered on or after the Distribution
Date pursuant to Section 22 hereof), 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. The adjustments provided for in this Section 11(p) shall be made successively whenever such a dividend is declared or paid or such a subdivision,
combination or reclassification is effected. If an event occurs that would require an adjustment under Section 11(a)(ii) and this Section 11(p), the adjustments provided for in this Section 11(p) shall be in addition and prior to any
adjustment required pursuant to Section 11(a)(ii). 
 Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. 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 reasonably detailed statement of the facts,
computations and methodology accounting for such adjustment, (b)

  
 25 

 
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) if a Distribution Date has occurred, mail
a brief summary thereof to each registered holder of a Rights Certificate in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement therein contained
and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any adjustment or any such event unless and until it shall have received such a certificate. 

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

(a) In the event that, at any time after a Person has become an Acquiring Person, directly or indirectly, 

(i) 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 or other entity of such consolidation or merger; 

(ii) 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 the Company) or cash or any other property; or 
 (iii) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets, cash flow or earning power aggregating fifty percent (50%) or more
of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole and calculated on the basis of the Company’s most recent regularly prepared financial statements) 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 (except as may be contemplated by Section 13(d) hereof), proper provision shall be made so that: (A) each registered holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price multiplied by the number of one one-thousandths of a share of Preferred Shares for which a Right is then exercisable in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable Common Shares of the Principal Party, not subject to any liens, encumbrances, rights of first refusal, transfer restrictions, preemptive rights or other adverse claims of any
nature whatsoever, as shall be equal to the result obtained by (1) multiplying the number of one one-thousandths of a Preferred Share 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 of a Section 11(a)(ii) Event, 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 

  
 26 

 
Right and for all purposes of this Agreement) by fifty percent (50%) of the Current Market Price per Common Share of such Principal Party on the date of consummation of such Section 13
Event; (B) 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; (C) the term “Company”
shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of 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; provided, however, that upon the subsequent occurrence of any
merger, consolidation, sale of all or substantially all assets, recapitalization, reclassification of shares, reorganization or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Purchase Price, such cash, shares, rights, options warrants and other property which such holder would have been entitled to receive had he, she or it at the time of such transaction, owned the
Common Shares of the Principal Party purchasable upon the exercise of a Right, and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of
the Rights in accordance with the terms hereof for such cash, shares, rights, warrants, options and other property; and (E) the provisions of Section 11(a)(ii) hereof shall be of no effect with respect to events occurring at any time
following the first occurrence of any Section 13 Event, and the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in this Section 13. 

(b) “Principal Party” shall mean: 

(i) in the case of any transaction described in Section 13(a)(i) or Section 13(a)(ii) hereof, the Person (including the Company as
successor thereto or as the surviving entity) that is the issuer of any securities into which Common Shares of the Company are converted, changed, or exchanged in such merger or consolidation or, if there is more than one such issuer, the issuer of
Common Shares of such issuer that has the highest aggregate current market price (determined pursuant to Section 11(d) hereof) and if no securities or other equity interests are so issued, the Person (including the Company as successor thereto
or as the surviving entity) that is the other party to such merger or consolidation, or, if there is more than one such Person, the Person that is a constituent party to such merger or consolidation, the Common Shares of such Person of which has the
highest aggregate current market price (determined pursuant to Section 11(d) hereof); and 
 (ii) in the case of any transaction
described in Section 13(a)(iii) hereof, the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions, or if each Person that is a party to such
transaction or transactions receives the same portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions, or if the Person receiving the largest portion of the assets, cash flow or earning power cannot
be determined, whichever of such Persons is the issuer of Common Shares having the greatest aggregate value of shares outstanding (as determined pursuant to Section 11(d) hereof); provided, however, that in any

  
 27 

 
such case, (A) if the Common Shares of such Person (who, but for this proviso, would be the Principal Party) 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 (B) 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 a
Section 13 Event unless the Principal Party shall have a sufficient number of authorized Common Shares that have not been issued or reserved or that are held in treasury 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 confirming that the requirements of Section 13(a) and Section 13(b)
hereof shall promptly be performed in accordance with their terms and further providing that, as soon as practicable after the date of any such Section 13 Event, the Principal Party, as soon as practicable after the execution of such agreement,
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) take all such other action as may be necessary to enable the
Principal Party to issue the securities purchasable upon exercise of the Rights, including, but not limited to, the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the
listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and 
 (iii) deliver to registered
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 (or any successor form) under the Exchange Act. 

(d) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a)
hereof. 
 (e) In case the Principal Party that is to be a party to a transaction referred to in this Section 13 has at the time of such
transaction, or immediately following such transaction will have, a provision in any of its authorized securities or in its certificate of incorporation or bylaws or other instrument governing its affairs, or any other agreements or arrangements,
which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares

  
 28 

 
of Common Shares of such Principal Party at less than such then current market price (other than to holders of Rights pursuant to this Section 13); (ii) providing for any special
payment, tax, or similar provisions in connection with the issuance of the Common Shares of such Principal Party pursuant to the provisions of Section 13; or (iii) otherwise eliminating or substantially diminishing the benefits intended to
be afforded by the Rights in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13; then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived, or amended, or that the authorized securities
shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction. 

Section 14. Fractional Rights and Fractional Shares. 

(a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates that evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay 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 price of a whole Right. For purposes of this Section 14(a), the current market price 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 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 NYSE or, if the Rights are not listed or
admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading 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 a
quotation system then in use or, if on any such date the Rights are not so quoted, 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. If on any such date
the Rights are not publicly held and are not so listed, admitted to trading, or quoted, and no market maker is making a market in the Rights, the current market value of a Right shall mean the fair value of a Right on such date as determined in good
faith by the Board, which determination shall be described in a statement filed with the Rights Agent and delivered to the holders of the Rights and shall be binding and conclusive for all purposes. 

(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates or make any entries in the book entry account system of the transfer agent that evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share). In lieu of fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company 

  
 29 

 
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 price of one
one-thousandth of a Preferred Share. For purposes of this Section 14(b), the current market price of one one-thousandth of a Preferred Share shall be one one-thousandth of the Closing Price of a Preferred Share or, if unavailable, the
appropriate alternative price (in each case, 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 or Ownership Statements 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 Section 14(c), the current market value of one Common Share shall be the Closing Price of one Common Share or, if
unavailable, the appropriate alternative price (in each case, as determined pursuant to Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of such exercise. 

(d) The registered holder of a Right by the acceptance of that Right expressly waives such holder’s right to receive any fractional Rights
or any fractional shares upon exercise of a Right, except as permitted by this Section 14. 
 (e) Whenever a payment for fractional
Rights or fractional shares is to be made by the Rights Agent under this Agreement, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and
the prices and formulas utilized in calculating such payments; and (ii) provide sufficient funds to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a
certificate and has no duty with respect to, and will not be deemed to have knowledge of, any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of fractional Rights or fractional shares
unless and until the Rights Agent has received such a certificate and sufficient monies. 
 Section 15. Rights of Action. All
rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent hereunder, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, of the Common
Shares); and any registered holder of any Rights Certificate (and, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the registered holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, on such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder’s right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the registered
holders of Rights, it is specifically acknowledged that the registered holders of Rights would not have an adequate remedy at law for any breach of this Agreement by the Company and shall be entitled to specific performance

  
 30 

 
of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder by the Company of any Person subject to this Agreement. 

Section 16. Agreement of Rights Holders. Every registered holder of a Right, by accepting the same, consents and agrees with the
Company and the Rights Agent and with every other registered holder of a Right that: 
 (a) prior to the Distribution Date, the Rights shall
be evidenced by the balances indicated in Ownership Statements in the names of the holders of Common Shares (which Common Shares shall also be deemed to represent certificates for Rights) or, in the case of certificated shares, the certificates for
the Common Shares registered in the names of the holders of the Common Stock (which certificates for shares of Common Shares also constitute certificates for Rights) and each Right 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 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 contained therein properly completed and duly
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, a Common Share certificate or Ownership Statement) 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 Common Share certificate or Ownership Statement made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 7(e) hereof, 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 registered holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, decree, judgment or ruling (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, that the Company must use its best efforts to have any
such injunction, order, decree, judgment or ruling lifted or otherwise overturned as soon as possible. 
 Section 17. Rights
Certificate Holder Not Deemed a Stockholder. No registered holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the registered holder of the number of one one-thousandths of a
Preferred Share or any other securities of the Company that may at any time be issuable on the exercise of the Rights evidenced thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the registered
holder of any Rights Certificate, as such, 

  
 31 

 
any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 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. 
 (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, reimbursement for its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the preparation, 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 for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost, or
expense, incurred without gross negligence, bad faith or willful misconduct (each as determined by a final non-appealable judgment of a court of competent jurisdiction) on the part of the Rights Agent, for any action taken, suffered or omitted by
the Rights Agent in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including reasonable attorneys’ fees and expenses and the costs and expenses of defending against any claim of
liability in the premises. The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Company. 
 (b)
The Rights Agent may conclusively rely upon and shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in connection with its acceptance and administration of this Agreement or
the exercise or performance of its duties hereunder in reliance upon any Rights Certificate or certificate for Common Shares or for other securities of the Company or an Ownership Statement, 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 have been signed, executed and, where necessary, verified or acknowledged, by the proper Person or
Persons, or otherwise upon the advice of counsel as set forth herein. The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and
shall incur no liability for failing to take any action in connection therewith, unless and until it has received such notice. 
 (c) The
provisions of this Section 18, Section 20 and Section 29 hereof shall survive the termination or expiration of this Agreement, the exercise or expiration of the Rights and the resignation, replacement or removal of the Rights Agent

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

(a) Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the corporate trust, stock transfer or other stockholder services business of

  
 32 

 
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; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of an authorized signatory 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, an authorized signatory of any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 

(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature of an authorized signatory under the Rights Agent’s prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, an authorized signatory of the Rights Agent may countersign such Rights Certificates either in the prior name of the Rights Agent or in the changed name of the Rights Agent; 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
the Rights Agent. The Rights Agent undertakes to perform 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
registered holders of Rights Certificates, by their acceptance thereof, shall be bound: 
 (a) The Rights Agent may consult with legal
counsel (who may be legal counsel for the Company or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no
liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct (which bad faith, gross negligence, or willful misconduct must be determined by a final,
non-appealable judgment of a court of competent jurisdiction) 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 the Rights Agent taking or suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company
and delivered to the Rights Agent; and such certificate shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability, for or in respect of any action taken or suffered or omitted to be
taken by it in the absence of bad faith, gross negligence or willful misconduct (which bad faith, gross 

  
 33 

 
negligence, or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction) under the provisions of this Agreement in reliance upon such
certificate. 
 (c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct (which
gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction). Notwithstanding anything in this Agreement to the contrary, in no event will the Rights Agent be liable
for special, punitive, indirect, incidental or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of
the form of action. Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the Company to the Rights Agent. 

(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 and it shall not be required to verify the same (except as to a countersignature by one of its authorized signatories 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 have any liability for or be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except a countersignature by one of its authorized signatories on
any such Rights Certificate); nor shall it be responsible for any breach by the Company of any covenant or failure by the Company to satisfy any condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 7(e) hereof) or any adjustment required under the provisions of Section 11, Section 13, Section 23 or Section 24
hereof or responsible for the manner, method or amount of any such change or adjustment or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt by the Rights Agent of a certificate describing any such adjustment, delivered pursuant to Section 12); 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 or Preferred Shares or any other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of 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 the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant 

  
 34 

 
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 to the Rights Agent and the Rights Agent shall not be liable for any action taken, suffered, or omitted to be taken by it in the absence of bad faith, gross negligence and willful misconduct (which bad faith, gross
negligence, or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction) in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. The
Rights Agent shall be fully authorized and protected in relying upon the most recent instructions received by any such officer. 
 (h) The
Rights Agent and any stockholder, Affiliate, director, officer or employee of the Rights Agent may buy, sell, or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent or any such stockholder, Affiliate,
director, officer or employee from acting in any other capacity for the Company or for any other Person. 
 (i) The Rights Agent may execute
and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers, and employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect, or misconduct, absent gross negligence, bad faith, or willful
misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction) of the Rights Agent 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 (other than internal costs incurred by the Rights Agent in providing services to the Company in the ordinary course of its business as Rights Agent) or in the exercise of any of its rights or powers 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 contained in the form
of assignment or form of election to purchase, as the case may be, has either not been properly completed or duly executed or indicates an affirmative response to clause 1 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 the Rights Agent. The
Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ prior written notice given to the Company (or such lesser notice as is acceptable to the Company in its
sole discretion) in accordance with Section 26 hereof, and to the extent that the Rights Agent or one of its Affiliates is not also the transfer agent for the Company, to each transfer 

  
 35 

 
agent of the Common Shares and Preferred Shares by registered or certified 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 have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination, and the Company shall be responsible for sending any required notice. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice given to the Rights Agent or successor Rights Agent, as the case may be, in accordance with Section 26 hereof, and to each transfer agent of the
Common Shares and Preferred Shares by registered or certified mail, and, if such removal occurs after the Distribution Date, to the registered holders of the Rights Certificates in accordance with Section 26 hereof. 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 proper notice of
such removal or after it has been properly notified of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the registered holder of a Rights Certificate (who shall, with such notice, submit such holder’s Rights
Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company
or by such a court, shall be (a) a legal business entity organized and doing business under the laws of the United States or of any State thereof, in good standing, which is authorized under such laws to exercise stockholder services powers and
which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000 or (b) an Affiliate of a legal business entity 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 that 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 the Preferred Shares, and, if such appointment occurs after the Distribution Date, give notice thereof to the registered holders of the Rights
Certificates in accordance with Section 26 hereof. 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.
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 the Board to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance
or sale of Common Shares following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion, or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue
Rights Certificates evidencing the appropriate number of Rights in connection with 

  
 36 

 
such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. 
 Section 23. Redemption and
Termination. 
 (a) The Board may, at its option, at any time prior to the earlier of (i) the Close of Business on the tenth
(10th) Business Day following the Shares Acquisition Date (or, if the tenth (10th) Business Day following the Shares Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) and (ii) the Final
Expiration Date (the “Redemption Period”), direct the Company to, and if directed the Company shall, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend, or similar transaction occurring after the date hereof (such redemption price, as adjusted, being hereinafter referred to as the “Redemption Price”). Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the right of redemption hereunder has expired. The Company may, at its option,
pay the Redemption Price in cash, Common Shares (based on the Current Market Price of the Common Shares at the time of redemption) or any other form of consideration deemed appropriate by the Board. 

(b) Immediately upon the action of the Board directing the Company to redeem the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the registered holders of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board directing the Company to make the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the registered holders of the then outstanding Rights in accordance with
Section 26 hereof. Any notice given in accordance with Section 26 hereof 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. Neither the Company nor any of its Affiliates or Associates may redeem, acquire, or purchase for value any Rights at any time in any manner other than specifically set forth in this Section 23 or in Section 24 hereof, or
other than in connection with the purchase of Common Shares or the conversion or redemption of Common Shares in accordance with the applicable provisions of the Company’s Amended and Restated Certificate of Incorporation prior to the
Distribution Date. 
 Section 24. Exchange of Rights. 

(a) The Board may, at its option, at any time after the occurrence of a Section 11(a)(ii) Event, direct the Company to, and if directed
the Company shall, 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 Common Shares at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any stock split, 

  
 37 

 
stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). The exchange of the Rights by
the Board may be made effective at such time, on such basis, and with such conditions as the Board in its sole discretion may establish. Notwithstanding the foregoing, the Board shall not be empowered to direct the Company to effect such exchange at
any time after any Person (other than an Exempt Person), together with all Related Persons 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 directing the Company to exchange any Rights pursuant to Section 24(a) hereof and without any
further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a registered holder 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 (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company promptly shall give notice of any such exchange to all of the registered holders of such Rights in accordance with Section 26 hereof. Any notice given in accordance with
Section 26 hereof 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 that will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) held by
each registered holder of Rights. 
 (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute
Preferred Shares (or Equivalent Preferred Shares) for Common Shares exchangeable for Rights, at the initial rate of one one-thousandth of a Preferred Share (or Equivalent Preferred Shares) for each Common Share, as appropriately adjusted to reflect
stock splits, stock dividends, and other similar transactions after the date hereof. 
 (d) In the event the number of Common Shares
authorized by the Amended and Restated Certificate of Incorporation, but which are not outstanding or reserved for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company may either take such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights or alternatively, at the option of the Board, substitute to the extent
of such insufficiency for each Common Share that would otherwise be issuable upon exchange of a Right, cash, debt securities of the Company, other assets, or any combination of the foregoing, in any event having an aggregate value, as determined in
good faith by the Board (whose determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders of the Rights), equal to the Current Market Price per
Common Share (as determined pursuant to Section 11(d)(i)) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. 

(e) The Company shall not be required to issue fractions of Common Shares or to distribute certificates or Ownership Statements that evidence
fractional Common Shares. In lieu of such fractional Common Shares, there shall be paid to the registered holders of the Rights 

  
 38 

 
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 price of a whole Common Share. For
the purposes of this Section 24(e), the current market price 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. 
 (f) Notwithstanding anything in this Section 24 to the contrary, the
exchange of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Without limiting the preceding sentence, the Board may (i) in lieu of issuing Common Shares or
any other securities contemplated by this Section 24 to the Persons entitled thereto in connection with the exchange (such Persons, the “Exchange Recipients,” and such shares and other securities, together with any dividends or
distributions made on such shares or other securities, the “Exchange Property”) issue, transfer or deposit the Exchange Property to or into a trust or other entity that may hold such Exchange Property for the benefit of the Exchange
Recipients (provided that such trust or other entity may not be controlled by the Company or any of its Related Persons and provided further that the trustee or similar fiduciary of the trust or other entity will attempt to distribute the Exchange
Property to the Exchange Recipients as promptly as practicable), (ii) permit such trust or other entity to exercise all of the rights that a stockholder of record would possess with respect to any shares deposited in such trust or entity and
(iii) impose such procedures as are necessary to verify that the Exchange Recipients are not Acquiring Persons or Related Persons of Acquiring Persons as of any time periods established by such trust or entity. 

Section 25. Notice of Certain Events. 

(a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to
the registered holders of Preferred Shares or to make any other distribution to the registered holders of Preferred Shares (other than a regular periodic cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to
the registered 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)), 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 fifty
percent (50%) or more of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole and calculated on the basis of the Company’s most recent regularly prepared financial statements) 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 registered 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 

  
 39 

 
take place and the date of participation therein by the registered holders of the 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 registered holders of the 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 registered holders of the Preferred Shares, whichever shall be the earlier; provided, however, that no such action shall be taken
pursuant to this Section 25(a) that will or would conflict with any provision of the Company’s Amended and Restated Certificate of Incorporation; provided, further, that no such notice shall be required pursuant to this Section 25, if
any Subsidiary of the Company effects a consolidation or merger with or into, or effects a sale or other transfer of assets or earning power to, any other Subsidiary of the Company. 

(b) In case a Section 11(a)(ii) Event shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter
give to the Rights Agent, and, to the extent feasible, each registered holder of a Rights Certificate, 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 registered holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in Section 25(a) to Preferred Shares shall be deemed thereafter to refer to Common Shares or, if appropriate, other
securities. 
 Notwithstanding anything to the contrary that may be contained in this Section 25 or elsewhere in this Agreement, the
failure to give, or any defect in, any notice required to be given pursuant to this Section 25 shall not affect the legality or validity of the transaction or event to which the notice requirement was applicable. 

In case any Section 13 Event shall occur, then the Company shall, as soon as practicable thereafter, give to each registered holder of a
Rights Certificate, to the extent feasible, and to the Rights Agent in accordance with Section 26 hereof, a written notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to the holders
of Rights under Section 13(a) hereof. 
 Section 26. Notices. Notices or demands authorized by this Agreement to be given
or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company will be sufficiently given or made if in writing and sent by a recognized national overnight delivery service, fax (when such fax is transmitted to the fax
number set forth below and confirmation of transmission is received) or first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent by the Company) as follows: 

Tempur Sealy International, Inc. 

1000 Tempur Way 
 Lexington, KY
40511 
 Attention: General Counsel 

with copies (which will not constitute notice) to: 

Morgan, Lewis & Bockius LLP 

  
 40 

 One Federal Street 

Boston, MA 02110-1726 
 Attention:
John R. Utzschneider 
 Fax: (617) 428-6419 

and 
 Morgan, Lewis &
Bockius LLP 
 1111 Pennsylvania Avenue, N.W. 

Washington, DC 20004 
 Attention:
Keith E. Gottfried 
 Fax: (202) 739-3001 

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the
registered holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by (i) first-class mail, postage prepaid, (ii) a recognized national overnight delivery service, prepaid, or
(iii) courier or messenger service, in each case addressed (until another address is filed in writing by the Rights Agent with the Company) as follows: 

American Stock Transfer & Trust Company, LLC 

6201 15th Avenue 
 Brooklyn, NY
11219 
 Attention: General Counsel 

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the registered holder of any Rights
Certificate (or, if prior to the Distribution Date, of the Common Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the
Rights Agent (or, if prior to the Distribution Date, of the transfer agent for the Common Shares). 
 Section 27. Supplements and
Amendments. Prior to the Distribution Date, and except as otherwise provided in this Section 27, the Company, by action of the Board, may from time to time, in its sole and absolute discretion, and the Rights Agent shall if the
Company so directs, supplement or amend any provision of this Rights Agreement in any respect (including, without limitation, any extension of the period in which the Rights may be redeemed, any increase in the Purchase Price and any extension of
the Final Expiration Date) without the approval of any holders of certificates representing the Common Shares; provided, however, that the adoption by the Board of any amendment to this Agreement that extends the Final Expiration Date
shall be submitted for ratification by the Company’s stockholders within one year of the date of the adoption of such an amendment. From and after the Distribution Date, and except as otherwise provided in this Section 27, the
Company and the Rights Agent shall, if the Company so directs, supplement or amend this Rights Agreement without the approval of any holders of Rights in order to (i) cure any ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein, (iii) shorten or lengthen any time period hereunder, or (iv) change or supplement the provisions hereunder in any manner

  
 41 

 
which the Company may deem necessary or desirable; provided, however, that no such supplement or amendment shall adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or any Related Person thereof), and no such amendment may cause the Rights again to become redeemable or cause this Rights Agreement again to become amendable as to an Acquiring Person or any Related Person thereof
other than in accordance with this sentence. Any such supplement or amendment shall be evidenced by a writing executed by the Company and the Rights Agent. Upon the delivery of a certificate from an appropriate officer of the Company which states
that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment; provided, that the Rights Agent shall not be obligated to enter into any
supplement or amendment that adversely affects the rights, duties or obligations of the Rights Agent under this Agreement. 

Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights
Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. 
 Section 29. Determinations and
Actions by the Board. For all purposes of this Agreement, any calculation of the number of Common Shares or any other class of capital stock 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 shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board 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 (a) interpret the provisions of this Agreement and (b) 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 this 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 in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the registered holders of the Rights and all other parties, and (y) not subject the Board, or any member thereof, to any liability to the registered holders of the
Rights. The Rights Agent is entitled always to assume the Company’s Board acted in good faith and shall be fully protected and incur no liability in reliance thereon. 

Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, 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, of the Common Shares). 

Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, null and void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or

  
 42 

 
invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such excluded term, provision, covenant or restriction shall materially and
adversely affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately upon written notice to the Company pursuant to the requirements of Section 26 of this Agreement; and
provided, further, 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, null and void or unenforceable and the Board
determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the Close of Business on the tenth (10th) Business Day following the date of such determination by the Board. Without limiting the foregoing, if any provision requiring a specific group of directors of the Company to act is
held by any court of competent jurisdiction or other authority to be invalid, null and void or unenforceable, such determination shall then be made by the Board in accordance with applicable law and the Amended and Restated Certificate of
Incorporation and the Bylaws. 
 Section 32. Governing Law. This Agreement, each Right and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of the Delaware 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; provided, however, that all provisions regarding the rights, duties, and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State. 
 Section 33. Counterparts; Facsimiles and PDFs.
This Agreement and any supplements or amendments hereto may be executed in any number of counterparts and each of such counterparts will for all purposes be deemed to be an original, and all such counterparts will together constitute one and the
same instrument, it being understood that all parties need not sign the same counterpart. A signature to this Agreement executed or transmitted electronically (including by fax and .pdf) will have the same authority, effect and enforceability as an
original signature. No party hereto may raise the use of such electronic execution or transmission to deliver a signature, or the fact that any signature or agreement or instrument was transmitted or communicated through such electronic
transmission, as a defense to the formation of a contract, and each party forever waives any such defense, except to the extent such defense relates to lack of authenticity. 

Section 34. Descriptive Headings. Descriptive headings of the several sections of this Agreement are inserted for convenience only
and shall not control or affect the meaning or construction of any of the provisions hereof. 
 Section 35. Force Majeure.
Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts,
shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil
unrest. 

  
 43 

 Section 36. Further Assurance. The Company shall perform, acknowledge and deliver or
cause to be performed, acknowledged and delivered all such further and other acts, documents, instruments and assurances as may be reasonably required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of
this Agreement. 
 [SIGNATURE PAGE FOLLOWS] 

  
 44 

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

			
	TEMPUR SEALY INTERNATIONAL, INC.
		
	By:	 	/s/ Barry A. Hytinen

 
			
	Name:	 	Barry A. Hytinen
	Title:	 	Executive Vice President and Chief Financial Officer

  

			
	AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS RIGHTS AGENT
		
	By:	 	/s/ Michael A. Nespoli

 
			
	Name:	 	Michael A. Nespoli
	Title:	 	Executive Director

 EXHIBIT A 

CERTIFICATE OF DESIGNATION 
 OF

 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK 

OF 
 TEMPUR SEALY INTERNATIONAL,
INC. 
 (Pursuant to Section 151 of the Delaware General Corporation Law) 

 
  

Tempur Sealy International, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law
of the State of the Delaware, as amended (the “DGCL”), hereby certifies that, pursuant to the authority granted by Article IV of the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the
“Amended and Restated Certificate of Incorporation”), and in accordance with Section 151 of the DGCL, the Board of Directors of the Corporation (hereinafter being referred to as the “Board of Directors” or the
“Board”), at a meeting duly called and held on February 8, 2017, has adopted the following resolution with respect to the designations, number of shares, preferences, voting powers and other rights and the restrictions and
limitations thereof, of the Series A Junior Participating Stock: 
 RESOLVED, that, pursuant to the authority granted to and vested in the
Board of Directors in accordance with the provisions of the Amended and Restated Certificate of Incorporation, the designations, number of shares, preferences, voting powers and other rights and the restrictions and limitations thereof of the Series
A Junior Participating Stock are as follows: 
 1. Designation and Amount. The shares of such series shall be designated as
“Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be 300,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors prior to issuance; provided, however, that no decrease shall reduce the number of shares of the Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into the Series A Preferred Stock; provided, further, that if more
than a total of 300,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the “Rights”) issued pursuant to the Rights Agreement, dated as of February 8, 2017, by and between the Corporation and
American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agreement”), the Board of Directors of the Corporation, pursuant to Section 151(g) of the DGCL, shall direct by resolution or resolutions that
a certificate be properly executed, acknowledged, filed and recorded, in accordance with the provisions of Section 103 of the DGCL, providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to
the extent that the 

  
 A-1 

 
Amended and Restated Certificate of Incorporation then permits) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. 

2. Dividends and Distributions. 

(a) Subject to the rights of the holders of any shares of any series of Preferred Stock of the Corporation (the “Preferred
Stock”) (or any similar stock) ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock, in preference to the holders of common stock, par value
$0.01 per share, of the Corporation (the “Common Stock”) and of any other stock of the Corporation ranking junior to the Series A Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out
of funds of the Corporation legally available for the payment of dividends, quarterly dividends payable in cash on the last day of each fiscal quarter of the Corporation in each year, or such other dates as the Board of Directors shall approve (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 A Preferred Stock (the
“Issue Date”), in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the provision for adjustment hereinafter set forth, 1000 times the aggregate per share amount of all
cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of the Common Stock
(by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. In the event the Corporation shall at any time after the Issue Date (A) declare and pay any dividend on the Common Stock payable in shares of Common Stock, or (B) effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) 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. In the event the Corporation shall at any time declare or pay any
dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of
a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such
event under clause (ii) of the first sentence of this Section 2(a) shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately
prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event. 

(b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (a) of this
Section 2 immediately after it declares a 

  
 A-2 

 
dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); and the Corporation shall pay such dividend or distribution on the Series A Preferred Stock
before the dividend or distribution declared on the Common Stock is paid or set apart; provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable, when, as and if declared, on such subsequent Quarterly Dividend Payment Date.

 (c) Dividends shall begin to accrue and be cumulative, whether or not declared, on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such 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 shares of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60
days prior to the date fixed for the payment thereof. 
 3. Voting Rights. The holders of shares of Series A Preferred Stock shall
have the following voting rights: 
 (a) Subject to the provision for adjustment hereinafter set forth and except as otherwise provided in
the Amended and Restated Certificate of Incorporation or required by law, each share of Series A Preferred Stock shall entitle the holder thereof to 1000 votes on all matters upon which the holders of the Common Stock of the Corporation are entitled
to vote. In the event the Corporation shall at any time after the Issue Date (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in
shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock)
into a greater or lesser number of shares of Series A Preferred Stock, then in 

  
 A-3 

 
each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after
such event. 
 (b) Except as otherwise provided herein, in the Amended and Restated Certificate of Incorporation or in any other Certificate
of Designations creating a series of Preferred Stock or any similar stock, and except as otherwise required by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. 

(c)(i) If at any time dividends on any Series A Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the
holders of the Series A Preferred Stock, voting as a separate series from all other series of Preferred Stock and classes of capital stock, shall be entitled to elect two members of the Board in addition to any Directors elected by any other series,
class or classes of securities and the authorized number of Directors will automatically be increased by two. Promptly thereafter, the Board of the Corporation shall, as soon as may be practicable, call a special meeting of holders of Series A
Preferred Stock for the purpose of electing such members of the Board. Such special meeting shall in any event be held within forty-five (45) days of the occurrence of such arrearage. 

(ii) During any period when the holders of Series A Preferred Stock, voting as a separate series, shall be entitled and shall have exercised
their right to elect two Directors, then, and during such time as such right continues, (a) the then authorized number of Directors shall be increased by two, and the holders of Series A Preferred Stock, voting as a separate series, shall be
entitled to elect the additional Directors so provided for, and (b) each such additional Director shall serve until the next annual meeting of stockholders for the election of Directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(c). 
 (iii) A Director elected
pursuant to the terms hereof may be removed with or without cause by the holders of Series A Preferred Stock entitled to vote in an election of such Director. 

(iv) If, during any interval between annual meetings of stockholders for the election of Directors and while the holders of Series A Preferred
Stock shall be entitled to elect two Directors, there is no such Director in office by reason of resignation, death or removal, then, promptly thereafter, the Board shall call a special meeting of the holders of Series A Preferred Stock for the
purpose of filling such vacancy and such vacancy shall be filled at such special meeting. Such special meeting shall in any event be held within 45 days of the occurrence of such vacancy. 

(v) At such time as the arrearage is fully cured, and all dividends accumulated and unpaid on any shares of Series A Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend has been paid subsequent to curing such arrearage, 

  
 A-4 

 
the term of office of any Director elected pursuant to this Section 3(c), or his successor, shall automatically terminate, and the authorized number of Directors shall automatically decrease
by two, the rights of the holders of the shares of the Series A Preferred Stock to vote as provided in this Section 3(c) shall cease, subject to renewal from time to time upon the same terms and conditions, and the holders of shares of the
Series A Preferred Stock shall have only the limited voting rights elsewhere herein set forth. 
 (d) Except as set forth herein, or as
otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action. 
  

	4.	Certain Restrictions. 

 (a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not: 
 (i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; 

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; 
 (iii) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that, the Corporation may at any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock or rights, warrants or options to acquire such junior stock;
or 
 (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking
on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series or classes. 
 (b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the 

  
 A-5 

 
Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 

5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued, without designation as to series until such
shares are once more designated as part of a particular series of Preferred Stock by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated
Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. 

6. Liquidation, Dissolution or Winding Up. (a) Upon any liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (i) to the holders of the Common Stock or of shares of any other stock of the Corporation ranking junior, either as to dividends or upon liquidation, dissolution or winding up, to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received $1000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided
that, the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate amount to be distributed per
share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity either as to dividends or upon liquidation, dissolution or winding up with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Preferred Stock liquidation preference and the liquidation preferences of all other classes and series of stock of the Corporation, if any, that rank on a parity with the Series A Preferred
Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A Preferred Stock and the holders of such parity shares in the proportion to their respective liquidation
preferences. In the event the Corporation shall at any time after the Issue Date (A) declare or pay any dividend on the Common Stock payable in shares of Common Stock, or (B) effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (i) of this Section 6(a) 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. In the event the Corporation shall at any time declare or pay
any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment
of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such 

  
 A-6 

 
case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of paragraph (A) of this
Section 6 shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of
shares of Series A Preferred Stock outstanding immediately after such event. 
 (b) Neither the merger, consolidation or other business
combination of the Corporation into or with another entity nor the merger, consolidation or other business combination of any other entity into or with the Corporation (nor the sale, lease, exchange or conveyance of all or substantially all of the
property, assets or business of the Corporation) shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6. 

7. Consolidation, Merger, etc. Notwithstanding anything to the contrary contained herein, in case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of Common Stock are converted into, exchanged for or changed into other stock or securities, cash and/or any other property (payable in kind), then in any such case each
share of Series A Preferred Stock shall at the same time be similarly converted into, exchanged for or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1000 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 converted or exchanged. In the event the Corporation shall at any time after the Issue Date
(i) declare or pay any dividend on the Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation (by reclassification or otherwise than by payment of a dividend in shares of Common Stock)
of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the conversion, exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock 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. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in
each such case the amount set forth in the first sentence of this Section 7 with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event. 

8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable from any holder. 

  
 A-7 

 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends
and the distribution of assets upon liquidation, dissolution or winding up of the Corporation, junior to all series of any other class of the Preferred Stock issued either before or after the issuance of the Series A Preferred Stock, unless the
terms of any such series shall provide otherwise, and shall rank senior to the Common Stock. 
 10. Amendment. At such time as any
shares of Series A Preferred Stock are outstanding, if any proposed amendment to the Amended and Restated Certificate of Incorporation (including this Certificate of Designation) would materially alter, change or repeal any of the preferences,
powers or special rights given to the Series A Preferred Stock so as to affect the Series A Preferred Stock adversely, then the holders of the Series A Preferred Stock shall be entitled to vote separately as a class upon such amendment, and the
affirmative vote of two-thirds of the outstanding shares of the Series A Preferred Stock, voting separately as a single class, shall be necessary for the adoption thereof, in addition to such other vote as may be required by the DGCL. 

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

IN WITNESS WHEREOF, the undersigned have signed and attested this Certificate of Designation on the 8th day of February 2017. 

 

			
	TEMPUR SEALY INTERNATIONAL, INC.
		
	By:	 	 
		 	Name:
		 	Title:

  

	
	Attest:
	
	   

	                            , Secretary

  
 A-8 

 EXHIBIT B 

[Form of Rights Certificate] 
  

			
	Certificate No. R-	  	                         Rights

 NOT EXERCISABLE AFTER 5:00 P.M., NEW YORK CITY TIME, ON FEBRUARY 7, 2018 UNLESS THE RIGHTS ARE EARLIER REDEEMED OR EXCHANGED.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY ANY
PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY RELATED PERSON THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY BENEFICIALLY OWNED BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT BENEFICIAL OWNER, MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY OR ON BEHALF OF A PERSON WHO IS, WAS OR BECAME AN ACQUIRING PERSON OR A RELATED PERSON 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.]1 

RIGHTS CERTIFICATE 
 TEMPUR SEALY
INTERNATIONAL, INC. 
 This certifies that
                        , or registered assigns, is the registered owner of the number of Rights set forth above, each of
which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of February 8, 2017 (the “Rights Agreement”), by and between Tempur Sealy International, Inc., a Delaware
corporation (the “Company”), and American Stock Transfer & Trust Company, LLC (the “Rights Agent”), to purchase from the Company after the Distribution Date (as such term is defined in the Rights Agreement)
and at any time prior to 5:00 p.m., New York City time, on February 7, 2018 unless the Rights are previously redeemed or exchanged, at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one
one-thousandth of a fully paid, nonassessable share of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company (a “Preferred Share”), at a purchase price of $90.00 in cash per one one-thousandth of a
share (such purchase price, as may be adjusted, the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares that may be purchased upon exercise thereof) set forth above, and the 

 

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

  
 B-1 

 
Purchase Price per share set forth above, are the number and Purchase Price as of the Close of Business on February 8, 2017, based on the Preferred Shares as constituted at such date. The
Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole Preferred Shares will be issued. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Rights Agreement. 
 In certain circumstances
described in the Rights Agreement, the Rights evidenced thereby may entitle the registered holder thereof to purchase capital stock of an entity other than the Company or receive capital stock, cash, or other assets of an entity other than the
Company, all as provided in the Rights Agreement. Upon the occurrence (whether prior to, on or after the date of this Rights Certificate) of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by
this Rights Certificate are beneficially owned by (i) an Acquiring Person or a Related Person of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person or of any such
Related Person thereof who becomes a transferee after the Acquiring Person becomes an Acquiring Person, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, concurrently with or prior to such
transfer, became an Acquiring Person, or a Related Person 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 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 issuable upon exercise of a Right and the number of Rights outstanding 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 above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent. 

This Rights Certificate, with or without other Rights Certificates, upon surrender at the office or offices of the Rights Agent designated for
such purpose, with the Form of Election and Certificate set forth on the reverse side properly completed and duly executed, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one one-thousandths of a Preferred Share 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. 

  
 B-2 

 Subject to the provisions of the Rights Agreement, the Rights evidenced by this Rights
Certificate may be redeemed by the Company at its option at a redemption price of $0.001 per Right, payable in cash or other securities or property of the Company, at any time prior to the earlier of (i) the Close of Business on the tenth
(10th) Business Day (or such later date as may be determined by the Board pursuant to clause (i) of the first sentence of Section 3(a) of the Rights Agreement with respect to the Distribution Date) following the Shares Acquisition
Date (or, if the Shares Acquisition Date shall have occurred prior to the Record Date, the Close of Business on the tenth Business Day following the Record Date), and (ii) the Final Expiration Date. In addition, subject to the provisions of the
Rights Agreement, under certain circumstances following the occurrence of a Section 11(a)(ii) Event but before any person acquires beneficial ownership of fifty percent (50%) or more of the Common Shares (as such term is defined in the
Rights Agreement), the Rights may be exchanged, in whole or in part, for Common Shares, Preferred Shares, or shares of other preferred stock of the Company having essentially the same value or economic rights as such share, subject to adjustment for
certain events as provided in the Rights Agreement. Immediately upon the action of the Board of Directors of the Company authorizing any such redemption or exchange, and without any further action or any notice, the Rights (other than Rights that
are not subject to such redemption or exchange) will terminate and the Rights will only enable holders to receive the redemption price or the shares issuable upon such exchange, as applicable. 

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

No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of
Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give consent to or withhold consent from any corporate action, or to receive notice
of meetings or other actions affecting stockholders (except as may otherwise be provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, unless and 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 or portable document format of
the proper officers of the Company. 
 Dated as of     , 201    . 

  
 B-3 

 
			
	TEMPUR SEALY INTERNATIONAL, INC.
		
	By:	 	 

 
			
	Name:	 	 

 
			
	Title:	 	 

  

			
	By:	 	 

 
			
	Name:	 	 

 
			
	Title:	 	 

  

			
	 Countersigned:
  

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, as Rights Agent

		
	By:	 	 

 
			
	Name:	 	 

 
			
	Title:	 	 

  
 B-4 

 [Form of Reverse Side of Rights Certificate] 

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

FOR VALUE RECEIVED
                                         
                                         
   hereby sells, assigns and transfers unto
                                         
                                         

 (Please print name and address of transferee) 

(Please spell out and include in numerals the 

number of Rights being transferred by this Agreement) 

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

Dated as of:
                           , 201     

 

			
	SIGNATURE
		
	By:	 	 

			
	Name:	 	 

			
	Title:	 	 

 Medallion Signature Guaranteed: 

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient. 

  
 B-5 

 CERTIFICATE 

The undersigned hereby certifies by checking the appropriate boxes that: 

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

(2) after due inquiry and to the best knowledge of the undersigned, he, she or 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 a Related Person of an Acquiring Person. 

Dated as of:
                           , 201     

 

			
	SIGNATURE
		
	By:	 	 

			
	Name:	 	 

			
	Title:	 	 

 Medallion Signature Guaranteed: 

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient. 

  
 B-6 

 NOTICE 

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

  
 B-7 

 [Form of Reverse Side of Rights Certificate – Continued] 

FORM OF ELECTION TO PURCHASE 

(To be executed by the registered holder if such holder desires to 

exercise any or all Rights evidenced by the Rights Certificate.) 

To: TEMPUR SEALY INTERNATIONAL, INC. 
 The undersigned hereby
irrevocably elects to exercise                     
(                ) Rights evidenced by this Rights Certificate to purchase the Preferred Shares issuable upon the exercise of the Rights (or such other securities
of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to or that such shares be credited to the book entry account of: 

(Please print name, address and social security, 

tax identification or other identifying number.) 

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 print name, address and social security, 

tax identification or other identifying number.) 

Dated:
                           ,          

 

			
	SIGNATURE
		
	By:	 	 

			
	Name:	 	 

			
	Title:	 	 

 Medallion Signature Guaranteed: 

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient. 

  
 B-8 

 CERTIFICATE 

The undersigned hereby certifies by checking the appropriate boxes that: 

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

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

Dated:
                           ,          

 

			
	SIGNATURE
		
	By:	 	 

			
	Name:	 	 

			
	Title:	 	 

 Medallion Signature Guaranteed: 

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient. 

  
 B-9 

 NOTICE 

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

  
 B-10 

 EXHIBIT C 

TEMPUR SEALY INTERNATIONAL, INC. 

SUMMARY OF RIGHTS 
 TO
PURCHASE PREFERRED STOCK 
 On February 8, 2017, the Board of Directors of Tempur Sealy International, Inc., a Delaware corporation
(the “Company”), declared a dividend distribution of one right (each, a “Right”) for each outstanding share of common stock, par value $0.01 per share, of the Company (the “Common Shares”). The
dividend is payable to holders of record as of the close of business on February 20, 2017 (the “Record Date”). 
 The
following is a summary description of the Rights. This summary is intended to provide a general description only and is subject to the detailed terms and conditions of the Rights Agreement (the “Rights Agreement”), dated as of
February 8, 2017, by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agent”). 
  

	 	1.	Issuance of Rights 

 Each holder of Common Shares as of the Record Date will receive a
dividend of one Right per Common Share. One Right will also be issued together with each Common Share issued by the Company after the Record Date and prior to the Distribution Date (as defined in Section 2 below), and in certain circumstances,
after the Distribution Date. New certificates (or, if uncertificated, the book entry account that evidences record ownership of such shares) for Common Shares issued after the Record Date will contain a notation incorporating the Rights Agreement by
reference. 
 Until the Distribution Date: 
  

	 	•	 	the Rights will not be exercisable; 

  

	 	•	 	the Rights will be evidenced by the certificates for Common Shares (or, if uncertificated, by the book entry account that evidences record ownership of such shares) and not by separate rights certificates; and

  

	 	•	 	the Rights will be transferable by, and only in connection with, the transfer of Common Shares. 

  

	 	2.	Distribution Date; Exercise of Rights; Beneficial Ownership 

 The Rights are not
exercisable until the Distribution Date. As of and after the Distribution Date, the Rights will separate from the Common Shares and each Right will become exercisable to purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock, par value $0.01 per share, of the Company (each whole share, a “Preferred Share”) at a purchase price of $90.00 (such purchase price, as may be adjusted, the “Purchase Price”). This portion of a

  
 C-1 

 
Preferred Share would give the holder thereof approximately the same dividend, voting, and liquidation rights as would one Common Share. 

The “Distribution Date” is the earlier of: 
  

	 	•	 	the close of business on the tenth (10th) business day following the first date of public announcement that any person, together with such person’s Related Persons (as defined below) (other than the Company or
certain related entities), has become the beneficial owner of twenty percent (20%) or more of the then outstanding Common Shares other than as a result of repurchases of Common Shares by the Company, certain stock option or restricted stock
grants by the Company or the exercise or conversion thereof, or certain inadvertent acquisitions (such person is an “Acquiring Person”) or that discloses information which reveals the existence of an Acquiring Person;
provided, however, that stockholders who beneficially own twenty percent (20%) or more of the outstanding Common Shares as of the date of this Rights Agreement will not be considered an Acquiring Person unless and until such
stockholder or any of its Related Persons acquires beneficial ownership of any additional Common Shares, subject to certain exceptions (such date being the “Shares Acquisition Date”); and 

 

	 	•	 	the close of business on the tenth (10th) business day (or such later date as the Board of Directors of the Company shall determine prior to the occurrence of a Distribution Date) after the date of the commencement
of, or first public announcement of the intent of any person (other than the Company or certain related entities) to commence (within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the U.S. Securities Exchange Act of 1934,
as amended (the “Exchange Act”), a tender or exchange offer that, if completed, would result in such person becoming an Acquiring Person. 

A person will be deemed to “beneficially own” any Common Shares if such person or any Related Person: 

 

	 	•	 	is considered a “beneficial owner” of the Common Shares under Rule 13d-3 of the General Rules and Regulations under the Exchange Act; 

 

	 	•	 	 has the right to acquire the Common Shares, either immediately or in the future, pursuant to any agreement,
arrangement, or understanding (other than a customary underwriting agreement relating to a bona fide public offering of the Common Shares) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise, except
that a person will not be deemed to be a beneficial owner of (a) Common Shares tendered pursuant to a tender offer or exchange offer by or on behalf of such person or any affiliated or associated persons of such person until the tendered Common
Shares are accepted for purchase or exchange, (b) securities issuable upon exercise of a Right before the occurrence of a Triggering Event (as defined in Section 5 below), or (c) securities issuable upon exercise of a Right after the
occurrence of a Triggering Event if the 

  
 C-2 

	 	 
Rights are originally issued Rights or were issued in connection with an adjustment to originally issued Rights; 

 

	 	•	 	has the right to vote or dispose of the Common Shares pursuant to any agreement, arrangement, or understanding (other than a right to vote arising from the granting of a revocable proxy or consent that is not also then
reportable on a Schedule 13D); or 

  

	 	•	 	has an agreement, arrangement, or understanding with another person who beneficially owns Common Shares and the agreement, arrangement, or understanding is for the purpose of acquiring, holding, voting, or disposing of
any securities of the Company (other than customary underwriting agreements relating to a bona fide public offering of Common Shares or a right to vote arising from the granting of a revocable proxy or consent that is not also then reportable on a
Schedule 13D). 

 For purposes of the Rights Agreement, a “Related Person” means, as to any person, any
Affiliates or Associates of such person, and any other person with whom such person or such person’s Affiliates or Associates is Acting in Concert (or any Affiliate or Associate of such other person). For purposes of the Rights Agreement,
“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. 

A Person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant
to an express agreement, arrangement or understanding) at any time after the first public announcement of the adoption of the Rights Agreement, in concert or in parallel with such other person, or towards a common goal with such other person,
relating to changing or influencing the control of the Company or in connection with or as a participant in any transaction having that purpose or effect, where (i) each person is conscious of the other person’s conduct and this awareness
is an element in their respective decision-making processes and (ii) at least one additional factor supports a determination by the Company’s Board of Directors that such persons intended to act in concert or in parallel, which additional
factors may include, without limitation, exchanging information, attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided that the additional factor required shall not include actions
by an officer or director of the Company acting in such capacities. A person who is Acting in Concert with another person shall also be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person. No
person shall be deemed to be Acting in Concert with another person solely as a result of (i) making or receiving a solicitation of, or granting or receiving, revocable proxies or consents given in response to a public proxy or consent
solicitation made to more than 10 holders of shares of a class of stock of the Company registered under Section 12 of the Exchange Act, or (ii) soliciting or being solicited for tenders of, or tendering or receiving tenders of, securities
in a public tender or exchange offer made pursuant to, and in accordance with, Section 14(d) of the Exchange Act by means of a tender offer statement filed on Schedule TO. 

Certain synthetic interests in securities created by derivative positions — whether or not such interests are considered to be ownership
of the underlying Common Shares or are reportable 

  
 C-3 

 
for purposes of Regulation 13D of the Securities Exchange Act — are treated as beneficial ownership of the number of Common Shares specified in the documentation evidencing the derivative
position as being subject to being acquired upon the exercise or settlement of the derivative position or as the basis upon which the value or settlement amount of such derivative position is to be calculated in whole or in part. 

 

	 	3.	Issuance of Rights Certificates 

 As soon as practicable after the Distribution Date, the
Rights Agent will mail rights certificates to holders of record of the Common Shares as of the close of business on the Distribution Date and, thereafter, the separate rights certificates alone will evidence the Rights. 

 

	 	4.	Expiration of Rights 

 The Rights will expire on the earliest of (a) 5:00 p.m., New
York City time, on February 7, 2018, (b) the time at which the Rights are redeemed (as described in Section 6 below), and (c) the time at which the Rights are exchanged in full (as described in Section 7 below). 

 

	 	5.	Change of Exercise of Rights Following Certain Events 

 The following described events
are referred to as “Triggering Events.” 
 (a) “Flip-In” Event. In the event that a person becomes an Acquiring
Person, each holder of a Right will thereafter have the right to receive, upon exercise, Common Shares (or, in certain circumstances, other securities, cash, or other assets of the Company) having a value equal to two times the Purchase Price.
Notwithstanding the foregoing, following the occurrence of a person becoming an Acquiring Person, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person (or by certain
related parties) will be null and void. However, Rights are not exercisable following the occurrence of a person becoming an Acquiring Person until such time as the Rights are no longer redeemable by the Company as set forth in Section 6 below.

 (b) “Flip-Over” Events. In the event that, at any time after a person has become an Acquiring Person, (i) the
Company engages in a merger or other business combination transaction in which the Company is not the continuing or surviving corporation or other entity, (ii) the Company engages in a merger or other business combination transaction in which
the Company is the continuing or surviving corporation and the Common Shares of the Company are changed or exchanged, or (iii) fifty percent (50%) or more of the Company’s assets or earning power is sold or transferred, each holder of
a Right (except Rights that have previously become null and void as set forth above) shall thereafter have the right to receive, upon exercise, common shares of the acquiring company having a value equal to two times the Purchase Price. 

 

	 	6.	Redemption 

 At any time until ten (10) business days following the Shares
Acquisition Date (as defined in Section 2 above), the Board of Directors of the Company may direct the Company to redeem the Rights in whole, but not in part, at a price of $0.001 per Right (payable in cash,

  
 C-4 

 
Common Shares, or other consideration deemed appropriate by the Board of Directors of the Company). Immediately upon the action of the Board of Directors of the Company directing the Company to
redeem the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price. 
  

	 	7.	Exchange of Rights 

 At any time after a person becomes an Acquiring Person but before
such person acquires beneficial ownership of fifty percent (50%) or more of the outstanding Common Shares, the Board of Directors of the Company may direct the Company to exchange the Rights (other than Rights owned by such person or certain
related parties, which will have become null and void), in whole or in part, at an exchange ratio of one Common Share per Right (subject to adjustment). The Company may substitute Preferred Shares (or shares of a class or series of the
Company’s preferred stock having equivalent rights, preferences, and privileges) for Common Shares at an initial rate of one one-thousandth of a Preferred Share (or of a share of a class or series of the Company’s preferred stock having
equivalent rights, preferences, and privileges) per Common Share. Immediately upon the action of the Board of Directors of the Company directing the Company to exchange the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the number of Common Shares (or one one-thousandth of a Preferred Share or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences, and privileges) equal to the number of
Rights held by such holder multiplied by the exchange ratio. 
  

	 	8.	Adjustments to Prevent Dilution; Fractional Shares 

 The Board of Directors of the
Company may adjust the Purchase Price, the number of Preferred Shares or other securities or assets issuable upon exercise of a Right, and the number of Rights outstanding to prevent dilution that may occur (a) in the event of a stock dividend
on, or a subdivision, combination, or reclassification of, the Preferred Shares, (b) in the event of a stock dividend on, or a subdivision or combination of, the Common Shares, (c) if holders of the Preferred Shares are granted certain
rights, options, or warrants to subscribe for Preferred Shares or convertible securities at less than the current market price of the Preferred Shares, or (d) upon the distribution to holders of the Preferred Shares of evidences of indebtedness
or assets (excluding regular periodic cash dividends) or of subscription rights or warrants (other than those referred to above). 
 With
certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least one percent (1%) of the Purchase Price. No fractional Preferred Shares will be issued (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share), and in lieu thereof, an adjustment in cash may be made based on the market price of the Preferred Shares on the last trading date prior to the date of exercise. 

 

	 	9.	No Stockholder Rights Prior to Exercise; Tax Considerations 

 Until a Right is exercised,
the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights should not be taxable to stockholders or to the Company,

  
 C-5 

 
stockholders may, depending upon the circumstances then existing, recognize taxable income in the event that the Rights become exercisable for Common Shares (or other consideration) of the
Company or for common shares of the acquiring company or in the event of the redemption of the Rights as set forth in Section 6 above. 
  

	 	10.	Amendment of Rights Agreement 

 The Company (by action of the Board of Directors) may
supplement or amend any provision of the Rights Agreement in order to (a) cure any ambiguity, (b) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with other provisions of the
Rights Agreement, (c) shorten or lengthen any time period under the Rights Agreement, or (d) make any other provisions with respect to the Rights that the Company deems necessary or desirable; provided, however, that no
supplement or amendment made after the time any person becomes an Acquiring Person may adversely affect the interests of the registered holders of rights certificates (other than an Acquiring Person or any affiliated or associated person of an
Acquiring Person or certain of their transferees). Without limiting the foregoing, the Company may at any time before any person becomes an Acquiring Person amend the Rights Agreement to make the provisions of the Rights Agreement inapplicable to a
particular transaction by which a person might otherwise become an Acquiring Person or to otherwise alter the terms and conditions of the Rights Agreement as they may apply with respect to any such provision. 

 

	 	11.	Availability of Rights Agreement 

 The Company has filed a copy of the Rights Agreement
with the Securities and Exchange Commission as an exhibit to a Current Report on Form 8-K and as an exhibit to a Registration Statement on Form 8-A, each filed on February 9, 2017. In addition, a copy of the Rights Agreement is available free
of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the complete text of the Rights Agreement. 

  
 C-6ffwm-ex101_7.htm

Exhibit 10.1

Execution Version

 

 

 

 

 

 

 

 

 

 

 

LOAN AGREEMENT

 

 

for a loan in the amount of

 

 

$25,000,000

 

MADE BY AND BETWEEN

 

First Foundation Inc., a Delaware corporation

18101 Von Karman Ave., Suite 700,

Irvine, California 92612,

as Borrower

 

AND

NEXBANK SSB,

2515 McKinney Avenue, Suite 1100,

Dallas, Texas 75201,

as Lender

 

 

 

 

 

Dated as of February 8, 2017

 

 

 

 

LOAN AGREEMENT

THIS LOAN AGREEMENT (as the same may be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is made as of February 8, 2017 (the “Effective Date”), by and between First Foundation Inc., a Delaware corporation (“Borrower”) and NEXBANK SSB, a Texas savings bank, its successors and assigns (“Lender”).

W I T N E S S E T H:

RECITALS

Borrower has applied to Lender for Revolving Credit Advances (as defined herein) in an aggregate amount not to exceed, at any time, the sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the “Loans”), and Lender is willing to make the Loans on the terms and conditions hereinafter set forth.

NOW,  THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

ARTICLE I

INCORPORATION OF RECITALS AND EXHIBITS

1.1Incorporation of Recitals.

The foregoing preambles and all other recitals set forth herein are made a part hereof by this reference.

1.2Incorporation of Exhibits.

Exhibit A to this Agreement, which is attached hereto, is hereby incorporated in this Agreement and expressly made a part hereof by this reference.

ARTICLE II

DEFINITIONS

2.1Defined Terms.

The following terms as used herein shall have the following meanings:

Advance Request Form: A certificate, in a form approved by Lender, properly completed and signed by Borrower requesting a Revolving Credit Advance. 

Affiliate:  With respect to a specified person or entity, any individual, partnership, corporation, limited liability company, trust, unincorporated organization, association or other entity which, directly or indirectly, through one or more intermediaries, Controls or is Controlled by or is under common control with such person or entity, including, without limitation, any general or limited partnership in which such person or entity is a partner.

Agreement:  As such term is defined in the Preamble.

Allowance for Loan and Lease Losses:  As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority and as reported by any Person on the Regulatory Capital Schedule of their respective Call Report applicable to such period.

 

 

Applicable Bank Regulatory Authority:  When used with reference to a Person, the Bank Regulatory Authority or Authorities which have jurisdiction over such Person.

Applicable Rate:  As such term is defined in Section 5.1(a).

Authorized Representatives:  The persons appointed as the Authorized Representatives of Borrower pursuant to Section 17.3.

Average Total Assets:  As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority and as reported by any Person on the Regulatory Capital Schedule of any their respective Call Report applicable to such period.

Bank:  First Foundation Bank, a wholly owned subsidiary of Borrower.

Bank Regulatory Authority:  The FDIC, the Federal Reserve Bank, DBO, OFAC and any regulatory authority (whether Federal or State) that has jurisdiction over the operations of Borrower, as a bank holding company, or over the banking operations of the Bank.

Bankruptcy Code:  Title 11 of the United States Code entitled “Bankruptcy” as now or hereafter in effect, or any successor thereto or any other present or future bankruptcy or insolvency statute.

BHCA:  The United States Bank Holding Company Act of 1956, as amended.

Borrower:  As such term is defined in the Preamble.  Borrower is the parent holding company of the Bank.  Unless otherwise expressly provided to the contrary in this Agreement or in any of the other Loan Documents, Borrower shall mean the Borrower on an unconsolidated basis

Borrower Disclosure Schedules:  A set of written schedules to be delivered to Lender by Borrower at least two (2) Business Days prior to the execution and delivery of this Agreement, setting forth (i) any information required, pursuant to any of the provisions of Article III hereof, to be disclosed to Lender and (ii) any exceptions or qualifications applicable to any of the representations or warranties of Borrower contained in Article III hereof.

Borrower 2015 Financial Statements:  The audited consolidated financial statements of Borrower as of and for the years ended December 31, 2015 and 2014, and the Annual Report on Form 10-K for the year ended December 31, 2015 that was filed by Borrower with the SEC on March 15, 2016..

Business Day:  A day of the year on which banks are not required or authorized to close in Dallas, Texas.

Call Report:  For each Bank, the “Consolidated Reports of Condition and Income” (FFIEC Form 031 or Form 041), or any successor form promulgated by the FFIEC.

Capital Lease Obligations:  With respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP (as in effect on the Effective Date) and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

Change of Control:  Borrower shall cease to beneficially own and control 100% on a fully diluted basis of the economic and voting interests in the Equity Interests of the Bank.  For the avoidance of doubt, the grant of the Lien in the Equity Interests of the Bank to Lender pursuant to the Security Documents shall not constitute a Change of Control.

2

 

Classified Assets:  An asset classified as “Substandard,” “Doubtful,” “Loss” or a similar category in accordance with the then-current regulations of the Applicable Bank Regulatory Authority.

Classified Assets to Tier 1 Capital Ratio:  With respect to any Person, the ratio (expressed as a percentage) as of the last day of any fiscal quarter of (a) Classified Assets of such Person to (b) (i) Tier 1 Capital of such Person, plus (ii) Allowance for Loan and Lease Losses.

Collateral:  The term “Collateral” shall have the meaning given to it in the Security Agreement.

Constituent Documents:  (a) in the case of a corporation, its articles or certificate of incorporation and bylaws; (b) in the case of a general partnership, its partnership agreement; (c) in the case of a limited partnership, its certificate of limited partnership and partnership agreement; (d) in the case of a trust, its trust agreement; (e) in the case of a joint venture, its joint venture agreement; (f) in the case of a limited liability company, its articles of organization, operating agreement, regulations and/or other organizational and governance documents and agreements; and (g) in the case of any other entity, its organizational and governance documents and agreements.

Control:  As such term is used with respect to any person or entity, including the correlative meanings of the terms “controlled by” and “under common control with”, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such person or entity, whether through the ownership of voting securities, by contract or otherwise.

Controlled Entity:   As such term is used with respect to a specified Person, (i) with respect to a corporation or limited liability company, such Person has the power to elect a majority of the directors or managers (as the case may be), (ii) with respect to a partnership, such Person is a general partner, or (iii) with respect to a trust, such Person or any wholly-owned subsidiary of such Person is a trustee.

Default or default:  Any event, circumstance or condition, which, if it were to continue uncured, would, with notice or lapse of time or both, constitute an Event of Default hereunder.

Default Rate:  A rate per annum equal to three percentage points (300 basis points) in excess of the Applicable Rate, but which shall not at any time exceed the Maximum Lawful Rate.

Depository Account:  A deposit account opened and maintained by Bank with Lender.

DBO:  The State of California Department of Business Oversight.

EBITDA:  For any period, the Net Income of Borrower for such period, plus, without duplication and to the extent deducted in calculating Net Income for such period, the sum of (a) Interest Expense for such period, (b) Taxes for such period, (c) the amount of any depreciation and amortization expense deducted in determining Net Income, and (d) any extraordinary or non-recurring items reducing Net Income for such period, minus any extraordinary or non-recurring items increasing Net Income for such period.

Effective Date:  As defined in the Preamble.

Environmental Proceedings:  Any environmental proceedings, whether civil (including actions by private parties), criminal, or administrative, relating to Borrower.

Equity Interests:  Shares of capital stock of a corporation, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

3

 

ERISA:  The Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder from time to time.

Event of Default:  As such term is defined in Article XV.

FDIA: The Federal Deposit Insurance Act of 1933, as amended from time to time, and the regulations promulgated pursuant thereto.

FDIC: The Federal Deposit Insurance Corporation, or any successor Governmental Authority then performing the same or substantially similar duties.

Federal Reserve Bank: The Board of Governors of the Federal Reserve Bank or the Federal Reserve System, or any Federal Reserve Bank, or any successor Governmental Authority then performing the same or substantially similar duties.

FFIEC: The Federal Financial Institutions Examination Council, or any successor Governmental Authority then performing the same or substantially similar duties.

Fixed Charges: For any period, the sum, without duplication, of the amounts determined for Borrower  equal to (a) Interest Expense, (b) scheduled payments of principal on Total Debt, and (c) Taxes.

Fixed Charge Coverage Ratio:  With respect to Borrower, the ratio as of the last day of any fiscal quarter of (a) EBITDA, to (b) Fixed Charges, all for the twelve month period ending on such date.

GAAP:  Generally accepted accounting principles in the United States of America.

Governmental Approvals: All authorizations, consents, approvals, permits, licenses and exemptions of, registrations and filings by Borrower or the Bank with, and reports made by Borrower or the Bank to, all Applicable Bank Regulatory Authorities.

Governmental Authority:  Any nation or government, any state, province or territory or other political subdivision thereof, any governmental agency (including any Bank Regulatory Authority), department, authority, instrumentality, regulatory body, court, central bank or other governmental entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization exercising such functions (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

Guarantee:  Any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner (other than any Indebtedness or other obligation of any direct or indirect subsidiaries of the guarantor), whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation of the primary obligor; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

4

 

Including or including:  Including but not limited to, and including without limitation.

Indebtedness:   Without duplication, with respect to any Person (a) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind which such Person is obligated to repay on a date certain or upon the happening of an event, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c)  all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding trade accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.  The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) if and to the extent such Person is contractually or legally obligated to pay such Indebtedness.

Intangible Assets: As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority.

Interest Expense:  For any period, total interest expense of Borrower (including that portion attributable to Capital Lease Obligations), premium payments, debt discount, fees and related expenses with respect to all outstanding Indebtedness of Borrower (but excluding any interest payable on deposits or like instruments).

Internal Revenue Code:  The Internal Revenue Code of 1986, as amended from time to time.

Knowledge or knowledge of Borrower:  Borrower’s knowledge or phrases such as “the best knowledge of Borrower” shall mean the actual knowledge of the then acting Chief Executive Officer or Chief Financial Officer of Borrower.

Late Charge:  As such term is defined in Section 4.6.

Laws:  Collectively, all federal, state and local laws, statutes, codes, ordinances, orders, rules and regulations, including judicial opinions or precedential authority in the applicable jurisdiction.

Lender:  As defined in the opening paragraph of this Agreement, and including any successor holder of the Loans from time to time.

Leverage Ratio: With respect to any Person, the ratio (expressed as a percentage) as of the last day of any fiscal quarter of (a) Tier 1 Capital of such Person to (b) Average Total Assets of such Person.

LIBOR: With respect to any LIBOR Reset Period, the rate of interest at which deposits in U.S. dollars are offered to major banks in the London interbank market for a ninety (90) day period on the day that is two (2) days prior to the commencement of such LIBOR Reset Period, based on information presented by any interest rate reporting service of recognized standing selected by Lender, or if Lender determines that no interest rate reporting service has presented such information, the rate of interest at which deposits in U. S. dollars are offered to major banks in the London interbank market for a ninety (90) day period on the day that is two (2) days prior to the commencement of such LIBOR Reset Period by any bank reasonably selected by Lender. Under the terms of this Agreement, the applicable “LIBOR” rate is used by Lender as a reference rate.  

5

 

The use of ninety (90) day LIBOR as a reference rate does not mean the Borrower will actually pay interest on the Loan pursuant to a ninety (90) day contract or any other interest rate contract.  Instead, the effective interest rate under this Agreement will adjust at the beginning of each LIBOR Reset Period.

LIBOR Reset Period:  (i) as to the calendar quarter in which the Effective Date occurs, the period commencing on the Effective Date and ending on the last calendar day of such quarter and (ii) as to any calendar quarter thereafter, the period commencing on the first calendar day of the quarter immediately following the end of the prior LIBOR Reset Period, and ending on the earlier of (a) the last calendar day of the quarter during which a Loan was made or most recently continued and (b) the Maturity Date.

Lien:  With respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, Capital Lease Obligations or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

Loan Amount:  The maximum amount of the Loans that may be outstanding at any time as set forth in Section 4.1(a) below.

Loan Documents:  The collective reference to this Agreement and the documents and instruments listed in Section 4.2.

Loan Opening Date:  The date of the initial disbursement of proceeds of the Loans.

Loans:  As defined in Section 4.1(a).

London Banking Day:  Any such day on which dealings in dollar deposits are conducted by and between banks in the London interbank Eurodollar market.

Marketable Securities:  Collectively, (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency thereof, (b) marketable direct obligations issued by any of the United States or any municipality thereof and currently having a rating of (i) AA or higher issued by S&P and (ii) Aa2 or higher issued by Moody’s, and (c) corporate bonds and issuances and currently having a rating of (i) AA or higher issued by S&P and (ii) Aa2 or higher issued by Moody’s.

Material Adverse Change or material adverse change:  When used herein, means, any change, effect, or circumstance that has or could reasonably be expected to have a material adverse effect on (a) the ability of Borrower to consummate the transactions contemplated by this Agreement and the Security Documents or to perform its material obligations thereunder; or (b) the business, financial condition, results of operations, or assets of  Borrower and its Subsidiaries taken as a whole; provided, however, that a “Material Adverse Change” shall not be deemed to occur or exist in the case of any change, effect, or circumstance that is or was reasonably attributable to: (i) economic conditions generally in the United States or foreign economies in any locations where Borrower or any of its Subsidiaries has material operations (ii) changes in banking and similar laws of general applicability or interpretations thereof by courts or Governmental Authorities or (iii) changes in the monetary policies of the Federal Reserve; provided, that with respect to clauses (i), (ii) and (iii), the changes, effects or circumstances do not have a materially disproportionate effect (relative to other industry participants) on Borrower and its Subsidiaries considered as a whole; (iv) the announcement or pendency of the transactions contemplated by this Agreement, or (v) any failure, in and of itself, by Borrower or any of its Subsidiaries to meet internal or other estimates, predictions, projections or forecasts of revenue, net interest income, operating income, net income or any other measure of financial performance, provided that unless excepted from the definition of Material Adverse Change as set forth in clauses (i) to (iv) inclusive of this definition, the facts or circumstances giving rise or contributing to such failure to meet estimates or 

6

 

projections may be deemed to constitute, or be taken into account in determining whether there has been, a Material Adverse Change.

Maturity Date:  The earlier of: (a) the Stated Maturity Date; and (b) the date of acceleration of the Obligations pursuant to Section 16.1.

Maximum Lawful Rate:  As such term is defined in Section 5.3.

Moody’s:  Moody’s Investors Service, Inc. and any successor thereto.

Net Income:  For any period, the consolidated net income of Borrower determined in accordance with GAAP.

Non-Performing Assets to Net Capital Ratio:  With respect to any Person, the ratio (expressed as a percentage) as of the last day of any fiscal quarter of (a) (i) Total Non-Accrual Loans of such Person, plus (ii) Other Real Estate Owned of such Person to (b) (i) Total Capital of such Person, plus (ii) unrealized losses (gains) on securities for such Person, plus (iii) Allowance for Loan and Lease Losses of such Person, minus (iv) Intangible Assets of such Person.

Note:  That certain Revolving Promissory Note dated as of the date hereof in the aggregate principal amount of $25,000,000, or such lesser amount of the Loans as may be outstanding hereunder, made payable to the order of Lender, to evidence the Loans.

Note Rate:  A rate per annum equal to the sum of (a) LIBOR for the then-current LIBOR Reset Period plus (b) 350 basis points (3.50%).

Obligations:  All obligations, indebtedness, and liabilities of Borrower to Lender, now existing or hereafter arising, under this Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time hereafter) and the other Loan Documents (as the same may be amended, restated, supplemented or otherwise modified from time to time), and all interest accruing thereon (whether a claim for post-filing or post-petition interest is allowed in any bankruptcy, insolvency, reorganization or similar proceeding) and all reasonable attorneys’ fees and other reasonable expenses incurred in the enforcement or collection thereof. 

OFAC:  As defined in Section 3.1(u).

Open the Loan, Opening of the Loan or Loan Opening:  The initial disbursement of Loan proceeds by Lender to Borrower pursuant to Section 4.1 hereof.

Other Real Estate Owned: As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority.

Payment Date: The first day of each and every calendar month during the term of the Note or the next succeeding Business Day if the first day of any such calendar month is a day other than a Business Day.

Permitted Investments:  Each of the following:

(a)loans made in the ordinary course of business (including liquidity support to broker-dealer Subsidiaries); 

7

 

(b)loans made other than in the ordinary course of business; provided, that the aggregate principal amount (based on the aggregate amount advanced and without giving effect to any payment thereof) of all outstanding loans hereunder shall not exceed $250,000 as at any date of determination; 

(c)direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(d)investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

(e)investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(f)fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(g)money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

Permitted Liens:  Each of the following:

(a)Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 10.3;

(b)carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business or which are being contested in good faith by appropriate proceedings and which could not reasonably be expected to cause a Material Adverse Change;

(c)pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

(d)deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e)judgment liens in respect of judgments that do not constitute an Event of Default under clause (f) of Article XV; and

(f)easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower;

8

 

provided that the term “Permitted Liens” shall not include any Liens securing Indebtedness (other than Indebtedness to Lender and Indebtedness which Borrower is permitted to incur pursuant to Section 11.1 of this Agreement).

Person:  Any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, bank, Governmental Authority or other entity.

Restricted Payment:  Any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower (other than for or in respect of repurchases or cancellations of equity incentive awards granted under the Borrower’s equity incentive plans, if and to the extent permitted thereunder).

Revolving Credit Advance:  Any advance of money made by Lender to Borrower pursuant to Section 4.1 of this Agreement. 

Risk-Based Capital Guidelines:  (a) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, (b) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (c) all requests, rules, guidelines or directives promulgated by the Bank for International settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, regardless of the date enacted, adopted or issued. 

S&P:  Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

Sanctioned Entity:  (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a person resident in, a country that is subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.

Sanctioned Person:  A person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise published from time to time.

SEC:  The United States Securities and Exchange Commission.

Security Agreement:  The Pledge and Security Agreement executed and delivered as of the date hereof by Borrower, as it may be amended, restated, supplemented or otherwise modified from time to time hereafter by mutual written agreement of Lender and Borrower.

Security Documents:  The Security Agreement and all other instruments, documents and agreements delivered by or on behalf of Borrower pursuant to this Agreement or any of the other Loan Documents in order to grant to, or perfect in favor of, Lender, a Lien on the Collateral as security for the Obligations.

Subsidiary:  (a) any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by Borrower or one or more of its other Subsidiaries or by Borrower and one or more of such Subsidiaries, and (b) any other entity (i) of which at least a majority of the ownership, equity or voting 

9

 

interest is at the time directly or indirectly owned or controlled by one or more of Borrower and other Subsidiaries and (ii) which is treated as a subsidiary in accordance with GAAP.

Stated Maturity Date:  Feburary 8, 2022, or such later date as shall be established pursuant to Section 4.6.

Taxes:  Any present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto accounted for in accordance with GAAP.

Term of the Loan:  The period from the date hereof to and including the Maturity Date (as hereinabove defined).

Tier 1 Capital:  As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority.

Tier 2 Capital:  As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority.

Total Capital:  As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority.

Total Debt:  As at the date of any determination thereof, the aggregate amount of all Indebtedness of Borrower.

Total Non-Accrual Loans:  Total value of the loans held by a Person, which loans are classified as non-accrual in accordance with the then-current regulations of its Applicable Bank Regulatory Authority and/or Call Report instructions.

Total Risk-Based Capital Ratio:  With respect to any Person, the ratio (expressed as a percentage) as of the last day of any fiscal quarter of (a) the sum of (i) Tier 1 Capital of such Person and (ii) Tier 2 Capital of such Person, to (b) Total Risk-Weighted Assets of such Person.

Total Risk-Weighted Assets:  As defined in accordance with the then-current regulations of the Applicable Bank Regulatory Authority.

2.2Other Definitional Provisions.

All terms defined in this Agreement shall have the same meanings when used in the Note, any other Loan Documents, or any certificate or other document made or delivered pursuant hereto.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement.

2.3Accounting Terms.

All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with GAAP, applied on a consistent basis, as in effect from time to time and in a manner consistent with that used in preparing the audited financial statements required by Section 10.1(a), except as otherwise specifically prescribed herein.  Notwithstanding the foregoing, all financial statements delivered hereunder shall be prepared, and all financial covenants contained herein shall be calculated, without giving effect to any election under the FASB ASC 825 (or any similar 

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accounting principle) permitting a Person to value its financial liabilities or Indebtedness at the fair value thereof.

ARTICLE III

BORROWER’S REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties.

To induce Lender to execute this Agreement and perform its obligations hereunder, Borrower hereby represents and warrants to Lender that, as of the date hereof, the statements contained in this Article III are true and correct, except as may otherwise be specified in any such representation or warranty in the Borrower Disclosure Schedules.

(a)Except as previously disclosed to Lender in writing, no litigation or proceedings are pending, or to the best of Borrower’s knowledge threatened, in writing, against Borrower or its Subsidiaries, which could reasonably be expected, if adversely determined against Borrower, to cause a Material Adverse Change with respect to Borrower and its Subsidiaries considered as a whole.  There are no pending Environmental Proceedings, no Environmental Proceedings have been threatened in writing against Borrower and to the knowledge of Borrower there are no facts or circumstances which could reasonably be expected to give rise to any future Environmental Proceedings against Borrower or its Subsidiaries that, if adversely determined against Borrower, would cause a Material Adverse Change with respect to Borrower and its Subsidiaries considered as a whole.

(b)Borrower is a duly organized and validly existing corporation and has all the requisite corporate power and authority to execute, deliver and perform its obligations under the Loan Documents to which Borrower is a party, and such execution, delivery and performance have been duly authorized by all requisite corporate action of Borrower.  Each Loan Document to which Borrower is a party has been duly executed and delivered by Borrower and is the legally binding obligation of Borrower, enforceable against Borrower  in  accordance  with  its  respective  terms,  except  as  the enforceability thereof may  be  limited  by  bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws, now or hereafter in effect, relating to or limiting the rights of creditors’ and general equitable principles , regardless of whether the issue of enforceability is considered in a proceeding in equity or at law.

(c)No consent, approval or authorization of or declaration, registration or filing with any Governmental Authority or nongovernmental person or entity, including any creditor of Borrower or its Subsidiaries, is required in connection with the execution, delivery and performance by Borrower of this Agreement or of any of the Loan Documents other than the filing of UCC-1 financing statements, except for such consents, approvals or authorizations of or declarations or filings with any Governmental Authority or non-governmental person or entity where the failure to so obtain would not have a Material Adverse Change on Borrower and its Subsidiaries, considered as a whole, or which have been obtained as of any date on which this representation is made.  The Borrower and each Subsidiary of Borrower (i) has all Governmental Approvals required by any applicable Law for it to conduct its business, each of which, on the date hereof is in full force and effect, and not subject to review on appeal and is not the subject of any proceeding pending or, which to Borrower’s knowledge, threatened  in writing against Borrower, (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other applicable Laws relating to it or any of its respective properties and (iii) has timely filed all material reports, documents and other materials required to be filed by it under all applicable Laws with any Governmental Authority and has retained all material records and documents required to be retained by it under applicable Law except in each case of clauses (i), (ii) or (iii) above, where the failure to have, comply or file could not reasonably be expected to have a Material Adverse Change.

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(d)The execution and delivery of, and the performance by Borrower of its obligations under this Agreement or the Security Documents does not constitute, upon the giving of notice or lapse of time or both, a breach or default under any other agreement to which Borrower or its Subsidiaries is a party or may be bound or affected, or a violation of any Law or court order which could reasonably be expected to have a Material Adverse Change.

(e)Borrower is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property where the failure to be in compliance therewith, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change.  Borrower has received all permits and licenses issued by any Governmental Authority as are necessary for the conduct of its business.

(f)There is no default under this Agreement or any of the other Loan Documents by Borrower, nor any condition known to Borrower which, after notice or the passage of time or both, would constitute a default or an Event of Default by Borrower under said Documents.

(g)No brokerage fees or commissions are payable by Borrower to any person pursuant to any brokerage agreement or agency or other agreement entered into by Borrower  in connection with this Agreement or the Loans to be disbursed hereunder.

(h)The Borrower 2015 Financial Statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated and fairly presented, in all material respects, the consolidated financial position, results of operations, cash flows and shareholders’ equity of the Borrower and its consolidated Subsidiaries as of the respective dates thereof and for the respective periods covered thereby, and no Material Adverse Change with respect to Borrower or its Subsidiaries has occurred since the respective dates of such statements.  Borrower does not have any material Indebtedness or other material liability, that is not disclosed in the Borrower 2015 Financial Statements, the Borrower Disclosure Schedules or in the Borrower’s 10-Q filed with the SEC on November 8, 2016 (the “Third Quarter 10-Q”).

(i)Borrower has good title to, or valid leasehold interests in, all its real and personal property material to its business, subject to Permitted Liens thereon and except for defects in title that do not interfere with its ability to  conduct  its  business  as  currently  conducted  or  to  utilize  such  properties  for  their  intended purposes.  

(j)The Bank has not received notice from any Bank Regulatory Authority that it is subject to any formal or material informal enforcement action by a Bank Regulatory Authority.

 

(k)Borrower owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual property material to its business, and, to Borrower’s Knowledge, the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Change.

(l)The Loans are not being made for the purpose of purchasing or carrying “margin stock” within the meaning of Regulation T, U or X issued by the Federal Reserve Bank.

(m)Borrower is not an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

(n)Borrower has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower has set aside 

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reserves on its books which Borrower deems adequate or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Change.

(o)The assets of Borrower are not “plan assets” of any employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code.

(p)Borrower has disclosed directly to Lender or in the Borrower Disclosure Schedules, the Borrower 2015 Financial Statements or in the Third Quarter 10-Q, all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change.  None of the representations or warranties contained in this Agreement, as modified or qualified by the Borrower Disclosure Schedules, the Borrower 2015 Financial Statements or the Third Quarter 10-Q, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(q)Borrower is not a “foreign person” within the meaning of Section 1445 or 7701 of the Internal Revenue Code.

(r)Borrower  uses no  trade  name  other  than  its  actual  name  set  forth  herein.  The principal place of business of Borrower is as stated in Section 17.16.

(s)Borrower’s place of formation or organization is the State of Delaware.

(t)None of Borrower or its Subsidiaries is a person with whom Lender is restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury of the United States of America (including, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transactions or otherwise be associated with such persons.  In addition, Borrower hereby agrees to provide to the Lender with any additional information that the Lender deems necessary from time to time in order to ensure compliance with all applicable Laws concerning money laundering and similar activities. None of the Borrower, any Subsidiary of the Borrower or any Affiliate of the Borrower: (i) is a Sanctioned Person, (ii) has more than ten percent (10%) of its assets in Sanctioned Entities, or (iii) derives more than ten percent (10%) of its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities.  The proceeds of any Loan will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

3.2Survival of Representations and Warranties.

The representations and warranties of Borrower set forth in Section 3.1, as may be modified or qualified by the information contained in the Borrower Disclosure Schedules, the notes to Borrower’s 2015 Financial Statements or in the Third Quarter 10-Q, will survive the execution and delivery by Borrower of the Loan Documents and the Loan Opening until all of the Obligations of Borrower have been paid or performed.  

ARTICLE IV

LOAN AND LOAN DOCUMENTS

4.1Agreement to Borrow and Lend; Lender’s Obligation to Disburse.

Lender agrees to make, from time to time during the Term of the Loan, revolving loans (the “Loans”) (sometimes referred to herein as “Revolving Credit Advances”) to Borrower, on the terms and provisions and 

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subject to the conditions of this Agreement and the other Loan Documents.  The maximum aggregate principal amount of such Revolving Credit Advances shall not, at any time, exceed Twenty-Five Million Dollars ($25,000,000) (the “Loan Amount”). Subject to the foregoing limitation, and the other terms and provisions of this Agreement, during the Term of the Loan Borrower may borrow and may repay loans hereunder, without any premium, penalty or other charges of any kind whatsoever, and may reborrow any or all of the Loan Amount as provided in Subsection 4.1(b) below. 

(a)Bank shall, prior to the Opening of the Loans, have opened the Depository Account, subject to the Bank’s compliance with Regulation F (12 CFR 206) and Bank’s internal policies related thereto.

(b)Borrower shall give Lender notice of each Revolving Credit Advance by means of an Advance Request Form containing the information required therein and delivered (by hand or by mechanically confirmed facsimile) to Lender no later than 1:00 p.m. (Dallas, Texas time) at least one Business Day before the day on which Borrower desires the Revolving Credit Advances to be funded to it by Lender.  Revolving Credit Advances shall be in a minimum amount of $1,000,000.  Lender at its option may accept telephonic requests for such Revolving Credit Advances, provided that such acceptance shall not constitute a waiver of Lender’s right to require delivery of an Advance Request Form in connection with subsequent Revolving Credit Advances.  Any telephonic request for a Revolving Credit Advance by Borrower shall be promptly confirmed by submission of a properly completed Advance Request Form to Lender, but failure to deliver such a confirming Advance Request Form shall not be a defense to payment of the Revolving Credit Advance made in response to a telephonic request.  Lender shall have no liability to Borrower for any loss or damage suffered by Borrower as a result of Lender’s honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically, by facsimile or electronically and purporting to have been sent to Lender by Borrower and Lender shall have no duty to verify the origin of any such communication or the identity or authority of the Person sending it.  Subject to the terms and conditions of this Agreement, each Revolving Credit Advance shall be made available to Borrower by depositing the same, in immediately available funds, in the Depository Account.

4.2Loan Documents.

Borrower agrees that it will, on or before the Loan Opening Date, execute and deliver or cause to be executed and delivered to Lender the following documents:

(a)This Agreement.

(b)The Note.

(c)The Security Agreement.

4.3Term of the Loan.

All principal, interest and other sums due under the Loan Documents shall be due and payable in full on the Maturity Date.

4.4Prepayments.

Borrower shall have the right to make prepayments of the Loans, without any premium, penalty or other charges of any kind whatsoever, in whole or in part, upon not less than seven (7) days’ prior written notice to Lender.  No prepayment of all or part of the Loans shall be permitted unless same is made together with the payment of all interest accrued on the Loans through the date of prepayment.

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4.5Late Charge.

Any and all amounts due hereunder or under the other Loan Documents which remain unpaid on the tenth (10th) day after the date said amount was due and payable shall incur a fee (the “Late Charge”) of five percent (5%) per annum of said amount, which payment shall be in addition to all of Lender’s other rights and remedies under the Loan Documents, provided that no Late Charge shall apply to the final payment of principal on the Maturity Date.  Nothing in this Section shall be deemed a cure period for the purpose of determining the occurrence of an Event of Default.

4.6Extension of Stated Maturity Date. 

So long as no Event of Default shall have occurred and be continuing on the date on which notice is given in accordance with the following clause (a) or on the Stated Maturity Date, Borrower may (on no more than two (2) successive occasions) extend the Stated Maturity Date to a date that is three hundred and sixty-four (364) days after the then-effective Stated Maturity Date, upon: (a) delivery of a written request therefor to Lender at least thirty (30) days, but no more than sixty (60) days, prior to the Stated Maturity Date then in effect; and (b) receipt by Lender of a certificate of Borrower dated the date of such request stating that (i) no Default or Event of Default then exists and is continuing and (ii) Borrower is in compliance with the covenants set forth in this Agreement. Such extension shall be evidenced by delivery of written confirmation of the same by Lender to Borrower; provided that the validity and binding effect of any such extension shall not be affected by a failure by Lender to have delivered such a written confirmation to Borrower.

ARTICLE V

INTEREST

5.1Interest Rate.

(a)Subject to Section 5.3, the principal amount of the Loans outstanding will bear interest at the Note Rate (the “Applicable Rate”), unless the Default Rate is applicable.

(b)Interest shall be calculated for the actual number of days elapsed on the basis of a 365-day year, including the first date of the applicable period to, but not including, the datfce of repayment.

(c)The principal amount of the Loans outstanding shall bear interest at the Default Rate at any time at which an Event of Default shall exist and is continuing, provided that if any Event of Default is cured by the Borrower, then the Interest Rate on the Loans shall thereupon revert back to the Applicable Rate.

5.2Required Principal and Interest Payments.

All accrued but unpaid interest on the principal balance of the Loans outstanding from time to time shall be payable on each Payment Date.  The outstanding principal balance of the Loan and any and all accrued but unpaid interest hereon shall be due and payable in full on the Maturity Date or upon any earlier maturity hereof, whether by acceleration in accordance with this Agreement and the other Loan Documents. All payments (whether of principal or of interest) shall be deemed credited to Borrower’s account only if received by 2:00 p.m. Dallas time on a Business Day; otherwise, such payment shall be deemed received on the next Business Day.  Borrower may from time to time during the term of this Agreement borrow, partially or wholly repay its outstanding borrowings, and reborrow any borrowings that it has repaid hereunder, subject to all of the limitations, terms and conditions of this Agreement; provided, however, that the total borrowings hereunder outstanding at any time shall not exceed the Loan Amount.  The unpaid principal balance of the Loans at any time shall be the total amount advanced under this Loan and the Note by Lender, less the amount of principal payments made hereon by or for Borrower.

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5.3Maximum Lawful Rate.

It is the intent of Borrower and Lender to conform to and contract in strict compliance with applicable usury law from time to time in effect. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the rate of interest taken, reserved, contacted for, charged or received under this Agreement and the other Loan Documents exceed the highest lawful interest rate permitted under applicable law (the “Maximum Lawful Rate”).  If Lender shall ever receive anything of value which is characterized as interest under applicable law and which would apart from this provision be in excess of the Maximum Lawful Rate, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans in the inverse order of its maturity and not to the payment of interest, or refunded to the Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal.   All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such obligation does not exceed the Maximum Lawful Rate.  As used in this Section, the term “applicable law” shall mean the laws of the State of Texas or the federal laws of the United States, whichever laws allow the greater interest, as such laws now exist or may be changed or amended or come into effect in the future.

ARTICLE VI

RESERVED.

ARTICLE VII

LOAN EXPENSE AND ADVANCES

7.1Loan and Administration Expenses.

Borrower unconditionally agrees to pay all reasonable costs and expenses incurred by Lender in connection with the Loans incurred by Lender if any Event of Default occurs hereunder or under any of the Loan Documents or if the Loans or Note or any portion thereof is not paid in full when and as due, all reasonable costs and expenses of Lender (including, without limitation, court costs and counsel’s fees and disbursements and fees and costs of paralegals, and costs incurred in connection with any litigation or bankruptcy or administrative hearing and any appeals therefrom and any post-judgment enforcement action including, without limitation, supplementary proceedings) incurred in attempting to enforce payment of the Loans and reasonable expenses of Lender incurred (including court costs and counsel’s fees and disbursements and fees and costs of paralegals) in attempting to realize, while an Event of Default exists, on any security or incurred in connection with the sale or disposition (or preparation for sale or disposition) of any security for the Loans.  Whenever Borrower is obligated to pay or reimburse Lender for any attorneys’ or paralegals’ fees, those fees shall include the reasonable allocated costs for services of in-house counsel.

7.2Reserved.

7.3Reserved.

7.4Expenses and Advances Secured by Loan Documents.

Any and all payments made by Lender under this Article VII from time to time, and any amounts expended by Lender pursuant to Article XVI, shall constitute additional indebtedness evidenced by the Note and secured by the Security Documents and the other Loan Documents if such payments or amounts expended are not paid to Lender within ten (10) days of the date Lender notifies Borrower in writing of the amounts of such payments due by Borrower to Lender and the purposes for which such payments were made by Lender.

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7.5Right of Lender to Take Certain Actions to Cure Borrower’s Defaults.

In the event that Borrower fails to perform any of Borrower’s covenants, agreements or obligations contained in this Agreement or any of the other Loan Documents (after the expiration of applicable grace periods, except in the event of an emergency or other exigent circumstances), Lender may (but shall not be required to) perform any of such covenants, agreements and obligations, and any amounts expended by Lender in so doing and shall constitute additional indebtedness evidenced by the Note and secured by the Security Documents and the other Loan Documents.

ARTICLE VIII

CONDITIONS PRECEDENT TO THE OPENING OF THE LOAN

8.1Conditions Precedent to Opening of the Loan.

Borrower agrees that Lender’s obligation to Open the Loan is conditioned upon Borrower’s delivery, performance and satisfaction of the following conditions precedent:

(a)Loan Documents:  The Lender shall have received copies of each of the documents set forth in Section 4.2 hereof, executed by the Borrower, and recorded, if applicable.

(b)Reserved. 

(c)Insurance Policies:  Borrower shall have furnished to Lender evidence that insurance coverages are in effect with respect to Borrower, in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.

(d)No Litigation:  No litigation or proceedings shall be pending or threatened which could reasonably be expected to cause a Material Adverse Change with respect to Borrower and its Subsidiaries, considered as a whole;

(e)Legal Opinion:  Borrower shall have furnished to Lender an opinion from counsel for Borrower covering due authorization, execution and delivery and enforceability of the Loan Documents;

(f)Searches:  Borrower shall have furnished to Lender current federal tax lien, state tax lien and judgment searches and searches of all Uniform Commercial Code financing statements for Borrower and Bank, filed in each place UCC Financing Statements are to be filed hereunder, demonstrating the absence of adverse claims;

(g)Financial  Statements:  Borrower shall have furnished to Lender the Borrower 2015 Financial Statements;

(h)Equity Interests of Bank:  Lender shall have possession of the share certificates evidencing the Equity Interests of Bank;

(i)Organizational  Documents:  Borrower shall have furnished to Lender proof satisfactory to Lender of the incorporation and good standing in the state of its incorporation of Borrower and Bank. Borrower shall also provide certified resolutions in form and content reasonably satisfactory to Lender, authorizing execution, delivery and performance of the Loan Documents by Borrower, and such other documentation as Lender may reasonably require to evidence the authority of the persons executing the Loan Documents.  Borrower shall also have delivered Constituent Documents for Borrower and Bank certified by the appropriate government officials of the state of incorporation. Borrower shall also have delivered a certificate of incumbency certified by an authorized officer or representative certifying the names of the 

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individuals or other Persons authorized to sign this Agreement and each of the other Loan Documents to which Borrower is or is to be a party (including the certificates contemplated herein) on behalf of such Person together with specimen signatures of such individual Persons;

(j)No Default:  There shall be no uncured Default or Event of Default by Borrower hereunder as of the Opening of the Loan;

(k)Additional Documents:  Borrower shall have furnished to Lender such other materials, documents, papers or requirements regarding Borrower and its Subsidiaries as Lender shall reasonably request, provided that such documents or instruments are of the type customarily delivered at closings of loan transactions similar to the loan transaction contemplated by this Agreement.

8.2Conditions Precedent to Subsequent Revolving Credit Advances.

Borrower agrees that Lender’s obligation to make any Revolving Credit Advance is conditioned upon Borrower’s delivery, performance and satisfaction of the following additional conditions precedent:

(a)Advance Request Form.  Lender shall have received in accordance with this Agreement, an Advance Request Form pursuant to Lender’s requirements and executed by a responsible officer of Borrower.

(b)No Default:  There shall be no uncured Default or Event of Default by Borrower hereunder as of the Opening of the Loan.

(c)Material Adverse Change.  No Material Adverse Change has occurred and no circumstance exists that could be a Material Adverse Change. 

(d)Representations and Warranties.  All of the representations and warranties contained in Article III and in the other Loan Documents, as modified by disclosures or information contained in the Borrower Disclosure Schedules, the Borrower 2015Financial Statements or the Third Quarter 10-Q, shall be true and correct on and as of the date of such Revolving Credit Advance with the same force and effect as if such representations and warranties had been made on and as of such date.

Each Revolving Credit Advance hereunder shall be deemed to be a representation and warranty by Borrower that the conditions specified in this Section 8.2 have been satisfied on and as of the date of the applicable Revolving Credit Advance. 

ARTICLE IX

RESERVED

ARTICLE X

AFFIRMATIVE COVENANTS

Borrower covenants and agrees as follows:

10.1Furnishing Information.

(a)Financial Reports.  Borrower shall deliver or cause to be delivered to Lender (i) a duly executed Certificate of Compliance substantially in the form of Exhibit B attached hereto within forty-five (45) days after the end of each calendar quarter, (ii) quarterly consolidated financial statements within (60) days after the end of each of the first three calendar quarters of each year and (iii) audited annual consolidated financial statements within 90 days after the end of each calendar year.  The Chief Executive Officer or the Chief Financial Officer of Borrower shall certify that each of such quarterly consolidated financial statements fairly present, in all material respects, the financial position, results of operations, cash flows and 

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shareholders’ equity of Borrower on a consolidated basis as of the date thereof and for the quarterly period covered thereby (subject to normal year-end adjustments which were not and which are not expected to be, individually or in the aggregate, material to Borrower and its consolidated Subsidiaries taken as a whole).  The Borrower’s filing with the SEC of its periodic reports including financial statements and certifications on Form 10-Q or Form 10-K as applicable and written confirmation to Lender of such filing shall satisfy the foregoing financial statement and certification requirements with respect to the related calendar quarter or year covered by such filing.  Borrower shall deliver to Lender with respect to Borrower copies of its annual Federal Income Tax Returns within ten (10) days after the filing thereof with the Internal Revenue Service.  Borrower shall, on not less than ten (10) days prior written notice from Lender, permit Lender or any of its agents or representatives, at Lender’s sole expense, to have access to and examine Borrower’s accounting books and records during Borrower’s regular business hours.

(b)Call Reports.  As soon as available, and in no event more than sixty (60) days after the end of each fiscal quarter of each Bank, copies of each Bank’s Call Reports or other quarterly reports of condition and income furnished to Governmental Authorities.

(c)FR Y-9SP.  If applicable to Borrower, as soon as available, and in any event no later than sixty (60) days after the end of each fiscal quarter, the Borrower’s complete form FR Y-9SP as filed with the Federal Reserve Bank in the applicable Federal Reserve District.

(d)FR Y-6.  If applicable to Borrower, as soon as available, and in any event within ninety (90) days after the end of each fiscal year, the Borrower’s complete form FR Y-6 as filed with the Federal Reserve Bank in the applicable Federal Reserve District.

(e)USA Patriot Act.  Promptly upon the request thereof, to the extent not prohibited by law, such other information and documentation required by Bank Regulatory Authorities under applicable “know your customer” and Anti-Money Laundering rules and regulations (including, without limitation, the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended), as from time to time reasonably requested by the Lender.

(f)Notice of Litigation and Other Matters.  Promptly (but in no event later than ten (10) days after Borrower obtains knowledge thereof), to the extent not prohibited by law, telephonic and written notice of (i) the commencement of all proceedings by or before any Governmental Authority (other than routine period examinations by Applicable Governmental Authorities) and (ii) all actions and proceedings in any court or before any arbitrator against or involving the Borrower or any Subsidiary of Borrower or any of their respective properties, assets or businesses which if adversely determined against Borrower or such Subsidiary, could reasonably be expected to result in a Material Adverse Change to the Borrower and its Subsidiaries, considered as a whole.

(g)Classified Assets Report.  As soon as available, and in no event more than forty five (45) days after the end of each fiscal quarter of Bank, Borrower shall deliver or cause to be delivered to Lender reports detailing the Bank’s Classified Assets.

 

(h)Additional Information.  Such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary as the Lender may reasonably request and which can be provided by Borrower in compliance with applicable laws and regulations.

10.2Maintenance of Insurance.

Borrower shall maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies and financial institutions engaged in the same or similar businesses operating in the same or similar locations.

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10.3Payment of Taxes.

Borrower shall pay all Taxes before the same become delinquent, provided, however, that Borrower shall have the right to contest any such tax or assessment, but only if (i) such contest has the effect of preventing the collection of such Taxes so contested and also of preventing the attachment of any Lien to any of Borrower’s property, and (ii) Borrower contests such Taxes diligently and in good faith.  If Borrower fails to commence such contest or, having commenced to contest the same, shall thereafter fail to prosecute such contest in good faith or with due diligence, or, upon adverse conclusion of any such contest, shall fail to pay such Tax, Lender may, at its election (but shall not be required to), pay and discharge any such Tax, and any interest or penalty thereon, and any amounts so expended by Lender shall be deemed to constitute disbursements of the Loan proceeds hereunder (even if the total amount of disbursements would exceed the face amount of the Note).  Upon request of Lender, Borrower shall furnish to Lender evidence that Taxes are paid on or prior to the last date for payment of such Taxes and before imposition of any penalty or accrual of interest (except for Taxes being contested diligently and in good faith as described in this Section).

10.4Reserved.

10.5Use of Proceeds.

The proceeds of the Loans will be used by Borrower for working capital and general corporate purposes, including the contribution of capital to its subsidiaries.  No part of the proceeds of the Loans will be used, whether directly or indirectly, for any purpose that entails a violation of any of regulations of any Bank Regulatory Authority, including Regulations T, U and X.

10.6Lost Note.

Upon Lender’s furnishing to Borrower an affidavit to such effect, Borrower shall, if the Note is mutilated, destroyed, lost or stolen, deliver to Lender, in substitution for such mutilated, destroyed, lost or stolen Note, a new note containing the same terms and conditions as the Note.  If Lender later finds the lost or recovers the stolen Note, it shall promptly deliver same to Borrower for cancellation.

10.7Indemnification.

FROM THE CLOSING DATE THROUGH THE DATE THAT IS THREE (3) YEARS FOLLOWING THE FULL SATISFACTION OF THE OBLIGATIONS HEREUNDER, BORROWER SHALL INDEMNIFY LENDER AND ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND CONSULTANTS (EACH, AN “INDEMNIFIED PARTY”) AND DEFEND AND HOLD EACH INDEMNIFIED PARTY HARMLESS FROM AND AGAINST ALL CLAIMS (INCLUDING, WITHOUT LIMITATION, ANY CIVIL PENALTIES OR FINES ASSESSED BY OFAC), INJURY, DAMAGE, LOSS AND LIABILITY, COST AND EXPENSE (INCLUDING ATTORNEYS’ FEES, COSTS AND EXPENSES) OF ANY AND EVERY KIND TO ANY PERSONS OR PROPERTY BY REASON OF (I) ANY BREACH OF REPRESENTATION OR WARRANTY, DEFAULT OR EVENT OF DEFAULT UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATED DOCUMENT; OR (II) ANY OTHER MATTER ARISING IN CONNECTION WITH THE LOANS, BORROWER, OR ITS SUBSIDIARIES THAT MAY ARISE ANY TIME PRIOR TO THE DATE THAT THE LOANS AND THE OTHER OBLIGATIONS OWED HEREUNDER ARE PAID IN FULL.  BORROWER’S DUTY TO INDEMNIFY, HOLD HARMLESS, AND DEFEND THE INDEMNIFIED PARTIES AGAINST LOSSES EXTENDS TO LOSS THAT MAY BE CAUSED OR ALLEGED TO BE CAUSED IN PART BY THE NEGLIGENCE OF INDEMNITEES TO THE FULLEST  EXTENT  THAT  SUCH INDEMNIFICATION IS PERMITTED BY APPLICABLE LAW.  THE FOREGOING INDEMNIFICATION SHALL SURVIVE REPAYMENT OF THE LOANS. 

20

 

ARTICLE XI

NEGATIVE COVENANTS

Borrower covenants and agrees as follows:

11.1Indebtedness.

Without prior written consent of Lender, Borrower will not create, incur, assume or permit to exist any Indebtedness, except: 

(a)Indebtedness created hereunder; and

(b)Indebtedness existing on the date hereof and set forth in Schedule 11.1(b), but not any extensions, renewals or replacements of any such Indebtedness.

11.2Liens.

Borrower will not create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable or rights in respect of any thereof, except:

(a)Permitted Liens;

(b)any Lien on any property or asset of Borrower existing on the date hereof and set forth in Schedule 11.2(b); provided that (i) such Lien shall not apply to any other property or asset of the Borrower and (ii) such Lien shall secure only those obligations which it secures on the date hereof; and

(c)Liens on fixed or capital assets acquired, constructed or improved by the Borrower; provided that (i) such security interests secure Indebtedness permitted by Section 11.1, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower.

11.3Fundamental Changes; Disposition of Assets.

Without prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrower will not (a) merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, unless the Persons who were the shareholders of Borrower immediately prior to the consummation of such merger or consolidation will, immediately after the consummation of such merger or consolidation, beneficially own at least 50.1% of the outstanding voting stock of the surviving company in such merger or consolidation; (b) sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (other than  in the ordinary course of business), (c) liquidate or dissolve, or (d) engage to any material extent in any business other than businesses of the type conducted by the Borrower on the Effective Date and businesses reasonably related thereto.

11.4Investments, Loans, Advances, Guarantees and Acquisitions.

The Borrower will not purchase, hold or acquire any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment by the Borrower in any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit (collectively, an “Investment”) except:

(a)Permitted Investments; 

21

 

(b)Investments made in the Bank and any other direct or indirect subsidiary of Borrower; 

(c)Guarantees constituting Indebtedness permitted by Section 11.1; and 

(d)Any Investments in which the amount of all such Investments in the aggregate does not exceed 20% of the capital of Borrower at any one time outstanding. 

11.5Reserved.

11.6Restricted Payments.

Without the prior written consent of Lender, the Borrower will not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment.

11.7Transactions with Directors or Officers.

The Borrower will not sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from any of Borrower’s directors or executive officers, or any of their Controlled Entities, or engage in any other transaction with any of such directors or officers, or any of their respective Controlled Entities outside  the ordinary course of business of Borrower or its Subsidiaries at prices and on terms and conditions not less favorable to the Borrower than could be obtained on an arm’s-length basis from unrelated third parties. 

11.8Reserved.

11.9Leverage Ratio.

	
 
	
(a)
	
As of the last day of any fiscal quarter, the Bank shall have a Leverage Ratio of 7.5% or greater.

	
 
	
(b)
	
As of the last day of any fiscal quarter, the Borrower shall have a Leverage Ratio of 6.5% or greater.

11.10Total Risk-Based Capital Ratio.

As of the last day of any fiscal quarter, the Bank shall have a Total Risk-Based Capital Ratio of 11.0% or greater.

11.11Non-Performing Assets to Net Capital Ratio.

As of the last day of any fiscal quarter, the Bank shall have a Non-Performing Assets to Net Capital Ratio of 40.0% or less.

11.12Classified Assets to Tier 1 Capital Ratio.

As of the last day of any fiscal quarter, the Bank shall have a Classified Assets to Tier 1 Capital Ratio of no greater than 50.0%.

11.13Fixed Charge Coverage Ratio. 

As of the last day of any fiscal quarter, Borrower shall not permit the Fixed Charge Coverage Ratio to be less than 1.50 to 1.0 for the twelve month period ending on such date.

22

 

ARTICLE XII

RESERVED

ARTICLE XIII

ASSIGNMENTS BY LENDER AND BORROWER

13.1Prohibition of Assignments and Participations by Lender.

Without prior written consent of Borrower, Lender shall not sell the Loans (or any interest therein) or any Loan Document nor grant any participations in the Loans.

13.2Prohibition of Assignments by Borrower.

Borrower shall not assign or attempt to assign its rights under this Agreement and any purported assignment shall be void.

13.3Successors and Assigns.

Subject to the foregoing restrictions on transfer and assignment contained in this Article XIII, this Agreement shall inure to the benefit of and shall be binding on the parties hereto and their respective successors and permitted assigns.

ARTICLE XIV

TIME OF THE ESSENCE

14.1Time is of the Essence.

Borrower agrees that time is of the essence under this Agreement.

ARTICLE XV

EVENTS OF DEFAULT

15.1Events of Default.

The occurrence of any one or more of the following shall constitute an “Event of Default” as said term is used herein:

(a)Failure of Borrower (i) (A) to make any payment when due, or (B) to observe or perform any of the other covenants or conditions by Borrower to be performed under the terms of this Agreement or any other Loan Document concerning the payment of money; or (ii) for a period of thirty (30) days after written notice from Lender, to observe or perform any non-monetary covenant or condition contained in this Agreement or any other Loan Documents; provided that if any such failure concerning a non-monetary covenant or any of the covenants set forth in Sections 11.9, 11.10, 11.11, 11.12 or 11.13, or any other covenant which is otherwise susceptible to cure and cannot reasonably be cured within said thirty (30) day period, then Borrower shall have an additional sixty (60) day period to cure such failure and no Event of Default shall be deemed to exist hereunder so long as Borrower commences such cure within the initial thirty (30) day period and diligently and in good faith pursues such cure to completion within such resulting ninety (90) day period from the date of Lender’s notice; and provided further that if a different notice or grace period is specified under any other subsection of this Section 15.1 with respect to a particular breach, or if another subsection of this Section 15.1 applies to a particular breach and does not expressly provide for a notice or grace period the specific provision shall control.

(b)Any assignment in violation of Section 13.2.

23

 

(c)If any representation or warranty made by Borrower contained in this Agreement or the Security Documents (as the same may be modified by the Borrower Disclosure Schedules, the Borrower 2015 Financial Statements or the Third Quarter 10-Q), or any report or certificate delivered by Borrower in satisfaction of any of the conditions of this Agreement is untrue or incorrect in any material respect at the time made or delivered, provided that if such breach is reasonably susceptible of cure, then no Event of Default shall exist so long as Borrower cures said breach (i) within the notice and cure period provided in (a)(i) above for a breach that can be cured by the payment of money or (ii) within the notice and cure period provided in (a)(ii) above for any other breach.

(d)Borrower or its Subsidiaries shall commence a voluntary case concerning Borrower or such Subsidiary under the Bankruptcy Code; or an involuntary proceeding is commenced against Borrower or its Subsidiaries under the Bankruptcy Code and relief is ordered against Borrower, or the petition is controverted but not dismissed or stayed within sixty (60) days after the commencement of the case, or a custodian (as defined in the Bankruptcy Code) is appointed for or takes charge of all or substantially all of the property of Borrower or its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other proceedings under any reorganization, arrangement, readjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar Law of any jurisdiction whether now or hereafter in effect relating to the Borrower or its Subsidiaries; or there is commenced against Borrower or its Subsidiaries any such proceeding which remains undismissed or unstayed for a period of sixty (60) days; or the Borrower or its Subsidiaries fails to controvert in a timely manner any such case under the Bankruptcy Code or any such proceeding, or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or its Subsidiaries by any act or failure to act indicates its consent to, approval of, or acquiescence in any such case or proceeding or the appointment of any custodian or the like of or for it for any substantial part of its property or suffers any such appointment to continue undischarged or unstayed for a period of sixty (60) days.

(e)Borrower or its Subsidiaries shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall consent to the appointment of a receiver or trustee or liquidator of all of its property or the major part thereof or if all or a substantial part of the assets of Borrower or its Subsidiaries are attached, seized, subjected to a writ or distress warrant, or are levied upon, or come into the possession of any receiver, trustee, custodian or assignee for the benefit of creditors.

(f)One or more final, non-appealable judgments are entered (i) against Borrower in amounts aggregating in excess of $250,000 or (ii) against any of Borrower’s Subsidiaries in amounts aggregating in excess of $2,000,000 and said judgments are not paid in full, stayed or bonded over within thirty (30) days after entry.

(g)If Borrower shall fail to pay any debt owed by it or is in default under any agreement with Lender or any other party (other than a failure or default for which Borrower’s maximum liability does not exceed $250,000) and such failure or default continues after any applicable grace period specified in the instrument or agreement relating thereto, unless Borrower is contesting its obligation to pay such debt in good faith and by appropriate actions or proceedings.

(h)If a Material Adverse Change occurs with respect to Borrower and any of its Subsidiaries, considered as a whole.

(i)The failure at any time of a security interest created under any Security Document to be a valid first lien upon the Collateral described therein, and such failure remains uncured for a period of fifteen (15) days following written notice of such failure by Lender to Borrower.

(j)Reserved.

(k)A Change of Control shall occur.

24

 

(l)Failure of Borrower to comply with clauses (a) through (f) of Section 10.1 and such failure continues uncured for a period of fifteen (15) days after such failure.  

(m)The occurrence of any other event or circumstance denominated as an Event of Default in this Agreement or under any of the other Loan Documents and the expiration of any applicable grace or cure periods, if any, specified for such Event of Default herein or therein, as the case may be.

(n)Reserved.

(o)If (i) any Bank shall cease for any reason to be an insured bank under the FDIA, (ii) the FDIC or any other Governmental Authority shall issue a cease and desist order to take other action of a disciplinary or remedial nature against the Borrower or any Subsidiary and such order or other action could reasonably be expected to have a Material Adverse Change or there shall occur with respect to any Subsidiary any event that is grounds for the required submission of a capital restoration plan under 12 U.S.C. § 1831o(e)(2) and the regulations thereunder, or (iii) the Borrower or any Subsidiary shall enter into a written supervisory or similar agreement with any Bank Regulatory Authority or other Governmental Authority for any reason, but only to the extent that such supervisory or similar agreement would have a Material Adverse Change with respect to such Subsidiary or the Borrower.

(p)Without limiting the generality of Section 15.1(o), the appointment of a conservator or receiver for any Subsidiary of Borrower that is an “insured depository institution” as defined in the FDIA (12 U.S.C. § 1813(c)(2)), by any “appropriate Federal banking agency” as defined in the FDIA (12 U.S.C. § 1813(q)), by any state supervisory agency or by the FDIC or any successor thereto pursuant to the FDIA; or the organization of a bridge bank to purchase assets and assume liabilities of such Subsidiary pursuant to the FDIA; or the provision of any form of assistance to any such Subsidiary by the FDIC pursuant to the FDIA or other Governmental Authority.

(q)If Borrower shall cease to be a bank holding company, within the meaning of the BHCA.

ARTICLE XVI

LENDER’S REMEDIES IN EVENT OF DEFAULT

16.1Remedies Conferred Upon Lender.

Upon the occurrence of, and during the continuance of, any Event of Default, Lender may pursue any one or more of the following remedies:

(a)Declare the Note to be immediately due and payable (the “Acceleration”);

(b)Following Borrower’s failure to repay the Note after Acceleration, (i) use and apply any monies or letters of credit deposited by Borrower with Lender, regardless of the purposes for which the same was deposited (other than the Depository Account), to cure any such default or to apply on account of any indebtedness under this Agreement which is due and owing to Lender; and (ii) exercise or pursue any other remedy or cause of action permitted under this Agreement or any other Loan Documents, or conferred upon Lender by operation of Law, including, the enforcement of any Liens or security interests under the Security Documents.  For the avoidance of doubt, in no event shall Lender use or apply any monies in the Depository Account as a remedy for or in respect of any Event of Default by Borrower or otherwise.

Notwithstanding the foregoing, upon the occurrence of any Event of Default under Section 15.1(d), (e), (o), (p) or (q) with respect to Borrower or any Bank, all amounts evidenced by the Note shall automatically become due and payable, without any presentment, demand, protest or notice of any kind to Borrower.

25

 

ARTICLE XVII

GENERAL PROVISIONS

17.1Captions.

The captions and headings of various Articles, Sections and subsections of this Agreement and Borrower Disclosure Schedules and Exhibits pertaining hereto are for convenience of reference only and are not to be considered as defining or limiting in any way the scope or intent of the provisions hereof.

17.2Modification; Waiver.

No modification, waiver, amendment or discharge of this Agreement or any other Loan Document shall be valid unless the same is in writing and signed by both parties hereto.

17.3Authorized Representatives.

Borrower hereby appoints each of Scott Kavanaugh, its Chief Executive Officer as of the Effective Date, David DePillo, its President as of the Effective Date, John Michel, its Chief Financial Officer as of the Effective Date, and Craig Kardokus, its Treasurer as of the Effective Date, as its Authorized Representatives for purposes of dealing with Lender on behalf of Borrower in respect of any and all matters in connection with this Agreement, the other Loan Documents, and the Loans.  Each of the Authorized Representatives shall have the power, in his discretion, to give and receive all notices, monies, approvals, and other documents and instruments, and to take any other action on behalf of Borrower.  All actions by any of the Authorized Representatives shall be final and binding on Borrower.  Lender may rely on the authority given to any of the Authorized Representatives until actual receipt by Lender of a duly authorized resolution substituting a different person as one of, or different persons as the Authorized Representatives.

17.4Governing Law.

Irrespective of the place of execution and/or delivery, this Agreement shall be governed by, and shall be construed in accordance with, the laws of the State of Texas.

17.5Reserved.

17.6Disclaimer by Lender.

This Agreement is made for the sole benefit of Borrower and Lender, and no other person or persons shall have any benefits, rights or remedies under or by reason of this Agreement, or by reason of any actions taken by Lender pursuant to this Agreement.  Lender shall not be liable for any debts or claims accruing in favor of any such parties against Borrower or others.  Lender, by making the Loans or taking any action pursuant to any of the Loan Documents, shall not be deemed a partner or a joint venturer with Borrower or fiduciary of Borrower.  No payment of funds directly to a contractor or subcontractor or provider of services shall be deemed to create any third-party beneficiary status or recognition of same by the Lender.

17.7Partial Invalidity; Severability.

If any of the provisions of this Agreement, or the application thereof to any person, party or circumstances, shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such provision or provisions to persons, parties or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Agreement shall be valid and enforceable to the fullest extent permitted by Law.

17.8Definitions Include Amendments.

26

 

Definitions contained in this Agreement which identify documents, including, but not limited to, the Loan Documents, shall be deemed to include all amendments and supplements to such documents from the respective dates thereof, and all future amendments, modifications, and supplements thereto entered into from time to time to satisfy the requirements of this Agreement or otherwise with the written consent of the parties hereto.  Reference to this Agreement contained in any of the foregoing documents shall be deemed to include all amendments and supplements executed in accordance with this Agreement and the other Loan Documents.

7.9Execution in Counterparts; Electronic Execution.

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page of this Agreement by fax or other digital or electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

17.10Entire Agreement.

This Agreement, taken together with all of the other Loan Documents, embody the entire agreement and supersedes all prior agreements, written or oral, between the parties, relating to the subject matter hereof.

17.11Waiver of Damages.

Neither Lender nor Borrower shall be liable to each other for punitive, exemplary or consequential damages, including, without limitation, lost profits, whatever the nature of a breach by Lender or Borrower of its obligations under this Agreement or any of the Loan Documents, and each of Lender and Borrower hereby waives all claims for punitive, exemplary or consequential damages.

17.12Claims Against Lender.

Lender shall not be in default under this Agreement, or under any other Loan Documents, unless a written notice specifically setting forth the claim of Borrower shall have been given to Lender within twelve (12) months after Borrower first had actual Knowledge of the occurrence of the event which Borrower alleges gave rise to such claim and Lender does not remedy or cure the default, if any there be, promptly thereafter.  Borrower waives any claim, set-off or defense against Lender arising by reason of any alleged default by Lender as to which Borrower does not give such notice timely as aforesaid.  Borrower acknowledges that such waiver is or may be essential to Lender’s ability to enforce its remedies without delay and that such waiver therefore constitutes a substantial part of the bargain between Lender and Borrower with regard to the Loans.

17.13Jurisdiction.

TO THE GREATEST EXTENT PERMITTED BY LAW, BORROWER HEREBY WAIVES ANY AND ALL RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), BORROWER IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF DALLAS, COUNTY OF DALLAS AND STATE OF TEXAS, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY.  NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A 

27

 

PROCEEDING IN ANY OTHER JURISDICTION.  BORROWER FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY TEXAS STATE OR UNITED STATES COURT SITTING IN THE CITY OF DALLAS AND COUNTY OF DALLAS MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF BORROWER SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

17.14Set-Offs.

After the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably authorizes and directs Lender from time to time to charge Borrower’s accounts and deposits with Lender or its Affiliates (other than the Depository Account and deposits therein), and to pay over to Lender an amount equal to any amounts from time to time due and payable to Lender hereunder, under the Note or under any other Loan Document.   Borrower hereby grants to Lender a security interest in and to all such accounts and deposits (other than the Depository Account and deposits therein) maintained by the Borrower with Lender (or its Affiliates).

17.15Lender’s Consent.

Wherever in this Agreement there is a requirement for Lender’s consent and/or a document to be provided or an action taken “to the satisfaction of Lender”, it is understood by such phrase that, except as expressly modified herein, Lender shall exercise its consent, right or judgment in its reasonable discretion.

17.16Notices.

Any notice, demand, request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing and shall be deemed to have been properly given (a) if hand delivered, when delivered; (b) if mailed by United States Certified Mail (postage prepaid, return receipt requested), three (3) Business Days after mailing (c) if by Federal Express or other reliable overnight courier service, on the next Business Day after delivered to such courier service or (d) if by telecopier on the day of transmission so long as copy is sent on the same day by overnight courier as set forth below:

If to Borrower:

First Foundation Inc.

18101 Von Karman Ave., Suite 700,

Irvine, California 92612

Attention: Mr. John Michel

Telephone: (949) 202-4160

Facsimile: (949) 202-4187

Email: jmichel@ff-inc.com

 

With a copy to:

Sheppard Mullin Richter @ Hampton LLP 

650 Town Center Drive, 4th Floor

Costa Mesa, CA 92626 

Attention: Joshua Dean

Telephone:  (714) 424-8292

28

 

Facsimile:  (714) 428-5991

Email:jdean@sheppardmullin.com

If to Lender:

NexBank SSB

2515 McKinney Avenue, Suite 1100

Dallas, Texas 75201

Attention: Matt Siekielski

Telephone: 972-934-4724

With a copy to: 

Haynes and Boone, LLP

2323 Victory Avenue, Suite 700

Dallas, Texas 75219

Attention: Darrel Rice 

Telephone: 214-651-5969

Facsimile: 214-200-0664

Email:darrel.rice@haynesboone.com

or at such other address as the party to be served with notice may have furnished in writing to the party seeking or desiring to serve notice as a place for the service of notice.

17.17Waiver of Jury Trial.

BORROWER AND LENDER EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

17.18No Oral Agreements.

THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Signature page follows.] 

 

 

 

29

 

EXECUTED as of the date first set forth above.

 

 

	
BORROWER:

	
 

	
FIRST FOUNDATION INC.

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
/s/ John Michel

	
 
	
 
	
Name:   John Michel

	
 
	
 
	
Title:  Chief Financial Officer

 

Signature Page to Loan Agreement

 

 

	
LENDER:

	
 

	
NEXBANK, SSB,

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
/s/ Matt Siekielski

	
 
	
 
	
Name:   Matt Siekielski

	
 
	
 
	
Title:  Chief Operating Officer

 

 

Signature Page to Loan Agreement

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