Document:

EX-4.1

Exhibit 4.1

Execution
Version

RIGHTS AGREEMENT

dated as of

March 11, 2009

between

Deerfield Capital Corp.

and

American Stock Transfer & Trust Company LLC

Rights Agent

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.

	 	Certain Definitions
	 	 	1	 
	Section 2.

	 	Appointment of Rights Agent
	 	 	8	 
	Section 3.

	 	Issuance of Rights Certificates
	 	 	8	 
	Section 4.

	 	Form of Rights Certificates
	 	 	10	 
	Section 5.

	 	Countersignature and Registration
	 	 	10	 
	Section 6.

	 	Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates
	 	 	11	 
	Section 7.

	 	
Exercise of Rights; Purchase Price; Expiration Date of Rights
	 	 	12	 
	Section 8.

	 	Cancellation and Destruction of Rights Certificates
	 	 	14	 
	Section 9.

	 	Reservation and Availability of Capital Stock
	 	 	14	 
	Section 10.

	 	Preferred Stock Record Date
	 	 	16	 
	Section 11.

	 	Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights
	 	 	16	 
	Section 12.

	 	
Certificate of Adjusted Purchase Price or Number of Shares
	 	 	23	 
	Section 13.

	 	Consolidation, Merger or Sale or Transfer of Assets Cash Flow or Earning Power
	 	 	23	 
	Section 14.

	 	
Fractional Rights and Fractional Shares
	 	 	27	 
	Section 15.

	 	Rights of Action
	 	 	28	 
	Section 16.

	 	Agreement of Rights Holders
	 	 	28	 
	Section 17.

	 	Rights Certificate Holder Not Deemed a Stockholder
	 	 	29	 
	Section 18.

	 	Concerning the Rights Agent
	 	 	29	 
	Section 19.

	 	Merger or Consolidation or Change of Name of Rights Agent
	 	 	30	 
	Section 20.

	 	Duties of Rights Agent
	 	 	30	 
	Section 21.

	 	Change of Rights Agent
	 	 	32	 
	Section 22.

	 	Issuance of New Rights Certificates
	 	 	33	 
	Section 23.

	 	Redemption and Termination
	 	 	33	 
	Section 24.

	 	Exchange
	 	 	34	 
	Section 25.

	 	Notice of Certain Events
	 	 	35	 
	Section 26.

	 	Notices
	 	 	36	 
	Section 27.

	 	Supplements and Amendments
	 	 	37	 
	Section 28.

	 	Successors
	 	 	37	 
	Section 29.

	 	Determinations and Actions by the Board of Directors, etc
	 	 	37	 
	Section 30.

	 	Benefits of this Agreement
	 	 	38	 
	Section 31.

	 	Severability
	 	 	38	 
	Section 32.

	 	Governing Law
	 	 	38	 
	Section 33.

	 	Counterparts
	 	 	38	 
	Section 34.

	 	Descriptive Headings
	 	 	39	 

EXHIBITS

	 	 	 
	Exhibit A

	 	Form of Articles Supplementary
	 
	 	 
	Exhibit B

	 	Form of Rights Certificate
	 
	 	 
	Exhibit C

	 	Form of Summary Rights

i 

 

RIGHTS AGREEMENT

     RIGHTS AGREEMENT, dated as of March 11, 2009 (this “Agreement”), between Deerfield Capital
Corp., a Maryland corporation (the “Company”), and American Stock Transfer & Trust Company LLC, a
New York limited liability company (the “Rights Agent”).

WITNESSETH

     WHEREAS, the Company has experienced substantial capital losses and operating losses and under
the Internal Revenue Code of 1986, as amended (the “Code”), and rules promulgated by the Internal
Revenue Service, the Company may “carry forward” its net capital losses (the “NCLs”) and net
operating losses (the “NOLs”) in certain circumstances to offset current and future gains and
earnings, and thus reduce its federal income tax liability (subject to certain requirements and
restrictions);

     WHEREAS, if the Company experiences an “ownership change,” as defined in Section 382 of the
Code, its ability to use its NCLs and NOLs could be substantially limited or lost altogether;

     WHEREAS, the Company believes that its NCLs and NOLs are substantial assets of the Company and
that it is in the best interest of the Company and its stockholders that the Company provide for
the protection of the Company’s NCLs and NOLs on the terms and conditions set forth herein; and

     WHEREAS, on March 11, 2009 (the “Rights Dividend Declaration Date”), the Board of Directors of
the Company authorized and the Company declared a dividend distribution of one Right (as
hereinafter defined) for each share of common stock, par value $0.001 per share, of the Company
(the “Common Stock”) outstanding at the close of business on March 11, 2009 (the “Record Date”),
and the Board of Directors has authorized the issuance of one Right (as such number may hereinafter
be adjusted pursuant to the provisions of Section 11(p) hereof) for each share of Common Stock of
the Company issued between the Record Date and the Distribution Date (as hereinafter defined), each
Right initially representing the right to purchase one one-thousandth of a share of Series A Junior
Participating Preferred Stock of the Company, par value $0.001 per Share (the “Preferred Stock”)
having the rights, powers and preferences set forth in the form of Articles Supplementary attached
hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth
(collectively, the “Rights”);

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

     Section 1. Certain Definitions. For purposes of this Agreement, the following terms
have the meanings indicated:

          (a) “Acquiring Person” shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 4.9% or more of the
shares of Common Stock then outstanding, but shall not include:

 

 

          (i) the Company,

          (ii) any Subsidiary of the Company,

          (iii) any employee benefit plan of the Company, or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan (each Person described in Section 1(a)(i), (ii) and (iii), a
“Related Person”),

          (iv) any Person who, together with such Person’s Affiliates and Associates, becomes the
Beneficial Owner of 4.9% or more of the shares of Common Stock then outstanding as a result
of a reduction in the number of shares of Common Stock outstanding due to the repurchase of
shares of Common Stock by the Company unless and until such Person, together with such
Person’s Affiliates and Associates, after becoming aware that such Person has become the
Beneficial Owner of 4.9% or more of the then outstanding shares of Common Stock acquires
beneficial ownership of any additional shares of Common Stock, in which case such Person
shall be deemed to be an Acquiring Person for purposes of this Agreement,

          (v) any Person who was, together with such Person’s Affiliates and Associates, the
Beneficial Owner of 4.9% or more of the then outstanding shares of Common Stock on the date
hereof, provided that after the date of this Agreement such Person, together with such
Person’s Affiliates and Associates, does not become the Beneficial Owner of any additional
shares of Common Stock, in which case such Person shall be deemed to be an Acquiring Person
for purposes of this Agreement,

          (vi) any Person who, together with such Person’s Affiliates and Associates, becomes the
Beneficial Owner of 4.9% or more of the shares of Common Stock then
outstanding, directly or indirectly, as a result
of a warrant, the exercise thereof, the transfer or acquisition of such warrant or the Common Stock acquired thereby (together, the
“Warrant Equity”), where such warrant had first been issued upon
approval by the Board of Directors of the Company; provided that after the date such Person,
together with such Person’s Affiliates and Associates, would otherwise have become the
Beneficial Owner of 4.9% or more of the shares of Common Stock then
outstanding, directly or indirectly, as a result
of the Warrant Equity but for the operation of this provision, such Person,
together with such Person’s Affiliates and Associates, does not become the Beneficial Owner
of any additional shares of Common Stock, in which case such Person shall be deemed to be an
Acquiring Person for purposes of this Agreement, and

          (vii) an Exempt Person;

provided, however, that no Person shall be an Acquiring Person unless the Board of
Directors of the Company shall have affirmatively determined, in its sole and absolute discretion,
within ten Business Days (or such later time) after such Person has otherwise met the requirements
of this Section 1(a), that such Person shall be an Acquiring Person.

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

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

          (d) “Affiliate” shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act and, to the extent not included,
shall also include, with respect to any Person, any other Person (other than a Related Person or an
Exempt Person) whose Common Stock would be deemed constructively owned by such first Person
pursuant to the provisions of Section 382 of the Code, or any successor provision or replacement
provision.

          (e) “Agreement” shall have the meaning set forth in the preamble of this Agreement.

          (f) “Associate” shall mean (i) with respect to a corporation, any officer or director
thereof or any associate of any Subsidiary thereof, or any Beneficial Owner of 10% or more of any
class of equity security thereof, (ii) with respect to an association, any officer or director
thereof or any associate of a Subsidiary thereof, (iii) with respect to a partnership, any general
partner thereof or any limited partner thereof who is, directly or indirectly, the Beneficial Owner
of a 10% or greater ownership interest therein, and any associate of any Subsidiary thereof, (iv)
with respect to a limited liability company, any manager or managing member thereof and any
Beneficial Owner of 10% or more of any class of membership interest therein or other equity
security thereof, and any associate of any Subsidiary thereof, (v) with respect to a business
trust, any officer or trustee thereof or any associate of any Subsidiary thereof, (vi) with respect
to any other trust or an estate, any trustee, executor or similar fiduciary and any Person who has
a 10% or greater interest as a beneficiary in the income from or principal of such trust or estate,
(vii) with respect to a natural person, the parents and children thereof and any spouse or relative
thereof, or any relative of such spouse, who has the same home as such person, and (viii) any
Affiliate of such Person.

          (g) A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to
“beneficially own,” (and any correlative terms shall have correlative meanings) any
securities:

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

3

 

          (ii) which such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the
“Beneficial Owner” of, or to “beneficially own,” any security under this subparagraph (ii)
as a result of an agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report);

          (iii) which are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates
or Associates) has any agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (g)) or disposing of any
voting securities of the Company; provided, however, that for purposes of
determining Beneficial Ownership of securities under this Agreement, officers and directors
of the Company solely by reason of their status as such shall not constitute a group
(notwithstanding that they may be Associates of one another or may be deemed to constitute a
group for purposes of Section 13(d) the Exchange Act) and shall not be deemed to own shares
owned by another officer or director of the Company;

Notwithstanding anything in this paragraph (g) to the contrary, a Person engaged in the business of
underwriting securities shall not be deemed the “Beneficial Owner” of, or to “beneficially own,”
any securities acquired or otherwise beneficially owned in good faith in a firm commitment
underwriting until the expiration of forty days after the date of the sale of securities to the
underwriter for subsequent sale to the public pursuant to such firm commitment underwriting, and
then only if such securities continue to be owned by such Person at the expiration of such forty
days.

To the extent not within the foregoing provisions of this Section 1(g), a Person shall be deemed
the “Beneficial Owner” of and shall be deemed to “beneficially own” securities that such Person (i)
would be deemed to constructively own pursuant to Section 382 of the Code, or any successor or
replacement provision; or (ii) would be deemed to have a direct or indirect economic or pecuniary
interest, including, without limitation, interests or rights acquired through derivative, hedging
or similar transactions relating to such securities with a counterparty, as determined by the
Company’s Board of Directors in its sole and absolute discretion.

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

4

 

          (i) “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.

          (j) “Code” shall have the meaning set forth in the recitals at the beginning of this
Agreement.

          (k) “Common Stock” shall mean the common stock, par value $0.001 per share, of the
Company, except that “Common Stock” when used with reference to any Person other than the Company
shall mean the capital stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the management, of such
Person, except that “Common Stock” when used with reference to any Person which shall not be
organized in corporate form shall mean units of beneficial interest in the profits or losses of
such Person or other equity security of such Person having of all classes of equity securities of
such Person the greatest aggregate voting power in the election of the directors, trustees,
managers or other Persons performing like governance functions for such Person.

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

          (m) “Company” shall have the meaning set forth in the preamble of this Agreement.

          (n) “Current Market Price” shall have the meaning set forth in Section 11(d)(i)
hereof.

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

          (p) “Distribution Date” shall mean the earlier to occur of (i) the close of business
on the tenth Business Day after the Stock Acquisition Date (or, if the tenth Business Day after the
Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date), or
(ii) the close of business on the tenth Business Day (or such later date as the Board of Directors
shall determine) after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or sent or given within
the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would become an Acquiring Person (without regard to the proviso
contained in Section 1(a) hereof requiring the Board of Directors to affirmatively determine that
such Person shall be an Acquiring Person); provided, however, that a Distribution
Date shall not occur unless, within either of the ten Business Day periods (or such later date)
specified in the cases of (i) and (ii) above, the Board of Directors of the Company shall have
affirmatively determined that a Distribution Date shall occur upon the end of such applicable ten
Business Day (or later) period.

5

 

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

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

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

          (t) “Exempt Person” means a Person whose Beneficial Ownership (together with all
Affiliates and Associates of such Person) of 4.9% or more of the then-outstanding Common Stock will
not, as determined by the Company’s Board of Directors in its sole and absolute discretion,
jeopardize or endanger the availability to the Company of its NCLs and NOLs or who the Company’s
Board of Directors otherwise determines, in its sole and absolute discretion, to treat as an Exempt
Person, provided that the Board of Directors may set any terms, conditions and limitations to the
treatment of a Person as an Exempt Person as the Board of Directors may determine in its sole and
absolute discretion.

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

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

          (w) “NASDAQ” shall have the meaning set forth in Section 11(d)(i) hereof.

          (x) “NCLs” shall have the meaning set forth in the recitals at the beginning of this
Agreement.

          (y) “NOLs” shall have the meaning set forth in the recitals at the beginning of this
Agreement.

          (z) “Person” shall mean any individual, firm, corporation, partnership, limited
liability company, limited liability partnership, trust, syndicate or other entity and includes,
without limitation, an unincorporated group of persons who, by formal or informal agreement or
arrangement (whether or not in writing), have embarked on a common purpose or act.

          (aa) “Preferred Stock” shall mean shares of Series A Junior Participating Preferred
Stock, par value $0.001 per share, of the Company, 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.

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

          (cc) “Purchase Price” shall have the meaning set forth in Section 4(a) hereof.

          (dd) “Record Date” shall have the meaning set forth in the recitals at the beginning
of this Agreement.

6

 

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

          (ff) “Related Person” shall have the meaning set forth in the definition of “Acquiring
Person” in Section 1(a) hereof.

          (gg) “Rights” shall have the meaning set forth in the recitals at the beginning of
this Agreement.

          (hh) “Rights Agent” shall have the meaning set forth in the preamble of this
Agreement.

          (ii) “Rights Certificates” shall have the meaning set forth in Section 3(a) hereof.

          (jj) “Rights Dividend Declaration Date” shall have the meaning set forth in the
recitals at the beginning of this Agreement.

          (kk) “Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii)
hereof.

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

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

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

          (oo) “Stock Acquisition Date” shall mean the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such.

          (pp) “Subsidiary” shall mean, with reference to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting power sufficient to
elect a majority of the board of directors of such corporation or other entity or other persons
performing similar functions are beneficially owned, directly or indirectly, by such Person or by
any corporation or other entity that is otherwise controlled by such Person.

          (qq) “Substitution Period” shall have the meaning set forth in Section 11(a)(iii)
hereof.

          (rr) “Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.

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

          (tt) “Transfer Taxes” shall have the meaning set forth in Section 6(a) hereof.

7

 

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

     Any determination required to be made by the Board of Directors of the Company for purposes of
applying the definitions contained in this Section 1 shall be made by a majority of the Board of
Directors of the Company in its good faith judgment, which determination shall be binding on the
Rights Agent and the holders of the Rights.

     Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent
to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date also be the holders of the Common Stock) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-rights agents as it may deem necessary or desirable
upon ten (10) days prior written notice to the Rights Agent. If the Company appoints one or more
co-rights agents, the respective duties of the Rights Agent and any co-rights agents shall be as
the Company shall determine, and the Company will notify, in writing, the Rights Agent and any
co-rights agents of any such respective 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, (x) the Rights will be evidenced (subject to the provisions
of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the
names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also
to be certificates for Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of Common Stock
(including a transfer to the Company). As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the Rights Agent will send
by first-class, postage-prepaid mail or by a courier of national reputation, to each record holder
of the Common Stock as of the close of business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more rights certificates, in substantially the
form of Exhibit B hereto (the “Rights Certificates”), evidencing one Right for each share of Common
Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the
time of distribution of the Rights Certificates, the Company shall make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of
any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely
by such Rights Certificates. The Company shall promptly notify the Rights Agent in writing upon
the occurrence of a Distribution Date. Until such notice is received by the Rights Agent, the
Rights Agent may presume conclusively for all purposes that a Distribution Date has not occurred.

          (b) The Company will make available, as promptly as practicable following the Record Date, a
copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary
of Rights”) to any holder of Rights who may so request from time to

8

 

time prior to the Expiration Date (as such term is defined in Section 7(a) hereof). With
respect to certificates for the Common Stock outstanding as of the Record Date, or issued
subsequent to the Record Date, unless and until the Distribution Date shall occur, the Rights will
be evidenced by such certificates for the Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date, the transfer of any certificates representing shares of
Common Stock in respect of which Rights have been issued shall also constitute the transfer of the
Rights associated with such shares of Common Stock.

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

This certificate also evidences and entitles the holder hereof to certain Rights as
set forth in the Rights Agreement between Deerfield Capital Corp. (the “Company”)
and the Rights Agent thereunder (the “Rights Agent”) dated as of March 11, 2009 (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 Rights Agent. Under
certain circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge, promptly
after receipt of a written request therefor. Under certain circumstances set forth
in the Rights Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and void.

With respect to such certificates containing the foregoing legend, until the earlier of (i) the
Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such certificates alone and registered
holders of Common Stock shall also be the registered holders of the associated Rights, and the
transfer of any of such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates. In the event that the Company purchases or
otherwise acquires any Common Stock after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Stock shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common Stock which are no longer
outstanding. Notwithstanding this paragraph (c), the omission of the foregoing legend shall not
affect the enforceability of any part of this Agreement or the rights of any holder of the Rights.

9

 

     Section 4. Form of Rights Certificates.

          (a) The Rights Certificates (and the forms of election to purchase and of assignment to be
printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange
on which the Rights may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed,
shall be dated as of the Record Date and on their face shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth
therein at the price set forth therein (such exercise price per one one-thousandth of a share, the
“Purchase Price”), but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

          (b) Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof
that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii)
a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is
part of a plan, arrangement or understanding which has as a primary purpose or effect 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) a legend in substantially the following
form:

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

Notwithstanding this paragraph (b), the omission of the foregoing legend shall not affect the
enforceability of any part of this Agreement or the rights of any holder of the Rights.

     Section 5. Countersignature and Registration.

          (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the
Board of Directors, its Chief Executive Officer, its President, its Chief Financial

10

 

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

          (b) Following the Distribution Date, and receipt by the Rights Agreement of notice to that
effect referred to in Section 3(a), the Rights Agent will keep, or cause to be kept, at its
principal office or offices designated as the appropriate place for surrender of Rights
Certificates upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the 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), Section 7(f) 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 may have been exchanged pursuant to 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 share of
Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates surrendered then 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 the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged at the principal
office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the transfer of any
such surrendered Rights Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 7(f), Section 14
hereof and Section 24 hereof, countersign and deliver to the Person entitled thereto a Rights
Certificate or Certificates, as the case may be, as so requested. The Company may

11

 

require payment of a sum sufficient to cover any tax or charge, including any documentary
stamp tax, imposed or collected by any governmental or regulatory authority that may be imposed in
connection with any transfer, split up, combination or exchange of Rights Certificates (“Transfer
Taxes”).

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

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

          (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 on the reverse
side thereof duly completed and executed, to the Rights Agent at the principal office or offices of
the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price
with respect to the total number of one one-thousandths of a share (or 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 earlier of (i) 5:00 P.M., New York City time, on March 10, 2019 or such earlier or
later time and date as the Board of Directors may determine in accordance with Section 27 hereof
(“Final Expiration Date”), (ii) the time at which the Rights are redeemed or exchanged as provided
in Section 23 and Section 24 hereof or (iii) the time at which the State Department of Assessments
and Taxation of Maryland accepts for record a charter amendment providing for (as determined in good faith by the
Board of Directors) restrictions on certain acquisitions and dispositions of the Company’s
securities in order to preserve the benefit of the Company’s NOLs, NCLs or other tax attributes
(the earlier of (i), (ii) and (iii) being herein referred to as the “Expiration Date”).

          (b) The Purchase Price for each one one-thousandth of a share of Preferred Stock pursuant to
the exercise of a Right initially shall be $16.00, 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
paragraph (c) below.

          (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of
election to purchase and the certificate duly executed, accompanied by payment, with respect to
each Right so exercised, of the Purchase Price per one one-thousandth of a share of Preferred Stock
(or other shares, securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable Transfer Tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any

12

 

transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the total number of one one-thousandths of a share
of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid
in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or, upon the order of the
registered holder of such Rights Certificate, registered in such name or names as may be designated
by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of
the registered holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof), and any applicable Transfer Taxes
consistent with Section 9(e) hereof shall be made in cash or by certified bank check or bank draft
payable to the order of the Company in lawful money of the United States of America. In the event
that the Company is obligated to issue other securities (including Common Stock) of the Company,
pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make
all arrangements necessary so that such other securities, cash and/or other property are available
for distribution by the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock would be issued.

          (d) In case the registered holder of any Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate evidencing the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder
of such Rights Certificate, registered in such name or names as may be designated by such holder,
subject to the provisions of Section 14 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 or transferred to (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of
the Company has determined is part of a plan, arrangement or understanding which has as a primary
purpose or effect the avoidance of this Section 7(e), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this

13

 

Section 7(e) and Section 4(b) hereof are complied with, but neither the Company nor the Rights
Agreement shall have liability to any holder of Rights Certificates or any other Person as a result
of the failure to make any determinations with respect to an Acquiring Person or any of its
Affiliates, Associates or transferees hereunder.

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

     Section 8. Cancellation and Destruction of Rights Certificates. 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 such cancelled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.

     Section 9. Reservation and Availability of Capital Stock.

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

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

          (c) The Company shall use its reasonable best efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) hereof, a registration statement under the Act,

14

 

with respect to the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights
are no longer exercisable for such securities, and (B) the date of the expiration of the Rights.
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 120 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. In addition, if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the exercisability of the
Rights until such time as a registration statement has been declared effective. Upon any such
suspension, the Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such time as the
suspension has been rescinded. 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 share of Preferred Stock (and, following the occurrence of
a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and nonassessable.

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

          (f) As determined in good faith by the Board of Directors, with such determination being
binding and conclusive on all parties, the requirements of this Section 9 shall apply to shares of
Common Stock or Common Stock Equivalents of the Company if the Company has elected in accordance
with Section 11(a)(iii) hereof to substitute shares of

15

 

Common Stock or Common Stock Equivalents for shares of Preferred Stock that otherwise may be
purchased upon the exercise of Rights.

     Section 10. Preferred Stock Record Date. Each Person in whose name any certificate
for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of such fractional shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable Transfer Taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer
books of the Company are closed, such Person shall be deemed to have become the record holder of
such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may
be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares 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 of capital stock covered by each
Right and the number of Rights outstanding are subject to adjustment from time to time as provided
in this Section 11.

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

16

 

          (ii) In the event any Person shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, unless the event causing such Person to become an
Acquiring Person is a transaction set forth in Section 13(a) hereof, then, promptly
following the occurrence of such event, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of a number of one one-thousandths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the then number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be referred to as the “Purchase
Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market
Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the date of
such first occurrence (such number of shares, the “Adjustment Shares”).

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

17

 

extended to the extent necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval (if
necessary) for the authorization of such additional shares (such thirty (30) day period, as
it may be extended, is herein called the “Substitution Period”). To the extent that the
Company determines that action should be taken pursuant to the first and/or third sentences
of this Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof,
that such action shall apply uniformly to all outstanding Rights, and (2) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in order to
seek such stockholder approval for such authorization of additional shares and/or to decide
the appropriate form of distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall
be the Current Market Price per share of the Common Stock 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 share of the Common Stock on such date.

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

18

 

          (c) In case the Company shall fix a record date for a distribution to all holders of Preferred
Stock (including any such distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation), in cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than Preferred Stock), 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 (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants applicable to a share
of Preferred Stock, and the denominator of which shall be such Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such distribution is not
so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in
effect if such record date had not been fixed.

          (d) (i) For the purpose of any computation hereunder, other than computations made pursuant to
Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common Stock for the thirty
(30) consecutive Trading Days immediately prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of such Common Stock
for the ten (10) consecutive Trading Days immediately following such date; provided,
however, that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such Common Stock or securities
convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or reclassification shall not
have occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall
be properly adjusted to take into account 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 Alternext US LLC or, if the shares of Common Stock are not listed or
admitted to trading on the NYSE Alternext US LLC, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by The Nasdaq Stock Market (“NASDAQ”) or such other system
then in use, or, if on any such date the shares of Common Stock are not quoted by any such
organization, the average

19

 

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

          (ii) For the purpose of any computation hereunder, the Current Market Price per share
of Preferred Stock shall be determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the
Current Market Price per share of Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number
may be appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of this
Agreement) multiplied by the Current Market Price per share of the Common Stock. If neither
the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current
Market Price per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all purposes.

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

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

20

 

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

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

          (i) The Company may elect on or after the date of any adjustment of the Purchase Price to
adjust the number of Rights, in lieu of any adjustment in the number of one one-thousandths of a
share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior
to such adjustment. Each Right held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest one-ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement 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 countersigned in the manner provided for herein (and may bear, at the option of the
Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record
of Rights Certificates on the record date specified in the public announcement.

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

21

 

share which were expressed in the initial Rights Certificates issued hereunder but,
nevertheless, shall represent the Rights as so adjusted.

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

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

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

          (n) The Company covenants and agrees that it shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof),
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a
series of related transactions, assets, cash flow or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such
consolidation, merger, sale or transfer there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with
or immediately after such consolidation, merger, sale or transfer, the stockholders of the Person
who constitutes, or would constitute, the “Principal Party” for

22

 

purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned
by such Person or any of its Affiliates and Associates.

          (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as
permitted by Section 23, Section 24 or Section 26 hereof, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

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

     Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Section 11 or Section 13 hereof or other provision hereof
warranting the same as determined by the Board of Directors of the Company, the Company shall (a)
promptly prepare a certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate and (c) if a
Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights
Certificate. Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity of or the force or effect of the
requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to have knowledge of
any adjustment unless and until it shall have received such certificate.

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

          (a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall
not be the continuing or surviving corporation of such consolidation or merger, (y) any Person
(other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof)
shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing
or surviving corporation of such consolidation or merger and, in connection with such consolidation
or merger, all or part of the

23

 

outstanding shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or earning power aggregating
more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken
as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o) hereof), then, and in each such
case, proper provision shall be made so that: (i) each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-thousandths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-thousandths of a share 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 Right and for all purposes of this Agreement) by
50% of the Current Market Price (determined pursuant to Section 11(d)(i) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii)
such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term
“Company” shall thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be,
in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.

          (b) “Principal Party” shall mean:

          (i) in the case of any transaction described in clause (x) or (y) of the first sentence
of Section 13(a), (A) the Person that is the issuer of the securities into which shares of
Common Stock of the Company are changed or otherwise exchanged or converted in such merger
or consolidation, or, if there is more than one such issuer, the issuer of the Common Stock
of which has the greatest market value or (B) if no securities are so issued, (I) the Person
that is the other party to the merger or consolidation and that survives such merger or
consolidation, or, if there is more than one such Person, the Person the Common Stock of
which has the greatest market value or (II) if the Person that is the other party to the
merger or consolidation does not survive the merger or

24

 

consolidation, the Person that does survive the merger or consolidation (including the
Company if it survives); and

          (ii) in the case of any transaction described in clause (z) of the first sentence of
Section 13(a), the Person that is the party receiving the greatest portion of the assets,
cash flow or earning power transferred pursuant to such transaction or transactions or, if
each Person that is a party to such transaction or transactions receives the same portion of
the assets or earning power so transferred or if the Person receiving the greatest portion
of the assets or earning power cannot be determined, whichever of such Persons as is the
issuer of Common Stock having the greatest market value of shares outstanding;

provided, however, that in any such case, (1) if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary
of another Person the Common Stock of which is and has been so registered, “Principal Party” shall
refer to such other Person; or (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Stock of two or more of which are and have been so registered,
“Principal Party” shall refer to whichever of such Persons is the issuer of the Common Stock having
the greatest aggregate market value or (3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in clauses (1) and (2) above shall apply to each of the owners having
an interest in the venture as if the Person owned by the joint venture was a Subsidiary of both or
all of such joint venturers, and the Principal Party in each such case shall bear the obligations
set forth in this Section 13 in the same ratio as its interest in such Person bears to the total of
such interests.

          (c) The Company shall not consummate any consolidation, merger or sale or transfer of assets,
cash flow or earning power referred to in Section 13(a) unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock that have not been issued or reserved
for issuance to permit exercise in full of all Rights in accordance with this Section 13 and unless
prior thereto the Company and the Principal Party involved therein shall have executed and
delivered to the Rights Agent an agreement confirming that the Principal Party shall, upon
consummation of such consolidation, merger or sale or transfer of assets or earning power, assume
this Agreement in accordance with Section 13(a) hereof and that all rights of first refusal or
preemptive rights in respect of the issuance of shares of Common Stock of the Principal Party upon
exercise of outstanding Rights have been waived and that such transaction shall not result in a
default by the Principal Party under this Agreement, and further providing that, as soon as
practicable after the date of any consolidation, merger or sale or transfer of assets or earning
power referred to in Section 13(a) hereof, the Principal Party will:

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

25

 

meeting the requirements of the Act) until the date of expiration of the Rights, and
similarly comply with applicable state securities laws;

          (ii) use its reasonable best efforts to list (or continue the listing of) the Rights
and the securities purchasable upon exercise of the Rights on a national securities exchange
in the United States;

          (iii) deliver to holders of the Rights historical financial statements for the
Principal Party which comply in all respects with the requirements for registration on Form
10 (or any successor form) under the Exchange Act. In the event that any of the
transactions described in Section 13(a) hereof shall occur at any time after the occurrence
of a transaction described in Section 11(a)(ii) hereof, the Rights which have not
theretofore been exercised shall, subject to the provisions of Section 7(e) hereof,
thereafter be exercisable in the manner described in Section 13(a); and

          (iv) obtain waivers of any rights of first refusal or preemptive rights in respect of
the Common Stock of the Principal Party subject to purchase upon exercise of outstanding
Rights.

          (d) In case the Principal Party which is to be a party to a transaction referred to in this
Section 13 has a provision in any of its authorized securities or in its certificate of
incorporation or by laws or other instrument governing its affairs, which provision would have the
effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, shares of Common Stock of such
Principal Party at less than the then Fair Market Value per share (determined pursuant to Section
11(b) hereof) or securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then Fair Market Value (other than to holders of Rights pursuant to this
Section 13) or (ii) providing for any special tax or similar payment in connection with the
issuance to any holder of a Right of Common Stock of such Principal Party pursuant to the
provisions of 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 canceled, waived or amended, or that the authorized securities
shall be redeemed, so that the applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.

          (e) The Company covenants and agrees that it shall not, at any time after any Person becomes
an Acquiring Person, enter into any transaction of the type described in clauses (x) through (z) of
the first sentence of Section 13(a) hereof if (i) at the time of or immediately after such
consolidation, merger, sale, transfer or other transaction there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such consolidation, merger, sale, transfer or other
transaction, 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 Affiliates or Associates or (iii) the form or nature of
organization of the Principal Party would preclude or limit the exercisability of the Rights.

26

 

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

     Section 14. Fractional Rights and Fractional Shares.

          (a) The Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which
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 value of
a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall
be the closing price of the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price of the Rights for any day
shall be the last sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities listed or admitted
to trading on the NYSE Alternext US LLC or, if the Rights are not listed or admitted to trading on
the NYSE Alternext US LLC, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange on which the Rights
are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system
then in use or, if on any such date the Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker making a market in
the Rights, selected by the Board of Directors of the Company. If on any such date no such market
maker is making a market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used and such determination shall be
conclusive for all purposes.

          (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other
than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock)
upon exercise of the Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share
of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth of a share of Preferred Stock, 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 one-thousandth of a
share of Preferred Stock. For purposes of this Section 14(b), the current market value of one
one-thousandth of a share of Preferred Stock shall be one one-thousandth of the closing price of a
share of Preferred Stock (as determined pursuant to Section 11(d)(ii) 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 shares of Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional

27

 

shares of Common Stock, 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 (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be the closing price per
share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) on the Trading Day
immediately prior to the date of such exercise.

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

     Section 15. Rights of Action. All rights of action in respect of this Agreement,
except for rights of action given to the Rights Agent in Section 18 hereof, are vested in the
respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of
the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in its own behalf and for its own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in respect of, its
right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available
to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have
an adequate remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

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

          (a) prior to the Distribution Date, the Rights shall be evidenced by the certificates for
Common Stock (or in the case of uncertificated shares of Common Stock, by the book-entry account
that evidences record ownership of such shares) registered in the name of the holders of Common
Stock (together, as applicable, with the Summary of Rights), which certificates for Common Stock
(or book-entry account) shall also constitute certificates for Rights, and not by separate Right
Certificates, and each Right shall be transferable only simultaneously and together with the
transfer of shares of Common Stock;

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

          (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem
and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner

28

 

thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be affected by any notice
to the contrary; and

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

     Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such,
of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose
the holder of the number of one one-thousandths of a share of Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights Certificate be construed
to confer upon the holder of any Rights Certificate, as such, any of the rights of a 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, its reasonable
expenses and counsel fees and disbursements and other disbursements incurred in the 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, or expense, incurred without gross negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises.

          (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any
action taken, suffered or omitted by it in connection with its administration of this Agreement in
reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document

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believed by it to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.

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

          (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 shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the parties hereto; but
only if such corporation 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 a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of
the Rights Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.

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

     Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions, by all of which the
Company and the 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), and the opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken, suffered or omitted by it in good faith and in
accordance with such opinion.

          (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem
it necessary or desirable that any fact or matter (including, without limitation, the identity of
any Acquiring Person and the determination of Current Market Price) be proved or established by the
Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman of the Board of
Directors, the Chief Executive Officer, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the

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Company and delivered to the Rights Agent; and such certificate shall be full authorization to
the Rights Agent for any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.

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

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

          (e) The Rights Agent shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any adjustment required under the provisions of Section 11, Section 13 or Section
24 hereof or responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or
Preferred Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.

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

          (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to
the performance of its duties hereunder from the Chairman of the Board of Directors, the Chief
Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any such officer.

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

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          (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.

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

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

     Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent
may resign and be discharged from its duties under this Agreement upon thirty (30) days’ notice in
writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock,
by registered or certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment
within a period of thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or incapacitated Rights
Agent or by the holder of a Rights Certificate (who shall, with such notice, submit its Rights
Certificate for inspection by the Company), then any registered holder of any Rights Certificate
may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person
organized and doing business under the laws of the United States or of the State of New York or of
any other state of the United States, in good standing, having an office in the State of New York,
which is authorized under such laws to exercise corporate trust, stock transfer or shareholder
services powers and which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an affiliate of a Person described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of
any such appointment, the Company shall file

32

 

notice thereof in writing with the predecessor Rights Agent and each transfer agent of the
Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution Date,
mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to
give any notice provided for in this Section 21, 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 of
Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class
of shares or other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or under any employee plan or arrangement,
granted or awarded 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 of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

     Section 23. Redemption and Termination.

          (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier
of (i) the close of business on the tenth Business Day following the Stock Acquisition Date (or, if
the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on
the tenth Business Day following the Record Date), and (ii) the Final Expiration Date, 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 $.001 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the “Redemption Price”).
Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company’s right of redemption hereunder has expired. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Current Market Price, as defined in
Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.

          (b) Immediately upon the action of the Board of Directors of the Company ordering the
redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without
any further action and without any notice, the right to exercise the Rights will

33

 

terminate and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such redemption to the
Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such
holders at each holder’s last address as it appears upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock.
Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.

          (c) Notwithstanding the provisions of Section 23(a) hereof, in the event that a majority of
the Board of Directors of the Company is elected by stockholder action by written consent, or is
comprised of persons elected at a meeting of stockholders who were not nominated by the Board of
Directors of the Company in office immediately prior to such meeting, then for a period of one
hundred and eighty (180) days following the effectiveness of such election the Rights shall not be
redeemed and the Board of Directors may not accelerate the Final Expiration Date to a date earlier
than March 10, 2019, if such redemption or such acceleration, as the case may be, is reasonably
likely to have the purpose or effect of allowing any Person to become an Acquiring Person or
otherwise facilitating the occurrence of a Triggering Event or a transaction with an Acquiring
Person.

          (d) In the event the Company shall at any time after the date of this Agreement but before
such time as any Person becomes an Acquiring Person (A) pay any dividend on Common Stock in shares
of Common Stock, (B) subdivide or split the outstanding shares of Common Stock into a greater
number of shares or (C) combine or consolidate the outstanding shares of Common Stock into a
smaller number of shares or effect a reverse split of the outstanding shares of Common Stock and as
a consequence thereof the number of Rights outstanding shall change, then, and in each such event,
the Redemption Price may, by action of the Board of Directors of the Company in its discretion, be
appropriately adjusted in respect of such transaction so as to maintain the aggregate Redemption
Price of all Rights after such transaction at the same amount, insofar as practicable, as before
the transaction.

     Section 24. Exchange.

          (a) The Board of Directors of the Company may, at its option, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the provisions of Section 7(e)
hereof) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”).
Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person, other than a Related Person or an Exempt Person,
together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock then outstanding. From and after the occurrence of an event specified in
Section 13(a) hereof, any Rights that theretofore have not been exchanged pursuant to this Section
24(a) shall thereafter be exercisable only in accordance with Section 13 and may not be exchanged
pursuant to this Section 24(a).

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

          (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute
Preferred Stock (or Equivalent Preferred Stock, as such term is defined in paragraph (b) of Section
11 hereof) for Common Stock exchangeable for Rights, at the initial rate of one one-thousandth of a
share of Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock, as
appropriately adjusted to reflect stock splits, stock dividends and other similar transactions
after the date hereof.

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

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

     Section 25. Notice of Certain Events.

          (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of its Common Stock or Preferred Stock or to
make any other distribution to the holders of its Common Stock or Preferred Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the Company not to exceed
150% of the rate of the last cash dividend theretofore paid), or (ii) to offer to the holders of
its Common Stock or Preferred Stock rights or warrants to subscribe for

35

 

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

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

     Section 26. Notices.

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

Deerfield Capital Corp.

One O’Hare Centre, 9th Floor

6250 North River Road

Rosemont, IL 60018

Attention: Corporate Secretary

          (b) Subject to the provisions of Section 21, any notice or demand authorized by this Agreement
to be given or made by the Company or by the holder of any Rights

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

American Stock Transfer & Trust Company LLC

59 Maiden Lane

New York, New York 10038

Attention: Stock Transfer Administration

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

     Section 27. Supplements and Amendments. Prior to the Distribution Date, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder, including, but not limited to, the Final Expiration
Date or (iv) to change or supplement the provisions hereunder in any manner which the Company may
deem necessary or desirable and which shall not materially and adversely affect the interests of
the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the
Company 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. Notwithstanding
anything herein to the contrary, this Agreement may not be amended (other than pursuant to clauses
(i) or (ii) of the preceding sentence) at a time when the Rights are not redeemable.

     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 of Directors, etc. For all
purposes of this Agreement, any calculation of the number of shares of Common Stock or any other
class of capital stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this

37

 

Agreement, (ii) make all determinations deemed necessary or advisable for the administration
of this Agreement (including a determination to redeem or not redeem the Rights or to amend the
Agreement) and (iii) accelerate the Final Termination Date in accordance with Section 7(a) hereof.
All such actions, calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith, shall (x) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all other parties, and (y) not subject the Board of Directors
or any of the directors on the Board of Directors to any liability to the holders of the Rights.
Notwithstanding anything contained herein to the contrary, the Rights Agent is entitled always to
assume that the Company’s Board of Directors 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, registered holders of the Common Stock)
any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for
the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock).

     Section 31. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the contrary,
if any such term, provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company determines in its good
faith judgment that severing the invalid language from this Agreement would adversely affect the
purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall
be reinstated and shall not expire until the close of business on the tenth Business Day following
the date of such determination by the Board of Directors. Without limiting the foregoing, if any
provision requiring a specific group of directors to act is held to by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such determination shall then
be made by the Board of Directors of the Company in accordance with applicable law and the
Company’s charter and Amended and Restated 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 Maryland and
for all purposes shall be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State.

     Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same instrument.

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     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.

39

 

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

	 	 	 	 	 
	 	DEERFIELD CAPITAL CORP.

 	 
	 	By:  	/s/ Jonathan W. Trutter
 	 
	 	 	Name:  	Jonathan W. Trutter 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	AMERICAN STOCK TRANSFER &

TRUST COMPANY LLC

 	 
	 	By:  	/s/
Paula Caroppoli
 	 
	 	 	Name:  	Paula Caroppoli	 
	 	 	Title:  	Vice
President	 
	 

40

 

Exhibit A

FORM OF

DEERFIELD CAPITAL CORP.

ARTICLES SUPPLEMENTARY

     Deerfield Capital Corp., a Maryland corporation (the “Corporation”), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:

     FIRST: Under a power contained in Article V, Section 5.3 of the charter of the
Corporation (the “Charter”), the Board of Directors of the Corporation (the “Board of Directors”),
by resolution duly classified 100,000 shares (the “Shares”) of Preferred Stock (as defined in the
Charter) as shares of Series A Junior Participating Preferred Stock, $.001 par value per share (the
“Series A Junior Participating Preferred Stock”), with the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption, as set forth as follows.

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

     Section 1. Designation and Amount. The shares of such series shall be classified as
“Series A Junior Participating Preferred Stock” and the number of shares constituting such series
shall be 100,000.

     Section 2. Dividends and Distributions.

          (a) Subject to the prior and superior rights of the holders of any shares of any series of
Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred
Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if authorized by the Board of Directors and
declared by the Corporation out of funds legally available for the purpose, quarterly dividends
payable in cash on or before the 30th day of January, April, July and October in each
year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing
on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $.001 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common
Stock, par value $.001 per share, of the Corporation (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 Junior Participating
Preferred Stock. In the event the Corporation shall at any time after March 11, 2009 (the “Rights
Declaration Date”) (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii)

A-1

 

combine the outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

          (b) The Corporation may not declare or pay a dividend on the Common Stock (other than a
dividend payable in shares of the Common Stock) unless it simultaneously declares and pays a
dividend on the Series A Junior Participating Preferred Stock as provided in paragraph (a) above;
provided that, in the event no dividend payable in shares shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, a dividend of $.001 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

          (c) Subject to the prior and superior rights of the holders of any shares of any series of
Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Stock
with respect to dividends,  dividends shall begin to accrue and be cumulative on outstanding shares of Series A
Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Junior Participating 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 Junior Participating 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 Junior Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared thereon, which record date
shall be no more than 30 days prior to the date fixed for the payment thereof.

     Section 3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:

          (a) Subject to the provision for adjustment hereinafter set forth, each share of Series A
Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the holders of Common Stock. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the

A-2

 

outstanding Common Stock into a smaller number of shares, then in each such case the number of
votes per share to which holders of shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.

          (b) Except as otherwise provided herein or by law, the holders of shares of Series A Junior
Participating Preferred Stock and the holders of shares of Common Stock 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 Junior Participating Preferred Stock shall be
in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a “default period”) which shall
extend until such time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A Junior
Participating Preferred Stock then outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred Stock (including holders of the
Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six
quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to
elect two directors.

               (ii) During any default period, such voting right of the holders of Series A Junior
Participating Preferred Stock may be exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(c) or at any annual meeting of stockholders, and thereafter at
annual meetings of stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase in certain cases the authorized
number of directors shall be exercised unless the holders of at least ten percent in number of
shares of Series A Junior Participating Preferred Stock outstanding shall be present in person or
by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by
the holders of Series A Junior Participating Preferred Stock of such voting right. At any meeting
at which the holders of Series A Junior Participating Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have the right, voting as a class, to
elect directors to fill such vacancies, if any, in the Board of Directors as may then exist up to
two directors or, if such right is exercised at an annual meeting, to elect two directors. If the
number which may be so elected at any special meeting does not amount to the required number, the
holders of the Series A Junior Participating Preferred Stock shall have the right to make such
increase in the number of directors as shall be necessary to permit the election by them of the
required number. After the holders of the Series A Junior Participating Preferred Stock shall have
exercised their right to elect directors in any default period and during the continuance of such
period, the number of directors shall not be increased or decreased except by vote of the holders
of Series A Junior Participating Preferred Stock as herein provided or pursuant to the rights of
any equity securities ranking senior to or pari passu with the Series A Junior Participating
Preferred Stock.

               (iii) Unless the holders of Series A Junior Participating Preferred Stock shall, during an
existing default period, have previously exercised their right to elect directors,

A-3

 

the Board of Directors may authorize, or any stockholder or stockholders owning in the
aggregate not less than ten percent of the total number of shares of Series A Junior Participating
Preferred Stock outstanding, may request, the calling of a special meeting of the holders of Series
A Junior Participating Preferred Stock, which meeting shall thereupon be called by the Chief
Executive Officer, President, a Vice President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Series A Junior Participating Preferred Stock
are entitled to vote pursuant to this paragraph (c)(iii) shall be given to each holder of record of
Series A Junior Participating Preferred Stock by mailing a copy of such notice to such holder at
its last address as the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than 20 days and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such order or request, such meeting may
be called on similar notice by any stockholder or stockholders owning in the aggregate not less
than ten percent of the total number of shares of Series A Junior Participating Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (c)(iii), no such special meeting
shall be called during the period within 60 days immediately preceding the date fixed for the next
annual meeting of the stockholders.

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

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

          (d) Except as set forth herein, holders of Series A Junior Participating 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.

A-4

 

     Section 4. Certain Restrictions.

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

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

               (ii) declare or pay dividends on or make any other distributions on any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A
Junior Participating 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 on
a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A
Junior Participating Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred Stock; or

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

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

     Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall become
authorized but unissued shares of Preferred Stock with classification or designation and may be
reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.

A-5

 

     Section 6. Liquidation, Dissolution or Winding Up.

          (a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received an amount equal to $1,000.00 per share of Series
A Junior Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the “Series A
Liquidation Preference”). Following the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall
have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set
forth in subparagraph (c) below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii), the “Adjustment
Number”). Following the payment of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.

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

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

          (d) In determining whether a distribution (other than upon voluntary or involuntary
liquidation) by dividend, redemption or other acquisition of shares of stock of the Corporation or
otherwise is permitted under the Maryland General Corporation Law, no effect shall be given to
amounts that would be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of shares of

A-6

 

stock of the Company whose preferential rights upon dissolution are superior to those
receiving the distribution.

     Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other property, then, as a
condition to the transaction, the shares of Series A Junior Participating Preferred Stock shall at
the same time be similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior
Participating 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.

     Section 8. No Redemption. The shares of Series A Junior Participating Preferred Stock
shall not be redeemable.

     Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of Preferred Stock as to the payment of dividends and the distribution
of assets, unless the terms of any such series shall provide otherwise.

     Section 10. Amendment. At any time when any shares of Series A Junior Participating
Preferred Stock are outstanding, the Charter, including the terms of these Articles Supplementary,
shall not be amended, by merger or otherwise, in any manner which would materially alter or change
the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.

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

     SECOND: The Shares have been classified by the Board of Directors under the authority
contained in the Charter.

     THIRD: These Articles Supplementary have been approved by the Board of Directors in
the manner and by the vote required by law.

     FOURTH: The undersigned duly authorized officer of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to all matters or

A-7

 

facts required to be verified under oath, the undersigned duly authorized officer acknowledges
that to the best of his or her knowledge, information and belief, these matters and facts are true
in all material respects and that this statement is made under the penalties for perjury.

A-8

 

     IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in
its name and on its behalf by the undersigned duly authorized officer and attested to by its
Corporate Secretary on March 11, 2009.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	DEERFIELD CAPITAL CORP.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	(SEAL)	 	 	 	 	 	 	 	Name:	 	 	 	 
	Name:
	 	

	 	 	 	 	 	Title:	 	 	 	 
	Title:	 	 	 	 	 	 	 	 	 	 	 	 

A-9

 

Exhibit B

[Form of Rights Certificate]

			
	 	 	 
	Certificate No. R-
	 	                     Rights

NOT EXERCISABLE AFTER MARCH 10, 2019 OR EARLIER (A) IF REDEEMED BY THE COMPANY, (B) IF THE
EXPIRATION DATE IS ACCELERATED BY THE BOARD OF DIRECTORS IN ACCORDANCE WITH THE RIGHTS AGREEMENT OR
(C) IF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
MARYLAND ACCEPTS FOR RECORD A CHARTER AMENDMENT
PROVIDING FOR (AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS) RESTRICTIONS ON CERTAIN
ACQUISITIONS AND DISPOSITIONS OF THE COMPANY’S SECURITIES IN ORDER TO PRESERVE THE BENEFIT OF THE
COMPANY’S NOLS, NCLS OR OTHER TAX ATTRIBUTES. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
EVIDENCED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS EVIDENCED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1

Rights Certificate

DEERFIELD CAPITAL CORP.

          This certifies that                                                          
, or its 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 March 11, 2009 (the
“Rights Agreement”), between Deerfield Capital Corp., a Maryland corporation (the “Company”), and
American Stock Transfer & Trust Company LLC, a New York limited liability company (the “Rights
Agent”), to purchase from the Company at any time prior to 5:00 P.M. (New York City time) on March
10, 2019 (unless such date is shortened or extended prior thereto by the Board of Directors) at the
office or offices of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one one-thousandth

 

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

B-1

 

of a fully paid, non-assessable share of Series A Junior Participating Preferred Stock (the
“Preferred Stock”) of the Company, at a purchase price of $16.00 per one one-thousandth of a share
(the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as
of                     , 20___, based on the Preferred Stock as constituted at such date. The Company reserves
the right to require prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock
will be issued.

          Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights
Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by or
transferred to (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an Acquiring Person, or an
Affiliate or Associate of 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 shares of
Preferred Stock or other securities, which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment upon the happening
of certain events, including Triggering Events.

          This Rights Certificate is subject to all of the terms, provisions and conditions of the
Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of
rights include the temporary suspension of the exercisability of such Rights under the specific
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
principal office or offices of the Rights Agent designated for such purpose, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-thousandths of a share of
Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not exercised.

          Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
may be redeemed by the Company at its option at a redemption price of $.001 per

B-2

 

Right at any time prior to the earlier of the close of business on (i) the tenth Business Day
following the Stock Acquisition Date (as such time period may be extended pursuant to the Rights
Agreement), and (ii) the Final Expiration Date. The foregoing notwithstanding, the Rights
generally may not be redeemed, and the Final Expiration Date may not be accelerated to a date prior
to March 10, 2019, for one hundred eighty (180) days following a change in a majority of the Board
as a result of a proxy contest or as a result of stockholder action by written consent. In
addition, under certain circumstances following the Stock Acquisition Date, the Rights may be
exchanged, in whole or in part, for shares of the Common Stock, or shares of preferred stock of the
Company having essentially the same value or economic rights as such shares. Immediately upon the
action of the Board of Directors of the Company authorizing any such exchange, and without any
further action or any notice, the Rights (other than Rights which are not subject to such exchange)
will terminate and the Rights will only enable holders to receive the shares issuable upon such
exchange.

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

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

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

B-3

 

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

Dated as of _________________.

	 	 	 	 	 
	 	DEERFIELD CAPITAL CORP.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title 	 
	 

	 	 	 	 	 
	 	Countersigned:

[                            ]

 	 
	 

	 	 	 	 	 
	 	By:  	
 	 
	 	 	Authorized Signature 	 
	 	 	 	 

B-4

 

	 	 	 	 	 

[Form of Reverse Side of Rights Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)

          FOR VALUE RECEIVED                                          hereby sells, assigns and transfers unto
                                         (Please print name and address of transferee) this Rights Certificate,
together with all right, title and interest therein, and does hereby irrevocably constitute and
appoint                                          Attorney, to transfer the within Rights Certificate on the books of the
within named Company, with full power of substitution.

Dated: ________________,

	 	 	 	 	 
	 	 	 
	 	

 	 
	 	Signature 	 
	 	 	 
	 

Signature Guaranteed:

 

 

Certificate

          The undersigned hereby certifies by checking the appropriate boxes that:

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

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

Dated:                                         ,

	 	 	 	 	 
	 	 	 
	 	

 	 
	 	Signature 	 
	 	 	 
	 

Signature Guaranteed:

 

 

NOTICE

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

 

 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires

to exercise Rights represented

by the Rights Certificate.)

To: Deerfield Capital Corp.

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

	 	 	 
	 

	 	 
	Please insert social security
	 	 
	or other identifying number
	 	 

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	(Please print name and address)	 	 

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

	 	 	 
	 

	 	 
	Please insert social security
	 	 
	or other identifying number
	 	 

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	(Please print name and address)	 	 

Dated:                     ,        

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	Signature	 	 

Signature Guaranteed:                                    

 

 

Certificate

          The undersigned hereby certifies by checking the appropriate boxes that:

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

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

Dated: _____________________,

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	Signature	 	 

Signature Guaranteed: __________

 

 

NOTICE

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

 

 

Exhibit C

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED STOCK

          On March 11, 2009, the Board of Directors of Deerfield Capital Corp. (the “Company”)
authorized and the Company declared a dividend distribution of one Right for each outstanding share
of Company Common Stock to stockholders of record at the close of business on March 11, 2009 (the
“Record Date”). Each Right entitles the registered holder to purchase from the Company a unit
consisting of one one-thousandth of a share (a “Unit”) of Series A Junior Participating Preferred
Stock, par value $0.001 per share (the “Series A Preferred Stock”) at a Purchase Price of $16.00
per Unit, subject to adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the “Rights Agreement”) between the Company and American Stock Transfer & Trust Company
LLC, as Rights Agent.

          By adopting the Rights Agreement, the Board of Directors protects stockholder value because
the Rights Agreement protects the Company’s ability to carry forward its net capital losses (the
“NCLs”) and net operating losses (the “NOLs”). The Company has experienced substantial capital
losses and operating losses, and under the Internal Revenue Code and rules promulgated by the
Internal Revenue Service, the Company may “carry forward” these losses in certain circumstances to
offset current and future earnings and thus, reduce the Company’s federal income tax liability,
subject to certain requirements and restrictions. However, if the Company experiences an
“ownership change,” as defined in Section 382 of the Internal Revenue Code, the Company’s ability
to use its NCLs and NOLs could be substantially limited or lost altogether.

          Initially, the Rights will be attached to all Common Stock certificates representing shares
then outstanding, and no separate Rights Certificates will be distributed. Subject to certain
exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has
acquired beneficial ownership of 4.9% or more of the outstanding shares of Common Stock (the “Stock
Acquisition Date”), other than as a result of repurchases of stock by the Company or (ii) 10
business days (or such later date as the Board shall determine) following the commencement of a
tender offer or exchange offer that would result in a person or group becoming an Acquiring Person
(notwithstanding the requirement described below that the Board of Directors affirmatively
determine that such person shall be an Acquiring Person); provided, however, that
the Distribution Date shall not occur unless, within either of the ten business day periods (or
such later date) specified in clauses (i) and (ii) above, the Board of Directors of the Company
shall have affirmatively determined, in its sole and absolute discretion, that a Distribution Date
shall occur upon the end of such applicable ten business day (or later) period. Until the
Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates, (ii) new Common Stock certificates
issued after the Record Date will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for Common Stock outstanding
will also constitute the transfer of the Rights associated with the Common Stock

 

 

represented by such certificate. Pursuant to the Rights Agreement, the Company reserves the
right to require prior to the occurrence of a Triggering Event (as defined below) that, upon any
exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock
will be issued.

          The definition of Acquiring Person contained in the Rights Agreement contains several
exemptions, including for (i) the Company or any of its subsidiaries, (ii) any employee benefit
plan of the Company, or of any subsidiary of the Company, or any person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such plan, (iii) any
person who becomes the beneficial owner of 4.9% or more of the shares of Common Stock then
outstanding as a result of a reduction in the number of shares of Common Stock by the Company,
unless and until such person, after becoming aware that such person has become the beneficial owner
of such percentage of shares of Common Stock, acquires beneficial ownership of any additional
shares of Common Stock then outstanding, (iv) any person who beneficially owns 4.9% or more of the
shares of Common Stock on the date of the Rights Agreement, unless and until such person and its
affiliates and associates acquire any additional shares of Common Stock then outstanding, (v) any
person who becomes the beneficial owner of 4.9% or more of the shares of Common Stock then
outstanding, directly or indirectly, as the result of a warrant, the exercise thereof, the transfer or acquisition of such warrant or the Common Stock acquired thereby, where such
warrant had first been issued upon approval by the Board of Directors of the Company unless and until such person and
its affiliates and associates acquire any additional shares of Common
Stock then outstanding that are unrelated to the warrant, or
(vi) any person whose beneficial ownership (together with all affiliates and associates of such
person) of 4.9% or more of the then-outstanding Common Stock will not, as determined by the
Company’s Board of Directors in its sole and absolute discretion, jeopardize or endanger the
availability to the Company of its NCLs and NOLs or who the Company’s Board of Directors otherwise
determines, in its sole and absolute discretion, to treat as exempt from the definition of
Acquiring Person. No person shall be an Acquiring Person unless the Board of Directors of the
Company affirmatively determines, in its sole and absolute discretion, within ten business days
after such person otherwise meets the requirements of the definition of Acquiring Person, that such
person shall be an Acquiring Person.

          The Rights are not exercisable until the Distribution Date and will expire at 5:00 P.M. (New
York City time) on March 10, 2019, unless such date is shortened or extended in accordance with the
Rights Agreement, or the Rights are earlier redeemed or exchanged by the Company as described
below. The Rights will also expire at the time the State Department of Assessments and Taxation of
Maryland accepts for record a charter amendment providing for (as determined in good faith by the Board of
Directors) restrictions on certain acquisitions and dispositions of the Company’s securities in
order to preserve the benefit of the Company’s NOLs, NCLs or other tax attributes.

          As soon as practicable after the Distribution Date, Rights Certificates will be mailed to
holders of record of the Common Stock as of the close of business on the Distribution Date and,
thereafter, the separate Rights Certificates alone will represent the Rights. Except as otherwise
determined by the Board of Directors, only shares of Common Stock issued prior to the Distribution
Date will be issued with Rights.

2

 

          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 Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times the exercise price
of the Right. Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by or transferred to any Acquiring Person will be null
and void. However, Rights are not exercisable following the occurrence of the event set forth
above until such time as the Rights are no longer redeemable by the Company as set forth below.

          For example, at an exercise price of $16.00 per Right, each Right not owned by or transferred
to an Acquiring Person (or by certain related parties) following an event set forth in the
preceding paragraph would entitle its holder to purchase $32.00 worth of Common Stock (or other
consideration, as noted above) for $16.00. If the Common Stock at the time of exercise had a
market value per share of $8.00, the holder of each valid Right would be entitled to purchase four
(4) shares of Common Stock for $16.00.

          In the event that, at any time following the Stock Acquisition Date, (i) the Company engages
in a merger or other business combination transaction in which the Company is not the surviving
corporation, (ii) the Company engages in a merger or other business combination transaction in
which the Company is the surviving corporation and the Common Stock of the Company is changed or
exchanged, or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or
transferred, each holder of a Right (except Rights which have previously been voided as set forth
above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise price of the Right. The events set forth in
this paragraph and in the second preceding paragraph are referred to as the “Triggering Events.”

          At any time after a person becomes an Acquiring Person and prior to the acquisition by such
person or group of fifty percent (50%) or more of the outstanding Common Stock, the Board may
exchange the Rights (other than Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of Common Stock, or one one-thousandth of a
share of Preferred Stock (or of a share of a class or series of the Company’s preferred stock
having equivalent rights, preferences and privileges), per Right (subject to adjustment).

          The Purchase Price payable, and the number of Units of Preferred Stock or other securities or
property issuable, upon exercise of the Rights are subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock are granted
certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution to holders of the
Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).

          With certain exceptions, no adjustment in the Purchase Price will be required until cumulative
adjustments amount to at least 1% of the Purchase Price. No fractional Units will be

3

 

issued and, in lieu thereof, an adjustment in cash will be made based on the market price of
the Preferred Stock on the last trading date prior to the date of exercise.

          At any time until ten business days following the Stock Acquisition Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.001 per Right, referred to as the
“Redemption Price” (payable in cash, Common Stock or other consideration deemed appropriate by the
Board of Directors). Immediately upon the action of the Board of Directors ordering redemption of
the Rights, the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price. The foregoing notwithstanding, the Rights generally may not
redeemed, and the expiration date of the Rights may not be accelerated to a date earlier than March
10, 2019, for one hundred eighty (180) days following a change in a majority of the Board of
Directors as a result of a proxy contest.

          Until a Right is exercised, the holder thereof 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 will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for common stock of the
acquiring company or in the event of the redemption of the Rights as set forth above.

          Any of the provisions of the Rights Agreement may be amended by the Board of Directors of the
Company prior to the Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by the Board in order to cure any ambiguity, to make changes which do not
materially adversely affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement. The foregoing notwithstanding, no amendment may be made at such
time as the Rights are not redeemable.

          A copy of the Rights Agreement will be filed with the Securities and Exchange Commission as an
Exhibit to a Registration Statement on Form 8-A and a Current Report on Form 8-K. A copy of the
Rights Agreement is available free of charge from the Rights Agent. This summary description of
the Rights does not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.

4EX-10.23

Exhibit 10.23

EXECUTIVE EMPLOYMENT AGREEMENT

     THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of August 7,
2006 by and among Thermadyne Holdings Corporation, a Delaware corporation (“Holdings”), and
Steven A. Schumm (“Employee”).

RECITALS

     A. The Parties desire Employee to be employed by Holdings in the capacity of Executive Vice
President — Chief Financial Officer and Chief Administrative Officer; and

	 	 B.	 	The Parties desire to set forth the terms and conditions of such employment to which
each Party will be bound;

     NOW THEREFORE, for and in consideration of the foregoing recitals, and in consideration of the
mutual covenants, agreements, understandings, undertakings, representations, warranties and
promises hereinafter set forth, and intending to be legally bound thereby, Holdings and Employee do
hereby covenant and agree as follows:

          SECTION 1. Basic Employment Provisions

     (a) Employment and Term. Holdings hereby employs Employee (hereinafter referred to as the
“Employment”) as Executive Vice President — Chief Financial Officer and Chief
Administrative Officer of Holdings and of Holdings’ subsidiaries (hereinafter collectively and
individually referred to as “Employers”) and Employee agrees to be employed by Employers in such
capacity, all on the terms and conditions set forth herein. The Employment shall be for a period
(the “Employment Period”) that will (i) commence on a mutually agreed date, no later than
August 7, 2006 (the “Effective Date” and continue for at least two years thereafter (unless
earlier terminated as provided herein) and (ii) renew on the second anniversary of the Effective
Date and each anniversary of the Effective Date thereafter for a one-year period, on the same terms
and conditions contained herein (unless earlier terminated as provided herein or Employee is timely
provided a notice of non-renewal as provided herein), such that the Employment Period shall extend
for a period of one year from the date of each such extension. The Employers must provide Employee
with written notice not less than 90 days in advance of the applicable anniversary of the Effective
Date in order to avoid renewal of the Employment Period on such anniversary as described above.
Notice shall be deemed given on the date it is received by the Employee. If Employers elect not to
renew the Employment Period in accordance with this Section
1(a), Employee shall be
entitled to continue to receive from Employers his then current basic compensation hereunder, such
amount to continue to be paid in accordance with the payroll practices of Employers for a period
equal to twelve months from the expiration of the Employment Period. If, however, the Employment
Period is not renewed, the Employee is a “specified employee” within the meaning of Section
409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (“Code”), and payments under this
Section 1(a) are not a separation
pay arrangement within the meaning of Prop. Treasury Reg. 1.409A-1(a)(9) or any successor Treasury
Regulations, the payment of Employee’s current basic compensation

 

 

shall be paid for a period of twelve consecutive months commencing with the seventh consecutive
month immediately following the month in which the Employment Period ends.

     (b) Duties. Employee shall be subject to the direction and supervision of the CEO and, as the
Executive Vice President — Chief Financial Officer and Chief Administrative Officer shall have
those duties and responsibilities which are assigned to him during the Employment Period by the CEO
consistent with his position. The parties expressly acknowledge that the Employee shall devote
substantially all of his business time and attention to the transaction of Employers’ businesses as
is necessary to discharge his supervisory management responsibilities hereunder. The foregoing will
not preclude reasonable participation in civic and community organizations and participation as a
member of the board of directors of at least one company will be permitted. Employee agrees to
perform faithfully the duties assigned to him to the best of his ability.

          SECTION 2. Compensation.

     (a) Salary. Employers shall pay to Employee during the Employment Period a salary as basic
compensation for the services to be rendered by Employee hereunder. The initial amount of such
salary shall be $325,000 per annum. Such salary shall be reviewed no less frequently than annually
by the CEO and may be increased upon the approval of the CEO, subject to the approval of the Board
of Directors of Holdings. Such salary shall accrue and be payable in accordance with the payroll
practices of Employers’ subsidiary or subsidiaries in effect from time to time. All such payments
shall be subject to deduction and withholding authorized or required by applicable law.

     (b) Bonus. During the Employment Period, Employee shall additionally participate in an annual
bonus plan providing for an annual bonus opportunity of not less than 75% of Employee’s annual
salary for each calendar year, in accordance with the terms set forth in Employers’ then current
Management Incentive Plan.

     (c) Benefits. During the Employment Period, Employee shall be entitled to participate in such
employee benefit plans, programs and arrangements made available to, and on the same terms as,
other similarly situated executives of Employers, including, without limitation, 401(k) plans,
employee stock purchase plans, and any other retirement plans, health, group life (with optional
additional coverage), short term disability, long term disability (not to exceed 60% of Employee’s
annual salary otherwise payable to him for the applicable period), hospitalization and such other
benefit programs as may be approved from time to
time by Employers for their executives. Employee shall be entitled to four weeks paid vacation per
year. Nothing herein shall affect Employers’ right to amend, modify or terminate any retirement or
other benefit plan at any time on a company-wide basis for similarly situated executives.

     (d) Stock Options. Holdings shall grant Employee stock options (the “Options”) to purchase up to
120,000 shares the common stock of Holdings in accordance with the terms and conditions of
Thermadyne Holdings Corporation 2004 Stock Incentive Plan. The exercise price for the Options shall
be equal to the closing bid

2

 

price per share of the common stock on the over-the-counter market as of the close of business
immediately preceding the date of Employee’s execution of this Agreement. Subject in each case to
Employee’s continued Employment until the applicable vesting date, one-half of the Options will
become vested and, subject to compliance with applicable securities laws, exercisable in three
equal annual installments on each of the next three anniversaries of the Effective date, and the
remaining one-half of the Option (the “Performance Options”) will become vested, and subject to
compliance with applicable securities laws, exercisable in three equal annual installments on each
of the first three anniversaries of the date of grant (each an “Installment Date”) if Holdings
achieves its Return on Invested Capital Targets in accordance with its annual budget for the
immediately preceding fiscal year. If any Performance Options do not vest in any year due to the
failure to meet the Return on Invested Capital Targets for such year,
such
Options shall vest on any subsequent Installment Date if Holdings has cumulatively achieved on such
date the Return on Invested Capital Targets for the current year, plus the Return on Invested
Capital Targets for the prior years for which such Targets were not achieved (after taking into
account any portion of such Targets achieved in such prior years); Provided, however, that if the
Performance Options do not vest by the final Installment Date, then such Options shall vest on the
seventh anniversary of the grant, provided Employee is still employed with the Employers on such
date. In addition to the grant listed above, Employee will be eligible for future grants on the
same basis as similarly situated employees of the Employers.

          SECTION 3. Termination.

     (a)
Death or Disability. Employment of Employee under this Agreement shall terminate
automatically upon the death or total disability of Employee. For the purpose of this Agreement,
Employee shall be totally disabled if he is disabled within the meaning of Code Section
409A(a)(2)(C).

     (b) Cause. The CEO, subject to the prior approval from the Board of Directors, may terminate
the Employment of Employee under this Agreement for Cause. For the purposes of this Agreement,
“Cause” shall be deemed to be (i) an act of willful misconduct, fraud, embezzlement, theft,
or any other act constituting a felony, involving moral turpitude or causing material harm,
financial or otherwise, to the Employers; (ii) an intentional act or failure to act, which is
committed by the Employee and which causes or can be expected to imminently cause material injury
to any of the Employers; (iii) a material breach of this Agreement that is not cured by the
Employee within 15 days after written notice from the CEO specifying the breach and requesting a
cure; or (vi) habitual abuse of alcohol, narcotics or other controlled substances which impairs
Employee’s ability to perform Employee’s duties hereunder.

     (c) Without Cause. Any of the Employers, acting alone, may terminate the Employment of
Employee under this Agreement without Cause.

     (d) Constructive Termination. Employee may elect to terminate his Employment under this
Agreement upon a Constructive Termination Without
Cause, as defined below. For purposes of this Agreement, “Constructive 
Termination Without

3

 

     Cause” shall mean a termination of the Employee’s employment at his initiative following
the occurrence, without the Employee’s prior written consent, of one or more of the following
events:

     (i) any failure by the Employers to comply with any of the provisions of this Agreement,
other than an isolated, insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Employers within 30 days after receipt of written notice
thereof given by the Employee;

     (ii) any reduction in salary, bonus percentage or material reduction in duties;

     (iii) any purported termination by the Employers of the Employee’s employment otherwise
than as expressly permitted by Section 3(b) of this Agreement;

     (iv) any failure by the Employers to comply with and satisfy the provisions of Section 6
hereof, or failure by any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the Employers to assume
expressly and agree to perform this Agreement in the same manner and to the same extent the
Employers would be required to perform it if no such succession had taken place, provided, in
either case, that the successor contemplated by Section 6 hereof has received, at least 10
days prior to the giving of notice of constructive termination by the Employee, written notice from
the Employers or the Employee of the requirements of the provisions of Section 6 or of such
failure. Employers agree to provide copy of this agreement to any such successor prior to the
succession.

     (v) The Employers shall relocate its principal executive offices or require the Employee
to have his principal location of work changed, in either case, to any location which is
in excess of 45 miles of its current location.

          SECTION 4. Compensation Following Termination.

     (a) Death. If the Employment Period is terminated pursuant to the provisions of Section 3(a) above
due to the death of Employee, this Agreement shall terminate, and no further compensation shall be
payable to Employee’s estate, heirs or beneficiaries, as applicable, except that Employee’s estate,
heirs or beneficiaries, as applicable, shall be entitled to receive (i) Employee’s then current
basic
compensation through the end of the month in which Employee’s death occurred, (ii) a pro rata
portion (based on a fraction the numerator of which is the number of days Employee worked in the
year of Employee’s death and the denominator of which is 365) of the bonus as set forth in
Section 2(b) which Employee would have been entitled to receive for the year in which
termination occurs if the performance objectives established in Employers’ Management incentive
Plan are achieved, and (iii) any un-reimbursed expenses pursuant to Section 5 below, and,
thereafter, Employers shall have no further obligations or liabilities hereunder to

4

 

Employee’s estate or legal representative or otherwise, other than the payment of benefits, if any,
pursuant to Section 2(c).

     (b) Disability. If the Employment Period is terminated pursuant to the
provisions of Section 3(a) above due to Employee’s total disability as determined
thereunder, this Agreement shall terminate, and (i) Employers will continue the payment of
Employee’s basic compensation at the then current rate until the earlier of (A) the benefits under
any long-term disability insurance provided by Employers commences or (B) 180 days from the date of
such total disability, (ii) Employers shall pay a pro rata portion (based on a fraction the
numerator of which is the number of days Employee worked in the year Employee became totally
disabled and the denominator of which is 365) of the bonus as set forth in Section 2(b)
which Employee would have been entitled to receive for the year in which termination occurs if the
performance objectives established in Employers’ Management Incentive Plan are achieved, and (iii)
Employers
shall pay any un-reimbursed expenses pursuant to Section 5 below. Thereafter,
Employers shall have no obligation for basic compensation or other compensation
payments to Employee during the continuance of such total disability.

     (c) Termination for Cause or Voluntary Termination. If the Employment Period is terminated
for Cause pursuant to Section 3(b) or voluntarily by the Employee for reasons other than those
described in Section 3(a) or 3(d) above, no further compensation or benefits shall be paid
to Employee after the date of termination, but Employee shall be entitled to receive benefits to
which he is or may become entitled pursuant to any benefit plan which by its terms survive
termination.

     (d)
Termination Without Cause; Constructive Termination. If the Employment
Period is terminated pursuant to Section 3(c) or 3(d) above, Employee shall be entitled (i)
to continue to receive from Employers his then current basic compensation hereunder, such amount to
continue to be paid in accordance with the payroll practices of Employers for a period equal to 12
months, (ii) to receive within 30 days of termination a bonus in an amount that shall be 75% of
Employee’s annual base compensation, and (iii) during such 12-month period, to continue to receive
the benefits to which he would otherwise be entitled during the Employment Period pursuant to
Section 2(c) above; provided that Employee shall continue to make the same contributions
toward such coverage as Employee was making on the date of termination, with such adjustments to
contributions as are made generally for all Employers’ employees. If the Employee is a “specified
employee” within the meaning of Code Section 409A(a)(2)(B)(i) at the time the Employment Period
expires and payments under this Section 4(d) are not a separation pay arrangement within the
meaning of Prop.
Treasury Reg. 1.409A-1(a)(9) or any successor Treasury Regulations, the payments under Section
4(d)(i) shall be paid for a period of twelve consecutive months commencing with the seventh
consecutive month immediately following the month in which the Employment Period ends.
Provided, however, that Employee shall no longer be entitled to participate in any of
Employers’ 401K plans, employee stock purchase plans or any other retirement plans. Employee
shall have the option to receive the present value of the benefits (at a 12% discount) described in
the immediately preceding sentence in a lump sum payment, with such option to be exercised by
Employee in writing within thirty (30) days of termination and

5

 

Employer shall make such lump sum payment within thirty (30) days of receiving the written notice
from Employee. In the event of Employee’s death during such 12-month period, such continuation of
compensation and benefits shall cease upon Employee’s death. In the event Employee obtains
employment elsewhere during such 12-month period, such compensation and benefits shall continue for
the period described above notwithstanding such reemployment of Employee. The sums received by
Employee under this Section 4(d) shall be considered liquidated damages in respect of claims based
on any provisions of this Agreement or Employee’s employment with Employers and the commencement of
the payment of such sums by Employers shall not begin until Employee executes and delivers a
general release of all such claims in form and substance mutually satisfactory to Employers and
Employee.

          SECTION 5. Expense Reimbursement. Upon the submission of properly documented expense account
reports, Employers shall reimburse Employee for all reasonable business-related travel and
entertainment expenses incurred by Employee in the course of his Employment with Employers. Unless
otherwise expressly provided in this Agreement, Employers’ obligations under this Section 5 shall
terminate upon the termination of the Employment Period, except for any expenses eligible for
reimbursement hereunder that are incurred prior to such termination.

          SECTION 6. Assignability Binding Nature. This Agreement shall be binding
and inure to the benefit of the parties, and their respective successors, heirs (in the case of
Employee) and assigns. No obligations of the Employers under this Agreement may be assigned or
transferred by the Employers except that such obligations shall be assigned or transferred (as
described below) pursuant to a merger or consolidation of Holdings in which Holdings is not the
continuing entity, or the sale or liquidation of all or substantially all of the assets of the
Employers, provided that the assignee or transferee is the surviving entity or successor to all or
substantially all of the assets of the Employers and such assignee or transferee assumes the
liabilities, obligations and duties of the Employers, as contained in this Agreement, either
contractually or as a matter of law. As used in this Agreement, the “Employers” and “Holdings”
shall mean the Employers and Holdings as hereinbefore defined, respectively, and any successor
to their business and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

          SECTION 7. Confidential Information.

     (a) Non-Disclosure. During the Employment Period or at any time thereafter, irrespective of
the time, manner or cause of the termination of this Agreement,
Employee will not directly or indirectly reveal, divulge, disclose or communicate to any person or
entity, other than authorized officers, directors and employees of the Employers, in any manner
whatsoever, any Confidential Information (as hereinafter defined) of Employers or any subsidiary of
Employers without the prior written consent of the CEO.

     (b) Definition. As used herein, “Confidential Information” means information
disclosed to or known by Employee as a direct or indirect consequence of or through the Employment
about Employers or any subsidiary of Employers, or their respective businesses, products and
practices which information is not generally known in the

6

 

business in which Employers or any subsidiary of Employers is or may be engaged. However,
Confidential Information shall not include under any circumstances any information with respect to
the foregoing matters which is (i) directly available to the public from a source other than
Employee, (ii) released in writing by Employers to the public or to persons who are not under a
similar obligation of confidentiality to Employers and who are not parties to this Agreement, (iii)
obtained by Employee from a third party not under a similar obligation of confidentiality to
Employers, (iv) required to be disclosed by any court process or any government or agency or
department of any
government, or (v) the subject of a written waiver executed by either Employers for the benefit of
Employee. In the event Employee believes that he is free to disclose or utilize Confidential
Information under Section 7(b), he shall give written notice of the same to Employers at
least 30 days prior to the release or use of such Confidential Information and shall specify the
claimed exemption and the circumstances giving rise thereto.

     (c) Return of Property. Upon termination of the Employment, Employee will surrender to Employers
all Confidential Information, including, without limitation, all lists, charts, schedules, reports,
financial statements, books and records of the Employers or any subsidiary of the Employers, and
all copies thereof, and all other property belonging to the Employers or any subsidiary of the
Employers, including, without limitation, company credit cards, cell phones, personal data
assistants or other electronic devices, provided Employee shall be accorded reasonable access to
such Confidential Information subsequent to the Employment Period for any proper purpose as
determined in the reasonable judgment of any of the Employers.

          SECTION 8. Agreement Not to Compete.

     (a) Termination for Cause. In the event that Employee is terminated for Cause pursuant to Section
3(b) above or voluntarily terminates his Employment with Employers other than as a Constructive
Termination pursuant to Section 3(d) above, Employee hereby agrees that for a period of 12 months
following such termination, he shall not, either in his own behalf or as a partner, officer,
director, employee, agent or shareholder (other than as the holder of less than 5% of the
outstanding capital stock of any corporation with a class of equity security registered under
Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended) engage in,
invest in or render services to any person or entity engaged in the businesses in which Employers
or any subsidiary of Employers are then engaged and situated within any country. Nothing contained
in this Section 8(a) shall be construed as restricting the Employee’s right to sell or otherwise
dispose of any business or investments owned or operated by Employee as of the date hereof.

     (b) Termination Without Cause or for Disability; Constructive Termination. In the event that the
Employment of Employee is terminated by Employers without Cause pursuant to Section 3(c) above, or
as a result of the total disability of Employee or by Employee as a Constructive Termination
pursuant to Section 3(a) and 3(d) above, respectively, Employee hereby agrees that during the
period that Employee accepts payments from the Employers pursuant to a disability plan sponsored by
Employers pursuant to Section 2(c) and 4(b) above or payments pursuant to Section 4(d) above, as

7

 

applicable, neither he nor any affiliate shall, either in his own behalf or as a partner, officer,
director, employee, agent or shareholder (other than as the holder of less than 5% of the
outstanding capital stock of any, corporation with a class of equity security registered under
Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended) engage in,
invest in or render services to any person or entity engaged in the businesses in which Employers
or any subsidiary of Employers is then engaged and situated within any country. Nothing contained
in this Section 8(b) shall be construed as restricting the Employee’s right to sell or
otherwise dispose of any business or investments owned or operated by Employee as of the date
hereof.

          SECTION 9. Agreement Not to Solicit Employees. Employee agrees that, for a period of twelve months
following the termination for any reason, neither he nor any affiliate shall, on behalf of any
business engaged in a business competitive with Employers or any subsidiary of Employers, solicit
or induce, or in any manner attempt to solicit or induce any person employed by, or any agent of,
any Employers or any subsidiary of Employers to terminate his or her employment or agency, as the
case may be, with any Employers or such subsidiary.

          SECTION 10. Injunctive Relief and other Remedies.

     (a) Employee acknowledges and agrees that the covenants, obligations and agreements of
Employee contained in Section 7, Section 8, Section 9 and this Section
10 relate to special, unique and extraordinary matters and that a violation of any of the terms
of such covenants, obligations or agreements will cause Employers irreparable injury for which
adequate remedies are not available at law. Therefore, Employee agrees that Employers shall be
entitled to an injunction, restraining order or such other equitable relief as a court of competent
jurisdiction may deem necessary or appropriate to restrain Employee from committing any violation
of such covenants, obligations or agreements.

     (b)
If Employee violates the provisions of Section 8, or 9 after the Employment
of Employee is terminated for any reason, and fails to cease or cure such violation within thirty
(30) days after the receipt by Employee of written notice of violation from Holdings, the right of Employee
to receive any further payment pursuant to this Agreement shall immediately terminate and the payments made to
Employee subsequent to the termination of Employee’s Employment pursuant to this Agreement shall be returned to
Employers by Employee within thirty (30) days after receipt of written notice from Employers of such violation.
The injunctive remedies and other remedies
described in this Section 10 are cumulative and in addition to any other rights and remedies Employers may have.

          SECTION 11. No Violation. Employee hereby represents and warrants to Employers that the execution,
delivery and performance of this Agreement by Employee does not, with or without the giving of
notice or the passage of time, or both, conflict with, result in a default, right to accelerate or
loss of rights under any provision of any agreement or understanding to which the Employee or, to
the best knowledge of Employee, any of Employee’s affiliates are a party or by which Employee, or
to the best knowledge of Employee, Employee’s affiliates may be bound or affected.

8

 

          SECTION 12. Captions. The captions, headings and arrangements used in this Agreement are for
convenience only and do not in any way affect, limit or amplify the provisions hereof.

          SECTION 13. Notices. All notices required or permitted to be given hereunder shall be in writing
and shall be deemed delivered, whether or not actually received, (i) one day after deposit with a
nationally recognized overnight express courier service with receipt of deposit confirmed, or (ii)
two days after deposited in the United States mail, postage prepaid, registered or certified mail,
return receipt requested, addressed to the party to whom notice is being given at the specified
address or at such other address as such party may designate by notice:

	 	 	 	 	 
	 

	 	Employers:
	 	Thermadyne Holdings Corporation
	 

	 	 	 	Attn: Chief Executive Officer
	 

	 	 	 	16052 Swingley Ridge Road, Suite 300
	 

	 	 	 	St. Louis, MO 63017
	 

	 	 	 	Fax: 636.728.3010
	 
	 	 	 	 
	 

	 	 	 	and
	 
	 	 	 	 
	 

	 	 	 	Thermadyne Holdings Corporation
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	16052 Swingley Ridge Road, Suite 300
	 

	 	 	 	St. Louis, MO 63017
	 

	 	 	 	Fax: 636.728.3010
	 
	 	 	 	 
	 

	 	Employee:
	 	c/o Thermadyne Holdings Corporation
	 

	 	 	 	16052 Swingley Ridge Road, Suite 300
	 

	 	 	 	St. Louis, Missouri 63017
	 
	 	 	 	 
	 

	 	 	 	Carmody MacDonald, PC
	 

	 	 	 	Attention: Mark B. Hillis
	 

	 	 	 	120 S. Central, Suite 1800
	 

	 	 	 	St. Louis, Missouri 63105

          SECTION 14. Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under present or future laws, such provisions shall be fully severable, and this
Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this
Agreement; the remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by its severance for
this Agreement. In lieu of each such illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

9

 

          SECTION 15. Amendments. This Agreement may be amended in whole or in part only by an instrument in
writing setting forth the particulars of such amendment and duly executed by an officer of
Employers and by Employee.

          SECTION 16. Waiver. No delay or omission by any party hereto to exercise any right or power
hereunder shall impair such right or power to be construed as a waiver thereof. A waiver by any of
the parties hereto of any of the covenants to be performed by any other party or any breach thereof
shall not be construed to be a waiver of any succeeding breach thereof or of any other covenant
herein contained. Except as otherwise expressly set forth herein, all remedies provided for in this
Agreement shall be cumulative and in addition to and not in lieu of any other remedies available to
any party at law, in equity or otherwise.

          SECTION 17. Counterparts. This Agreement may be executed in multiple counterparts, each of which
shall constitute an original, and all of which together shall constitute one and the same
Agreement.

          SECTION 18. Governing Law. This Agreement shall be construed and enforced according to the laws of
the State of Missouri.

          SECTION 19. Resolution of Disputes; Arbitration. Any dispute arising out of or
relating to this Agreement or Employee’s employment with Employers or the termination thereof shall
be resolved first by negotiation between the parties. If such negotiations leave the matter
unresolved after 60 days, then such dispute or claim shall be resolved by binding confidential
arbitration, to be held in St. Louis, Missouri, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The arbitrator in any arbitration provided for herein will
be mutually selected by the parties or in the event the parties cannot mutually agree, then
appointed by the American Arbitration Association. Both parties hereby voluntarily waive any right
to trial by jury. Judgment upon the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. The parties shall be responsible for their own costs and
expenses under this Section 19, although the arbitrator shall have the right and
jurisdiction to award costs and attorneys’ fees to the prevailing (in the opinion of the
arbitrator) party. Nothing in this Section 19 shall limit the Employers’ right to obtain an
injunction, restraining order or other equitable relief pursuant to Section 10.

          SECTION 20. Payment Upon Death of Employee. In the event of the death of Employee during the term
hereof, any unpaid payments due either prior to Employee’s death or after Employee’s death shall be
payable as designated by Employee prior to his death in
writing to Employers, or, in the absence of such designation, as designated in the depositive
investments or beneficiary designation of Employee duly executed by Employee according to law. In
the event of the death of all such persons so designated by Employee, either prior to the death of
the Employee or during any time when payments are due as provided herein, or in the event Employee
fails to so designate prior to his death, or withdraws all such designations, said payments
thereafter shall be made to Employee’s estate.

          SECTION 21. Prior Employment Agreements. This Agreement supersedes any and all other prior
employment, change-in-control, severance or similar agreements between Employee and Employers.

10

 

          SECTION 22. Jointly and Severally Liable. Each of the Employers that have signed below is a party
to this Agreement and is jointly and severally liable for the obligations of Employers set forth in
this Agreement.

          SECTION 23. Relocation and Other. Within 30 days of the Effective Date, Employers will pay Employee
$65,000 in recognition of relocation and other forfeitures incurred by Employee. In addition, the
Employers will pay Employee’s actual and reasonable legal expenses incurred in connection with
accepting employment with the Employers.

          SECTION 24. Tax considerations.

     (a) Golden Parachute Taxes. Notwithstanding anything herein to the
contrary, in the event of any payments or benefits provided to Employee hereunder, or
under any other benefit, bonus, option, incentive or severance plan are subject to and
excise tax under Section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”), the Company shall pay Employee, within ten (10) days of such determination,
an amount equal to such tax plus an additional amount so that the net after tax effect,
considering Federal and state income taxes, Federal Insurance Contribution Act and
Medicare taxes and the excise tax under Section 4999 of the Code, of the payment of
such excise tax is as if such additional payment had not been made. A determination
required to be made under this Section 24 and the assumptions to be utilized in arriving at
such determination shall be made by an independent, nationally recognized accounting
firm (the “Auditor”) acceptable to Holdings. The Auditor shall provide detailed
supporting calculations to both Holdings and the Employee within fifteen (15) days of the receipt
of a notice from Employee that there has been a payment under this Agreement that is subject to an
excise tax under Section 4999 of the Code. All fees and expenses of the Auditor shall be paid by
Holdings. All determinations by the Auditor shall be binding upon the Holdings and Employee.

     
(b) Withholding Taxes. All payments under this Agreement shall be net of appropriate
withholding taxes.

          SECTION 25. Indemnification. Holdings will indemnify Employee to the fullest extent that would be
permitted by law (including a payment of expenses in advance of final
disposition of a proceeding) as in effect at the time of the subject act or omission, or by the
charter or by-laws of Holdings as in effect in effect at such time, or by the terms of any
indemnification agreement between Holdings and the Employee, whichever affords greatest protection
to Employee, and the Employee shall be entitled to the protection of any insurance policies
Holdings may elect to maintain generally for the benefit of its officers and/or, during the
Employee’s service in such capacity (if applicable), directors, (and to the extent Holdings
maintains such an insurance policy or policies, in accordance with its or their terms to the
maximum extent of the coverage available for any Holdings officer or director); against all costs,
charges, and expenses whatsoever incurred or sustained by Employee (including but not limited to
any judgment entered by a court of law) at the time such costs, charges, and expenses are incurred
or sustained, in connection with any action, suit or proceeding to which Employee may be made a
party by reason of his being or having been an officer or employee of Holdings,
or serving as a
director, officer or employee of an affiliate of Holdings, at the request of Holdings,

11

 

other than any action, suit or proceeding brought against Employee by or on account of his breach
of the provisions of an employment agreement with a third party that has not been disclosed by
Employee to Holdings. The provisions of this Section 25 shall survive any termination of this
agreement.

          SECTION 26. Stock Options/Change of Control. If a change of control occurs within 183 days of the
effective date of this Agreement, Employee shall be paid, in a single, lump sum, cash payment
within thirty days of the Change of Control, an amount equal to the product of the fair market
value of a share of common stock of Holdings multiplied by 120,000 reduced by the total exercise
price of the Options provided under Section 2(d). In this event, all Options granted Employee
pursuant to Section 2(d) shall be cancelled and not exercisable and Employee shall not be entitled
to any compensation under the terms of the Thermadyne Holdings Corporation 2004 Stock Incentive
Plan (“stock plan”). “Fair market value” means the closing bid price per share of common stock of
Holdings on the over-the-counter market as of the close of business on the effective date of the
change of control or, if there is no trading on such date, as of the close of the last date
immediately preceding the change of control when such Stock is traded. “Change of control” has the
meaning as defined in the stock plan.

* * * * * *

12

 

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amended and Restated
Executive Employment Agreement as of the date first above written.

	 	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 
	 
	 	 	 	 	 	 
	 	 		 	 
	 	 	 	 	 
	 	 	Name: Steven A. Schumm	 	 
	 
	 	 	 	 	 	 
	 

	 	Dated:
	 	8-7-2006	 	 
	 
	 	 	 	 	 	 
	 	 	EMPLOYERS:	 	 
	 
	 	 	 	 	 	 
	 	 	Thermadyne Holdings Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	
 

	 	 
	 

	 	 	 	Paul D. Melnuk	 	 
	 

	 	Title:
	 	Chairman and Chief Executive Officer	 	 

THIS CONTRACT CONTAINS A BINDING ARBITRATION

PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

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