Document:

ex4-1

 

RIGHTS AGREEMENT

between

WEBMETHODS, INC.

and

AMERICAN STOCK TRANSFER & TRUST COMPANY,

as Rights Agent

Dated as of October 18, 2001

 

 

Table of Contents

	 	 	 	 	 	 	 
	Section 1.	 	
Certain Definitions
	 	 	1	 
	Section 2.	 	
Appointment of Rights Agent
	 	 	5	 
	Section 3.	 	
Issuance of Rights Certificates
	 	 	5	 
	Section 4.	 	
Form of Rights Certificates
	 	 	7	 
	Section 5.	 	
Countersignature and Registration
	 	 	8	 
	Section 6.	 	
Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates
	 	 	8	 
	Section 7.	 	
Exercise of Rights; Purchase Price; Expiration Date of Rights
	 	 	9	 
	Section 8.	 	
Cancellation and Destruction of Rights Certificates
	 	 	11	 
	Section 9.	 	
Reservation and Availability of Capital Stock
	 	 	11	 
	Section 10.	 	
Preferred Stock Record Date
	 	 	13	 
	Section 11.	 	
Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights
	 	 	13	 
	Section 12.	 	
Certificate of Adjusted Purchase Price or Number of Shares
	 	 	20	 
	Section 13.	 	
Consolidation, Merger or Sale or Transfer of Assets, Cash
Flow or Earning Power
	 	 	20	 
	Section 14.	 	
Fractional Rights and Fractional Shares
	 	 	22	 
	Section 15.	 	
Rights of Action
	 	 	23	 
	Section 16.	 	
Agreement of Rights Holders
	 	 	24	 
	Section 17.	 	
Rights Certificate Holder Not Deemed a Stockholder
	 	 	24	 
	Section 18.	 	
Concerning the Rights Agent
	 	 	25	 
	Section 19.	 	
Merger or Consolidation or Change of Name of Rights Agent
	 	 	25	 
	Section 20.	 	
Duties of Rights Agent
	 	 	26	 
	Section 21.	 	
Change of Rights Agent
	 	 	27	 
	Section 22.	 	
Issuance of New Rights Certificates
	 	 	28	 
	Section 23.	 	
Redemption and Termination
	 	 	29	 
	Section 24.	 	
Exchange
	 	 	29	 
	Section 25.	 	
Notice of Certain Events
	 	 	30	 
	Section 26.	 	
Notices
	 	 	31	 
	Section 27.	 	
Supplements and Amendments
	 	 	32	 
	Section 28.	 	
Successors
	 	 	32	 
	Section 29.	 	
Determinations and Actions by the Board of Directors, Etc.
	 	 	32	 
	Section 30.	 	
Benefits of this Agreement
	 	 	33	 
	Section 31.	 	
Severability
	 	 	33	 
	Section 32.	 	
Governing Law
	 	 	33	 
	Section 33.	 	
Counterparts
	 	 	34	 
	Section 34.	 	
Descriptive Headings
	 	 	34	 

 

 

RIGHTS AGREEMENT

     RIGHTS AGREEMENT, dated as of October 18, 2001 (the “Agreement”), between
webMethods, Inc., a Delaware corporation (the “Company”), and American Stock
Transfer & Trust Company as Rights Agent (the “Rights Agent”).

W I T N E S S E T H

     WHEREAS, on October 17, 2001 (the “Rights Dividend Declaration Date”), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of common
stock, par value $0.01 per share, of the Company outstanding at the close of
business on October 18, 2001 (the “Record Date”), and has authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11 hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company’s treasury) and the 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 having
the rights, powers and preferences set forth in the form of Certificate of
Designation, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (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
fifteen percent (15%) or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company,
(iii) any employee benefit plan of the Company, or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company, (iv) any Person who becomes the
Beneficial Owner of fifteen percent (15%) 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, after becoming aware that such Person
has become the Beneficial Owner of fifteen percent (15%) or more of the then
outstanding shares of Common Stock, acquires beneficial ownership of additional
shares of Common Stock representing one percent (1%) or more of the shares of
Common Stock then outstanding, and (v) any such Person who has reported or is
required to report such ownership (but less than twenty percent (20%)) on
Schedule 13G under the Exchange Act (or any comparable or successor report) or
on Schedule 13D under the Exchange Act (or any comparable or successor report)
which Schedule 13D does not state any intention to or reserve the right to
control or influence the management or policies

 

 

of the Company or engage in any of the actions specified in Item 4 of such
schedule (other than the disposition of the Common Stock) and, within ten (10)
Business Days of being requested by the Company to advise it regarding the
same, certifies in writing to the Company that such Person acquired shares of
Common Stock in excess of fourteen and nine-tenths percent (14.9%)
inadvertently or without knowledge of the terms of the Rights and who or which,
together with all Affiliates and Associates, thereafter does not acquire
additional shares of Common Stock while the Beneficial Owner of fifteen percent
(15%) or more of the shares of Common Stock then outstanding; provided,
however, that if the Person requested to so certify fails to do so within ten
(10) Business Days, then such Person shall become an Acquiring Person
immediately after such ten (10)-Business-Day period.

          (b)  “Act” shall mean the Securities Act of 1933, as amended, or any
successor act or statute thereto.

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

          (d)  “Affiliate” and “Associate” shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.

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

               (i)  which such Person or any of such Person’s Affiliates or Associates,
directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, 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;

               (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 or consent given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable provisions

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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 or consent as described
in the proviso to subparagraph (ii) of this paragraph (e)) or disposing of any
voting securities of the Company.

Nothing in this paragraph (e) shall cause (A) a Person engaged in business as
an underwriter of securities to be the “Beneficial Owner” of, or to
“beneficially own,” any securities acquired through such Person’s participation
in good faith in a firm commitment underwriting until the expiration of forty
days after the date of such acquisition, and then only if such securities
continue to be owned by such Person at such expiration of forty days and (B)
any stockholder of the Company, with affiliate(s), associate(s) or other
person(s) who may be deemed representatives of it serving as director(s) of the
Company, to be deemed to beneficially own securities held by other Persons as a
result of (i) persons affiliated or otherwise associated with such stockholder
serving as directors or taking any action in connection therewith, (ii)
discussing the status of its shares with the Company or other stockholders of
the Company similarly situated or (iii) voting or acting in a manner similar to
other stockholders similarly situated, absent a specific finding by the Board
of Directors of an express agreement among such stockholders to act in concert
with one another as stockholders so as to cause, in the good faith judgment of
the Board of Directors, each such stockholder to be the Beneficial Owner of the
shares held by the other stockholder(s).

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

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

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

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

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

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

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

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

          (n)  “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended and in effect on the date of the Agreement, or any successor act or
statute thereto.

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

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

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

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

          (s)  “Person” shall mean any individual, firm, corporation, partnership or
other entity.

          (t)  “Preferred Stock” shall mean shares of Series A Junior Participating
Preferred Stock, par value $0.01 per share, of the Company, and, to the extent
that there 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.

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

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

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

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

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

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

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

          (bb) “Rights Dividend Declaration Date” shall have the meaning set forth
in the preamble of this Agreement.

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

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

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

          (ff)  “Stock Acquisition Date” shall mean the earlier of (i) the first date
of public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed or amended pursuant to Section 13(d) under
the Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such, and (ii) the date that an Acquiring Person has become
such; provided, however, that if such Person is determined by the Company not
to have become an Acquiring Person pursuant to Section 1(a)(v) hereof, then no
Stock Acquisition Date shall be deemed to have occurred.

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

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

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

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

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

     Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable, upon ten (10) days’ prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and in no event be
liable for, the acts or omissions of any such co-Rights Agent.

     Section 3. Issuance of Rights Certificates.

          (a)  Until the earlier 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 may determine) after the date of the
commencement of 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

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pursuant to the terms of any such plan or for the purpose of funding any
such plan or funding other employee benefits for employees of the Company or of
any Subsidiary of the Company) within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, or any successor
provision thereto, if upon consummation thereof, such Person would become an
Acquiring Person (the earlier of (i) and (ii) being herein referred to as the
“Distribution Date”), (x) the Rights will be evidenced (subject to the
provisions of paragraphs (b) and (c) 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 Rights Agent will send by first-class,
insured, postage-prepaid mail or other reputable national delivery service, 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 (each a “Rights Certificate”), 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.

          (b)  The Company will send, as promptly as practicable on or 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 each holder of record of
Rights who may so request from time to time prior to the Expiration Date (other
than any Acquiring Person or any Associate or Affiliate of any Acquiring
Person). With respect to certificates for the Common Stock outstanding as of
the Record Date, or issued subsequent to the Record Date but prior to the
earlier of the Distribution Date or the Expiration Date, 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 (whether originally issued or from the Company’s treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock shall also be
deemed to be certificates for Rights, and shall bear the following legend:

		
	 	This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in the
Rights Agreement between webMethods, Inc. (the
“Company”) and the Rights Agent thereunder, dated as
of October 18, 2001, and as amended from

-6-

 

		
	 	time to time (the “Rights Agreement”), the terms of
which are hereby incorporated herein by reference and
a copy of which is on file at the principal offices of
the 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 Rights Agent
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.

     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 automated quotation system or 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),
Section 11(p) 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

-7-

 

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 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) the following legend:

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

     Section 5. Countersignature and Registration.

          (a)  The Rights Certificates shall be executed on behalf of the Company by
its Chairman or Vice-Chairman of its Board of Directors, its Chief Executive
Officer, its President or any Vice President, its Chief Financial Officer or
any Assistant Treasurer, or its Secretary or any Assistant Secretary, either
manually or by facsimile signature, and shall have affixed thereto the
Company’s seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned 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, the Rights Agent shall 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) and Section 14
hereof, at any time after the close of business on the Distribution Date, and
at or prior to the

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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 14 and
Section 24 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.

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

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

          (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 executed, to the Rights Agent at
the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-thousandths of a share of Preferred Stock (or 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, New York time, on October 18, 2011, or such later date as may
be established by the Board of Directors prior to the expiration of the Rights
(such date, as it may be extended by the Board of Directors, the “Final
Expiration Date”), or (ii) the time at which the Rights are redeemed or
exchanged as provided in

-9-

 

Section 23 and Section 24 hereof (the earlier of (i) and (ii) 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 $100.00, 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 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
Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be payable in U.S. Dollars in cash or by certified bank check or
bank draft payable to the order of the Company. In the event that the Company
is obligated to issue other securities (including Common Stock) of the Company,
pay cash and/or distribute other property pursuant to Section 11(a) 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 (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an

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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 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 its best efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or any other
Person as a result of its 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) 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
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Section 11(a)(ii) Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out
of its authorized and issued shares held in its treasury), the number of shares
of Preferred Stock (and, following the occurrence of a Section 11(a)(ii) 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.

-11-

 

          (b)  So long as the shares of Preferred Stock (and, following the
occurrence of a Section 11(a)(ii) Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
automated quotation system or national securities exchange, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
automated quotation system or exchange upon official notice of issuance upon
such exercise.

          (c)  The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section
11(a)(iii) hereof, a registration statement under the Act, with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the 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 ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(c),
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension has been rescinded. 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. 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 Section 11(a)(ii) 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)  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, 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), to a Person in respect of a name other than
that of the registered holder of the Rights Certificates evidencing

-12-

 

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.

     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 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,

-13-

 

subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.

               (ii)  In the event 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, 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
(whether or not such Right was then 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
fifty percent (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 Fifth Amended and Restated Certificate of
Incorporation, as amended from time to time, but not outstanding or reserved
for issuance for purposes other than upon exercise of the Rights, is not
sufficient to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the Company shall (A)
determine the value of the Adjustment Shares issuable upon the exercise of a
Right (the “Current Value”), and (B) with respect to each Right (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 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

-14-

 

in good faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the Rights, the
thirty (30) day period set forth above may be extended to the extent necessary,
but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the authorization of
such additional shares (such thirty (30) day period, as it may be extended, 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 (as determined pursuant to Section 11(d) hereof) 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)
calendar days after such record date) Preferred Stock (or shares having the
same rights, privileges and preferences as the shares of Preferred Stock
(“Equivalent Preferred Stock”)) or securities convertible into Preferred Stock
or Equivalent Preferred Stock at a price per share of Preferred Stock or per
share of Equivalent Preferred Stock (or having a conversion price per share, if
a security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price (as determined pursuant to Section 11(d) 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, 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

-15-

 

adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.

          (c)  In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation), 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) or evidences of indebtedness, or of subscription rights
or warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price (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, 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 or post-record date trading. The
closing price for each day shall be the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers Automated
Quotation System (“Nasdaq”) or such other system then in use, or, if on such
date the shares of Common Stock are not quoted by any such organization, 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 principal national
securities exchange on which the shares of Common Stock are

-16-

 

listed or admitted to trading or, if the shares of Common Stock on such date
are not quoted by any such organization or listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors. 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. The term
“Trading Day” shall mean a day on which the Nasdaq or the principal national
securities exchange on which the shares of Common Stock are quoted, listed or
admitted to trading, as the case may be, is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to
trading on any automated quotation system or 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 one
thousand (1000) (as such number may be appropriately adjusted for such events
as stock splits, stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement) multiplied by the
Current Market Price per share of the Common Stock. If neither the Common
Stock nor the Preferred Stock is publicly held or so listed or traded, Current
Market Price per share of the Preferred Stock shall mean the fair value per
share as determined in good faith by the Board of Directors, 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 ten-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),

-17-

 

(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.

          (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 ten-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 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.

-18-

 

          (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-thousandth of a share which were expressed in
the initial Rights Certificates issued hereunder.

          (k)  Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable 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)  Notwithstanding anything in this Section 11 to the contrary, 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 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 fifty percent (50%) of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would

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substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the 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 and Associates.

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

          (p)  Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the earlier of the Distribution Date or the Expiration 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 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 and Section 13 hereof,
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 (or, if prior to the Distribution Date, to each holder of
a certificate representing shares of Common Stock) in accordance with Section
25 hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.

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

-20-

 

consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or earning
power aggregating fifty percent (50%) or more 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 tradeable
shares of Common Stock of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
(whether or not such Right was then 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 fifty percent
(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), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and

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

-21-

 

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;
(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; and (3)
in case 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 (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a “Subsidiary” of both or all of such joint ventures and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.

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

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

               (ii)  take all such other action as may be necessary to enable the
Principal Party to issue the securities purchasable upon exercise of the
Rights, including but not limited to the registration or qualification of such
securities under all requisite securities laws of jurisdictions of the various
states and the listing of such securities on such automated quotation systems,
exchanges and trading markets as may be necessary or appropriate; and

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

               (iv)  obtain waivers of any rights of first refusal or preemptive rights in
respect of the securities of the Principal Party purchasable upon exercise of
the Rights.

The provisions of this Section 13 shall 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).

-22-

 

     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(i) or 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 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 such date the
Rights are not quoted by any such organization, 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 principal national securities exchange on
which the Rights are listed or admitted to trading, or, if the Rights on such
date are not quoted by any such organization or are not listed or admitted to
trading on any national securities exchange, 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. 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 shall be used.

          (b)  The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). 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 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.

-23-

 

          (d)  The holder of a Right by the acceptance of the Rights expressly waives
his 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 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 his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting
the foregoing or any remedies available to the holders of Rights, 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 will be transferable only
in connection with the transfer of Common Stock;

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

          (c)  subject to Section 6(a) and Section 7(f) 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 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 required to be affected by any notice to the contrary; and

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

-24-

 

however, the Company must use its best efforts to have any such 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
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 corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust, stock transfer or other stockholder 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,

-25-

 

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 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 or suffering 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 President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization 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

-26-

 

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

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

-27-

 

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 his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a legal business entity organized and doing business under the
laws of the United States or of the Commonwealth of Virginia or of any other
state of the United States, in good standing, which is authorized under such
laws to exercise corporate trust, stock transfer or stockholder 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 legal business
entity described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and, 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

-28-

 

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, 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 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), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of One
Tenth of One Cent ($.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 ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder’s last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.

     Section 24. Exchange.

          (a)  The Board of Directors 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

-29-

 

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 shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Stock for or pursuant to the terms of
any such plan or for the purpose of funding any such plan or funding other
employee benefits for employees of the Company or of any Subsidiary of the
Company), together with all Affiliates and Associates of such Person, becomes
the Beneficial Owner of fifty percent (50%) or more of the Common Stock then
outstanding.

          (b)  Immediately upon the action of the Board of Directors 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 or, in the case of an exchange pursuant to Section 24(c) above,
Preferred Stock or Equivalent Preferred Stock, as applicable, 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

-30-

 

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
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) 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
fifty percent (50%) or more 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 Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least twenty (20) days prior to the record date
for determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.

          (b)  In case a Section 11(a)(ii) Event or Section 13 Event shall occur,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 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 this Agreement, and (ii) all references in the preceding paragraph
to Preferred Stock shall be deemed thereafter in the event of a Section
11(a)(ii) Event to refer to Common Stock and/or, if appropriate, other
securities, or for a Section 13 Event, to the Common Stock or other securities
of the Principal Party.

     Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall

-31-

 

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:

	 	webMethods, Inc.

3930 Pender Drive

Fairfax, Virginia 22030

Attention: Corporate Secretary

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

	 	American Stock Transfer & Trust Company

59 Maiden Lane

New York, New York 10038

Attention: General Counsel

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, or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, that this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period, unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. 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 contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Stock.

-32-

 

     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 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 Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board 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.

     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 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.

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

-33-

 

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

     Section 34. Descriptive Headings. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

-34-

 

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

	 	 	 
	 	WEBMETHODS, INC	 
	 
	 	By: /s/ PHILLIP MERRICK	 
	 	
	 
	 	Name:   Phillip Merrick	 
	 	Title:     Chairman and Chief Executive Officer	 
	 
	 	AMERICAN STOCK TRANSFER & TRUST COMPANY	 
	 
	 	By: /s/ HERBERT J. LEMMER	 
	 	
	 
	 	Name:   Herbert J. Lemmer	 
	 	Title:     Vice President	 

-35-

 

CERTIFICATE OF DESIGNATION, PREFERENCES AND

RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

WEBMETHODS, INC.

	
	Pursuant to Section 151 of the General Corporation Law
of the State of Delaware

     We, the undersigned officers of webMethods, Inc., a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
“Corporation”), in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:

     That pursuant to the authority conferred upon the Board of Directors by
the Fifth Amended and Restated Certificate of Incorporation, as amended (the
“Amended and Restated Certificate”) of the said Corporation, the said Board of
Directors on October 17, 2001, adopted the following resolution creating a
series of Seventy-Five Thousand (75,000) shares of Preferred Stock designated
as Series A Junior Participating Preferred Stock:

     RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of the Corporation’s
Amended and Restated Certificate, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:

     Section 1.    Designation and Amount. The shares of such series shall be
designated as “Series A Junior Participating Preferred Stock” and the number of
shares constituting such series shall be Seventy-Five Thousand (75,000). Such
number of shares may be increased or decreased by resolution of the Board;
provided, that no decrease shall reduce the number of shares of Series A Junior
Participating Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Junior Participating Preferred Stock.

     Section 2.    Dividends and Distributions.

     (A)  Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock 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 declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
March 31, June 30, September 30 and December 31 of each year (each such date
being referred to herein as a “Quarterly Dividend Payment Date”), commencing on
the first Quarterly Dividend Payment

A-1

 

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) $10.00 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 $.01 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 October
17, 2001 (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 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. In the event the Corporation
shall at any time declare or pay any dividend on the Series A Junior
Participating Preferred Stock payable in shares of Series A Junior
Participating Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Junior Participating
Preferred Stock (by reclassification or otherwise than by payment of a dividend
in shares of Series A Junior Participating Preferred Stock) into a greater or
lesser number of shares of Series A Junior Participating Preferred Stock, 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 first sentence of this Section 2(A) shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Series A Junior Participating Preferred Stock that were
outstanding immediately prior to such event and the denominator of which is the
number of shares of Series A Junior Participating Preferred Stock outstanding
immediately after such event.

     (B)  The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in Paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock) and the Corporation
shall pay such dividend or distribution on the Series A Junior Participating
Preferred Stock before the dividend or distribution declared on the Common
Stock is paid or set apart; provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

     (C)  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

A-2

 

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 sixty (60) 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 one thousand (1,000) votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A 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.
In the event the Corporation shall at any time declare or pay any dividend on
the Series A Junior Participating Preferred Stock payable in shares of Series A
Junior Participating Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Junior Participating
Preferred Stock (by reclassification or otherwise than by payment of a dividend
in shares of Series A Junior Participating Preferred Stock) into a greater or
lesser number of shares of Series A Junior Participating Preferred Stock, 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 amount by a fraction, the
numerator of which is the number of shares of Series A Junior Participating
Preferred Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Series A Junior Participating
Preferred Stock outstanding immediately after such event.

     (B)  Except as otherwise provided herein, in the Amended and Restated
Certificate or by law, the holders of shares of Series A Junior Participating
Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.

A-3

 

     (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 (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a “default period”) which shall extend until such
time when all accrued and unpaid dividends for all previous 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
the Series A Junior Participating Preferred Stock with dividends in arrears in
an amount equal to six (6) quarterly dividends thereon, together with any other
series of Preferred Stock entitled to vote with the Series A Junior
Participating Preferred Stock thereon, voting as a class, irrespective of
series, shall have the right to elect two (2) directors.

     (ii)  During any default period, such voting right of the holders of Series
A 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 ten percent (10%) 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 the Series A Junior Participating Preferred Stock of
such voting right. At any meeting at which the holders of Preferred Stock
shall exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
directors or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of directors as shall be
necessary to permit the election by them of the required number. After the
holders of the 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 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 Preferred Stock shall, during an existing
default period, have previously exercised their right to elect directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling
of a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the Chairman of the Board or the President or by the
Board of Directors acting pursuant to a resolution adopted by a majority of the
entire Board of Directors. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to this
Paragraph (C)(iii) shall be given to each holder of record of Preferred Stock
by mailing a copy of such notice to him at his last address as the same appears
on the books of the Corporation. Such meeting shall be called for a time not
earlier than 10 days and not later than

A-4

 

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 (10%) of the total number of shares of 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, shall continue to be entitled to
elect the whole number of directors until the holders of the Series A Junior
Participating Preferred Stock, together with any other series of Preferred
Stock entitled to vote with the Series A Junior Participating Preferred Stock
thereon, shall have exercised their right to elect two (2) directors voting as
a class, after the exercise of which right (x) the directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors of a director elected by
the Series A Junior Participating Preferred Stock, together with any other
series of Preferred Stock entitled to vote thereon, 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 Preferred Stock as a class to elect directors shall cease, (y)
the term of any directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of directors shall be such number as may be
provided for in the Amended and Restated Certificate 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 Amended and Restated Certificate 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 or as otherwise provided by law, 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.

     Section 4.    Certain Restrictions.

     (A)  Whenever quarterly dividends or other dividends or distributions
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
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

A-5

 

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

     Section 6.    Liquidation, Dissolution or Winding Up.

     (A)  Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares
of 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 $100.00 per share of
Series

A-6

 

A 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, subject to the rights of any other
classes and series of capital stock of the Corporation, receive their ratable
and proportionate share of the remaining assets to be distributed in the ratio
of the Adjustment Number to one (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,
subject to the rights of any other classes and series of capital stock of the
Corporation, be distributed ratably to the holders of Common Stock.

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

     Section 7.    Consolidation, Merger, Etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A 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

A-7

 

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 the Corporation’s 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, neither the Amended and Restated
Certificate of the Corporation nor this Certificate of Designation shall be
amended 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 or more 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.

[Signatures Next Page]

A-8

 

     IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this 18th day of
October, 2001.

	 	 	 
	By:	 	 
	 	 	

	 	 	
Phillip Merrick,

Chairman and Chief Executive Officer

     Attest:

	 	 	 
	     By:	 	 
	 	 	

	 	 	
Douglas McNitt

Executive Vice President

A-9

 

[Form of Rights Certificate]

	 	 	 
	Certificate No. R-_________     	 	
____________Rights

NOT EXERCISABLE AFTER OCTOBER 18, 2011 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001
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 REPRESENTED BY THIS RIGHTS CERTIFICATE
ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*

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

WEBMETHODS, INC.

     This certifies that___________________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of October 18, 2001 (the “Rights Agreement”),
between webMethods, Inc., a Delaware corporation (the “Company”), and American
Stock Transfer & Trust Company, a federally chartered trust company (the
“Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M.
(New York, New York time) on October 18, 2011 (unless such date is 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 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 $100.00 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 aggregate number of
share 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 October 18, 2001 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.

B-1

 

     Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate
are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate
of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of 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, as amended from time to time 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 as amended from time to time.
Copies of the Rights Agreement and any amendments as may be made from time to
time, are on file at the 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 $0.001 per 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. 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 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.

B-2

 

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

     No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give 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.

[Signatures Next Page]

B-3

 

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

	 	 
	Dated as of___________________________
	 
	ATTEST:	WEBMETHODS, INC  
	 
	_______________________________	By:__________________________
	 
		Name:__________________________
	 
		Title:__________________________
	 
	Countersigned:
	 
	AMERICAN STOCK TRANSFER & TRUST COMPANY
	 
	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:	 	 
	 
	_________________________________	 	 

B-5

 

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:	 	 
	 
	_______________________________	 	 

B-6

 

NOTICE

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

B-7

 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise Rights

represented by the Rights Certificate)

To: WEBMETHODS, INC.:

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

Please insert social security

or other identifying number______________________________________
__________________________________________________________

(Please print name and address)

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

Please insert social security

or other identifying number______________________________________
__________________________________________________________

     

     

(Please print name and address)

	 	 	 
	Dated:______________________	 	
______________________________________
Signature
	 
	Signature Guaranteed:	 	 
	 
	______________________________	 	 

B-8

 

CERTIFICATE

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or 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:	 	 
	 
	______________________________	 	 

B-9

 

NOTICE

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

B-10

 

SUMMARY OF RIGHTS TO PURCHASE

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

     On October 17, 2001, the Board of Directors of webMethods, Inc. (the
“Company”) declared a dividend distribution of one Right for each outstanding
share of Company common stock (the “Common Stock”), payable to stockholders of
record at the close of business on October 18, 2001, the Record Date. Each
Right, when exercisable, entitles the registered holder to purchase from the
Company one one-thousandth of a share of Series A Junior Participating
Preferred Stock at a price of $100.00 per Right (the “Purchase Price”), subject
to adjustment. The description and terms of the Rights are set forth in a
Rights Agreement (the “Rights Agreement”) between the Company and American
Stock Transfer & Trust Company, as Rights Agent.

     Initially, the Rights will be attached to all certificates representing
shares of the Company’s Common Stock then outstanding, and no separate
certificates evidencing the Rights 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) ten
business days following the earlier of the date on which a person or group of
affiliated or associated persons (an “Acquiring Person”) has acquired, or the
date such person or group publicly announced its acquisition of, beneficial
ownership of fifteen percent (15%) or more of the outstanding shares of Common
Stock, other than as a result of repurchases of stock by the Company or certain
inadvertent actions by institutional or certain other stockholders (the “Stock
Acquisition Date”) or (ii) ten business days (or such later date as the Board
shall determine) following the commencement of a tender offer or exchange offer
that would result, upon completion, in a person or group having beneficial
ownership of fifteen percent (15%) or more of the outstanding shares of Common
Stock. 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 of October 18, 2001 will contain a legend 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 Rights are not exercisable until the Distribution Date and will expire
at 5:00 p.m. (New York, New York time) on October 18, 2011, unless such date is
extended or the Rights are earlier redeemed or exchanged by the Company as
described below.

     As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights (“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.

C-1

 

     In the event that a Person becomes an Acquiring Person, each holder of a
Right, except for the Acquiring Person and associates and affiliates thereof,
will, after the end of the redemption period referred to below, be able to
exercise the Right by purchasing, for an amount equal to the Purchase Price,
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times such amount. 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 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.

     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 is changed or exchanged, or (iii)
fifty percent (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, after the expiration of the
redemption period referred to below, have the right to receive, upon exercise,
securities of the acquiring party having a value equal to two times the
exercise price of the Right. The events set forth in this paragraph and the
paragraph above are referred to as “Triggering Events.”

     At any time after a person or group of affiliated or associated persons
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).

     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
$0.001 per Right (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 remaining right of the holders of Rights
will be to receive the Redemption Price.

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

C-2

 

     Any provision of the Rights Agreement may be amended by the Company and
the Rights Agent without stockholder approval prior to the Distribution Date.
After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Company and the Rights Agent without stockholder approval in
order (i) to cure any ambiguity, (ii) to make changes which do not adversely
affect the interests of holders of Rights (other than an Acquiring Person or an
Associate or Affiliate of an Acquiring Person), (iii) to correct or supplement
any provision which may be defective or otherwise inconsistent with any other
provision, or (iv) to shorten or lengthen any time period under the Rights
Agreement; provided, however, that the Rights Agreement may not be supplemented
or amended to lengthen (a) a time period relating to when the Rights may be
redeemed at such time as the rights are not then redeemable, or (b) any other
time period, unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights (other than an Acquiring Person or an Associate or Affiliate of an
Acquiring Person). No supplement or amendment shall be made which changes the
Redemption Price.

     A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available 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 into this Summary by reference.

C-3<PAGE>

                                                                     Exhibit 4.1

                             SUPPLEMENTAL INDENTURE

                                       OF

                                   GUARANTORS

         THIS SUPPLEMENTAL INDENTURE dated as of August 30, 2001 is delivered
pursuant to Section 10.04 of the Indenture dated as of November 15, 1996 (as
heretofore or hereafter modified and supplemented and in effect from time to
time, the "Indenture") among LAMAR MEDIA CORP., a Delaware corporation,
(formerly Lamar Advertising Company) certain of its subsidiaries ("Guarantors")
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking corporation, as
Trustee ("Trustee") (all terms used herein without definition having the
meanings ascribed to them in the Indenture).

         The undersigned hereby agree that:

         1. The undersigned is a Guarantor under the Indenture with all of the
rights and obligations of a Guarantor thereunder.

         2. The undersigned hereby grants, ratifies and confirms the guarantee
provided for by Article Ten of the Indenture to guarantee unconditionally,
jointly and severally with the other Guarantors, to each Holder of a Note
authenticated and delivered by the Trustee, and to the Trustee on behalf of such
Holder, the due and punctual payment of the principal of (and premium, if any)
and interest on such Note when and as the same shall become due and payable.

         3. The undersigned hereby represents and warrants that the
representations and warranties set forth in the Indenture, to the extent
relating to the undersigned as Guarantor, are correct on and as of the date
hereof.

         4. All notices, requests and other communications provided for in the
Indenture should be delivered to the undersigned at the address specified in
Section 12.02 of the Indenture.

         5. A counterpart of this Supplemental Indenture may be attached to any
counterpart of the Indenture.

         6. This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York.

<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.

                                             Guarantor:

                                             Maine Logos, LLC,
                                             a Maine limited liability company

                                             By: Interstate Logos, L.L.C.
                                             Its: Managing Member

                                             By: Lamar Media Corp.
                                             Its: Managing Member

                                             By:  /s/ Keith A. Istre
                                                --------------------------------
                                                  Keith A. Istre
                                                  Vice President - Finance and
                                                  Chief Financial Officer
Attest:

By:      /s/ James R. McIlwain
   ------------------------------
     James R. McIlwain, Secretary

Accepted:

STATE STREET BANK AND TRUST
         COMPANY, as Trustee

By:      /s/ Andrew L. Sciorz
   ------------------------------

Title:   Assistant Vice President

                                       2

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