Document:

Exhibit 4.1

 

TOREADOR
RESOURCES CORPORATION

 

and

 

AMERICAN
STOCK TRANSFER & TRUST COMPANY, LLC

 

Rights
Agent

 

Rights
Agreement

 

Dated
as of November 20, 2008

 

 

TABLE
OF CONTENTS

 

	
  Section

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Certain
  Definitions

  	
   

  	
  1

  
	
  Section 2.

  	
  Appointment
  of Rights Agent

  	
   

  	
  7

  
	
  Section 3.

  	
  Issuance of
  Rights Certificates

  	
   

  	
  7

  
	
   

  	
  (a)

  	
  Distribution Date; Rights Certificates

  	
   

  	
  7

  
	
   

  	
  (b)

  	
  Common Stock Certificates; Summary of Rights

  	
   

  	
  8

  
	
   

  	
  (c)

  	
  Legend

  	
   

  	
  8

  
	
  Section 4.

  	
  Form of
  Rights Certificates

  	
   

  	
  9

  
	
   

  	
  (a)

  	
  Form; Date

  	
   

  	
  9

  
	
   

  	
  (b)

  	
  Acquiring Person Legend

  	
   

  	
  10

  
	
  Section 5.

  	
  Countersignature
  and Registration

  	
   

  	
  10

  
	
   

  	
  (a)

  	
  Signatures

  	
   

  	
  10

  
	
   

  	
  (b)

  	
  Registration and Transfer

  	
   

  	
  11

  
	
  Section 6.

  	
  Transfer,
  Split Up, Combination and Exchange of Rights Certificates; Mutilated,
  Destroyed, Lost or Stolen Rights Certificates

  	
   

  	
  11

  
	
   

  	
  (a)

  	
  Procedure

  	
   

  	
  11

  
	
   

  	
  (b)

  	
  Issuance of New Rights Certificates

  	
   

  	
  11

  
	
  Section 7.

  	
  Exercise of
  Rights; Purchase Price; Expiration Date of Rights

  	
   

  	
  12

  
	
   

  	
  (a)

  	
  Exercise

  	
   

  	
  12

  
	
   

  	
  (b)

  	
  Purchase Price

  	
   

  	
  12

  
	
   

  	
  (c)

  	
  Rights Agent Actions

  	
   

  	
  13

  
	
   

  	
  (d)

  	
  Partial Exercise

  	
   

  	
  13

  
	
   

  	
  (e)

  	
  Termination of Acquiring Person’s Rights

  	
   

  	
  13

  
	
   

  	
  (f)

  	
  Surrender of Rights Certificates; Identity of Beneficial Owner

  	
   

  	
  14

  
	
  Section 8.

  	
  Cancellation
  and Destruction of Rights Certificates

  	
   

  	
  14

  
	
  Section 9.

  	
  Reservation
  and Availability of Capital Stock

  	
   

  	
  14

  
	
   

  	
  (a)

  	
  Reservation of Capital Stock

  	
   

  	
  14

  
	
   

  	
  (b)

  	
  Listing

  	
   

  	
  14

  
	
   

  	
  (c)

  	
  Registration under the Act

  	
   

  	
  15

  
	
   

  	
  (d)

  	
  Covenant Regarding Capital Stock

  	
   

  	
  15

  
	
   

  	
  (e)

  	
  Transfer Taxes and Charges

  	
   

  	
  15

  
	
  Section 10.

  	
  Preferred
  Stock Record Date

  	
   

  	
  16

  
	
  Section 11.

  	
  Adjustment
  of Purchase Price; Number and Kind of Shares or Number of Rights

  	
   

  	
  16

  
	
   

  	
  (a)

  	
  Certain Adjustments

  	
   

  	
  16

  

 

ii

 

	
   

  	
  (b)

  	
  Purchase Price Adjustment — Capital Stock

  	
   

  	
  20

  
	
   

  	
  (c)

  	
  Purchase Price Adjustment — Cash, Assets, etc.

  	
   

  	
  20

  
	
   

  	
  (d)

  	
  Current Market Price

  	
   

  	
  21

  
	
   

  	
  (e)

  	
  Purchase Price Adjustment Threshold

  	
   

  	
  22

  
	
   

  	
  (f)

  	
  Equivalent Adjustments

  	
   

  	
  22

  
	
   

  	
  (g)

  	
  Post-Adjustment Rights Issuances

  	
   

  	
  23

  
	
   

  	
  (h)

  	
  Preferred Stock Anti-Dilution

  	
   

  	
  23

  
	
   

  	
  (i)

  	
  Adjustment of Number of Rights

  	
   

  	
  23

  
	
   

  	
  (j)

  	
  Rights Certificates

  	
   

  	
  24

  
	
   

  	
  (k)

  	
  Adjustment Below Par Value

  	
   

  	
  24

  
	
   

  	
  (l)

  	
  Adjustment Effective as of Future Date; Exercise

  	
   

  	
  24

  
	
   

  	
  (m)

  	
  Tax Adjustments

  	
   

  	
  24

  
	
   

  	
  (n)

  	
  Restriction on Certain Transactions

  	
   

  	
  25

  
	
   

  	
  (o)

  	
  Restriction Against Diminishing Benefits of the Rights

  	
   

  	
  25

  
	
   

  	
  (p)

  	
  Common Stock Adjustments

  	
   

  	
  25

  
	
  Section 12.

  	
  Certificate
  of Adjusted Purchase Price or Number of Shares

  	
   

  	
  26

  
	
  Section 13.

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

  	
   

  	
  26

  
	
   

  	
  (a)

  	
  Flip-over Event

  	
   

  	
  26

  
	
   

  	
  (b)

  	
  Principal Party

  	
   

  	
  27

  
	
   

  	
  (c)

  	
  Supplemental Agreement

  	
   

  	
  28

  
	
   

  	
  (d)

  	
  Exceptions

  	
   

  	
  29

  
	
  Section 14.

  	
  Fractional
  Rights and Fractional Shares

  	
   

  	
  29

  
	
   

  	
  (a)

  	
  Fractional Rights

  	
   

  	
  29

  
	
   

  	
  (b)

  	
  Fractional Shares of Preferred Stock

  	
   

  	
  30

  
	
   

  	
  (c)

  	
  Fractional Shares of Common Stock

  	
   

  	
  30

  
	
   

  	
  (d)

  	
  Waiver of Fractional Rights and Shares

  	
   

  	
  31

  
	
  Section 15.

  	
  Rights of
  Action

  	
   

  	
  31

  
	
  Section 16.

  	
  Agreement of
  Rights Holders

  	
   

  	
  31

  
	
  Section 17.

  	
  Rights
  Certificate Holder Not Deemed a Stockholder

  	
   

  	
  32

  
	
  Section 18.

  	
  Concerning
  the Rights Agent

  	
   

  	
  32

  
	
   

  	
  (a)

  	
  Compensation

  	
   

  	
  32

  
	
   

  	
  (b)

  	
  Reliance

  	
   

  	
  32

  
	
  Section 19.

  	
  Merger or
  Consolidation or Change of Name of Rights Agent

  	
   

  	
  33

  
	
   

  	
  (a)

  	
  Successor

  	
   

  	
  33

  
	
   

  	
  (b)

  	
  Prior Countersignatures

  	
   

  	
  33

  
	
  Section 20.

  	
  Duties of
  Rights Agent

  	
   

  	
  33

  
	
   

  	
  (a)

  	
  Legal Counsel

  	
   

  	
  33

  

 

iii

 

	
   

  	
  (b)

  	
  Certification by the Company

  	
   

  	
  33

  
	
   

  	
  (c)

  	
  Liability for Negligence, etc.

  	
   

  	
  34

  
	
   

  	
  (d)

  	
  Statements of Fact or Recitals

  	
   

  	
  34

  
	
   

  	
  (e)

  	
  Agreement; Adjustments

  	
   

  	
  34

  
	
   

  	
  (f)

  	
  Further Assurances

  	
   

  	
  34

  
	
   

  	
  (g)

  	
  Instructions

  	
   

  	
  34

  
	
   

  	
  (h)

  	
  Dealing in Rights

  	
   

  	
  34

  
	
   

  	
  (i)

  	
  Agents; Reasonable Care

  	
   

  	
  34

  
	
   

  	
  (j)

  	
  Expenses; Repayment Assurances

  	
   

  	
  35

  
	
   

  	
  (k)

  	
  Exercise of Rights; Consultation with Company

  	
   

  	
  35

  
	
  Section 21.

  	
  Change of
  Rights Agent

  	
   

  	
  35

  
	
  Section 22.

  	
  Issuance of
  New Rights Certificates

  	
   

  	
  36

  
	
  Section 23.

  	
  Redemption
  and Termination

  	
   

  	
  36

  
	
   

  	
  (a)

  	
  Redemption

  	
   

  	
  36

  
	
   

  	
  (b)

  	
  Effect of Redemption; Procedure

  	
   

  	
  37

  
	
  Section 24.

  	
  Exchange

  	
   

  	
  37

  
	
   

  	
  (a)

  	
  Right to Exchange

  	
   

  	
  37

  
	
   

  	
  (b)

  	
  Effect of Exchange; Procedure

  	
   

  	
  37

  
	
   

  	
  (c)

  	
  Common Stock Equivalents

  	
   

  	
  38

  
	
   

  	
  (d)

  	
  Insufficient Common Stock

  	
   

  	
  38

  
	
   

  	
  (e)

  	
  Fractional Shares

  	
   

  	
  38

  
	
  Section 25.

  	
  Notice of
  Certain Events

  	
   

  	
  38

  
	
   

  	
  (a)

  	
  Preferred Stock Transactions, etc.

  	
   

  	
  38

  
	
   

  	
  (b)

  	
  Other Transactions

  	
   

  	
  39

  
	
  Section 26.

  	
  Notices

  	
   

  	
  39

  
	
  Section 27.

  	
  Supplements
  and Amendments

  	
   

  	
  40

  
	
  Section 28.

  	
  Successors

  	
   

  	
  41

  
	
  Section 29.

  	
  Determinations
  and Actions by the Board of Directors, etc.

  	
   

  	
  41

  
	
  Section 30.

  	
  Benefits of
  this Agreement

  	
   

  	
  41

  
	
  Section 31.

  	
  Severability

  	
   

  	
  41

  
	
  Section 32.

  	
  Governing
  Law

  	
   

  	
  42

  
	
  Section 33.

  	
  Counterparts

  	
   

  	
  42

  
	
  Section 34.

  	
  Descriptive
  Headings

  	
   

  	
  42

  

 

iv

 

	
  Exhibit 1

  	
  Certificate of Designation, Preferences and
  Rights of Series B Preferred Stock of Toreador Resources Corporation

  
	
   

  	
   

  
	
  Exhibit 2

  	
  Form of Rights Certificate

  
	
   

  	
   

  
	
  Exhibit 3

  	
  Letter to Stockholders

  
	
   

  	
   

  
	
  Exhibit 4

  	
  Press Release

  

 

v

 

RIGHTS AGREEMENT

 

RIGHTS AGREEMENT, dated as of November 20, 2008, between TOREADOR
RESOURCES CORPORATION, a Delaware corporation (the “Company”), and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, a New York limited
liability trust company (the “Rights Agent”).

 

RECITALS

 

Effective November 20, 2008 (the “Rights Dividend Declaration Date”), the
Board of Directors of the Company (i) authorized and declared a dividend
distribution of one preferred share purchase right (a “Right”) for each
share of Common Stock (as hereinafter defined) of the Company outstanding at
the close of business on December 1, 2008 (the “Record Date”), each
Right initially representing the right to purchase one one-thousandth of a
share of Series B Preferred Stock, par value $1.00 per share, of the
Company having the rights, powers and preferences set forth in the Certificate
of Designation, Preferences and Rights of Series B Preferred Stock
attached hereto as Exhibit 1, upon the terms and subject to the conditions
hereinafter set forth, and (ii) further authorized the issuance of one
Right (as such number may be hereafter adjusted as provided herein) 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;

 

AGREEMENT

 

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 (as such term is hereinafter defined) who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 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, (iv) any Person who becomes an Acquiring
Person solely 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 shall purchase or otherwise become (as a
result of actions taken by such Person or its Affiliates or Associates) the
Beneficial Owner of additional shares of Common Stock constituting 1% or more
of the then outstanding shares of Common Stock, or (v) an Exempted Person
(as such term is hereinafter defined). 
Notwithstanding the foregoing, if (i) the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
Acquiring Person, as defined pursuant to the foregoing provisions of this
paragraph, has become such inadvertently (including, 

 

1

 

without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of Common Stock that
would otherwise cause such Person to be an Acquiring Person, or (B) such
Person was aware of the extent of its Beneficial Ownership of Common Stock but
had no actual knowledge of the consequences of such Beneficial Ownership under
this Agreement) and without any intention of changing or influencing control of
the Company, and (ii) within ten (10) Business Days of being requested by
the Company to advise it regarding the same, such Person certifies to the
Company that such Person acquired shares of Common Stock in excess of 14.99%
inadvertently or without knowledge of the terms of the Rights and who, together
with all Affiliates and Associates, thereafter does not acquire additional
shares of Common Stock and within ten (10) Business Days of being requested by
the Company to do so disposes of the portion of such shares of Common Stock in
excess of 14.99%, then such Person shall not be deemed to be or to have become
an Acquiring Person for any purposes of this Agreement; provided, however,
that if the Person requested to so certify fails to do so within ten (10) Business
Days of the Company’s request or such Person fails to dispose of such shares of
Common Stock in excess of 14.99% within ten (10) Business Days of the Company’s
request, then such Person shall become an Acquiring Person immediately after
such ten (10) Business Day period.  The
phrase “then outstanding,” when used with reference to a Person’s Beneficial
Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.

 

(b)          “Act” shall mean the Securities Act of 1933,
as amended and in effect from time to time.

 

(c)           “Adjustment Shares” shall have the meaning set
forth in Section 11(a)(ii) (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights — Certain Adjustments)

 

(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)           “Agreement” shall mean this Rights Agreement
as originally executed or as it may from time to time be supplemented or
amended pursuant to the applicable provisions hereof.

 

(f)           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, rights,
warrants or options, or otherwise; provided, however, that a
Person shall not, for purposes of this paragraph (i), 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 

 

2

 

Associates until such tendered securities are accepted for purchase or
exchange, or (B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event, or (C) securities issuable
upon exercise of Rights from and after the occurrence of a Triggering Event,
which Rights were acquired by such Person or any of such Person’s Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) (Issuance
of Rights Certificates — Distribution Date; Rights Certificates) or Section 22
(Issuance of New Rights Certificates) (the “Original Rights”) or
pursuant to Section 11(i) (Adjustment of Purchase Price; Number and
Kind of Shares or Number of Rights — Adjustment of Number of Rights)
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 given in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the Exchange
Act, and (B) is not also then reportable by such Person on a Schedule 13D
under the Exchange Act (or any comparable or successor report);

 

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

 

(iv)          in respect to which such Person or any such
Person’s Affiliates or Associates has a Synthetic Long Position (as herinafter
defined); provided, however, that a Person will not be deemed the Beneficial
Owner of, or to beneficially own, any security if such beneficial ownership
arises solely as a result of such Person’s status as a “clearing agency” as
defined in Section 3(a)(23) of the Exchange Act;

 

provided, however, that nothing in this
Section 1 will cause a Person engaged in business as an underwriter of
securities to be the “Beneficial Owner” of or to “beneficially own,” any
securities acquired through such Person’s participation in good faith in a firm
commitment underwriting until the expiration of forty (40) calendar days after
the date of such acquisition, or such later date as the Board of Directors of
the Company may determine in any specific case.

 

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

 

3

 

(h)           “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.

 

(i)            “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.

 

(j)            “Common Stock” shall
mean the common stock, par value $0.15625 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.

 

(k)           “Common Stock Equivalents”
shall have the meaning set forth in Section 11(a)(iii) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights — Certain
Adjustments).

 

(l)            “Company” shall mean
the Person named as the “Company” in the first paragraph of this Agreement
until a successor corporation shall have become such, or until a Principal
Party shall assume, and thereafter be liable for, all obligations and duties of
the Company hereunder, pursuant to the applicable provisions of this Agreement,
and thereafter “Company” shall mean such successor corporation or Principal
Party.

 

(m)          “Current Market Price”
shall have the meaning set forth in Section 11(d) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights — Current
Market Price).

 

(n)           “Current Value” shall
have the meaning set forth in Section 11(a)(iii) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights — Certain
Adjustments).

 

(o)           “Distribution Date”
shall have the meaning set forth in Section 3(a) (Issuance of Rights
Certificates — Distribution Date; Rights Certificates).

 

(p)           “Equivalent Preferred Stock” shall have the
meaning set forth in Section 11(b) (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights — Purchase Price
Adjustment — Capital Stock).

 

(q)           “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended and in effect on the date
of this Agreement.

 

(r)            “Exchange Number”
shall mean one-half of the number of shares of Common Stock or one
one-thousandths of a share of Series B Preferred Stock, or shares or other
units of other property for which a Right is exercisable immediately prior to the
time of the action of the Board to exchange the Rights.

 

4

 

(s)           “Expiration Date”
shall have the meaning set forth in Section 7(a) (Exercise of Rights;
Purchase Price; Expiration Date of Rights — Exercise).

 

(t)            “Final Expiration Date”
shall mean the Close of Business on November 20, 2009.

 

(u)           “Flip-in Event” shall
mean any event described in Section 11(a)(ii) (A) or (B) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Certain
Adjustments).

 

(v)           “Flip-in Trigger Date”
shall have the meaning set forth in Section 11(a)(iii) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights — Certain
Adjustments).

 

(w)          “Flip-over Event”
shall mean any event described in clauses (x), (y) or (z) of Section 13(a)
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power — Flip-over
Event).

 

(x)            “Original Rights”
shall have the meaning set forth in Section 1(f)(i) (Certain
Definitions).

 

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

 

(z)            “Preferred Stock”
shall mean shares of Series B Preferred Stock, par value $1.00 per share,
of the Company, and, to the extent that there is not a sufficient number of
shares of Series B Preferred Stock authorized to permit the full exercise
of the Rights, any other series of Preferred Stock, par value $1.00 per share,
of the Company designated for such purpose containing terms substantially
similar to the terms of the Series B Preferred Stock.

 

(aa)         “Principal Party”
shall have the meaning set forth in Section 13(b) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power — Principal Party).

 

(bb)         “Purchase Price” shall
have the meaning set forth in Section 4(a) (Form of Rights Certificates
— Form; Date).

 

(cc)         “Record Date” shall
have the meaning set forth in the Recital at the beginning of the Agreement.

 

(dd)         “Redemption Date”
shall have the meaning set forth in Section 23(a) (Redemption and
Termination — Redemption).

 

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

 

5

 

(ff)          “Rights” shall have the meaning set forth in
the Recital at the beginning of the Agreement.

 

(gg)        “Rights Agent” shall mean the Person named as
the “Rights Agent” in the first paragraph of this Agreement until a successor
Rights Agent shall have become such pursuant to the applicable provisions
hereof and thereafter “Rights Agent” shall mean such successor Rights Agent. If
at any time there is more than one Person appointed by the Company as Rights
Agent pursuant to the applicable provisions of this Agreement, “Rights Agent”
shall mean and include each such Person.

 

(hh)        “Rights Certificates” shall have the meaning
set forth in Section 3(a) (Issuance of Rights Certificates — Distribution
Date; Rights Certificates).

 

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

 

(jj)           “Spread” shall have the meaning set forth in Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights
— Certain Adjustments).

 

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

 

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

 

(mm)       “Substitution Period” shall have the meaning set forth in
Section 11(a)(iii) (Adjustment of Purchase Price; Number and Kind of
Shares or Number of Rights — Certain Adjustments).

 

(nn)        “Synthetic Long Position”  shall mean any option, warrant, convertible
security, stock appreciation right or other contractual right, whether or not
presently exercisable, which has an exercise or conversion privilege or a
settlement payment or mechanism at a price related to Common Stock or a value
determined in whole or part with reference to, or derived in whole or in part
from, the market price or value of Common Stock, whether or not such right is
subject to settlement in whole or in part in Common Stock, and which increases
in value as the value of Common Stock increases or which provides to the holder
of such right an opportunity, directly or indirectly, to profit or share in any
profit derived from any increase in the value of Common Stock, but shall not
include:

 

(i)            rights of a pledgee under a bona fide
pledge of Common Stock;

 

6

 

(ii)           rights of all holders of Common Stock to
receive Common Stock pro rata, or obligations to dispose of Common Stock, as a
result of a merger, exchange offer, or consolidation involving the Company;

 

(iii)          rights or obligations to surrender Common
Stock, or have Common Stock withheld, upon the receipt or exercise of a
derivative security or the receipt or vesting of equity securities, in order to
satisfy the exercise price or the tax withholding consequences of receipt,
exercise or vesting;

 

(iv)          interests
in broad-based index options, broad-based index futures, and broad-based
publicly traded market baskets of stocks approved for trading by the
appropriate federal governmental authority;

 

(v)           interests
or rights to participate in employee benefit plans of the Company held by
employees or former employees of the Company; or

 

(vi)          options
granted to an underwriter in a registered public offering for the purpose of
satisfying over-allotments in such offering.

 

The shares of Common Stock in respect of which a Person has a Synthetic
Long Position shall be the notional or other number of shares of Common Stock
specified in a filing by such Person or any of such Person’s Affiliates or
Associates with the Securities and Exchange Commission in respect of which
shares of Common Stock are the “subject security” or in the documentation
evidencing the Synthetic Long Position as being subject to be acquired upon the
exercise or settlement of the applicable right or as the basis upon which the
value or settlement amount of such right, or the opportunity of the holder of
such right to profit or share in any profit, is to be calculated in whole or in
part or, if no such number of shares of Common Stock is specified in any filing
or documentation, as determined by the Board of Directors of the Company in
good faith to be the number of shares of Common Stock to which the Synthetic
Long Position relates.

 

(oo)         “Trading Day” shall
have the meaning set forth in Section 11(d)(i) (Adjustment of Purchase
Price; Number and Kind of Shares or Number of Rights — Current Market
Price).

 

(pp)         “Triggering Event”
shall mean any Flip-in Event or any Flip-over 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.

 

Section 3.              Issuance of
Rights Certificates.

 

(a)           Distribution Date; Rights Certificates.  Until the earlier of (i) the Close of
Business on the tenth Business Day after the Stock Acquisition Date (or, if the
tenth Business 

 

7

 

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 shall determine prior to such time as any Person becomes an
Acquiring Person) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act, if upon consummation thereof such Person would be the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding (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 paragraph (b) of
this Section 3) by the certificates for the Common Stock registered in the
names of the holders of the Common Stock (which certificates for Common Stock
shall be deemed also to be certificates for Rights) and not by separate certificates,
and (y) the Rights will be transferable only in connection with the
transfer of the underlying shares of Common Stock (including a transfer to the
Company, except pursuant to the provision of Section 23 (Redemption and
Termination)). As soon as practicable after the Distribution Date, the
Rights Agent will send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit 2
hereto (the “Rights
Certificates”), evidencing one Right for each share of Common
Stock so held, subject to adjustment as provided herein.  In the event that an adjustment in the number
of Rights per share of Common Stock has been made pursuant to Section 11(p)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights
— Common Stock Adjustments) 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) (Fractional Rights and
Fractional Shares — Fractional Rights)) 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)          Common Stock Certificates; Summary of
Rights.  With respect to certificates
for the Common Stock outstanding as of the Record Date, until the Distribution
Date, the Rights associated with the Common Stock represented by such
certificates will be evidenced by such certificates alone and the registered
holders of such 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.  On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Preferred Stock, in substantially the form of Exhibit 3 hereto (the “Summary of Rights”),
by first-class, postage-prepaid mail, to each record holder of shares of Common
Stock as of the close of business of the Record Date, at the address of such
holder shown on the records of the Company.

 

(c)           Legend.  Rights shall be issued in respect of all
certificates for shares of Common Stock which are issued (whether originally
issued or from the Company’s treasury) after the Record Date but prior to the
earliest of the (i) Distribution Date, (ii) the Expiration Date, 

 

8

 

or (iii) the Redemption
Date, or, in certain circumstances provided in Section 22 (Issuance of
New Rights Certificates) after the Distribution 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 dated as of November 20,
2008, by and between Toreador Resources Corporation (the “Company”) and
American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agreement”),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor.  Under certain circumstances set forth in the
Rights Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and void.

 

With respect to such certificates containing the foregoing legend,
until the earliest of (i) the Distribution Date, (ii) the Expiration
Date, and (iii) the Redemption Date, (x) the Rights associated with
the Common Stock represented by such certificates shall be evidenced by such
certificates alone, (y) the registered holders of such Common Stock shall
also be the registered holders of the associated Rights, and (z) the
transfer of any of such certificates shall also constitute the transfer of the
Rights associated with such shares of Common Stock.  In the event that the Company purchases, or
acquires any shares of Common Stock after the Record Date but prior to the
Distribution Date, any rights associated with such shares of Common Stock shall
be deemed canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with shares of Common Stock which are no longer
outstanding.

 

Section 4.              Form of
Rights Certificates.

 

(a)           Form;
Date.  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 2
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed or any securities
association on whose interdealer quotation system the Rights may be from time
to time authorized for quotation, or to conform to usage. Subject to the
provisions of Section 11 (Adjustment of Purchase Price; Number and Kind
of Shares or Number of Rights) and Section 22 (Issuance of New
Rights Certificates), the Rights Certificates, whenever distributed, shall
be dated as of the Record Date and on their face shall entitle the holders
thereof 

 

9

 

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 is referred to herein as 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)           Acquiring
Person Legend.  Any Rights
Certificate issued pursuant to Section 3(a) (Issuance of Rights
Certificates — Distribution Date; Rights Certificates) or Section 22
(Issuance of New Rights Certificates) that represents Rights
beneficially owned by (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which is part of a plan, arrangement or
understanding which has as a primary purpose or effect avoidance of Section 7(e)
(Exercise of Rights; Purchase Price; Expiration Date of Rights — Termination
of Acquiring Person’s Rights) and any Rights Certificate issued pursuant to
Section 6 (Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates), Section 11
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights)
or Section 22 (Issuance of New Rights Certificates) 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 dated as of November 20, 2008, by and between Toreador
Resources Corporation and American Stock Transfer & Trust Company,
LLC, as Rights Agent).  Accordingly, this
Rights Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) (Exercise of Rights;
Purchase Price; Expiration Date of Rights — Termination of Acquiring
Person’s Rights) of such Agreement.

 

Section 5.              Countersignature
and Registration.

 

(a)           Signatures.  The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company’s seal or a facsimile thereof which shall be attested to 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 

 

10

 

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)          Registration and Transfer.  Following the Distribution Date, the Rights
Agent will keep or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates 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)           Procedure.  Subject to the provisions of Section 4(b)
(Form of Rights Certificates — Acquiring Person Legend), Section 7(e)
(Exercise of Rights; Purchase Price; Expiration Date of Rights — Termination
of Acquiring Person’s Rights) and Section 14 (Fractional Rights and
Fractional Shares), at any time after the Close of Business on the
Distribution Date, and at or prior to the Close of Business on the Expiration
Date, any Rights Certificate or Certificates may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of 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 entitle such holder (or former holder in the
case of a transfer) to purchase.  Any
registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Certificates
to be transferred, split up, combined or exchanged at the principal office or
offices of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.  Thereupon, the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14,
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)           Issuance
of New Rights Certificates.  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 

 

11

 

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)            Exercise.  Subject to Section 7(e) (Exercise of
Rights; Purchase Price; Expiration Date of Rights — Termination of
Acquiring Person’s Rights), 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)
(Reservation and Availability of Capital Stock — Registration under
the Act), Section 11(a)(iii) (Adjustment of Purchase Price; Number
and Kind of Shares or Number of Rights — Certain Adjustments), Section 23(a)
(Redemption and Termination — Redemption), and Section 24(b)
(Exchange — Effect of Exchange; Procedure)) in whole or in part
at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the 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 and an amount equal to any applicable transfer tax, at or prior to
the earliest of (i) the Final Expiration Date, (ii) the Redemption
Date, or (iii) the expiration of the Rights pursuant to Section 13(d)
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power — Exceptions)
(the earliest of (i), (ii) and (iii) being herein referred to as the “Expiration Date”).  The payment of the Purchase Price and the
applicable transfer tax, if any (as such amount may be reduced pursuant to Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights
— Certain Adjustments)), may be made (x) in cash, (y) by
certified check, cashier’s check or money order payable to the order of the
Company, or (z) by delivery of a certificate or certificates (with
appropriate stock powers executed in blank attached thereto) evidencing a
number of shares of Common Stock equal to the then Purchase Price divided by
the closing price (as determined pursuant to Section 11(d) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Current
Market Price)) per share of Common Stock on the Trading Day immediately
preceding the date of such exercise.  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) 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.

 

(b)            Purchase Price.  The Purchase Price for each one
one-thousandth of a share of Preferred Stock purchasable upon the exercise of a
Right shall initially be $30.00, and shall be subject to adjustment from time
to time as provided in Section 11 (Adjustment of Purchase Price; Number
and Kind of Shares or Number of Rights) and Section 13(a) 

 

12

 

(Consolidation, Merger or
Sale or Transfer of Assets or Earning Power — Flip-over Event) and
shall be payable in accordance with paragraph (a) of this Section 7.

 

(c)           Rights
Agent Actions.  Upon receipt of a
Rights Certificate representing exercisable Rights and the compliance by the
holder of such Rights Certificate with paragraph (a) of this Section 7,
the Rights Agent shall, subject to Section 20(k) (Duties of Rights
Agent — Exercise of Rights; Consultation with Company), 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
(Fractional Rights and Fractional Shares), (iii) after receipt
thereof, deliver such certificates or depositary receipts 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.

 

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

 

(e)           Termination
of Acquiring Person’s Rights. 
Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Flip-in Event, any Rights beneficially owned by
(i) an Acquiring Person, or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate
or Affiliate) who becomes a transferee after such 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 is part of a
plan, arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) (Form of
Rights Certificates — Acquiring Person Legend) are complied with,
but shall have no liability to 

 

13

 

any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or any of its respective Affiliates,
Associates or transferees hereunder.

 

(f)             Surrender of Rights Certificates;
Identity of Beneficial Owner. 
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 canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.

 

Section 9.              Reservation and Availability of
Capital Stock.

 

(a)            Reservation of Capital Stock.  The Company will use its best efforts to
reserve and keep available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of
its authorized and unissued shares of Common Stock and/or other securities or
out of its authorized and issued shares of Common Stock held in its treasury),
the number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as provided in
this Agreement, including the rights of the Company under Section 11(a)(iii)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights
— Certain Adjustments) to otherwise fulfill its obligations, will be
sufficient to permit the exercise in full of all outstanding Rights.

 

(b)            Listing.  So long as the shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange or authorized for quotation on any
interdealer quotation system of any securities association, 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
exchange or quoted on such system upon official notice of issuance upon such
exercise.

 

14

 

(c)            Registration under the Act.  The Company will use its best efforts to (i) file,
as soon as practicable following the earliest date after the first occurrence
of a Flip-in 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)
(Adjustment of Purchase Price; Number and Kind of Shares or Number of Rights
— Certain Adjustments), or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement on an
appropriate form under the Act with respect to the securities purchasable upon
exercise of the Rights, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities, and (B) the
Expiration Date.  The Company will also
take such action as may be appropriate under, or to ensure compliance with, the
securities or “blue sky” laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) calendar 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 is no longer in
effect. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
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)            Covenant Regarding Capital Stock.  The Company will take all such action as may
be necessary to ensure that all one one-thousandths of a share of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.

 

(e)            Transfer Taxes and Charges.  The Company will pay when due and payable any
and all federal and state transfer taxes and charges which may be payable in
respect of the issuance or delivery of the Rights Certificates and of any
certificates for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) upon the exercise
of Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than, that of the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of one
one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such 

 

15

 

Rights Certificate at the time
of surrender) or until it has been established to the Company’s satisfaction
that no such tax is due.

 

Section 10.            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 as of, 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)            Certain Adjustments.

 

(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 or split the
outstanding Preferred Stock, (C) combine the shares of 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) (Exercise of
Rights; Purchase Price; Expiration Date of Rights — Termination of
Acquiring Person’s Rights), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
split, combination 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 aggregate
adjusted Purchase Price then in effect necessary to exercise a Right in full,
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 (or other capital stock, as
the case may be) 

 

16

 

transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, split, combination or reclassification.  If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) the
adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).

 

(ii)           In the event:

 

(A)          (1) any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, at any time after the date of
this Agreement, directly or indirectly, shall merge into the Company or
otherwise combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Common Stock shall
remain outstanding and unchanged, or (2) subject to Section 23 (Redemption
and Termination), any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan), alone or together with
its Affiliates and Associates, shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person, unless the event causing such
Person to become an Acquiring Person is a Flip-over Event, or is an acquisition
of shares of Common Stock pursuant to a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined by
the Board, prior to the public announcement of such tender offer or exchange
offer, after receiving advice from one or more investment banking firms
selected by the Board, to be (a) at a price which is fair to the
stockholders of the Company (taking into account all factors which the Board
deems relevant including, without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (b) otherwise in the best interests of the
Company and its stockholders, other than such Acquiring Person, its Affiliates
and its Associates; or

 

(B)           during such time as there is an Acquiring
Person, there shall be any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to which the provisions
of Section 13(a) (Consolidation, Merger or Sale or Transfer of Assets
or Earning Power — Flip-over Event) apply (whether or not with or
into or otherwise involving an Acquiring Person) which has the effect, directly
or indirectly, of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity securities of the Company or any of
its subsidiaries, which is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person,

 

17

 

then, promptly following the occurrence of any such Flip-in Event
(whether described in Section 11(a)(ii)(A) or (B)), proper provision shall
be made so that each holder of a Right (except as provided below and in Section 7(e)
(Exercise of Rights; Purchase Price; Expiration Date of Rights — Termination
of Acquiring Person’s Rights)) 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 the number of one one-thousandths of a
share of Preferred Stock, such number of shares of Common Stock as shall equal
the result obtained by (x) multiplying the then current Purchase Price by
the then number of one one-thousandths of a share of Preferred Stock for which
a Right was exercisable immediately prior to the first occurrence of a Flip-in
Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the “Purchase Price” for each
Right and for all purposes of this Agreement) by 50% of the Current Market
Price per share of Common Stock on the date of such first occurrence (such
number of shares being referred to as the “Adjustment Shares”).

 

(iii)          In the event that the number of shares of
Common Stock that are authorized by the Company’s Restated Certificate of
Incorporation, as amended, 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 excess of (1) the
value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”) over (2) the
Purchase Price (such excess, the “Spread”), and (B) with respect to each
Right, subject to Section 7(e) (Exercise of Rights; Purchase Price;
Expiration Date of Rights — Termination of Acquiring Person’s Rights),
make adequate provision to substitute for the Adjustment Shares, upon payment
of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred stock
which the Board has deemed to have substantially the same dividend, voting and
liquidation rights as shares of Common Stock and are deemed in good faith by
the Board of Directors to have substantially the same value as the 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 based upon the advice of a
nationally recognized investment banking firm selected by the Board; provided,
however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) calendar
days following the first occurrence of a Flip-in Event (the date of such
Flip-in Event being referred to herein as the “Flip-in 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. If the Board shall determine in good
faith that it is likely that sufficient additional shares of Common Stock or
other equity securities could be authorized for issuance upon exercise in full
of the Rights, the thirty (30) calendar day period set forth above may be
extended to the extent necessary, but not more than ninety (90) calendar days
after the 

 

18

 

Flip-in Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such period, the “Substitution Period”).
To the extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e), that such
action shall apply uniformly to all outstanding Rights, and (y) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof.  In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii),
the value of the shares of Common Stock shall be the Current Market Price per
share of the Common Stock on the Flip-in Trigger Date and the value of any
Common Stock Equivalent shall be deemed to have the same value as the Common
Stock on such date.

 

(iv)          If the rules of the national securities
exchange, registered as such pursuant to Section 6 of the Exchange Act, or
of the national securities association, registered as such pursuant to Section 15A
of the Exchange Act, on which the Common Stock is principally traded or quoted
would prohibit such exchange or association from listing or continuing to list,
or from authorizing for or continuing quotation and/or transaction reporting
through an inter-dealer quotation system, the Common Stock or other equity
securities of the Company if the Rights were to be exercised for shares of
Common Stock in accordance with subparagraph (ii) of this Section 11(a)
because such issuance would nullify, restrict or disparately reduce the per
share voting rights of holders of Common Stock, the Company shall: (A) determine
the Spread, and (B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) equity
securities of the Company, including, without limitation, Common Stock
Equivalents, other than securities which would have the effect of nullifying,
restricting or disparately reducing the per share voting rights of holders of
Common Stock, (4) debt securities of the Company, (5) other assets,
or (6) any combination of the foregoing, having an aggregate value equal
to the Current Value, where such aggregate value has been determined by the
Board based upon the advice of a recognized investment banking firm selected by
the Board; provided, however, if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within
thirty (30) calendar days following the Flip-in 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, cash having an aggregate value
equal to the Spread. To the extent that the Company determines that some action
need be taken pursuant to the first sentence of this Section 11(a)(iv),
the Company (x) shall provide, subject to Section 7(e) (Exercise
of Rights; Purchase Price; Expiration Date of Rights — Termination of
Acquiring Person’s Rights), that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisability of the Rights,
but not longer than ninety (90) calendar days after the Flip-in Trigger Date,
in order 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 

 

19

 

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)(iv), the value of the shares of
Common Stock shall be the Current Market Price per share of the Common Stock on
the Flip-in Trigger Date and the value of any Common Stock Equivalent shall be
deemed to have the same value as the Common Stock on such date.

 

(b)           Purchase
Price Adjustment — Capital Stock.  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) shares of 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 shares
of Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price 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, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. Shares of Preferred Stock owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.

 

(c)           Purchase
Price Adjustment — Cash, Assets, etc. 
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) of evidences of indebtedness, 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 subscription rights or warrants
(excluding those referred to in Section 11(b) (Adjustment of Purchase
Price; Number and Kind of Shares or Number of Rights  Purchase Price
Adjustment — Capital Stock)), 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 

 

20

 

a fraction, the numerator of
which shall be the Current Market Price per share of Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent) 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 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)           Current Market
Price.

 

(i)            For the purpose of any computation
hereunder, other than computations made pursuant to Section 11(a)(iii) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Certain
Adjustments), 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) the
Current Market Price per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common Stock for
the ten (10) consecutive Trading Days immediately following such date; provided,
however, that in the event that the Current Market Price per share of
the Common Stock is determined during a period following the announcement by
the issuer of such Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities convertible
into shares of such Common Stock (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Stock and the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification shall not have occurred prior to
the commencement of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, then, and in each such case, the Current Market
Price shall be properly adjusted to take into account ex-dividend trading.  The closing price for each Trading Day shall
be the last sale price, regular way, or, in case no such sale takes place on
such Trading Day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Stock selected by the Board. If on any such date no market maker 

 

21

 

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 shall be used. The term “Trading Day” shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

 

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

 

(e)           Purchase Price
Adjustment Threshold.  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 (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights) shall be
made to the nearest cent or to the nearest hundredth of a share of Common Stock
or other share or one-hundred-thousandth 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
Expiration Date.

 

(f)            Equivalent
Adjustments.  If as a
result of an adjustment made pursuant to Section 11(a)(ii) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Certain
Adjustments) or Section 13(a) (Consolidation Merger or Sale or
Transfer of Assets or Earning Power — Flip-over Event) 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 

 

22

 

equivalent as practicable to
the provisions with respect to the Preferred Stock contained in Sections 11(a),
(b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on
like terms to any such other shares.

 

(g)           Post-Adjustment Rights Issuances.  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)           Preferred Stock Anti-Dilution.  Unless the Company shall have exercised its
election as provided in Section 11(i) (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights — Adjustment of Number of
Rights), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights — Purchase Price
Adjustment — Capital Stock) and Section 11(c) (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights — Purchase
Price Adjustment — Cash, Assets, etc.), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one-hundred-thousandth)
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 such Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of such Purchase Price.

 

(i)            Adjustment of Number of Rights.  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 such Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
one-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 such 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) calendar 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 (Fractional
Rights and Fractional Shares) 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 

 

23

 

upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record
of Rights Certificates on the record date specified in the public announcement.

 

(j)            Rights Certificates.  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 of Preferred Stock and the number of one
one-thousandths of a share of such Preferred Stock which were expressed in the
initial Rights Certificates issued hereunder.

 

(k)           Adjustment Below Par Value.  Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par or 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 is or 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)            Adjustment Effective as of Future Date; Exercise.  In any case in which this Section 11 (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights) 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)          Tax Adjustments. 
Anything in this Section 11 (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights) to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this Section 11,
as and to the extent that in its good faith judgment the Board 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.

 

24

 

(n)           Restriction on Certain Transactions.  The Company shall not, at any time after the
earlier of the Stock Acquisition Date or 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) (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights — Restriction Against
Diminishing Benefits of the Rights)), (ii) merge with or into any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)), (iii) enter into a statutory share
exchange or similar transaction with any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o)), or (iv) sell
or transfer (or permit any Subsidiary to sell or transfer), in one transaction,
or a series of related transactions, assets, cash flow or earning power
aggregating more than 50% of the assets, 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)), if (x) at
the time of or immediately after such consolidation, merger, statutory share
exchange or similar transaction, or sale there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger, statutory share exchange or similar
transaction, or sale, the stockholders of the Person who constitutes, or would
constitute, the “Principal Party” for purposes of Section 13(a) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power — Flip-over Event)
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates.

 

(o)           Restriction Against Diminishing Benefits of the Rights.  The Company covenants and agrees that, after
the earlier of the Stock Acquisition Date or the Distribution Date, it will
not, except as permitted by Section 23 (Redemption and Termination)
or Section 27 (Supplements and Amendments) 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)           Common Stock Adjustments.  Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide or split the outstanding shares of Common
Stock, or (iii) combine the outstanding shares of Common Stock into a smaller
number of shares, the number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.  The adjustments provided for in this Section 11(p) shall
be made 

 

25

 

successively to the Common
Stock whenever such a dividend is declared or paid or such subdivision,
combination or consolidation is effected on such Common Stock.

 

Section 12.            Certificate of
Adjusted Purchase Price or Number of Shares.   Whenever an adjustment is made as provided
in Section 11 (Adjustment of Purchase Price; Number and Kind of Shares
or Number of Rights) and Section 13 (Consolidation, Merger or Sale
or Transfer of Assets or Earning Power) 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) mail or cause the Rights
Agent to 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 26 (Notices).
The Rights Agent shall be fully protected in relying on any such certificate
and on any adjustment therein contained.

 

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

 

(a)           Flip-over Event.  In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, or enter into a statutory stock
exchange or similar transaction with, any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)(Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Restriction
Against Diminishing Benefits of the Rights)), and the Company shall not be
the continuing or surviving corporation of such consolidation, merger or
statutory share exchange or similar transaction, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section 11(o))
shall consolidate with, or merge with or into, or enter into a statutory stock
exchange or similar transaction with, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation, merger or statutory
share exchange or similar transaction and, in connection with such
consolidation, merger or statutory share exchange or similar transaction, 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 more than 50% of the assets, cash flow or earning power of
the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o)), then, and in each
such case (except as may be contemplated by Section 13(d) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power — Exceptions)),  (i) proper provision shall be made so
that: each holder of a Right, except as provided in Section 7(e) (Exercise
of Rights; Purchase Price; Expiration Date of Rights — Termination of
Acquiring Person’s Rights) 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, nonassessable and freely tradeable shares of Common Stock of the
Principal Party, not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (A) multiplying
the then current Purchase Price by the number of one one-thousandths of a share
of 

 

26

 

Preferred Stock for which a
Right is exercisable immediately prior to the first occurrence of a Flip-over
Event (or, if a Flip-in Event has occurred prior to the first occurrence of a
Flip-over 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 Flip-in Event by the Purchase Price in effect immediately prior to such first
occurrence), and (B) dividing that product (which, following the first
occurrence of a Flip-over Event, shall be referred to as the “Purchase Price”
for each Right and for all purposes of this Agreement) by  50% of the Current Market Price per share of
the Common Stock of such Principal Party on the date of consummation of such
Flip-over Event; (ii) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Flip-over 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 (Adjustment of
Purchase Price; Number and Kind of Shares or Number of Rights) shall apply
only to such Principal Party following the first occurrence of a Flip-over
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) (Adjustment of Purchase Price;
Number and Kind of Shares or Number of Rights — Certain Adjustments)
hereof shall be of no effect following the first occurrence of any Flip-over
Event.  Notwithstanding anything in this
Agreement to the contrary, if a Flip-over Event shall occur prior to the
Distribution Date, then (i) the Rights shall survive such Flip-over Event
and shall not as a result thereof be cancelled, terminated or otherwise cease
to exist and (ii) the Distribution Date shall be deemed to have occurred
on the day immediately prior to the date of such Flip-over Event.

 

(b)           Principal Party.  “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)
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power — Flip-over
Event), the Person that is the issuer of any securities into which the
shares of Common Stock are converted in such consolidation, merger or statutory
share exchange or similar transaction, or, if there is more than one such
issuer, the issuer of the shares of Common Stock of which have the greatest
aggregate market value of shares outstanding and if no securities are so
issued, (x) the Person that is the other party to such consolidation,
merger or statutory share exchange or similar transaction if the Person
survives the merger, or, if there is more than one such Person, the Person the
shares of Common Stock of which have the greatest aggregate market value of
shares outstanding, or (y) if the Person that is the other party to the
merger does not survive the merger, the Person that does survive the merger or (z) the
Person resulting from the consolidation, and

 

(ii)           in the case of any transaction
described in clause (z) of the first sentence of Section 13(a) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power — Flip-over Event),
the Person that is the party receiving the greatest portion of the assets, cash
flow or earning power transferred pursuant to such transaction or transactions,
or, if each Person that is a party to such transaction or

 

27

 

transactions receives that
same portion of the assets, cash flow or earning power so transferred or if the
Person receiving the greatest portion of the assets or earning power cannot be
determined, whichever of such Persons as is the issuer of Common Stock having
the greatest aggregate market value of shares outstanding;

 

provided, however,
that in any such case, (1) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding twelve (12) month
period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, “Principal Party” shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Stocks 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 total outstanding Common Stock having the greatest
aggregate market value.

 

(c)           Supplemental
Agreement.  The Company
shall not consummate a Flip-over Event 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 (Consolidation, Merger or Sale or
Transfer of Assets or Earning Power) 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 such Flip-over Event, the Principal Party will

 

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

 

(ii)           use its best efforts, if the Common
Stock of the Principal Party shall be listed or admitted to trading on the New
York Stock Exchange or on another national securities exchange, to list or
admit to trading (or continue the listing of) the Rights and the securities
purchasable upon exercise of the Rights on the New York Stock Exchange or such
securities exchange, or, if the Common Stock of the Principal Party shall not
be listed or admitted to trading on the New York Stock Exchange or a national
securities exchange, to cause the Rights and the securities receivable upon
exercise of the Rights to be reported by such other system then in use;

 

(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 

 

28

 

requirements for
registration on Form 10 (or any successor form) under the Exchange Act;
and

 

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

 

The provisions of this Section 13
(Consolidation, Merger or Sale or Transfer of Assets or Earning Power)
shall similarly apply to successive consolidations, mergers or statutory share
exchanges or similar transactions or sales or other transfers. In the event
that a Flip-over Event shall occur at any time after the occurrence of a
Flip-in Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power — Flip-over Event).

 

(d)          Exceptions.  Notwithstanding anything in this Agreement to
the contrary, Section 13 (Consolidation, Merger or Sale or Transfer of
Assets or Earning Power) shall not be applicable to a transaction described
in subparagraphs (x) and (y) of Section 13(a) (Consolidation,
Merger or Sale or Transfer of Assets or Earning Power — Flip-over Event)
if (i) such transaction is consummated with a Person or Persons who
acquired shares of Common Stock pursuant to a tender offer or exchange offer
for all outstanding shares of Common Stock which complies with the provisions
of Section 11(a)(ii)(A) (Adjustment of Purchase Price;  Number and Kind of Shares or Number of Rights
— Certain Adjustments) (or a wholly-owned subsidiary of any such Person
or Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased pursuant to such
tender or exchange offer and (iii) the form of consideration being offered
in such transaction is the same as the form of consideration paid to all
holders of shares of Common Stock whose shares were purchased pursuant to such
tender offer or exchange offer.  Upon
consummation of any such transaction contemplated by this Section 13(d),
all Rights hereunder shall expire.

 

Section 14.            Fractional
Rights and Fractional Shares.

 

(a)           Fractional
Rights.  The Company shall not be
required to issue fractions of Rights, except prior to the Distribution Date as
provided in Section 11(p) (Adjustment of Purchase Price;  Number and Kind of Shares or Number of Rights —
Common Stock Adjustments), or to distribute Rights Certificates which
evidence fractional Rights.  In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right.  For purposes of
this 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
Trading Day shall be the last sale price, regular way, or, in case no such sale
takes place on such Trading 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 

 

29

 

New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. Automated Quotation
System or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board.  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 shall be
used.

 

(b)           Fractional Shares of Preferred Stock.  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 which may at the
option of the Company, be evidenced by depositary receipts) 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). 
Interests in fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, that such agreement shall provide that the holders of such
depositary receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Preferred Stock represented
by such depositary receipts. 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) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Current
Market Price) for the Trading Day immediately prior to the date of such
exercise.

 

(c)           Fractional Shares of Common Stock  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 of
one share of Common Stock (as determined pursuant to Section 11(d)(i) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Current
Market Price) for the Trading Day immediately prior to the date of such
exercise.

 

30

 

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

 

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 or her own behalf and for his or her 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 or her 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) (Transfer,
Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates — Procedure) and Section 7(f) (Exercise
of Rights; Purchase Price; Expiration Date of Rights — Surrender of
Rights Certificates; Identity of Beneficial Owner), 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) (Exercise
of Rights; Purchase Price; Expiration Date of Rights — Termination
of Acquiring Person’s Rights), shall be required to be affected by any
notice to the contrary; and

 

31

 

(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, 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 (Notice
of Certain Events)), 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)           Compensation.  The Company shall pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability or expense, incurred without negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything
done or omitted to be done by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against or investigating any claim of liability in the
premises.

 

(b)           Reliance.  The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted
to be taken by it in connection with its 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, or otherwise upon the advice of counsel as set
forth in Section 20 (Duties of Rights Agent).

 

32

 

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

 

(a)           Successor.  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 or stock transfer business of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided, however,
that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 (Change of Rights Agent).
In case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or
in the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

 

(b)           Prior Countersignatures.  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)           Legal Counsel.  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 to be taken by it in good faith and in
accordance with such opinion.

 

(b)           Certification by the Company.  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 President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company and delivered to the Rights Agent; and such certificate shall be
full 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.

 

33

 

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

 

(d)           Statements of Fact or
Recitals. 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)           Agreement; Adjustments.  The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature); 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 (Adjustment of Purchase Price; Number and Kind
of Shares or Number of Rights) or Section 13 (Consolidation, Merger
or Sale or Transfer of Assets or Earning Power) 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)            Further Assurances.  The Company 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)           Instructions.  The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company and to apply
to such persons 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 the instructions of any such person.

 

(h)           Dealing in Rights.  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)            Agents; Reasonable Care.  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 

 

34

 

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

 

Section 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) calendar 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 to the holders of the
Rights Certificates by first-class mail. 
The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) calendar 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 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) calendar 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 the 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 corporation organized
and doing business under the laws of the United States or of any State of the
United States, in good standing, which is authorized under such laws to
exercise stock transfer or corporate trust powers, is subject to supervision or
examination by federal or state authority and 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 corporation described in clause (a) of
this sentence.  After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose.  Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and Preferred Stock, and 

 

35

 

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 (Change of Rights Agent), or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.

 

Section 22.             Issuance of New
Rights Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Purchase Price and the number or kind or shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement.  In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with
respect to shares of Common Stock so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, in either
case outstanding as of the Distribution Date, and (b) may, in any other
case, if deemed necessary or appropriate by the Board, 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)           Redemption.  The Company may, at its option, at any time
prior to the earliest of (i) the Stock Acquisition Date, (ii) the
tenth Business Day (or such later date as may be determined by action of the
Board of Directors of the Company prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement of, or first public
announcement of the intent to commence, by any Person (other than the Company,
any wholly owned subsidiary of the Company, or any employee benefit plan of the
Company or any Subsidiary or any entity holding shares of Common Stock for or
pursuant to the terms of any such plan) a tender offer or exchange offer the
consummation of which would result in any Person becoming an Acquiring Person
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights), or (iii) the Final Expiration Date, redeem
(the date of such redemption being referred to herein as the “Redemption Date”)
all but not less than all of the then outstanding Rights at a redemption price
of $0.001 per Right, as such amount may be appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the “Redemption Price”).  The redemption of the Rights by the Company
may be made effective at such time, on such basis and with such conditions as
the Board in its sole discretion may establish. The Company may, at its option,
pay the Redemption Price in cash, shares of Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form
of consideration deemed appropriate by Board.

 

36

 

(b)           Effect of Redemption;
Procedure.  Immediately
upon the action of the Company ordering the redemption of the Rights 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 Redemption Date, the
Company shall (i) give notice of such redemption to the Rights Agent, (ii) give
public notice of such redemption; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such redemption, and (iii) mail notice of such redemption to the holders
of the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made. Amounts payable shall be rounded down to the nearest $0.01.

 

Section 24.             Exchange.

 

(a)           Right to Exchange.  The Company may, at its option, at any time
and from time to time after the first occurrence of a Flip-in Event, exchange
all or part of the then outstanding and exercisable Rights (other than Rights
which have become void as provided in Section 7(e) (Exercise of
Rights; Purchase Price;  Expiration Date
of Rights — Termination of Acquiring Person’s Rights)) for the
Exchange Number of shares of Common Stock, shares or units of Preferred Stock
which the Board has determined to be a Common Stock Equivalent, units of other
property or any combination thereof as determined by the Board. Notwithstanding
the foregoing, the Company 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 shares of Common Stock for or pursuant to any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then
outstanding.  The exchange of the Rights
by the Company may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish.

 

(b)           Effect of Exchange;
Procedure.  Immediately
upon the action of the Company ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise such Rights will terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock, Common Stock Equivalents or units of other property equal to
the number of such Rights held by such holder multiplied by the Exchange
Number. Promptly after the action of the Company ordering the exchange of the
Rights, the Company shall (i) file evidence of such action with the Rights
Agent, (ii) give public notice of such exchange; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange, and (iii) mail notice of such exchange to 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 will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange of Rights 

 

37

 

shall be effected pro rata
based on the number of Rights (other than Rights which have become void as
provided in Section 7(e) (Exercise of Rights; Purchase Price;  Expiration Date of Rights — Termination
of Acquiring Person’s Rights)) held by each holder of Rights.

 

(c)           Common Stock Equivalents.  In any exchange pursuant to this Section 24,
the Company, at its option, may substitute Common Stock Equivalents for Common
Stock exchangeable for Rights, at the initial rate of one share of Common Stock
Equivalent for each share of Common Stock, as appropriately adjusted to reflect
adjustments in the voting rights of the Common Stock pursuant to the Company’s
Restated Certificate of Incorporation, as amended, so that the share of Common
Stock Equivalent delivered in lieu of each share of Common Stock shall have the
same voting rights as one share of Common Stock.

 

(d)           Insufficient Common Stock.  In the event that the number of shares of
Common Stock which are authorized by the Company’s Restated Certificate of
Incorporation, as amended, but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights is not sufficient to permit any
exchange of such Rights for Common Stock in accordance with this Section 24,
the Company may, at its option, take all such action as may be necessary to
authorize additional shares of Common Stock for issuance upon such exchange.

 

(e)           Fractional Shares.  Upon the action of the Company ordering the
exchange of any Rights pursuant to paragraph (a) of this Section 24,
the Company shall not be required to issue fractions of shares or to distribute
certificates which evidence fractional shares. In lieu of such fractional
shares, the Company may pay to the registered holders of the Rights
Certificates with regard to which such fractional shares would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of one share of Common Stock. For purposes of this Section 24, the
current market value of one share of Common Stock shall be the closing price of
one share of Common Stock (as determined pursuant to Section 11(d)(i) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Current
Market Price)) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24, and the value of any Common Stock
Equivalent shall be deemed to have the same current market value as the Common
Stock on such date.

 

Section 25.             Notice of
Certain Events.

 

(a)           Preferred Stock
Transactions, etc.  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); (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; (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock); (iv) to effect any consolidation with, merger
into or with, or statutory share exchange or similar transaction with, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) (Adjustment of Purchase Price; Number
and Kind of Shares or Number of Rights — Restriction against Diminishing
Benefits of the Rights)), or to effect any 

 

38

 

sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions, of more than 50% of the
assets, cash flow or earning power of the Company and its Subsidiaries (taken
as a whole) to any other Person or Persons (other than the Company and/or any
of its Subsidiaries in one or more transactions each of which complies with Section 11(o));
(v) to effect the liquidation, dissolution or winding up of the Company,
or (vi) to declare or pay any dividend on the shares of Common Stock
payable in Common Stock or to effect a subdivision, combination or
consolidation of the shares of Common Stock (by reclassification or otherwise
than by payment of dividends in Common Stock), 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 (Notices), 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, statutory share exchange or
similar transaction, 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) calendar 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) calendar 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)           Other Transactions.  In case any of the events set forth in Section 11(a)(ii) (Adjustment
of Purchase Price; Number and Kind of Shares or Number of Rights — Certain
Adjustments) 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 (Notices),
a notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii),
and (ii) all references in the preceding paragraph to Preferred Stock
shall be deemed thereafter to refer to Common Stock and/or, if appropriate,
other securities.

 

Section 26.             Notices.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made if
sent by facsimile (with receipt confirmed) or by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:

 

Toreador Resources
Corporation

13760 Noel Rd., Suite 1100

Dallas, Texas  75240

Attention:  Chief Executive Officer

Fax:  (214) 559-3945

 

39

 

with a copy to:

 

Haynes and Boone, LLP

2323 Victory Plaza, Suite 700

Dallas,
Texas  75219

Attn:  Janice V. Sharry

Fax:  (214) 200-0620

 

Subject to the provisions of
Section 21 (Change of Rights Agent), 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 facsimile (with receipt confirmed) or by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:

 

American Stock Transfer and Trust Company, LLC

59 Maiden Lane

Plaza Level

New York, NY 10038

Attention:  Corporate Trust

Fax: (718) 331-1852

 

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.  For so long
as the Rights are redeemable, and subject to the penultimate sentence of this Section 27,
the Company may, and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock or, on and after
the Distribution Date, the holders of Rights Certificates.  At any time when the Rights are no longer
redeemable and subject to the penultimate sentence of this Section 27, 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; provided, however, that no such supplement or
amendment may (i) adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of
any such Person) or, prior to the Distribution Date, holders of certificates
representing shares of Common Stock; (ii) cause this Agreement again to
become amendable other than in accordance with this sentence; or (iii) cause
the Rights again to become redeemable. 
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, the Final Expiration Date, the Purchase Price, or the number
of one one-thousandths of a share of Preferred Stock for which a right is
exercisable; provided, however, that at any time prior to (i) a

 

40

 

Stock Acquisition Date or (ii) the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding the Board may amend this
Agreement to increase the Purchase Price or extend the Final Expiration
Date.  Prior to the Distribution Date,
the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Stock.

 

Section 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 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 shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board 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, 

 

41

 

if any such term, provision,
covenant or restriction is held by such court or authority to be invalid, void
or unenforceable and the Board determines in its good faith judgment that
severing the invalid language from this Agreement would adversely affect the
purpose or effect of this Agreement, the right of redemption set forth in Section 23
(Redemption and Termination) 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.

 

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; provided, however,
that the rights, duties, responsibilities and obligations of the Rights Agent
shall be governed and construed in accordance with the laws of the State of New
York.

 

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.

 

42

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and their
respective corporate seals to be hereunto affixed and attested, all as of the
day and year first above written.

 

 

	
   

  	
  TOREADOR RESOURCES
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Nigel Lovett

  
	
   

  	
   

  	
  Name:  Nigel Lovett

  
	
   

  	
   

  	
  Title:  President and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMERICAN STOCK
  TRANSFER & TRUST 

  
	
   

  	
  COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Hebert J. Lemmer

  
	
   

  	
   

  	
  Name:  Herbert J. Lemmer

  
	
   

  	
   

  	
  Title:  Vice President

  

 

43

 

Exhibit 1

 

CERTIFICATE OF

DESIGNATION, PREFERENCES AND
RIGHTS OF

SERIES B PREFERRED STOCK

of

TOREADOR RESOURCES CORPORATION

 

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

 

I, Shirley Anderson, Secretary of Toreador Resources
Corporation (the “Corporation”),
a corporation organized and existing under the General Corporation Law of the
State of Delaware (the “GCL”),
in accordance with the provisions of Section 103 of the GCL, DO HEREBY
CERTIFY

 

That pursuant to the authority conferred upon the Board
of Directors (the “Board”)
by the Restated Certificate of Incorporation of the Corporation, as amended,
the said Board on November 6,
2008 adopted the following resolutions creating a series of 60,000 shares of
Preferred Stock, par value $1.00 per share, designated as Series B
Preferred Stock:

 

RESOLVED, that, pursuant to the authority vested in the
Board in accordance with the provisions of its Restated Certificate of
Incorporation, as amended, the Board does hereby create, authorize and provide
for the issuance upon the exercise of the Corporation’s Preferred Stock
Purchase Rights, of a series of Preferred Stock of the Corporation, and does
hereby fix and state that the designations, amounts, powers, preferences and
relative and other special rights and the qualifications, limitations or
restrictions thereof are as follows:

 

Series B Preferred Stock

 

Section 1.               Designation and Amount.  The shares of such series shall be designated
as Series B Preferred Stock and the number of shares constituting such
series shall be 60,000.

 

Section 2.               Dividends and Distributions.

 

(A)          Subject to the prior and superior rights of the holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series B
Preferred Stock with respect to dividends, the holders of shares of Series B
Preferred Stock in preference to the holders of Common Stock, par value
$0.15625 per share (the “Common
Stock”), and of any other stock of the Corporation ranking
junior to the Series B Preferred Stock with respect to dividends shall be
entitled to receive, when, as and if declared by the Board out of funds legally
available for that purpose, quarterly dividends payable in cash on the 1st day
of March, June, September and December (each such date being referred
to herein as a “Quarterly
Dividend Payment Date”), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series B Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $0.001 or (b) subject to
the provision for adjustment hereinafter set forth, one thousand (1,000) times
the aggregate per share amount of all cash dividends, and one thousand (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, 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 B Preferred Stock. In the event the
Corporation shall at any time after November 20, 2008 (the “Rights Declaration Date”)
(i) declare any dividend on Common Stock payable in shares of Common 

 

1

 

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 B
Preferred Stock were entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

 

(B)           The Corporation shall declare a dividend or distribution on the Series B
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); 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 $0.001 per share on the Series B
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 B Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series B Preferred Stock,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series B 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 B
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 may
fix a record date for the determination of holders of shares of Series B
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 B
Preferred Stock shall have the following voting rights:

 

(A)          Subject to the provision for adjustment hereinafter set forth, each
share of Series B Preferred Stock shall entitle the holder thereof to one
thousand (1,000) votes which each share of Common Stock is entitled to vote. 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 B Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.

 

(B)           Except as otherwise provided herein or by law, the holders of shares of Series B
Preferred Stock and the holders of shares of Common Stock shall vote together
as one class on all matters submitted to a vote of stockholders of the
Corporation.  Except as otherwise
provided herein or by law, the holders of the shares of Series B Preferred
Stock shall not be entitled to vote as a separate class on any matters
submitted to a vote of the stockholders.

 

(C)           Except as set forth herein, holders of Series B Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote 

 

2

 

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 B 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 B Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:

 

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

 

(iv)          purchase or otherwise acquire for consideration any shares of Series B
Preferred Stock, or any shares of stock ranking on a parity with the Series B
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board) to all holders of such shares upon
such terms as the Board, 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 B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued 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, subject to the
conditions and restrictions on issuance set forth herein.

 

Section 6.               Liquidation, Dissolution or Winding Up.  Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of Common Stock or of shares of any other stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Preferred Stock unless, prior thereto, the
holders of shares of Series B Preferred Stock shall have received an
amount equal to the greater of (i) $1,000 per share, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment and (ii) an aggregate amount per
share, subject to the provision for 

 

3

 

adjustment hereinafter set forth, equal to 1,000 times
the aggregate amount to be distributed per share to holders of shares of Common
Stock (the “Series B
Liquidation Preference”) or (2) to the holders of shares of
stock ranking on a parity upon liquidation, dissolution or winding up with the Series B
Preferred Stock, except distributions made ratably on the Series B
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.  In the event
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 aggregate
amount to which holders of shares of Series B Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

 

Section 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, securities, cash or
any other property, then in any such case the shares of Series B Preferred
Stock shall at the same time be similarly exchanged for or changed into an
amount per share (subject to the provision for adjustment hereinafter set
forth) equal to one thousand (1,000) times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (ii) 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 B
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.               Redemption.  The outstanding shares of Series B
Preferred Stock may be redeemed at the option of the Board as a whole, but not
in part, at any time, or from to time to time, at a cash price per share equal
to one hundred five percent (105%) of (i) the product of the Adjustment
Number (as such term is hereinafter defined) times the Average Market Value (as
such term is hereinafter defined) of the Common Stock, plus (ii) all
dividends which on the redemption date have accrued on the shares to be
redeemed and have not been paid, or declared and a sum sufficient for the
payment thereof set apart, without interest. The “Adjustment Number” is one thousand
(1,000) (as appropriately adjusted as set forth in the last sentence of Section 6
to reflect such events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock).  The “Average Market Value” is the average
closing price for each trading day during the thirty (30) day period
immediately preceding the date before the redemption date, and the closing
price for each trading day shall be the last sale price, regular way, or, in
case no such sale takes place on such trading day, the average of the closing
bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board. If on any such date
no 

 

4

 

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 shall be used.

 

Section 9.               Ranking.  The Series B Preferred Stock shall rank (a) senior
to all Common Stock and (b) junior to all other series of preferred stock
with respect to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.

 

Section 10.             Amendment.  The Restated Certificate of Incorporation of
the Corporation, as amended, shall not be further amended in any manner which
would materially alter or change the powers, preferences or special rights of
the Series B 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 B Preferred Stock, voting separately as a class.

 

Section 11.             Fractional Shares.  At the Corporation’s sole discretion, Series B
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 B Preferred Stock.

 

********

 

5

 

IN
WITNESS WHEREOF, I have executed and subscribed this Certificate of Designation
and do affirm the foregoing as true as of November 20, 2008.

 

	
   

  	
  TOREADOR
  RESOURCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Shirley Anderson, Secretary

  

 

6

 

Exhibit 2

 

[Form of
Rights Certificate]

 

Certificate No. R
                   Rights

 

NOT EXERCISABLE AFTER THE EARLIER OF NOVEMBER 20, 2009, OR SUCH DATE AS
THE RIGHTS REPRESENTED HEREBY ARE REDEEMED BY TOREADOR RESOURCES CORPORATION
(THE “CORPORATION”).  THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE CORPORATION, AT
$0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT DATED AS OF
NOVEMBER 20, 2008, BY AND BETWEEN THE CORPORATION AND AMERICAN STOCK TRANSFER &
TRUST COMPANY, LLC, AS RIGHTS AGENT (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) (EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS — TERMINATION OF ACQUIRING PERSON’S RIGHTS) OF SUCH AGREEMENT.](1)

 

Rights
Certificate

TOREADOR
RESOURCES CORPORATION

 

This certifies that
                                                        ,
or its, his or her 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 November 20,
2008 (the “Rights
Agreement”), between Toreador Resources Corporation, a Delaware
corporation (the “Corporation”),
and American Stock Transfer & Trust Company, LLC (the “Rights Agent”), to
purchase from the Corporation at any time prior to 5:00 P.M. (New York,
New York time) on November 20, 2009 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-thousandth (1/1,000) of a fully paid, nonassessable share of Series B
Preferred Stock (the “Series B
Preferred Stock”) of the Corporation, at a purchase price of
$30.00 per one one-thousandth (1/1,000) of a share (the 

 

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

 

 

“Purchase Price”),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The number of
Rights evidenced by this Rights Certificate (and the number of shares which may
be purchased upon exercise thereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of November 20, 2008
based on the Series B Preferred Stock as constituted at such date.  The Corporation reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Series B Preferred Stock would be
issued.

 

Upon the occurrence of a Flip-in 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
Associate or Affiliate or any such Person (as such terms are defined in the
Rights Agreement), (ii) a transferee of an Acquiring Person or its
Associate or Affiliate who becomes a transferee after such Acquiring Person or
its Associate or Affiliate becomes such, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of an Acquiring
Person or its Associate or Affiliate who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such, 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 Flip-in Event.

 

As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares of Series B 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
(as such term is defined in the Rights Agreement).

 

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

 

This Rights Certificate, with or without
other Rights Certificates, upon surrender at the principal office or offices of
the Rights Agent designated for such purpose, may be exchanged for another
Rights Certificate or Rights Certificates of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate number of one
one-thousandths of a share of Series B 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 for which this Rights Certificate is not exercised.

 

 

Subject to the provisions of the Rights
Agreement, the Rights evidenced by this Certificate (i) may be redeemed by
the Corporation at its option at a redemption price of $0.001 per Right at any
time prior to the earlier of (a) the Stock Acquisition Date (as such term
is defined in the Rights Agreement), (b) the tenth business day (or such
later date as may be determined by action of the Board of Directors of the
Corporation prior to such time as any person becomes an Acquiring Person) after
the date of the commencement of, or first public announcement of the intent to
commence, by any person (other than the Corporation, any wholly owned
subsidiary of the Corporation, or any employee benefit plan of the Corporation
or any subsidiary or any entity holding shares of the Corporation’s Common
Stock for or pursuant to the terms of any such plan) a tender offer or exchange
offer the consummation of which would result in any person becoming an
Acquiring Person (including any such date which is after the date of the Rights
Agreement and prior to the issuance of the Rights), or (c) the Final
Expiration Date (as such term is defined in the Rights Agreement) and (ii) may
be exchanged in whole or in part for Series B Preferred Stock, shares of
the Corporation’s Common Stock, par value $0.15625 per share, other property or
any combination thereof.

 

In addition, the Rights may be exchanged, in
whole or in part, for shares of the Common Stock, or shares of Common Stock
equivalents of the Corporation having substantially the same dividend, voting
and liquidation rights as shares of Common Stock and are deemed in good faith
by the Board of Directors to have substantially the same value as the shares of
Common Stock.  Immediately upon the
action of the Board of Directors of the Corporation authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.

 

No fractional shares of Series B
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 (1/1,000) of a share of Series B Preferred Stock, which
may, at the election of the Corporation, be evidenced by depositary receipts),
but a cash payment will be made in lieu thereof, as provided in the Rights Agreement.

 

No holder of this Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
shares of Series B Preferred Stock or of any other securities of the
Corporation 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
Corporation or any right to vote for the election of directors or upon any matter
submitted to stockholders of the Corporation 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 of the Corporation (except as provided in
the Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Rights Certificate shall
have been exercised as provided in the Rights Agreement.

 

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

 

 

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

 

 

	
  Dated as of

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  TOREADOR
  RESOURCES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Secretary

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signature

  	
   

  	
   

  
								

 

 

[Form of
Reverse Side of Rights Certificate]

 

FORM OF
ASSIGNMENT

 

(To be executed by the registered holder if
such

holder desires to transfer the Rights
Certificate.)

 

FOR VALUE RECEIVED,

hereby sells, assigns and transfers unto

 

 

(Please print name and address of transferee)

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  

 

CERTIFICATE

 

The undersigned hereby certifies by checking
the appropriate boxes that:

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  

 

NOTICE

 

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

 

 

FORM OF
ELECTION TO PURCHASE

(To be executed if holder desires to exercise

Rights represented by the Rights
Certificate.)

 

To:          TOREADOR RESOURCES CORPORATION

 

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

 

Please insert social security or other identifying number

 

 

(Please
print name and address)

 

 

 

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

 

Please insert social security or other identifying number

 

 

(Please
print name and address)

 

 

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  

 

 

CERTIFICATE

 

The undersigned hereby certifies by checking
the appropriate boxes that:

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  

 

NOTICE

 

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

 

 

Exhibit 3

 

[Letter to Stockholders]

 

December     , 2008

 

Dear Toreador Resources Corporation Stockholder:

 

Effective November 20, 2008, your Board
of Directors adopted a Stockholder Rights Plan designed to prevent a potential
acquiror from gaining control of the Company without fairly compensating all of
the Company’s stockholders.

 

The Rights will initially trade with shares
of the Company’s Common Stock and will have no impact on the way in which the
Company’s shares are traded. There are no separate certificates or market for
the Rights.

 

The Rights will not separate from the Common
Stock until the earlier of (1) ten business days after a public
announcement that a person or group has acquired 15% (subject to certain
exceptions as set forth in the Rights Plan) or more of the shares of the
Company’s Common Stock or (2) ten business days (or any later date
determined by the Company’s Board of Directors) after a person makes a tender
or exchange offer for 15% (subject to certain exceptions as set forth in the
Rights Plan) or more of the shares of the Company’s Common Stock.  The Rights Plan provides limited exemptive
relief to certain of the Company’s existing significant stockholders and their
subsequent transferees.

 

Many other public companies have adopted
similar plans, indicating widespread agreement that such plans can help
Directors deflect coercive and inadequate offers.

 

A summary of the terms of the Rights is
included with this letter.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Nigel J. Lovett

  
	
   

  	
  President and Chief Executive Officer

  

 

 

SUMMARY OF
RIGHTS TO PURCHASE

PREFERRED
STOCK

 

Effective November 20, 2008, the Board
of Directors (the “Board”)
of Toreador Resources Corporation (“Toreador”) declared a dividend distribution
to its stockholders of record at the close of business on December 1,
2008, of one preferred stock purchase right (a “Right”) for each outstanding share of
Common Stock, par value $0.15625 per share (the “Common Stock”), that will entitle the
registered holder to purchase from Toreador one one-thousandth (1/1,000) of a
share of Series B Preferred Stock, par value $1.00 per share (the “Preferred Stock”), at
a purchase price of  $30.00 per one
one-thousandth (1/1,000) of a share, subject to adjustment.  The description and terms of the Rights are
set forth in a Rights Agreement (the “Rights Agreement”) between Toreador and
American Stock Transfer& Trust Company, LLC, as Rights Agent (the “Rights Agent”).  Initially capitalized terms used but not
defined herein have the meanings set forth in the Rights Agreement.

 

Separation
and Distribution of Rights; Exercisablility.  Initially, the Rights will be attached to all
certificates representing shares of Common Stock then outstanding, and no
separate Rights certificates will be distributed.  The Rights will separate from the Common
Stock upon the earlier of:

 

·      ten (10) business
days following a public announcement that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the shares of Common Stock then outstanding
(subject to certain exceptions discussed below and as set forth in the Rights
Agreement) (such person is referred to as an “Acquiring
Person”); or

 

·      ten (10) business
days (or some later date as determined by the Board) following the commencement
of a tender or exchange offer that would result in a person or group
beneficially owning 15% or more of the shares of Common Stock then outstanding
(subject to exceptions as set forth in the Rights Agreement).

 

The date the Rights separate from the Common Stock is referred to as
the “Distribution Date.”

 

Until the Distribution Date, (i) the
Rights will be evidenced by and transferred with, and only with, the Common
Stock certificates, (ii) new Common Stock certificates issued after December 1,
2008 will contain a notation incorporating the Rights Agreement by reference,
and (iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by those certificates. 
Pursuant to the Rights Agreement, Toreador reserves the right to require
prior to the occurrence of a Triggering Event (as hereinafter defined) 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 the close of business on November 20,
2009, unless earlier redeemed by Toreador as described below.

 

 

As soon as practicable after the Distribution
Date, Rights certificates will be mailed to the holders of record of Common
Stock as of the close of business on the Distribution Date and, after that, the
separate Rights certificates will represent the Rights.  Except in connection with shares of Common
Stock issued or sold pursuant to the exercise of stock options under any
employee plan or arrangements, or upon the exercise, conversion or exchange of
securities issued by Toreador in the future, or as otherwise determined by the
Board, only shares of Common Stock issued prior to the Distribution Date will
be issued with Rights.

 

Flip-in
Events.  Each holder of a Right (other
than the Acquiring Person and any associate or affiliate thereof) will have the
right to receive, upon exercise, Common Stock (or, in some circumstances, cash,
property or other securities of Toreador) having a value equal to two times the
purchase price of the Right, as the case may be, if:

 

·      any person
becomes an Acquiring Person (except pursuant to specified exceptions, including
an offer made for all outstanding shares of Common Stock at a price and upon
terms and conditions that the Board determines to be in the best interests of
Toreador and its stockholders);

 

·      Toreador is the
surviving corporation in a merger with an Acquiring Person and the Common Stock
is not changed or exchanged; or

 

·      during the time
that there is an Acquiring Person, an event occurs that results in increasing
the Acquiring Person’s beneficial ownership of shares of Common Stock by more
than 1%.

 

Notwithstanding any of the foregoing, following the occurrence of any
of the events described in this paragraph, all Rights that are, or (under some
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void. 
The events described in this paragraph are referred to as “Flip-in Events.”

 

For example, at a purchase price of $30 per
Right, each Right not owned by an Acquiring Person (or by some related parties
or transferees) following an event set forth in the preceding paragraph would
entitle its holder to purchase $60 worth of Common Stock (or other
consideration, as noted above) for $30.

 

Flip-over
events.  At any time following a public
announcement that a person has become an Acquiring Person, each holder of a
Right (except Rights which previously have been voided as set forth above) will
have the right to receive, upon exercise, common stock of an acquiring company
having a value equal to two times the purchase price of the Right if any of the
following occur:

 

·      Toreador enters
into a merger in which Toreador is not the surviving corporation;

 

·      Toreador is the
surviving corporation in a merger pursuant to which all or part of the
outstanding shares of Common Stock are changed into or exchanged for stock or
other securities of any other person or cash or any other property; or

 

 

·      more than 50%
of the combined assets, cash flow or earning power of Toreador and its
subsidiaries is sold or transferred (in each case other than some
consolidations with, mergers with and into, or sales of assets, cash flow or
earning power by or to subsidiaries of Toreador as specified in the Rights
Agreement).

 

The events described in this paragraph are referred to as “Flip-over Events.”
Flip-in events and Flip-over events are referred to collectively as “Triggering Events.”

 

Anti-dilution
Adjustments; Fractional Shares.  The applicable purchase price payable, the
number of shares of Preferred Stock or other securities or property issuable
upon the exercise of the Rights, and the number of applicable Rights
outstanding are subject to adjustment from time to time to prevent dilution:

 

·      in the event of
a stock dividend on, or a subdivision, combination or reclassification of,
Preferred Stock;

 

·      if the holders
of Preferred Stock are granted rights, options or warrants to subscribe for the
applicable Preferred Stock or securities convertible into the applicable
Preferred Stock at less than the current market price of the applicable
Preferred Stock; or

 

·      upon the
distribution to holders of Preferred Stock of evidences of indebtedness, cash
(excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than
those referred to in the bullet point immediately above).

 

The number of outstanding Rights are also subject to adjustment in the
event of a stock dividend on, or a subdivision or combination of Common
Stock.  With some exceptions, no
adjustment in the purchase price relating to a Right will be required until
cumulative adjustments amount to at least one percent (1%) of the purchase
price relating to the Right.

 

No fractional shares of Preferred Stock are
required to be issued (other than fractions which are integral multiples of one
one-thousandth (1/1,000) of a share of Preferred Stock) and, in lieu of the
issuance of fractional shares, Toreador may make an adjustment in cash based on
the market price of the Preferred Stock on the trading date immediately prior
to the date of exercise.

 

Dividend,
Liquidation and Redemption Rights of the Preferred Stock.  Each share of Preferred Stock will be
entitled, when, as and if declared, to a minimum preferential quarterly
dividend payment equal to the greater of $0.001 per share and an aggregate
amount of 1,000 times the dividend declared per share of Common Stock (other
than stock dividends payable in Common Stock). 
Upon liquidation, the holders of Preferred Stock will be entitled to the
greater of (1) a minimum preferential liquidation payment of $1,000 per
share (plus any accrued but unpaid dividends) and (2) an aggregate payment
equal to 1,000 times the payment to be made per share of Common Stock.  Each share of Preferred Stock will have 1,000
times the number of 

 

 

votes each share of the Common Stock has on matters the respective
class is entitled to vote on, which will be voted together with Common
Stock.  Upon any merger, consolidation or
other transaction in which shares of Common Stock are converted or exchanged,
each share of Preferred Stock will be entitled to receive 1,000 times the
amount received per share of Common Stock. These rights are protected by
customary antidilution provisions.

 

At any time, or from time to time, the Board
may redeem the outstanding shares of Preferred Stock, in whole but not in part,
at a cash price per share equal to one hundred five percent (105%) of (i) 1,000
(subject to adjustment) times the average market value of Common Stock plus (ii) all
accrued and unpaid dividends of the Preferred Stock as of the redemption date.

 

Because of the nature of the dividend,
liquidation and voting rights of Preferred Stock, the value of the one
one-thousandth interest in a share of Preferred Stock purchasable upon exercise
of each Right, should approximate the value of one share of Common Stock.

 

Exchange
of the Rights.  At any time
after the occurrence of a Flip-in Event and prior to the acquisition by a
person or group of 50% or more of the shares of Common Stock then outstanding,
the Board may, without payment of the purchase price by the holder, exchange
the Rights, in whole or in part, as follows:

 

·      one Right
(other than the Rights owned by the Acquiring Person or group, which will
become void) for one-half the number of shares of Common Stock, one
one-thousandths of a share of Preferred Stock or shares or other units of other
property for which a Right is exercisable immediately prior to the time of the
action of the Board to exchange the Rights.

 

Redemption
of the Rights.  At any time
prior to the earliest of (i) the date an Acquiring Person makes a public
announcement that it has acquired beneficial ownership of 15% of the Common
Stock, (ii) the tenth business day (or such later date as may be determined
by action of the Board of Directors prior to such time as any person or group
of affiliated or associated persons becomes an Acquiring Person) after the
commencement of, or announcement of an intention to commence, a tender offer or
exchange offer the consummation of which would result in any person becoming an
Acquiring Person, or (iii) November 20, 2009, the Company may redeem
all, but not less than all, of the Rights at a price of $0.001 per Right
(payable in cash, shares of Common Stock or other consideration deemed
appropriate by the Board and subject to adjustment).  Immediately upon the action of the Board
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of these Rights will be to receive the $0.001 redemption price.

 

No Rights
as Stockholder.  Until a
Right is exercised, the holder will have no rights as a stockholder of
Toreador, including, without limitation, the right to vote or to receive
dividends.

 

Amendment
of the Rights Agreement. 
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board at any time during the period in which the Rights are redeemable. At any
time when the Rights are no longer redeemable, the provisions of the Rights
Agreement may be 

 

 

amended by the Board only if the amendment does not adversely affect
the interest of holders of Rights (excluding the interest of any Acquiring
Person) or cause the Rights to become redeemable again.

 

A copy of the Rights Agreement has been filed
with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A filed on November 24, 2008. A copy
of the Rights Agreement is available free of charge from the Rights Agent.  This summary description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.Exhibit 10.1

 

ZALE CORPORATION

NON-EMPLOYEE DIRECTOR

EQUITY COMPENSATION PLAN

(As amended through November 2008)

 

1.                                   PREAMBLE

 

This Zale Corporation Non-Employee Director Equity
Compensation Plan, as it may be amended from time to time (the “Plan”), is intended
to promote the interests of Zale Corporation, a Delaware corporation (the “Company”),
and its stockholders by providing directors of the Company who are not
employees of the Company with appropriate incentives and rewards to serve on
the board of directors of the Company and to acquire a proprietary interest in
the long-term success of the Company.

 

2.                                   DEFINITIONS

 

As used in the Plan, the following definitions apply
to the terms indicated below:

 

(a)                              “Board of Directors” shall mean the Board of Directors of the Company.

 

(b)                             “Cause,” when used in connection with a Participant’s removal or
resignation as a member of the Board of Directors, shall mean (i) the
willful and continued failure by the Participant substantially to perform his
or her duties and obligations to the Company (other than any such failure
resulting from his or her incapacity due to physical or mental illness) or (ii) the
willful engaging by the Participant in misconduct which is materially injurious
to the Company.  For purposes of this Section 2(b),
no act, or failure to act, on a Participant’s part shall be considered “willful”
unless done, or omitted to be done, by the Participant in bad faith and without
reasonable belief that his or her action or omission was in the best interests
of the Company.  The Board of Directors
shall determine whether a Participant’s removal or resignation as a member of
the Board of Directors is for Cause.

 

(c)                              “Change in Control” shall mean the first to occur of the following:

 

(i)                                  any “person,” as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the
Company or any trustee or other fiduciary holding securities under an employee
benefit plan of the Company), is or becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities;

 

(ii)                               during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (i), (iii) or
(iv) of this 

 

 

definition)
whose election by the Board of Directors or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;

 

(iii)                            the stockholders of the Company approve a merger or consolidation of
the Company with any other entity, other than (i) a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no “person” (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company’s then outstanding securities; or

 

(iv)                           the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all of the Company’s assets.

 

(d)                             “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(e)                              “Company Stock” shall mean the common stock, par value $.01 per share,
of the Company.

 

(f)                                 A “Deferred Stock Unit” shall mean a unit
which is granted pursuant to the terms of Section 6 and as described in Section 8B.

 

(g)                              “Disability” shall mean any physical or mental condition that would
qualify a Participant for a disability benefit under the long-term disability
plan maintained by the Company and applicable to him or her.

 

(h)                              “Effective Date” shall mean November 11, 2005.

 

(i)                                  “Equity Award” shall mean a Deferred Stock
Unit, an Option, a share of Restricted Stock or a Restricted Stock Unit granted
pursuant to the terms of the Plan.

 

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

 

(k)                             The “Fair Market Value” of a share of Company Stock with respect to any
day shall be the closing price of Company Stock on the day of the award as
reported on the New York Stock Exchange or on such other securities exchange or
reporting system as may be designated by the Board of Directors.  In the event that the price of a share of
Company Stock shall not be so reported, the Fair Market Value of a share of
Company Stock shall be determined by the Board of Directors in its absolute
discretion.

 

 

2

 

(l)                                  “Option” shall mean an option to purchase
shares of Company Stock granted pursuant to Section 6(a) and as
described in Section 7.

 

(m)                          “Participant” shall mean a member of the Board of Directors who is not
an employee of the Company or a Subsidiary.

 

(n)                              A share of “Restricted Stock” shall mean a share of Company Stock which
is granted pursuant to the terms of Section 6 and as described in Section 8.

 

(o)                             A “Restricted Stock Unit” shall mean a unit which is granted pursuant
to the terms of Section 6 and as described in Section 8A.

 

(p)                             “Rule 16b-3” shall mean the rule thus designated as
promulgated under the Exchange Act.

 

(q)                             “Subsidiary” shall mean any corporation or other entity in which, at
the time of reference, the Company owns, directly or indirectly, stock or
similar interests comprising more than 50 percent of the combined voting
power of all outstanding securities of such entity.

 

(r)                                “Vesting Date” shall mean the date established by the Board of
Directors on which Restricted Stock and Restricted Stock Units vest.

 

3.                                   STOCK SUBJECT TO THE PLAN

 

(a)                              Shares Available for EquityAwards

 

The total number of shares of Company Stock with
respect to which EquityAwards may be granted shall not exceed 250,000 shares,
with not more than 100,000 shares to be granted as Deferred Stock Units,
Restricted Stock or Restricted Stock Unit awards.  Such shares may be authorized but unissued
Company Stock or authorized and issued Company Stock held in the Company’s
treasury or acquired by the Company for the purposes of the Plan.  The Board of Directors may direct that any
stock certificate evidencing shares of Company Stock issued pursuant to the
Plan shall bear a legend setting forth such restrictions on transferability as
may apply to such shares pursuant to the Plan.

 

(b)                             Adjustment for Change in Capitalization

 

If there is any change in the outstanding shares of
Company Stock by reason of a stock dividend or distribution, stock split-up,
recapitalization, combination or exchange of shares, or by reason of any
merger, consolidation, spin-off or other corporate reorganization in which the
Company is the surviving corporation, the number of shares available for
issuance both in the aggregate and with respect to each outstanding
EquityAward, and the price per share under each outstanding Option, shall be
proportionately adjusted by the Board of Directors, whose determination shall
be final and binding.  After any
adjustment made pursuant to this Section 3(b), the number of shares
subject to each outstanding EquityAward shall be rounded to the nearest whole
number.

 

 

3

 

(c)                              Re-use of Shares

 

Any shares subject to an EquityAward that remain
unissued upon the cancellation or termination of such EquityAward for any
reason whatsoever shall again become available for EquityAwards under the Plan.

 

(d)                             No Repricing

 

Absent stockholder approval, the Board of Directors
shall not have any authority, with or without the consent of the affected
holders of Options, to “reprice” an Option after the date of its initial grant
with a lower exercise price in substitution for the original exercise
price.  This paragraph may not be
amended, altered or repealed by the Board of Directors without approval of the
stockholders of the Company.

 

4.                                   ADMINISTRATION OF THE PLAN

 

The Plan shall be administered by the Board of Directors.  The Board of Directors shall have full
authority to administer the Plan, including authority to interpret and construe
any provision of the Plan and the terms of any EquityAwards issued under it and
to adopt such rules and regulations for administering the Plan as it may
deem necessary or appropriate.  Decisions
of the Board of Directors shall be final and binding on all parties.  Unless determined otherwise by the Board of
Directors, the authority of the Board of Directors to administer the Plan is
delegated to the Compensation Committee of the Board of Directors.

 

No member of the Board of Directors shall be liable
for any action, omission or determination relating to the Plan, and the Company
shall indemnify and hold harmless each member of the Board of Directors and
each other director or employee of the Company to whom any duty or power
relating to the administration or interpretation of the Plan has been delegated
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Board of Directors)
arising out of any action, omission or determination relating to the Plan,
unless, in either case, such action, omission or determination was taken or
made by such member, director or employee in bad faith and without reasonable
belief that it was in the best interests of the Company.

 

5.                                   ELIGIBILITY

 

The persons who shall be eligible to receive
EquityAwards pursuant to the Plan shall be such members of the Board of
Directors who are not employees of the Company or a Subsidiary.

 

6.                                   EQUITYAWARDS UNDER THE PLAN

 

EquityAwards granted under
the Plan shall be subject to the terms and conditions set forth in the Plan,
and shall be evidenced by an EquityAward Agreement which shall not be
inconsistent with the provisions of the Plan.

 

(a)                              Annual Awards.  Following each
annual meeting of stockholders, Participants shall receive such combination of
Options, Restricted Stock and Restricted 

 

 

4

 

Stock
Units as the Board of Directors shall from time-to-time determine (the “Annual
Award”).

 

(b)                             Other Awards.  Upon the initial
election to the Board of Directors of any person who is a Participant (other
than through an initial election by the Company’s stockholders at an annual
meeting of stockholders), such person shall be granted a pro rata portion of
the Annual Award based upon the number of full calendar months elapsed since
the most recent annual meeting of stockholders.

 

(c)                              Elective Awards.  At the election
of the Board of Directors or individual Participants, a Participant shall
receive a grant of Deferred Stock Units in lieu of a portion or all of the cash
retainer and meeting and other fees payable to the Participant for serving on
the Board of Directors, provided that such election is made in accordance with
the requirements of Section 409A of the Code.

 

 

7.                                   OPTIONS

 

(a)                              Exercise Price

 

The exercise price per share of an Option shall be the
Fair Market Value of a share of Company Stock on the date the Option is
granted.

 

(b)                             Term and Exercise of Options

 

(i)                                  Unless the Board, in its discretion,
determines otherwise, each Option shall become fully exercisable on the earlier
of the first anniversary of the date of grantor the next annual meeting of
stockholders of the Company following the date of grant.  The expiration date of each Option shall be
ten years after the date of grant; provided, however, that if the
expiration date would occur during a period in which the Participant is
prohibited from trading in the Company Stock pursuant to the provisions of the
Company’s insider trading policy, then the expiration date shall be extended
and such Option shall expire on the 30th day after the prohibition against trading
under the Company’s insider trading policy has ceased to be in effect.

 

(ii)                               An Option may be exercised for all or any portion of the shares as to
which it is exercisable; provided, that no partial exercise of an Option shall
be for an aggregate exercise price of less than $1,000.  The partial exercise of an Option shall not
cause the expiration, termination or cancellation of the remaining portion
thereof.

 

(iii)                            An Option shall be exercised by delivering notice to the Company’s
principal office, to the attention of its Secretary (or the Secretary’s
designee), no less than one business day in advance of the effective date of
the proposed exercise.  Such notice shall
specify the number of shares of Company Stock with respect to which the Option
is being exercised and the effective date of 

 

 

5

 

the
proposed exercise and shall be signed by the Participant or other person then
having the right to exercise the Option. 
Such notice may be withdrawn at any time prior to the close of business
on the business day immediately preceding the effective date of the proposed
exercise.  Payment for shares of Company
Stock purchased upon the exercise of an Option shall be made on the effective
date of such exercise by one or a combination of the following means: (i) in
cash, by certified check, bank cashier’s check or wire transfer; (ii) subject
to the approval of the Board of Directors, in shares of Company Stock owned by
the Participant for at least six months prior to the date of exercise and
valued at their Fair Market Value on the effective date of such exercise; or (iii) subject
to the approval of the Board of Directors, by such other provision as the Board
of Directors may from time to time authorize. 
Any payment in shares of Company Stock shall be effected by the delivery
of such shares to the Secretary (or the Secretary’s designee) of the Company,
duly endorsed in blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the Secretary (or the Secretary’s
designee) of the Company shall require.

 

(iv)                           Certificates for shares of Company Stock purchased upon the exercise of
an Option shall be issued in the name of the Participant or other person
entitled to receive such shares, and delivered to the Participant or such other
person as soon as practicable following the effective date on which the Option
is exercised.

 

(c)                              Effect of Termination of Directorship

 

(i)                                  Unless the Board of Directors shall determine
otherwise, in the event of a Participant’s removal or resignation as a member
of the Board of Directors for any reason other than Cause, Disability or death:
(i) Options granted to such Participant, to the extent that they were
exercisable at the time of such removal or resignation, shall remain exercisable
until the date that is three months after such removal or resignation, on which
date they shall expire; and (ii) Options granted to such Participant, to
the extent that they were not exercisable at the time of such removal or
resignation, shall expire at the close of business on the date of such removal
or resignation.  The three-month period
described in this Section 7(c)(i) shall be extended to one year in
the event of the Participant’s death during such three-month period.  Notwithstanding the foregoing, no Option
shall be exercisable after the expiration of its term.

 

(ii)                               Unless the Board of Directors shall determine otherwise, in the event
of a Participant’s removal or resignation as a member of the Board of Directors
on account of the Disability or death of the Participant: (i) Options
granted to such Participant, to the extent that they were exercisable at the
time of such removal or resignation, shall remain exercisable until the first
anniversary of such removal or resignation, on which date they shall expire;
and (ii) Options granted to such Participant, to the extent that they were
not exercisable at the time of such removal or resignation, shall expire at the
close of business on the date of 

 

 

6

 

such
removal or resignation.  Notwithstanding
the foregoing, no Option shall be exercisable after the expiration of its term.

 

(iii)                            In the event of a Participant’s removal or resignation as a member of
the Board of Directors for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on the date of such
removal or resignation.

 

(d)                             Acceleration of Exercise Date Upon Change in Control

 

Upon the occurrence of a Change in Control, each
Option granted under the Plan and outstanding at such time shall become fully
and immediately exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan.  In addition, in the event of a potential
Change in Control, the Board of Directors may in its discretion, cancel any
outstanding Options and pay to the holders thereof, in cash or stock, or any
combination thereof, the value of such Options based upon the price per share
of Company Stock to be received by shareholders of the Company in the
transaction giving rise to the Change in Control less the exercise price of
each Option.

 

8.                                   RESTRICTED STOCK

 

(a)                              Vesting Date

 

At the time of the grant of shares of Restricted
Stock, the Board of Directors shall establish a Vesting Date (or Vesting Dates)
with respect to such shares.  Provided
that all conditions to the vesting of shares of Restricted Stock imposed
pursuant to Section 8(b) are satisfied, upon the occurrence of the
Vesting Date with respect to shares of Restricted Stock, such shares shall vest
and the restrictions of Section 8(b) shall cease to apply to such
shares.  Unless the Board of Directors
determines otherwise, the Vesting Date of Restricted Stock shall  be the earlier of the first anniversary of date
of grant or the date of the next annual meeting of stockholders of the Company
following the date of grant.

 

(b)                             Conditions to Vesting

 

At the time of the grant of
shares of Restricted Stock, the Board of Directors may impose such restrictions
or conditions to the vesting of such shares as it, in its absolute discretion,
deems appropriate.  By way of example and
not by way of limitation, the Board of Directors may require, as a condition to
the vesting of any class or classes of shares of Restricted Stock, that the
Participant or the Company achieves such performance goals as the Board of
Directors may specify.

 

(c)                              Restrictions on Transfer Prior to Vesting

 

Prior to the vesting of a
share of Restricted Stock, no transfer of a Participant’s rights with respect
to such share, whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. 
Immediately upon any attempt to transfer such rights, such share, and
all of the rights related thereto, shall be forfeited by the Participant.

 

 

7

 

(d)                             Dividends on Restricted Stock

 

The Board of Directors in
its discretion may require that any dividends paid on shares of Restricted
Stock shall be held in escrow until all restrictions on such shares have lapsed.

 

(e)                              Issuance of Certificates

 

Reasonably promptly after
the date of grant with respect to shares of Restricted Stock, the Company shall
cause to be issued a stock certificate, registered in the name of the
Participant to whom such shares were granted, evidencing such shares; provided,
that the Company shall not cause such a stock certificate to be issued unless
it has received a stock power duly endorsed in blank with respect to such
shares.  Each such stock certificate
shall bear the following legend:

 

The transferability of this certificate and the
shares of stock represented hereby are subject to the restrictions, terms and
conditions (including forfeiture provisions and restrictions against transfer)
contained in the Zale Corporation Non-Employee Director Equity Compensation
Plan, and such rules, regulations and interpretations as the Zale Corporation
Board of Directors may adopt.  Copies of
the Plan and, if any, rules, regulations and interpretations are on file in the
office of the Secretary of Zale Corporation, 901 West Walnut Hill Lane, Irving,
Texas 75038-1003.

 

Such legend shall not be
removed until such shares vest pursuant to the terms hereof.

 

Each certificate issued
pursuant to this Section 8(e), together with the stock powers relating to
the shares of Restricted Stock evidenced by such certificate, shall be held by
the Company unless the Board of Directors determines otherwise.

 

(f)                                 Voting Rights of Restricted Stock

 

During the restricted
period, Participants holding shares of Restricted Stock may exercise full
voting rights with respect to the shares.

 

(g)                              Consequences of Vesting

 

Upon the vesting of a share of Restricted Stock
pursuant to the terms of the Plan, the restrictions of Section 8(c) shall
cease to apply to such share.  Reasonably
promptly after a share of Restricted Stock vests, the Company shall cause to be
delivered to the Participant to whom such shares were granted, a certificate
evidencing such share, free of the legend set forth in Section 8(e).  Notwithstanding the foregoing, such share
still may be subject to restrictions on transfer as a result of applicable
securities laws.

 

(h)                              Effect of Termination of Directorship

 

(i)                                  Unless the Board of Directors provides
otherwise, during the 90 days following a Participant’s removal or
resignation as a member of the 

 

 

8

 

Board
of Directors for any reason other than Cause, the Company shall have the right
to require the return of any shares to which restrictions on transferability
apply, in exchange for which the Company shall repay to the Participant (or the
Participant’s estate) any amount paid by the Participant for such shares.  In the event that the Company requires such a
return of shares, it also shall have the right to require the return of all
dividends paid on such shares, whether by termination of any escrow arrangement
under which such dividends are held or otherwise.

 

(ii)                               In the event of a Participant’s removal or resignation as a member of
the Board of Directors for Cause, all shares of Restricted Stock granted to
such Participant which have not vested as of the date of such removal or
resignation shall immediately be returned to the Company, together with any
dividends paid on such shares, in return for which the Company shall repay to
the Participant any amount paid for such shares.

 

(i)                                  Effect of Change in Control

 

Upon the occurrence of a Change in Control, all
outstanding shares of Restricted Stock which have not theretofore vested shall
immediately vest.

 

8A.                        RESTRICTED STOCK UNITS

 

(a)                              Vesting

 

At the time of the grant of Restricted Stock Units,
the Board of Directors shall establish a Vesting Date (or Vesting Dates) with
respect thereto.  Provided that all
conditions to the vesting of Restricted Stock Units imposed pursuant to Section (b) are
satisfied, upon the occurrence of the Vesting Date with respect to Restricted
Stock Units, such Restricted Stock Units shall vest and the restrictions of Section (b) shall
cease to apply thereto.  Unless the Board
of Directors determines otherwise, the Vesting Date of Restricted Stock Units
shall be the earlier of the first anniversary of the date of grant or the date
of the next annual meeting of stockholders of the Company following the date of
grant.

 

(b)                             Conditions to Vesting

 

At the time of the grant of
Restricted Stock Units, the Board of Directors may impose such restrictions or
conditions to the vesting of such Restricted Stock Units as it, in its absolute
discretion, deems appropriate.  By way of
example and not by way of limitation, the Board of Directors may require, as a
condition to the vesting of any Restricted Stock Units, that the Participant or
the Company achieves such performance goals as the Board of Directors may
specify.

 

(c)                              Restrictions on Transfer

 

Prior to payment of a
Restricted Stock Unit, no transfer of a Participant’s rights with respect
thereto, whether voluntary or involuntary, by operation of law or otherwise,
shall be 

 

 

9

 

permitted.  Immediately upon any
attempt to transfer such rights, such Restricted Stock Unit, and all of the
rights related thereto, shall be forfeited by the Participant.

 

(d)                             No Dividends for Restricted Stock Units

 

No dividends shall be
payable with respect to Restricted Stock Units. 
Unless otherwise provided by the Board of Directors the Participant
shall be entitled to receive, currently or on a deferred basis, amounts
equivalent to cash, stock or other property dividends on Company Stock (“Dividend
Equivalents”) with respect to the number of shares of Company Stock covered by
the Restricted Stock Units.  The Board of
Directors may provide that the Dividend Equivalents shall be deemed to have
been reinvested in additional Restricted Stock Units or otherwise reinvested
and may provide that the Dividend Equivalents are subject to the same Vesting
Date and other conditions as the Restricted Stock Units.

 

(e)                              No Voting Rights for Restricted Stock Units

 

Holders of Restricted Stock
Units shall not have any voting rights with respect to Restricted Stock Units.

 

(f)                                 Payment of Restricted Stock Units

 

Upon the vesting of a Restricted Stock Unit pursuant
to the terms of the Plan, the Company promptly shall cause to be delivered to
the Participant a number of shares of Company Stock equal to the number of
Restricted Stock Units granted by the Board of Directors (and any additional
Restricted Stock Units or other amounts credited with respect to Dividend
Equivalents), unless the Board of Directors in its sole discretion determines
that payment shall be made instead by delivering an amount of cash equal to the
Fair Market Value thereof.  A Participant
or, at the time of the grant, the Board of Directors may elect to defer such
receipt of the delivery of shares of Company Stock that would otherwise be due
to the Participant by virtue of the vesting of a Restricted Stock Unit,
provided such deferral election is made in accordance with the requirements of Section 409A
of the Code.  Notwithstanding the
foregoing, such shares may be subject to restrictions on transfer as a result
of applicable securities laws.

 

(g)                              Effect of Termination of Directorship

 

In the event a Participant’s resignation or removal
for Cause as a member of the Board of Directors, all Restricted Stock Units
granted to such Participant which have not vested as of the date of such
resignation or removal (and any additional Restricted Stock Units or other
amounts credited with respect to Dividend Equivalents) shall immediately be
forfeited.

 

(h)                              Effect of Change in Control

 

Upon the occurrence of a Change in Control, all
outstanding Restricted Stock Units which have not theretofore vested shall
immediately vest.

 

8B.                        DEFERRED
STOCK UNITS

 

(a)                              Vesting

 

 

10

 

Deferred Stock Units
shall be fully vested at all times.

 

(b)        Restrictions on Transfer

 

Prior to payment of a Deferred Stock Unit, no transfer
of a Participant’s rights with respect thereto, whether voluntary or
involuntary, by operation of law or otherwise, shall be permitted.  Immediately upon any attempt to transfer such
rights, such Deferred Stock Unit, and all of the rights related thereto, shall
be forfeited by the Participant.

 

(c)        No Dividends for Deferred Stock Units

 

No dividends shall be payable with respect to Deferred
Stock Units.  Unless otherwise provided
by the Board of Directors the Participant shall be entitled to receive,
currently or on a deferred basis, Dividend Equivalents with respect to the number
of shares of Company Stock covered by the Deferred Stock Units.  The Board of Directors may provide that the
Dividend Equivalents shall be deemed to have been reinvested in additional
Deferred Stock Units or otherwise reinvested.

 

(d)        No Voting Rights for Deferred Stock
Units

 

Holders
of Restricted Stock Units shall not have any voting rights with respect to
Deferred Stock Units.

 

(e)        Payment of Deferred Stock Units

 

On the payment
date elected by the Board of Directors or a Participant, the Company promptly
shall cause to be delivered to the Participant a number of shares of Company
Stock equal to the number of Deferred Stock Units granted to the Participant
(and any additional Deferred Stock Units or other amounts credited with respect
to Dividend Equivalents), unless the Board of Directors in its sole discretion
determines that payment shall be made instead by delivering an amount of cash
equal to the Fair Market Value thereof. 
Notwithstanding the foregoing, such shares may be subject to
restrictions on transfer as a result of applicable securities laws.

 

(f)         Effect of Change in Control

 

Upon the occurrence of a
Change in Control that is a Section 409A Change in Control as defined in
Appendix A, the Company shall promptly (but in all events within 2-1/2 months)
pay to the Participant all outstanding Deferred Stock Units (and any additional
Deferred Stock Units or other amounts credited with respect to Dividend
Equivalents) by delivering an amount of cash equal to the Fair Market Value
thereof.  Upon the occurrence of any
other Change in Control (i) as of the date of the Change of Control the
Company shall credit to an account for the Participant the Fair Market Value of
the Deferred Stock Units granted to the Participant (and any additional
Deferred Stock Units or other amounts credited with respect to Dividend
Equivalents) and (ii) the Company shall pay the value of the account
together with interest at the rate of 10% per annum to the Participant in
accordance with paragraph (e) of this Section.

 

 

11

 

9.         REQUIRED HOLDINGS

 

Notwithstanding anything
in Sections 7, 8, 8A or 8B to the contrary, by accepting a grant hereunder,
each Participant agrees to hold and not dispose of any securities received
hereunder to the extent required by the Company’s director equity ownership
guidelines in place as of the date of the grant.

 

10.       RIGHTS AS A STOCKHOLDER

 

No person shall
have any rights as a stockholder with respect to any shares of Company Stock
covered by or relating to any Option, Restricted Stock Unit, or Deferred Stock
Unit until the date of issuance of a stock certificate with respect to such
shares of Company Stock.  Except as
otherwise expressly provided in Section 3(b), no adjustment to any Option,
Restricted Stock Unit, or Deferred Stock Unit shall be made for regular cash
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.

 

11.       NO RIGHT TO EQUITYAWARD

 

Other than as
specifically provided in the Plan, no person shall have any claim or right to
receive an EquityAward hereunder.  The
Board of Director’s granting of an EquityAward to a Participant at any time
shall neither require the Board of Directors to grant any other EquityAward to
such Participant or other person at any time nor preclude the Board of
Directors from making subsequent grants to such Participant or any other
person.

 

12.       SECURITIES MATTERS

 

The Company shall
be under no obligation to effect the registration pursuant to the Securities
Act of 1933 of any interests in the Plan or any shares of Company Stock to be
issued hereunder or to effect similar compliance under any state laws.  Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or delivered
any certificates evidencing shares of Company Stock pursuant to the Plan unless
and until the Company is advised by its counsel that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of the New York Stock Exchange and
any other securities exchange on which shares of Company Stock are traded.  Certificates evidencing shares of Company
Stock issued pursuant to the terms hereof, may bear such legends, as the Board
of Directors, in its sole discretion, deems necessary or desirable to insure
compliance with applicable securities laws.

 

The transfer of
any shares of Company Stock hereunder shall be effective only at such time as
counsel to the Company shall have determined that the issuance and delivery of
such shares is in compliance with all applicable laws, regulations of
governmental authority and the requirements of the New York Stock Exchange and
any other securities exchange on which shares of Company Stock are traded.  The Board of Directors may, in its sole
discretion, defer the effectiveness of any transfer of shares of Company stock
hereunder in order to allow the issuance of such shares to be made pursuant to
registration or an exemption from registration or other methods for compliance
available under federal or state securities laws.  The Company shall inform the Participant in
writing of the Board of Director’s decision to defer the 

 

 

12

 

effectiveness of a
transfer.  During the period of such a
deferral in connection with the exercise of an Option, the Participant may, by
written notice, withdraw such exercise and obtain the refund of any amount paid
with respect thereto.

 

13.       NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF
THE CODE

 

If any Participant
shall, in connection with the acquisition of shares of Company Stock under the
Plan, make the election permitted under Section 83(b) of the Code
(i.e., an election to include in gross income in the year of transfer the
amounts specified in Section 83(b)), such Participant shall notify the
Company of such election within ten days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code Section 83(b).

 

14.       WITHHOLDING TAXES

 

Whenever cash is
to be paid pursuant to an EquityAward, the Company shall have the right to
deduct therefrom an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto.

 

Whenever shares of
Company Stock are to be delivered either pursuant to an Equity Award, the
Company shall have the right to require the Participant to remit to the Company
in cash an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. 
With the approval of the Board of Directors, which it shall have sole
discretion to grant, a Participant may satisfy the foregoing requirement by
electing to have the Company withhold from delivery shares of Company Stock
having a value equal to the amount of tax required to be withheld.  Such shares shall be valued at their Fair
Market Value on the date as of which the amount of tax to be withheld is
determined (the “Tax Date”).  Fractional
share amounts shall be settled in cash. 
Such a withholding election may be made with respect to all or any
portion of the shares to be delivered pursuant to an  Award. 
To the extent required for such a withholding of stock to qualify for
the exemption available under Rule 16b-3, such an election by a grantee
whose transactions in Company Stock are subject to Section 16(b) of
the Exchange Act shall be: (i) subject to the approval of the Board of
Directors in its sole discretion; (ii) irrevocable; (iii) made no
sooner than six months after the grant of the award with respect to which the
election is made; and (iv) made at least six months prior to the Tax Date
unless such withholding election is in connection with exercise of an Option
and both the election and the exercise occur prior to the Tax Date in a “window
period” of ten business days beginning on the third day following release of
the Company’s quarterly or annual summary statement of sales and earnings.

 

15.       AMENDMENT OR TERMINATION OF THE PLAN

 

Except as provided
in Section 3(d), the Board of Directors may, at any time, suspend or
terminate the Plan or revise or amend it in any respect whatsoever; provided,
however, that stockholder approval shall be required if and to the extent
required by Rule 16b-3 or the New York Stock Exchange or any other
securities exchange on which shares of the Company Stock are traded.  Nothing herein shall restrict the Board of
Director’s ability to exercise its discretionary authority pursuant to Section 4,
which discretion may be exercised without 

 

 

13

 

amendment to the
Plan.  No action hereunder may, without
the consent of a Participant, reduce the Participant’s rights under any
outstanding EquityAward.

 

16.       NO OBLIGATION TO EXERCISE

 

The grant to a
Participant of an Option shall impose no obligation upon such Participant to
exercise such Option.

 

17.       TRANSFERS UPON DEATH; NONASSIGNABILITY

 

Upon the death of
a Participant outstanding EquityAward granted to such Participant may be
exercised only by the executor or administrator of the Participant’s estate or
by a person who shall have acquired the right to such exercise by will or by
the laws of descent and distribution.  No
transfer of an EquityAward by will or the laws of descent and distribution
shall be effective to bind the Company unless the Company shall have been
furnished with (a) written notice thereof and with a copy of the will
and/or such evidence as the Board of Directors may deem necessary to establish
the validity of the transfer and (b) an agreement by the transferee to
comply with all the terms and conditions of the EquityAward that are or would
have been applicable to the Participant and to be bound by the acknowledgments
made by the Participant in connection with the grant of the EquityAward.

 

During a
Participant’s lifetime, the Board of Directors may permit the transfer,
assignment or other encumbrance of an outstanding EquityAward unless the award
is meant to qualify for the exemptions available under Rule 16b-3 and the
Board of Directors and the Participant intend that it shall continue to so
qualify.

 

18.       EXPENSES AND RECEIPTS

 

The expenses of
the Plan shall be paid by the Company. 
Any proceeds received by the Company in connection with the exercise of
any Option by a Participant will be used for general corporate purposes.

 

19.       FAILURE TO COMPLY

 

In addition to the
remedies of the Company elsewhere provided for herein, failure by a Participant
(or beneficiary) to comply with any of the terms and conditions of the Plan,
unless such failure is remedied by such Participant (or beneficiary) within ten
days after notice of such failure by the Board of Directors, shall be grounds
for the cancellation and forfeiture of such EquityAward, in whole or in part,
as the Board of Directors, in its sole discretion, may determine.

 

20.       EFFECTIVE DATE AND TERM OF PLAN

 

The Plan shall be
effective as of the Effective Date. 
Unless earlier terminated by the Board of Directors, the right to grant
Options under the Plan will terminate on the tenth anniversary of the Effective
Date.  Options outstanding at the
termination of the Plan will remain in effect according to their terms and the
provisions of the Plan.

 

 

14

 

21.       APPLICABLE LAW

 

Except to the
extent preempted by any applicable federal law, the Plan will be construed and
administered in accordance with the laws of the State of Delaware, without
reference to the principles of conflicts of laws thereunder.

 

 

15

 

APPENDIX A

 

“409A Change in Control”
means and shall be deemed to have occurred as of the date of the first to occur
of the following events:

 

(a)        Any Person or Group acquires stock of
the Company that, together with stock held by such Person or Group, constitutes
more than 50% of the total fair market value or total voting power of the stock
of the Company.  However, if any Person
or Group is considered to own more than 50% of the total fair market value or
total voting power of the stock of the Company, the acquisition of additional
stock by the same Person or Group is not considered to cause a 409A Change in
Control.  An increase in the percentage
of stock owned by any Person or Group as a result of a transaction in which the
Company acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this subsection.  This subsection applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) and
stock in the Company remains outstanding after the transaction;

 

(b)        Any Person or Group acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such Person or Group) ownership of stock of the Company
possessing 30% or more of the total voting power of the stock of the
Company.  However, if any Person or Group
is considered to own 30% of the total voting power of the stock of the Company,
the acquisition of additional stock by the same Person or Group is not
considered to cause a 409A Change in Control;

 

(c)        A majority of members of the Company’s
Board is replaced during any 12-month period by Directors whose appointment or
election is not endorsed by a majority of the members of the Company’s Board
prior to the date of the appointment or election; or

 

(d)        Any
Person or Group acquires (or has acquired during the 12-month period ending on
the date of the most recent acquisition by such Person or Group) assets from
the Company that have a total gross fair market value equal to or more than 40%
of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions.  For this purpose, gross fair market value
means the value of the assets of the Company, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such
assets.   However, no 409A Change in
Control shall be deemed to occur under this subsection (d) as a result of
a transfer to:

 

(i)         A
shareholder of the Company (immediately before the asset transfer) in exchange
for or with respect to its stock;

 

(ii)        An
entity, 50% or more of the total value or voting power of which is owned,
directly or indirectly, by the Company;

 

(iii)       A
Person or Group that owns, directly or indirectly, 50% or more of the total
value or voting power of all the outstanding stock of the Company; or

 

 

16

 

(iv)       An
entity, at least 50% of the total value or voting power of which  is owned, directly or indirectly, by a person described in
clause (iii) above.

 

For these
purposes, the term:

 

(i)  “Person” shall mean an individual, Company,
association, joint stock company, business trust or other similar organization,
partnership, limited liability company, joint venture, trust, unincorporated
organization or government or agency, instrumentality or political subdivision
thereof.

 

(ii)  The term “Group” shall have the meaning set
forth in Rule13d-5 of the Securities Exchange Commission, modified to the
extent necessary to comply with Treasury Regulation Section 1.409A-3(g)(5)(v)(B),
or any successor thereto in effect at the time a determination of whether a
Change of Control has occurred is being made. 
Persons will not be considered to be acting as a group solely because
they purchase or own stock of the same corporation at the same time, or as a
result of the same public offering. 
Persons will be considered to be acting as a group if they are owners of
a corporation that enters into a merger consolidation, purchase or acquisition
of stock, or similar business transaction with the corporation.  If a person, including an entity, owns stock
in both corporations that enter into a merger consolidation, purchase or
acquisition of stock, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation prior to the
transaction giving rise to the change and not with respect to the ownership
interest in the other corporation.

 

 

17

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