Document:

exv10w4

    Exhibit 10.4

 

    STOCKHOLDERS’
    AGREEMENT

 

    This STOCKHOLDERS’ AGREEMENT (this “Agreement”),
    is dated as of September 1, 2008, by and between Teradyne,
    Inc., a Massachusetts corporation (“Parent”) and the
    stockholders listed on the signature pages hereto (each a
    “Stockholder” and collectively, the
    “Stockholders”).

 

    W I T N E
    S S E T H:

 

    WHEREAS, Parent, Turin Acquisition Corp., a Delaware corporation
    and a direct wholly owned subsidiary of Parent (“Merger
    Sub”), and Eagle Test Systems, Inc., a Delaware corporation
    (the “Company”), are entering into an Agreement and
    Plan of Merger, dated as of the date hereof (as it may be
    amended from time to time in accordance with its terms, the
    “Merger Agreement”), providing for, among other
    things, the merger of Merger Sub with and into the Company with
    the Company surviving the merger as a wholly owned subsidiary of
    Parent, in each case, on the terms and subject to the conditions
    set forth in therein (capitalized terms used herein and not
    otherwise defined shall have the meanings ascribed to such terms
    in the Merger Agreement); and

 

    WHEREAS, as of the date hereof, each Stockholder is the record
    and beneficial owner of the number of shares of Common Stock set
    forth, and in the manner reflected, on Attachment A
    hereto (the “Owned Shares”); and

 

    WHEREAS, as a condition to each of Parent and Merger Sub’s
    willingness to enter into and perform their respective
    obligations under the Merger Agreement, Parent and Merger Sub
    have required that each Stockholder agree, and each Stockholder
    has agreed, (i) to vote all of such Stockholder’s
    Owned Shares as well as any shares of Common Stock acquired by
    such Stockholder after the execution of this Agreement (all of
    which, after so acquired, shall constitute “Owned
    Shares”), whether upon the exercise of options, conversion
    of convertible securities or otherwise, and any other voting
    securities of the Company (whether acquired heretofore or
    hereafter) that are beneficially owned by such Stockholder or
    over which such Stockholder has, directly or indirectly, the
    right to vote (collectively, the “Voting Shares”) in
    favor of any proposal in furtherance of the Merger Agreement or
    the transactions contemplated thereby, including the Merger, and
    (ii) to take the other actions described herein; and

 

    WHEREAS, each Stockholder desires to express its support for the
    Merger Agreement and the transactions contemplated thereby,
    including the Merger, by executing this Agreement; and

 

    NOW, THEREFORE, in consideration of the foregoing and for other
    good and valuable consideration given to each party hereto, the
    receipt of which is hereby acknowledged, the parties agree as
    follows:

 

    1. Agreement to Vote; Irrevocable Proxy.

 

    1.1 Agreement to Vote.  Each
    Stockholder hereby agrees that, during the time this Agreement
    is in effect, at any meeting of the stockholders of the Company,
    however called, or any adjournment or postponement thereof, such
    Stockholder shall be present (in person or by proxy) and vote
    (or cause to be voted) all of its Voting Shares (a) in
    favor of the adoption of the Merger Agreement and
    (b) against any Alternative Proposal and against any action
    or agreement that would delay, prevent, impede or impair the
    ability of Parent and Merger Sub to complete the Merger or the
    ability of the Company to consummate the Merger or the
    transactions contemplated by the Merger Agreement.

 

    1.2 Irrevocable Proxy.  Solely with
    respect to the matters described in Section 1.1, for so
    long as this Agreement has not terminated in accordance with
    Section 5.1, each Stockholder hereby irrevocably appoints
    Parent (or any nominee of Parent) as its attorney and proxy with
    full power of substitution and resubstitution, to the full
    extent of such Stockholder’s voting rights with respect to
    such Stockholder’s Voting Shares (which proxy is
    irrevocable and which appointment is coupled with an interest,
    including for purposes of Section 212 of the Delaware
    General Corporation Law) to vote all such Stockholder’s
    Voting Shares solely

 

    on the matters described in Section 1.1, and in accordance
    therewith. Each Stockholder hereby revokes any proxies
    previously granted that would otherwise conflict with the proxy
    contemplated pursuant to this Section 1.2 and agrees to
    execute any further agreement or form reasonably necessary or
    appropriate to confirm and effectuate the grant of the proxy
    contained herein. Such proxy shall automatically terminate upon
    the valid termination of this Agreement in accordance with
    Section 5.1.

 

    2. Representations and Warranties of
    Stockholders.  Each Stockholder hereby
    represents and warrants to Parent as follows:

 

    2.1 Due Organization.  Such
    Stockholder, if a corporation or other entity, has been duly
    organized, is validly existing and is in good standing under the
    laws of the state of its formation or organization.

 

    2.2 Power; Due Authorization; Binding
    Agreement.  Such Stockholder has full legal
    capacity, power and authority to execute and deliver this
    Agreement, to perform its obligations hereunder and to
    consummate the transactions contemplated hereby. This Agreement
    has been duly and validly executed and delivered by such
    Stockholder and constitutes a valid and binding agreement of
    such Stockholder, enforceable against Stockholder in accordance
    with its terms, except to the extent that enforceability may be
    subject to the effect of any applicable bankruptcy,
    reorganization, insolvency, moratorium or other similar laws
    affecting or relating to the enforcement of creditors rights
    generally and to general principles of equity.

 

    2.3 Ownership of Shares.  On the
    date hereof, the Owned Shares set forth opposite such
    Stockholder’s name on Attachment A hereto are owned
    of record or beneficially by such Stockholder in the manner
    reflected thereon and include all of the Voting Shares owned of
    record or beneficially by such Stockholder, free and clear of
    any claims, liens, encumbrances and security interests, except
    (if applicable) as set forth on Attachment A hereto,
    which encumbrances or other items do not affect in any respect
    the ability of such Stockholder to perform such
    Stockholder’s obligations hereunder. As of the date hereof
    such Stockholder has, and at all times prior to the valid
    termination of this Agreement in accordance with
    Section 5.1 such Stockholder will have (except as otherwise
    permitted by this Agreement), sole voting power (to the extent
    such securities have voting power) and sole dispositive power
    with respect to all of the Owned Shares, except as otherwise
    reflected on Attachment A.

 

    2.4 No Conflicts.  The execution
    and delivery of this Agreement by such Stockholder does not, and
    the performance of the terms of this Agreement by such
    Stockholder will not, (a) require such Stockholder to
    obtain the consent or approval of, or make any filing with or
    notification to, any governmental or regulatory authority,
    domestic or foreign, (b) require the consent or approval of
    any other person or entity pursuant to any agreement, obligation
    or instrument binding on such Stockholder or its properties and
    assets, (c) conflict with or violate any organizational
    document or law, rule, regulation, order, judgment or decree
    applicable to such Stockholder or pursuant to which any of its
    or its affiliates’ respective properties or assets are
    bound or (d) violate any other agreement to which such
    Stockholder or any of its affiliates is a party including,
    without limitation, any voting agreement, stockholders
    agreement, irrevocable proxy or voting trust. The Voting Shares
    are not, with respect to the voting or transfer thereof, subject
    to any other agreement, including any voting agreement,
    stockholders agreement, irrevocable proxy or voting trust.

 

    2.5 Acknowledgment.  Such
    Stockholder understands and acknowledges that each of Parent and
    Merger Sub is entering into the Merger Agreement in reliance
    upon such Stockholder’s execution, delivery and performance
    of this Agreement.

 

    3. Representations and Warranties of
    Parent.  Parent hereby represents and warrants
    to the Stockholders as follows:

 

    3.1 Power; Due Authorization; Binding
    Agreement.  Parent is a corporation duly
    organized, validly existing and in good standing under the laws
    of the Commonwealth of Massachusetts. Parent has full corporate
    power and authority to execute and deliver this Agreement, to
    perform its obligations hereunder and to consummate the
    transactions contemplated hereby. The execution and delivery of
    this Agreement and the consummation by Parent of the
    transactions contemplated hereby have been duly and validly
    authorized by all necessary corporate action on the part of
    Parent, and no other proceedings on the part of Parent are
    necessary to authorize this Agreement or to consummate the
    transactions contemplated hereby. This Agreement has been

    

    2

 

    duly and validly executed and delivered by Parent and
    constitutes a valid and binding agreement of Parent, except that
    enforceability may be subject to the effect of any applicable
    bankruptcy, reorganization, insolvency, moratorium or other
    similar laws affecting or relating to the enforcement of
    creditors rights generally and to general principles of equity.

 

    3.2 No Conflicts.  The execution
    and delivery of this Agreement by Parent does not, and the
    performance of the terms of this Agreement by Parent will not,
    (a) require Parent to obtain the consent or approval of, or
    make any filing with or notification to, any governmental or
    regulatory authority, domestic or foreign or (b) conflict
    with or violate any organizational document or law, rule,
    regulation, order, judgment or decree applicable to Parent or
    pursuant to which any of its or its subsidiaries’
    respective assets are bound.

 

    4. Certain Covenants of the
    Stockholders.  Each Stockholder hereby
    covenants and agrees with Parent as follows:

 

    4.1 Restriction on Transfer, Proxies and
    Non-Interference.  Each Stockholder hereby
    agrees, while this Agreement is in effect, at any time prior to
    the Effective Time, and otherwise as is contemplated by the
    Merger Agreement, not to (a) other than as may be
    specifically required by a court order, which such Stockholder
    shall use its reasonable best efforts to avoid (including by
    offering substitute consideration or property) and provided
    further that such Stockholder shall use reasonable best efforts
    to cause any such Voting Shares to be transferred subject to
    this Agreement, sell, transfer, pledge, encumber (except as set
    forth on Attachment A or due to this Agreement), assign
    or otherwise dispose of (including, without limitation, by gift,
    merger, consolidation or reorganization), or enter into any
    contract, option or other arrangement or understanding with
    respect to the sale, transfer, pledge, encumbrance, assignment
    or other disposition of, or limitation on the voting rights of,
    any of the Voting Shares (any such action, a
    “Transfer”), provided that nothing in this Agreement
    shall prohibit the exercise by such Stockholder of any options
    to purchase Voting Shares, (b) grant any proxies or powers
    of attorney, deposit any Voting Shares into a voting trust or
    enter into a voting agreement with respect to any Voting Shares,
    (c) take any action that would cause any representation or
    warranty of such Stockholder contained herein to become untrue
    or incorrect or have the effect of preventing or disabling
    Stockholder from performing its obligations under this
    Agreement, or (d) commit or agree to take any of the
    foregoing actions. Any action taken in violation of the
    foregoing sentence shall be null and void ab initio and each
    Stockholder agrees that any such prohibited action may and
    should be enjoined. If any involuntary Transfer of any of the
    Voting Shares shall occur (including, but not limited to, a sale
    by a Stockholder’s trustee in any bankruptcy, or a sale to
    a purchaser at any creditor’s or court sale or any sale or
    transfer by operation of law, including, without limitation, by
    will or intestacy), the transferee (which term, as used herein,
    shall include any and all transferees and subsequent transferees
    of the initial transferee) shall take and hold such Voting
    Shares subject to all of the restrictions, liabilities and
    rights under this Agreement, which shall continue in full force
    and effect until valid termination of this Agreement.

 

    4.2 Additional Shares.  Each
    Stockholder hereby agrees, while this Agreement is in effect,
    that any shares of Common Stock acquired by such Stockholder
    after the date hereof shall be subject to the terms of this
    Agreement as though owned by such Stockholder on the date hereof.

 

    4.3 No Limitations on
    Actions.  Each Stockholder signs this
    Agreement solely in its capacity as the record
    and/or
    beneficial owner, as applicable, of the Owned Shares; any
    trustee who signs this Agreement on behalf of a Stockholder that
    is a trust is signing only in his fiduciary capacity and not as
    an individual; this Agreement shall not limit or otherwise
    affect the actions of such Stockholder or any affiliate,
    employee or designee of such Stockholder or any of its
    affiliates in any other capacity, including such person’s
    capacity, if any, as an officer of the Company or a member of
    the board of directors of the Company; and nothing herein shall
    limit or affect the Company’s rights in connection with the
    Merger Agreement.

 

    4.4 No Solicitation.  Each
    Stockholder agrees, while this Agreement is in effect, not to
    directly or indirectly engage in any activity which would be
    prohibited pursuant to Section 5.2(a) of the Merger
    Agreement if engaged in by the Company.

 

    4.5 Disclosure.  Each Stockholder
    hereby permits Parent or the Company to publish and disclose in
    any proxy materials (including, but not limited to, all
    documents and schedules filed with the Securities and

    

    3

 

    Exchange Commission) its identity and ownership of shares of
    Common Stock and the terms of this Agreement.

 

    4.6 Further Assurances.  From time
    to time, at the request of Parent and without further
    consideration, each Stockholder shall execute and deliver such
    additional documents and take all such further action as may be
    necessary or reasonably desirable to consummate and make
    effective the transactions contemplated by this Agreement.

 

    5. Miscellaneous.

 

    5.1 Termination of this
    Agreement.  This Agreement shall terminate
    upon the earlier to occur of (i) the termination of the
    Merger Agreement in accordance with its terms, or (ii) the
    consummation of the Merger.

 

    5.2 Effect of Termination.  In the
    event of termination of this Agreement pursuant to
    Section 5.1, this Agreement shall become void and of no
    effect with no liability on the part of any party hereto;
    provided, however, no such termination shall relieve any party
    hereto from any liability for any breach of this Agreement
    occurring prior to such termination; and provided, further, that
    upon payment of the Termination Fee (as defined in the Merger
    Agreement) Stockholder shall have no further liability with
    respect to this Agreement or the transactions contemplated
    hereby.

 

    5.3 Non-Survival.  The
    representations and warranties made herein shall not survive the
    termination of this Agreement.

 

    5.4 Entire Agreement;
    Assignment.  This Agreement constitutes the
    entire agreement among the parties with respect to the subject
    matter hereof and supersedes all other prior agreements and
    understandings, both written and oral, among the parties with
    respect to the subject matter hereof. Nothing in this Agreement,
    express or implied, is intended to or shall confer upon any
    other person or entity any right, benefit or remedy of any
    nature whatsoever under or by reason of this Agreement. This
    Agreement shall not be assigned by operation of law or otherwise
    and shall be binding upon and inure solely to the benefit of
    each party hereto.

 

    5.5 Amendments.  This Agreement may
    not be modified, amended, altered or supplemented, except upon
    the execution and delivery of a written agreement executed by
    each of the parties hereto.

 

    5.6 Notices.  Any notice required
    to be given hereunder shall be sufficient if in writing, and
    sent by facsimile transmission (provided that any notice
    received by facsimile transmission or otherwise at the
    addressee’s location on any Business Day after
    5:00 p.m. (addressee’s local time) shall be deemed to
    have been received at 9:00 a.m. (addressee’s local
    time) on the next Business Day), by reliable overnight delivery
    service (with proof of service), hand delivery or certified or
    registered mail (return receipt requested and first-class
    postage prepaid), addressed as follows:

 

    If to the Stockholders:

 

    Foxman Family LLC

    c/o Eagle
    Test Systems, Inc.

    2200 Millbrook Drive

    Buffalo Grove, IL 60089

    Fax:
    (847) 367-8640

 

    If to Parent:

 

    Teradyne, Inc.

    700 Riverpark Drive

    North Reading, Mass. 01864

    Attention: Eileen Casal, V.P. & General Counsel

    Fax:
    (978) 370-2290

    

    4

 

 

    with copy to:

 

    WilmerHale LLP

    60 State Street

    Boston, Mass 02109

    Attention: Jay E. Bothwick, Esq.

    Fax:
    617-526-5000

 

    or to such other address as any party shall specify by written
    notice so given, and such notice shall be deemed to have been
    delivered as of the date so telecommunicated, personally
    delivered or received. Any party to this Agreement may notify
    any other party of any changes to the address or any of the
    other details specified in this paragraph; provided, however,
    that such notification shall only be effective on the date
    specified in such notice or two Business Days after the notice
    is given, whichever is later. Rejection or other refusal to
    accept or the inability to deliver because of changed address of
    which no notice was given shall be deemed to be receipt of the
    notice as of the date of such rejection, refusal or inability to
    deliver.

 

    5.7 Governing Law; Venue.  

 

    (a) This Agreement shall be governed by, and construed in
    accordance with, the Laws of the State of Delaware, without
    giving effect to conflicts of laws principles that would result
    in the application of the Law of any other state.

 

    (b) Each of the parties hereto hereby irrevocably and
    unconditionally submits, for itself and its property, to the
    exclusive jurisdiction of the Delaware Court of Chancery, or, if
    no such state court has proper jurisdiction, the Federal court
    of the United States of America, sitting in Delaware, and any
    appellate court from any thereof, in any action or proceeding
    arising out of or relating to this Agreement or the transactions
    contemplated hereby or for recognition or enforcement of any
    judgment relating thereto, and each of the parties hereby
    irrevocably and unconditionally (i) agrees not to commence
    any such action or proceeding except in such courts;
    (ii) agrees that any claim in respect of any such action or
    proceeding may be heard and determined in such Delaware Court of
    Chancery or, if no such state court has proper jurisdiction,
    then in such Federal court; (iii) waives, to the fullest
    extent it may legally and effectively do so, any objection which
    it may now or hereafter have to the laying of venue of any such
    action or proceeding in any such Delaware Court of Chancery or
    Federal court; and (iv) waives, to the fullest extent
    permitted by Law, the defense of an inconvenient forum to the
    maintenance of such action or proceeding in any such Delaware
    Court of Chancery or Federal court. Each of the parties hereto
    agrees that a final judgment in any such action or proceeding
    shall be conclusive and may be enforced in other jurisdictions
    by suit on the judgment or in any other manner provided by Law.
    Each party to this Agreement irrevocably consents to service of
    process in the manner provided for notices in Section 5.6.
    Nothing in this Agreement will affect the right of any party to
    this Agreement to serve process in any other manner permitted by
    Law. Each party hereto agrees not to commence any legal
    proceedings relating to or arising out of this Agreement or the
    Transactions in any jurisdiction or courts other than as
    provided herein.

 

    5.8 WAIVER OF JURY TRIAL.  EACH
    PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT
    MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
    DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
    AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT:
    (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
    HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
    WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH
    WAIVER; (B) IT UNDERSTANDS AND HAS CONSIDERED THE
    IMPLICATIONS OF SUCH WAIVER; (C) IT MAKES SUCH WAIVER
    VOLUNTARILY; AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS
    AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
    CERTIFICATIONS IN THIS SECTION 5.8.

 

    5.9 Specific Performance.  The
    parties agree that irreparable damage would occur in the event
    that any of the provisions of this Agreement were not performed
    in accordance with its specific terms or were

    

    5

 

    otherwise breached. Each Stockholder agrees that, in the event
    of any breach or threatened breach by such Stockholder of any
    covenant or obligation contained in this Agreement, Parent shall
    be entitled (in addition to any other remedy that may be
    available to it, including monetary damages) to seek and obtain
    (a) a decree or order of specific performance to enforce
    the observance and performance of such covenant or obligation,
    and (b) an injunction restraining such breach or threatened
    breach. Each Stockholder further agrees that neither Parent nor
    any other person or entity shall be required to obtain, furnish
    or post any bond or similar instrument in connection with or as
    a condition to obtaining any remedy referred to in this
    Section 5.9, and each Stockholder irrevocably waives any
    right it may have to require the obtaining, furnishing or
    posting of any such bond or similar instrument.

 

    5.10 Counterparts.  This Agreement
    may be executed in two or more counterparts, each of which shall
    be deemed an original but all of which together shall be
    considered one and the same agreement and shall become effective
    when counterparts have been signed by each of the parties hereto
    and delivered to the other parties, it being understood that all
    parties need not sign the same counterpart. This Agreement may
    be executed and delivered by facsimile transmission.

 

    5.11 Descriptive Headings.  The
    descriptive headings used herein are inserted for convenience of
    reference only and are not intended to be part of or to affect
    the meaning or interpretation of this Agreement.

 

    5.12 Severability.  Any term or
    provision of this Agreement that is invalid or unenforceable in
    any situation in any jurisdiction shall not affect the validity
    or enforceability of the remaining terms and provisions hereof
    or the validity or enforceability of the offending term or
    provision in any other situation or in any other jurisdiction.
    If the final judgment of a court of competent jurisdiction
    declares that any term or provision hereof is invalid or
    unenforceable, the parties hereto agree that the court making
    such determination shall have the power to limit the term or
    provision, to delete specific words or phrases, or to replace
    any invalid or unenforceable term or provision with a term or
    provision that is valid and enforceable and that comes closest
    to expressing the intention of the invalid or unenforceable term
    or provision, and this Agreement shall be enforceable as so
    modified. In the event such court does not exercise the power
    granted to it in the prior sentence, the parties hereto agree to
    replace such invalid or unenforceable term or provision with a
    valid and enforceable term or provision that will achieve, to
    the extent possible, the economic, business and other purposes
    of such invalid or unenforceable term.

 

    [Remainder
    of Page Intentionally Blank]

    

    

    6

 

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

 

    TERADYNE, INC.

 

			
	 	    By: 
	
    /s/  Michael
    A. Bradley

    Name:     Michael A. Bradley

			
	 	    Title: 
	
    President and CEO

 

    FOXMAN FAMILY LLC

 

			
	 	    By: 
	
    /s/  Leonard
    A. Foxman

    Name:     Leonard A. Foxman

			
	 	    Title: 
	
    Trustee

 

    ATTACHMENT
    A

 

    Details
    of Ownership

 

	 	 	 	 	 
	

    Shares

	
 
	
 
	

    Entity or Individual Name

	 

	
 
	
    2,152,868
	
 
	
 
	
    Foxman Family LLCEX-4.1 Amended and Restated Rights Agreement

Exhibit 4.1

 

 

 

 

 

The Ultimate Software Group, Inc.

And

Computershare Trust Company, N.A.

As Rights Agent

 

Amended and Restated Rights Agreement

Dated as of August 26, 2008

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 1.	 	Certain Definitions
	 	 	1	 
	Section 2.	 	Appointment of Rights Agent
	 	 	5	 
	Section 3.	 	Issue of Right Certificates
	 	 	5	 
	Section 4.	 	Form of Right Certificates
	 	 	7	 
	Section 5.	 	Countersignature and Registration
	 	 	7	 
	Section 6.	 	Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates
	 	 	8	 
	Section 7.	 	Exercise of Rights; Purchase Price; Expiration Date of Rights
	 	 	8	 
	Section 8.	 	Cancellation and Destruction of Right Certificates
	 	 	9	 
	Section 9.	 	Availability of Preferred Shares
	 	 	9	 
	Section 10.	 	Preferred Shares Record Date
	 	 	10	 
	Section 11.	 	Adjustment of Purchase Price, Number of Shares or Number of Rights
	 	 	10	 
	Section 12.	 	Certificate of Adjusted Purchase Price or Number of Shares
	 	 	16	 
	Section 13.	 	Consolidation, Merger or Sale or Transfer of Assets or Earning Power
	 	 	17	 
	Section 14.	 	Fractional Rights and Fractional Shares
	 	 	18	 
	Section 15.	 	Rights of Action
	 	 	19	 
	Section 16.	 	Agreement of Right Holders
	 	 	20	 
	Section 17.	 	Right Certificate Holder not Deemed a Stockholder
	 	 	20	 
	Section 18.	 	Concerning the Rights Agent
	 	 	20	 
	Section 19.	 	Merger or Consolidation or Change Of Name of Rights Agent
	 	 	21	 
	Section 20.	 	Duties of Rights Agent
	 	 	21	 
	Section 21.	 	Change of Rights Agent
	 	 	23	 
	Section 22.	 	Issuance of New Right Certificates
	 	 	24	 
	Section 23.	 	Redemption
	 	 	24	 
	Section 24.	 	Exchange
	 	 	25	 
	Section 25.	 	Notice of Certain Events
	 	 	26	 
	Section 26.	 	Notices
	 	 	27	 
	Section 27.	 	Supplements and Amendments
	 	 	27	 
	Section 28.	 	Successors
	 	 	27	 
	Section 29.	 	Determinations and Actions by the Board of Directors
	 	 	27	 
	Section 30.	 	Benefits of This Rights Agreement
	 	 	28	 
	Section 31.	 	Severability
	 	 	28	 
	Section 32.	 	Governing Law
	 	 	28	 
	Section 33.	 	Counterparts
	 	 	28	 
	Section 34.	 	Descriptive Headings
	 	 	28	 
	Section 35.	 	Force Majeure
	 	 	28	 

Exhibit A — Form of Certificate of Designations

Exhibit B — Form of Right Certificate

Exhibit C — Summary of Rights to Purchase Preferred Shares

 

 

Amended and Restated Rights Agreement

          Amended and Restated Rights Agreement, dated as of August 26, 2008 (the “Rights
Agreement”), between The Ultimate Software Group, Inc., a Delaware corporation (the
“Company”), and Computershare Trust Company, N.A., successor rights agent to BankBoston,
N.A. (the “Rights Agent”).

          WHEREAS, the Company and the Rights Agent entered into that certain Rights Agreement dated as
of October 22, 1998 (the “Prior Rights Agreement”);

          WHEREAS, the Board of Directors of the Company previously authorized and declared a dividend
of one preferred share purchase right (a “Right”) for each Common Share of the Company
outstanding as of November 15, 1998 (the “Record Date”), and previously authorized and
directed the issuance of one Right with respect to each Common Share issued between the Record Date
and the earliest of the Distribution Date, the Redemption Date and the Expiration Date (as such
terms are hereinafter defined), each Right representing the right to purchase one one-hundredth of
a Preferred Share (as such term is hereinafter defined), upon the terms and subject to the
conditions herein set forth;

          WHEREAS, the Prior Rights Agreement would have expired on October 22, 2008; and

          WHEREAS, the Board of Directors has determined to amend and restate the Prior Rights
Agreement, to, among other things, extend the term of the Prior Agreement as set forth herein.

          Accordingly, 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 Rights Agreement, the following
terms have the meanings indicated:

          (a) “Acquiring Person” shall mean any Person who or which, together with its
Affiliates and Associates, shall be the Beneficial Owner of 15% or more of the Common Shares then
outstanding, but shall not include (i) the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any entity holding Common
Shares for or pursuant to the terms of any such plan, (ii) any Person who or which becomes the
Beneficial Owner of 15% or more of the Common Shares then outstanding as the result of a reduction
in the outstanding Common Shares resulting from acquisition of Common Shares by the Company
approved by the Board of Directors, unless and until such Person becomes the Beneficial Owner of
any additional Common Shares, other than pursuant to a stock dividend or stock split, (iii) any
Person who or which the Board of Directors of the Company determines, in good faith, became an
Acquiring Person inadvertently, if such Person divests as promptly as practicable a sufficient
number of Common Shares (or, in the case solely of Derivative Common Shares (as such term is
hereinafter defined), such Person terminates the subject derivative transaction or transactions or
disposes of the subject derivative security or

 

 

securities, or establishes to the satisfaction of the Board of Directors that such Derivative
Common Shares are not held with any intention of changing or influencing control of the Company) so
that such Person would no longer be an Acquiring Person, or (iv) any Person who or which the Board
of Directors of the Company determines, prior to the time such Person would otherwise be an
Acquiring Person, should be exempted from the definition of Acquiring Person, provided that the
Board of Directors may make such exemption subject to such conditions, if any, which the Board of
Directors may determine.

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

          (c) 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 beneficially
owns, directly or indirectly;

          (ii) which such Person or any of such Person’s Affiliates or Associates has (A) the
right to acquire (whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants or options, or otherwise, provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to Beneficially Own,
securities tendered pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person’s Affiliates or Associates until such tendered securities are
accepted for purchase or exchange or (B) the right to vote pursuant to any agreement,
arrangement or understanding, provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to Beneficially Own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated under the
Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report);

          (iii) which are beneficially owned, directly or indirectly, by any other Person with
which such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of securities) for
the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso
to Section 1(c)(ii)(B)) or disposing of any securities of the Company; provided, however,
that for purposes of determining Beneficial Ownership of securities under this Rights
Agreement, officers and directors of the Company solely by

2

 

reason of their status as such shall not constitute a group (notwithstanding that they
may be Associates of one another or may be deemed to constitute a group for purposes of
Section 13(d) of the Exchange Act) and shall not be deemed to own shares owned by another
officer or director of the Company; or

          (iv) that are the subject of a derivative transaction entered into by such Person, or
derivative security acquired by such Person, which gives such Person the economic
equivalent of ownership of an amount of such securities due to the fact that the value of
the derivative is explicitly determined by reference to the price or value of such
securities, without regard to whether (x) such derivative conveys any voting rights in such
securities to such Person, (y) the derivative is required to be, or capable of being,
settled through delivery of such securities, or (z) such Person may have entered into other
transactions that hedge the economic effect of such derivative. In determining the number
of Common Shares deemed Beneficially Owned by virtue of the operation of this Section
1(c)(iv), the subject Person shall be deemed to Beneficially Own (without duplication) the
number of Common Shares that are synthetically owned pursuant to such derivative
transactions or such derivative securities. Such Common Shares that are deemed so
Beneficially Owned pursuant to the operation of this Section 1(c)(iv) shall be referred to
herein as “Derivative Common Shares.”

     Notwithstanding anything in this definition of Beneficial Ownership to the contrary, 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 Beneficially Own hereunder.

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

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

          (f) “Common Shares” shall mean the shares of common stock, par value $0.01 per share, of the
Company, except that “Common Shares” when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.

          (g) “Company” shall have the meaning set forth in the first paragraph hereof.

3

 

          (h) “current per share market price” shall have the meaning set forth in Section 11(d) hereof.

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

          (j) “equivalent preferred shares” shall have the meaning set forth in Section 11(b) hereof.

          (k) “Exchange Act” shall mean the Securities Exchange Act of 1934.

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

          (m) “Expiration Date” shall mean the Close of Business on October 22, 2018.

          (n) “NASDAQ” shall mean the National Association of Securities Dealers, Inc. Automated
Quotations System.

          (o) “Person” shall mean any individual, firm, corporation, partnership or other entity, and
shall include any successor (by merger or otherwise) of such entity.

          (p) “Preferred Shares” shall mean shares of Series A Junior Participating Preferred Stock,
$0.01 par value, of the Company having the rights and preferences set forth in the form of
Certificate of Designations attached to this Rights Agreement as Exhibit A.

          (q) “Purchase Price” shall initially be $135 for each one one-hundredth of a Preferred Share
purchasable pursuant to the exercise of a Right, and shall be subject to adjustment from time to
time as provided in Section 11 or 13 hereof.

          (r) “Record Date” shall have the meaning set forth in the second paragraph hereof.

          (s) “Redemption Date” shall mean the time at which the Rights are redeemed as provided in
Section 23 hereof.

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

          (u) “Right” shall have the meaning set forth in the second paragraph hereof.

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

4

 

          (w) “Rights Agent” shall have the meaning set forth in the preamble hereof.

          (x) “Rights Agreement” shall have the meaning set forth in the first paragraph hereof.

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

          (z) “Stock Acquisition Date” shall mean the first date of public announcement (including,
without limitation, by a filing under the Exchange Act) by the Company or an Acquiring Person that
an Acquiring Person has become such or such earlier date as a majority of the Board of Directors
shall become aware of the existence of an Acquiring Person.

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

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

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

     Section 3. Issue of Right Certificates. (a) Until the Close of Business on the day
which is the earlier of (i) the tenth Business Day following the Stock Acquisition Date or (ii)
tenth Business Day (or such later date, if any, as the Board may determine prior to such time as
any Person becomes an Acquiring Person) after the date that 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 entity holding Common Shares for or pursuant to the terms of any such plan)
commences, or of the first public announcement of the intention of 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 entity holding Common Shares for or pursuant to the terms of any
such plan) to commence, a tender or exchange offer the consummation of which would result in any
Person becoming the Beneficial Owner of 15% or more of the outstanding Common Shares, in each case,
including any such date which is after the date of this Rights Agreement and prior to the issuance
of the Rights (the earlier of such dates being herein referred to as the “Distribution Date”), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which certificates shall also be
deemed to

5

 

be Right Certificates) and not by separate Right Certificates and (y) the right to receive
Right Certificates will be transferable only in connection with the transfer of Common Shares. As
soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will,
if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on
the records of the Company, a Right Certificate, in substantially the form of Exhibit B
hereto (a “Right Certificate”), evidencing one Right for each Common Share so held. As of the
Distribution Date, the Rights will be evidenced solely by such Right Certificates.

          (b) The Company will make available a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto, to any holder of Rights who may so request from
time to time prior to the Expiration Date. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates and the registered holders of the Common Shares shall also be the registered
holders of the associated Rights. Until the Distribution Date (or the earlier of the Redemption
Date or the Expiration Date), the surrender for transfer of any certificate for Common Shares in
respect of which Rights have been issued shall also constitute the transfer of the Rights
associated with such Common Shares.

          (c) Rights shall be issued in respect of all Common Shares which are issued (whether
originally issued or from the Company’s treasury) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Expiration Date. Certificates representing
such Common Shares shall bear the following legend:

THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS
SET FORTH IN A RIGHTS AGREEMENT BETWEEN THE ULTIMATE SOFTWARE GROUP, INC. (THE
“COMPANY”) AND THE RIGHTS AGENT THEREUNDER (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 WITHOUT CHARGE AFTER
RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH
IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT), INCLUDING SUCH RIGHTS HELD BY A
SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

6

 

          With respect to such certificates containing the foregoing legend, until the Distribution
Date, the Rights associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such certificate shall
also constitute the transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed
cancelled and retired so that the Company shall not be entitled to exercise any Rights associated
with the Common Shares which are no longer outstanding.

     Section 4. Form of Right Certificates. The Right Certificates (and the forms of
election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall
be substantially the same as Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Rights Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or automated quotation system on which the Rights
may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 11
and 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of
one one-hundredths of a Preferred Share as shall be set forth therein at the price per one
one-hundredth of a Preferred Share set forth therein, but the number of one one-hundredths of a
Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.

     Section 5. Countersignature and Registration. (a) The Right Certificates shall be
executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its
President, any of its Vice Presidents, or its Treasurer, either manually or by facsimile signature,
shall have affixed thereto the Company’s seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The
Right 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 Right Certificates shall cease to be such officer of
the Company before countersignature by the Rights Agent and issuance and delivery by the Company,
such Right 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 Right
Certificates had not ceased to be such officer of the Company; and any Right Certificate may be
signed on behalf of the Company by any Person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the Company to sign such Right Certificate although
at the date of the execution of this Rights Agreement any such Person was not such an officer.

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

7

 

     Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates. (a) Subject to the provisions of Section 14
hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the earlier of the Redemption Date or the Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing Rights that have
become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right
Certificates entitling the registered holder to purchase a like number of one one-hundredths of a
Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any
Right Certificate or Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent
shall, countersign and deliver to the Person entitled thereto a Right Certificate or Right
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 Right Certificates.

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

     Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein), in whole or in part, at any time after the Distribution
Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to
which the Rights are exercised, at or prior to the earliest of (i) the Expiration Date, (ii) the
Redemption Date or (iii) the time at which such Rights are exchanged as provided in Section 24
hereof.

          (b) The Purchase Price shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.

8

 

          (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of
election to purchase duly executed, accompanied by payment of the
Purchase Price for the shares to be purchased and an amount equal to any applicable transfer
tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof
by certified check, cashier’s check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares
certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably
authorizes any such transfer agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing such number of one one-hundredths of a Preferred
Share as are to be purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent of the Preferred Shares with such depositary
agent) and the Company hereby directs such depositary agent to comply with such request; (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of
fractional shares in accordance with Section 14 hereof; (iii) promptly after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as may be designated
by such holder; and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the
order of the registered holder of such Right Certificate.

          (d) In case the registered holder of any Right Certificate shall exercise less than all the
Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to such holder’s duly authorized assigns, subject to the provisions of Section 14
hereof.

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

     Section 9. Availability of Preferred Shares. (a) The Company covenants and agrees
that it will cause to be reserved and kept available out of its authorized and unissued Preferred
Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be
sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7.
The Company covenants and agrees that it will take all such action as may be necessary to ensure
that all securities delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.

9

 

          (b) The Company further covenants and agrees that it will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any Preferred Shares 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 Right Certificates to a Person other than, or the issuance or delivery
of certificates or depositary receipts for the Preferred Shares in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue
or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any
Rights until any such tax shall have been paid (any such tax being payable by the holder of such
Right Certificate at the time of surrender) or until it has been established to the Company’s
reasonable satisfaction that no such tax is due.

          (c) The Company will use its best efforts to ensure that any securities issued pursuant hereto
are issued in compliance with all applicable laws.

     Section 10. Preferred Shares Record Date. Each Person in whose name any certificate
for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon which the
Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not
be entitled to any rights of a holder of Preferred 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 of Shares or Number of Rights. The
Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this Section 11.

          (a) (i) In the event the Company shall at any time after the date of this Rights Agreement
(A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation), except as otherwise provided in
this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or reclassification, and the number and
kind of shares of capital stock issuable on such date, shall be proportionately adjusted so

10

 

that the holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Shares transfer books of the
Company were open, such holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification; provided, however, that in
no event shall the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon exercise of one
Right.

               (ii) Subject to Section 24 of this Rights Agreement, in the event any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise
thereof at a price equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Rights Agreement and in lieu of Preferred Shares, such number of Common Shares as
shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of
one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that
product by (B) 50% of the then current per share market price of the Company’s Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event;
provided, however, that if the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii).
In the event that any Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or diminish the benefits
intended to be afforded by the Rights.

          Notwithstanding anything in this Agreement to the contrary, from and after the occurrence of
such event, any Rights that are or were acquired or Beneficially Owned by any Acquiring Person (or
any Associate or Affiliate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of this Rights
Agreement. No Right Certificate shall be issued pursuant to Section 3 that represents Rights
Beneficially Owned by an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time
upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for
transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall
be cancelled.

               (iii) If there shall not be sufficient Common Shares issued but not outstanding or authorized
but unissued to permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exercise of the Rights. If the Company shall, after
good faith effort, be unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common Share that would otherwise
be issuable upon exercise

11

 

of a Right, a number of Preferred Shares or fraction thereof (or a security with substantially
similar rights, privileges, preferences, voting power and economic rights) such that the current
per share market price of one Preferred Share (or such other security) multiplied by such number or
fraction is equal to the current per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof (or other security).

          (b) In case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Shares entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares
having the same rights, privileges and preferences as the Preferred Shares (“equivalent preferred
shares”)) or securities convertible into Preferred Shares or equivalent preferred shares at a price
per Preferred Share or equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less than the then
current per share market price of the Preferred Shares on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares
so to be offered (and/or the aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such current market price and the denominator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of additional Preferred
Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially convertible); provided, however, that in
no event shall the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon exercise of one
Right. In case such subscription price may be paid in a consideration part or all of which shall
be in a form other than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights.
Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be made successively whenever such
a record date is fixed; and in the event that such rights, options 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) In case the Company shall fix a record date for the making of a distribution to all
holders of the Preferred Shares (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend
payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall

12

 

be the then current per share market price of the Preferred Shares on such record date, less
the fair market value (as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and holders of the Rights) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share market price of the
Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. 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 again be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.

          (d) (i) For the purpose of any computation hereunder, the “current per share market price” of
any security (a “Security” for the purpose of this Section 11(d)(i)) on any date shall be deemed to
be the average of the daily closing prices per share of such Security for the thirty (30)
consecutive Trading Days immediately prior to such date; provided, however, that in the event that
the current per share market price of the Security is determined during a period following the
announcement by the issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the expiration of thirty
(30) Trading Days after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market price per share
equivalent of such Security. The closing price for each day shall be the last sale price, regular
way, recorded at or prior to 4.00 p.m. New York time or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, recorded at or prior to 4.00
p.m. New York time, in either case, as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NASDAQ or, if the Security
is not listed or admitted to trading on the NASDAQ, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal national securities
exchange on which the Security is listed or admitted to trading or, if the Security is not listed
or admitted to trading on any national securities exchange, the last quoted price or at or prior to
4:00 p.m. New York Time, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported as of 4:00 p.m. New York time by the NASDAQ or such other
system then in use, or, if on any such date the Security is 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 Security selected by the Board of Directors of the Company. If on any such date no
such market maker is making a market in the Security, the fair value of the Security on such date
as determined in good faith by the Board of Directors of the Company shall be used. The term
“Trading Day” shall mean a day on which the principal national securities exchange on which the
Security is listed or admitted to trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national securities exchange, a Business
Day.

13

 

               (ii) For the purpose of any computation hereunder, the “current per share market price” of the
Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i).
If the Preferred Shares are not publicly traded, the “current per share market price” of the
Preferred Shares shall be conclusively deemed to be the current per share market price of the
Common Shares as determined pursuant to Section 11(d)(i) (appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by
one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed
or traded, “current per share market price” shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent.

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

          (f) If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any
Right thereafter exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained
in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10 and 13 with
respect to the Preferred Shares shall apply on like terms to any such other shares.

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

          (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon
each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and
(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths
of a Preferred Share (calculated to the nearest one millionth of a Preferred Share) obtained by (A)
multiplying (x) the number of

14

 

one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (B)
dividing the product so obtained by the Purchase Price in effect immediately after such adjustment
of the Purchase Price.

          (i) The Company may elect on or after the date of any adjustment of the Purchase Price to
adjust the number of Rights in substitution for any adjustment in the number of one one-hundredths
of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one millionth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the
Right Certificates have been issued, shall be at least 10 days later than the date of the public
announcement. If Right 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 Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the Right Certificates
held by such holders prior to the date of adjustment, and upon surrender thereof, if required by
the Company, new Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in the names of the
holders of record of Right Certificates on the record date specified in the public announcement.

          (j) Irrespective of any adjustment or change in the Purchase Price or the number of one
one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the Purchase Price and the
number of one one-hundredths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder, but, nevertheless, shall represent the Rights as so adjusted.

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

15

 

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

          (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Purchase Price, in addition to those adjustments expressly required
by this Section 11, as and to the extent that, it, in its sole discretion, shall determine to be
advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly
for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of
Preferred Shares or securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to
holders of its Preferred Shares shall not be taxable to such stockholders.

          (n) In the event that at any time after the date of this Rights Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable
in Common Shares or effect a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right shall be determined
by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the number of Common
Shares outstanding immediately after such event, and (B) each Common Share outstanding immediately
after such event shall have issued with respect to it that number of Rights which each Common Share
outstanding immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively whenever such a dividend is declared
or paid or such a subdivision, combination or consolidation is effected.

     Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Sections 11 or 13 hereof, the Company shall promptly (a) prepare
a certificate setting forth such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) if a Distribution Date has occurred, mail a
brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make such certification or
give

16

 

such notice shall not affect the validity of or the force or effect of the requirement for
such adjustment. Any adjustment to be made pursuant to Section 11 or Section 13 of this Rights
Agreement shall be effective as of the date of the event giving rise to such adjustment.

     Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In
the event, directly or indirectly, at any time after a Person has become an Acquiring Person, (a)
the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall
consolidate with the Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such merger, all or part
of the Common Shares shall be changed into or exchanged for stock or other securities of any other
Person (or the Company) or cash or any other property or (c) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one
or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be
made so that

          (i) each holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this Rights Agreement
and in lieu of Preferred Shares, such number of validly issued, fully paid, nonassessable
and freely tradable Common Shares of such other Person (including the Company as successor
thereto or as the surviving corporation) not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable and dividing that product by (B) 50%
of the then current per share market price of the Common Shares of such other Person
(determined pursuant to Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer;

          (ii) the issuer of such Common Shares shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and
duties of the Company pursuant to this Rights Agreement;

          (iii) the term “Company” shall thereafter be deemed to refer to such issuer; and

          (iv) such issuer shall take such steps (including, but not limited to, the reservation
of a sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as
nearly as reasonably may be, in relation to the Common Shares thereafter deliverable
upon the exercise of the Rights.

17

 

          The Company shall not consummate any such consolidation, merger, sale or transfer unless prior
thereto the Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the benefits intended
to be afforded by the Rights. The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. The provisions of Section
11(a)(ii) hereof shall be of no effect following the occurrence of any event described in clause
(a), (b) or (c) above of this Section 13.

     Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be
required to issue fractions of Rights or to distribute Right Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the
Right 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 the
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 for any day shall be the last sale
price, regular way reported at or prior to 4:00 p.m., New York time, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way reported at or
prior to 4:00 p.m., New York time, in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to trading on the NASDAQ
or, if the Rights are not listed or admitted to trading on the NASDAQ, 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 reported at or prior to 4:00 p.m., New York time, or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported at or prior to 4:00 p.m.,
New York time, by NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked prices reported at or
prior to 4:00 p.m., New York time, as furnished by a professional market maker making a market in
the Rights selected by the Board of Directors of the Company. If on any such date no such market
maker is making a market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.

          (b) The Company shall not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of
the Rights or to distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of

18

 

one one-hundredth of a Preferred Share 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 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 Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right 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 Preferred Share. For the purposes of this Section 14(b), the current market
value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant
to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the
date of such exercise.

          (c) The Company shall not be required to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares,
the Company shall pay to the registered holder of the Right Certificates at the time such Rights
are exercised as herein provided an amount of cash equal to the same fraction of the current market
value of a whole Common Share. For the purpose of this Section 14(c), the current market value of
a Common Share (as defined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.

          (d) The holder of a Right by the acceptance of the Right expressly waives such holder’s right
to receive any fractional Rights or any fractional shares upon exercise of a Right (except as
expressly provided above).

     Section 15. Rights of Action. All rights of action in respect of this Rights
Agreement, except the rights of action given to the Rights Agent under Section 18 hereof, are
vested in the respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Shares); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent
of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution
Date, of the Common Shares), may, in such holder’s own behalf and for such holder’s own benefit,
enforce, and may institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by
such Right Certificate in the manner provided in such Right Certificate and in this Rights
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 Rights Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations of the obligations
of any Person subject to, this Rights Agreement.

19

 

     Section 16. Agreement of Right 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 the Common Shares;

          (b) after the Distribution Date, the Right Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed
or accompanied by a proper instrument of transfer; and

          (c) the Company and the Rights Agent may deem and treat the Person in whose name the Right
Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificate or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.

     Section 17. Right Certificate Holder not Deemed a Stockholder. No holder, as such, of
any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of the Preferred Shares 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 Right Certificate be construed to confer upon the holder of any Right Certificate, as such,
any of the rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.

     Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Rights Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for,
and to hold it harmless against, any loss, liability or expense incurred without gross negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by
the Rights Agent in connection with the acceptance and administration of this Rights Agreement,
including the costs and expenses of defending against any claim of liability in the premises.

          (b) The Rights Agent shall be protected and shall incur no liability for, or in respect of any
action taken, suffered or omitted by it in connection with, its administration of this Rights
Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common
Shares or for other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or
other paper or document believed by it to be genuine and to be signed, executed and, where
necessary,
verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.

20

 

     Section 19. Merger or Consolidation or Change Of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any corporation resulting from any merger or consolidation
to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Rights Agreement without the
execution or filing of any paper or any further act on the part of any of the parties hereto;
provided that such corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Rights Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so countersigned; and, in case at
that time any of the Right Certificates shall not have been countersigned, any successor Rights
Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or
in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this Rights Agreement.

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

     Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Rights Agreement upon the following terms and conditions, by all of
which the Company and the holders of Right Certificates, by their acceptance thereof, shall be
bound:

          (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the
Company), and the opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with
such opinion.

          (b) Whenever in the performance of its duties under this Rights Agreement the Rights Agent
shall deem it necessary or desirable that any fact or matter 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 any one of the Chairman of the Board, the Chief
Executive Officer,
the President, any Vice President, the Treasurer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this Rights Agreement in
reliance upon such certificate.

21

 

          (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for
its own gross negligence, bad faith or willful misconduct.

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

          (e) The Rights Agent shall not be under any responsibility in respect of the validity of this
Rights 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 Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the Rights becoming
void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including
the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right Certificates after actual notice that
such change or adjustment is required); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Preferred Shares to be
issued pursuant to this Rights Agreement or any Right Certificate or as to whether any Preferred
Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.

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

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

22

 

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

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

     Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent
may resign and be discharged from its duties under this Rights Agreement upon 30-days’ notice in
writing mailed to the Company and to each transfer agent of the Common Shares or Preferred Shares
by registered or certified mail, and to the holders of the Right Certificates by first-class mail.
In the event the transfer agency relationship in effect between the Company and the Rights Agent
terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from
its duties under this Agreement as of 30 days from the effective date of such termination, and the
Company shall be responsible for sending any required notice. The Company may remove the Rights
Agent or any successor Rights Agent upon 30-days’ notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or
Preferred Shares by registered or certified mail, and to the holders of the Right 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 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who or which shall, with such
notice, submit such holder’s Right Certificate for inspection by the Company), then the registered
holder of any Right 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 corporation or trust company organized and doing business under the
laws of the United States or of any state of the United States in good standing, having an office
in the State of New York, which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent, including its Affiliates, a combined
capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

23

 

     Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions
of this Rights Agreement or of the Rights to the contrary, the Company may, at its option, issue
new Right Certificates evidencing Rights in such form as may be approved by the Board of Directors
of the Company to reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Rights Agreement.

     Section 23. Redemption. (a) The Board of Directors of the Company may, at its
option, at any time prior to the Distribution Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.01 per Right, appropriately adjusted to reflect any
stock split, stock combination, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the “Redemption Price”).
Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of the event described in Section 11(a)(ii) until such time
as the Company’s right of redemption hereunder has expired. The redemption of the Rights by the
Board of Directors of the Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors of the Company, in its sole discretion, may establish. The
Company may, at its option, pay the Redemption Price in cash, Common Shares (based on the current
market price at the time of redemption) or any other form of consideration deemed appropriate by
the Board of Directors.

          (b) Immediately upon the action of the Board of Directors of the Company ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23, 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. The Company shall
promptly give public notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption. Within ten (10)
days after such action of the Board of Directors of the Company ordering the redemption of the
Rights, the Company shall mail a notice of redemption to all 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 Shares. 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. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in
connection with the purchase of Common Shares prior to the Distribution Date.

24

 

     Section 24. Exchange. (a) The Board of Directors of the Company may, at its option,
at any time after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have become void pursuant
to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common
Share per Right, appropriately adjusted to reflect any adjustment in the number of Rights pursuant
to Section 11(i) (such exchange ratio being hereinafter referred to as the “Exchange Ratio”).
Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding
Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.

          (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange
of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and
without any notice, the right to exercise such Rights shall terminate and the only right thereafter
of a holder of such Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Common Shares for Rights will
be effected and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by
each holder of Rights.

          (c) In the event that there shall not be sufficient Common Shares issued but not outstanding
or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this
Section 24, the Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize such additional
Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable
upon exchange of a Right, a number of Preferred Shares or fraction thereof (or a security with
substantially similar rights, privileges, preferences, voting power and economic rights) such that
the current per share market price of one Preferred Share (or other such security) multiplied by
such number or fraction is equal to the current per share market price of one Common Share as of
the date of issuance of such Preferred Shares or fraction thereof (or other such security).

25

 

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

     Section 25. Notice of Certain Events. (a) In case the Company, at any time after the
Distribution Date, shall propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any other distribution to the holders of its Preferred
Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its
Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares
or shares of stock of any class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to
effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any
dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends
in Common Shares), then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, or distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of participation therein by
the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10
days prior to the record date for determining holders of the Preferred Shares for purposes of such
action, and in the case of any such other action, at least 10 days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of the Common Shares
and/or Preferred Shares, whichever shall be the earlier.

          (b) In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company
shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance
with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such
event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

26

 

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

The Ultimate Software Group, Inc.

2000 Ultimate Way

Weston, Florida 33326

Attention: Corporate Secretary

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

Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

Attention: Client Services

          Notices or demands authorized by this Rights Agreement to be given or made by the Company or
the Rights Agent to the holder of any Right Certificate 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. The Company may from time to time supplement
or amend this Rights Agreement without the approval of any holders of Right Certificates in order
to cure any ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other provisions with
respect to the Rights which the Board of Directors of the Company may deem necessary or desirable,
any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, from and after the Distribution Date, this Rights Agreement shall not be
amended in any manner which would adversely affect the interests of the holders of Rights (other
than an Acquiring Person or Affiliate or Associate thereof).

     Section 28. Successors. All the covenants and provisions of this Rights 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. Except as otherwise
specifically provided herein, the Board of Directors shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company hereunder, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and power (i) to
interpret the provisions of this Agreement, and (ii) to make all determinations deemed necessary or
advisable for the administration of this Agreement. All such actions, calculations, interpretations
and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board of Directors shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board of
Directors or any member thereof to any liability to the holders of the Rights.

27

 

     Section 30. Benefits of This Rights Agreement. Nothing in this Rights Agreement shall
be construed to give to any Person, other than the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any
legal or equitable right, remedy or claim under this Rights Agreement; but this Rights Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares).

     Section 31. Severability. If any term, provision, covenant or restriction of this
Rights 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
Rights Agreement shall remain in full force and effect and shall in no way be affected, impaired or
invalidated.

     Section 32. Governing Law. This Rights Agreement and each Right 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 to be made and performed entirely within such State.

     Section 33. Counterparts. This Rights 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 Rights Agreement are inserted for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.

     Section 35. Force Majeure. Notwithstanding anything to the contrary contained herein,
the Rights Agent shall not be liable for any delays or failures in performance resulting from acts
beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage
of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss
of data due to power failures or mechanical difficulties with information storage or retrieval
systems, labor difficulties, war, or civil unrest.

28

 

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

	 	 	 	 	 
	 	THE ULTIMATE SOFTWARE GROUP, INC.

 	 
	 	By  /s/ Mitchell K. Dauerman
 	 
	 	Name:  	Mitchell K. Dauerman 	 
	 	Title:  	Executive Vice President, Chief
Financial Officer and Treasurer 	 
	 

	 	 	 	 	 
	 	COMPUTERSHARE TRUST COMPANY, N.A.

 	 
	 	By:  	/s/ Dennis V. Moccia
 	 
	 	 	Name:  	Dennis V. Moccia 	 
	 	 	Title:  	Managing Director 	 
	 

29

 

EXHIBIT A

FORM of

CERTIFICATE OF DESIGNATIONS

of

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

THE ULTIMATE SOFTWARE GROUP, INC.

(Pursuant to Section 151 of the Delaware General Corporation Law)

 

     The Ultimate Software Group, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the “Corporation”), hereby certifies
that the following resolution was adopted by the Board of Directors of the Corporation as required
by Section 151 of the General Corporation Law at a meeting duly called and held on October 22,
1998:

     RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of
this Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with
the provisions of the Restated Certificate of Incorporation, the Board of Directors hereby creates
a series of Preferred Stock of the Corporation, par value $0.01 per share (the “Preferred Stock”),
and hereby states the designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:

     Series A Junior Participating Preferred Stock:

     Section 1. Designation and Amount. The shares of such series shall be designated as
“Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of
shares constituting the Series A Preferred Stock shall be 500,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.

     Section 2. Dividends and Distributions.

     (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or
any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of
Common Stock, par value $0.01 per share (the “Common Stock”), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being referred to herein as a
“Quarterly

A-1

 

Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all
cash dividends, and 100 times the aggregate per share amount (payable in 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 A Preferred Stock. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to such event under
clause (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 A Preferred Stock
as provided in paragraph (A) of this Section 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 $1.00 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

     (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock entitled to receive payment of a
dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the date fixed for
the payment thereof.

A-2

 

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

     (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of
the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per share to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.

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

     (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any
corporate action.

     Section 4. Certain Restrictions.

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

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

          (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking
on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series
A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;

A-3

 

          (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or

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

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

     Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the
Restated Certificate of Incorporation, or in any other Certificate of Designations creating a
series of Preferred Stock or any similar stock or as otherwise required by law.

     Section 6. Liquidation, Dissolution or Winding up. Upon any liquidation, dissolution
or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, provided that the
holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on
the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon

A-4

 

such liquidation, dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (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 or securities, cash and/or any other property, then in
any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged
or changed into an amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

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

     Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment
of dividends and the distribution of assets, junior to all series of any other class of the
Corporation’s Preferred Stock.

     Section 10. Amendment. The Restated Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the powers, preferences
or special rights of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.

A-5

 

     IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation
by its President and attested by its Secretary this the 22nd day of October, 1998.

	 	 	 	 	 
	 	THE ULTIMATE SOFTWARE GROUP, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Scott Scherr 	 
	 	 	Title:  	Chairman of the Board, President and
Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	Attest:

 	 
	 	By:  	 	 
	 	 	Name:  	Vivian Maza 	 
	 	 	Title:  	Secretary 	 

A-6

 

	 	 	 	 	 

EXHIBIT B

Form of Right Certificate

Certificate No. R- _________ Rights

NOT EXERCISABLE AFTER OCTOBER 22, 2018 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE
SUBJECT TO REDEMPTION AT $0.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.

Rights Certificate

THE ULTIMATE SOFTWARE GROUP, INC.

     This certifies that __________________, or registered assigns, is the registered owner of the number
of Rights set forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Amended and Restated Rights Agreement, dated as of August 26, 2008
(the “Rights Agreement”), between The Ultimate Software Group, Inc., a Delaware corporation (the
“Company”), and Computershare Trust Company, N.A. (the “Rights Agent”), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 p.m., New York time, on October 22, 2018 at the principal office of the Rights
Agent, or at the office of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock of the Company, par value
$0.01 per share (the “Preferred Shares”), at a purchase price of $135 per one one-hundredth of a
Preferred Share (the “Purchase Price”), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of
____________ ___, 20___ based on the Preferred Shares as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of certain events.

     This Right Certificate is subject to all of the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and
made a part hereof and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights
Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are
on file at the principal executive offices of the Company and the offices of the Rights Agent.

     This Right Certificate, with or without other Right Certificates, upon surrender at the
principal office of the Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the

B-1

 

holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase.
If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon
surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not
exercised.

     Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right
Certificate (i) may be redeemed by the Company at a redemption price of $0.01 per Right or (ii) may
be exchanged, in whole or in part, for Preferred Shares or shares of the Company’s Common Stock,
par value $0.01 per share.

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

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

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

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

     Dated
as of ____________ ___, 20__.

	 	 	 	 	 
	 	THE ULTIMATE SOFTWARE GROUP, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Mitchell K. Dauerman 	 
	 	 	Title:  	Executive Vice President, Chief
Financial Officer and Treasurer 	 
	 

	 	 	 	 	 
	COUNTERSIGNED:

 	 
	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

B-2

 

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

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

to transfer the Right Certificate.)

     FOR
VALUE RECEIVED ___________________________________________ hereby sells, assigns and transfers
unto
____________________________________________________________________________________________________

____________________________________________________________________________________________________

(Please print name and address of
transferee) this Right Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________ Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full power of substitution.

Dated:
__________________________

Signature __________________________

Signature Guaranteed:

     Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker,
savings and loan association or credit union with membership in an approved signature guarantee
medallion program) pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934.

CERTIFICATE

     The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement). After due inquiry and to the best knowledge of the undersigned, the Rights
evidenced by this Right Certificate were not acquired or beneficially owned by an Acquiring Person
or an Affiliate or Associate thereof.

Dated:
____________________________

Signature ____________________________

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

B-3

 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise Rights

represented by the Right Certificate.)

     To: THE ULTIMATE SOFTWARE GROUP, INC.

     The
undersigned hereby irrevocably elects to exercise ____________ Rights represented by this Right
Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests
that certificates for such Preferred Shares be issued in the name of:

     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 Right Certificate, a new
Right Certificate for the balance remaining 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:

     Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker,
savings and loan association or credit union with membership in an approved signature guarantee
medallion program) pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934.

B-4

 

CERTIFICATE

     The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement). After due inquiry and to the best knowledge of the undersigned, the Rights
evidenced by this Right Certificate were not acquired or beneficially owned by an Acquiring Person
or an Affiliate or Associate thereof.

Dated:_____________________

Signature_____________________________

     The signature in the Form of Assignment or Form of Election to Purchase, as the case may be,
must conform to the name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.

     In the event the certification set forth above in the Form of Assignment or the Form of Election to
Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the
beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election
to Purchase will not be honored.

B-5

 

EXHIBIT C

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED SHARES

     On October 22, 1998, the Board of Directors of The Ultimate Software Group, Inc. (the
“Company”) declared a dividend of one preferred share purchase right (a “Right”) for each
outstanding share of common stock, par value $0.01 per share (the “Common Shares”), of the Company.
The dividend was payable on November 15, 1998 (the “Record Date”) to the stockholders of record on
that date, and effective August 26, 2008, the Board of Directors of the Company approved amending
the Company’s outstanding Rights on each outstanding share of Common Stock. Except as set forth
below, each Right, as amended, entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company, par value
$0.01 per share (the “Preferred Shares”), at a price of $135 per one one-hundredth of a Preferred
Share (the “Purchase Price”), subject to adjustment. The description and terms of the Rights are
set forth in an Amended and Restated Rights Agreement (the “Rights Agreement”) between the Company
and Computershare Trust Company, N.A. as Rights Agent (the “Rights Agent”).

DISTRIBUTION DATE; EXERCISABILITY

     Initially, the Rights will be attached to all Common Share certificates and no separate Rights
certificates will be issued. Separate certificates evidencing the Rights (“Right Certificates”)
will be mailed to holders of record of the Common Shares as of the close of business on the earlier
to occur of (i) the tenth business day following a public announcement that a person or group of
affiliated or associated persons (an “Acquiring Person”) has acquired beneficial ownership of 15%
or more of the outstanding Common Shares (which includes for this purpose stock referenced in
derivative transactions and securities) or (ii) the tenth business day (or such 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) following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Shares (the earlier of such
dates being the “Distribution Date”).

     The Rights Agreement provides that, until the Distribution Date (or earlier redemption or
expiration of the Rights), (i) the Rights will be transferred with and only with the Common Shares,
(ii) new Common Share certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any certificates for Common Shares outstanding as of the Record Date will
also constitute the transfer of the Rights associated with the Common Shares represented by such
certificate.

     The Rights are not exercisable until the Distribution Date. The Rights will expire on October
22, 2018 (the “Expiration Date”), unless the Expiration Date is
extended or unless the Rights are earlier redeemed or exchanged by the Company, in each case,
as described below.

C-1

 

FLIP-IN

     If a person or group becomes an Acquiring Person each holder of a Right will thereafter have
the right to receive, upon exercise, Common Shares (or, in certain circumstances, Preferred Shares
or other similar securities of the Company) having a value equal to two times the exercise price of
the Right. Notwithstanding any of the foregoing, following the existence of an Acquiring Person,
all Rights that are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and void.

     For example, at an exercise price of $135 per Right, each Right not owned by an Acquiring
Person following an event set forth in the preceding paragraph would entitle its holder to purchase
$270 worth of Common Shares (or other consideration, as noted above) for $135. Assuming a value of
$67.50 per Common Share at such time, the holder of each valid Right would be entitled to purchase
four Common Shares for $135.

FLIP-OVER

     In the event that the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold after a person or
group has become an Acquiring Person, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then current exercise
price of the Right, that number of shares of common stock of the acquiring company which at the
time of such transaction will have a market value of two times the exercise price of the Right.

EXCHANGE

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

REDEMPTION

     At any time prior to the Distribution Date, the Board of Directors of the Company may redeem
the Rights, in whole but not in part, at a price of $0.01 per Right (the “Redemption Price”). The
redemption of the Rights may be made effective at such time on such basis with such conditions as
the Board of Directors, in its sole discretion, may establish. Immediately upon any redemption of
the Rights, the right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price. Notwithstanding anything in the Rights Agreement,
the “flip-in”
provision (described above) would not be triggered until the Board of Directors’ right of
redemption described in this paragraph has expired.

C-2

 

AMENDMENT

     The terms of the Rights may be amended by the Board of Directors of the Company without the
consent of the holders of the Rights, except that from and after the Distribution Date no such
amendment may adversely affect the interests of the holders of the Rights (other than the Acquiring
Person).

ADJUSTMENT

     The number of outstanding Rights and the number of one one-hundredths of a Preferred Share
issuable upon exercise of each Right are subject to adjustment under certain circumstances.

PREFERRED STOCK

     Because of the nature of the Preferred Shares’ dividend, liquidation and voting rights, the
value of the one one-hundredth interest in a Preferred Share purchasable upon exercise of each
Right should approximate the value of one Common Share.

RIGHTS OF HOLDERS

     Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder
of the Company, including, without limitation, the right to vote or to receive dividends.

FURTHER INFORMATION

     A copy of the Rights Agreement will be attached as an Exhibit to a Current Report on Form 8-K
to be filed with the Securities and Exchange Commission on August 26, 2008. A copy of the Rights
Agreement is available free of charge from the Company. This summary description of the Rights
does not purport to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is hereby incorporated herein by reference.

C-3

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