Document:

Exhibit 10.2

Golf
Galaxy, Inc.

Incentive Awards to Executive Officers

Fiscal 2007 Performance Goals

The Compensation
Committee of the Board of Directors of Golf Galaxy, Inc. has established
that the performance goal for the fiscal 2007 period is earnings before
interest, taxes, depreciation and amortization (“EBITDA”).Exhibit 4.1

 

Execution Copy

 

 

 

RIGHTS AGREEMENT

 

dated as of

July 11, 2006

 

between

 

Affordable Residential Communities Inc.

 

and

 

American
Stock Transfer & Trust Company

Rights Agent

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Appointment of Rights Agent

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Issuance of Rights Certificates

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Form of Rights Certificates

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Countersignature and Registration

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

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

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  Exercise of Rights; Purchase Price;
  Expiration Date of Rights

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Cancellation and Destruction of Rights
  Certificates

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Reservation and Availability of Capital
  Stock

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Preferred Stock Record Date

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

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

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Certificate of Adjusted Purchase Price or
  Number of Shares

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

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

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  Fractional Rights and Fractional Shares

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 15.

  	
   

  	
  Rights of Action

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 16.

  	
   

  	
  Agreement of Rights Holders

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 17.

  	
   

  	
  Rights Certificate Holder Not Deemed a
  Stockholder

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 18.

  	
   

  	
  Concerning the Rights Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 19.

  	
   

  	
  Merger or Consolidation or Change of Name
  of Rights Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 20.

  	
   

  	
  Duties of Rights Agent

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 21.

  	
   

  	
  Change of Rights Agent

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 22.

  	
   

  	
  Issuance of New Rights Certificates

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 23.

  	
   

  	
  Redemption and Termination

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 24.

  	
   

  	
  Exchange

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 25.

  	
   

  	
  Notice of Certain Events

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 26.

  	
   

  	
  Notices

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 27.

  	
   

  	
  Supplements and Amendments

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 28.

  	
   

  	
  Successors

  	
   

  	
  36

  

 

i

 

	
  Section 29.

  	
   

  	
  Determinations and Actions by the Board of
  Directors, etc.

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 30.

  	
   

  	
  Benefits of this Agreement

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 31.

  	
   

  	
  Severability

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 32.

  	
   

  	
  Governing Law

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 33.

  	
   

  	
  Counterparts

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 34.

  	
   

  	
  Descriptive Headings

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Articles Supplementary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Rights Certificate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Form of Summary of Rights

  	
   

  

 

ii

 

RIGHTS
AGREEMENT

 

RIGHTS AGREEMENT, dated as of July 11, 2006
(the “Agreement”), between Affordable Residential Communities Inc., a
Maryland corporation (the “Company”), and American Stock Transfer &
Trust Company, a New York corporation
(the “Rights Agent”).

 

W I T N E S S E T H

 

WHEREAS, on July 11, 2006 (the “Rights Dividend
Declaration Date”), the Board of Directors of the Company authorized and
the Company declared a dividend distribution of one Right (as hereinafter
defined) for each share of common stock, par value $0.01 per share, of the
Company (the “Common Stock”) outstanding at the close of business on
July 17, 2006 (the “Record Date”), and the Board of Directors has
authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date and the Distribution
Date (as hereinafter defined), each Right initially representing the right to
purchase one one-thousandth of a share of Series B Junior Participating
Preferred Stock of the Company (the “Preferred Stock”) having the
rights, powers and preferences set forth in the form of Articles Supplementary
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth (the “Rights”);

 

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

 

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

 

(a)           “Acquiring Person” shall mean
any Person who or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 5% or more of the shares of Common
Stock then outstanding, but shall not include:

 

(i)            the
Company,

 

(ii)           any
Subsidiary of the Company,

 

(iii)          any
employee benefit plan of the Company, or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan,

 

(iv)          Gerald
J. Ford (“Ford”), Ford’s Affiliates and Associates, provided, however,
that, notwithstanding the foregoing, the exceptions set forth in this
Subsection 1(a)(iv) shall not apply if any of Ford, Ford’s Affiliates or Ford’s
Associates shall be the Beneficial Owner of more than 19.9% of the shares of
Common Stock then outstanding,

 

 

(v)           any
Person who becomes the Beneficial Owner of five percent (5%) or more of the
shares of Common Stock then outstanding (or the Beneficial Owner of more than
19.9% or more of the shares of Common Stock then outstanding in the case of
Ford, Ford’s Affiliates and Associates) as a result of a reduction in the
number of shares of Common Stock outstanding due to the repurchase of shares of
Common Stock by the Company unless and until such Person, after becoming aware
that such Person has become the Beneficial Owner of five percent (5%) or more
of the then outstanding shares of Common Stock (or the Beneficial Owner of more
than percent 19.9% or more of the shares of Common Stock then outstanding in
the case of Ford, Ford’s Affiliates and Associates), acquires beneficial
ownership of additional shares of Common Stock representing one percent (1%) or
more of the shares of Common Stock then outstanding,

 

(vi)          any
Person (other than Ford, Ford’s Affiliates and Associates) who was, together
with such Person’s Affiliates and Associates, the Beneficial Owner of five
percent (5%) or more of the then outstanding shares of Common Stock on the date
hereof, provided that after the date of this Agreement such Person, together
with such Person’s Affiliates and Associates, does not (A) become the
Beneficial Owner of additional shares of Common Stock representing one percent
(1%) or more of the then outstanding shares of Common Stock, in which case such
Person shall be deemed to be an Acquiring Person for purposes of this
Agreement, or (B) decrease its percentage ownership below five percent (5%) of
the then outstanding shares of Common Stock, in which case such Person shall no
longer be eligible to be excepted from the definition of Acquiring Person by
operation of this Subsection 1(a)(vi),

 

(vii)         any
Person (other than Ford, Ford’s Affiliates and Associates) who, by the
collective acquisition by such Person or any of its Affiliates or Associates
after the date hereof of one percent (1%) or fewer of the shares of Common
Stock then outstanding, becomes the Beneficial Owner of five percent (5%) or
more of the shares of Common Stock then outstanding, unless and until such
Person, together with its Affiliates or Associates, (A) acquires any additional
shares of Common Stock in excess of the collective one percent (1%) of the
shares of Common Stock then outstanding permitted by the preceding clause, in
which case the exception set forth in this Subsection 1(a)(vii) shall not
apply, or (B) decreases its percentage ownership below five percent (5%) of the
then outstanding shares of Common Stock, in which case the exception set forth
in this Subsection 1(a)(vii) shall not apply, or

 

(viii)        any
such Person who has reported or is required to report such ownership (but less
than 20%) on Schedule 13G under the Exchange Act (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or any comparable
or successor report) which Schedule 13D does not state any intention to or reserve
the right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such schedule (other than
the disposition of the Common Stock) and, within 10

 

2

 

Business
Days of being requested by the Company to advise it regarding the same,
certifies to the Company that such Person acquired shares of Common Stock in
excess of 4.9% inadvertently or without knowledge of the terms of the Rights
and who or which, together with all Affiliates and Associates, thereafter does
not acquire additional shares of Common Stock while the Beneficial Owner of 5%
or more of the shares of Common Stock then outstanding; provided, however,
that if the Person requested to so certify fails to do so within 10 Business
Days, then such Person shall become an Acquiring Person immediately after such
10-Business-Day period;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

(iii)          which
are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement or understanding
(whether or not in writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (d)) or disposing of any voting securities
of the Company; provided, however, that nothing in this paragraph
(d) shall cause a Person engaged in business as an underwriter of securities to
be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired
through such Person’s participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition, and then only if such securities continue to be owned by such
Person at such expiration of forty days.

 

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

 

(h)           “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.

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(t)            “Ford” shall have the meaning
set forth in Section 1(a)(iv) hereof.

 

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

 

(v)           “Person” shall mean any
individual, firm, corporation, partnership, limited liability company, limited
liability partnership, trust, syndicate or other entity and includes, without
limitation, an unincorporated group of persons who, by formal or

 

5

 

informal
agreement or arrangement (whether or not in writing), have embarked on a common
purpose or act.

 

(w)          “Preferred Stock” shall mean
shares of Series B Junior Participating Preferred Stock, par value $0.01 per
share, of the Company, and, to the extent that there are not a sufficient
number of shares of Series B Junior Participating Preferred Stock authorized to
permit the full exercise of the Rights, any other series of preferred stock of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series B Junior Participating Preferred Stock.

 

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

 

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

 

(z)            “Record Date” shall have the
meaning set forth in the recitals to this Agreement.

 

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

 

(bb)         “Rights” shall have the meaning
set forth in the recitals to this Agreement.

 

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

 

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

 

(ee)         “Rights Dividend Declaration Date”
shall have the meaning set forth in the recitals to this Agreement.

 

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

 

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

 

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

 

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

 

(jj)           “Stock Acquisition Date” shall
mean the first date of public announcement 

 

6

 

by
the Company or an Acquiring Person that an Acquiring Person has become such.

 

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

 

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

 

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

 

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

 

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

 

Section 2.               Appointment
of Rights Agent.  The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-rights agents as
it may deem necessary or desirable.

 

Section 3.               Issuance
of Rights Certificates. 

 

(a)           Until the Distribution Date, (x) the
Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for the Common Stock registered in the names of
the holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates,
and (y) the Rights will be transferable only in connection with the transfer of
the underlying shares of Common Stock (including a transfer to the Company). As
soon as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage-prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit B hereto (the “Rights
Certificates”), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided herein. In the event that an adjustment
in the number of Rights per share of Common Stock has been made pursuant to
Section 11(p) hereof, at the time of distribution of the Rights Certificates,
the Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.

 

7

 

(b)           The Company will make available, as
promptly as practicable following the Record Date, a copy of a Summary of
Rights, in substantially the form attached hereto as Exhibit C (the “Summary
of Rights”) to any holder of Rights who may so request from time to time
prior to the Expiration Date. With respect to certificates for the Common Stock
outstanding as of the Record Date, or issued subsequent to the Record Date,
unless and until the Distribution Date shall occur, the Rights will be
evidenced by such certificates for the Common Stock and the registered holders
of the Common Stock shall also be the registered holders of the associated
Rights. Until the earlier of the Distribution Date or the Expiration Date (as
such term is defined in Section 7(a) hereof), the transfer of any certificates
representing shares of Common Stock in respect of which Rights have been issued
shall also constitute the transfer of the Rights associated with such shares of
Common Stock.

 

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

 

This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Affordable
Residential Communities Inc. (the “Company”) and the Rights Agent thereunder
(the “Rights Agent”) dated as of July 11, 2006 (the “Rights Agreement”), the
terms of which are hereby incorporated herein by reference and a copy of which
is on file at the principal offices of the Rights Agent. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing, without charge,
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder, may
become null and void.

 

With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the
Rights associated with the Common Stock represented by such certificates shall
be evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.

 

8

 

Section 4.               Form
of Rights Certificates. 

 

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

 

(b)           Any Rights Certificate issued
pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents
Rights beneficially owned by:  (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of Section 7(e) hereof,
and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof
upon transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:

 

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

 

Section 5.               Countersignature
and Registration. 

 

(a)           The Rights Certificates shall be
executed on behalf of the Company by its Chairman of the Board, its President
or any Vice President, either

 

9

 

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

 

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

 

Section 6.               Transfer,
Split-Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates. 

 

(a)           Subject to the provisions of Section
4(b), Section 7(e) and Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the Expiration Date, any Rights Certificate or Certificates (other than Rights
Certificates representing Rights that may have been exchanged pursuant to
Section 24 hereof) may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of one one-thousandths of a share of Preferred Stock
(or, following a Triggering Event, Common Stock, other securities, cash or
other assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitles such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 hereof
and Section 24 hereof,

 

10

 

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

 

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

 

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

 

(a)           Subject to Section 7(e) hereof, at
any time after the Distribution Date the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on exercisability
set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in
whole or in part upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the principal office or offices of the Rights
Agent designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of one one-thousandths of a
share (or other securities, cash or other assets, as the case may be) as to
which such surrendered Rights are then exercisable, at or prior to the earlier
of (i) 5:00 P.M., New York City time, on July 17, 2016, or such later date as
may be established by the Board of Directors prior to the expiration of the
Rights (such date, as it may be extended by the Board, the (“Final
Expiration Date”), or (ii) the time at which the Rights are redeemed or
exchanged as provided in Section 23 and Section 24 hereof (the earlier of (i)
and (ii) being herein referred to as the “Expiration Date”).

 

(b)           The Purchase Price for each one
one-thousandth of a share of Preferred Stock pursuant to the exercise of a
Right initially shall be $50.00, shall be subject to adjustment from time to
time as provided in Section 11 and Section 13(a) hereof and shall be payable in
accordance with paragraph (c) below.

 

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

 

11

 

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

 

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

 

(e)           Notwithstanding anything in this
Agreement to the contrary, from and after the first occurrence of a Section
11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined
is part of a plan, arrangement or understanding which has as a primary purpose
or effect the avoidance of this Section 7(e), shall become null and void
without any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to insure
that the provisions of this Section 7(e)

 

12

 

and
Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or any other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or any of its
Affiliates, Associates or transferees hereunder.

 

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

 

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

 

Section 9.               Reservation
and Availability of Capital Stock. 

 

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

 

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

 

(c)           The Company shall use its best
efforts to (i) file, as soon as practicable following the earliest date after
the first occurrence of a Section 11(a)(ii) Event on which the consideration to
be delivered by the Company upon exercise of the

 

13

 

Rights
has been determined in accordance with Section 11(a)(iii) hereof, a
registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance
with, the securities or “blue sky” laws of the various states in connection
with the exercisability of the Rights. The Company may temporarily suspend, for
a period of time not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of
the Rights in order to prepare and file such registration statement and permit
it to become effective. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension has been rescinded. In addition, if the Company shall determine that
a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective. Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained, the exercise thereof shall not be
permitted under applicable law, or a registration statement shall not have been
declared effective.

 

(d)           The Company covenants and agrees that
it will take all such action as may be necessary to ensure that all one
one-thousandths of a share of Preferred Stock (and, following the occurrence of
a Triggering Event, Common Stock and/or other securities) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.

 

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

 

14

 

Section 10.             Preferred
Stock Record Date.  Each person in
whose name any certificate for a number of one one-thousandths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such fractional shares of Preferred Stock (or
Common Stock and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.

 

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

 

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

 

15

 

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

 

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

 

16

 

ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such thirty (30) day period, as it may
be extended, is herein called the “Substitution Period”). To the extent
that the Company determines that action should be taken pursuant to the first
and/or third sentences of this Section 11(a)(iii), the Company (1) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (2) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek such
stockholder approval for such authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of each Adjustment Share shall be the Current
Market Price per share of the Common Stock on the Section 11(a)(ii) Trigger
Date and the per share or per unit value of any Common Stock Equivalent shall
be deemed to equal the Current Market Price per share of the Common Stock on
such date.

 

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

 

17

 

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

 

(d)           (i) 
For the purpose of any computation hereunder, other than computations
made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share
of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share
of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the ten (10) consecutive
Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of the Common Stock
is determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such
Common Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange,

 

18

 

as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by The Nasdaq Stock Market (“NASDAQ”) or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith
by the Board shall be used. The term “Trading Day” shall mean a day on
which the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of business
or, if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

 

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

 

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

 

19

 

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

 

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

 

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

 

(i)            The Company may elect on or after
the date of any adjustment of the Purchase Price to adjust the number of
Rights, in lieu of any adjustment in the number of one one-thousandths of a
share of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest one-ten-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company,

 

20

 

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

 

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

 

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

 

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

 

(m)          Anything in this Section 11 to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that in their good faith judgment the
Board of Directors of the Company shall determine to be advisable in order that
any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance
wholly for cash of any shares of Preferred Stock at less than the Current
Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or
securities which by their terms are convertible into or exchangeable for shares
of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 11,

 

21

 

hereafter
made by the Company to holders of its Preferred Stock shall not be taxable to
such stockholders.

 

(n)           The Company covenants and agrees that
it shall not, at any time after the Distribution Date, (i) consolidate with any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related transactions,
assets, cash flow or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
if (x) at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding
or agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale,
the stockholders of the Person who constitutes, or would constitute, the
“Principal Party” for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.

 

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

 

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

 

Section 12.             Certificate
of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in
Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent, and
with each transfer agent for the Preferred Stock and the Common Stock, a

 

22

 

copy of such
certificate and (c) if a Distribution Date has occurred, mail a brief summary
thereof to each holder of a Rights Certificate. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.

 

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

 

(a)           In the event that, following the
Stock Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), and the Company shall not be the continuing or surviving corporation
of such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets, cash flow or earning power aggregating more than 50% of
the assets, cash flow or earning power of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons (other than the Company or any
Subsidiary of the Company in one or more transactions each of which complies
with Section 11(o) hereof), then, and in each such case, proper provision shall
be made so that: (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof
at the then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be
equal to the result obtained by (1) multiplying the then current Purchase Price
by the number of one one-thousandths of a share of Preferred Stock for which a
Right is exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such one
one-thousandths of a share for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence of a Section 11(a)(ii)
Event), and (2) dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the “Purchase Price” for each Right
and for all purposes of this Agreement) by 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient

 

23

 

number
of shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following
the first occurrence of any Section 13 Event.

 

(b)           “Principal Party” shall mean:

 

(i)            in
the case of any transaction described in clause (x) or (y) of the first
sentence of Section 13(a), the Person that is the issuer of any securities into
which shares of Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to such merger or consolidation; and

 

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

 

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

 

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

 

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

 

24

 

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

 

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

 

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

 

Section 14.             Fractional
Rights and Fractional Shares. 

 

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

 

25

 

(b)           The Company shall not be required to
issue fractions of shares of Preferred Stock (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock) upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Preferred Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock). In lieu of fractional shares
of Preferred Stock that are not integral multiples of one one-thousandth of a
share of Preferred Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-thousandth of a share of Preferred
Stock shall be one one-thousandth of the closing price of a share of Preferred
Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.

 

(c)           Following the occurrence of a
Triggering Event, the Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of fractional shares
of Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one (1) share
of Common Stock. For purposes of this Section 14(c), the current market value
of one share of Common Stock shall be the closing price per share of Common
Stock (as determined pursuant to Section 11(d)(i) hereof) on the Trading Day
immediately prior to the date of such exercise.

 

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

 

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

 

26

 

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

 

(a)           prior to the Distribution Date, the
Rights will be transferable only in connection with the transfer of Common
Stock;

 

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

 

(c)           subject to Section 6(a) and Section
7(f) hereof, the Company and the Rights Agent may deem and treat the person in
whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, subject to
the last sentence of Section 7(e) hereof, shall be required to be affected by
any notice to the contrary; and

 

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

 

Section 17.             Rights
Certificate Holder Not Deemed a Stockholder.  No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of the number of one one-thousandths of a share of Preferred Stock or
any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.

 

27

 

Section 18.             Concerning the Rights Agent.

 

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

 

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

 

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

 

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

 

(b)           In case at any time the name of the Rights Agent shall
be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such 

 

28

 

Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

29

 

authorization or reservation of any shares of
Common Stock or Preferred Stock to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

Section 22.             Issuance of New Rights
Certificates.  Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by the Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to 

 

31

 

the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.

 

Section 23.             Redemption and Termination. 

 

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

 

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

 

(c)           Notwithstanding the provisions of Section 23(a)
hereof, in the event that a majority of the Board of Directors of the Company
is elected by stockholder 

 

32

 

action by written consent, or is comprised of
persons elected at a meeting of stockholders who were not nominated by the
Board of Directors of the Company in office immediately prior to such meeting,
then for a period of one hundred and eighty (180) days following the
effectiveness of such election the Rights shall not be redeemed if such
redemption is reasonably likely to have the purpose or effect of allowing any
Person to become an Acquiring Person or otherwise facilitating the occurrence
of a Triggering Event or a transaction with an Acquiring Person.

 

Section 24.             Exchange.

 

(a)           The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”). Notwithstanding the
foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Stock for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Stock then
outstanding.

 

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

 

(c)           In any exchange pursuant to this Section 24, the
Company, at its option, may substitute Preferred Stock (or Equivalent Preferred
Stock, as such term is defined in paragraph (b) of Section 11 hereof) for
Common Stock exchangeable for Rights, at the initial rate of one one-thousandth
of a share of Preferred Stock (or 

 

33

 

Equivalent Preferred Stock) for each share of
Common Stock, as appropriately adjusted to reflect stock splits, stock
dividends and other similar transactions after the date hereof.

 

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

 

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

 

Section 25.             Notice
of Certain Events.

 

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

 

34

 

such action, and in the case of any such
other action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
shares of Preferred Stock, whichever shall be the earlier.

 

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

 

Section 26.             Notices.

 

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

 

Affordable Residential Communities Inc. 

7887 East Belleview Avenue, Suite 200

Englewood, Colorado 80111

Attention: Scott L. Gesell, Corporate Secretary

 

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

 

American Stock Transfer & Trust Company

59 Maiden Lane

New York, New York 10038

Attention:  Stock Transfer Administration

 

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

 

Section 27.             Supplements
and Amendments.  Prior to the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock. From
and after the Distribution Date, the Company and the Rights Agent shall, if the
Company so directs, supplement or 

 

35

 

amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time period hereunder
or (iv) to change or supplement the provisions hereunder in any manner which
the Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Rights Certificates (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person). Upon the delivery
of a certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything herein to the contrary, this Agreement may not be amended (other than
pursuant to clauses (i) or (ii) of the preceding sentence) at a time when the
Rights are not redeemable.

 

Section 28.             Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

 

Section 29.             Determinations
and Actions by the Board of Directors, etc. 
For all purposes of this Agreement, any calculation of the number of
shares of Common Stock or any other class of capital stock outstanding at any
particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board or any of the directors on the Board to
any liability to the holders of the Rights.

 

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

 

Section 31.             Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be 

 

36

 

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

 

Section 32.             Governing
Law.  This Agreement, each Right and
each Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Maryland and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts made and to be performed entirely within such State.

 

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

 

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

 

37

 

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

 

	
   

  	
  AFFORDABLE RESIDENTIAL

  
	
   

  	
  COMMUNITIES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry Kreider

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry Kreider

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMERICAN STOCK TRANSFER &

  
	
   

  	
  TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Herbert J. Lemmer

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Herbert J. Lemmer

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
										

 

 

Exhibit A

 

FORM OF

 

AFFORDABLE RESIDENTIAL COMMUNITIES INC.

 

ARTICLES SUPPLEMENTARY

 

Affordable Residential Communities Inc., a Maryland corporation

 

(the “Corporation”), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:

 

FIRST:    Under
a power contained in Article VI, Section 6.4 of the charter of the Corporation
(the “Charter”), the Board of Directors of the Corporation (the “Board of
Directors”), by resolution duly adopted, classified and designated 200,000
shares (the “Shares”) of Preferred Stock (as defined in the Charter) as shares
of Series B Junior Participating Preferred Stock, $.01 par value per share (the
“Series B Junior Participating Preferred Stock”), with the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption, as set forth as follows, which upon any restatement of the Charter
shall be made part of Article VI, with any necessary or appropriate changes to
the enumeration or lettering of sections or subsections hereof. The
classification increases the number of shares classified as Series B Junior
Participating Preferred Stock from no shares immediately prior to the
classification to 200,000 shares immediately after the classification. The
classification decreases the number of shares of unclassified Preferred Stock
from 4,250,000 shares immediately prior to the classification to 4,050,000
shares immediately after the classification.

 

SERIES B JUNIOR PARTICIPATING PREFERRED STOCK

 

Section 1.               Designation
and Amount. The shares of such series shall be classified and designated as
“Series B Junior Participating Preferred Stock” and the number of shares constituting
such series shall be 200,000.

 

Section 2.               Dividends
and Distributions.

 

(a)           Subject to the prior
and superior rights of the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of Series B Junior Participating
Preferred Stock with respect to dividends, the holders of shares of Series B
Junior Participating Preferred Stock shall be entitled to receive, when, as and
if authorized by the Board of Directors and declared by the Corporation out of
funds legally available for the purpose, quarterly dividends payable in cash on
or before the 30th day of January, April, July and October in each
year (each such date being referred to herein as a “Quarterly Dividend Payment
Date”), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B Junior 

 

A-1

 

Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $.01 or (b) subject to the provision
for adjustment hereinafter set forth, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $.01 per share, of the Corporation (the “Common Stock”)
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series B Junior Participating Preferred
Stock. In the event the Corporation shall at any time after July 11, 2006 (the “Rights
Declaration Date”) (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series B Junior Participating
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

 

(b)           The Corporation may not
declare or pay a dividend or distribution on the Common Stock (other than a
dividend payable in shares of the Common Stock) unless it simultaneously
declares and pays a dividend or distribution on the Series B Junior Participating
Preferred Stock as provided in paragraph (a) above; provided that, in the event
no dividend payable in shares of 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 $.01 per
share on the Series B Junior Participating Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.

 

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

 

A-2

 

determination of holders of shares of Series B Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

 

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

 

(a)           Subject to the
provision for adjustment hereinafter set forth, each share of Series B Junior
Participating Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the holders of Common Stock. In the event
the Corporation shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the number of votes per
share to which holders of shares of Series B Junior Participating Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.

 

(b)           Except as otherwise
provided herein or by law, the holders of shares of Series B Junior
Participating Preferred Stock and the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a vote of stockholders
of the Corporation.

 

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

 

(ii)           During any default
period, such voting right of the holders of Series B Junior Participating
Preferred Stock may be exercised initially at a special meeting called pursuant
to subparagraph (iii) of this Section 3(c) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders, provided that
neither such voting right nor the right of the holders of any other series of
Preferred Stock, if any, to increase in certain cases the authorized number of
directors shall be exercised unless the holders of ten percent in number of
shares of Series B Junior Participating Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Series B Junior Participating
Preferred Stock of such voting right. At any meeting at 

 

A-3

 

which the holders of Series B Junior Participating Preferred Stock
shall exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two
directors or, if such right is exercised at an annual meeting, to elect two
directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Series B Junior
Participating Preferred Stock shall have the right to make such increase in the
number of directors as shall be necessary to permit the election by them of the
required number. After the holders of the Series B Junior Participating
Preferred Stock shall have exercised their right to elect directors in any
default period and during the continuance of such period, the number of
directors shall not be increased or decreased except by vote of the holders of
Series B Junior Participating Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to or pari passu
with the Series B Junior Participating Preferred Stock.

 

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

 

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

 

A-4

 

become vacant. References in this paragraph (c) to directors elected by
the holders of a particular class of stock shall include directors elected by
such directors to fill vacancies as provided in clause (y) of the foregoing
sentence.

 

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

 

(d)           Except as set forth
herein, holders of Series B Junior Participating Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.

 

Section 4.               Certain
Restrictions.

 

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

 

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

 

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

 

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

 

A-5

 

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

 

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

 

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

 

Section 6.               Liquidation,
Dissolution or Winding Up.

 

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

 

A-6

 

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

 

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

 

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

 

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

 

A-7

 

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

 

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

 

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

 

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

 

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

 

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

 

FOURTH:              The
undersigned President of the Corporation acknowledges these Articles
Supplementary to be the corporate act of the Corporation and, as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.

 

A-8

 

IN WITNESS
WHEREOF, the Corporation has caused these Articles Supplementary to be signed
in its name and on its behalf by its President and attested to by its Corporate
Secretary on July        , 2006.

 

	
  ATTEST:

  	
  AFFORDABLE RESIDENTIAL 

  COMMUNITIES INC.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  (SEAL)

  	
  Name: James F. Kimsey

  
	
  Name: Scott L. Gesell

  	
  Title: President

  
	
  Title: Corporate Secretary

  	
   

  
					

 

A-9

 

Exhibit B

 

[Form of
Rights Certificate]

 

	
  Certificate No. R-

  	
   

  	
                     
  Rights

  

 

NOT EXERCISABLE AFTER JULY 17, 2016 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM
IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
MAY BECOME NULL AND VOID. [THE RIGHTS EVIDENCED BY THIS RIGHTS CERTIFICATE ARE
OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS EVIDENCED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.](1)

 

Rights
Certificate

 

[THE COMPANY]

 

This certifies that                                                                   ,
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of                ,
2006 (the “Rights Agreement”), between Affordable Residential Communities Inc.,
a Maryland corporation (the “Company”), and American Stock Transfer & Trust
Company, a New York corporation (the “Rights Agent”), to purchase from the
Company at any time prior to 5:00 P.M. (New York City time) on                          ,
2016 (unless such date is extended prior thereto by the Board of Directors) at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of Series B Junior Participating Preferred Stock (the “Preferred Stock”)
of the Company, at a purchase price of $                 
per one one-thousandth of a share (the “Purchase Price”), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of 

 

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

 

B-1

 

                           ,
2006, based on the Preferred Stock as constituted at such date. The Company
reserves the right to require prior to the occurrence of a Triggering Event (as
such term is defined in the Rights Agreement) that a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.

 

Upon the occurrence of a Section 11(a)(ii)
Event (as such term is defined in the Rights Agreement), if the Rights
evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Associate or Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a person who, after such transfer,
became an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, such Rights shall become null and void and no holder hereof shall have
any right with respect to such Rights from and after the occurrence of such
Section 11(a)(ii) Event.

 

As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares of Preferred Stock or other
securities, which may be purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and adjustment upon the
happening of certain events, including Triggering Events.

 

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

 

This Rights Certificate, with or without
other Rights Certificates, upon surrender at the principal office or offices of
the Rights Agent designated for such purpose, may be exchanged for another
Rights Certificate or Rights Certificates of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate number of one
one-thousandths of a share of Preferred Stock as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not
exercised.

 

Subject to the provisions of the Rights
Agreement, the Rights evidenced by this Certificate may be redeemed by the
Company at its option at a redemption price of $.001 per Right at any time
prior to the earlier of the close of business on (i) the tenth Business Day
following the Stock Acquisition Date (as such time period may be extended
pursuant to the Rights Agreement), and (ii) the Final Expiration Date. The
foregoing notwithstanding, the Rights generally may not be redeemed for one
hundred 

 

B-2

 

eighty (180)
days following a change in a majority of the Board as a result of a proxy
contest. In addition, under certain circumstances following the Stock
Acquisition Date, the Rights may be exchanged, in whole or in part, for shares
of the Common Stock, or shares of preferred stock of the Company having
essentially the same value or economic rights as such shares. Immediately upon
the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.

 

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

 

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

 

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

 

B-3

 

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

 

	
  Dated as of
                          ,         

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AFFORDABLE RESIDENTIAL 

  COMMUNITIES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  [•]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signature

  	
   

  	
   

  	
   

  

 

 

[Form of
Reverse Side of Rights Certificate]

 

FORM OF
ASSIGNMENT

 

(To be
executed by the registered holder if such 

holder desires to transfer the Rights Certificate.)

 

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

 

Dated:                          ,         

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  

 

 

Certificate

 

The undersigned hereby certifies by checking
the appropriate boxes that:

 

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

 

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

 

Dated:                                    ,         

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  

 

 

NOTICE

 

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

 

 

FORM OF
ELECTION TO PURCHASE

 

(To be
executed if holder desires 

to exercise Rights represented 

by the Rights Certificate.)

 

To:  Affordable Residential
Communities Inc.:

 

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

 

Please insert social security

or other identifying number

 

	
   

  
	
  (Please
  print name and address)

  
	
   

  
	
   

  

 

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

 

Please insert social security

or other identifying number

 

	
   

  
	
  (Please
  print name and address)

  
	
   

  
	
   

  

 

Dated:                                ,             

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  

 

 

Certificate

 

The undersigned hereby certifies by checking
the appropriate boxes that:

 

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

 

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

 

Dated:                           ,       

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  

 

 

NOTICE

 

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

 

 

Exhibit C

 

SUMMARY OF
RIGHTS TO PURCHASE

 

PREFERRED
STOCK

 

On July 11, 2006, the Board of Directors of Affordable
Residential Communities Inc. (the “Company”) authorized and the Company declared
a dividend distribution of one Right for each outstanding share of Company
Common Stock to stockholders of record at the close of business on July 17,
2006 (the “Record Date”). Each Right entitles the registered holder to purchase
from the Company a unit consisting of one one-thousandth of a share (a “Unit”)
of Series B Junior Participating Preferred Stock, par value $0.01 per share
(the “Series B Preferred Stock”) at a Purchase Price of $50.00 per Unit, subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the “Rights Agreement”)
between the Company and American Stock Transfer & Trust Company, as Rights
Agent.

 

Initially, the Rights will be attached to all
Common Stock certificates representing shares then outstanding, and no separate
Rights Certificates will be distributed. Subject to certain exceptions
specified in the Rights Agreement, the Rights will separate from the Common
Stock and a Distribution Date will occur upon the earlier of (i) 10 business
days following a public announcement that a person or group of affiliated or
associated persons (an “Acquiring Person”) has acquired beneficial ownership of
5% or more of the outstanding shares of Common Stock (the “Stock Acquisition
Date”), other than as a result of repurchases of stock by the Company or
certain inadvertent actions by institutional or certain other stockholders or
(ii) 10 business days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer that would
result in a person or group becoming an Acquiring Person (notwithstanding the
requirement described below that the Board of Directors affirmatively determine
that such person shall be an Acquiring Person); provided, however,
that the Distribution Date shall not occur unless, within either of the ten
business day periods (or such later date) specified in clauses (i) and (ii)
above, the Board of Directors of the Company shall have affirmatively determined
that a Distribution Date shall occur upon the end of such applicable ten
business day (or later) period. Until the Distribution Date, (i) the Rights
will be evidenced by the Common Stock certificates and will be transferred with
and only with such Common Stock certificates, (ii) new Common Stock
certificates issued after the Record Date will contain a notation incorporating
the Rights Agreement by reference and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate. Pursuant
to the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event (as defined below) that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock will be issued.

 

The definition of Acquiring Person contained
in the Rights Agreement contains several exemptions, including for (i) the
Company or any of its subsidiaries, (ii) any employee benefit plan of the
Company, or of any subsidiary of the Company, or any 

 

C-1

 

person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan, (iii) Gerald J. Ford and his affiliates and associates,
provided that such persons will be deemed to be an Acquiring Person if any
of them shall beneficially own more than 19.9% of the shares of Common Stock
then outstanding, (iv) any person who becomes the beneficial owner of 5% or
more of the shares of Common Stock then outstanding (or the beneficial owner of
more than 19.9% in the case of Mr. Ford and his affiliates and associates) as a
result of a reduction in the number of shares of Common Stock by the Company,
unless and until such person, after becoming aware that such person has become
the beneficial owner of such percentage of shares of Common Stock, acquires
beneficial ownership of an additional 1% of the shares of Common Stock then
outstanding, (v) any person (other than Mr. Ford and his affiliates and associates)
who beneficially owns 5% or more of the shares of Common Stock on the date of
the Rights Agreement, unless and until such person and its affiliates and associates
acquire an additional 1% or more of the shares of Common Stock then outstanding
or such person decreases its percentage ownership below 5% of the Common Stock
then outstanding, (vi) any person (other than Mr. Ford and his affiliates and associates)
who by virtue of the collective acquisition by it or its affiliates or associates
of an additional 1% or fewer of the shares of Common Stock then outstanding
after the date of the Rights Agreement, becomes the beneficial owner of 5% or
more of the shares of Common Stock then outstanding, unless and until such person
or its affiliates and associates acquire additional shares of Common Stock in
excess of the collective 1% of the shares of Common Stock then outstanding
permitted above or decrease their percentage ownership below 5% of the Common
Stock then outstanding, or (vii) any person who has reported or is required to
report such ownership (but less than 20%) on Schedule 13G or Schedule 13D under
the Securities Exchange Act of 1934, as amended, which Schedule 13D does not
state any intention to or reserve the right to control or influence the
management or policies of the Company and who, upon request, certifies to the
Company that such person acquired shares of Common Stock in excess of 4.9%
inadvertently and without knowledge of the terms of the Rights and who or
which, together with all affiliates and associates, thereafter does not acquire
additional shares of Common Stock while the beneficial owner of 5% or more of
the shares of Common Stock then outstanding. No person shall be an Acquiring
Person unless the Board of Directors of the Company affirmatively determines,
within ten business days after such person otherwise meets the requirements of
the definition of Acquiring Person, that such person shall be an Acquiring
Person.

 

The Rights are not exercisable until the
Distribution Date and will expire at 5:00 P.M. (New York City time) on July 17,
2016, unless such date is extended or the Rights are earlier redeemed or exchanged
by the Company as described below.

 

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

 

C-2

 

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

 

For example, at an exercise price of $50.00 per Right, each Right not owned by an Acquiring Person (or
by certain related parties) following an event set forth in the preceding
paragraph would entitle its holder to purchase $100.00 worth of Common Stock
(or other consideration, as noted above) for $50.00. Assuming that the Common
Stock had a per share value of $11.08 at such time,
the holder of each valid Right would be entitled to purchase 9.03 shares of
Common Stock for $50.00.

 

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

 

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

 

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

 

C-3

 

With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative adjustments amount to at least
1% of the Purchase Price. No fractional Units will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise.

 

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

 

Until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends. While
the distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the Company or for common stock of the acquiring
company or in the event of the redemption of the Rights as set forth above.

 

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

 

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

 

C-4

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