Document:

EXHIBIT 4.1

 

Wireless Facilities, Inc.

 

and

 

Wells Fargo Bank, N.A.

 

as Rights Agent

 

 

Rights Agreement

 

Dated as of December 16, 2004

 

 

TABLE OF CONTENTS

 

	
  Section 1.

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issue of Rights
  Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and
  Registration

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.

  	
  Exercise
  of Rights; Purchase Price; Expiration Date of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.

  	
  Cancellation
  and Destruction of Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.

  	
  Reservation
  and Availability of Capital Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Preferred Stock Record Date

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.

  	
  Certificate
  of Adjusted Purchase Price or Number of Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional
  Rights and Fractional Shares.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Rights Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  17.

  	
  Rights
  Certificate Holder Not Deemed a Stockholder

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  19.

  	
  Merger
  or Consolidation or Change of Name of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New
  Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 23.

  	
  Redemption and Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 24.

  	
  Notice of Certain Events

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Supplements and Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Determinations
  and Actions by the Board of Directors, etc

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Benefits of this Agreement

  	
   

  

 

i

 

	
  Section 30.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Descriptive Headings

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Exchange

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Rights
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  Summary of Rights to
  Purchase Preferred Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  Certificate of
  Designation of the Series C Preferred Stock

  	
   

  

 

ii

 

Rights
Agreement

 

Rights Agreement, dated as of December 16, 2004
(the “Agreement”), between Wireless
Facilities, Inc., a Delaware corporation (the “Company”),
and Wells Fargo Bank, N.A. (the ”Rights Agent”).

 

Whereas, effective December 16, 2004 (the “Rights Dividend Declaration Date”), the Board of Directors
of the Company (the “Board of Directors”)
(i) authorized and declared a dividend distribution of one Right for each
share of Common Stock, par value $0.001 per share, of the Company
(the ”Company Common Stock”) outstanding at
the Close of Business on December 27, 2004 (the ”Record Date”),
and (ii) authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant hereto) for each share of Company Common Stock
issued between the Record Date (whether originally issued or delivered from the
Company’s treasury) and, except as otherwise provided in Section 22,
the Distribution Date, each Right initially representing the right to purchase
upon the terms and subject to the conditions hereinafter set forth one Unit of
Series C Preferred Stock (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 or Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Company Common Stock then
outstanding.  Notwithstanding the
foregoing, (i) an “Acquiring Person” shall not include:  (A) the Company; (B) any Subsidiary
of the Company; (C) any employee benefit plan maintained by the Company or
any of its Subsidiaries; (D) any trustee or fiduciary with respect to such
employee benefit plan acting in such capacity or a trustee or fiduciary holding
shares of Company Common Stock for the purpose of funding any such plan or
employee benefits; (E) Massih Tayebi or Masood Tayebi together with their “immediate
families” as such term is defined in Rule 16a-1(e) promulgated under the
Exchange Act; (F) any Person if the Board of Directors determines in good
faith that such Person who would otherwise be an “Acquiring Person” became such
inadvertently (including, without limitation, because (x) such Person was
unaware that it beneficially owned a percentage of Company Common Stock that
would otherwise cause such Person to be an “Acquiring Person” or (y) such Person
was aware of the extent of its Beneficial Ownership of Company Common Stock but
had no actual knowledge of the consequences of such Beneficial Ownership under
this Agreement) and without any intention of changing or influencing control of
the Company, and if such Person does not acquire any additional shares of
Company Common Stock and as promptly as practicable divested or divests itself
of Beneficial Ownership of a sufficient number of shares of Company Common
Stock so that such Person would no longer be an “Acquiring Person;” or
(G) any Person who becomes the Beneficial Owner of 15% or more of the
then-outstanding shares of Company Common Stock as a result of the acquisition
of shares of Company Common Stock directly from the Company in one or more
transactions approved by a majority of the

 

1

 

Board of
Directors; and (ii) no Person shall be deemed an “Acquiring Person” as a
result of the acquisition of shares of Company Common Stock by the Company which,
by reducing the number of shares of Company Common Stock outstanding, increases
the proportional number of shares beneficially owned by such Person; provided, however, that if (x) a Person would become an
Acquiring Person (but for the operation of this subclause (ii)) as a
result of the acquisition of shares of Company Common Stock by the Company and
(y) after such share acquisition by the Company, such Person becomes the
Beneficial Owner of any additional shares of Company Common Stock (other than pursuant
to the grant or exercise of an option under a Company stock option plan or
pursuant to a dividend or distribution paid or made by the Company on the
outstanding shares of Company Common Stock or pursuant to a split or
subdivision of the Company Common Stock), then such Person shall be deemed an
Acquiring Person unless, upon becoming the Beneficial Owner of such additional
shares, such Person is the Beneficial Owner of less than 15% of the outstanding
shares of Company Common Stock.  Each
Person identified in subclauses (A), (B), (C), (D), (E), (F) and (G) of
this Section (1)(a) is individually an “Exempt
Person” and collectively “Exempt Persons.”

 

(b)                                 “Affiliate” and “Associate”
shall have the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), as in effect on
the date hereof.

 

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

 

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

 

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

 

(iii)                               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 or upon the satisfaction of
conditions) pursuant to any agreement, arrangement or understanding (whether or
not in writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise;

 

2

 

provided, however, that under
this paragraph (c) a Person shall not be deemed the “Beneficial
Owner” of, to have “Beneficial Ownership”
of, or to “beneficially own,” (A) securities
tendered pursuant to a tender or exchange offer made in accordance with
Exchange Act Regulations by such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (B) securities that may be issued upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities that
may be issued upon exercise of Rights from and after the occurrence of a
Triggering Event, which Rights were acquired by such Person or any of such
Person’s Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(c) 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; and further provided, however, that (x) nothing in this
paragraph (c) shall cause a Person engaged in business as an underwriter
of securities to be the “Beneficial Owner” of, to have “Beneficial Ownership
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, (y) no
decision reached, or action taken, by the Board of Directors or any committee
thereof shall cause any Person (or any Affiliate or Associate of such Person)
who is a member of the Board of Directors or such committee to be deemed, for
the purposes of this Agreement, to be a Beneficial Owner of any securities beneficially
owned by any other Person (or any Affiliate or Associate of such Person) who is
a member of the Board of Directors or any committee thereof solely by reason of
such membership of the Board of Directors or any committee thereof or
participation in the decisions or actions thereof on the part of either or both
of such Persons and (z) no Person who is an officer, director or employee
of an Exempt Person shall be deemed, solely by reason of such Person’s status
or authority as such, to be the “Beneficial Owner” of, to have “Beneficial
Ownership” of, or to “beneficially own,” any securities that are “beneficially
owned” (as defined in this paragraph (c)), including, without limitation,
in a fiduciary capacity, by an Exempt Person or by any other such officer,
director or employee of an Exempt Person.

 

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

 

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

 

(f)                                    “Common Stock” of any Person other than the Company shall
mean the capital stock of such Person with the greatest voting power, or, if
such Person shall have no capital stock, the equity securities or other equity
interest having power to control or direct the management of such Person.

 

(g)                                 “Company” has the meaning given it in the first paragraph of
this Agreement, and also means a Principal Party to the extent provided in Section 13(a).

 

(h)                                 “Company Common Stock” has the meaning set forth in the
Whereas Clause.

 

3

 

(i)                                     “Person” shall mean any individual, partnership, firm,
limited liability company, corporation, association, trust, unincorporated
organization or other entity, as well as any syndicate or group deemed to be a
person under Section 14(d)(2) of the Exchange Act as in effect on the date
hereof.

 

(j)                                     “Preferred Stock” shall mean the Series C Preferred Stock,
par value $0.001 per share, of the Company having the voting powers,
designation, preferences and relative, participating, optional or other special
rights and qualifications, limitations and restrictions described in the
Certificate of Designation set forth as Exhibit C hereto and as
amended from time to time.

 

(k)                                  “Record Date” has the meaning set forth in the Whereas
Clause.

 

(l)                                     “Right” has the meaning set forth in the Whereas Clause.

 

(m)                               “Rights Dividend Declaration Date” has the meaning set forth
in the Whereas Clause.

 

(n)                                 “Stock Acquisition Date” shall mean the first date of public
announcement (including, without limitation, the filing of any report, or any
amendment to any report, pursuant to Section 13(d) of the Exchange
Act (or any comparable or successor report)) by the Company or an Acquiring
Person that an Acquiring Person has become such; provided,
however, that if such Person is determined not to have become an
Acquiring Person pursuant to Section 1(a)(i)(F) hereof, then no Stock
Acquisition Date shall be deemed to have occurred.

 

(o)                                 “Subsidiary” shall mean, with reference to any Person, any
other Person of which an amount of voting securities or equity interests
sufficient to elect at least a majority of the directors or equivalent
governing body of such other Person is beneficially owned, directly or
indirectly, by such Person, or any other Person otherwise controlled by such
first-mentioned Person.

 

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

 

In
addition, the following terms are defined in the Sections indicated below:

 

	
  Defined Term

  	
   

  	
  Section Number

  
	
   

  	
   

  	
   

  
	
  Adjustment Shares

  	
   

  	
   

  	
  11(a)(ii)

  
	
  Common stock equivalents

  	
   

  	
   

  	
  11(a)(iii)

  
	
  Current Value

  	
   

  	
   

  	
  11(a)(iii)

  
	
  Depositary Agent

  	
   

  	
   

  	
  7(c)

  
	
  Distribution Date

  	
   

  	
   

  	
  3(a)

  
	
  Equivalent Preferred Stock

  	
   

  	
   

  	
  11(b)

  
	
  Exchange Act

  	
   

  	
   

  	
  1(b)

  
	
  Exchange Act Regulations

  	
   

  	
   

  	
  1(c)

  
	
  Exchange Ratio

  	
   

  	
   

  	
  34(a)

  
	
  Exempt Person

  	
   

  	
   

  	
  1(a)

  

 

4

 

	
  Defined Term

  	
   

  	
  Section Number

  
	
   

  	
   

  	
   

  
	
  Expiration Date

  	
   

  	
   

  	
  7(a)

  
	
  Final Expiration Date

  	
   

  	
   

  	
  7(a)

  
	
  Nasdaq

  	
   

  	
   

  	
  11(d)(i)

  
	
  Original Rights

  	
   

  	
   

  	
  1(c)

  
	
  Purchase Price

  	
   

  	
   

  	
  7(b)

  
	
  Redemption Price

  	
   

  	
   

  	
  23(a)

  
	
  Registered Common Stock

  	
   

  	
   

  	
  13(b)(ii)

  
	
  Registration Date

  	
   

  	
   

  	
  9(c)

  
	
  Registration Statement

  	
   

  	
   

  	
  9(c)

  
	
  Rights Certificates

  	
   

  	
   

  	
  3(a)

  
	
  Section 11(a)(ii) Event

  	
   

  	
   

  	
  11(a)(ii)(C)

  
	
  Section 11(a)(iii) Trigger Date

  	
   

  	
   

  	
  11(a)(iii)

  
	
  Section 13 Event

  	
   

  	
   

  	
  13(a)

  
	
  Securities Act

  	
   

  	
   

  	
  9(c)

  
	
  Spread

  	
   

  	
   

  	
  11(a)(iii)

  
	
  Summary of Rights

  	
   

  	
   

  	
  3(b)

  
	
  Trading Day

  	
   

  	
   

  	
  11(d)(i)

  
	
  Unit

  	
   

  	
   

  	
  7(b)

  

 

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 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.                                            Issue of Rights Certificates.

 

(a)                                  Until
the earlier of (i) the Close of Business on the tenth Business Day after
the Stock Acquisition Date, and (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of a majority
of the Board of Directors prior to the occurrence of a Section 11(a)(ii)
Event) after the date that a tender or exchange offer by any Person (other than
an Exempt Person) is first published or sent or given within the meaning of
Rule 14d-4(a) of the Exchange Act Regulations or any successor rule, if
upon consummation thereof such Person would be an Acquiring Person (including,
in the case of both clause (i) and (ii), any such date which is after the
date of this Agreement and prior to the issuance of the Rights) (the earlier of
(i) and (ii) above being the “Distribution Date”):

 

(x)                                 the
Rights will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for shares of Company Common
Stock registered in the names of the holders of shares of Company Common Stock
as of and subsequent to the Record Date (which certificates for shares of
Company 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 Company Common Stock including a transfer to the Company;

 

5

 

provided,
however, that if a tender or exchange offer is terminated
prior to the occurrence of a Distribution Date, then no Distribution Date shall
occur as a result of such tender or exchange offer.  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 shares of Company 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 A hereto (the “Rights Certificates”),
evidencing one Right for each share of Company Common Stock so held, subject to
adjustment as provided herein.

 

In the
event that an adjustment in the number of Rights per share of Company Common
Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company may make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Rights.  As of and after the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates.

 

(b)                                 As
promptly as practicable following the Record Date, the Company will send a copy
of a Summary of Rights to Purchase Preferred Stock, in substantially the form
attached hereto as Exhibit B (the “Summary of
Rights”), by first-class, postage prepaid mail, to each record
holder of shares of Company Common Stock as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the
Company.  With respect to certificates
for Company Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates registered
in the names of the holders thereof together with the Summary of Rights.  Until the Distribution Date (or, if earlier,
the Expiration Date), the surrender for transfer of any such certificate for
Company Common Stock outstanding as of the Record Date, with or without a copy
of the Summary of Rights, shall also constitute the transfer of the Rights
associated with the Company Common Stock represented thereby.

 

(c)                                  Rights
shall, without any further action, be issued in respect of all shares of
Company Common Stock which are issued (including any shares of Company Common
Stock held in treasury) after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date. 
Certificates representing such shares of Company Common Stock, issued
after the Record Date 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 Wireless Facilities, Inc. (the “Company”) and Wells Fargo Bank, N.A. (the “Rights Agent”) dated as of December 16, 2004, as
amended from time to time (the “Rights Agreement”),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal office of the stock transfer administration
office 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

 

6

 

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 certificates representing shares of
Company Common Stock that bear the foregoing legend, until the earlier of the
Distribution Date and the Expiration Date, the Rights associated with the
shares of Company Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of the shares of
Company 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 shares of Company Common Stock
represented by such certificates.

 

(d)                                 In
the event that the Company purchases or acquires any shares of Company Common
Stock after the Record Date but prior to the Distribution Date, any Rights
associated with such shares of Company Common Stock shall be deemed canceled
and returned so that the Company shall not be entitled to exercise any Rights
associated with the shares of Company Common Stock that are no longer outstanding.

 

Section
4.                                            Form of Rights Certificates.

 

(a)                                  The
Rights Certificates (and the forms of election to purchase and of assignment
and the certificate to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A 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 any rule or regulation thereunder or with any rule
or regulation of any stock exchange or automated quotation system on which the
Rights may from time to time be listed or to conform to usage.  Subject to the provisions of 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 Units of Preferred Stock
as shall be set forth therein at the price set forth therein, but the amount
and type of securities, cash or other assets that may be acquired 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) or Section 22
hereof that represents Rights which are null and void pursuant to Section
7(e) of this Agreement 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 owed 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).

 

7

 

Accordingly, this Right Certificate and the Rights
represented hereby are null and void.

 

The provisions of Section
7(e) hereof shall be operative whether or not the foregoing legend is
contained on any such Right Certificate.

 

Section
5.                                            Countersignature and Registration.

 

(a)                                  Rights
Certificates shall be executed on behalf of the Company by its Chairman, its
Chief Executive Officer, its President or one of its Vice Presidents under its
corporate seal reproduced thereon attested by its Secretary, its Treasurer or
one of its Assistant Secretaries.  The
signature of any of these officers on the Rights Certificates may be manual or
facsimile.  Rights Certificates bearing
the manual or facsimile signatures of the individuals who were at any time the
proper officers of the Company shall bind the Company, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at
the date of such Rights Certificates.  No
Rights Certificate shall be entitled to any benefit under this Agreement or be
valid for any purpose unless there appears on such Rights Certificate a
countersignature duly executed by the Rights Agent by manual signature of an
authorized signatory, and such countersignature upon any Rights Certificate
shall be conclusive evidence, and the only evidence, that such Rights
Certificate has been duly countersigned as required hereunder.

 

(b)                                 Following
the Distribution Date, the Rights Agent will keep or cause to be kept, at its
office designated 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
name and address of each holder of the Rights Certificates, the number of
Rights evidenced on its face by each Rights Certificate and the date of each
Rights Certificate.

 

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

 

(a)                                  Subject
to the provisions of Sections 4, 7(e) and 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 may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of Units of Preferred Stock (or, following a Triggering Event,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled 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 office 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 executed the certificate set forth 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) of the Rights represented by such Rights Certificate or
Affiliates or

 

8

 

Associates thereof
as the Company shall reasonably request; whereupon the Rights Agent shall,
subject to the provisions of Section 4(b), Section 7(e),
Section 14 and Section 34 hereof, countersign and deliver to
the Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested.  The
Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.

 

(b)                                 Subject
to Section 7(e) hereof, if a Rights Certificate shall be
mutilated, lost, stolen or destroyed, upon request by the registered holder of
the Rights represented thereby and upon payment to the Company and the Rights
Agent of all reasonable expenses incident thereto, there shall be issued, in
exchange for and upon cancellation of the mutilated Rights Certificate, or in
substitution for the lost, stolen or destroyed Rights Certificate, a new Rights
Certificate, in substantially the form of the prior Rights Certificate, of like
tenor and representing the equivalent number of Rights, but, in the case of
loss, theft or destruction, only upon receipt of evidence satisfactory to the
Company and the Rights Agent of such loss, theft or destruction of such Rights
Certificate and, if requested by the Company or the Rights Agent, indemnity
also satisfactory to it.

 

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

 

(a)                                  Prior
to the earlier of (i) the Close of Business on the tenth anniversary
hereof (the “Final Expiration Date”),
(ii) the time at which the Rights are redeemed as provided in Section 23
hereof, (iii) the time at which the Rights are exchanged as provided in Section 34
hereof, and (iv) the closing of any merger or other acquisition
transaction involving the Company pursuant to an agreement of the type
described in Section 13(f) hereof, at which time the Rights are
deemed terminated (the earlier of (i), (ii), (iii) and (iv) being the “Expiration Date”), the registered holder of any Rights
Certificate may, subject to the provisions of Sections 7(e), 7(f),
9(c),11(a) and 23 hereof, exercise the Rights evidenced thereby, in
whole or in part, at any time after the Distribution Date upon surrender of the
Rights Certificate, with the form of election to purchase and the certificate
on the reverse side thereof duly executed, to the Rights Agent at the office of
the Rights Agent designated for such purpose, together with payment of the
aggregate Purchase Price (as hereinafter defined) for the number of Units of Preferred
Stock (or, following a Triggering Event, other securities, cash or other
assets, as the case may be) for which such surrendered Rights are then
exercisable.

 

(b)                                 The
purchase price for each one one-hundredth (1/100) of a share (each such one
one-hundredth (1/100) of a share being a “Unit”) of
Preferred Stock upon exercise of Rights shall be $54.00, subject to adjustment
from time to time as provided in Sections 11 and 13(a)
hereof (such purchase price, as so adjusted, being the “Purchase
Price”), and shall be payable in accordance with paragraph (c)
below.

 

(c)                                  As
promptly as practicable following the occurrence of the Distribution Date, the
Company shall deposit with the Rights Agent or other corporation in good
standing organized under the laws of the United States or any State of the
United States, which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by
federal or state authority (such institution being the “Depositary
Agent”), certificates representing the shares of Preferred Stock
that may be acquired upon

 

9

 

exercise of the
Rights and shall cause such Depositary Agent to enter into an agreement
pursuant to which the Depositary Agent shall issue receipts representing
interests in the shares of Preferred Stock so deposited.  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 for the Units of Preferred Stock (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) to be purchased thereby as set forth below and an amount equal to
any applicable transfer tax or evidence satisfactory to the Company of payment
of such tax, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) requisition from the Depositary Agent depositary
receipts representing such number of Units of Preferred Stock as are to be
purchased 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 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.  In the event that the Company is obligated to
issue Company Common Stock or other securities 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 Company Common Stock,
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate. 
The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) may be made in cash or by
certified or bank check or money order payable to the order of the Company.

 

(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 any 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) which becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and which receives such Rights pursuant
to either (A) a transfer (whether or not for consideration) from the
Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or any such Associate or Affiliate) or to
any Person with whom the Acquiring Person (or such Associate or Affiliate) has
any continuing agreement, arrangement or understanding regarding the
transferred Rights, shares of Company Common Stock or the Company or (B) a
transfer which the Board of Directors has determined to be part of a plan, arrangement
or understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall be null and void without any further action,
and no holder of such Rights shall have any rights whatsoever with respect to
such Rights, whether under any provision of this Agreement or otherwise.  The Company shall use all reasonable efforts
to ensure that the provisions of this Section 7(e) hereof are
complied with, but shall have no

 

10

 

liability to any
holder of Rights or any other Person as a result of its failure to make any
determination under this Section 7(e) with respect to an Acquiring
Person or its Affiliates, Associates or transferees.

 

(f)                                    Notwithstanding
anything in this Agreement or any Rights Certificate 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 by such registered holder unless such registered holder shall have
(i) completed and executed the certificate following 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) of the Rights
represented by such Rights Certificate 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
this Agreement.  The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any Rights Certificates acquired by the
Company otherwise than upon the exercise thereof.  The Rights Agent shall retain all cancelled
Rights Certificates, and may, at the written request of the Company and after
or in accordance with any Securities and Exchange Commission retention and
destruction requirements, destroy such cancelled Rights Certificates, and in
such case shall deliver a certificate of destruction thereof to the Company
upon request.

 

Section
9.                                            Reservation and Availability of
Capital Stock.

 

(a)                                  The
Company shall at all times prior to the Expiration Date use its best efforts to
cause to be reserved and kept available, out of its authorized and unissued
shares of preferred stock (and, following the occurrence of a Section 11(a)(ii)
Event, out of its authorized but unissued shares of Company Common Stock and/or
other securities or out of its authorized and issued shares held in its
treasury), the number of shares of Preferred Stock (and, following a Section
11(a)(ii) Event, Company Common Stock and/or other securities) that, as
provided in this Agreement, will be sufficient to permit the exercise in full
of all outstanding Rights.  Upon the
occurrence of any events resulting in an increase in the aggregate number of
shares of Preferred Stock (or other equity securities of the Company) issuable
upon exercise of all outstanding Rights above the number then reserved, the
Company shall use its best efforts to make appropriate increases in the number
of shares so reserved to the extent practicable.

 

(b)                                 If
the shares of Preferred Stock (and, following a Section 11(a)(ii) Event,
Company Common Stock and/or other securities) to be issued and delivered upon
the exercise of the Rights may be listed on any national securities exchange or
automated quotation system, the Company shall use its best efforts to cause
during the period from the Distribution Date through the Expiration Date all
securities reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.

 

11

 

(c)                                  The
Company shall use its best efforts (i) as soon as practicable following
the earliest date after the occurrence of a Section 11(a)(ii) Event and a
determination by the Company in accordance with Section 11(a)(iii)
hereof of the consideration to be delivered by the Company upon exercise of the
Rights or, if so required by law, as soon as practicable following the
Distribution Date (such date being the “Registration Date”),
to file a registration statement on an appropriate form under the Securities
Act of 1933, as amended (the “Securities Act”),
with respect to the securities that may be acquired upon exercise of the Rights
(the “Registration Statement”), (ii) to
cause the Registration Statement to become effective as soon as practicable
after such filing, (iii) to cause the Registration Statement to continue
to be effective (and to include a prospectus complying with the requirements of
the Securities Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for the securities covered by the Registration
Statement, and (B) the Expiration Date and (iv) to take as soon as
practicable following the Registration Date such action as may be required to
ensure that any acquisition of securities upon exercise of the Rights complies
with any applicable state securities or “blue sky” laws.  The Company may temporarily suspend, for a
period of time not to exceed one hundred twenty (120) days after the
Registration Date, the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective.  Upon any such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. 
In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective.  Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction
if the requisite qualification in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted under applicable law or a
registration statement shall not have been declared effective.

 

(d)                                 The
Company shall take such action as may be necessary to ensure that all shares of
Preferred Stock (and, following the occurrence of a Triggering Event, any other
securities that may be delivered upon exercise of Rights) shall be, at the time
of delivery of the certificates or depositary receipts for such securities (subject
to payment of the Purchase Price), duly and validly authorized and issued and
fully paid and non-assessable.

 

(e)                                  The
Company shall pay any documentary, stamp or transfer tax imposed in connection
with the issuance or delivery of the Rights Certificates or upon the exercise
of Rights; provided, however, the Company shall not
be required to pay any such tax imposed in connection with the issuance or
delivery of Units of Preferred Stock, or any certificates or depositary
receipts for such Units of Preferred Stock (or, following the occurrence of a
Triggering Event, any other securities, cash or assets, as the case may be) to
any Person other than the registered holder of the Rights Certificates
evidencing the Rights surrendered for exercise. 
The Company shall not be required to issue or deliver any certificates
or depositary receipts for Units of Preferred Stock (or, following the
occurrence of a Triggering Event, any other securities, cash or assets, as the
case may be) to, or in a name other than that of, the registered holder upon
the exercise of any Rights until any such tax shall have been paid (any such
tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company’s satisfaction that
no such tax is due.

 

12

 

Section
10.                                      Preferred Stock Record Date.  Each Person in whose name any certificate or
depositary receipt for Units of Preferred Stock (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 the Units of Preferred Stock (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 any 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 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 securities on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or other
securities, as the case may be) transfer books of the Company are open; and further provided, however, that if delivery of Units of
Preferred Stock (or other securities) is delayed pursuant to Section 9(c)
hereof, such Persons shall be deemed to have become the record holders of such
Units of Preferred Stock (or other securities) only when such Units first
become deliverable.  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 securities 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
securities purchasable upon exercise of 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 for herein, including 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 upon exercise
of the Rights, 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, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon
the exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon the exercise of one Right.  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.

 

13

 

(ii)                                  In
the event any Person alone or together with its Affiliates and Associates,
shall become an Acquiring Person, other than pursuant to any transaction set
forth in Section 13(a) hereof, then, immediately upon the
occurrence of such event (a “Section 11(a)(ii)
Event”), proper provision shall be made so that each holder of a
Right (except as otherwise provided herein, including Section 7(e)
hereof) shall, subject to Section 34 hereof, thereafter have the
right to receive, upon exercise of such Right at the then-current Purchase
Price in accordance with the terms of this Agreement, in lieu of the number of
Units of Preferred Stock for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event (whether or not such
Right was then exercisable), such number of Units of Preferred Stock as shall
equal the result obtained:

 

(A)                              multiplying
the then-current Purchase Price by the then-number of Units of Preferred Stock
for which a Right was exercisable immediately prior to the first occurrence of
a Section 11(a)(ii) Event (whether or not such Right was then exercisable)
(such product thereafter being, for all purposes of this Agreement, other than Section 13
hereof, the “Purchase Price”), and

 

(B)                                dividing
that product by fifty percent (50%) of the current market price (determined
pursuant to Section 11(d) hereof) per Unit of Preferred Stock on
the date of such first occurrence (such Units of Preferred Stock being the “Adjustment Shares”);

 

provided, however, that the
Purchase Price and the number of Units of Preferred Stock so receivable upon
exercise of a Right shall, following the Section 11(a)(ii) Event, be
subject to further adjustment as appropriate in accordance with this Section 11.  Notwithstanding the foregoing, the Rights
shall not be exercisable pursuant to this Section 11(a)(ii) until
the time period during which the Rights may be redeemed pursuant to Section 23
hereof shall have expired.

 

(iii)                               The
Company, by the vote of a majority of the Board of Directors, may at its option
substitute for a Unit of Preferred Stock issuable upon the exercise of Rights
in accordance with the foregoing subparagraph (ii), shares of Company
Common Stock or fractions thereof having a current market price (as determined
by Section 11(d) hereof) equal to the current market price of a
Unit of Preferred Stock on the date of the Section 11(a)(ii) Event.  In the event that the number of shares of
Preferred Stock which are authorized by the Company’s Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii) of
this Section 11(a), the Company, by the vote of a majority of the
Board of Directors, shall, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party or by which
it is bound:

 

(A)                              determine
the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the “Current Value”)
over (2) the Purchase Price (such excess being the “Spread”),
and

 

(B)                                with
respect to each Right (other than Rights which have become void pursuant to Section 7(e)),
make adequate provision to substitute, in whole or in part, for such Adjustment
Shares, upon exercise of a Right and payment of the applicable

 

14

 

Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) shares of Company Common Stock or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock (such other shares being “common stock
equivalents”)), (4) debt securities of the Company,
(5) other assets, or (6) any combination of the foregoing, having an
aggregate value which, when added to the value of the Units of Preferred Stock
actually issued upon exercise of such Right, shall have an aggregate value
equal to the Current Value (less the amount of any reduction in such Purchase
Price), where such aggregate value has been determined by a majority of the
Board of Directors, after receiving advice from a nationally recognized
investment banking firm;

 

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)(iii) Trigger Date”), then, subject to Section 34
hereof, the Company shall be obligated (to the extent permitted by applicable
law and any material agreements then in effect to which the Company is a party
or by which it is bound) to deliver, upon the surrender for exercise of a Right
and without requiring payment of the Purchase Price, Units of Preferred Stock
(to the extent available) and then, if necessary, shares (or fractions of
shares, at the discretion of the Board of Directors) of Company Common Stock,
cash or a combination thereof, which Units of Preferred Stock, shares (or
fractions of shares) of Company Common Stock and/or cash shall have an
aggregate value equal to the Spread; further provided, however,
that if the Company is unable to comply with the immediately foregoing
provision within such thirty-day period, then the Company shall (to the extent
permitted by law) take all such action as may be necessary to comply with such
provision, including the calling of a meeting of stockholders to authorize
additional shares of Preferred Stock or Company Common Stock.  To the extent that the Company determines
that some action need be taken pursuant to the first sentence of this Section 11(a)(iii),
the Company shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights.  For purposes of this Section 11(a)(iii),
the value of a Unit of Preferred Stock or share of Company Common Stock shall
be the current market price (as determined pursuant to Section 11(d)
hereof) per Unit of Preferred Stock or share of Company Common Stock, as the
case may be, on the Section 11(a)(iii) Trigger Date and the value of any
common stock equivalent shall be deemed to be the same value as a Unit of
Preferred 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) shares of Preferred Stock (or shares having substantially the same
rights, privileges and preferences as 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 l1(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:

 

15

 

(i)                                     the
Purchase Price in effect immediately prior to such record date by

 

(ii)                                  a
fraction, (A) the numerator of which shall be the sum of 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 (B) the
denominator of which shall be the sum of the number of shares of Preferred
Stock outstanding on such record date plus (B) 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);

 

provided,
however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon the exercise of one
Right.  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 a majority of the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. 
Shares of Preferred Stock owned by or held for the account of the
Company or any Subsidiary shall not be deemed outstanding for the purpose of
any such computation.  Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

 

(c)                                  In
case the Company shall fix a record date for a distribution to all holders of
shares of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend paid out of funds legally available therefor), assets
(other than a dividend payable in shares of Preferred Stock, but including any
dividend payable in stock other than Preferred Stock) or subscription rights,
options 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:

 

(i)                                     the
Purchase Price in effect immediately prior to such record date by

 

(ii)                                  a
fraction, (A) 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 a majority of the Board of Directors), whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holder of the Rights) of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights, options or
warrants distributable in respect of a share of Preferred Stock and
(B) the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per share of Preferred
Stock;

 

16

 

provided,
however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon the exercise of one
Right.  Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall 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, the “current market price” per share
of Company Common Stock or Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such shares for the ten (10)
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however,
if prior to the expiration of such requisite ten (10) Trading Day period the
issuer announces either (A) a dividend or distribution on such shares
payable in such shares or securities convertible into such shares (other than
the Rights), or (B) any subdivision, combination or reclassification of
such shares, then, following the ex-dividend date for such dividend or the
record date for such subdivision, combination or reclassification, as the case
may be, the “current market price” shall be properly adjusted to take into
account such event.  The closing price
for each day shall be, if the shares are listed and admitted to trading on a
national securities exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such shares are listed or admitted to
trading or, if such shares 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 National Market (“Nasdaq”) or
such other system then in use, or, if on any such date such shares 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 such
shares selected by a majority of the Board of Directors.  If on any such date no market maker is making
a market in such shares, or if such shares are 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 a majority of the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. 
The term “Trading Day” shall mean, if such
shares are listed or admitted to trading on any national securities exchange, a
day on which the principal national securities exchange on which such shares
are listed or admitted to trading is open for the transaction of business or,
if such shares are not so listed or admitted, a Business Day.

 

(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 Company Common Stock in clause (i) of this Section 11(d)
(other than the penultimate 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
(A) 100 (as such amount may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to Company
Common Stock occurring after the date of this Agreement) multiplied by
(B) the current market price per share of Company Common Stock.  If neither Company Common Stock nor 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

 

17

 

determined in good
faith by a majority of the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. 
For all purposes of this Agreement, the “current market price” of a Unit
of Preferred Stock shall be equal to (A) the “current market price” of one
share of Preferred Stock divided by (B) 100.

 

(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 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Section 11 shall be made to the nearest cent or to the
nearest one one-hundredth (1/100) of a share of Company Common Stock or Common
Stock or other share or one ten-thousandth (1/10,000) 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 years from the date of the transaction which mandates such
adjustment and (ii) the Expiration Date.

 

(f)                                    If
as a result of an adjustment made pursuant to Section 11(a)(ii) or Section
13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a),
(b), (c), (d), (e), (g), (h), (i), (j), (k), (l) 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 Units of Preferred Stock (or other
securities or amount of cash or combination thereof) that may be acquired 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 Units of
Preferred Stock (calculated to the nearest one ten-thousandth (1/10,000)
of a Unit) obtained by (i) multiplying (x) the number of Units of
Preferred Stock 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
Units of Preferred Stock that may be acquired 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 Units of Preferred Stock for which a Right was exercisable
immediately prior to such

 

18

 

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 (1/10,000)) obtained by dividing
(x) the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by (y) 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 days later than the date of such public announcement.  If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment.  Rights Certificates to be so
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 Units 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 Unit and the number of Units of Preferred Stock 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-par value of the number of Units 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 such fully paid and non-assessable number of Units 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 of that
number of Units of Preferred Stock and shares of other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of Units of Preferred Stock and shares of other capital stock or
other securities, assets or cash 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.

 

19

 

(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 a majority of the Board of
Directors shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Stock,
(ii) issuance wholly for cash of any shares of Preferred Stock at less
than the current market price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends, or
(v) issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock, shall not be
taxable to such holders or shall reduce the taxes payable by such holders.

 

(n)                                 The
Company shall not, at any time after the Distribution Date,
(i) consolidate with any other Person (other than a wholly owned
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 wholly
owned 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 transactions, assets or earning
power aggregating more than fifty percent (50%) of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if
(x) at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding
or agreements in effect which would 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 Person which constitutes, or would constitute, the “Principal Party”
for purposes of Section 13(a) hereof shall have distributed or
otherwise transferred to its stockholders or other persons holding an equity
interest in such Person Rights previously owned by such Person or any of its
Affiliates and Associates; provided, however,
this Section 11(n) shall not affect the ability of any wholly owned
Subsidiary of the Company to consolidate with, merge with or into, or sell or
transfer assets or earning power to, any other wholly owned Subsidiary of the
Company.

 

(o)                                 After
the Distribution Date, the Company shall not, except as permitted by Section 23,
Section 26 or Section 34 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 Company Common Stock payable in shares of Company Common Stock,
(ii) subdivide the outstanding shares of Company Common Stock,
(iii) combine the outstanding shares of Company Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock in
a reclassification of Company Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), the number of Rights associated with each
share of Company Common Stock then outstanding, or issued or delivered
thereafter prior to the Distribution Date or in accordance with Section 22
hereof, shall be proportionately adjusted so that the number of Rights
thereafter associated with each share of

 

20

 

Company Common
Stock following any such event shall equal the result obtained by multiplying
the number of Rights associated with each share of Company Common Stock
immediately prior to such event by a fraction (y) the numerator of which
shall be the total number of shares of Company Common Stock outstanding
immediately prior to the occurrence of the event (z) and the denominator
of which shall be the total number of shares of Company Common Stock
outstanding immediately following the occurrence of such event.

 

Section
12.                                      Certificate of Adjusted Purchase
Price or Number of Shares.  Whenever
an adjustment is made as provided in Section 11 or Section 13
hereof, 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 Company Common Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Company Common Stock) in accordance with Section 25
hereof.  Notwithstanding the foregoing
sentence, the failure of the Company to make such certification or give such
notice shall not affect the validity of such adjustment or the force or effect
of the requirement for such adjustment. 
The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any such adjustment unless and until it shall have received
such certificate.

 

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

 

(a)                                  In
the event that, following the first occurrence of a Section 11(a)(ii)
Event, directly or indirectly, either (x) the Company shall consolidate
with, or merge with and into, any other Person (other than a wholly owned
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 wholly owned
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 Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or 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)
to any Person or Persons (other than the Company or any of its wholly owned
Subsidiaries in one or more transactions each of which complies with Section 11(o)
hereof), in one or more transactions, assets or earning power aggregating fifty
percent (50%) or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) (any such event being a “Section 13
Event”), then, and in each such case, proper provision shall be made
so that:

 

(i)                                     each
holder of a Right (other than Rights which have become void 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 this Agreement and in
lieu of Units of Preferred Stock or shares of Company Common Stock, such number
of validly authorized and issued, fully paid, non-assessable and freely
tradable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), which shares shall not be subject to any liens,

 

21

 

encumbrances,
rights of call or first refusal, transfer restrictions or other adverse claims,
as shall be equal to the result obtained by (1) multiplying (A) the
then-current Purchase Price by (B) the number of Units 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 Units for which a Right would be exercisable hereunder but for the
occurrence of such Section 11(a)(ii) Event by the Purchase Price which
would be in effect hereunder but for such first occurrence) and (2) dividing
that product (which, following the first occurrence of a Section 13 Event,
shall be the “Purchase Price” for all purposes of this Agreement) by fifty
percent (50%) of the current market price (determined pursuant to Section 11(d)
hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; provided, however,
that the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii)
hereof) and the number of shares of Common Stock of such Principal Party so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(f) hereof to reflect any
events occurring in respect of the Common Stock of such Principal Party after
the occurrence 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 in
all respects;

 

(iv)                              such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock in accordance
with Section 9 hereof) in connection with the consummation of any
such transaction as may be necessary to assure that the provisions of this
Agreement 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;

 

(v)                                 upon
the subsequent occurrence of any merger, consolidation, sale of all or
substantially all of the assets, recapitalization, reclassification of shares,
reorganization or other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to receive, upon
exercise of a Right and payment of the Purchase Price, such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had it, at the time of such transaction, owned the shares of Common
Stock of the Principal Party purchasable upon the exercise of a Right, and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property; and

 

(vi)                              the
provisions of Section 11(a)(ii) hereof shall be of no further
effect following the first occurrence of any Section 13 Event.

 

22

 

(b)                                 “Principal Party” shall mean:

 

(i)                                     in
the case of any transaction described in clause (x) or (y) of the first
sentence of Section 13(a), (A) the Person that is the issuer
of any securities into which shares of Company Common Stock are converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer of Common Stock that has the highest aggregate current market price
(determined pursuant to Section 11(d) hereof) and (B) if no
securities are so issued, the Person that is the other party to such merger or
consolidation, or, if there is more than one such Person, the Person the Common
Stock of which has the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and

 

(ii)                                  in
the case of any transaction described in clause (z) of the first sentence
of Section 13(a) hereof, the Person that is the party receiving the
largest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest
aggregate current market price (determined pursuant to Section 11(d)
hereof); 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-month period registered under
Section 12 of the Exchange Act (“Registered Common Stock”),
or such Person is not a corporation, and such Person is a direct or indirect
Subsidiary of another Person that has Registered Common Stock outstanding, “Principal
Party” shall refer to such other Person; (2) if the Common Stock of such
Person is not Registered Common Stock or such Person is not a corporation, and
such Person is a direct or indirect Subsidiary of another Person but is not a
direct or indirect Subsidiary of another Person which has Registered Common
Stock outstanding, “Principal Party” shall refer to the ultimate parent entity
of such first-mentioned Person; (3) if the Common Stock of such Person is
not Registered Common Stock or such Person is not a corporation, and such
Person is directly or indirectly controlled by more than one Person, and one or
more of such other Persons has Registered Common Stock outstanding, “Principal
Party” shall refer to whichever of such other Persons is the issuer of the
Registered Common Stock having the highest aggregate current market price
(determined pursuant to Section 11(d) hereof); and (4) if the
Common Stock of such Person is not Registered Common Stock or such Person is
not a corporation, and such Person is directly or indirectly controlled by more
than one Person, and none of such other Persons have Registered Common Stock
outstanding, “Principal Party” shall refer to whichever ultimate parent entity
is the corporation having the greatest stockholders equity or, if no such
ultimate parent entity is a corporation, shall refer to whichever ultimate
parent entity is the entity having the greatest net assets.

 

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

 

(i)                                     (A) file
on an appropriate form, as soon as practicable following the execution of such
agreement, a registration statement under the Securities Act with respect to

 

23

 

the Common Stock that may
be acquired upon exercise of the Rights, (B) cause such registration
statement to remain effective (and to include a prospectus complying with the
requirements of the Securities Act) until the Expiration Date, and (C) as
soon as practicable following the execution of such agreement, take such action
as may be required to assure that any acquisition of such Common Stock upon the
exercise of the Rights complies with any applicable state securities or “blue
sky” laws; and

 

(ii)                                  as
soon as practicable following the execution of such agreement, 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.

 

(d)                                 In
case the Principal Party which is to be a party to a transaction referred to in
this Section 13 has a provision in any of its authorized securities
or in its Certificate of Incorporation or Bylaws or other instrument governing
its corporate affairs, which provision would have the effect of
(i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section 13,
shares of Common Stock of such Principal Party at less than the then-current
market price per share (determined pursuant to Section 11(d)
hereof) or securities exercisable for, or convertible into, Common Stock of
such Principal Party at less than such then-current market price (other than to
holders of Rights pursuant to this Section 13) or
(ii) providing for any special payment, tax or similar provisions in
connection with the issuance of the Common Stock of such Principal Party
pursuant to the provisions of this Section 13; then, in such event,
the Company shall not consummate any such transaction unless prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been cancelled, waived or amended, or that
the authorized securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.

 

(e)                                  The
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 and for the securities described in Section 13(a).

 

(f)                                    Notwithstanding
anything contained herein to the contrary, in the event of any merger or other
acquisition transaction involving the Company pursuant to a merger or other
acquisition agreement between the Company and any Person (or one or more of
such Person’s Affiliates or Associates), which agreement has been approved by
the Board of Directors prior to any Person becoming an Acquiring Person, this
Agreement and the rights of holders of Rights hereunder shall be terminated in
accordance with Section 7(a) hereof.

 

Section 14.                                      Fractional Rights and Fractional
Shares.

 

(a)                                  The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights.  In lieu of issuing such fractional Rights,
there shall be paid to the Persons to which such fractional Rights would
otherwise be

 

24

 

issuable an amount in
cash equal to such fraction of the market value of a whole Right.  For purposes of this Section 14(a),
the 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, if the Rights are listed or
admitted to trading on a national securities 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 a majority of the Board
of Directors.  If on any such date no
such market maker is making a market in the Rights, the fair value of the
Rights on such date as determined in good faith by a majority of the Board of
Directors shall be used and such determination shall be described in a
statement filed with the Rights Agent and the holders of the Rights.

 

(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-hundredth (1/100)
of a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence such fractional shares of Preferred Stock (other
than fractions which are integral multiples of one one-hundredth (1/100) of a
share of Preferred Stock); provided, however,
that in lieu of fractions of shares of Preferred Stock which are integral
multiples of one one-hundredth (1/100) of a share of Preferred Stock, the
Company may provide for the issuance of depositary receipts pursuant to Section 7(c)
hereof.  In lieu of such fractional
shares of Preferred Stock that are not integral multiples of one one-hundredth
(1/100) of a share, 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 then-current market price of a share
of Preferred Stock on the day of exercise (as determined in accordance with Section 14(a)
for the Trading Day immediately prior to the date of such exercise or
exchange).

 

(c)                                  The
Company shall not be required to issue fractions of shares of Company Common
Stock or to distribute certificates which evidence fractional shares of Company
Common Stock upon the exercise or exchange of Rights.  In lieu of such fractional shares, the
Company shall pay to the registered holders of the Rights Certificates with
regard to which such fractional shares of Company Common Stock would otherwise
be issuable an amount in cash equal to the same fraction of the current market
price of a whole share of Company Common Stock on the day of exercise (as
determined in accordance with Section 14(a) for the Trading Day
immediately prior to the date of such exercise or exchange).

 

(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, other than rights of action vested in the Rights Agent pursuant to Section 18
hereof, are vested in the respective registered holders of the Rights Certificates
(and, prior to the Distribution Date, the

 

25

 

registered holders of
certificates representing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate representing shares of Company 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 a certificate representing shares of Company 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 or
any other Person to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement.  Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged that
the holders of Rights would not have an adequate remedy at law for any breach
of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this
Agreement.

 

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

 

(a)                                  prior
to the Distribution Date, the Rights will be transferable only in connection
with the transfer of Company 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 office of the Rights
Agent designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates duly
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 Company 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 Company Common Stock certificate
made by any Person other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 7(e) hereof, shall be affected by any notice to
the contrary; and

 

(d)                                 notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or any 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, judgment 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 promptly as practicable.

 

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

 

26

 

purpose to be the holder
of the number of shares 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, except as provided in Section 24 hereof, to receive notice of
meetings or other actions affecting stockholders, 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.  This Section 17
shall also apply to holders, as such, of Rights prior to the issuance of Rights
Certificates.

 

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, including reasonable fees and
disbursements of its counsel, incurred in connection with the execution and
administration of this Agreement and the exercise and performance of its duties
hereunder.  The Company shall indemnify
the Rights Agent for, and hold it harmless against, any loss, liability or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the reasonable costs and expenses of defending against any claim of liability
hereunder.

 

(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 Preferred 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 reasonably believed by it to be genuine and to have been
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 or
stockholder services businesses 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 document or any further act on the part of any
of the parties hereto; provided, however,
that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 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

 

27

 

Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and
in all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.

 

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

 

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

 

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

 

(b)                                 Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of “current
market price”) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be specified herein) 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; provided, however,
that so long as any Person is an Acquiring Person hereunder, such certificate
shall be signed and delivered by a majority of the Board of Directors; 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 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 have any responsibility for the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or for 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 failure by the Company to satisfy
conditions contained in this Agreement or in any Rights Certificate; nor

 

28

 

shall it be responsible
for any adjustment required under the provisions of Section 11 or Section 13
hereof or 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 receipt by the Rights Agent of the certificate describing any such
adjustment contemplated by Section 12); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the authorization
or reservation of any shares of Preferred Stock or any other securities to be
issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Preferred Stock or any other securities will, when so issued, be
validly authorized and issued, fully paid and non-assessable.

 

(f)                                    The
Company shall perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may reasonably be required by the Rights Agent
for the performance by the Rights Agent of its duties under 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
omitted to be taken by it in good faith in accordance with instructions of any
such officer; provided, however, that so long
as any Person is an Acquiring Person hereunder and the Rights Agent has received
written notice thereof, the Rights Agent shall accept such instructions and
advice only from a majority of the Board of Directors.

 

(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 have a pecuniary interest in any transaction in which the Company
may be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other Person.

 

(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.

 

(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 or in the exercise of its rights hereunder if the Rights
Agent shall have 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, not signed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further

 

29

 

action with respect to
such requested exercise or transfer without first consulting with the Company.

 

Section 21.                                      Change of Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon
thirty (30) days’ prior notice in writing mailed to the Company, and to each
transfer agent of the Preferred Stock and the Company Common Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail.  The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days’ prior
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Preferred Stock and the Company
Common Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail.  If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of thirty (30) 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 corporation organized and doing business under the laws of
the United States or any state of the United States in good standing, shall be
authorized under applicable laws to exercise corporate trust or stock transfer
powers and shall be subject to supervision or examination by federal or state
authorities and which has at the time of its appointment as Rights Agent a
combined capital surplus of at least Fifty Million Dollars ($50,000,000) or
(b) an Affiliate of a corporation described in clause (a).  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 Preferred Stock and the
Company Common Stock, and 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.

 

Section 22.                                      Issuance of New Rights Certificates.  Notwithstanding any of the provisions of this
Agreement or 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 a
majority of the Board of Directors to reflect any adjustment or change made in
accordance with the provisions of this Agreement in the Purchase Price or the
number or kind or class of shares or other securities or property that may be
acquired under the Rights Certificates. 
In addition, in connection with the issuance or sale of shares of
Company Common Stock following the Distribution Date and prior to the
Expiration Date, the Company (a) shall, with respect to shares of Company
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in
any other case, if deemed necessary or

 

30

 

appropriate by a majority
of the Board of Directors, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if,
and to the extent that, appropriate adjustment shall otherwise have been made
in lieu of the issuance thereof.

 

Section 23.                                      Redemption and Termination.

 

(a)                                  Subject
to Section 30 hereof, the Company may, at its option, by action of
a majority of the Board of Directors, at any time prior to the earlier of
(i) the Close of Business on the tenth (10th) Business Day
following the Stock Acquisition Date or (ii) the Final Expiration Date,
redeem all but not less than all of the then-outstanding Rights at a redemption
price of $0.001 per Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being the “Redemption
Price”).  The Company may, at
its option, by action of a majority of the Board of Directors, pay the
Redemption Price either in shares of Company Common Stock (based on the “current
market price,” as defined in Section 11(d) hereof, of the shares of
Company Common Stock at the time of redemption) or cash or any other form of
consideration deemed appropriate by the Board of Directors and the redemption
of the Rights shall be effective at such time and on the basis and with such
conditions as the Board of Directors may in its sole discretion establish.  Notwithstanding anything in this Agreement to
the contrary, the Rights shall not be exercisable after a Section 11(a)(ii)
Event until such time as the Company’s right of redemption has expired.

 

(b)                                 Immediately
upon the action of the Board of Directors ordering the redemption of the Rights
as provided in Section 23(a) above (or at such later time as the
Board of Directors may establish for the effectiveness of such redemption),
evidence of which shall be 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. 
The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption.  Promptly after the action of a majority of
the Board of Directors ordering the redemption of the Rights as provided in Section 23(a)
above, 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 Company 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)                                  The
Company may, at its option, discharge all of its obligations with respect to
the Rights by (i) issuing a press release announcing the manner of redemption
of the Rights in accordance with this Agreement, and (ii) mailing payment of
the Redemption Price to the registered holders of the Rights as their last
addresses as they appear on the registry books of the rights Agent or, prior to
the Distribution date, on the registry books of the transfer agent of

 

31

 

the Company Common Stock,
and upon such action, all outstanding Rights and Rights Certificates shall be
null and void without any further action by the Company.

 

Section 24.                                      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 periodic cash dividend paid out of funds legally
available therefor), (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), (iv) to effect any consolidation or merger
into or with any other Person, or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other transfer),
in one or more transactions, of more than fifty (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 a transfer by the Company and/or any of its
wholly owned 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 25 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least twenty (20) days prior
to the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier; provided, however,
no such notice shall be required pursuant to this Section 24, if
any wholly owned Subsidiary of the Company effects a consolidation or merger
with or into, or effects a sale or other transfer of assets or earnings power
to, any other wholly owned Subsidiary of the Company.

 

(b)                                 In
case any Triggering Event shall occur, then, in any such case, 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 25
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)
or Section 13 hereof, as the case may be.

 

Section 25.                                      Notices.  All
notices and other communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including by telex, telegram or cable) and mailed
or sent or delivered, if to the Company, at its address at:

 

Wireless
Facilities, Inc.

Bridge Point
Corporate Centre

4810 Eastgate Mall

 

32

 

San Diego, CA
92121

(858) 228-2001
(facsimile)

Attention:  Company Secretary

 

and if to the Rights
Agent, at its address at:

 

Wells Fargo Bank, N.A.

161 North Concord
Exchange

South St. Paul, MN 55075

(651) 450-4078
(facsimile)

Attention:  Account Management

 

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 Company 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 26.                                      Supplements and Amendments.  For so long as the Rights are then
redeemable, subject to the penultimate sentence of this Section 26,
the Company may, in its sole and absolute discretion, and the Rights Agent
shall, if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of certificates
representing Rights or shares of Company Common Stock.  From and after the time that the Rights are
no longer redeemable, subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights
Certificates, in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen
any time period hereunder, or (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, however,
that this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) subject to Section 30
hereof, a time period relating to when the Rights may be redeemed at such time
as the Rights are not then redeemable, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights.  Upon the delivery of a certificate from an
appropriate officer of the Company or, so long as any Person is an Acquiring
Person hereunder, from the majority of the Board of Directors which states that
the proposed supplement or amendment is in compliance with the terms of this Section 26,
the Rights Agent shall execute such supplement or amendment.  Notwithstanding anything contained in this
Agreement to the contrary, (i) no supplement or amendment shall be made
which changes the Redemption Price, the Purchase Price, the Expiration Date or
the number of Units of Preferred Stock or other securities or assets for which
a Right is exercisable without the approval of a majority of the Board of
Directors, and (ii) following the occurrence of a Section 11(a)(ii)
Event, no supplement or amendment whatsoever shall be made without the approval
of the Board of Directors.  Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Company Common Stock.

 

33

 

Section 27.                                      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 28.                                      Determinations and Actions by the
Board of Directors, etc. 
For all purposes of this Agreement, any calculation of the number of
shares of Company Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding
shares of Company 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 Exchange Act Regulations as in effect on the date hereof.  Except as otherwise specifically provided
herein, the Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power (i) to interpret the provisions of this
Agreement, and (ii) to make all determinations deemed necessary or
advisable for the administration of this Agreement.  All such actions, calculations,
interpretations and determinations (including, for purposes of clause
(y) below, all omissions with respect to the foregoing) which are done or
made by the Board of Directors in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board of Directors
or any member thereof to any liability to the holders of the Rights.

 

Section 29.                                      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 shares of Company 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 shares of Company Common Stock).

 

Section 30.                                      Severability. 
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and a majority of the
Board of Directors determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement and the Rights shall not then be redeemable, 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 a majority of the Board of
Directors.

 

Section 31.                                      Governing Law. 
This Agreement, each Right and each Rights Certificate issued hereunder
shall be governed by, and construed in accordance with, the laws of the State
of Delaware applicable to contracts executed in and to be performed entirely in
such State.

 

34

 

Section 32.                                      Counterparts. 
This Agreement may be executed (including by facsimile) in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.

 

Section 33.                                      Descriptive Headings.  The headings contained in this Agreement are
for descriptive purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

Section 34.                                      Exchange.

 

(a)                                  The
Company, upon resolution of a majority of the Board of Directors, may, at its
option, at any time after the first occurrence of a Section 11(a)(ii)
Event, exchange all or part of the then-outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to Section 7(e)
hereof) for Units of Preferred Stock or shares of Company Common Stock (at the
election of the Board of Directors) at an exchange ratio of one Unit of
Preferred Stock or one share of Company Common Stock, as the case may be, per
Right, as appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than an Exempt Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of shares of Company
Common Stock aggregating fifty (50%) or more of the shares of Company Common
Stock then outstanding.  From and after
the occurrence of a Section 13(a) Event, any Rights that theretofore have
not been exchanged pursuant to this Section 34(a) shall thereafter
be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 34(a).  The exchange of the Rights by the Board of
Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.

 

(b)                                 Immediately
upon the action of a majority of the Board of Directors ordering the exchange
of any Rights pursuant to Section 34(a) 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 Units of Preferred Stock or shares of Company Common
Stock, as the case may be, 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
shall state the method by which the exchange of Units of Preferred Stock or
shares of Company Common Stock, as the case may be, 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.

 

35

 

(c)                                  In
the event that the number of shares of Preferred Stock or Company Common Stock,
as the case may be, which are authorized by the Company’s Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit any exchange of
Rights as contemplated in accordance with this Section 34, the
Company, upon a resolution of a majority of the Board of Directors, shall take
all such action as may be necessary to authorize additional shares of Preferred
Stock or Company Common Stock, as the case may be, for issuance upon exchange
of the Rights or make adequate provision to substitute, in whole or in part,
(1) cash, (2) other equity securities of the Company, (3) debt
securities of the Company, (4) other assets, or (5) any combination
of the foregoing, having an aggregate value for each Right to be exchanged
equal to the per share market price of one Unit of Preferred Stock or share of
Company Common Stock, as the case may be (determined pursuant to Section 11(d) hereof)
as of the date of a Section 11(a)(ii) Event, where such aggregate
value has been determined by a majority of the Board of Directors.  To the extent that the Company determines
that some action need be taken pursuant to the foregoing clauses of this Section
34(c), the Board of Directors may suspend the exercisability of the Rights
for a period of up to sixty (60) days following the date on which the event
described in Section 34(a) shall have occurred, in order to seek
any authorization of additional shares of Company Common Stock and/or to decide
the appropriate form of distribution to be made pursuant to the above provision
and to determine the value thereof.

 

(d)                                 The
Company shall not be required to issue fractions of Units of Preferred Stock or
fractions of shares of Company Common Stock or to distribute certificates which
evidence fractional Units or fractional shares. 
In lieu of issuing fractional Units or fractional shares, the Company
may pay to the registered holders of Rights Certificates at the time such
Rights are exchanged as herein provided an amount in cash equal to the same
fraction of the current market price (determined pursuant to Section 11(d)
hereof) of one Unit of Preferred Stock or one share of Company Common Stock, as
the case may be, on the Trading Day immediately prior to the date of exchange
pursuant to this Section 34.

 

 

[Remainder of Page Intentionally Left Blank]

 

36

 

In Witness Whereof, the parties hereto have caused
this Agreement to be duly executed, all as of the date first above written.

 

	
   

  	
  Wireless Facilities,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ James R. Edwards

  	
   

  
	
   

  	
  Name: James R. Edwards

  
	
   

  	
  Title: Sr. Vice President,
  General Counsel and

  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wells Fargo Bank, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Darren Larson

  	
   

  
	
   

  	
  Name:  Darren
  Larson

  
	
   

  	
  Title:  Assistant Vice President

  

 

 

[SIGNATURE PAGE TO RIGHTS AGREEMENT]

 

 

Exhibit
A

to Rights Agreement

 

Form
of Rights Certificate

 

	
  Certificate No.

  	
  Rights

  

 

NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED
IN THE RIGHTS AGREEMENT REFERRED TO BELOW). 
THE RIGHTS ARE SUBJECT TO REDEMPTION OR EXCHANGE, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN THE
RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED 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.

 

Rights
Certificate

 

Wireless
Facilities, Inc.

 

This
certifies that                               ,
or registered assigns, is the registered holder of the number of Rights set
forth above, each of which entitles the registered holder thereof, subject to
the terms and conditions of the Rights Agreement dated as of December 16,
2004, as amended from time to time (the “Rights Agreement”)
(terms defined therein being used herein with the same meaning unless otherwise
defined herein) between Wireless Facilities, Inc., a Delaware corporation (the “Company”), and Wells Fargo Shareholder Services as Rights
Agent (which term shall include any successor Rights Agent under the Rights
Agreement), to purchase from the Company at any time after the Distribution
Date and prior to the Expiration Date, at the office of the Rights Agent, one
one-hundredth (1/100) of a fully paid and nonassessable share of Series C
Preferred Stock, par value $0.001 per share (the “Preferred
Stock”), of the Company at the Purchase Price initially of $54.00 per one one-hundredth (1/100) share of Preferred Stock
(each such one one-hundredth (1/100) of a share being a “Unit”),
upon presentation and surrender of this Rights Certificate with the Election to
Purchase and related certificate duly executed. 
The number of Rights evidenced by this Rights Certificate (and the
number and kind of shares which may be purchased upon exercise thereof) and the
Purchase Price per Unit set forth above, are the number and Purchase Price as
of December 16, 2004, 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 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, 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 or (ii) under certain
circumstances described in the Rights Agreement, a transferee of any such
Acquiring Person, Associate or Affiliate, 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.

 

A-1

 

In
certain circumstances described in the Rights Agreement, the Rights evidenced
hereby may entitle the registered holder thereof to purchase capital stock of
an entity other than the Company or receive common stock, cash or other assets,
all as provided in the Rights Agreement.

 

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 a
Triggering Event.

 

This
Rights Certificate is subject to all of the terms and conditions of the Rights
Agreement, which terms 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 principal office of the Rights Agent and are available from the Rights
Agent upon written request.

 

This
Rights Certificate, with or without other Rights Certificates, upon surrender
at the office of the Rights Agent designated for such purpose, may be exchanged
for another Rights Certificate or Rights Certificates of like tenor and date
evidencing an aggregate number of Rights equal to the aggregate number of
Rights evidenced by the Rights Certificate or Rights Certificates
surrendered.  If this Rights Certificate
shall be exercised in part, the registered 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 under certain circumstances at its
option at a redemption price of $0.001 per Right (as such amount may be
adjusted pursuant to the Rights Agreement), at any time prior to the earlier of
the close of business on (i) the tenth business day following the Stock
Acquisition Date and (ii) the Final Expiration Date.  The Rights will not be exercisable after a
Section 11(a)(ii) Event until such time as the Company’s right of redemption
has expired.  In addition, subject to the
provisions of the Rights Agreement, the Rights may be exchanged, in whole or in
part, for shares of the Common Stock of the Company.

 

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-hundredth (1/100) of a share of Preferred Stock or
depositary receipts representing such fractions), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

 

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

 

A-2

 

action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends of subscription rights, or otherwise, until the Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.

 

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

 

Witness the
facsimile signature of the proper officers of the Company.  Dated as of                      
       ,          .

 

 

	
   

  	
  Wireless Facilities,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:  Secretary

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  Wells
  Fargo Shareholder Services

  	
   

  
	
  as Rights Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
					

 

A-3

 

[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 in (1) and
(2) 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 in the Rights Agreement); and

 

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

 

	
   

  	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  
							

 

A-4

 

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.

 

Signatures
must be guaranteed by an approved eligible financial institution acceptable to
the Rights Agent in its sole discretion or by a participant in the Securities
Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the
New York Stock Exchange Medallion Program.

 

In the
event the certification set forth above is not completed, the Company will deem
the Beneficial Owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and, in the case of an Assignment, will affix a legend to that
effect on any Rights Certificates issued in exchange for this Rights
Certificate.

 

A-5

 

Form
of Election to Purchase

 

(To be
executed if the registered holder desires to exercise

Rights represented by the Rights Certificate.)

 

To:  Wireless
Facilities, Inc.

 

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

 

	
   

  	
   

  	
  (Please print name and
  address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Please insert social
  security or other identifying number).

  

 

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 print name and
  address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Please insert social
  security or other identifying number).

  

 

 

	
  Dated:

  	
   

  	
   ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

A-6

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes in (1) and
(2) 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 an Associate thereof (as defined in the Rights Agreement); and

 

(2)                                  after
due inquiry and to the best knowledge of the undersigned, the undersigned
[ ] 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 thereof.

 

	
   

  	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

 

Notice

 

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

 

Signatures
must be guaranteed by an approved eligible financial institution acceptable to
the Rights Agent in its sole discretion or by a participant in the Securities
Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the
New York Stock Exchange Medallion Program.

 

In the
event the certification set forth above is not completed, the Company will deem
the Beneficial Owner of the Rights evidenced by this Rights Certificate to be
an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement) and the election to purchase will not be honored.

 

A-7

 

Exhibit
B

to Rights Agreement

 

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.

 

Summary
of Rights to Purchase Preferred Stock

 

On December
16, 2004, the Board of Directors of Wireless Facilities, Inc. (the “Company”) authorized and declared a dividend distribution of
one Right for each outstanding share of its Common Stock, par value
$0.001 per share (the “Company Common Stock”),
to stockholders of record at the close of business on December 27, 2004
(the “Record Date”), and authorized the issuance
of one Right with each share of Company Common Stock issued (including shares
distributed from Treasury) by the Company (except as otherwise provided in the
Rights Agreement, as defined below) between the Record Date and the
Distribution Date (as defined below). 
Each Right entitles the registered holder, subject to the terms of the
Rights Agreement (as defined below), to purchase from the Company one
one-hundredth (1/100) of a share (a “Unit”) of
Series C Preferred Stock, par value $0.001 per share (the “Preferred Stock”), at a purchase price of $54.00 per
Unit, subject to adjustment.  The
purchase price is payable in cash or by certified or bank check or money order
payable to the order of the Company.  The
description and terms of the Rights are set forth in a Rights Agreement between
the Company and Wells Fargo Shareholder Services as Rights Agent, dated as
of December 16, 2004, as amended from time to time (the ”Rights Agreement”).

 

Copies
of the Rights Agreement and the Certificate of Designation for the Preferred
Stock have been filed with the Securities and Exchange Commission as exhibits
to a Registration Statement on Form 8-A dated December 16, 2004.  Copies of the Rights Agreement and the Certificate
of Designation are available free of charge from the Company.  This summary description of the Rights and
the Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Rights Agreement and the
Certificate of Designation, including the definitions therein of certain terms,
which Rights Agreement and Certificate of Designation are incorporated herein
by reference.

 

The
Rights Agreement

 

Certificates;
Distribution Date.

 

Initially,
the Rights will attach to all certificates representing shares of outstanding
Company Common Stock, and no separate Rights Certificates will be
distributed.  Subject to the provisions
of the Rights Agreement the Rights will separate from the Company Common Stock

 

B-1

 

and the “Distribution Date” will occur upon the
earlier of (i) ten business days following a public announcement (the date
of such announcement being the “Stock Acquisition Date”)
that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired or otherwise obtained
beneficial ownership of 15% or more of the then-outstanding shares of Company
Common Stock, and (ii) ten business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
becomes an Acquiring Person) following the commencement of a tender offer or
exchange offer that would result in a person or group becoming an Acquiring
Person.  Until the Distribution Date,
(i) the Rights will be evidenced by Company Common Stock certificates and
will be transferred with and only with such Company Common Stock certificates,
(ii) new Company Common Stock certificates issued after the Record Date
(also including shares distributed from Treasury) will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender
for transfer of any certificates representing outstanding Company Common Stock
will also constitute the transfer of the Rights associated with the Company
Common Stock represented by such certificates.

 

An “Acquiring
Person” does not include certain persons specified in the Rights Agreement.

 

The
Rights are not exercisable until the Distribution Date and will expire at the
close of business on the tenth anniversary of the Rights Agreement unless
earlier redeemed or exchanged by the Company as described below.  Under certain circumstances the
exercisability of the Rights may be suspended. 
In no event, however, will the Rights be exercisable prior to the
expiration of the period in which the Rights may be redeemed.

 

As
soon as practicable after the Distribution Date, Rights Certificates will be
mailed to holders of record of Company Common Stock as of the close of business
on the Distribution Date (and to each initial holder of certain shares of
Company Common Stock issued after the Distribution Date) and, thereafter, the
separate Rights Certificates alone will represent the Rights.

 

Flip-In.  In the event that a person becomes an
Acquiring Person, then, in such case, each holder of a Right will thereafter
have the right to receive, upon exercise, Units of Preferred Stock or at the
option of the Company, shares of Company 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.  The exercise price is the purchase price
multiplied by the number of Units of Preferred Stock issuable upon exercise of
a Right prior to the event described in this paragraph.  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 or any affiliate or associate
thereof (or certain transferees of any thereof) will be null and void.

 

Flip-Over.  In the event that, at any time following the
date that any person becomes an Acquiring Person, (i) the Company is
acquired in a merger or other business combination transaction and the Company
is not the surviving corporation, (ii) any person merges with the Company
and all or part of the Company Common Stock is converted or exchanged for
securities, cash or property of the Company or any other person or
(iii) fifty percent (50%) or more of the Company’s assets or earning power
is sold or transferred, each holder of a Right

 

B-2

 

(except Rights which previously have been voided as
described 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.

 

Adjustments.  The purchase price payable, and the number of
Units of Preferred Stock 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 the holders of the Preferred Stock of evidences of
indebtedness, cash or assets (excluding regular periodic cash dividends) or of
subscription rights or warrants (other than those referred to above).

 

With
certain exceptions, no adjustment in the purchase price will be required until
cumulative adjustments amount to at least 1% of the purchase price.  The Company is not required to issue
fractional shares of Preferred Stock (other than fractions which are integral
multiples of one one-hundredth (1/100) of a share of Preferred Stock, which may
be evidenced by depositary receipts).  In
lieu thereof, an adjustment in cash may be made based on the current market
price of a share of Preferred Stock on the day of exercise.

 

Redemption.  At any time until ten business days following
the Stock Acquisition Date, a majority of the Board of Directors may redeem the
Rights in whole, but not in part, at a price of $0.001 per Right (subject to
adjustment in certain events) (the “Redemption Price”)
payable, at the election of the majority of the Board of Directors, in cash,
shares of Company Common Stock or other consideration considered appropriate by
the Board of Directors.  Immediately upon
the action of a majority of the Board of Directors ordering the redemption of
the Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.

 

Exchange.  The Company may at any time after there is an
Acquiring Person, by action of a majority of the Board of Directors, exchange
all or part of the then-outstanding and exercisable Rights (other than Rights
that shall have become null and void) for Units of Preferred Stock or shares of
Company Common Stock pursuant to a one-for-one exchange ratio, subject to
adjustment.

 

No
Stockholder Rights; taxation. 
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
Units of Preferred Stock (or other consideration) or for common stock of the
acquiring company or in the event of the redemption of Rights as set forth
above.

 

Amended.  Any of the provisions of
the Rights Agreement may be amended without the approval of the holders of the
Rights or Company Common Stock at any time prior to the date the Rights are no
longer redeemable.  After such date, the
provisions of the Rights Agreement may be amended in order to cure any
ambiguity, defect or inconsistency, to make changes which

 

B-3

 

do not adversely affect the interests of holders of
Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the Rights Agreement; provided, however, that no
amendment shall be made to lengthen (i) the time period governing
redemption at such time as the Rights are not redeemable or (ii) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of
Rights.  In addition, after a person
becomes an Acquiring Person, no amendment or supplement may be made without the
approval of a majority of the Board of Directors.

 

Description
of Preferred Stock

 

The
Units of Preferred Stock that may be acquired upon exercise of the Rights will
be nonredeemable and subordinate to any other shares of preferred stock issued
by the Company.

 

In the
event of liquidation, the holder of a Unit of Preferred Stock will receive a
liquidation payment equal to the greater of $0.01 per Unit and the per
share amount paid in respect of a share of the Company Common Stock.

 

Each
Unit of Preferred Stock will have one vote, voting together with the Company
Common Stock.

 

In the
event of any merger, consolidation or other transaction in which shares of
Company Common Stock are exchanged, each Unit of Preferred Stock will be
entitled to receive the per share amount paid in respect of each share of
Company Common Stock.

 

The
rights of holders of the Preferred Stock with respect to liquidation and
voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.

 

Because
of the nature of the Preferred Stock’s liquidation and voting rights, the
economic value of one Unit of Preferred Stock that may be acquired upon the
exercise of each Right should approximate the economic value of one share of
Company Common Stock.

 

B-4

 

Exhibit
C

to Rights Agreement

 

Certificate
of Designation

of the

Series C Preferred Stock

of

Wireless Facilities, Inc.

 

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

 

 

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

 

That,
pursuant to the authority conferred upon the Board of Directors of the
Corporation by its Amended and Restated Certificate of Incorporation (the “Certificate”), the said Board of Directors unanimously
adopted the following resolution by written consent on December 16, 2004, which
resolution remains in full force and effect on the date hereof, creating a
series of Preferred Stock having a par value of $0.001 per share, designated as
Series C Preferred Stock (the “Series C Preferred
Stock”) out of the Corporation’s shares of preferred stock of the
par value of $0.001 per share (the ”Preferred
Stock”):

 

Resolved, that
pursuant to the authority vested in the Board of Directors in accordance with
the provisions of its Certificate, the Board of Directors does hereby create,
authorize and provide for 1,200,000 shares of its authorized Preferred Stock to
be designated and issued as the Series C Preferred Stock, having the
voting powers, designation, relative, participating, optional and other special
rights, preferences and qualifications, limitations and restrictions that are
set forth as follows:

 

2.               Voting
Rights.  The holders of one one-hundredth
(1/100) of a share (a “Unit”) of
Series C Preferred Stock shall have the following voting rights:

 

(A)                              Subject
to the provision for adjustment hereinafter set forth, each Unit of Series C
Preferred Stock shall entitle the holder thereof to one vote on all matters
submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall, at any
time after the December 16, 2004 (the “Rights Declaration Date”),
(i) declare any dividend on outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock
or (iii) combine the outstanding shares of Common Stock into a smaller
number of shares, then in each such case the number of votes per Unit to which
holders of Units of Series C Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction
(y) the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such event and (z) the denominator of which
shall be the number of shares of Common Stock that were outstanding immediately
prior to such event; and

 

C-1

 

(B)                                Except
as otherwise provided herein, in the Certificate or the Bylaws of the
Corporation or as required by law, the holders of Units of Series C 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.

 

3.                                       Reacquired
Shares.  Any Units of Series C
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof.  All such Units shall, upon
their cancellation, become authorized but unissued shares (or fractions of
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.

 

4.                                       Liquidation,
Dissolution or Winding Up.  (A)  Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (i) to the holders of shares of junior stock, unless the
holders of Units of Series C Preferred Stock shall have received, subject to
adjustment as hereinafter provided in paragraph (B), the greater of either
(a) $0.01 per Unit plus an amount equal to accrued and unpaid
dividends and distributions thereon to the date of such payment, or
(b) the amount equal to the aggregate per share amount to be distributed
to holders of shares of Common Stock, or (ii) to the holders of shares of
parity stock, unless simultaneously therewith distributions are made ratably on
Units of Series C Preferred Stock and all other shares of such parity stock in
proportion to the total amounts to which the holders of Units of Series C
Preferred Stock are entitled under clause (i)(a) of this sentence and to
which the holders of shares of such parity stock are entitled, in each case
upon such liquidation, dissolution or winding up.

 

(B)                                In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock,
or (iii) combine outstanding shares of Common Stock into a smaller number
of shares, then in each such case the aggregate amount to which holders of
Units of Series C Preferred Stock were entitled immediately prior to such event
pursuant to clause (i)(b) of paragraph (A) of this Section 3
shall be adjusted by multiplying such amount by a fraction (y) the numerator
of which shall be the number of shares of Common Stock that are outstanding
immediately after such event and (z) the denominator of which shall be the
number of shares of Common Stock that were outstanding immediately prior to
such event.

 

6.               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 converted into other
stock or securities, cash and/or any other property, then in any such case
Units of Series C Preferred Stock shall at the same time be similarly exchanged
for or converted into an amount per Unit (subject to the provision for
adjustment hereinafter set forth) equal to 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 converted or
exchanged.  In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any
dividend on outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock, or
(iii) combine outstanding Common Stock into a smaller number of shares,
then in each such case the amount set forth in

 

C-2

 

the immediately preceding sentence with respect to the
exchange or conversion of Units of Series C Preferred Stock shall be adjusted
by multiplying such amount by a fraction (y) the numerator of which shall
be the number of shares of Common Stock that are outstanding immediately after
such event and (z) the denominator of which shall be the number of shares
of Common Stock that were outstanding immediately prior to such event.

 

7.                                       Redemption.  The Units of Series C Preferred Stock and
shares of Series C Preferred Stock shall not be redeemable.

 

8.                                       Ranking.  The Units of Series C Preferred Stock and
shares of Series C Preferred Stock shall rank junior to all other series and
any other class of Preferred Stock (now or hereafter authorized or issued by
the Corporation) as to the payment of dividends, conversion, redemption or
liquidation rights and the distribution of assets, unless the terms of any such
series or class shall provide otherwise.

 

9.                                       Fractional
Shares.  The Series C Preferred Stock
may be issued in Units or other fractions of a share, which Units or fractions
shall entitle the holder, in proportion to such holder’s units or fractional
shares, to exercise voting rights, receive dividends, participate in distributions
and to have the benefit of all other rights of holders of Series C Preferred
Stock.

 

10.                                 Amendment.  At any time when any Units of Series C
Preferred Stock are outstanding, neither the Certificate of the Corporation nor
this Certificate of Designation shall be amended in any manner that would
materially alter or change the powers, preferences or special rights of the
Units of Series C Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding Units
of Series C Preferred Stock, voting separately as a class.

 

11.                                 Certain
Definitions.  As used in this
resolution with respect to the Series C Preferred Stock, the following terms
shall have the following meanings:

 

(A)                              The
term “Common Stock” shall mean the class of stock designated as the common
stock, par value $0.001 per share, of the Corporation at the date hereof
or any other class of stock resulting from successive changes or
reclassification of the common stock.

 

(B)                                The
term “junior stock” shall mean the Common Stock and any other class or series
of capital stock of the Corporation over which the Series C Preferred Stock has
preference or priority in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.

 

(C)                                The
term “parity stock” shall mean any class or series of capital stock ranking pari passu with the Series C Preferred Stock in the
distribution of assets on any liquidation, dissolution or winding up.

 

In Witness Whereof, Wireless Facilities, Inc. has
caused this Certificate of Designation to be signed by its Chief Executive
Officer and President and its Sr. Vice President and Chief Financial Officer
this 16th day of December, 2004.

 

C-3

 

	
   

  	
  Wireless Facilities,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Eric M. DeMarco 

  Title:  Chief
  Executive Officer and President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Deanna H. Lund

  
	
   

  	
  Title:   Senior Vice President
  and Chief Financial Officer

  

 

C-4Exhibit 4.03

 

KMG
AMERICA CORPORATION

 

2004
EQUITY INCENTIVE PLAN

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.01.

  	
   

  	
  Acquiring
  Person

  	
   

  
	
  1.02.

  	
   

  	
  Affiliate

  	
   

  
	
  1.03.

  	
   

  	
  Agreement

  	
   

  
	
  1.04.

  	
   

  	
  Award

  	
   

  
	
  1.05.

  	
   

  	
  Board

  	
   

  
	
  1.06.

  	
   

  	
  Cause

  	
   

  
	
  1.07.

  	
   

  	
  Change
  in Control

  	
   

  
	
  1.08.

  	
   

  	
  Code

  	
   

  
	
  1.09.

  	
   

  	
  Committee

  	
   

  
	
  1.10.

  	
   

  	
  Common
  Stock

  	
   

  
	
  1.11.

  	
   

  	
  Company

  	
   

  
	
  1.12.

  	
   

  	
  Continuing Director

  	
   

  
	
  1.13.

  	
   

  	
  Control Change Date

  	
   

  
	
  1.14.

  	
   

  	
  Corresponding
  SAR

  	
   

  
	
  1.15.

  	
   

  	
  Disability

  	
   

  
	
  1.16.

  	
   

  	
  Exchange
  Act

  	
   

  
	
  1.17.

  	
   

  	
  Fair
  Market Value

  	
   

  
	
  1.18.

  	
   

  	
  Good
  Reason

  	
   

  
	
  1.19.

  	
   

  	
  Incentive
  Award

  	
   

  
	
  1.20.

  	
   

  	
  Initial
  Value

  	
   

  
	
  1.21.

  	
   

  	
  Named Executive Officer

  	
   

  
	
  1.22.

  	
   

  	
  Option

  	
   

  
	
  1.23.

  	
   

  	
  Participant

  	
   

  
	
  1.24.

  	
   

  	
  Performance Shares

  	
   

  
	
  1.25.

  	
   

  	
  Person

  	
   

  
	
  1.26.

  	
   

  	
  Plan

  	
   

  
	
  1.27.

  	
   

  	
  Related
  Entity

  	
   

  
	
  1.28.

  	
   

  	
  SAR

  	
   

  
	
  1.29.

  	
   

  	
  Stock
  Award

  	
   

  
	
  1.30.

  	
   

  	
  Ten Percent Shareholder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  PURPOSES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  ADMINISTRATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  ELIGIBILITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  COMMON STOCK SUBJECT TO PLAN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.01.

  	
   

  	
  Common Stock Issued

  	
   

  
	
  5.02.

  	
   

  	
  Aggregate
  Limit

  	
   

  
					

 

i

 

	
  5.03.

  	
   

  	
  Individual
  Limit

  	
   

  
	
  5.04.

  	
   

  	
  Reallocation of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  OPTIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.01.

  	
   

  	
  Grant

  	
   

  
	
  6.02.

  	
   

  	
  Option
  Price

  	
   

  
	
  6.03.

  	
   

  	
  Maximum Option Period

  	
   

  
	
  6.04.

  	
   

  	
  Nontransferability

  	
   

  
	
  6.05.

  	
   

  	
  Transferable Options

  	
   

  
	
  6.06.

  	
   

  	
  Exercise

  	
   

  
	
  6.07.

  	
   

  	
  Payment

  	
   

  
	
  6.08.

  	
   

  	
  Employee
  Status

  	
   

  
	
  6.09.

  	
   

  	
  Change
  in Control

  	
   

  
	
  6.10.

  	
   

  	
  Stockholder Rights

  	
   

  
	
  6.11.

  	
   

  	
  Disposition of Shares

  	
   

  
	
  6.12.

  	
   

  	
  No Liability of Company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  SARS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.01.

  	
   

  	
  Grant

  	
   

  
	
  7.02.

  	
   

  	
  Maximum SAR Period

  	
   

  
	
  7.03.

  	
   

  	
  Nontransferability

  	
   

  
	
  7.04.

  	
   

  	
  Transferable
  SARs

  	
   

  
	
  7.05.

  	
   

  	
  Exercise

  	
   

  
	
  7.06.

  	
   

  	
  Change
  in Control

  	
   

  
	
  7.07.

  	
   

  	
  Employee
  Status

  	
   

  
	
  7.08.

  	
   

  	
  Settlement

  	
   

  
	
  7.09.

  	
   

  	
  Stockholder Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  STOCK AWARDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.01.

  	
   

  	
  Award

  	
   

  
	
  8.02.

  	
   

  	
  Vesting

  	
   

  
	
  8.03.

  	
   

  	
  Performance Objectives

  	
   

  
	
  8.04.

  	
   

  	
  Employee Status

  	
   

  
	
  8.05.

  	
   

  	
  Change
  in Control

  	
   

  
	
  8.06.

  	
   

  	
  Stockholder Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  PERFORMANCE SHARE AWARDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.01.

  	
   

  	
  Grant

  	
   

  
	
  9.02.

  	
   

  	
  Earning
  the Award

  	
   

  
	
  9.03.

  	
   

  	
  Maximum Performance Share Award Period

  	
   

  
	
  9.04.

  	
   

  	
  Payment

  	
   

  
	
  9.05.

  	
   

  	
  Stockholder Rights

  	
   

  
	
  9.06.

  	
   

  	
  Nontransferability

  	
   

  

 

ii

 

	
  9.07.

  	
   

  	
  Transferable Performance Shares

  	
   

  
	
  9.08.

  	
   

  	
  Employee
  Status

  	
   

  
	
  9.09.

  	
   

  	
  Change
  in Control

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
  INCENTIVE AWARDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.01.

  	
   

  	
  Grant

  	
   

  
	
  10.02.

  	
   

  	
  Terms and Conditions

  	
   

  
	
  10.03.

  	
   

  	
  Maximum Incentive Award Period

  	
   

  
	
  10.04.

  	
   

  	
  Nontransferability

  	
   

  
	
  10.05.

  	
   

  	
  Transferable Incentive Awards

  	
   

  
	
  10.06.

  	
   

  	
  Employee
  Status

  	
   

  
	
  10.07.

  	
   

  	
  Change
  in Control

  	
   

  
	
  10.08.

  	
   

  	
  Stockholder Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  	
  ADJUSTMENT UPON CHANGE IN COMMON STOCK

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  	
  COMPLIANCE WITH LAW AND APPROVAL OF
  REGULATORY BODIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.01.

  	
   

  	
  Compliance.

  	
   

  
	
  12.02.

  	
   

  	
  Postponement of Exercise or Payment.

  	
   

  
	
  12.03.

  	
   

  	
  Forfeiture of Payment.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.01.

  	
   

  	
  Effect on Employment and Service

  	
   

  
	
  13.02.

  	
   

  	
  Unfunded Plan

  	
   

  
	
  13.03.

  	
   

  	
  Rules of Construction

  	
   

  
	
  13.04.

  	
   

  	
  Tax Withholding and Reporting.

  	
   

  
	
  13.05.

  	
   

  	
  Reservation of Shares.

  	
   

  
	
  13.06.

  	
   

  	
  Governing Law.

  	
   

  
	
  13.07.

  	
   

  	
  Other Actions.

  	
   

  
	
  13.08.

  	
   

  	
  Other
  Conditions.

  	
   

  
	
  13.09.

  	
   

  	
  Forfeiture Provisions.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
   

  	
  AMENDMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
   

  	
  DURATION OF PLAN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI

  	
   

  	
  EFFECTIVE DATE OF PLAN

  	
   

  

 

iii

 

ARTICLE I

DEFINITIONS

 

1.01.                     Acquiring
Person

 

Acquiring Person means that a Person,
considered alone or as part of a “group” within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, is or becomes directly or
indirectly the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of securities representing more than fifty percent (50%) of the Company’s
then outstanding securities entitled to vote generally in the election of the
Board.

 

1.02.                     Affiliate

 

Affiliate means any “subsidiary” or “parent”
corporation (as such terms are defined in Section 424 of the Code) of the
Company.

 

1.03.                     Agreement

 

Agreement means a written agreement
(including any amendment or supplement thereto) between the Company and a Participant
specifying the terms and conditions of an Award granted to such Participant.

 

1.04.                     Award

 

Award means an Incentive Award, Option,
Performance Share, SAR or Stock Award granted under this Plan.

 

1.05.                     Board

 

Board means the Board of Directors of the
Company.

 

1.06.                     Cause

 

Cause has the same definition as under any
employment or service agreement between the Company or any Affiliate and the
Participant or, if no such employment or service agreement exists or if such
employment or service agreement does not contain any such definition, Cause
means that the Participant (i) has committed fraud or misappropriated, stolen
or embezzled funds or property from the Company or an Affiliate or secured or
attempted to secure personally any profit in connection with any transaction
entered into on behalf of the Company or any Affiliate, (ii) has been convicted
of, or entered a plea of guilty or “nolo
contendere” to, any criminal act or has committed any other act of
willful misconduct which brings the Participant into disrepute or is likely to
cause material harm to the Company’s (or any Affiliate’s) reputation, business,
customer or supplier relations, financial condition or prospects, (iii) has,
notwithstanding not less than 30 days’ prior written notice, willfully failed
to comply with any lawful directives of the Board, the Board of Directors of
any Affiliate or any supervisory personnel of the Participant or otherwise
failed to perform in a satisfactory manner his or her duties with the Company
or any Affiliate (other than by reason of illness or temporary disability),
(iv) has violated or breached

 

1

 

any material law or regulation to the
material detriment of the Company or any Affiliate or its or their business,
(v) has breached any non-competition, non-disclosure or non-solicitation
agreement which causes or is reasonably likely to cause material harm to the
Company or any Affiliate or (vi) has committed any act of willful malfeasance
or gross negligence in a matter of material importance to the Company or any
Affiliate.  For purposes of the Plan,
other than where the definition of Cause is determined under any employment or
service agreement between the Company or any Affiliate and the Participant in
which case such employment or service agreement shall control, in no event
shall any termination of employment or service be deemed for Cause unless the
Company’s Chief Executive Officer concludes that the situation warrants a
determination that the Participant’s employment or service terminated for
Cause; in the case of the Chief Executive Officer, any determination that the
Chief Executive Officer’s employment terminated for Cause shall be made by the
Board acting without the Chief Executive Officer.

 

1.07.                     Change in
Control

 

“Change in Control” means (i) a Person is or
becomes an Acquiring Person; (ii) a transfer of all or substantially all of the
Company’s assets on a consolidated basis, as reported in the Company’s
consolidated financial statements; (iii) a merger, consolidation or statutory
share exchange with a Person, regardless of whether the Company is intended to
be the surviving or resulting entity after the merger, consolidation or
statutory share exchange, other than a
transaction that results in the voting securities of the Company carrying the
right to vote in elections of persons to the Board outstanding immediately
prior to the closing of the transaction continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% (fifty percent) of the Company’s voting
securities carrying the right to vote in elections of persons to the Company’s
Board, or such securities of such surviving entity, outstanding immediately
after the closing of such transaction; (iv) the Continuing Directors cease for
any reason to constitute a majority of the Board; (v) a liquidation of the
Company or the commencement of actions constituting a plan of liquidation or
the closing of a liquidation agreement); or (vi) a majority of the independent
members of the Board adopt a resolution to the effect that, in their judgment,
as a consequence of any one or more transactions or events or series of
transactions or events, a change in control of the Company has effectively
occurred.  The independent members of the
Board shall be entitled to exercise their sole and absolute discretion in
exercising their judgment and in the adoption of such resolution, whether or
not any such transaction(s) or event(s) might be deemed, individually or
collectively, to satisfy any of the criteria set forth in subparagraphs (i)
through (v) above.  Notwithstanding the
foregoing, no event resulting from the initial public offering of the Company’s
securities as contemplated by the Company’s Form S-1 Registration Statement
under the Securities Act of 1933, dated August 3, 2004, as amended (the “Initial
Public Offering”), shall constitute a Change in Control.

 

1.08.                     Code

 

Code means the Internal Revenue Code of 1986,
and any amendments thereto.

 

2

 

1.09.                     Committee

 

Committee means the Compensation Committee of
the Board if the Board appoints one to administer the Plan, or the Board itself
if no such Compensation Committee is appointed. 
If such Compensation Committee is appointed, if and to the extent deemed
necessary by the Board, such Compensation Committee shall consist of two or
more directors, all of whom are “non-employee directors” within the meaning of
Rule 16b-3 under the Exchange Act and, after the transition period prescribed
by the regulations under Code Section 162(m), “outside directors” within the
meaning of Code Section 162(m).

 

1.10.                     Common
Stock

 

Common Stock means the common stock, par
value $0.01 per share, of the Company.

 

1.11.                     Company

 

Company means KMG America Corporation, a
Virginia corporation, or any successor thereto.

 

1.12.                     Continuing
Director

 

Continuing Director means any member of the
Board, while a member of the Board and (i) who was a member of the Board at the
time of the Initial Public Offering or (ii) whose nomination for or election to
the Board was recommended or approved by a majority of the Continuing
Directors.

 

1.13.                     Control
Change Date

 

Control Change Date means the date on which a
Change in Control occurs.  If a Change in
Control occurs on account of a series of transactions, the “Control Change Date”
is the date of the last of such transactions.

 

1.14.                     Corresponding
SAR

 

Corresponding SAR means an SAR that is
granted in relation to a particular Option and that can be exercised only upon
the surrender to the Company, unexercised, of that portion of the Option to
which the SAR relates.

 

1.15.                     Disability

 

Disability has the same definition as under
the Company’s long-term disability insurance plan or, if the Participant does
not participate in such plan or the Company does not sponsor such plan or
discontinues to sponsor such plan, the Participant shall be considered to have
a disability if he or she qualifies for and receives Social Security disability
benefits; provided, however, that with respect to an incentive stock option,
Disability means the inability of a Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental

 

3

 

impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months as defined in Code Section 22(e)(3).

 

1.16.                     Exchange
Act

 

Exchange Act means the Securities Exchange
Act of 1934, as amended.

 

1.17.                     Fair
Market Value

 

Fair Market Value of a share of Common Stock
means, on any given date, the fair market value of a share of Common Stock as
the Committee in its discretion shall determine; provided, however, that the
Committee shall determine Fair Market Value without regard to any restriction
other than a restriction which, by its terms, will never lapse and, if the
shares of Common Stock are traded on any national stock exchange or quotation
system, the Fair Market Value of a share of Common Stock shall be the closing
price of a share of Common Stock as reported on such stock exchange or
quotation system on such date, or if the shares of Common Stock are not traded
on such stock exchange or quotation system on such date, then on the next
preceding day that the shares of Common Stock were traded on such stock
exchange or quotation system, all as reported by such source as the Committee
shall select.  The Fair Market Value that
the Committee determines shall be final, binding and conclusive on the Company,
any Affiliate and each Participant.

 

1.18.                     Good
Reason

 

Good Reason has the same definition as under
any employment or service agreement between the Company or any Affiliate and
the Participant or, if no such employment or service agreement exists or if
such employment or service agreement does not contain any such definition, Good
Reason means the Participant voluntarily terminates employment or service on
account of and within ninety (90)  days
of (i) a failure by the Company or any Affiliate to comply with any material
provision of any employment or service agreement between the Company or the
Affiliate and the Participant (other than the payment obligations referred to
in clause (v) below) which has not been cured within thirty (30) days after
notice of such noncompliance has been given by the Participant to the Company
or the Affiliate, as applicable; (ii) the assignment to the Participant of any
material duties inconsistent with the Participant’s position with the Company
or any Affiliate or a substantial adverse alteration in the nature or status of
the Participant’s responsibilities, in either event without the Participant’s
consent; (iii) a material reduction in employee benefits, other than a
reduction generally applicable to similarly situated employees of the Company
or the Affiliate, as applicable, without the Participant’s consent; (iv)
relocation of the Participant’s principal place of employment outside a fifty
(50) mile radius of the Participant’s then current principal place of
employment without the Participant’s consent; or (v) any failure by the
Company or an applicable Affiliate to pay the Participant’s base salary or any
incentive bonus to which he or she is entitled, which failure has not been cured
within ten (10) days after notice of such noncompliance has been given by the
Participant to the Company or the Affiliate, as applicable.  For purposes of the Plan, other than where
the definition of Good Reason is determined under any employment or service
agreement between the Company or any Affiliate and the Participant in which
case such employment of service agreement shall control,

 

4

 

the Committee shall determine whether any
termination of employment or service shall be deemed for Good Reason.

 

1.19.                     Incentive
Award

 

Incentive Award means an award stated with
reference to a specified dollar amount which, subject to such terms and
conditions as may be prescribed by the Committee, entitles the Participant to
receive shares of Common Stock from the Company or an Affiliate.

 

1.20.                     Initial
Value

 

Initial Value means, with respect to a
Corresponding SAR, the option price per share of the related Option and, with
respect to an SAR granted independently of an Option, the Fair Market Value of
one share of Common Stock on the date of grant.

 

1.21.                     Named
Executive Officer

 

Named Executive Officer means a Participant
who, as of the last day of a taxable year, is the Chief Executive Officer of
the Company (or is acting in such capacity) or one of the four highest
compensated officers of the Company (other than the Chief Executive Officer) or
is otherwise one of the group of “covered employees”, as defined in the
Treasury Regulations promulgated under Code Section 162(m).

 

1.22.                     Option

 

Option means a stock option that entitles the
holder to purchase from the Company a stated number of shares of Common Stock
at the price set forth in an Agreement.

 

1.23.                     Participant

 

Participant means an employee of the Company
or an Affiliate, a non-employee member of the Board, or a person or entity that
provides services to the Company or an Affiliate and who satisfies the
requirements of Article IV and is selected by the Committee to receive an
Award.

 

1.24.                     Performance
Shares

 

Performance Shares means an award, in the
amount determined by the Committee, stated with reference to a specified number
of shares of Common Stock, that in accordance with the terms of an Agreement
entitles the holder to receive a cash payment or shares of Common Stock or a
combination thereof.

 

1.25.                     Person

 

“Person” means any human being, firm,
corporation, partnership, or other entity. 
“Person” also includes any human being, firm, corporation, partnership,
or other entity as defined in sections 13(d)(3) and 14(d)(2) of the Exchange
Act.  The term “Person” does not include
the Company or any Related Entity, and the term Person does not include any
employee-

 

5

 

benefit plan maintained by the Company or any
Related Entity, or any person or entity organized, appointed, or established by
the Company or any Related Entity for or pursuant to the terms of any such
employee-benefit plan, unless the Board determines that such an
employee-benefit plan or such person or entity is a “Person”.

 

1.26.                     Plan

 

Plan means this KMG America Corporation 2004
Equity Incentive Plan, in its current form and as hereafter amended.

 

1.27.                     Related
Entity

 

Related Entity means any entity that is part
of a controlled group of corporations or is under common control with the
Company within the meaning of Sections 1563(a), 414(b) or 414(c) of the Code.

 

1.28.                     SAR

 

SAR means a stock appreciation right that in
accordance with the terms of an Agreement entitles the holder to receive a
number of shares of Common Stock, or in the discretion of the Committee, a cash
award, or a combination of shares of Common Stock and cash, based on the
increase in the Fair Market Value of the shares underlying the stock
appreciation right during a stated period specified by the Committee.  References to “SARs” include both
Corresponding SARs and SARs granted independently of Options, unless the
context requires otherwise.

 

1.29.                     Stock
Award

 

Stock Award means shares of Common Stock
granted to a Participant under Article VIII.

 

1.30.                     Ten
Percent Shareholder

 

Ten Percent Shareholder means any individual
who (considering the stock attribution rules described in Code Section 424(d))
owns stock possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company or any Affiliate.

 

6

 

ARTICLE II

PURPOSES

 

The Plan is intended to assist the Company
and its Affiliates in recruiting and retaining individuals and other service
providers with ability and initiative by enabling such persons or entities to
participate in the future success of the Company and its Affiliates and to
associate their interests with those of the Company and its stockholders.  The Plan is intended to permit the grant of both
Options qualifying under Section 422 of the Code (“incentive stock options”)
and Options not so qualifying, and the grant of SARs, Stock Awards, Performance
Shares and Incentive Awards in accordance with the Plan and procedures that may
be established by the Committee.  No
Option that is intended to be an incentive stock option shall be invalid for
failure to qualify as an incentive stock option.  The proceeds received by the Company from the
sale of shares of Common Stock pursuant to this Plan shall be used for general
corporate purposes.

 

7

 

ARTICLE
III

ADMINISTRATION

 

The Plan shall be administered by the
Committee.  The Committee shall have
authority to grant Awards upon such terms (not inconsistent with the provisions
of this Plan) as the Committee may consider appropriate.  Such terms may include conditions (in
addition to those contained in this Plan) on the exercisability of all or any
part of an Option or SAR, the transferability or forfeitability of a Stock
Award, or the grant or settlement of Performance Shares or an Incentive
Award.  Notwithstanding any such
conditions, the Committee may, in its discretion, accelerate the time at which
any Option or SAR may be exercised, or the time at which a Stock Award may
become transferable or nonforfeitable or the time at which an Incentive Award
or award of Performance Shares may be settled. 
In addition, the Committee shall have complete authority to interpret
all provisions of this Plan; to prescribe the form of Agreements; to adopt,
amend, and rescind rules and regulations pertaining to the administration of
the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan.  The express
grant in the Plan of any specific power to the Committee shall not be construed
as limiting any power or authority of the Committee.  Any decision made, or action taken, by the
Committee in connection with the administration of this Plan shall be final and
conclusive.  The members of the Committee
shall not be liable for any act done in good faith with respect to this Plan or
any Agreement or Award.  All expenses of
administering this Plan shall be borne by the Company.

 

To the extent applicable law so permits, the
Committee, in its discretion, may delegate to one or more officers of the
Company all or part of the Committee’s authority and duties with respect to
Awards to be granted to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act and, after the
transition period prescribed by the regulations under Code Section 162(m), who
are not Named Executive Officers.  The
Committee may revoke or amend the terms of a delegation at any time but such
action shall not invalidate any prior actions of the Committee’s delegate or
delegates that were consistent with the terms of the Plan and the Committee’s
prior delegation.  If and to the extent
deemed necessary by the Board, all Awards granted to any individual who is
subject to the reporting and other provisions of Section 16 of the Exchange Act
shall be made by a Committee comprised solely of two or more directors, all of
whom are “non-employee directors” within the meaning of Rule 16b-3 under the
Exchange Act and, after the transition period prescribed by the regulations
under Code Section 162(m), all Awards granted to any individual who is a Named
Executive Officer shall be made by a Committee comprised solely of two or more
directors, all of whom are “outside directors” within the meaning of Code
Section 162(m).

 

The Company shall bear all expenses of
administering this Plan.  The Company
shall indemnify and hold harmless each person who is or shall have been a
member of the Committee acting as administrator of the Plan, or any delegate of
such, against and from any cost, liability, loss or expense that may be imposed
upon or reasonably incurred by such person in connection with or resulting from
any action, claim, suit, or proceeding to which such person may be a party or
in which such person may be involved by reason of any action taken or not taken
under the Plan and against and from any and all amounts paid by such person in
settlement thereof, with

 

8

 

the Company’s approval, or paid by such person
in satisfaction of any judgment in any such action, suit, or proceeding against
such person, provided he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. 
Notwithstanding the foregoing, the Company shall not indemnify and hold
harmless any such person if (i) applicable law or the Company’s Articles of
Incorporation or Bylaws prohibit such indemnification or (ii) such person did
not act in good faith and in a manner that such person believed to be
consistent with the Plan or such person’s conduct constituted gross negligence
or willful misconduct.  The foregoing
right of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company’s Articles of
Incorporation or Bylaws, as a matter of law or otherwise, or under any other
power that the Company may have to indemnify such person or hold him or her
harmless.  The provisions of the
foregoing indemnity shall survive indefinitely the term of this Plan.

 

9

 

ARTICLE IV

ELIGIBILITY

 

Any employee of the Company or an Affiliate
(including a corporation that becomes an Affiliate after the adoption of this
Plan) and any non-employee member of the Board is eligible to participate in
this Plan.  In addition, any other person
or entity that provides services to the Company or an Affiliate is eligible to
participate in this Plan if the Board, in its sole discretion, determines that
it is in the best interest of the Company.

 

10

 

ARTICLE V

COMMON STOCK SUBJECT TO PLAN

 

5.01.                     Common
Stock Issued

 

Upon the issuance of shares of Common Stock
pursuant to an Award, the Company may deliver to the Participant shares of
Common Stock or treasury shares from its authorized but unissued Common Stock.

 

5.02.                     Aggregate
Limit

 

The maximum aggregate number of shares of
Common Stock that may be issued under this Plan shall be the lesser of (i)
1,827,500 shares or (ii) that number that equals nine and one-half percent
(9.5%) of the outstanding shares of Common Stock as of the Initial Public
Offering.  One hundred percent (100%) of
such shares may be issued pursuant to Options or any other type of Award.  In addition, the maximum aggregate number of
shares of Common Stock that may be issued under this Plan and the foregoing
limits shall be subject to adjustment as provided in Article XI.

 

5.03.                     Individual
Limit

 

In any calendar year, no Participant may
receive Options, SARs, Stock Awards, Performance Shares or any combination of
each that relate to more than 350,000 shares. 
This Section 5.03 applies only with respect to Awards that are made at
the end of the transition period prescribed by the regulations under Code
Section 162(m).

 

5.04.                     Reallocation
of Shares

 

If an Option is terminated, in whole or in
part, for any reason other than its exercise or the exercise of a Corresponding
SAR that is settled with shares of Common Stock, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other
Awards to be granted under this Plan.  If
an SAR is terminated, in whole or in part, for any reason other than its
exercise that is settled with shares of Common Stock or the exercise of a
related Option, the number of shares of Common Stock allocated to the SAR or
portion thereof may be reallocated to other Awards to be granted under this
Plan.  If an award of Performance Shares
is terminated, in whole or in part, for any reason other than its settlement
with shares of Common Stock, the number of shares allocated to the Performance
Shares or portion thereof may be reallocated to other Awards to be granted
under this Plan.  If a Stock Award is
forfeited, in whole or in part, for any reason, the number of shares of Common
Stock allocated to the Stock Award or portion thereof may be reallocated to
other Awards to be granted under this Plan.

 

11

 

ARTICLE VI

OPTIONS

 

6.01.                     Grant

 

In accordance with the provisions of
Article IV, the Committee will designate each individual or entity to whom
an Option is to be granted and will specify the number of shares of Common
Stock covered by such grant.  Notwithstanding any other provision of the
Plan or any Agreement, the Committee may only grant an incentive stock option
to an individual who is an employee of the Company or an Affiliate.

 

6.02.                     Option
Price

 

The price per share of Common Stock purchased
on the exercise of an Option shall be determined by the Committee on the date
of grant, but shall not be less than the Fair Market Value of a share of Common
Stock on the date the Option is granted. 
However, if at the time of grant of an Option that is intended to be an
incentive stock option the Participant is a Ten Percent Shareholder, the price
per share of Common Stock purchased on the exercise of such Option shall not be
less than 110% of the Fair Market Value of a share of Common Stock on the date
the Option is granted.

 

6.03.                     Maximum
Option Period

 

The maximum period in which an Option may be
exercised shall be determined by the Committee on the date of grant, except
that no Option shall be exercisable after the expiration of ten years from the
date such Option was granted (five years from the date such Option was granted
in the event of an incentive stock option granted to a Ten Percent
Shareholder).

 

6.04.                     Nontransferability

 

Except as provided in Section 6.05, each
Option granted under this Plan shall be nontransferable except by will or by
the laws of descent and distribution.  In
the event of any transfer of an Option (by the Participant or his transferee),
the Option and any Corresponding SAR that relates to such Option must be
transferred to the same person or persons or entity or entities.  Except as provided in Section 6.05, during
the lifetime of the Participant to whom the Option is granted, the Option may
be exercised only by the Participant.  No
right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.

 

6.05.                     Transferable
Options

 

Section 6.04 to the contrary notwithstanding,
if the Agreement provides, an Option that is not an incentive stock option may
be transferred by a Participant to the Participant’s children, grandchildren,
spouse, one or more trusts for the benefit of such family members or a
partnership in which such family members are the only partners, on such terms
and conditions as appropriate so that such transferees are included in the
class of transferees who may rely on a Form S-8

 

12

 

Registration Statement under the Securities
Act of 1933 to sell shares issuable upon exercise of Options granted under the
Plan.  The holder of an Option
transferred pursuant to this Section shall be bound by the same terms and
conditions that governed the Option during the period that it was held by the
Participant; provided, however, that such transferee may not transfer the
Option except by will or the laws of descent and distribution.  In the event of any transfer of an Option (by
the Participant or his transferee), the Option and any Corresponding SAR that
relates to such Option must be transferred to the same person or persons or
entity or entities.

 

6.06.                     Exercise

 

Subject to the provisions of this Plan and if
an applicable Agreement does not provide for when Options shall become
exercisable, a Participant’s Options shall become exercisable with respect to
one-fourth of the shares of Common Stock subject to the Options on each of the
first, second, third and fourth anniversaries of the date of grant, provided
the Participant has been continuously employed by or has continuously provided
services to the Company or an Affiliate as of each such date.  Additionally, if the Committee so provides in
an applicable Agreement, the Participant’s outstanding Options shall become
exercisable with respect to one hundred percent (100%) of the shares of Common
Stock subject to the Options that have not previously become exercisable upon
(i) involuntary termination of the Participant’s employment or service by the
Company or an Affiliate other than for Cause, (ii) voluntary termination of the
Participant’s employment or service with the Company or an Affiliate by the
Participant for Good Reason, (iii) the Participant’s death while still employed
by or providing services to the Company or an Affiliate or (iv) the Participant’s
Disability while still employed by or providing services to the Company or an
Affiliate.  Notwithstanding the
foregoing, incentive stock options (granted under the Plan and all plans of the
Company and its Affiliates) may not be first exercisable in a calendar year for
shares of Common Stock having a Fair Market Value (determined as of the date
the Option is granted) exceeding $100,000. 
If the limitation is exceeded, the Options that cause the limitation to
be exceeded shall be treated as nonqualified stock options.  An Option shall be exercised in such a manner
and in compliance with such requirements as the Committee shall determine.  An Option granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
for which the Option could be exercised. 
A partial exercise of an Option shall not affect the right to exercise
the Option from time to time in accordance with this Plan and the applicable
Agreement with respect to the remaining shares subject to the Option.  The exercise of an Option shall result in the
termination of any Corresponding SAR to the extent of the number of shares with
respect to which the Option is exercised.

 

6.07.                     Payment

 

Subject to rules established by the Committee
and unless provided otherwise in an Agreement, payment of all or part of the
Option price may be made in cash, certified check, by tendering shares of
Common Stock (which, if acquired from the Company, have been held by the
Participant for at least six months) or by a broker-assisted cashless exercise.  If shares of Common Stock are used to pay all
or part of the Option price, the sum of the cash and cash equivalent and the
Fair Market Value (determined as of the day preceding the date of exercise) of

 

13

 

the shares surrendered must not be less than
the Option price of the shares for which the Option is being exercised.

 

6.08.                     Employee
Status

 

For purposes of determining the applicability
of Section 422 of the Code (relating to incentive stock options), or in
the event that the terms of any Option provide that it may be exercised only
during employment or continued service or within a specified period of time
after termination of employment or continued service, the Committee may decide
to what extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment or service.

 

6.09.                     Change in
Control

 

Notwithstanding any provision of any
Agreement, in the event of or in anticipation of a Change in Control, the
Committee in its discretion (i) may declare that some or all outstanding
Options previously granted under the Plan, whether or not then exercisable,
shall terminate as of a date before or on the Control Change Date without any
payment to the holder of the Option, provided the Committee gives prior written
notice to the Participants of such termination and gives such Participants the
right to exercise their outstanding Options before such date to the extent then
exercisable or (ii) may terminate before or on the Control Change Date some or
all outstanding Options previously granted under the Plan, whether or not then
exercisable, in consideration of payment to the holder of the Option, with
respect to each share of Common Stock for which the Option is then exercisable,
of the excess, if any, of the Fair Market Value on such date of the Common
Stock subject to the exercisable portion of the Option over the Option
price.  The payment described in (ii) above
may be made in any manner the Committee determines, including in cash, stock or
other property.  The Committee may take
the actions described in (i) or (ii) above with respect to Options that are not
then exercisable whether or not the Participant will receive any payment
therefor.  The Committee in its
discretion may take the actions described in (i) or (ii) above contingent on
consummation of the Change in Control and with respect to some or all
outstanding Options, whether or not then exercisable, or on an Option-by-Option
basis, which actions need not be uniform with respect to all outstanding
Options.  However, the Options shall not
be terminated to the extent that written provision is made for their
continuance, assumption or substitution by the Company or a successor employer
or its parent or subsidiary in connection with the Change in Control.  If the Committee so provides in an applicable
Agreement, a Participant’s outstanding Options shall be fully exercisable on
and after a Control Change Date or immediately before the date the Options will
be terminated in connection with the Change in Control, as described above,
provided the Participant has been continuously employed by or has continuously
provided services to the Company or an Affiliate as of such time.

 

6.10.                     Stockholder
Rights

 

No Participant shall have any rights as a
stockholder with respect to shares subject to his Option until the date of
exercise of such Option.

 

14

 

6.11.                     Disposition
of Shares

 

A Participant shall notify the Company of any
sale or other disposition of shares of Common Stock acquired pursuant to an
Option that was an incentive stock option if such sale or disposition occurs
(i) within two years of the grant of an Option or (ii) within one
year of the issuance of shares of Common Stock to the Participant.  Such notice shall be in writing and directed
to the Secretary of the Company.

 

6.12.                     No
Liability of Company

 

The Company shall not be liable to any
Participant or any other person if the Internal Revenue Service or any court or
other authority having jurisdiction over such matter determines for any reason
that an Option intended to be an incentive stock option and granted hereunder
does not qualify as an incentive stock option.

 

15

 

ARTICLE
VII

SARS

 

7.01.                     Grant

 

In accordance with the provisions of
Article IV, the Committee will designate each individual or entity to whom
SARs are to be granted and will specify the number of shares of Common Stock
covered by such grant.  For purposes of
the foregoing limit, an Option and Corresponding SAR shall be treated as a
single Award.  In addition, no
Participant may be granted Corresponding SARs (under this Plan and all other
incentive stock option plans of the Company and its Affiliates) that are
related to incentive stock options which are first exercisable in any calendar
year for shares of Common Stock having an aggregate Fair Market Value
(determined as of the date the related Option is granted) that exceeds
$100,000.

 

7.02.                     Maximum
SAR Period

 

The term of each SAR shall be determined by
the Committee on the date of grant, except that no SAR shall have a term of
more than ten years from the date such SAR was granted (five years for a
Corresponding SAR that is related to an incentive stock option and that is
granted to a Ten Percent Shareholder).

 

7.03.                     Nontransferability

 

Except as provided in Section 7.04, each SAR
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution.  In the
event of any such transfer, a Corresponding SAR and the related Option must be
transferred to the same person or persons or entity or entities.  Except as provided in Section 7.04, during
the lifetime of the Participant to whom the SAR is granted, the SAR may be
exercised only by the Participant.  No
right or interest of a Participant in any SAR shall be liable for, or subject
to, any lien, obligation, or liability of such Participant.

 

7.04.                     Transferable
SARs

 

Section 7.03 to the contrary notwithstanding,
if the Agreement so provides, an SAR, other than a Corresponding SAR that is
related to an incentive stock option, may be transferred by a Participant to
the Participant’s children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members
are the only partners, on such terms and conditions as appropriate so that such
transferees are included in the class of transferees who may rely on a Form S-8
Registration Statement under the Securities Act of 1933 to sell shares received
pursuant to Awards granted under the Plan. 
The holder of an SAR transferred pursuant to this Section shall be bound
by the same terms and conditions that governed the SAR during the period that
it was held by the Participant; provided, however, that such transferee may not
transfer the SAR except by will or the laws of descent and distribution.  In the event of any transfer of a
Corresponding SAR (by the Participant or his transferee), the Corresponding SAR
and the related Option must be transferred to the same person or person or
entity or entities.

 

16

 

7.05.                     Exercise

 

Subject to the provisions of this Plan and if
an applicable Agreement does not provide for when an SAR shall become
exercisable, an SAR shall become exercisable with respect to one-fourth of the
shares of Common Stock covered by the grant on each of the first, second, third
and fourth anniversaries of the date of grant, provided the Participant has been
continuously employed by or has continuously provided services to the Company
or an Affiliate as of each such date. 
Additionally, if the Committee so provides in an applicable Agreement,
an SAR shall become exercisable with respect to one hundred percent (100%) of
the shares of Common Stock covered by the grant that have not previously become
exercisable upon (i) involuntary termination of the Participant’s employment or
service by the Company or an Affiliate other than for Cause, (ii) voluntary
termination of the Participant’s employment or service with the Company or an
Affiliate by the Participant for Good Reason, (iii) the Participant’s death
while still employed by or providing services to the Company or an Affiliate or
(iv) the Participant’s Disability while still employed by or providing services
to the Company or an Affiliate. 
Notwithstanding the foregoing, an SAR may be exercised only to the
extent that the related Option (in the case of a Corresponding SAR) is
exercisable and only when the Fair Market Value of the Common Stock that is
subject to the exercise exceeds the Initial Value of the SAR.  An SAR granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
for which the SAR could be exercised.  A
partial exercise of an SAR shall not affect the right to exercise the SAR from
time to time in accordance with this Plan and the applicable Agreement with
respect to the remaining shares subject to the SAR.  The exercise of a Corresponding SAR shall result
in the termination of the related Option to the extent of the number of shares
with respect to which the SAR is exercised.

 

7.06.                     Change in
Control

 

Notwithstanding any provision of any
Agreement, in the event of or in anticipation of a Change in Control, the
Committee in its discretion (i) may declare that some or all outstanding SARs
previously granted under the Plan, whether or not then exercisable, shall
terminate as of a date before or on the Control Change Date without any payment
to the holder of the SAR, provided the Committee gives prior written notice to
the Participants of such termination and gives such Participants the right to
exercise their outstanding SARs before such termination date to the extent then
exercisable or (ii) may terminate before or on the Control Change Date some or
all outstanding SARs previously granted under the Plan, whether or not then
exercisable, in consideration of payment to the holder of the SAR, with respect
to each share of Common Stock for which the SAR is then exercisable, of the
excess, if any, of the Fair Market Value of such Common Stock on such date over
the Initial Value of the SAR.  The
payment described in (ii) above may be made in any manner the Committee determines,
including in cash, stock or other property. 
The Committee may take the actions described in (i) or (ii) above with
respect to SARs that are not then exercisable whether or not the Participant
will receive any payment therefor.  The
Committee in its discretion may take the actions described in (i) or (ii) above
contingent on consummation of the Change in Control and with respect to some or
all outstanding SARs, whether or not then exercisable, or on an SAR-by-SAR
basis, which actions need not be uniform with respect to all outstanding SARs.  Notwithstanding the foregoing, no

 

17

 

payment shall be made with respect to a
Corresponding SAR to the extent the Committee made a payment with respect to
the Option that relates to the Corresponding SAR.  No SARs shall be terminated to the extent that
written provision is made for their assumption, continuance or substitution by
the Company or a successor employer or its parent or subsidiary in connection
with the Change in Control.  If the
Committee so provides in an applicable Agreement, a Participant’s outstanding
SARs shall be fully exercisable on and after a Control Change Date or
immediately before the date the SARs will be terminated in connection with the
Change in Control, as described above, provided the Participant has been
continuously employed by or has continuously provided services to the Company
or an Affiliate as of such time.

 

7.07.                     Employee
Status

 

If the terms of any SAR provide that it may
be exercised only during employment or continued service or within a specified
period of time after termination of employment or continued service, the
Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability or other reasons shall not be deemed
interruptions of continuous employment or service.

 

7.08.                     Settlement

 

At the Committee’s discretion, the amount
payable as a result of the exercise of an SAR may be settled in cash, shares of
Common Stock, or a combination of cash and Common Stock.  No fractional share will be deliverable upon
the exercise of an SAR but a cash payment will be made in lieu thereof.

 

7.09.                     Stockholder
Rights

 

No Participant shall, as a result of
receiving an SAR, have any rights as a stockholder of the Company or any Affiliate
until the date that the SAR is exercised and then only to the extent that the
SAR is settled by the issuance of Common Stock.

 

18

 

ARTICLE VIII

STOCK AWARDS

 

8.01.                     Award

 

In accordance with the provisions of
Article IV, the Committee will designate each individual or entity to whom
a Stock Award is to be granted and will specify the number of shares of Common
Stock covered by such grant.

 

8.02.                     Vesting

 

The Committee, on the date of grant, may
prescribe that a Participant’s rights in the Stock Award shall be forfeitable
and nontransferable for a period of time and subject to such conditions as may
be set forth in the Agreement.  By way of
example and not of limitation, the Committee may prescribe that a Participant’s
rights in a Stock Award shall be forfeitable and nontransferable subject to (a)
the attainment of objectives stated with reference to the Company’s, an
Affiliate’s or a business unit’s attainment of objectives stated with respect
to performance criteria listed in Section 8.03, (b) the Participant’s
completion of a specified period of employment or service with the Company or
an Affiliate, (c) the Participant’s death, disability or retirement or (d)
satisfaction of a combination of any of the foregoing factors.  To the extent the Participant’s rights in a
Stock Award are forfeitable and nontransferable for a period of time, the
Committee on the date of grant shall determine the maximum period over which
the rights may become nonforfeitable and transferable, except that such period
shall not exceed ten years.  If an
applicable Agreement does not provide for when a Participant’s rights in a
Stock Award will become nonforfeitable and transferable, a Participant’s rights
in a Stock Award will become nonforfeitable and transferable with respect to
one-fourth of the shares of Common Stock covered by the grant on each of the
first, second, third and fourth anniversaries of the date of grant, provided
the Participant has been continuously employed by or has continuously provided
services to the Company or an Affiliate as of each such date.  Additionally, if the Committee so provides in
an applicable Agreement, an outstanding Stock Award shall become nonforfeitable
and transferable with respect to one hundred percent (100%) of the shares of
Common Stock covered by the grant upon (i) involuntary termination of the
Participant’s employment or service by the Company or an Affiliate other than
for Cause, (ii) voluntary termination of a Participant’s employment or service
with the Company or an Affiliate by the Participant for Good Reason, (iii) the
Participant’s death while still employed by or providing services to the
Company or an Affiliate or (iv) the Participant’s Disability while still
employed by or providing services to the Company or an Affiliate.

 

8.03.                     Performance Objectives

 

In accordance with Section 8.02, the
Committee may prescribe in an applicable Agreement that Stock Awards will
become nonforfeitable and transferable based on objectives stated with respect
to the Company’s, an Affiliate’s or a business unit’s (a) total stockholder
return; (b) total stockholder return as compared to total return (on a
comparable basis) of a publicly available index; (c) net income; (d) gross,
operating or net earnings before or after taxes; (e) funds from operations; (f)
earnings before interest expense, taxes, depreciation and

 

19

 

amortization; (g) operating margin; (h)
earnings per share; (i) return on equity, capital, assets, net assets, sales or
investment; (j) working capital; (k) ratio of debt to stockholders equity;
(l) revenue; (m) cash flow or cash flow per share; (n) book value per share;
(o) earnings growth; (p) sales growth; (q) customer growth; (r) Fair Market
Value of the Company or any Affiliate or shares of Common Stock; (s) share
price; (t) market share; (u) economic value added; (v) market value added; (w)
productivity; (x) level of expenses; (y) quality; (z) safety; (aa) customer
satisfaction or (bb) peer group comparisons of any of the aforementioned
performance objectives.  If the
Committee, on the date of grant, prescribes that a Stock Award shall become
nonforfeitable and transferable only upon the attainment of any of the above
performance objectives, the shares of Common Stock subject to such Stock Award
shall become nonforfeitable and transferable only to the extent that the
Committee certifies in writing that such objectives have been achieved.

 

8.04.                     Employee Status

 

In the event that the terms of any Stock
Award provide that shares shall become nonforfeitable and transferable
thereunder only after completion of a specified period of employment or
continuous service, the Committee may decide in each case to what extent leaves
of absence for governmental or military service, illness, temporary disability,
or other reasons shall not be deemed interruptions of continuous employment or
service.

 

8.05.                     Change in Control

 

Notwithstanding any provision of any
Agreement, in the event of or in anticipation of a Change in Control, the
Committee in its discretion may terminate before or on the Control Change Date
outstanding Stock Awards previously granted under the Plan that are not then
nonforfeitable and transferable without any payment to the holder of the Stock
Awards.  The Committee in its discretion
may take the action described in this Section 8.05 contingent on the
consummation of the Change in Control and with respect to some or all
outstanding Stock Awards or on a Stock Award-by-Stock Award basis, which
actions need not be uniform with respect to all outstanding Stock Awards.  The preceding sentences to the contrary
notwithstanding, the Stock Awards shall not be terminated to the extent that
written provision is made for their assumption, continuance or substitution by
the Company or a successor employer or its parent or subsidiary in connection
with the Change in Control.  If the
Committee so provides in an applicable Agreement, a Participant’s outstanding
Stock Awards shall become nonforfeitable and transferable on and after a
Control Change Date or immediately before the date the Stock Awards would
otherwise be terminated in connection with the Change in Control, as described
above, provided the Participant has been continuously employed by or has
continuously provided services to the Company or an Affiliate as of such time.

 

8.06.                     Stockholder Rights

 

Prior to their forfeiture (in accordance with
the applicable Agreement and while the shares of Common Stock granted pursuant
to the Stock Award may be forfeited and are nontransferable), a Participant
will have all rights of a stockholder with respect to a Stock Award, including
the right to receive dividends and vote the shares; provided, however, that

 

20

 

during such period (i) a Participant may not
sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of shares
granted pursuant to a Stock Award, (ii) the Company shall retain custody of the
certificates evidencing shares granted pursuant to a Stock Award, and (iii) the
Participant will deliver to the Company a stock power, endorsed in blank, with
respect to each Stock Award.  The
limitations set forth in the preceding sentence shall not apply after the
shares granted under the Stock Award are transferable and are no longer
forfeitable.

 

21

 

ARTICLE IX

PERFORMANCE SHARE AWARDS

 

9.01.                     Grant

 

In accordance with the provisions of
Article IV, the Committee will designate each individual or entity to whom
a grant of Performance Shares is to be made and will specify the number of
shares covered by such grant.

 

9.02.                     Earning the Award

 

The Committee, on the date of grant of the
Performance Shares, shall prescribe that the Performance Shares will be earned
and become payable subject to such conditions as are set forth in the
Agreement.  By way of example and not of
limitation, the Committee may prescribe that the Performance Shares will be
earned and become payable upon (a) the satisfaction of performance objectives
as described below, (b) the Participant’s completion of a specified period of
employment or service with the Company or an Affiliate, (c) the Participant’s
death, disability or retirement or (d) satisfaction of a combination of any of
the foregoing factors.  The performance
objectives may be stated with respect to the Company’s, an Affiliate’s or a
business unit’s (a) total stockholder return; (b) total stockholder return as
compared to total return (on a comparable basis) of a publicly available index;
(c) net income; (d) gross, operating or net earnings before or after taxes; (e)
funds from operations; (f) earnings before interest expense, taxes,
depreciation and amortization; (g) operating margin; (h) earnings per share;
(i) return on equity, capital, assets, net assets, sales or investment; (j)
working capital; (k) ratio of debt to stockholders equity; (l) revenue; (m)
cash flow or cash flow per share; (n) book value per share; (o) earnings
growth; (p) sales growth; (q) customer growth; (r) Fair Market Value of the
Company or any Affiliate or shares of Common Stock; (s) share price; (t) market
share; (u) economic value added; (v) market value added; (w) productivity;
(x) level of expenses; (y) quality; (z) safety; (aa) customer satisfaction
or (bb) peer group comparisons of any of the aforementioned performance
objectives.  If the Committee, on the
date of grant, prescribes that Performance Shares will be earned and payable
only upon the attainment of such performance objectives, no Performance Shares
will be considered earned and no payments will be made with respect to such
Performance Shares unless, and then only to the extent that, the Committee
certifies in writing that such objectives have been achieved.  If an applicable Agreement does not provide
for when a Participant’s rights in Performance Shares will be earned and become
payable, a Participant’s rights in Performance Shares will be earned and become
payable with respect to one-fourth of the shares of Common Stock covered by the
grant on each of the first, second, third and fourth anniversaries of the date
of grant, provided the Participant has been continuously employed by or has
continuously provided services to the Company or an Affiliate as of each such
date.  Additionally, if the Committee so
provides in an applicable Agreement, outstanding Performance Shares shall be
earned and become payable with respect to one hundred percent (100%) of the
shares of Common Stock covered by the grant upon (i) involuntary termination of
the Participant’s employment or service by the Company or an Affiliate other
than for Cause, (ii) voluntary termination of a Participant’s employment or
service with the Company or an Affiliate by the Participant for Good Reason,
(iii) the Participant’s death while still

 

22

 

employed by or providing services to the
Company or an Affiliate or (iv) the Participant’s Disability while still
employed by or providing services to the Company or an Affiliate.

 

9.03.                     Maximum Performance Share Award
Period

 

The Committee, on the date of grant, shall
determine the maximum period over which Performance Share Awards may be earned,
except that such period shall not exceed ten years.

 

9.04.                     Payment

 

In the discretion of the Committee, the
amount payable when an award of Performance Shares is earned may be settled in
cash, by the issuance of shares of Common Stock, or a combination thereof.  A fractional share of Common Stock shall not
be deliverable when an award of Performance Shares is earned, but a cash
payment will be made in lieu thereof.

 

9.05.                     Stockholder Rights

 

No Participant shall, as a result of
receiving a grant of Performance Shares, have any rights as a stockholder until
and then only to the extent that the Performance Shares are earned and settled
in shares of Common Stock.  After
Performance Shares are earned and settled in shares, a Participant will have
all the rights of a stockholder with respect to such shares, including the
right to receive dividends and vote the shares.

 

9.06.                     Nontransferability

 

Except as provided in Section 9.07
Performance Shares granted under this Plan shall be nontransferable except by
will or by the laws of descent and distribution.  No right or interest of a Participant in any
Performance Shares shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.

 

9.07.                     Transferable Performance Shares

 

Section 9.06 to the contrary
notwithstanding, if the Agreement so provides, an award of Performance Shares
may be transferred by a Participant to the Participant’s children,
grandchildren, spouse, one or more trusts for the benefit of such family
members or a partnership in which such family members are the only partners, on
such terms and conditions as appropriate so that such transferees are included
in the class of transferees who may rely on a Form S-8 Registration Statement
under the Securities Act of 1933 to sell shares received pursuant to Awards granted
under the Plan.  The holder of
Performance Shares transferred pursuant to this Section shall be bound by the
same terms and conditions that governed the Performance Shares during the
period that they were held by the Participant; provided, however that such
transferee may not transfer Performance Shares except by will or the laws of
descent and distribution.

 

9.08.                     Employee Status

 

In the event that the terms of any
Performance Share award provide that no payment will be made unless the
Participant completes a stated period of employment or continued service, the

 

23

 

Committee may decide to what extent leaves of
absence for government or military service, illness, temporary disability, or
other reasons shall not be deemed interruptions of continuous employment or
service.

 

9.09.                     Change in Control

 

Notwithstanding any provision of any
Agreement, in the event of or in anticipation of a Change in Control, the
Committee in its discretion may terminate before or on the Control Change Date
some or all outstanding Performance Shares previously granted under the Plan
that are not then earned and payable without any payment to the holder of the
Performance Shares.  The Committee in its
discretion may take the action described in this Section 9.09 contingent on
consummation of the Change in Control and with respect to some or all
outstanding Performance Shares or on a Performance Share-by-Performance Share
basis, which actions need not be uniform with respect to all outstanding
Performance Shares.  The Performance
Shares shall not be terminated to the extent that written provision is made for
their assumption, continuance or substitution by the Company or a successor
employer or its parent or subsidiary in connection with the Change in
Control.  If the Committee so provides in
an applicable Agreement, a Participant’s outstanding Performance Shares shall
be deemed earned (and any shares of Common Stock to be paid in settlement of
such Performance Shares shall be nonforfeitable and transferable) as of a
Control Change Date or immediately before the date the Performance Shares would
otherwise be terminated in connection with the Change in Control, as described
above, provided the Participant has been continuously employed by or has
continuously provided services to the Company or an Affiliate as of such time.

 

24

 

ARTICLE X

INCENTIVE AWARDS

 

10.01.              Grant

 

The Committee shall designate Participants to
whom Incentive Awards are to be granted. 
All Incentive Awards shall be finally determined exclusively by the
Committee under the procedures established by the Committee; provided, however,
that no Participant may receive an Incentive Award payment in any calendar year
that exceeds $750,000.

 

10.02.              Terms and Conditions

 

The Committee, on the date of grant of an
Incentive Award, shall specify in the applicable Agreement the terms and
conditions which govern the grant.  By
way of example and not of limitation, the Committee may prescribe that the
Incentive Award shall be earned and payable upon (a) the satisfaction of
performance objectives as described below, (b) the Participant’s completion of
a specified period of employment or service with the Company or an Affiliate,
(c) the Participant’s death, disability or retirement or (d) satisfaction of a
combination of any of the foregoing factors. 
The performance objectives may be stated with respect to the Company’s,
an Affiliate’s or a business unit’s (a) total stockholder return; (b) total
stockholder return as compared to total return (on a comparable basis) of a
publicly available index; (c) net income; (d) gross, operating or net earnings
before or after taxes; (e) funds from operations; (f) earnings before
interest expense, taxes, depreciation and amortization; (g) operating margin;
(h) earnings per share; (i) return on equity, capital, assets, net assets,
sales or investment; (j) working capital; (k) ratio of debt to
stockholders equity; (l) revenue; (m) cash flow or cash flow per share; (n)
book value per share; (o) earnings growth; (p) sales growth; (q) customer
growth; (r) Fair Market Value of the Company or any Affiliate or shares of
Common Stock; (s) share price; (t) market share; (u) economic value added;
(v) market value added; (w) productivity; (x) level of expenses; (y)
quality; (z) safety; (aa) customer satisfaction or (bb) peer group
comparisons of any of the aforementioned performance objectives.  If the Committee, on the date of grant,
prescribes that the Incentive Awards will be earned and payable only upon the
attainment of such performance objectives, no Incentive Awards will be
considered earned and no payments will be made with respect to such Incentive
Awards unless, and then only to the extent that, the Committee certifies in
writing that such objectives have been achieved.  If an applicable Agreement does not provide
for when a Participant’s rights in an Incentive Award will become earned and
payable, a Participant’s rights in an Incentive Award will be earned and payable
with respect to one-fourth of the value of the Incentive Award on each of the
first, second, third and fourth anniversaries of the date of grant, provided
the Participant has been continuously employed by or has continuously provided
services to the Company or an Affiliate as of each such date.  Additionally, if the Committee so provides in
an applicable Agreement, an outstanding Incentive Award shall be earned and
payable with respect to one hundred percent (100%) of the value of the
Incentive Award that was not previously earned and payable upon
(i) involuntary termination of the Participant’s employment or service by
the Company or an Affiliate other than for Cause, (ii) voluntary termination of
a Participant’s employment or service with the Company or an Affiliate by the
Participant for Good Reason,

 

25

 

(iii) the Participant’s death while still
employed by or providing services to the Company or an Affiliate or (iv) the
Participant’s Disability while still employed by or providing services to the
Company or an Affiliate.

 

10.03.              Maximum Incentive Award Period

 

The Committee, at the time an Incentive Award
is made, shall determine the maximum period over which the Incentive Award may
be earned, except that such period shall not exceed ten years.

 

10.04.              Nontransferability

 

Except as provided in Section 10.05,
Incentive Awards granted under this Plan shall be nontransferable except by
will or by the laws of descent and distribution.  No right or interest of a Participant in an
Incentive Award shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.

 

10.05.              Transferable Incentive Awards

 

Section 10.04 to the contrary
notwithstanding, if so provided in an Agreement, an Incentive Award may be
transferred by a Participant to the Participant’s children, grandchildren,
spouse, one or more trusts for the benefit of such family members or to a
partnership in which such family members are the only partners, on such terms
and conditions as appropriate so that such transferees are included in the
class of transferees who may rely on a Form S-8 Registration Statement under
the Securities Act of 1933 to sell shares received pursuant to Awards granted
under the Plan.  The holder of an Incentive
Award transferred pursuant to this Section shall be bound by the same terms and
conditions that governed the Incentive Award during the period that it was held
by the Participant; provided, however, that such transferee may not transfer
the Incentive Award except by will or the laws of descent and distribution.

 

10.06.              Employee Status

 

If the terms of an Incentive Award provide
that a payment will be made thereunder only if the Participant completes a
stated period of employment or continuous service, the Committee may decide to
what extent leaves of absence for governmental or military service, illness,
temporary disability or other reasons shall not be deemed interruptions of
continuous employment or service.

 

10.07.              Change in Control

 

Notwithstanding any provision of any
Agreement, in the event of or in anticipation of a Change in Control, the
Committee in its discretion may terminate before or on the Control Change Date
some or all outstanding Incentive Awards previously granted under the Plan that
are not then earned and payable without any payment to the holder of the
Incentive Award.  The Committee in its
discretion may take the action described in this Section contingent on
consummation of the Change in Control and with respect to some or all outstanding
Incentive

 

26

 

Awards or on an Incentive Award-by-Incentive
Award basis, which actions need not be uniform with respect to all outstanding
Incentive Awards.  The Incentive Awards
shall not be terminated to the extent that written provision is made for their
assumption, continuance or substitution by the Company or a successor employer
or its parent or subsidiary in connection with the Change in Control.  If the Committee so provides in an applicable
Agreement, a Participant’s outstanding Incentive Awards shall be deemed earned
(and shares of Common Stock to be paid in settlement of such Incentive Awards
shall be nonforfeitable and transferable) as of a Control Change Date or
immediately before the date the Incentive Awards would otherwise be terminated
in connection with the Change in Control, as described above, provided the
Participant has been continuously employed by or has continuously provided
services to the Company or an Affiliate as of such time.

 

10.08.              Stockholder
Rights

 

No Participant shall, as a result of
receiving an Incentive Award, have any rights as a stockholder of the Company
or any Affiliate on account of such Incentive Award, unless and until the
Incentive Award is earned and shares of Common Stock paid in settlement
thereof.  After an Incentive Award is
earned and settled in shares, a Participant will have all the rights of a
stockholder with respect to such shares, including the right to receive
dividends and vote the shares.

 

27

 

ARTICLE XI

ADJUSTMENT UPON CHANGE IN COMMON STOCK

 

The maximum number of shares that may be
issued pursuant to Awards, the terms of outstanding Awards, and the per
individual limitations on the number of shares of Common Stock that may be
issued pursuant to for which Awards shall be adjusted as the Board shall
determine to be equitably required in the event that (i) the Company (a)
effects one or more stock dividends, stock split-ups, subdivisions or consolidations
of shares or (b) engages in a transaction described under Section 424 of
the Code or (ii) there occurs any other event which, in the judgment of the
Board, necessitates such action.  In
addition, the Committee may make such other adjustments to the terms of any
Awards to the extent equitable and necessary to prevent an enlargement or
dilution of the Participant’s rights thereunder as a result of any such event
or similar transaction.  Any
determination made under this Article XI by the Board shall be final and
conclusive.

 

The issuance by the Company of stock of any
class, or securities convertible into stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of stock or
obligations of the Company convertible into such stock or other securities,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the maximum number of shares that may be issued pursuant to Awards
may be granted, the per individual limitations on the number of shares that may
be issued pursuant to Awards, or the terms of outstanding Awards.

 

The Committee may grant Awards in
substitution for performance shares, incentive awards, stock awards, stock
options, stock appreciation rights, or similar awards held by an individual who
becomes an employee of the Company or an Affiliate in connection with a
transaction described in the first paragraph of this Article XI.  Notwithstanding any provision of the Plan
(other than the limitation of Section 5.02), the terms of such substituted
Awards shall be as the Committee, in its discretion, determines is appropriate.

 

28

 

ARTICLE XII

COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES

 

12.01.              Compliance.

 

No Option or SAR shall be exercisable, no
shares of Common Stock shall be issued, no certificates for shares of Common
Stock shall be delivered, and no payment shall be made under this Plan except
in compliance with all applicable federal and state laws and regulations
(including, without limitation, withholding tax requirements), any listing
agreement to which the Company is a party, and the rules of all domestic stock
exchanges on which the Company’s shares may be listed.  The Company shall have the right to rely on
an opinion of its counsel as to such compliance.  Any stock certificate evidencing shares of
Common Stock issued pursuant to an Award may bear such legends and statements
as the Committee may deem advisable to assure compliance with federal and state
laws and regulations.  No Option or SAR
shall be exercisable, no Stock Award or Performance Share shall be granted, no
shares of Common Stock shall be issued, no certificate for shares of Common
Stock shall be delivered, and no payment shall be made under this Plan until
the Company has obtained such consent or approval as the Committee may deem
advisable from regulatory bodies having jurisdiction over such matters.

 

12.02.              Postponement of Exercise or Payment.

 

The Committee may postpone any grant,
exercise, vesting or payment of an Award for such time as the Committee in its
sole discretion may deem necessary in order to permit the Company (i) to
effect, amend or maintain any necessary registration of the Plan or the shares
of Common Stock issuable pursuant to the Award under the securities laws; (ii)
to permit any action to be taken in order to (A) list such shares of Common
Stock or other shares of stock of the Company on a stock exchange if shares of
Common Stock or other shares of stock of the Company are not then listed on
such exchange or (B) comply with restrictions or regulations incident to the
maintenance of a public market for its shares of Common Stock or other shares
of stock of the Company, including any rules or regulations of any stock
exchange on which the shares of Common Stock or other shares of stock of the
Company are listed; (iii) to determine that such shares of Common Stock in the
Plan are exempt from such registration or that no action of the kind referred
to in (ii)(B) above needs to be taken; (iv) to comply with any other applicable
law, including without limitation, securities laws; (v) during any such time
the Company or any Affiliate is prohibited from doing any of such acts under
applicable law, including without limitation, during the course of an
investigation of the Company or any Affiliate, or under any contract, loan
agreement or covenant or other agreement to which the Company or any Affiliate
is a party or (vi) to otherwise comply with any prohibition on such acts or
payments during any applicable blackout period; and the Company shall not be
obligated by virtue of any terms and conditions of any Agreement or any
provision of the Plan to recognize the grant, exercise, vesting or payment of
an Award or to grant, sell or issue shares of Common Stock or make any such
payments in violation of the securities laws or the laws of any government
having jurisdiction thereof or any of the provisions hereof.  Any such postponement shall not extend the
term of the Award and neither the Company nor its directors and officers nor
the Committee shall have any obligation or liability to any Participant or to
any other person with

 

29

 

respect to shares of Common Stock or payments
as to which the Award shall lapse because of such postponement.

 

12.03.              Forfeiture of Payment.

 

A Participant shall be required to forfeit
any and all rights under Awards or to reimburse the Company for any payment
under any Award (with interest as necessary to avoid imputed interest or
original issue discount under the Code or as otherwise required by applicable
law) to the extent applicable law requires such forfeiture or reimbursement.

 

30

 

ARTICLE XIII

GENERAL PROVISIONS

 

13.01.              Effect on Employment and Service

 

Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof), shall confer upon any individual or entity any right to continue in
the employ or service of the Company or an Affiliate or in any way affect any
right and power of the Company or an Affiliate to terminate the employment or
service of any individual or entity at any time with or without assigning a
reason therefor.

 

13.02.              Unfunded Plan

 

This Plan, insofar as it provides for Awards,
shall be unfunded, and the Company shall not be required to segregate any
assets that may at any time be represented by Awards under this Plan.  Any liability of the Company to any person
with respect to any Award under this Plan shall be based solely upon any
contractual obligations that may be created pursuant to this Plan.  No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.

 

13.03.              Rules of Construction

 

Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference.  The reference to any statute, regulation, or
other provision of law shall be construed to refer to any amendment to or
successor of such provision of law.

 

13.04.              Tax Withholding and Reporting.

 

Unless an Agreement provides otherwise, each
Participant shall be responsible for satisfying in cash or cash equivalent
acceptable to the Committee any income and employment (including without
limitation Social Security and Medicare) tax withholding obligations
attributable to participation in the Plan and the grant, exercise, vesting or
payment of Awards granted thereunder.  In
accordance with procedures that the Committee establishes, the Committee, to
the extent applicable law permits, may allow a Participant to pay such amounts
(i) in cash, (ii) by certified check, (iii) by tendering shares of Common
Stock (which, if acquired from the Company, have been held by the Participant
for at least six months) and which do not exceed the Company’s minimum
statutory withholding obligation, (iv) by a broker-assisted cashless exercise
or (v) by any combination of the aforementioned methods of payment.  The Company shall comply with all such
reporting and other requirements relating to the administration of this Plan
and the grant, exercise, vesting or payment of any Award hereunder as applicable
law requires.

 

13.05.              Reservation of Shares.

 

The Company, during the term of this Plan,
shall at all times reserve and keep available such number of shares of Common
Stock as shall be sufficient to satisfy the requirements of the

 

31

 

Plan.  Additionally, the Company, during the term of
this Plan, shall use its best efforts to seek to obtain from appropriate
regulatory agencies any requisite authorizations needed in order to issue and
to sell such number of shares of Common Stock as shall be sufficient to satisfy
the requirements of the Plan.  However,
the inability of the Company to obtain from any such regulatory agency the
requisite authorizations the Company’s counsel deems to be necessary for the
lawful issuance and sale of any shares of Common Stock hereunder, or the
inability of the Company to confirm to its satisfaction that any issuance and
sale of any shares of Common Stock hereunder will meet applicable legal
requirements, shall relieve the Company of any liability in respect to the failure
to issue or to sell such shares of Common Stock as to which such requisite
authority shall not have been obtained.

 

13.06.              Governing Law.

 

This Plan and all Awards granted hereunder
shall be governed by the laws of the Commonwealth of Virginia, except to the
extent federal law applies.

 

13.07.              Other Actions.

 

Nothing in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, by way of illustration and not by way of limitation, the right to
grant options, stock appreciation rights, stock awards, incentive awards or
performance shares for proper corporate purposes otherwise than under the Plan
to any employee or to any other person, firm, corporation, association or other
entity, or to grant options, stock appreciation rights, stock awards, incentive
awards or performance shares to, or assume such awards of any person in
connection with, the acquisition, purchase, lease, merger, consolidation,
reorganization or otherwise, of all or any part of the business and assets of
any person, firm, corporation, association or other entity.

 

13.08.              Other Conditions.

 

The Committee, in its discretion, may, as a
condition to the grant, exercise, payment or settlement of an Award, require
the Participant on or before the date of grant, exercise, payment or settlement
of the Award to enter into (i) a covenant not to compete (including a
confidentiality, non-solicitation, non-competition or other similar agreement)
with the Company or any Affiliate, which may become effective on the date of
termination of employment or service of the Participant with the Company or any
Affiliate or any other date the Committee may specify and shall contain such
terms and conditions as the Committee shall otherwise specify, (ii) an
agreement to cancel any other employment agreement, service agreement, fringe
benefit or compensation arrangement in effect between the Company or any
Subsidiary and such Participant and/or (iii) a shareholders’ agreement with
respect to shares of Common Stock to be issued pursuant to the Award.  If the Participant shall fail to enter into
any such agreement at the Committee’s request, then no Award shall be granted,
exercised, paid or settled and the number of shares of Common Stock that would
have been subject to such Award, if any, shall be added to the remaining shares
of Common Stock available under the Plan.

 

32

 

13.09.              Forfeiture Provisions.

 

Notwithstanding any other provisions of the
Plan or any Agreement, all rights to any Award that a Participant has will be
immediately discontinued and forfeited, and the Company shall not have any
further obligation hereunder to the Participant with respect to any Award and
the Award will not be exercisable (whether or not previously exercisable) or
become vested or payable on and after the time the Participant is discharged
from employment or service with the Company or any Affiliate for Cause.

 

33

 

ARTICLE XIV

AMENDMENT

 

The Board may amend or terminate this Plan at
any time; provided, however, that no amendment may adversely impair the rights
of a Participant with respect to outstanding Awards without the Participant’s
consent.  In addition, an amendment will
be contingent on approval of the Company’s stockholders, to the extent required
by law or by the rules of any stock exchange on which the Company’s securities
are traded or if the amendment would (i) increase the benefits accruing to
Participants under the Plan, including without limitation, any amendment to the
Plan or any Agreement to permit a repricing or a decrease in the exercise price
of any outstanding Options, (ii) increase the aggregate number of shares of
Common Stock that may be issued under the Plan, (iii) modify the requirements
as to eligibility for participation in the Plan or, (iv) after the transition
period prescribed by the regulations under Code Section 162(m), change the
performance objectives set forth in Sections 8.03, 9.02 or 10.02.

 

34

 

ARTICLE XV

DURATION OF PLAN

 

No Award may be granted under this Plan after
December 14, 2014.  Awards granted before
that date shall remain valid in accordance with their terms.

 

35

 

ARTICLE XVI

EFFECTIVE DATE OF PLAN

 

Awards may be granted under this Plan upon
its adoption by the Board; provided that, this Plan shall not be effective
unless approved by unanimous consent of the Company’s stockholders or by a majority
of the votes cast by the Company’s stockholders, voting either in person or by
proxy, at a duly held stockholders’ meeting at which a stockholder quorum is
present, before December 14, 2004.

 

36

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