Document:

exv4w12

 

EXHIBIT 4.12

RIGHTS AGREEMENT

DATED AS OF AUGUST 25, 2005

BY AND BETWEEN

SMITH & WESSON HOLDING CORPORATION

AND

INTERWEST TRANSFER COMPANY, INC.,

AS RIGHTS AGENT

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	Section 1. Definitions
	 	 	1	 
	 
	 	 	 	 
	Section 2. Appointment of Rights Agent
	 	 	4	 
	 
	 	 	 	 
	Section 3. Issue of Right Certificates
	 	 	5	 
	 
	 	 	 	 
	Section 4. Form of Right Certificates
	 	 	6	 
	 
	 	 	 	 
	Section 5. Countersignature and Registration
	 	 	6	 
	 
	 	 	 	 
	Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates
	 	 	7	 
	 
	 	 	 	 
	Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights
	 	 	7	 
	 
	 	 	 	 
	Section 8. Cancellation and Destruction of Right Certificates
	 	 	8	 
	 
	 	 	 	 
	Section 9. Availability of Preferred Shares
	 	 	9	 
	 
	 	 	 	 
	Section 10. Preferred Shares Record Date
	 	 	9	 
	 
	 	 	 	 
	Section 11. Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights
	 	 	10	 
	 
	 	 	 	 
	Section 12. Certificate of Adjusted Purchase Price or Number of Shares
	 	 	16	 
	 
	 	 	 	 
	Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power
	 	 	16	 
	 
	 	 	 	 
	Section 14. Fractional Rights and Fractional Shares
	 	 	19	 
	 
	 	 	 	 
	Section 15. Rights of Action
	 	 	20	 
	 
	 	 	 	 
	Section 16. Agreement of Right Holders
	 	 	20	 
	 
	 	 	 	 
	Section 17. Right Certificate Holder Not Deemed a Stockholder
	 	 	20	 
	 
	 	 	 	 
	Section 18. Concerning the Rights Agent
	 	 	20	 
	 
	 	 	 	 
	Section 19. Merger or Consolidation or Change of Name of Rights Agent
	 	 	21	 
	 
	 	 	 	 
	Section 20. Duties of Rights Agent
	 	 	21	 
	 
	 	 	 	 
	Section 21. Change of Rights Agent
	 	 	23	 
	 
	 	 	 	 
	Section 22. Issuance of New Right Certificates
	 	 	24	 
	 
	 	 	 	 
	Section 23. Redemption
	 	 	24	 

 

 

TABLE OF CONTENTS

(Continued)

	 	 	 	 	 
	 	 	Page
	Section 24. Exchange
	 	 	24	 
	 
	 	 	 	 
	Section 25. Notice of Certain Events
	 	 	25	 
	 
	 	 	 	 
	Section 26. Notices
	 	 	26	 
	 
	 	 	 	 
	Section 27. Supplements and Amendments
	 	 	27	 
	 
	 	 	 	 
	Section 28. Successors
	 	 	27	 
	 
	 	 	 	 
	Section 29. Benefits of this Agreement
	 	 	27	 
	 
	 	 	 	 
	Section 30. Determinations and Actions by the Board of Directors
	 	 	27	 
	 
	 	 	 	 
	Section 31. Severability
	 	 	28	 
	 
	 	 	 	 
	Section 32. Governing Law
	 	 	28	 
	 
	 	 	 	 
	Section 33. Counterparts
	 	 	28	 
	 
	 	 	 	 
	Section 34. Descriptive Headings
	 	 	28	 

 ii 

 

 

EXHIBIT INDEX

	 	 	 	 	 
	Exhibit A — Form of Certificate of Designation 
	 	 	A-1	 
	Exhibit B — Form of Right Certificate 
	 	 	B-1	 
	Exhibit C — Summary of Rights to Purchase Preferred Shares 
	 	 	C-1	 

 iii 

 

 

RIGHTS AGREEMENT

     RIGHTS AGREEMENT, dated as of August 25, 2005, between Smith & Wesson Holding Corporation, a
Nevada corporation (the “Company”), and Interwest Transfer Company, Inc., a Utah corporation, as
rights agent (the “Rights Agent”).

     The Board of Directors of the Company has authorized and declared a dividend of one preferred
share purchase right (a “Right” and, collectively, the “Rights”) for each Common Share (as
hereinafter defined) of the Company outstanding as of the Close of Business (as defined below) on
August 26, 2005 (the “Record Date”), each Right representing the right to purchase one
one-thousandth of a Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the issuance of one Right
(subject to adjustment as provided herein) with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date
and the Final Expiration Date (as such terms are hereinafter defined).

     Accordingly, for and in consideration of the premises and the mutual agreements set forth
herein, and for other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

     Section 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings
indicated (other terms may be defined elsewhere in this Agreement):

          (a) “Acquiring Person” shall mean any Person who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding, but shall not include an Exempt Person (as such term is hereinafter
defined); provided, however, that (i) if the Board of Directors of the Company determines in good
faith that a Person who would otherwise be an “Acquiring Person” (as defined in this Section
1(a)) became or has become such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned an amount or percentage of Common Shares that would
otherwise cause such Person to be an “Acquiring Person” or (B) such Person was aware of the extent
of its Beneficial Ownership of Common Shares 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, then such Person shall not be deemed to be or to have become an
“Acquiring Person” for any purposes of this Agreement unless and until such Person shall have
failed to divest itself, as soon as practicable (as determined, in good faith, by the Board of
Directors of the Company), of Beneficial Ownership of a sufficient number of Common Shares so that
such Person would no longer otherwise qualify as an “Acquiring Person” under this Agreement; (ii)
if, as of the date hereof or at any time after the date hereof and prior to the first public
announcement of the adoption of this Agreement, any Person (other than a Grandfathered Person, as
defined and addressed in clause (iii) immediately below) is or becomes the Beneficial Owner of 15%
or more of the Common Shares then outstanding (an “Existing 15% Holder”), such Person shall not be
deemed to be or to become an “Acquiring Person” unless and until such time as such Person shall,
after the first public announcement of the adoption of this Agreement, become the Beneficial Owner
of an additional 1% or more of the Common Shares then outstanding (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding Common Shares or pursuant
to a split or subdivision of the outstanding Common Shares), unless, upon becoming the Beneficial
Owner of such additional Common Shares, such Person is not then the Beneficial Owner of 15% or more
of the Common Shares then outstanding; provided, however, that the exception (from qualification as
an “Acquiring Person” under this Agreement) provided in this clause
(ii) shall not apply to any Person who or which is not an Affiliate or Associate of an
Existing 15% Holder on the date of the first public announcement of the adoption of this Agreement
and who or which

 

 

subsequently acquires direct or indirect control of an Existing 15% Holder without
the prior written approval of the Board of Directors of the Company; (iii) if, as of August 9,
2005, any individual (other than an Existing 15% Holder, as defined and addressed in clause (ii)
immediately above) who on such date both (A) was a member of the Board of Directors of the Company
and (B) beneficially owned 15% or more of the Common Shares then outstanding (a “Grandfathered
Person”), such individual shall not be deemed to be, to have become or to become an “Acquiring
Person” unless and until such time as such Person shall, after August 9, 2005, become the
Beneficial Owner of an additional 1% or more of the Common Shares then outstanding (other than
pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Shares
or pursuant to a split or subdivision of the outstanding Common Shares), unless, upon becoming the
Beneficial Owner of such additional Common Shares, such Person is not then the Beneficial Owner of
15% or more of the Common Shares then outstanding; and (iv) no Person shall become an “Acquiring
Person” solely as the result of the purchase or acquisition of Common Shares by the Company which,
by reducing the number of shares outstanding, increases the proportionate number of Common Shares
beneficially owned by such Person to 15% (or such other percentage as would otherwise result in
such person becoming an “Acquiring Person” under this Section 1(a)) or more of the Common
Shares then outstanding; provided, however, that if a Person shall become the Beneficial Owner of
15% (or such other percentage) or more of the Common Shares then outstanding by reason of such
share purchase or acquisition by the Company (as addressed in clause (iv) of this Section
1(a)) and such Person shall thereafter become the Beneficial Owner of any additional Common
Shares (other than pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares or pursuant to a split or subdivision of the outstanding Common Shares),
then such Person shall be deemed to be an “Acquiring Person” unless upon becoming the Beneficial
Owner of such additional Common Shares such Person does not beneficially own 15% (or such other
percentage as would otherwise result in such person becoming an “Acquiring Person” under this
Section 1(a)) or more of the Common Shares then outstanding. For all purposes of this
Agreement, any calculation of the number of Common Shares outstanding at any particular time,
including for purposes of determining the particular percentage of such outstanding Common Shares
of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act, as in effect on
the date hereof.

          (b) “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act as in effect on the date of this Agreement.

          (c) “Associate” shall have the meaning ascribed to such term in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act as in effect on the date of this Agreement.

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

               (i) which such Person or any of such Person’s Affiliates or Associates beneficially owns,
directly or indirectly;

               (ii) which such Person or any of such Person’s Affiliates or Associates has (A) the right to
acquire (whether such right is exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide underwritten public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, (x) securities tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities
are accepted for purchase or exchange, (y) securities which such Person has a right to acquire upon
the exercise of Rights

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at any time prior to the time that any Person becomes an Acquiring Person,
or (z) securities issuable upon the exercise of Rights from and after the time that any Person
becomes an Acquiring Person if such Rights were acquired by such Person or any of such Person’s
Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (“Original Rights”) or pursuant to Section 11(i) or
Section 11(n) with respect to an adjustment to Original Rights; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

               (iii) which are beneficially owned, directly or indirectly, by any other Person and with
respect to which such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to Section
1(d)(ii)(B) hereof) or disposing of any securities of the Company.

          Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the
phrase “then outstanding,” when used with reference to a Person’s Beneficial Ownership of
securities of the Company, shall mean the number of such securities then issued and outstanding
together with the number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.

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

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

          (g) “Common Shares” when used with reference to the Company shall mean the shares of common
stock, par value $0.001 per share, of the Company. “Common Shares” when used with reference to any
Person other than the Company shall mean the capital stock (or, in the case of a non-corporation
entity, equivalent or similar equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.

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

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

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

          (k) “Exempt Person” shall mean the Company or any Subsidiary (as such term is hereinafter
defined) of the Company, in each case including, without limitation, in its fiduciary capacity, or
any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity or
trustee holding Common Shares for or pursuant to the terms of any such plan or for the purpose
of

3

 

funding any such plan or funding other employee benefits for employees of the Company or of any
Subsidiary of the Company.

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

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

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

          (o) “Preferred Shares” shall mean shares of Series A Junior Participating Preferred Stock, par
value $0.001 per share, of the Company having the rights and preferences set forth in the Form of
Certificate of Designations attached to this Agreement as Exhibit A.

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

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

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

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

          (t) “Right” and “Rights” shall have the meanings set forth in the second paragraph hereof.

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

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

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

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

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

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

4

 

     Section 3. Issue of Right Certificates.

          (a) Until the Close of Business on the earlier of (i) the tenth day after the Shares
Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action
of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement by any Person (other than an Exempt Person) of, or of
the first public announcement of the intention of such Person (other than an Exempt Person) to
commence, a tender or exchange offer the consummation of which would result in any Person (other
than an Exempt Person) becoming the Beneficial Owner of Common Shares of the Company aggregating
15% or more of the then outstanding Common Shares of the Company (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates
being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares of
the Company registered in the names of the holders thereof (which certificates shall also be deemed
to be Right Certificates) and not by separate Right Certificates, and (y) Rights (and any right to
receive Right Certificates) will be transferable only in connection with the transfer of Common
Shares of the Company. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be
sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of Common Shares of the Company as of the Close of Business on the
Distribution Date (other than any Acquiring Person or any Affiliate or Associate of any Acquiring
Person), at the address of such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one
Right (subject to adjustment as provided herein) for each Common Share so held. As of the
Distribution Date, the Rights will be evidenced solely by such Right Certificates.

          (b) On the Record Date, or as soon as practicable thereafter, the Company will send a copy of
a Summary of Rights to Purchase Preferred Shares, in substantially the form of Exhibit C
hereto (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record
holder of Common Shares 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 Common Shares of the
Company 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 a copy
of the Summary of Rights. Until the Distribution Date (or, if earlier, the Redemption Date or the
Final Expiration Date), the surrender for transfer of any certificate for Common Shares of the
Company outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Shares of the Company represented
thereby.

          (c) Rights shall be issued in respect of all Common Shares issued or disposed of (including,
without limitation, upon disposition of Common Shares out of treasury stock or issuance or
reissuance of Common Shares out of authorized but unissued shares) after the Record Date but prior
to the earlier of the Distribution Date and the Expiration Date, or in certain circumstances
provided in Section 22 hereof, after the Distribution Date. Certificates issued for Common
Shares (including, without limitation, upon transfer of outstanding Common Shares, disposition of
Common Shares out of treasury stock or issuance or reissuance of Common Shares out of authorized
but unissued shares) after the Record Date but prior to the earlier of the Distribution Date and
the Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them
the following legend:

THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A
RIGHTS AGREEMENT BETWEEN SMITH & WESSON HOLDING CORPORATION AND
INTERWEST TRANSFER COMPANY, INC.,

5

 

DATED AS OF AUGUST 25, 2005, AS IT
MAY BE AMENDED FROM TIME TO TIME (THE “AGREEMENT”), THE TERMS OF
WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF SMITH &
WESSON HOLDING CORPORATION. UNDER CERTAIN CIRCUMSTANCES, AS SET
FORTH IN THE AGREEMENT, SUCH RIGHTS (AS DEFINED IN THE AGREEMENT)
WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE
EVIDENCED BY THIS CERTIFICATE. SMITH & WESSON HOLDING CORPORATION
WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE AGREEMENT
WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE AGREEMENT, RIGHTS OWNED
BY OR TRANSFERRED TO ANY PERSON (AS DEFINED IN THE AGREEMENT) WHO IS
OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE AGREEMENT) AND
CERTAIN TRANSFEREES THEREOF BECOME NULL AND VOID AND WILL NO LONGER
BE TRANSFERABLE.

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

     Notwithstanding this paragraph (c), the omission of a legend shall not affect the
enforceability of any part of this Agreement or the rights of any holder of the Rights.

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

     Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the
Company by its Chief Executive Officer or its President, either manually or by facsimile signature,
shall have affixed thereto the Company’s seal or a facsimile thereof, and shall be attested by the
Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall
be

6

 

manually countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with the same force and
effect as though the individual who signed such Right Certificates had not ceased to be such
officer of the Company; and any Right Certificate may be signed on behalf of the Company by any
individual who, at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of the execution of
this Agreement any such individual was not such an officer.

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

     Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost
or Stolen Right Certificates. Subject to the provisions of this Agreement, at any time after the
Distribution Date and prior to the Expiration Date, any Right Certificate or Right Certificates
(other than Right Certificates representing Rights that have become void pursuant to Section
11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Right Certificate or Right Certificates
entitling the registered holder to purchase a like number of one one-thousandths of a Preferred
Share as the Right Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office or agency of the Rights Agent designated for such purpose.
Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right Certificates.

     Subject to the provisions of this Agreement, at any time after the Distribution Date and prior
to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and,
at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right
Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor
to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.

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

          (a) Except as otherwise provided herein, the Rights shall become exercisable on the
Distribution Date, and thereafter the registered holder of any Right Certificate may (subject to
Section 11(a)(ii) and except as otherwise provided herein) exercise the Rights evidenced
thereby, in whole or in part, upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the office or agency of
the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price
with respect to the total number of one one-thousandths of Preferred Shares (or other securities,
cash or other assets, as the case may be) as to which the Rights are exercised, at any time which
is both after the Distribution Date and prior to the time

7

 

(the “Expiration Date”) that is the
earliest of (i) the Close of Business on August 25, 2015 (the “Final Expiration Date”),
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the
“Redemption Date”), or (iii) the time at which such Rights are exchanged as provided in
Section 24 hereof.

          (b) The Purchase Price for each one one-thousandth of a Preferred Share purchasable pursuant
to the exercise of a Right shall initially be $36.00. The Purchase Price and the number of one
one-thousandths of a Preferred Share (or other securities or property) to be acquired upon exercise
of a Right shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof, and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) of this Section 7.

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

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

          (e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to undertake any action with respect to a registered holder of
Rights upon the occurrence of any purported transfer or purported exercise of Rights pursuant to
Section 6 hereof or this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of assignment or form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for such transfer or
exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) thereof as the Company may reasonably request.

     Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for
the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the
Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates
shall be issued in lieu thereof except as expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so

8

 

cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled
Right Certificates to the Company, or shall, at the written request of the Company, destroy such
cancelled Right Certificates, and, in such case, shall deliver a certificate of destruction thereof
to the Company.

     Section 9. Availability of Preferred Shares.

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

          (b) So long as the Preferred Shares issuable upon the exercise of Rights may be listed or
admitted to trading on any national securities exchange, or quoted on NASDAQ, the Company shall use
its best efforts to cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed or admitted to trading on such exchange, or quoted on
NASDAQ, upon official notice of issuance upon such exercise.

          (c) From and after such time as the Rights become exercisable, the Company shall use its best
efforts, if then necessary to permit the issuance of Preferred Shares upon the exercise of Rights,
to register and qualify such Preferred Shares under the Securities Act and any applicable state
securities or “Blue Sky” laws (to the extent exemptions therefrom are not available), cause such
registration statement and qualifications to become effective as soon as practicable after such
filing and keep such registration and qualifications effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of the date as of which the
Rights are no longer exercisable for such securities and the Expiration Date. The Company may
temporarily suspend, for a period of time not to exceed 90 days, the exercisability of the Rights
in order to prepare and file a registration statement under the Securities Act 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. Notwithstanding any provision
of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless
the requisite qualification in such jurisdiction shall have been obtained and until a registration
statement under the Securities Act shall have been declared effective, unless an exemption
therefrom is available.

          (d) The Company further covenants and agrees that it will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery
of certificates or depositary receipts for the Preferred Shares in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue
or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any
Rights until any such tax shall have been paid (any such tax being payable by the holder of such
Right Certificate at the time of surrender) or until it has been established to the Company’s
reasonable satisfaction that no such tax is due.

     Section 10. Preferred Shares Record Date. Each Person in whose name any certificate for Preferred Shares
is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of
record of the Preferred Shares represented thereby on, and such certificate shall be dated, the

9

 

date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided, however,
that, if the date of such surrender and payment is a date upon which the Preferred Shares transfer
books of the Company are closed, such Person shall be deemed to have become the record holder of
such shares on, and such certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a
holder of Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other distributions, 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 and Number of Rights. The Purchase
Price, the number of Preferred Shares or other securities or property 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 and pay a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation), except as otherwise provided in
this Section 11(a), the number and kind of shares of capital stock issuable upon exercise
of a Right as of the record date for such dividend or the effective date of such subdivision,
combination or reclassification, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such date and at a time
when the Preferred Shares transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification.

               (ii) Subject to Section 24 of this Agreement, in the event any Person becomes an
Acquiring Person (the first occurrence of such event being referred to hereinafter as the
“Flip-In Event”), then (A) the Purchase Price shall be adjusted to be the Purchase Price in
effect immediately prior to the Flip-In Event multiplied by the number of one one-thousandths of a
Preferred Share for which
a Right was exercisable immediately prior to such Flip-In Event, whether or not such Right was
then exercisable, and (B) each holder of a Right, except as otherwise provided in this Section
11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the right to receive,
upon exercise thereof at a price equal to the Purchase Price (as so adjusted), in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares as shall
equal the result obtained by dividing the Purchase Price (as so adjusted) by 50% of the current per
share market price of the Common Shares (determined pursuant to Section 11(d) hereof) on
the date of such Flip-In Event; provided, however, that the Purchase Price (as so
adjusted) and the number of Common Shares so receivable upon exercise of a Right shall, following
the Flip-In Event, be subject to further adjustment as appropriate in accordance with Section
11(f) hereof. Notwithstanding anything in this Agreement to the contrary, however, from and
after the Flip-In Event, any and all Rights that are beneficially owned by (x) any Acquiring Person
(or any Affiliate or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person
(or any such Affiliate or Associate thereof) who becomes a transferee after the Flip-In Event or
(z) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a
transferee prior to or concurrently with the Flip-In Event pursuant to either (I) a transfer from
the Acquiring Person to holders of its equity securities or to any Person with whom it has any
continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a
transfer which the Board of Directors has determined is part of a

10

 

plan, arrangement or
understanding which has the purpose or effect of avoiding the provisions of this paragraph, and
subsequent transferees of such Persons, shall be void without any further action and any holder of
such Rights shall thereafter have no rights whatsoever with respect to such Rights under any
provision of this Agreement. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any
holder of Right Certificates or other Person as a result of its failure to make any determinations
with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. From
and after the Flip-In Event, no Right Certificate shall be issued pursuant to Section 3 or
Section 6 hereof that represents Rights that are or have become void pursuant to the
provisions of this paragraph, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of this paragraph shall
be canceled. From and after the occurrence of an event specified in Section 13(a) hereof,
any Rights that theretofore have not been exercised pursuant to this Section 11(a)(ii)
shall thereafter be exercisable only in accordance with Section 13 and not pursuant to this
Section 11(a)(ii).

               (iii) The Company may at its option substitute for a Common Share issuable upon the exercise of
Rights in accordance with the foregoing subparagraph (ii) a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share multiplied by such
number or fraction is equal to the current per share market price of one Common Share. In the
event that there shall not be sufficient Common Shares authorized but unissued (or issued but not
outstanding) to permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Board of Directors shall, with respect to such deficiency, to the extent
permitted by applicable law and any material agreements then in effect to which the Company is a
party, (A) determine the excess (such excess, the “Spread”) of (1) the value of the Common
Shares issuable upon the exercise of a Right in accordance with the foregoing subparagraph (ii)
(the “Current Value”) over (2) the Purchase Price (as adjusted in accordance with the
foregoing subparagraph (ii)), and (B) with respect to each Right (other than Rights which have
become void pursuant to the foregoing subparagraph (ii)), make adequate provision to substitute for
the Common Shares issuable in accordance with the foregoing subparagraph (ii) upon exercise of the
Right and payment of the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a
reduction in such Purchase Price, (3) Preferred Shares or other equity securities of the Company
(including, without limitation, shares or fractions of shares of preferred stock which, by virtue
of having dividend, voting, liquidation and other rights substantially comparable to those of the
Common Shares, are deemed in good faith by the Board of Directors to have substantially the same
value as the Common Shares (such Preferred Shares and shares or fractions of shares of preferred
stock are hereinafter referred to as “Common Stock Equivalents”)), (4) debt securities of
the Company, (5) other assets, or (6)
any combination of the foregoing, having a value which, when added to the value of the Common
Shares 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 the Board of Directors upon the advice of a nationally recognized investment banking
firm selected in good faith by the Board of Directors; provided, however, that if
the Company shall not make adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the Flip-In Event (the date of the Flip-In Event being the “Section
11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in effect to which the Company is a
party, upon the surrender for exercise of a Right and without requiring payment of such Purchase
Price, Common Shares (to the extent available), and then, if necessary, such number or fractions of
Preferred Shares (to the extent available) and then, if necessary, cash, which shares and/or cash
have an aggregate value equal to the Spread. If, upon the occurrence of the Flip-In Event, the
Board of Directors shall determine in good faith that it is likely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of the Rights, then, if the
Board of Directors so elects, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may

11

 

be extended, is herein called the “Substitution
Period”). To the extent that the Company determines that some action need be taken pursuant to
the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 11(a)(ii) hereof and the last sentence of this Section
11(a)(iii) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may
suspend the exercisability of the Rights until the expiration of the Substitution Period in order
to seek any authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such second sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the current per share market price (as
determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per
share or fractional value of any “Common Stock Equivalent” shall be deemed to equal the current per
share market price of the Common Shares. The Board of Directors of the Company may, but shall not
be required to, establish procedures to allocate the right to receive Common Shares upon the
exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).

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

          (c) In case the Company shall fix a record date for the making of a distribution to all
holders of the Preferred Shares (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend
payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per

12

 

share market price of the Preferred
Shares (determined pursuant to Section 11(d) hereof) on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the Company whose
determination shall be described in a statement filed with the Rights Agent) of the portion of the
assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share, and the denominator of which shall be such current per share
market price (determined pursuant to Section 11(d) hereof) of the Preferred Shares;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.

          (d) (i) Except as otherwise provided herein, for the purpose of any computation hereunder, the
“current per share market price” of any security (a “Security” for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices
per share of such Security for the 30 consecutive Trading Days immediately prior to such date;
provided, however, that, in the event that the current per share market price of
the Security is determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision, combination or reclassification of
such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination or reclassification,
then, and in each such case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case, as reported in the
principal consolidated transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or admitted to trading
on any national securities exchange, the last quoted price or, 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 Security is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional market maker making
a market in the Security selected by the Board of Directors of the
Company. The term “Trading Day” shall mean a day on which the principal national
securities exchange or quotation system on which the Security is listed or admitted to trading is
open for the transaction of business, or, if the Security is not listed or admitted to trading on
any national securities exchange or quotation system, a Business Day.

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

13

 

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

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

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

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

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

14

 

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

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

          (k) Before taking any action that would cause an adjustment reducing the Purchase Price below
the then applicable par value, if any, of the fraction of Preferred Shares issuable upon exercise
of a Right, the Company shall take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully paid and nonassessable
Preferred Shares, or other capital stock or securities, 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 issuing to the holder of any Right exercised after such
record date of the Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to
receive such additional shares upon the occurrence of the event requiring such adjustment.

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

          (n) Anything in this Agreement to the contrary notwithstanding, in the event that, at any time
after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare
and pay any dividend on the Common Shares payable in Common Shares, or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or otherwise than by payment
of a dividend payable in Common Shares) into a greater or lesser number of Common Shares, then, in
each such case, (A) the number Rights associated with each Common Share then outstanding, or issued
or delivered thereafter, shall be proportionately adjusted so that the number of Rights thereafter
associated with each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share outstanding immediately prior to
such event by a fraction the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the occurrence of the event and the denominator of which shall be
the total number of Common Shares outstanding immediately following the occurrence of such event.

15

 

          (o) The Company agrees that, after the earlier of the Distribution Date or the Shares
Acquisition Date, it will not, except as permitted by Sections 23, 24 or 27
hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or eliminate the benefits
intended to be afforded by the Rights as provided in this Agreement.

     Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as
provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a
certificate setting forth such adjustment and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate, and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment therein contained 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, directly or indirectly, at any time after the Flip-in Event, (i) the Company
shall consolidate with, or merge with and into, any other Person, (ii) any Person shall merge with
and into the Company and the Company shall be the continuing or surviving corporation of such
merger and, in connection with such merger, all or part of the Common Shares shall be changed into
or exchanged for stock or other securities of any other Person (or the Company) or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning
power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, upon the first occurrence of any such event, proper provision shall be made so
that: (A) each holder of a Right (other than Rights which have become void pursuant to Section
11(a)(ii) hereof) shall thereafter have the right to receive, upon the exercise thereof at the
Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof), in
accordance with the terms of this Agreement and in lieu of Preferred Shares or Common Shares of the
Company, such number of validly authorized and issued, fully paid, non-
assessable and freely tradeable Common Shares of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other
adverse claims, as shall equal the result obtained by dividing the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the current per share
market price of the Common Shares of such Principal Party (determined pursuant to Section
11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer;
provided, however, that the Purchase Price (as theretofore adjusted in accordance
with Section 11(a)(ii) hereof) and the number of Common Shares 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 Shares of such Principal Party after the occurrence of such consolidation, merger, sale or
transfer; (B) such Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of the Company
pursuant to this Agreement; (C) the term “Company” shall thereafter be deemed to refer to such
Principal Party; and (D) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of its Common Shares in accordance with Section 9
hereof) in connection with such consummation of any such transaction as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in
relation to the Common Shares thereafter deliverable upon the exercise of the Rights;
provided, however, that, upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets 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

16

 

as provided in this Section 13(a), such cash, shares, rights,
warrants and other property which such holder would have been entitled to receive had such holder,
at the time of such transaction, owned the Common Shares of the Principal Party receivable upon the
exercise of a Right pursuant to this Section 13(a), 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.

          (b) For purposes of this Agreement, “Principal Party” shall mean:

               (i) in the case of any transaction described in clause (i) or clause (ii) of the first
sentence of Section 13(a) hereof: (A) the Person that is the issuer of the securities into
which the Common Shares are converted in such merger or consolidation, or, if there is more than
one such issuer, the issuer the Common Shares of which have the greatest aggregate market value of
shares outstanding, or (B) if no securities are so issued, (x) the Person that is the other party
to the merger, if such Person survives said merger, or, if there is more than one such Person, the
Person the Common Shares of which have the greatest aggregate market value of shares outstanding or
(y) if the Person that is the other party to the merger does not survive the merger, the Person
that does survive the merger (including the Company, if it survives) or (z) the Person resulting
from the consolidation; and

               (ii) in the case of any transaction described in clause (iii) of the first sentence of
Section 13(a) hereof, the Person that is the party receiving the greatest 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 so transferred or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of Common Shares having
the greatest aggregate market value of shares outstanding;

provided, however, that in any such case described in the foregoing clause (b)(i)
or (b)(ii), if the Common Shares of such Person are not at such time or have not been continuously
over the preceding 12-month period registered under Section 12 of the Exchange Act, then (1) if
such Person is a direct or indirect Subsidiary of another Person the Common Shares of which are and
have been so registered, the term
“Principal Party” shall refer to such other Person, or (2) if such Person is a Subsidiary, directly
or indirectly, of more than one Person, the Common Shares of all of which are and have been so
registered, the term “Principal Party” shall refer to whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are
not owned, directly or indirectly, by the same Person, the rules set forth in clauses (1) and (2)
above shall apply to each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the same ratio
as its interest in such Person bears to the total of such interests.

          (c) The Company shall not consummate any consolidation, merger, sale or transfer referred to
in Section 13(a) hereof unless prior thereto the Company and the Principal Party involved
therein shall have executed and delivered to the Rights Agent an agreement confirming that the
requirements of Sections 13(a) and (b) hereof shall promptly be performed in
accordance with their terms and that such consolidation, merger, sale or transfer of assets shall
not result in a breach or default by the Principal Party of or under this Agreement as the same
shall have been assumed by the Principal Party pursuant to Sections 13(a) and (b)
hereof and providing that, as soon as practicable after executing such agreement pursuant to this
Section 13, the Principal Party will:

17

 

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

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

               (iii) deliver to holders of the Rights historical financial statements for the Principal Party
which comply in all respects with the requirements for registration on Form 10 (or any successor
form) under the Exchange Act; and

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

          (d) In case the Principal Party has a provision in any of its authorized securities or in its
certificate of incorporation or by-laws or other instrument(s) governing its affairs, which
provision would have the effect of (i) causing such Principal Party to issue (other than to holders
of Rights pursuant to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, Common Shares or Common Stock
Equivalents of such Principal Party at less than the then current market price per share thereof
(determined pursuant to Section 11(d) hereof) or securities exercisable for, or convertible
into, Common Shares or Common Stock Equivalents of such Principal Party at less than the then
current market price, or (ii) providing for any special payment, tax or similar provision in
connection with the issuance of the Common Shares of such Principal Party pursuant to the
provisions of Section 13, then, in such event, the Company hereby agrees with each
holder of Rights that it 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
canceled, 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 Company covenants and agrees that it shall not, at any time after the Flip-In Event,
enter into any transaction of the type described in clauses (i) through (iii) of Section
13(a) hereof if (i) at the time of or immediately after such consolidation, merger, sale,
transfer or other transaction 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, (ii) prior to, simultaneously with or immediately
after such consolidation, merger, sale, transfer or other transaction, the stockholders of the
Person who constitutes, or would constitute, the Principal Party for purposes of Section
13(b) hereof shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates, or (iii) the form or nature of organization of the Principal
Party would preclude or limit the exercisability of the Rights.

18

 

     Section 14. Fractional Rights and Fractional Shares.

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

          (b) The Company shall not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred Share) upon exercise of
the Rights or to distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred Share) upon the
exercise or exchange of Rights. Interests in fractions of Preferred Shares in integral multiples
of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, however, that
such agreement shall provide that the holders of such depositary receipts shall have all the
rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are
not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised or exchanged as
herein provided an amount in cash equal to the same fraction of the current market value of a whole
Preferred Share (as determined in accordance with Section 14(a) hereof) 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 Common Shares or to distribute
certificates which evidence fractional Common Shares upon the exercise or exchange of Rights. In
lieu of such fractional shares, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Common Shares would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a whole Common Share (as
determined in accordance with Section 14(a) hereof) 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 Right expressly waives his right to receive
any fractional Rights or any fractional shares upon exercise or exchange of a Right (except as
expressly provided above).

19

 

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

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

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

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

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

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

     Section 18. Concerning the Rights Agent.

          (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder, and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The Company also agrees
to indemnify the Rights Agent and its officers, employees, attorneys, and affiliates, for, and to
hold it and

20

 

them harmless against, any loss, liability, or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent, its officers,
employees, attorneys, or affiliates, for anything done or omitted by the Rights Agent, its
officers, employees, attorneys, or affiliates, in connection with the acceptance and administration
of this Agreement, including the costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly.

          (b) The Rights Agent and its officers, employees, attorneys, and affiliates 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 Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or
Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.

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

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

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

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

          (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem
it necessary or desirable that any fact or matter be proved or established by the

21

 

Company prior to
taking or suffering any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chief Executive Officer, the President or the Chief
Financial Officer of the Company, and the Secretary of the Company, and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this Agreement in reliance upon such
certificate.

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

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

          (e) The Rights Agent shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be
responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to Section
11(a)(ii) hereof) or any adjustment in the terms of the Rights provided for in Sections
3, 11, 13, 23 and 24 hereof, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished
pursuant to Section 12, describing such change or adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the authorization or reservation
of any Preferred Shares or other securities to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares or other securities will, when issued, be validly
authorized and issued, fully paid and nonassessable.

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

          (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to
the performance of its duties hereunder from any person reasonably believed by the Rights Agent to
be one of the Chief Executive Officer, the President, the Chief Financial Officer or the Secretary
of the Company, or legal counsel to the Company, and to apply to such officers or legal counsel for
advice or instructions in connection with its duties, and it shall not be liable for any action
taken or suffered by it in good faith in accordance with instructions of any such officer or legal
counsel or for any delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set
forth in writing any action proposed to be taken or omitted by the Rights Agent under this
Agreement and the date on and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business Days after the date
any officer of the Company or legal counsel to the Company actually receives such application
unless any such officer or legal counsel shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such application specifying
the action

22

 

to be taken or omitted. For purposes of this Section 20(g), an officer of the Company
or legal counsel to the Company shall be deemed to have actually received such application from the
Rights Agent (i) upon receipt as indicated by the date on the signed receipt if sent by recognized
overnight courier, (ii) five business days following deposit in the mails if sent by first-class
mail, postage prepaid, upon deposit in the mails, or (iii) upon receipt by the Rights Agent of an
acknowledgement or transmission report generated by the machine from which the facsimile was sent
indicating that the facsimile was sent in its entirety to the addressee’s facsimile number if sent
by facsimile.

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

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

          (j) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate contained in the form of assignment or the form of election to purchase
set forth on the reverse thereof, as the case may be, has not been completed in a manner sufficient
to certify that the holder is not an Acquiring Person (or an Affiliate or Associate thereof) or a
transferee thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

     Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the
Company and to each transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and, following the Distribution Date, to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30
days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be,
and to each transfer agent of the Common Shares or Preferred Shares by registered or certified
mail, and, following the Distribution Date, to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to
make such appointment within a period of 30 days after giving notice of such removal or after it
has been notified in writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (which holder shall, with such notice, submit
his Right Certificate for inspection by the Company), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or of any State of the
United States or the District of Columbia, in good standing, having an office in the State of
California or New York, which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and surplus of at least
$50 million. After appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the

23

 

predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of
any such appointment, the Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Shares or Preferred Shares, and, following the
Distribution Date, mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may be.

     Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement
or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form(s) as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the Expiration Date, the Company
may with respect to Common Shares so issued or sold pursuant to (i) the exercise of stock
options, (ii) under any employee plan or arrangement, (iii) upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Company or (iv) a contractual obligation
of the Company, in each case existing prior to the Distribution Date, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance or sale.

     Section 23. Redemption.

          (a) The Board of Directors of the Company may, at its option and in its sole discretion, at
any time prior to the Flip-In Event, redeem all but not less than all the then outstanding Rights
at a redemption price of $0.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring in respect of the Common Shares after the date hereof
(such redemption price being hereinafter referred to as the “Redemption Price”). The
redemption 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.
The Redemption Price shall be payable, at the option of the Company, in cash, Common Shares, or
such other form of consideration as the Board of Directors shall determine.

          (b) Immediately upon the action of the Board of Directors ordering the redemption of the
Rights pursuant to paragraph (a) of this Section 23 (or at such later time as the Board of
Directors may establish for the effectiveness of such redemption), and without any further action
and without any notice, the right to exercise the Rights will terminate and the only right of the
holders of Rights thereafter shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure to
give, or any defect in, any such notice shall not affect the validity of such redemption. Within
10 days after such action of the Board of Directors ordering the redemption of the Rights (or such
later time as the Board of Directors may establish for the effectiveness of such redemption), the
Company shall mail a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by which the payment of
the Redemption Price will be made.

     Section 24. Exchange.

24

 

          (a) The Board of Directors of the Company may, at its option and in its sole discretion,
at any time after the Flip-In Event, exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become void pursuant to the provisions of
Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction
occurring in respect of the Common Shares after the date hereof (such amount per Right being
hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board
of Directors shall not be empowered to effect such exchange at any time after an Acquiring Person
shall have become the Beneficial Owner of Common Shares aggregating 50% or more of the Common
Shares then outstanding. From and after the occurrence of an event specified in Section
13(a) hereof, any Rights that theretofore have not been exchanged pursuant to this Section
24(a) shall thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 24(a). The exchange of 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 effectiveness of the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and
without any further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to receive that number
of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of
the holders of the Rights so exchanged at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Common Shares for Rights will be effected, and, in
the event of any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of
Rights.

          (c) The Company may at its option substitute and, in the event that there shall not be
sufficient Common Shares authorized but unissued (or issued but not outstanding) to permit any
exchange of Rights as contemplated in accordance with this Section 24, the Company shall
substitute to the extent of such insufficiency, for each Common Share that would otherwise be
issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof (or Equivalent
Preferred Shares, as such term is defined in Section 11(b)) such that the current per share
market price (determined pursuant to Section 11(d) hereof) of one Preferred Share (or
Equivalent Preferred Share) multiplied by such number or fraction is equal to the current per share
market price of one Common Share (determined pursuant to Section 11(d) hereof) as of the
date of such exchange.

     Section 25. Notice of Certain Events.

          (a) In case the Company shall, at any time after the earlier of the Distribution Date or the
Shares Acquisition Date, propose (i) to pay any dividend payable in shares of any class to the
holders of the Preferred Shares or to make any other distribution to the holders of the Preferred
Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of the
Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares
or shares of stock of any class or any other securities, rights or options, (iii) to effect any
reclassification of the Preferred Shares (other than a reclassification involving only the
subdivision or combination of outstanding Preferred Shares), (iv) to
effect the liquidation, dissolution or winding up of the Company, or (v) to pay any dividend
on the Common Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of

25

 

the Common Shares (by reclassification or otherwise than by payment of dividends
in Common Shares), then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such dividend or distribution or offering of
rights or warrants, or the date on which such liquidation, dissolution, winding up,
reclassification, subdivision, combination or consolidation is to take place and the date of
participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date
is to be fixed, and such notice shall be so given in the case of any action covered by clause (i)
or (ii) above at least 10 days prior to the record date for determining holders of the Preferred
Shares for purposes of such action, and in the case of any such other action, at least 10 days
prior to the date of the taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.

          (b) In case any event set forth in Section 11(a)(ii) or Section 13 hereof
shall occur, then the Company shall, as soon as practicable thereafter, give to each holder of a
Right Certificate (or, if occurring prior to the Distribution Date, to each holder of Common
Shares), in accordance with Section 26 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to holders of Rights
under Section 11 (a)(ii) and/or Section 13 hereof.

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

Smith & Wesson Holding Corporation

2100 Roosevelt Avenue

Springfield, MA 01104

Attn: Chief Executive Officer

Facsimile: (413) 739-8528

Telephone: (413) 781-8300

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

Interwest Transfer Company, Inc.

1981 E. Murray Holladay Road, Suite 100

Salt Lake City, UT 84117

Attention: Kurtis D. Hughes

Facsimile: (801) 277-3147

Telephone: (801) 272-9294

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by
recognized overnight courier with fees prepaid, first-class mail, postage prepaid, or facsimile
with receipt, addressed to such holder at the address of such holder as shown on the registry books
of the Company. Notices or
demands authorized by this Agreement to be given or made by the Company or the Rights Agent shall
be deemed to be effective upon receipt by the party if given in accordance with this Section 26. A
notice or demand is deemed to have been received as follows: (i) if notice or demand is sent by
recognized

26

 

overnight courier, upon receipt as indicated by the date on the signed receipt, (ii) if
notice or demand is sent by first-class mail, postage prepaid, five business days after deposit in
the mails, or (iii) if notice or demand is sent by facsimile, upon receipt by the party giving the
notice or demand of an acknowledgement or transmission report generated by the machine from which
the facsimile was sent indicating that the facsimile was sent in its entirety to the addressee’s
facsimile number.

     Section 27. Supplements and Amendments. Except as provided in the penultimate sentence of this
Section 27, for so long as the Rights are outstanding and then redeemable, the Company may,
in its sole and absolute discretion, and the Rights Agent shall if the Company so directs,
supplement or amend this Agreement, and/or any term, provision or condition of this Agreement, in
any respect without the consent or approval of any holder or holders of the Rights. Without
limiting the foregoing, the Company may, at any time prior to the Flip-In Event, amend this
Agreement to lower the percentage thresholds set forth in Sections 1(a) and 3(a)
hereof to not less than 10% (the “Reduced Threshold”); provided, however,
that no Person who beneficially owns a number of Common Shares equal to or greater than the Reduced
Threshold shall become an Acquiring Person unless such Person shall, after the public announcement
of the Reduced Threshold, increase its beneficial ownership of the then outstanding Common Shares
(other than as a result of the purchase or acquisition of Common Shares by the Company) to an
amount equal to or greater than the greater of (x) the Reduced Threshold and (y) the sum of (i) the
lowest beneficial ownership of such Person as a percentage of the outstanding Common Shares as of
any date on or after the date of the public announcement of the Reduced Threshold, plus (ii) .001%.
At any time when the Rights are no longer redeemable, except as provided in the penultimate
sentence of this Section 27, the Company may, and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the consent or approval of any holder or
holders of Rights, provided that no such supplement or amendment may (a) adversely affect the
interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person), (b) cause this Agreement again to become amendable other than in
accordance with this sentence, or (c) cause the Rights again to become redeemable. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment shall be made to
this Agreement which changes the Redemption Price. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such supplement or
amendment, provided that any supplement or amendment that does not amend Sections 18,
19, 20 or 21 hereof in a manner adverse to the Rights Agent shall become
effective immediately upon execution by the Company, whether or not also executed by the Rights
Agent.

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

     Section 29. 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 Right
Certificates (and, prior to the Distribution Date, the Common Shares) 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 Right Certificates (and, prior to the Distribution Date, the Common
Shares).

     Section 30. Determinations and Actions by the Board of Directors. The Board of Directors of the Company
shall have the exclusive power and authority to administer this Agreement and to exercise the
rights and powers specifically granted to the Board of Directors of the Company or to the Company,
or as may be necessary or advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this Agreement
(including,

27

 

without limitation, a determination to redeem or not redeem the Rights, to exchange or not to
exchange the Rights or to amend or not amend this Agreement). All such actions, calculations,
interpretations and determinations that are effected, done or made by the Board of Directors of the
Company in good faith shall be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights, as such, and all other parties.

     Section 31. Severability. The parties intend that this Agreement be enforced and interpreted as written.
If, however, 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.

     Section 32. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to
be a contract made under the laws of the state of Nevada and for all purposes shall be governed by
and construed in accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state; provided, however, that the rights, duties, responsibilities,
and obligations of the Rights Agent shall be governed and construed in accordance with the laws of
the state of Utah.

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

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

28

 

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

	 	 	 	 	 	 	 	 	 
	Attest:	 	 	 	SMITH & WESSON HOLDING CORPORATION
	 
	 	 	 	 	 	 	 	 
	By:

	 	     /s/ Ann B. Makkiya
	 	 	 	By:
	 	     /s/ Michael F. Golden
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	     Ann B. Makkiya
	 	 	 	Name:
	 	     Michael F. Golden
	Title:

	 	     Secretary
	 	 	 	Title:
	 	     President and Chief Executive Officer
	 
	 	 	 	 	 	 	 	 
	Attest:	 	 	 	INTERWEST TRANSFER COMPANY, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	     /s/ Kurtis D. Hughes
	 	 	 	By:
	 	     /s/ Shirrell W. Hughes
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	     Kurtis D. Hughes
	 	 	 	Name:
	 	     Shirrell W. Hughes
	Title:

	 	     Vice President
	 	 	 	Title:
	 	     President

29

 

Exhibit A

FORM

OF

CERTIFICATE OF DESIGNATION

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

SMITH & WESSON HOLDING CORPORATION

Pursuant to Section 78.1955 of the

Nevada General Corporation Law

     Smith & Wesson Holding Corporation, a corporation organized and existing under the General
Corporation Law of the State of Nevada (hereinafter called the “Corporation”), in accordance with
the provisions of Section 78.195 thereof, DOES HEREBY CERTIFY:

     That pursuant to the authority vested in the Board of Directors in accordance with the
provisions of the Articles of Incorporation of the said Corporation, the said Board of Directors on
August 9, 2005 adopted the following resolution creating a series of 100,000 shares of Preferred
Stock designated as “Series A Junior Participating Preferred Stock”:

     RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation
in accordance with the provisions of the Articles of Incorporation, a series of Preferred Stock,
par value $.001 per share, of the Corporation be and hereby is created, and that the designation
and number of shares thereof, and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows:

Series A Junior Participating Preferred Stock

     1. Designation and Amount. There shall be a series of Preferred Stock that shall be
designated as “Series A Junior Participating Preferred Stock,” and the number of shares
constituting such series shall be 100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, however, that no decrease shall reduce the number
of shares of Series A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of outstanding rights,
options or warrants or upon conversion of outstanding securities issued by the Corporation.

     2. Dividends and Distribution.

          (A) Subject to the prior and superior rights of the holders of any shares of any class or
series of stock of the Corporation ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior
Participating Preferred Stock, in preference to the holders of shares of any class or series of
stock of the Corporation ranking junior to the Series A Junior Participating Preferred Stock in
respect thereof, shall be

A-1

 

entitled to receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day of March, June,
September and December, in each year (each such date being referred to herein as a “Quarterly
Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) the
Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends,
and the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, par value $.001 per share, of the Corporation (the “Common Stock”) since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. The “Adjustment Number” shall initially be 1000. In the
event the Corporation shall at any time after August 9, 2005 (i) declare and pay any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or
(iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying
such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.

          (B) The Corporation shall declare a dividend or distribution on the Series A Junior
Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in shares of Common
Stock).

          (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior
Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Junior Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series A Junior Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared thereon, which record date
shall be no more than 60 days prior to the date fixed for the payment thereof.

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

          (A) Each share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of
the stockholders of the Corporation.

          (B) Except as required by law, by Section 3(C) and by Section 10 hereof, holders of Series A
Junior Participating Preferred Stock shall have no special voting rights and their consent shall

A-2

 

not be required (except to the extent they are entitled to vote with holders of Common Stock
as set forth herein) for taking any corporate action.

          (C) If, at the time of any annual meeting of stockholders for the election of directors, the
equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares
of Series A Junior Participating Preferred Stock are in default, the number of directors
constituting the Board of Directors of the Corporation shall be increased by two. In addition to
voting together with the holders of Common Stock for the election of other directors of the
Corporation, the holders of record of the Series A Junior Participating Preferred Stock, voting
separately as a class to the exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all
dividends in arrears on the Series A Junior Participating Preferred Stock have been paid or
declared and set apart for payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Junior Participating Preferred Stock being entitled to
cast a number of votes per share of Series A Junior Participating Preferred Stock as is specified
in paragraph (A) of this Section 3. Until the default in payments of all dividends which permitted
the election of said directors shall cease to exist, any director who shall have been so elected
pursuant to the provisions of this Section 3(C) may be removed at any time, with or without cause,
only by the affirmative vote of the holders of the shares of Series A Junior Participating
Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the
election of any such director at a special meeting of such holders called for that purpose, and any
vacancy thereby created may be filled by the vote of such holders. If and when such default shall
cease to exist, the holders of the Series A Junior Participating Preferred Stock shall be divested
of the foregoing special voting rights, subject to revesting in the event of each and every
subsequent like default in payments of dividends. Upon the termination of the foregoing special
voting rights, the terms of office of all persons who may have been elected directors pursuant to
said special voting rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this Section 3(C) shall
be in addition to any other voting rights granted to the holders of the Series A Junior
Participating Preferred Stock in this Section 3.

     4. Certain Restrictions.

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

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

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

               (iii) purchase or otherwise acquire for consideration any shares of Series A Junior
Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of Series A Junior
Participating Preferred Stock, or to such holders and holders of any such shares ranking on a
parity therewith, upon

A-3

 

such terms as the Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the respective series or
classes.

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

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

     6. Liquidation, Dissolution or Winding Up.

          (A) Upon any liquidation, dissolution or winding up of the Corporation, voluntary or
otherwise, no distribution shall be made to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received an amount per share (the “Series A Liquidation
Preference”) equal to the greater of (i) $1.00 plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment, or (ii) the
Adjustment Number times the per share amount of all cash and other property to be distributed in
respect of the Common Stock upon such liquidation, dissolution or winding up of the Corporation.

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

          (C) Neither the merger or consolidation of the Corporation into or with another entity nor the
merger or consolidation of any other entity into or with the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.

     7. Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the outstanding shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other property, then in
any such case each share of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment Number times the
aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or exchanged.

     8. No Redemption. Shares of Series A Junior Participating Preferred Stock shall not be
subject to redemption by the Corporation.

A-4

 

     9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other
series of the Preferred Stock as to the payment of dividends and as to the distribution of assets
upon liquidation, dissolution or winding up, unless the terms of any such series shall provide
otherwise, and shall rank senior to the Common Stock as to such matters.

     10. Amendment. At any time that any shares of Series A Junior Participating Preferred Stock
are outstanding, the Articles of Incorporation of the Corporation shall not be amended in any
manner which would materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.

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

     IN WITNESS WHEREOF, this Certificate of Designation has been executed on behalf of the
Corporation by its President and Chief Executive Officer, and attested by its Secretary, this
25th day of August, 2005.

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Michael F. Golden
	 

	 	 	 	President and Chief Executive Officer
	Attest:
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 	 	 
	Ann B. Makkiya
	 	 	 	 
	Secretary
	 	 	 	 

A-5

 

Exhibit B

FORM OF RIGHT CERTIFICATE

Certificate No. R-

NOT EXERCISABLE AFTER AUGUST 25, 2015 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES
THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

RIGHT CERTIFICATE

SMITH & WESSON HOLDING CORPORATION

     This
certifies that ______ or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Rights Agreement, dated as of August 25, 2005, as the
same may be amended from time to time (the “Rights Agreement”), between Smith & Wesson Holding
Corporation, a Nevada corporation (the “Company”), and Interwest Transfer Company, Inc., as Rights
Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time, on
August 25, 2015 at the office or agency of the Rights Agent designated for such purpose, or of its
successor as Rights Agent, one one-thousandth of a fully paid and non-assessable share of Series A
Junior Participating Preferred Stock, par value $.001 per share (the “Preferred Stock”), of the
Company at a purchase price of $36.00 per one one-thousandth of a share of Preferred Stock (the
“Purchase Price”), upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed. The number of Rights evidenced by this Rights Certificate (and
the number of one one-thousandths of a share of Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of August 25, 2005, based on the Preferred Stock as constituted at such date. As
provided in the Rights Agreement, the Purchase Price, the number of one one-thousandths of a share
of Preferred Stock (or other securities or property) which may be purchased upon the exercise of
the Rights and the number of Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.

     This Right Certificate is subject to all of the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and
made a part hereof and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights
Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are
on file at the principal executive offices of the Company and the above-mentioned office or agency
of the Rights Agent. The Company will mail to the holder of this Right Certificate a copy of the
Rights Agreement without charge after receipt of a written request therefor.

B-1

 

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

     Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
(i) may be redeemed by the Company at a redemption price of $.01 per Right or (ii) may be exchanged
in whole or in part for shares of the Company’s Common Stock, par value $.001 per share, or shares
of Preferred Stock.

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

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

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

B-2

 

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

Dated as of ___, 20___.

	 	 	 	 	 	 	 	 	 
	Attest:	 	SMITH & WESSON HOLDING CORPORATION
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Countersigned:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	INTERWEST TRANSFER COMPANY, INC.	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

B-3

 

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH

HOLDER DESIRES TO TRANSFER THE RIGHT CERTIFICATE)

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Right Certificate)

     FOR
VALUE RECEIVED ______
hereby sells, assigns and transfers unto                                                                                 

 

(Please print name and address of transferee)

     ___Rights represented by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint ___
Attorney, to transfer said Rights on the books of the within-named Company, with full power of
substitution.

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Signature

Signature Guarantee:

     Signatures must be guaranteed by a bank, trust company, broker, dealer or other eligible
institution participating in a recognized signature guarantee medallion program.

      

 

(To be completed)

     The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by, were not acquired by the undersigned from, and are not being transferred or
assigned to an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement).

	 	 	 
	 

	 	 
	 

	 	 
	 

	 	Signature

B-4

 

Form of Reverse Side of Right Certificate — continued

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise

Rights represented by the Rights Certificate)

To SMITH & WESSON HOLDING CORPORATION:

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

 

 

(Please print name and address)

 

 

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

Please insert social security

or other identifying number:
               

 

 

(Please print name and address)

	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Signature
	 	 
	 	 	(Signature must conform to holder specified on Right Certificate)

Signature Guarantee:

     Signature must be guaranteed by a bank, trust company, broker, dealer or other eligible
institution participating in a recognized signature guarantee medallion program.

B-5

 

Form of Reverse Side of Right Certificate — continued

 

 

(To be completed)

     The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by, were not acquired by the undersigned from, and have not been transferred or
assigned to an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement).

	 	 	 
	 

	 	 
	 

	 	 
	 

	 	Signature

 

NOTICE

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

     In the event the certification set forth above in the Form of Assignment or the Form of
Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase
will not be honored.

B-6

 

Exhibit C

UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON
(AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL
BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES

OF SMITH & WESSON HOLDING CORPORATION

Introduction

     On August 9, 2005, the Board of Directors of our Company, Smith & Wesson Holding Corporation,
a Nevada corporation, declared a dividend of one preferred share purchase right (a “Right”) for
each outstanding share of common stock, par value $.001 per share (the “Common Stock”). The
dividend is payable on August 26, 2005 to the stockholders of record on August 26, 2005. Each
Right entitles the registered holder to purchase from the Company one one-thousandth of a share of
Series A Junior Participating Preferred Stock, par value $.001 per share, of the Company (the
“Preferred Stock”), at a price of $36.00 per one one-thousandth of a share of Preferred Stock (the
“Purchase Price”), subject to adjustment.

     Our Board has adopted the Rights Agreement, and declared the Rights dividend, to protect
stockholders from abusive, coercive or otherwise unfair takeover tactics. In general terms, it
works by imposing a significant penalty upon any person or group that acquires 15% or more of our
outstanding common stock without the approval of our Board. The Rights Agreement should not
interfere with any merger or other business combination approved by our Board.

Rights Agreement

     For those interested in the specific terms and provisions of the Rights Agreement as entered
into between our Company and Interwest Transfer Company, Inc., as the Rights Agent, as of August
25, 2005, we provide the following summary description. Please note, however, that this
description is only a summary, and is not complete, and should be read together with the entire
Rights Agreement, which has been filed with the Securities and Exchange Commission as an exhibit to
a Registration Statement on Form 8-A dated [___], 2005. A copy of the agreement is
available free of charge from our Company.

The Rights; Certificates

     The Rights will initially trade with, and will be inseparable from, the Common Stock. Until
the earlier to occur of (1) 10 days following a public announcement that a person or group of
affiliated or associated persons (with certain exceptions provided in the Rights Agreement, an
“Acquiring Person”) has acquired beneficial ownership of 15% or more of the outstanding shares of
Common Stock or (2) 10 business days (or such later date as may be determined by action of the
Board of Directors prior to such time as any person or group of affiliated persons becomes an
Acquiring Person) following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the

C-1

 

consummation of which would result in the beneficial ownership by a person or group of 15% or
more of the outstanding shares of Common Stock (the earlier of such dates being called the
“Distribution Date”), the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Record Date, by such Common Stock certificate together with this
Summary of Rights. Among other exceptions, any existing Board member or other stockholder owning
(as of specified dates, on or prior to the announcement of the Plan’s adoption) 15% or more of the
Company’s outstanding Common Stock is “grandfathered” (and thus not deemed to be an “Acquiring
Person”) under the Plan, and would be permitted to acquire up to an additional 1% of the
outstanding shares before becoming an “Acquiring Person”, as provided (and subject to the
conditions) in the Rights Agreement.

     The Rights Agreement provides that, until the Distribution Date (or earlier expiration of the
Rights), the Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier expiration of the Rights), new Common Stock certificates issued after
the Record Date upon transfer or new issuances of Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier
expiration of the Rights), the surrender for transfer of any certificates for shares of Common
Stock outstanding as of the Record Date, even without such notation or a copy of this Summary of
Rights, will also constitute the transfer of the Rights associated with the shares of Common Stock
represented by such certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of
the Common Stock as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.

Exercisability; Exercise Price; Adjustments

     The Rights are not exercisable until the Distribution Date. Until a Right is exercised (or
exchanged), 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.

     Once exercisable, each Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Preferred Stock, at the Purchase Price of $36.00 per one
one-thousandth of a share of Preferred Stock, subject to adjustment.

     The Purchase Price payable, and the number of shares of Preferred Stock or other securities or
property issuable, upon exercise of the Rights is subject to adjustment from time to time to
prevent dilution (1) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (2) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred Stock at a price, or securities
convertible into Preferred Stock with a conversion price, less than the then-current market price
of the Preferred Stock, or (3) upon the distribution to holders of the Preferred Stock of evidences
of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those referred to above). The
number of outstanding Rights is subject to adjustment in the event of a stock dividend on the
Common Stock payable in shares of Common Stock or subdivisions, consolidations, or combinations of
the Common Stock occurring, in any such case, prior to the Distribution Date.

     With certain exceptions, no adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares of
Preferred Stock (or Common Stock) will be issued (other than fractions of Preferred Stock which are
integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election
of the Company, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the current market price of the Preferred Stock or the Common Stock.

C-2

 

Preferred Stock Provisions

     Shares of Preferred Stock purchasable upon exercise of the Rights will not be redeemable.
Each share of Preferred Stock will be entitled, when, as, and if declared, to a minimum
preferential quarterly dividend payment of the greater of (a) $1.00 per whole share, and (b) an
amount equal to 1,000 times the dividend declared per share of Common Stock. In the event of
liquidation, dissolution, or winding up of the Company, the holders of the Preferred Stock will be
entitled to a minimum preferential payment of the greater of (a) $1.00 per whole share (plus any
accrued but unpaid dividends), and (b) an amount equal to 1,000 times the payment made per share of
Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the Common
Stock. Finally, in the event of any merger, consolidation, or other transaction in which
outstanding shares of Common Stock are converted or exchanged, each share of Preferred Stock will
be entitled to receive 1,000 times the amount received per share of Common Stock. These rights are
protected by customary antidilution provisions.

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

Flip-In, Flip-Over Rights

     In the event that any person or group of affiliated or associated persons becomes an Acquiring
Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which
will thereupon become void), will thereafter have the right to receive upon exercise of a Right
that number of shares of Common Stock having a market value of two times the exercise price of the
Right. This is the so-called “flip-in” provision.

     In the event that, after a person or group has become an Acquiring Person, the Company is
acquired in a merger or other business combination transaction or 50% or more of its consolidated
assets or earning power are sold, proper provisions are required to be made so that each holder of
a Right (other than Rights beneficially owned by an Acquiring Person, which will have become void)
will thereafter have the right to receive upon the exercise of a Right that number of shares of
common stock of the person with whom the Company has engaged in the foregoing transaction (or its
parent) that at the time of such transaction have a market value of two times the exercise price of
the Right. This is the so-called “flip-over” provision.

Exchange Provision

     At any time after any person or group becomes an Acquiring Person and prior to the earlier of
one of the events described in the previous paragraph or the acquisition by such Acquiring Person
of 50% or more of the outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such Acquiring Person, which will have become
void), in whole or in part, for shares of Common Stock or Preferred Stock (or a series of the
Company’s preferred stock having equivalent rights, preferences, and privileges), at an exchange
ratio of one share of Common Stock, or a fractional share of Preferred Stock (or other preferred
stock) equivalent in value thereto, per Right.

Redemption

     At any time prior to the time a person or group becomes an Acquiring Person, the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the “Redemption Price”) payable, at the option of the Company, in cash, shares of Common
Stock, or

C-3

 

such other form of consideration as the Board of Directors of the Company shall determine.
The redemption of the Rights 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. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and the only right of any
and all holders of Rights will be to receive the Redemption Price.

Amendment

     For so long as the Rights are outstanding and then redeemable, the Company may, except with
respect to the Redemption Price, amend the Rights Agreement in any manner. This includes the
ability to lower the ownership threshold which triggers the “flip-in” provision to as low as 10%.
After the Rights are no longer redeemable, the Company may, except with respect to the Redemption
Price, amend the Rights Agreement in any manner that does not adversely affect the interests of
holders of the Rights.

Interpretation; Board Approvals

     The Board of Directors of the Company has the sole authority to administer the Rights Plan and
to exercise all rights and powers granted to the Board or to the Company, or as are advisable in
the administration of the Rights Plan, including the power to (1) interpret the provisions of the
Rights Plan and (2) make all determinations appropriate for the administration of the Rights Plan
(including a determination to redeem or not redeem the Rights, to exchange the Rights or to amend
the Rights Plan). All such interpretations and determinations in good faith are final and binding
on the parties (including the Rights holders) and do not subject the Board (or the directors) to
any liability to the holders of Rights.

Expiration

     The Rights will expire on August 25, 2015, unless this date is extended or unless the Rights
are earlier redeemed or exchanged by the Company, in each case as provided in the Rights Agreement.

Obtaining a Copy of the Rights Agreement

     A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as
an Exhibit to a Registration Statement on Form 8-A dated [___], 2005. A copy of the Rights
Agreement is available free of charge from the Company. This summary description of the Rights
does not purport to be complete and is qualified in its entirety by reference to the Rights
Agreement, as the same may be amended from time to time, which is hereby incorporated herein by
reference.

C-4AGREEMENT OF SETTLEMENT

     This  Agreement  of  Settlement (the "Agreement") is entered into this 20th
day  of  August  2005,  by  and between, Atlantic Wine Agencies, Inc., a Florida
corporation  with  its  principal  place  of  business  formerly  located  at 64
Knightsbridge,  London  UK  SWIX but now with its principal place of business at
Golden  Cross  House,  8  Duncannon  Street Strand, London, WC24JF ("Atlantic");
Dominion  Wines  Ltd, ACN 087183739 an Australian corporation with its principal
place of business at Level 4, 973 Nepean Highway, Moorabbin, Victoria, Australia
("Wines  ");  Dominion  Estates Pty Ltd, ACN 072221375 an Australian corporation
with  its principal place of business at Level 4, 973 Nepean Highway, Moorabbin,
Victoria,  Australia  ("Estates");  and Global Realty Development Corp (formerly
known  as  Australian Agriculture and Property Development Corporation) with its
principal  place  of  business  at  11555  Heron Bay Boulevard, Suite 200, Coral
Springs,  Florida  33076,  USA ("Global"). Collectively, Wines and Estates shall
sometimes  be  referred  to  as  the  "Dominion  Estates  Group".

W I T N E S S E T H:
--------------------

     WHEREAS,  Atlantic  and  the  Dominion  Estates  Group entered into a Share
Exchange  Agreement,  effective  as of September 4, 2004 ( "Exchange Agreement")
pursuant  to which Atlantic acquired from A1 Financial Planners Pty Ltd (ACN 006
942  598)  ("A1")  all  the  shares  in  Estates  and  Estates acquired from the
shareholders  as  set  out in Schedule 1 ("Dominion Estates Group Shareholders")
their shares in Wines ("Wines Shares");

     WHEREAS,  pursuant  to the terms of the Exchange Agreement, Atlantic agreed
to, among other things, (i) deliver 20,000,000 restricted shares of common stock
of  Atlantic  to  the  shareholders  of  Wines and Estates; (ii) transfer to the
National Australia Bank the amount of AUD$3,097,677.91 to discharge the loans to
Wines  specified  in the Exchange Agreement ("National Loans"), (iii) assume the
Commonwealth Bank of Australia loan to Estates in the amount of AUD$4,081,387.11
("Commonwealth  Loan"); and (iv) transfer AUD$262,322.09 to the Dominion Estates
Group's  bank  accounts  as  assurance  of  its  good  faith  in  servicing  the
Commonwealth Loan;

                                                                               1
<PAGE>

     WHEREAS,  in  part  satisfaction  of  its  obligations  under  the Exchange
Agreement,  Atlantic  has  (i)  issued  and  delivered to the parties set out in
Schedule  2  ("Atlantic  Shareholders")  shares in Atlantic ("Atlantic Shares"),
(ii)  paid the National Australia Bank the amount of AUD$3,136,202.87, and (iii)
transferred  the  said  sum  of  AUD$262,322.09 at the direction of the Dominion
Estates  Group;  WHEREAS  Atlantic  did not acquire the shares in Wines owned by
P.L.S  Pty  Ltd (ACN 006 449 485) ("PLS") but Atlantic incorrectly issued to PLS
shares  in  Atlantic  in  the  mistaken  belief  that  PLS  had  delivered  its
shareholding in Wines to Atlantic;

     WHEREAS,  Atlantic  has  not assumed the Commonwealth Loan as a dispute had
arisen between the parties to the Exchange Agreement;

     WHEREAS,  pursuant  to  the  terms  of the Exchange Agreement, the Dominion
Estates  Group  Shareholders  delivered to Atlantic all of their shares in Wines
and  Estates, and Atlantic caused to be transferred all those shares in Wines to
Estates and all those shares in Estates to Atlantic;

     WHEREAS,  each  of  the boards of directors of Atlantic, Wines and Estates,
have each determined that it would be in the best interests of each of Atlantic,
Wines  and  Estates,  and their respective stockholders and the Dominion Estates
Group Shareholders to unwind the transactions consummated in connection with the
Exchange Agreement;

     WHEREAS,  on February 28, 2005, Mount Rozier Estates Pty Ltd, ("Mt Rozier")
a  wholly-owned  subsidiary  of Atlantic borrowed AUD$465,000 from Estates ( "Mt
Rozier Loan");

     WHEREAS,  as additional consideration for this Agreement, Global has agreed
to  assume  Mt  Rozier's  obligation  under  the  Mt  Rozier Loan and to issue a
promissory  note to Estates as security for the repayment of the Mt Rozier Loan,
and  Estates  has agreed to substitute Global for Mt Rozier as the debtor of the
Mt Rozier Loan as evidenced by a novation agreement;

     WHEREAS,  on April 4 2005, the board of directors of Estates placed Estates
into  voluntary  administration  under  Section  436A  of  the  Corporations Act
(Commonwealth)  2001  ("the  Act")  and  as a result, the transfer of any of its
shares  is  subject to approval of the Federal Court pursuant to Section 437F of
the Act.

                                                                               2
<PAGE>

     WHEREAS,  each  of  the  boards of directors of Atlantic, Wines and Estates
have  determined  that  it  would  be  in the best interests of Atlantic, Wines,
Estates,  A1  and the Dominion Estates Group Shareholders to have A1 acquire all
the  issued  shares  in  Estates  ("the  Estates  Shares")  from  Atlantic  in
consideration of A1 returning its shares in Atlantic to Atlantic;

     WHEREAS  Atlantic warrants that all the Estates Shares are unencumbered and
represents  that,  except  for the appointment of the Administrators to Estates,
Atlantic  has  not  created  or  caused  any  party  to  obtain  or  possess any
encumbrance,  lien, charge or claim with respect to either the Estates Shares or
to  the  best  of  its knowledge and belief the Wines Shares and that subject to
paragraph  1.1  of  Section  1 of this Agreement, it is entitled to transfer the
Estates Shares to Global in accordance with this Agreement;

     WHEREAS  this  Agreement  is  conditional  upon  and will have no force and
affect  unless  either (a) the approval of the Federal Court pursuant to Section
437F  of  the  Act  ("Court  Approval") to the transfer by Atlantic to A1 of the
Estates Shares is obtained or (b) the Deed of Company Arrangement (as defined in
the  following  recital)  has  come  into  force  and  effect  and  the  Deed
Administrators  (as defined in the next following recital) have consented to the
transfer by Atlantic to A1 of all right title and interest in and to the Estates
Shares;  WHEREAS,  following  a  meeting of creditors of Estates held on 29 July
2005  it  was  resolved that Estates execute a Deed of Company Arrangement which
will  be  executed  pursuant  to  Section  444A  of  the  Act  ("Deed of Company
Arrangement");  WHEREAS, if the Deed of Company Arrangement comes into force and
effect  the  requirement to obtain Court Approval to the transfer by Atlantic to
A1  of  the  Estates  Shares  will not be necessary, in which event and with the
consent  of those parties defined in the Deed of Company Arrangement as the Deed
Administrators  ("Deed  Administrators"),  the transfer by Atlantic to A1 of the
Estates  Shares  can proceed in the manner set out in paragraph 1.6 of Section 1
of the Agreement;

     WHEREAS,  as  additional  consideration  for  this Agreement Global has, at
Atlantic's request, agreed to issue to Sapphire Developments Ltd a duly executed
promissory  note  for  AUD$3.2  Millio  together  with  a duly executed security
agreement in relation thereto;

     WHEREAS  in  consideration  of the Agreement Atlantic releases the Dominion
Estates Group from each and every obligation which Wines and/or Estates may have
to  repay  any  monies  which  may  be owing by Wines and/or Estates to Atlantic
including  any  monies  which  Atlantic  may  have  advanced  or provided to, or
provided  for  the  benefit  of,  either or both of the companies comprising the
Dominion  Estates  Group (including without limitation the amount transferred to
discharge  the  National  Loans  and  the amount of AUD$262,322.09 herein before
referred  to  as  being  transferred  at  the  direction of the Dominion Estates
Group);

                                                                               3
<PAGE>

     WHEREAS  Atlantic  warrants that to the best of its knowledge and belief it
has not caused Wines to become liable to or indebted to any third party and that
Estates  is  not  liable or indebted to any party other than as disclosed to the
Administrators of Estates;

     WHEREAS,  the parties acknowledge that certain of the Atlantic Shares noted
with  an  asterisk  in Schedule 2 ("DPP Controlled Shares") are the subject of a
restraint  order  obtained  by  the  Director  of  Public  Prosecutions  of  the
Commonwealth  of  Australia  ("DPP")  under  proceedings in the Supreme Court of
Victoria (Australia) No. 1530 of 2004 and have been placed under the custody and
control  of the Official Trustee at the Insolvency and Trustee Service Australia
("Official  Trustee")  and  that  any  transfer  of the DPP Controlled Shares is
subject to the approval of the Official Trustee;

     WHEREAS  Global  and the Dominion Estates Group agree that once the Estates
Shares  have  been  transferred  to  A1,  Estates  comes  out  of  voluntary
administration and control is returned to its directors they shall cause all the
shares  in  Wines  which  were  formerly  held  by  the  Dominion  Estates Group
Shareholders  to  be  transferred  to  each  of  the  Dominion  Estates  Group
Shareholders  upon  each of the Atlantic Shareholders at the time of transfer of
the  Estate  Shares  returning  its  Atlantic Shares to Atlantic (save for those
shareholdings marked with an asterisks in Schedule 1 which shall, subject to the
Official  Trustee's  approval,  be  transferred to the Official Trustee upon the
Official Trustee returning the relevant Atlantic Shares to Atlantic);

     WHEREAS  Atlantic  has  agreed subject to paragraph 1.1 of Section 1 of the
Agreement  to  (i)  transfer  to A1 all rights, title and interest to and in the
Estates  Shares,  (ii)  deliver  the  resignations  of directors appointed by it
namely  Adam  Mauerberger,  Andrew  Bayley  and Chris Kopitkke from the board of
Estates; and (iii) deliver to the Dominion Estates Group a general release;

     WHEREAS  Global  has  agreed  subject to paragraph 1.1 of Section 1 to: (a)
assume  the  obligations  under  the  Mt  Rozier Loan (by way of entering into a
novation  agreement  and  issuing  a  promissory note to Estates); (b) deliver a
promissory  note to Sapphire Developments Limited and execute a related security
agreement;  (c)  use  its  best endeavours to cause the Atlantic Shareholders to
return the Atlantic Shares other than the DPP Controlled Shares to Atlantic; (d)
use  its  best  endeavours  to  cause  the  Official  Trustee  to return the DPP
Controlled Shares to Atlantic;

     WHEREAS,  the Dominion Estates Group has agreed subject to paragraph 1.1 of
Section  1  to  deliver to Atlantic a general release; WHEREAS, the parties have
agreed  that  entering  into this Agreement and related Releases, as referred to
below,  is  the  best manner to ensure that each of Atlantic, Wines, Estates, A1
and  the Dominion Estates Group Shareholders are returned the consideration they
exchanged in connection with the Exchange Agreement; and

                                                                               4
<PAGE>
     NOW, THEREFORE, in consideration of the covenants, and agreements set forth
in  this  Agreement, Atlantic, Wines, Estates and Global intending to be legally
bound  thereby,  and  hereby  warranting  that  they  each have the capacity and
authority  to  execute this Agreement, it is agreed by and among the undersigned
parties,  that all of the claims asserted (or which could have been asserted) by
Atlantic  against  Wines  or Estates and Wines or Estates against Atlantic will,
subject  to  paragraph  1.1  of  Section  1  of  this  Agreement, be settled and
compromised on the following terms and conditions, to wit:

     1. Compromise

1.1  This  Agreement  and  the  documents  executed  pursuant  thereto  are
     conditional  upon  and  will  have  no  force  and  affect unless either of
     following conditions precedent have been satisfied ("Conditions Precedent")
     (a)  the  Court  Approval  to the transfer by Atlantic to A1 of the Estates
     Shares  has  been  obtained or (b) the Deed of Company Arrangement has come
     into  force  and  effect  and the Deed Administrators have consented to the
     transfer by Atlantic to A1 of the Estates Shares;

1.2  Atlantic  agrees  that  subject  to  paragraph  1.1  of  Section  1  of the
     Agreement to (i) transfer to A1 all right, title and interest to and in the
     Estates  Shares, (ii) deliver the resignations of directors appointed by it
     namely Adam Mauerberger, Andrew Bayley and Chris Kopitkke from the board of
     Estates  and (iii) deliver to Wines and Estates a general release; and (iv)
     deliver  to  Global  a  novation agreement in respect of the Mt Rozier Loan
     duly executed by Global;

1.3  Global  agrees  subject  to  paragraph  1.1  of  Section 1 of the Agreement
     to: (a) assume the obligations under the Mt Rozier Loan (by way of entering
     into  a  novation  agreement and issuing a promissory note to Estates); (b)
     deliver  a  promissory  note to Sapphire Developments Limited and execute a
     related  security  agreement;  (c)  use  its  best  endeavours to cause the
     Atlantic  Shareholders  to  return  the  Atlantic Shares other than the DPP
     Controlled Shares to Atlantic; and (d) use its best endeavours to cause the
     Official Trustee to return the DPP Controlled Shares to Atlantic.

     1.4  The  Dominion  Estates  Group  agrees to deliver to Atlantic a general
     release;

1.5  In  order  to  facilitate  the  carrying  out  of  the  respective  parties
     obligations  under  paragraphs  1.2,  1.3  and  1.4 of Section 1 as soon as
     practicable  after  the  signing  of the Agreement: Global and the Dominion
     Estates  Group  shall  cause  to be delivered to Atlantic's counsel, Rubin,
     Bailan, Ortoli, Mayer & Baker LLP 45 Park Avenue, New York, New York 110022
     or its appointed agent;

     i.   a  duly  executed  Novation  Agreement  ("Novation")  duly executed by
          Global and Estates in the form attached hereto as Exhibit A;

                                                                               5
<PAGE>

     ii.  a  duly  executed  promissory  note  to AUD$3.2 Million from Global to
          Sapphire Developments Limited in the form attached hereto as Exhibit B
          ("Global Promissory Note");

     iii. a  duly  executed  promissory  note  from  Global  to  Estates  for
          AUD$465,000.00  in the form attached hereto as Exhibit C together with
          a legal certification from counsel for Global, Sichenzia Ross Freidman
          Ference LLP (collectively, "Estates Promissory Note");

     iv.  a  duly  executed  Security  Agreement  ("Global  Security Agreement")
          in the form attached hereto as Exhibit D;

     v.   the  share  certificates  for  the  Atlantic  Shares  (other  than the
          DPP  Controlled  Shares) with duly executed stock powers in blank with
          customary signature guarantees; and

     vi.  a  general  release  duly  executed  by  the Dominion Estates Group in
          the  form annexed hereto as Exhibit E in favour of Atlantic ("Dominion
          Estates Group Release");

Atlantic  shall  deliver  to  Global  and  the  Dominion Estates Group's counsel
Sichenzia  Ross  Freidman  Ference  LLP  or  its  appointed  agent:

     (a)  the  share  certificate  for  the  Estates  Shares  together with duly
          executed share transfer pursuant to which Atlantic transfers to A1 all
          of  its  right  title  and  interest  in  and  to  the  Estates Shares
          (collectively the "Estates Shares Transfer Documents");

     (b)  the  Novation  duly  executed  by  Mt  Rozier  or confirmation from Mt
          Rozier's  counsel  that  they  are holding the Novation executed by Mt
          Rozier  and will deliver the original executed of the same to Global's
          counsel when requested;

     (c)  the  written  resignations  of  Adam  Mauerberger,  Andrew  Bayley and
          Chris Kopitkke from the board of Estates respectively; and

     (d)  a  general  release  duly  executed  by  Atlantic  in the form annexed
          hereto as Exhibit E in favour of the Dominion Estates Group.

                                                                               6
<PAGE>

1.6  Pending  the  satisfaction  of  one  of  the  Conditions  Precedent and the
     receipt  by  Rigby  Cooke  of  the  Estates  Shares  Transfer Documents the
     respective  counsel referred to in paragraph 1.5 of Section 1shall hold the
     documents  referred  to  therein  in escrow and they shall have no force or
     effect.  If  neither  of  the Conditions Precedents are satisfied within 90
     days from the date of the Agreement then the respective counsel will return
     the  documents referred to in paragraph 1.5 of Section 1 to the counsel who
     provided  them and the Agreement and those documents shall have no force or
     effect.

     Upon  either  of  the  Conditions  Precedent  being  satisfied  Atlantic's
     counsel  will  then  forward  to  Rigby  Cooke  the Estates Shares Transfer
     Documents.

     Upon Rigby Cooke receiving the Estates Shares Transfer Documents,

     i.   Global's counsel shall promptly forward (a) the Estates
          Promissory Note and Novation to Estates' Administrators: C/- Simon
          Wallace-Smith, Deloittes, 180 Lonsdale Street, Melbourne, VIC,
          Australia 3000, (b) to Atlantic's counsel the Atlantic Shares
          (including the DPP Controlled Shares to the extent it has physical
          possession of such, if at all), the Global Promissory Note, the Global
          Security Agreement and the Dominion Estates Group Release;

     ii.  Atlantic's counsel will forward to Monahan + Rowell, Atlantic's
          Australian counsel (a) the resignations of Adam Mauerberger, Andrew
          Bayley and Chris Kopitkke from Estates; (b) the Atlantic Release; and
          (c) the Novation executed by Mt Rozier. Monahan + Rowell shall
          promptly forward the documents referred to in (a), (b) and (c) of this
          subparagraph to Rigby Cooke, Global's counsel in Australia.

1.7  Global  and  the  Dominion  Estates  Group  agree  that  once  the  Estates
     Shares  have  been  transferred  to  A1  and Estates comes out of voluntary
     administration  and  control  returning  to  its directors to cause all the
     shares  in  Wines  which  were  formerly held by the Dominion Estates Group
     Shareholders  to  be  transferred  to  each  of  the Dominion Estates Group
     Shareholders  upon  each  of  Atlantic  Shareholders returning its Atlantic
     Shares  to  Atlantic (save for those shareholdings marked with an asterisks
     in  Schedule  1 which shall, subject to the Official Trustee's approval, be
     transferred to the Official Trustee upon the Official Trustee returning the
     DPP Controlled Shares to Atlantic).

1.8  Global  and  the  Dominion  Estates  Group  agree  that  once  the  Estates
     Shares  have  been  transferred  to  A1  and Estates comes out of voluntary

                                                                               7
<PAGE>
     administration  and  control  has been returned to its directors, they will
     use  their  best  endeavors to cause the Official Trustee to return the DPP
     Controlled  Shares  to Atlantic and in return issue to the Official Trustee
     the  shares in Wines marked with the asterisks in Schedule 1 in the name of
     the Official Trustee.

     In  the  event  that  Atlantic  reasonably  forms the view that the matters
     referred  to in the preceding paragraph are not completed to its reasonable
     satisfaction,  or  Estates  is  placed  into  liquidation (whichever occurs
     first)  then  and if those situations are capable of being remedied and the
     matters  are  not  remedied  to Atlantic's satisfaction following notice to
     that  effect  given  by Atlantic and giving 14 calendar days to remedy that
     default,  Atlantic  shall  then be entitled to deal with the DPP Controlled
     Shares according to law.

1.9  Atlantic  warrants  that  all  the  Estates  Shares  are  unencumbered  and
     represents  that,  except  for  the  appointment  of  the Administrators to
     Estates,  Atlantic has not created or caused any party to obtain or possess
     any  encumbrance,  lien, charge or claim with respect to either the Estates
     Shares or to the best of its knowledge and belief the Wines Shares and that
     subject  to  paragraph 1.1 of Section 1 of the Agreement, it is entitled to
     transfer the Estates Shares to A1 in accordance with the Agreement.

1.10 Dominion  Estates  Group  warrants  that  the  Atlantic  Shares (other than
     the  DPP  Controlled  Shares)  are  to  the best of its knowledge an belief
     unencumbered  and  that  the holders of the Atlantic Shares (other than the
     registered holders of the DPP Controlled Shares) are entitled to return the
     Atlantic Shares to Atlantic.

1.11 In  consideration  of  this  Agreement  Atlantic,  subject to paragraph 1.1
     of  Section  1  releases  the  Dominion  Estates  Group from each and every
     obligation  which  Wines  and/or Estates may have to repay any monies which
     may be owing by Wines and/or Estates to Atlantic including any monies which
     Atlantic  may have advanced or provided to, or provided for the benefit of,
     either  or  both  of  the  companies  comprising the Dominion Estates Group
     (including  without  limitation  the  amount  transferred  to discharge the
     National  Loans  and the amount of AUD$262,322.09 herein before referred to
     as being transferred at the direction of the Dominion Estates Group).

1.12 Atlantic  warrants  that  to  the  best  of its knowledge and belief it has
     not  caused  Wines  to  become liable to or indebted to any third party and
     that Estates is not liable or indebted to any party other than as disclosed
     to the Administrators of Estates by the date of the Agreement.

                                                                               8
<PAGE>
     2.  Termination  of  Exchange  Agreement. Upon execution of this Agreement,
paragraph  1.1  of  Section  1  being  satisfied  and  the  consummation  of the
aforementioned transactions, including the exchange of the releases contemplated
hereby, the Exchange Agreement and any and all obligations of any of the parties
arising  from such Exchange Agreement shall, in all respects, be deemed null and
void  and  of  no further force and effect and none of the parties thereto shall
have  any  remaining  obligations  or  liabilities  pursuant  to  the  Exchange
Agreement, including, but not limited to: (i) the Dominion Estates Group's right
to  20%  representation on the Board of Directors of Atlantic; (ii) any Atlantic
liabilities resulting from the Commonwealth Bank of Australia loan referenced in
the Exchange Agreement; and (iii) any Atlantic liabilities resulting from the GE
Commercial  Corporation  of  Australia  Pty  Ltd Facility Agreement to which the
Dominion Estates Group is a party.

     3.  Confidentiality.  The parties agree to keep the terms of this Agreement
and  the matters raised herein as confidential, and shall not disclose the terms
of  this Agreement unless compelled to by court order, subpoena, or request by a
self-regulatory organization.

     4.  Binding  Agreement.  The  terms  of this Agreement are binding upon and
inure to the benefit of each of the parties hereto, their respective successors,
assigns, dependents, and all other related persons, affiliates or associates.

     5.  Headings. The captions of the paragraphs and sections of this Agreement
are  provided  solely  for  convenience,  and  shall not affect the substance or
meaning of this Agreement.

     6. Representation. Each of the parties hereto represents that each has read
and  fully  understands each of the provisions as contained herein, and has been
afforded the opportunity to review same with his attorney of choice; and further
that  each  of  the  parties  hereto  represents  that each and every one of the
provisions  contained in this Agreement is fair and not unconscionable to either
party.

     7.  Counterparts.  The Agreement may be executed in facsimile counterparts,
each  of  which  when  all  parties have executed at least one such counterpart,
shall be deemed an original, with the same force and effect as if all signatures

                                                                               9
<PAGE>

were  appended to one instrument, but all of which together shall constitute one
and the same Agreement.

     8.  Severability.  Should  any provision of the Agreement be declared or be
determined  by  any  court or tribunal to be illegal or invalid, the validity of
the  remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term or provision shall be severed and deemed not to be
part of the Agreement.

     9.  Choice  of  Laws.  The  Agreement shall be governed by and construed in
accordance  with  the  substantive  law of the State of New York and the parties
hereto  consent  that  the jurisdiction will lie with Courts of the State of New
York.

     10.  Further Acts.Each party agrees to do all things as may be necessary or
desirable to give full effect to every part of the Agreement.

     11.  Pre-Emptive Rights. Each of the parties waives and will, to the extent
that  it is within their power (respectively), waive or ensure the waiver of any
pre-emptive  rights  in  relation  to the transfer of any shares pursuant to the
Agreement.

     12. Corporate Steps. Each of the parties to transfers of shares and each of
the  companies  in  respect  of  which shares are being transferred will, to the
extent that it is within their power (respectively), take or procure to be taken
all necessary corporate steps to facilitate the transfers of shares contemplated
by  the  Agreement  including,  but  not limited to, the proper calling of board
meetings  to  resolve  that the aforesaid transfers of shares are registered and
the filing of appropriate documents at the relevant corporate regulator.

                                                                              10
<PAGE>

     IN  WITNESS  WHEREOF,  the parties have read and executed this Agreement of
Settlement  as  of  the  date  and  year  first  above  written.
ATLANTIC  WINE  AGENCIES,  INC.

By: /s/  Peter  Spring
    ------------------
Name:  Peter  Spring
Title:

DOMINION  ESTATES  PTY  LTD

By: /s/  Salvatore  Algeri
    ----------------------
Name:  Salvatore  Algeri
Title:

DOMINION  WINES  LTD

By: /s/  Carl  David  Voss
    ---------------------
Name:  Carl  David  Voss
Title:

GLOBAL  REALTY  DEVELOPMENT  GROUP

By: /s/  Roger  Charles  David
    --------------------------
Name:  Roger  Charles  David
Title

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