Document:

exv10w10

 

EXHIBIT
10.10

			
	
	 	901 E. 233rd Street

Carson, California

90745-6204

310/835-8400

Fax 310/835-6615

July 13,
2006

Mr. Kevin McDonnell 

2210 Lorain Road 

San Marino, CA
91108

Dear Kevin:

I am excited to make you a formal offer to join the Leiner team. Together we can build a great
success for the Company and for ourselves as individuals. Your start date will be Monday, July
17, 2006. Following is our offer for the position of Executive Vice President, Chief Financial
Officer:

	 	1.	 	Base Salary: $300,000 Annual
	 
	 	2.	 	Bonus (Prorated for 8.5 months in FY07):

	 	•	 	Minimum: 50% of Base Salary at $85 million
EBITDA (Adj. EBITDA)
	 
	 	•	 	Target: 75% of Base Salary at $90 million EBITDA (Adj. EBITDA)
	 
	 	•	 	Upside: 100% of Base Salary at $95 million EBITDA (Adj. EBITDA)
	 
	 	•	 	Eligible for additional bonus awards at Board discretion

	 	3.	 	Sign on Bonus: $50,000 payable upon start of employment
	 
	 	4.	 	Stock options: 10,000 shares upon hire with four year vesting or liquidity event
	 
	 	5.	 	Employment Agreement: Two years base salary and target bonus for termination without
cause
	 
	 	6.	 	Club Memberships: Dues payable by expense report for two club memberships
	 
	 	7.	 	Health Benefits: Customary Executive Benefits (attached)
	 
	 	8.	 	Responsibilities will include Finance, Accounting, Human Resources, Management
Systems (IT) and Legal
	 
	 	9.	 	Vacation: Four weeks

 

I would appreciate your acceptance by signing and returning this offer to my attention by July
14, 2006. If you have any questions please do not hesitate to call.

	 	 	 
	Regards,
	 	 
	 
	 	 
	/s/ Robert K. Reynolds

	 	 
	 	 	 
	Robert K. Reynolds
	 	 
	Executive Vice President and Chief Operating Officer
	 	 

I accept Leiner Health Products’ offer of employment.

	 	 	 	 	 
	/s/ Kevin McDonnell

	 	7-17-06
	 	 
	 	 	 	 	 
	Kevin McDonnell

	 	Dateexv4w3

 

EXHIBIT 4.3

SECOND AMENDMENT

TO

SECOND AMENDED AND RESTATED RIGHTS AGREEMENT

     This Second Amendment to Second Amended and Restated Rights Agreement, dated as of June 29,
2007 (the “Amendment”), is by and between Sovereign Bancorp, Inc., a Pennsylvania
corporation (the “Company”), and Mellon Investor Services LLC, a New Jersey limited
liability company (the “Rights Agent”).

WITNESSETH

     WHEREAS, the Company and Rights Agent have heretofore entered into the Second Amended and
Restated Rights Agreement, dated January 19, 2005, as amended on October 24, 2005 (as so amended,
the “Rights Agreement”);

     WHEREAS, no Distribution Date (as defined in the Rights Agreement) has occurred;

     WHEREAS, the Board of Directors of the Company has adopted, in accordance with Section 27 of
the Rights Agreement, a resolution approving this Amendment and directing the appropriate officers
of the Company to take all appropriate steps to execute and put into effect this Amendment, and an
appropriate officer of the Company has provided a certificate to the Rights Agent as provided for
in such Section 27.

     NOW, THEREFORE, in consideration of the premises and covenants set forth in the Rights
Agreement and this Amendment, the parties hereby agree as follows:

     1. Expiration Date of Rights. Section 7(a) of the Rights Agreement is hereby amended
and restated to read in its entirety as follows:

“(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii), and Section
23(a) hereof) in whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly executed, to
the Rights Agent at the office of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect
to the total number of one-hundredths of a share (or other securities, cash,
or other assets, as the case may be) as to which such surrendered Rights are
then exercisable, at or prior to the earliest of (i) the close of business
on June 30, 2011 (the “Final Expiration Date”), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the earlier of (i) and
(ii) being herein referred to as the “Expiration Date”), and (iii) the time
at which such Rights are exchanged as provided in Section 24 hereof.”

     2. Exhibits. Exhibits B and C of the Rights Agreement are hereby
amended and restated to read in their entirety as attached hereto.

1

 

     3. Rights Agreement. On or after the date hereof, each reference in the Rights
Agreement (including the Exhibits thereto) to “This Agreement,” “hereunder,” “herein” or words of
like import shall mean and be a reference to the Rights Agreement as amended hereby and all
Exhibits thereto shall be deemed to be amended to reflect the amendments made hereby.

     4. Effective Date. This Amendment shall be effective as of the date of its execution
and, except as set forth herein, the Rights Agreement shall remain in full force and effect and
shall be otherwise unaffected hereby.

     5. Capitalized Terms. Capitalized terms which are used but not defined herein shall
have the meaning ascribed to such terms in the Rights Agreement.

     6. Enforceability. If any term, provision, covenant, or restriction of this Amendment
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
Amendment shall remain in full force and effect and shall in no way be affected, impaired, or
invalidated.

     7. Governing Law. This Amendment shall be deemed to be a contract made under the laws
of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed in
accordance with the laws of the Commonwealth applicable to contracts made and to be performed
entirely within the Commonwealth; provided, however, that all provisions regarding the rights,
duties and obligations of the Rights Agent shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be performed entirely within
such State.

     8. Counterparts. This Amendment 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.

2

 

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

	 	 	 	 	 	 	 
	 	 	SOVEREIGN BANCORP, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Joseph P. Campanelli	 	 
	 

	 	 	 	 	 	 
	 	 	Name:	 	Joseph P. Campanelli
	 	 	Title	 	Chief Executive Officer
	 
	 	 	 	 	 	 
	 	 	Attest:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Richard Toomey	 	 
	 

	 	 	 	 	 	 
	 	 	Name:	 	Richard Toomey
	 	 	Title	 	General Counsel
	 
	 	 	 	 	 	 
	 	 	MELLON INVESTOR SERVICES LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Cynthia Pacolay	 	 
	 

	 	 	 	 	 	 
	 	 	Name:	 	Cynthia Pacolay
	 	 	Title	 	Client Relationship Executive
	 
	 	 	 	 	 	 
	 

	 	Attest:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Rita Swartz	 	 
	 

	 	 	 	 	 	 
	 	 	Name:	 	Rita Swartz
	 	 	Title	 	Client Relationship Executive

3

 

Exhibit B

[Form of Rights Certificate]

Certificate No. R-                     Rights

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

Rights Certificate|

SOVEREIGN BANCORP, INC.

     This certifies that                     , or registered assigns, is the registered owner of the number
of Rights set forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Second Amended and Restated Rights Agreement, dated as of January
19, 2005, as amended on October 24, 2005 and June 29, 2007 (together, the “Rights Agreement”),
between Sovereign Bancorp, Inc., a Pennsylvania corporation (the “Company”), and Mellon Investor
Services LLC, a New Jersey limited liability company (the “Rights Agent”), to purchase from the
Company at any time prior to 5:00 P.M. (New York City time) on June 30, 2011, at the office or
offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, nonassessable share of Series A Junior Participating Preferred Stock
(the “Preferred Stock”) of the Company, at a purchase price of $40.00 per one one-hundredth of a
share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced
by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof)
set forth above, and the Purchase Price per share set forth above, are the number and Purchase
Price as of January 19, 2005, based on the Preferred Stock as constituted at such date. The Company
reserves the right to require prior to the occurrence of a Triggering Event (as defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock
will be issued.

     Upon the occurrence of a Section 11(a)(ii) Event (as defined in the Rights Agreement), if the
Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person

 

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

B-1

 

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

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

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

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

     Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
(i) may be redeemed by the Company at its option at a redemption price of $.001 per Right at any
time prior to the earlier of the close of business on (a) the 10th business day following notice to
the Board of Directors of the occurrence of the Stock Acquisition Date (as such time period may be
extended pursuant to the Rights Agreement), and (b) the Final Expiration Date.

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

     No holder of this Rights Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the
Company which may at any time be issuable on the exercise hereof, nor shall anything contained

B-2

 

in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the election of directors or
Upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to
any corporate action, or, to receive notice of meetings or other actions affecting shareholders
(except as provided in the Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised
as provided in the Rights Agreement.

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

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

Dated as of                     , 20__

	 	 	 	 	 	 	 
	 	 	SOVEREIGN BANCORP, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	Attest:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Title:	 	 

Countersigned:

                                                                  

By                                                             

          Authorized Signature

B-3

 

[Form of Reverse Side of Rights Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)

     FOR VALUE RECEIVED                                                             
 hereby sells, assigns and transfers unto         
            
            
            
   

 

(Please print name and address of transferee)

 

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

Dated:                                        , 20__

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	Signature
	 	 

Signature Guaranteed:                                                                                 

     Signatures must be guaranteed by a participant in the Securities Transfer Agent Medallion
Program, the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc. Medallion
Signature Program.

Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

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

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

	Dated:                                        ,
20___ 

	 	 	 	 
	 	 

Signature
	 	  

Signature Guaranteed:

NOTICE

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

B-4

 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise Rights represented by the Rights Certificate.)

To: SOVEREIGN BANCORP, INC.:

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

Please insert social security

or other identifying number

                                                                                

(Please print name and address)

                                                                     
           

                                                                     
           

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

Please insert social security

or other identifying number

                                                                     
           

(Please print name and address)

                                                                     
           

                                                                     
           

Dated:                                        , 20__

                                                                     
           

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	Signature
	 	 

Signature Guaranteed:                                                                 
                                                       

     Signatures must be guaranteed by a participant in the Securities Transfer Agent Medallion
Program, the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc. Medallion
Signature Program.

B-5

 

Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

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

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

	Dated:                                        , 20___ 

	 	 	 	 
	 	 

Signature
	 	 

Signature Guaranteed:

NOTICE

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

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

B-6

 

Exhibit C

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED STOCK

     On September 19, 1989, the Board of Directors of Sovereign Bancorp, Inc. (the “Company”)
declared a dividend distribution of one Right for each outstanding share of the Company’s Common
Stock, par value $1.00 per share (the “Common Stock”), to shareholders of record at the close of
business on October 2, 1989. The Board of Directors amended the terms and conditions of the Rights
on September 27, 1995, June 21, 2001, January 19, 2005, October 24, 2005 and on June 29, 2007.
Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share
of Series A Junior Participating Preferred Stock, without par value (the “Preferred Stock”), at a
Purchase Price of $40, subject to adjustment. The description and terms of the Rights are set
forth in the Second Amended and Restated Rights Agreement, dated January 19, 2005, as amended on
October 24, 2005 and June 29, 2007 (collectively, the “Rights Agreement”) between the Company and
Mellon Investor Services LLC, as Rights Agent.

     Initially, the Rights will be evidenced by Common Stock certificates representing shares then
outstanding, and no separate Rights Certificates will be distributed. The Rights will separate
from the Common Stock and a Distribution Date will occur upon the earlier of (i) 10 business days
following a public announcement that a person or group of affiliated or associated persons (an
“Acquiring Person”) has acquired, or obtained the right to acquire, 9.9% or more of the outstanding
shares of Common Stock or voting securities representing 9.9% or more of the total voting power of
the Company (the “Stock Acquisition Date”) or (ii) 10 business days (or such later date as the
Board of Directors shall determine) following the commencement of a tender offer or exchange offer
that would result in a person or group acquiring 9.9% or more of such outstanding shares of Common
Stock or total voting power.

     On October 24, 2005, the Company and the Rights Agent amended the provisions of the Rights
Agreement to provide that the term “Acquiring Person” shall not include Banco Santander Central
Hispano, S.A. (and its affiliates and associates) (collectively, “Santander”), to the extent and
only to the extent that Santander acquires beneficial ownership of Common Stock in accordance with
and as permitted by the terms of the Investment Agreement, dated October 24, 2005, between the
Company and Santander.

     Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates
and will be transferred with and only with such Common Stock certificates, (ii) new Common Stock
certificates issued after October 2, 1989, will contain a notation incorporating the Rights
Agreement by reference, and (iii) the surrender for transfer of any certificate for Common Stock
outstanding will also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.

     The Rights are not exercisable until the Distribution Date and will expire at the close of
business on June 30, 2011, unless earlier redeemed as described below. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of a Triggering

C - 1

 

Event (as defined below) that, upon any exercise of Rights, a number of Rights be exercised so
that only whole shares of Preferred Stock will be issued.

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

     In the event that (i) a person becomes an Acquiring Person (except pursuant to an offer for
all outstanding shares of the Company’s voting securities which at least a majority of the members
of the Board of Directors of the Company who are not a representative or an affiliate of the
Acquiring Person determines to be fair to and otherwise in the best interests of the Company and
its shareholders), (ii) an Acquiring Person engages in one or more “self-dealing” transactions as
defined in the Rights Agreement, (iii) the Company is the surviving corporation in a merger with an
Acquiring Person, or (iv) during such time that there exists an Acquiring Person, a
recapitalization or reverse stock split occurs which results in such Acquiring Person’s
proportionate ownership interest being increased by more than 1% (any of the foregoing, a “Flip-in
Event”), each holder of a Right will thereafter have the right to receive, upon exercise, Common
Stock (or, in certain circumstances, cash, property, or other securities of the Company) having a
value (based on the lowest closing price of the Common Stock during the twelve-month period
preceding the Flip-in Event) equal to two times the exercise price of the Right. Notwithstanding
the foregoing, following the occurrence of a Flip-in Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person
(or by certain related parties) will be null and void. Rights are not exercisable following the
occurrence of a Flip-in Event, however, until such time as the Rights are no longer redeemable by
the Company as set forth below.

     For example, at an exercise price of $40.00 per Right, each Right not owned by an Acquiring
Person (or by certain related parties) following a Flip-in Event would entitle its holder to
purchase $80.00 worth of Common Stock based on the lowest closing price of the Common Stock during
the twelve-month period preceding the Flip-in Event (or other consideration, as noted above) for
$40.00. Assuming that the lowest closing price of the Common Stock during such period was $20.00,
the holder of each valid Right would be entitled to purchase four shares of Common Stock for
$40.00.

     In the event that, at any time following the Stock Acquisition Date, (i) the Company is
acquired in a merger or other business combination transaction in which the Company is not the
surviving corporation (other than a merger which follows an offer for all outstanding voting
securities of the Company, which at least a majority of the members of the Board of Directors of
the Company determines to be fair to and otherwise in the best interests of the Company and its
shareholders, and the merger price is not less than, and the form of consideration is the same as,
that paid in the tender or exchange offer) or (ii) 50% or more of the Company’s assets or earning
power is sold or transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a value equal to two times the exercise price of the Right. The

C - 2

 

events set forth in this paragraph and in the second preceding paragraph are referred to as
“Triggering Events.”

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

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

     At any time until ten business days following notice to the Board of Directors of the
occurrence of the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in
part, at a price of $.001 per Right (payable in cash, Common Stock, or other consideration deemed
appropriate as determined by the Board of Directors). At any time prior to the date the Rights
would otherwise become nonredeemable, a majority of the members of the Board of Directors of the
Company may extend the period for redemption. The Company’s right of redemption may be reinstated
if an Acquiring Person reduces such Person’s beneficial ownership to less than 9.9% of the
outstanding shares of Common Stock or total voting power in a transaction or series of transactions
not involving the Company and there is then no other Acquiring Person. Immediately upon the action
of the Board of Directors ordering redemption of the Rights, the Rights will terminate and the only
right of the holders of the Rights will be to receive the $.001 redemption price.

     At any time after the occurrence of a Flip-in Event, the Board of Directors may exchange the
Rights (other than Rights owned by an Acquiring Person or an affiliate or an associate of any such
person, which have become void), in whole or in part, at an exchange ratio of one share of Common
Stock, and/or other equity securities deemed to have the equivalent value, per Right, subject to
adjustment.

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

     Other than those provisions relating to the principal economic terms of the Rights, any of the
provisions of the Rights Agreement may be amended by the Board of Directors of the Company prior to
the Distribution Date. After the Distribution Date, the provisions of the Rights

C - 3

 

Agreement may be amended by the Board in order to cure any ambiguity, to make changes which
do not adversely affect the interests of holders of Rights (excluding the interests of any
Acquiring Person or an affiliate or associate of any such person), or to shorten or lengthen any
time period under the Rights Agreement; however, no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not redeemable.

     A copy of the Second Amendment to the Second Amended and Restated Rights Agreement, dated June
29, 2007, has been filed with the Securities and Exchange Commission as Exhibit 4.3 to the
Company’s Form 8-K/A No. 5 filed on June 29, 2007. Copies of the Rights Agreement are available
free of charge from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.

C - 4

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