Document:

Exhibit
4.1

 

NEW
YORK & COMPANY, INC.

AMENDED
AND RESTATED

2006
LONG-TERM INCENTIVE PLAN

ARTICLE
I

ESTABLISHMENT,
PURPOSE AND TERM

 

1.1
Establishment. The New York & Company,
Inc. Amended and Restated 2006 Long-Term Incentive Plan (“Plan”)
is hereby established by New York & Company, Inc. (“Company”),
effective as of the Effective Date. Subject to Section 13.1,
Awards may be granted as provided herein for the term of the Plan.

 

1.2
Purposes. The purposes of the Plan are
to foster and promote the long-term financial success of the Company and
materially increase shareholder value by motivating performance through
incentive compensation. The Plan also is intended to encourage Participant
ownership in the Company, attract and retain talent, and enable Participants to
participate in the long-term growth and financial success of the Company. In
addition, the Plan provides the ability to make Awards linked to the
profitability of the Company’s businesses and increases in shareholder value.

 

1.3
Term. The term of the Plan shall extend
from the Effective Date until the tenth anniversary thereof. No additional
Awards shall be made after the expiration of such term, but outstanding awards
shall be administered in accordance with the provisions thereof. The Plan shall
continue in effect until all matters relating to the settlement of Awards and
administration of the Plan have been completed.

 

ARTICLE II

DEFINITIONS

 

For
purposes of the Plan, the following terms are defined as set forth below:

 

2.1
“2002 Plan” means the New York &
Company, Inc. Amended and Restated 2002 Stock Option Plan.

 

2.2
“Affiliate” means any individual,
corporation, partnership, association, limited liability company, joint-stock
company, trust, unincorporated association or other entity that directly or
indirectly through one or more intermediaries, controls, is controlled by, or
is under control with, the Company.

 

2.3
“Agreement” means any agreement entered
into pursuant to the Plan by which an Award is granted to a Participant.

 

2.4
“Award” means any Stock Option, Stock
Appreciation Right, Restricted Stock, Deferred Stock, or Performance Award
granted to a Participant under the Plan. Awards shall be subject to the terms
and conditions of the Plan and shall be evidenced by an Agreement containing such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall deem desirable.

 

2.5
“Beneficiary” means any person or other
entity, which has been designated by a Participant in his or her most recent
written beneficiary designation filed with the Committee to 

 

 

receive
the compensation, specified under the Plan to the extent permitted. If there is
no designated beneficiary, then the term means any person or other entity
entitled by will or the laws of descent and distribution to receive such
compensation.

 

2.6
“Board of Directors” or “Board” means the Board of Directors of the Company.

 

2.7
“Cause” means, unless otherwise
specifically provided in an Agreement, any act or omission which permits the
Company to terminate the written employment agreement or arrangement between
the Participant and the Company or an Affiliate for “cause” as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term “Cause,”
then “Cause” means the occurrence of one or more of the following events:

 

(1)    misappropriation of the Company’s assets or
business opportunities;

 

(2)    alcoholism or drug addiction which impairs
one’s ability to perform his duties and responsibilities hereunder or is
injurious to the business of the Company;

 

(3)    the commission by such Participant of, or
the plea of nolo contendere with respect to, a felony or crime involving moral
turpitude;

 

(4)    intentionally causing the Company to violate
a local, state or federal law in any material respect;

 

(5)    gross negligence or willful misconduct in
the conduct or management of the Company not remedied within 10 days after
receipt of written notice from the Company; or willful refusal to comply with
any significant policy, directive or decision of the Board in furtherance of a
legitimate business purpose or willful refusal to perform the duties reasonably
assigned to the individual by the Board consistent with the functions, duties
and responsibilities of his position and only if not remedied within 10 days
after receipt of written notice from the Company; or

 

(6)    such other meaning as may be specified with
respect to any particular Award or in any employment or other agreement entered
into at or before the time the Award is granted (or, with the consent of the
Participant, after such time).

 

2.8
“Code” means the Internal Revenue Code of
1986, as amended from time to time, and any successor thereto.

 

2.9
“Commission” means the Securities and
Exchange Commission or any successor thereto.

 

2.10
“Committee” means the committee of the
Board responsible for granting and administering Awards under the Plan, which
initially shall be the Compensation Committee of the Board, until such time as
the Board may designate another committee. The Committee shall consist solely
of two or more directors and each member of the Committee shall be a “non-employee
director” within the meaning of Rule 16b-3 and also an “outside director” under
Section 162(m) of the Code. In addition, each member of the Compensation
Committee shall satisfy any independence or other corporate governance
standards imposed by the New York Stock Exchange or other securities market on
which the Stock shall be listed from time to time.

 

 

2.11
“Company” means New York and Company, Inc.,
a Delaware corporation, and includes any successor or assignee corporation or
corporations into which the Company may be merged, changed or consolidated; any
corporation for whose securities the securities of the Company shall be
exchanged; and any assignee of or successor to substantially all of the assets
of the Company. Wherever the context of the Plan so admits or requires, “Company” also means “Affiliate.”

 

2.12
“Covered Employee” means a Participant
who is a “covered employee” within the meaning of Section 162(m) of the Code.

 

2.13
“Deferred Stock” means a right granted to
a Participant under Section 9.1
hereof to receive Stock at the end of a specified deferral period.

 

2.14
“Domestic Relations Order” has the
meaning set forth in the Code.

 

2.15
“Effective Date” means the date that the
Plan is approved by the Company’s shareholders.

 

2.16
“Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

 

2.17
“Exercise Price” means the price that a
Participant must pay to exercise an Award or the amount upon which the value of
an Award is based.

 

2.18
“Fair Market Value” means, as of any
given date, the closing market price on the New York Stock Exchange  or such other public trading market on which the Stock is
traded on that date. If there is no regular public trading market for such
Stock, the Fair Market Value of the Stock shall be determined by the Committee
in good faith. In each case, the Fair Market Value shall be determined without
regard to whether the Stock is restricted or represents a minority interest.

 

2.19
“Grant Date” means the date as of which
an Award is granted pursuant to the Plan. In no event may the Grant Date be
earlier than the Effective Date.

 

2.20
“Incentive Stock Option” means any Option
that is intended to be, is designated as, and actually qualifies as, an “incentive
stock option” within the meaning of Section 422 of the Code.

 

2.21
“Non-Qualified Stock Option” means a
Stock Option that is not an Incentive Stock Option.

 

2.22
“Option Period” means the period during
which the Option shall be exercisable in accordance with an Agreement and Article VI.

 

2.23
“Participant” means a person who
satisfies the eligibility conditions of Article V and
to whom an Award has been granted by the Committee under the Plan. In the event
that a Representative is appointed for a Participant, then the term “Participant”
shall mean such appointed Representative. Notwithstanding the appointment of a
Representative, the term “Termination of Employment”
shall mean the Termination of Employment of the Participant.

 

2.24
“Performance Award” means an Award
consisting of Performance Shares, Performance Units or other Award described in
Article X that is dependent upon the
achievement of Performance Goals.

 

 

2.25
“Performance Goals” mean the level of
performance established by the Committee as the Performance Goal with respect
to a Performance Measure. Performance Goals may vary from Performance Period to
Performance Period and from Participant to Participant and may be established
on a stand-alone basis, in tandem or in the alternative.

 

2.26
“Performance Measure” means any measure
based on any of the performance criteria set out in this Section, either alone
or in any combination, and, if not based on individual performance, on either a
consolidated or a division or business unit level, as the Committee may
determine: individual Participant financial or non-financial performance goals;
sales; cash flow; cash flow from operations; operating profit or income; net
income; operating margin; net income margin; return on net assets; four-wall
contribution; economic value added; return on total assets; return on equity;
return on total capital; total shareholder return; revenue; revenue growth;
earnings before interest, taxes, depreciation and amortization (“EBITDA”); EBITDA growth; basic earnings per share; diluted
earnings per share; funds from operations per share and per share growth; cash
available for distribution; cash available for distribution per share and per
share growth; share price performance on an absolute basis and relative to an
index of earnings per share or improvements in the Company’s attainment of
expense levels; or implementing or completion of critical projects. The
foregoing criteria shall have any reasonable definitions that the Committee may
specify, which may include or exclude any or all of the following items as the
Committee may specify: extraordinary, unusual or non-recurring items; effects
of accounting changes; effects of financing activities; expenses for
restructuring or productivity initiatives; other non-operating items; spending
for acquisitions; effects of divestitures; and effects of litigation activities
and settlements. Any such performance criterion or combination of such criteria
may apply to the Participant’s Award opportunity in its entirety or to any
designated portion or portions of the Award opportunity, as the Committee may
specify. In the event Code Section 162(m) or applicable tax or other laws
change to permit the Committee discretion to alter the governing performance
measures without obtaining shareholder approval of such changes, the Committee
shall have sole discretion to make such changes without obtaining shareholder
approval. Performance Measures may vary from Performance Period to Performance
Period and from Participant to Participant.

 

2.27
“Performance Period” means the time
period during which a Performance Award shall be earned shall be the “Performance
Period,” and shall be at least one (1) fiscal year in length, unless otherwise
determined by the Committee. Performance Awards shall be subject to Performance
Goals which shall be established by the Committee.

 

2.28
“Performance Unit” means a right granted
pursuant to the terms and conditions established by the Committee which is
described in Section 10.1.

 

2.29
“Performance Share” means a right granted
pursuant to the terms and conditions established by the Committee which is
described in Section 10.1.

 

2.30
“Plan” means the New York & Company, Inc.
Amended and Restated 2006 Long Term Incentive Plan, as herein set forth and as
may be amended from time to time.

 

2.31
“Representative” means (a) the person or
entity acting as the executor or administrator of a Participant’s estate
pursuant to the last will and testament of a Participant or pursuant to the
laws of the jurisdiction in which the Participant had the Participant’s primary
residence at the date of the Participant’s death; (b) the person or entity
acting as the guardian or temporary 

 

 

guardian
of a Participant; or (c) the person or entity which is the Beneficiary of the
Participant upon or following the Participant’s death; provided that only one
of the foregoing shall be the Representative at any point in time as determined
under applicable law and recognized by the Committee.

 

2.32
“Restricted Stock” means Stock granted to
a Participant under Section 8.1
hereof and which is subject to certain restrictions and to a risk of forfeiture
or repurchase by the Company.

 

2.33
“Rule 16b-3” means Rule 16b-3, as from
time to time in effect and applicable to the Plan and Participants, promulgated
by the Commission under Section 16 of the Exchange Act.

 

2.34
“Stock” means the Company’s common stock,
$0.001 par value per share, whether presently or hereafter issued, and any
other stock or security resulting from adjustment thereof as described
hereinafter.

 

2.35
“Stock Appreciation Right” means a right
granted under Section 7.1.

 

2.36
“Stock Option” or “Option”
means a right, granted to a Participant under Section 6.1
hereof, to purchase Stock at a specified price during specified time periods.

 

2.37
“Termination of Employment” means the
occurrence of any act or event whether pursuant to an employment agreement or
otherwise that actually or effectively causes or results in the person’s
ceasing, for whatever reason, to be an officer or employee of the Company or of
any Affiliate, including, without limitation, death, disability, dismissal,
severance at the election of the Participant, retirement, or severance as a
result of the discontinuance, liquidation, sale or transfer by the Company or
its Affiliates of a business owned or operated by the Company or its
Affiliates. With respect to any non-employee member of the Board, Termination
of Employment means the termination of a Participant’s status as a non-employee
director of the Board. With respect to any other person who is not an employee
with respect to the Company or an Affiliate, the Agreement shall establish what
act or event shall constitute a Termination of Employment for purposes of the
Plan. A Termination of Employment shall occur with respect to an employee who
is employed by an Affiliate if the Affiliate shall cease to be an Affiliate and
the Participant shall not immediately thereafter become an employee of the
Company or an Affiliate.

 

In
addition, certain other terms used herein have definitions given to them in the
first place in which they are used.

 

ARTICLE III

COMPENSATION COMMITTEE ADMINISTRATION

 

3.1  Committee
Structure. The Plan shall be administered by the
Committee, but any action that may be taken by the Committee may also be taken
by the full Board of Directors of the Company.

 

3.2  Committee
Actions. Subject to the Committee’s charter, the
Committee may authorize any one or more of its members or an officer of the
Company to execute and deliver documents on behalf of the Committee or the
Committee may allocate among one or more of its members, or may delegate to one
or more of its agents, such duties and responsibilities as it determines,
provided that the Committee shall not delegate the authority to grant Awards. A

 

 

member
of the Committee shall be recused from Committee action regarding an Award
granted or to be granted to such member.

 

3.3  Committee
Authority. Subject to applicable law, the Company’s
certificate of incorporation and by-laws, the Committee’s charter or the terms
of the Plan, the Committee shall have the authority:

 

(1)    to select those persons to whom Awards may
be granted from time to time;

 

(2)    to determine whether and to what extent
Awards are to be granted hereunder;

 

(3)    to determine the number of shares of Stock
to be covered by each Award granted hereunder;

 

(4)    to determine the terms and conditions of any
Award granted hereunder (including any provisions deemed by the Committee in
good faith to be necessary or appropriate for a “nonqualified deferred
compensation plan,” as defined in Code Section 409A(d)(1), to avoid being
subject to taxation under Code Section 409A(a)(1)), provided that the Exercise
Price of any Option or Stock Appreciation Right shall not be less than the Fair
Market Value per share of the underlying stock as of the Grant Date;

 

(5)    to adjust the terms and conditions, at any
time or from time to time, of any Award, subject to the limitations contained
elsewhere herein, including but not limited to Sections 13.1
and 13.11;

 

(6)    to determine to what extent and under what
circumstances Stock and other amounts payable with respect to an Award shall be
deferred, subject to compliance in good faith with the requirements of the Plan
and Code Section 409A to avoid the Award being subject to taxation under Code Section
409A(a)(1);

 

(7)    to provide for the forms of Agreement to be
utilized in connection with this Plan;

 

(8)    to determine what legal requirements are
applicable to the Plan, Awards, and the issuance of Stock, and to require of a
Participant that appropriate action be taken with respect to such requirements;

 

(9)    to cancel, with the consent of the
Participant or as otherwise provided in the Plan or an Agreement, outstanding
Awards;

 

(10)  to require as a condition of the exercise of
an Award or the issuance or transfer of a certificate (or other representation
of title) of Stock, the withholding from a Participant of the amount of any
taxes as may be necessary in order for the Company or any other employer to
obtain a deduction or as may be otherwise required by law;

 

(11)  to determine whether and with what effect an
individual has incurred a Termination of Employment;

 

(12)  to determine the restrictions or limitations
on the transfer of Stock;

 

(13)  to determine whether an Award is to be
adjusted, modified or purchased, or is to become fully or partially
exercisable, under the Plan or the terms of an Agreement;

 

(14) to determine the permissible methods of Award
exercise and payment within the terms and conditions of the Plan and the
particular Agreement;

 

 

(15)  to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of this
Plan;

 

(16)  to appoint and compensate agents, counsel,
auditors or other specialists to aid it in the discharge of its duties; and

 

(17)  to make all other determinations which may be
necessary or advisable for the administration of the Plan.

 

The
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee’s policies and
procedures may differ with respect to Awards granted at different times and may
differ with respect to a Participant from time to time, or with respect to
different Participants at the same or different times.

 

3.4  Committee
Determinations and Decisions. Any
determination made by the Committee pursuant to the provisions of the Plan
shall be made in its sole discretion, and in the case of any determination
relating to an Award may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company
and Participants unless revised by the Committee, subject to any ratifications
or approvals of the Board that the Committee or Board may request. Any determination
shall not be subject to de novo review if challenged in court. Neither the
Committee (including any member thereof) nor the Company shall have any
liability to any Participant for any matter it determined in good faith as
being in compliance with the Code even if such determination was later proved
incorrect.

 

ARTICLE IV

SHARES SUBJECT TO PLAN

 

4.1  Number
of Shares.  The
maximum number of shares of Stock which may be used for Awards under this Plan
(all of which may, in the discretion of the Company, be Incentive Stock
Options) shall be equal to 4,668,496; provided that in any case the maximum
number of such shares which may be used for Awards other than Stock Options or
Stock Appreciation Rights shall be 1,750,000 shares. Upon approval of the Company’s
2006 Long-Term Incentive Plan by shareholders on June 21, 2006, the 2002 Plan
immediately ceased to be available for use for the grant of new incentive
awards other than awards granted wholly from shares returned to the 2002 Plan
by forfeiture after May 5, 2006. The shares of Stock available under the Plan
may be authorized and unissued shares, treasury shares or a combination
thereof, as the Committee shall determine.

 

4.2  Release
of Shares. Subject to Section 4.1,
the Committee shall have full authority to determine the number of shares of
Stock available for Awards. In its discretion the Committee may include
(without limitation), as available for distribution, (a) shares of Stock
subject to any Award that have been previously forfeited; or (b) shares under
an Award that otherwise terminates without issuance of Stock being made to a
Participant. Any shares that are available

 

 

immediately
prior to the termination of the Plan, or any shares of Stock returned to the
Company for any reason subsequent to the termination of the Plan, may be
transferred to a successor plan.

 

4.3  Restrictions
on Shares.  Stock
issued upon exercise of an Award shall be subject to the terms and conditions
specified herein and to such other terms, conditions and restrictions as the
Committee in its discretion may determine or provide in the Award Agreement.
The Company shall not be required to issue or deliver any certificates for
Stock, cash or other property prior to (i) the completion of any registration
or qualification of such shares under federal, state or other law, or any
ruling or regulation of any government body which the Committee determines to be
necessary or advisable; (ii) the satisfaction of any applicable withholding
obligation in order for the Company or an Affiliate to obtain a deduction or
discharge its legal obligation with respect to the exercise of an Award and (iii)
satisfaction of any other terms, conditions or restrictions specified herein.
The Company may cause any certificate (or other representation of title) for
any shares of Stock to be delivered to be properly marked with a legend or
other notation reflecting the limitations on transfer of such Stock as provided
in this Plan, any stockholder agreement then in effect, or as the Committee may
otherwise require. The Committee may require any person exercising an Award to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the Stock in
compliance with applicable law or otherwise. Fractional shares shall not be
delivered, but shall be rounded to the next lower whole number of shares.

 

4.4  Shareholder
Rights.  No
person shall have any rights of a shareholder as to Stock subject to an Award
until, after proper exercise of the Award or other action required, such shares
shall have been recorded on the Company’s official shareholder records as
having been issued and transferred. Upon exercise of the Award or any portion
thereof, the Company will have a reasonable period in which to issue and
transfer the shares, and a Participant will not be treated as a shareholder for
any purpose whatsoever prior to such issuance and transfer. No adjustment shall
be made for cash dividends or other rights for which the record date is prior
to the date such shares are recorded as issued and transferred in the Company’s
official shareholder records, except as provided herein or in an Agreement.

 

4.5  Effect
of Certain Corporate Changes.  Notwithstanding
anything to the contrary herein, in the event of any share dividend, share
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company shareholders other than a normal cash dividend),
reorganization, rights offering, a partial or complete liquidation, or any
other corporate transaction, Company securities offering or event involving the
Company and having an effect similar to any of the foregoing, then the
Committee may make appropriate adjustments or substitutions as described below
in this Section and in compliance with the Code. The adjustments or
substitutions may relate to the number of shares of Stock available for Awards
under the Plan, the number of shares of Stock covered by outstanding Awards,
the Exercise Price per share of outstanding Awards, and any other
characteristics or terms of the Awards as the Committee may deem necessary or
appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that to the extent that Code Section 409A
shall apply to an Award, any such adjustments or substitutions shall only be
made to the extent that, in the Committee’s good faith determination, they
comply with the requirements of Code Section 409A to avoid being subject 

 

 

to
taxation under Code Section 409A(a)(1). Notwithstanding the foregoing, any
fractional shares resulting from such adjustment shall be eliminated by
rounding down to the nearest whole share.

 

ARTICLE V

ELIGIBILITY

 

5.1
Eligibility. Except as herein provided,
the persons who shall be eligible to participate in the Plan and be granted
Awards shall be those persons who are employees of, or consultants or advisors
to, the Company or any Affiliate, or non-employee members of the Board of
Directors. Of those persons described in the preceding sentence, the Committee
may, from time to time, select persons to be granted Awards and shall determine
the terms and conditions with respect thereto. In making any such selection and
in determining the form of the Award, the Committee shall give consideration to
such factors deemed appropriate by the Committee.

 

ARTICLE VI

STOCK OPTIONS

 

6.1
General. The Committee shall have
authority to grant Options under the Plan at any time or from time to time. The
Committee shall consider the potential impact of Code Section 409A on each
grant of Options and, if necessary, shall make the terms and conditions of the
Options, in its good faith determination, comply with the requirements of Code Section
409A to avoid being subject to taxation under Code Section 409A(a)(1). An
Option shall entitle the Participant to receive Stock upon exercise of such
Option, subject to the Participant’s satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an Agreement
(the terms and provisions of which may differ from other Agreements) including,
without limitation, payment of the Exercise Price.

 

6.2
Grant. The grant of an Option shall
occur as of the Grant Date determined by the Committee, provided that the Grant
Date shall not be earlier than the date upon which the Committee acts to grant
the Option. Options may be granted alone or in connection with other Awards. An
Award of Options shall be evidenced by, and subject to the terms of, an
Agreement. Only a person who is a common-law employee of the Company, any “parent
corporation” of the Company, or a “subsidiary corporation” of the Company (each
term as defined in Section 424 of the Code) on the date of grant shall be
eligible to be granted an Incentive Stock Option. To the extent that any Option
is not designated as an Incentive Stock Option or even if so designated does
not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.

 

6.3
Terms and Conditions. Options shall be
subject to such terms and conditions as shall be determined by the Committee,
including and subject to the following:

 

(1)    Exercise Price.
The Exercise Price per share shall not be less than the Fair Market Value per
share on the Grant Date. If an Option which is intended to qualify as an Incentive
Stock Option is granted to an individual (a “10% Owner”)
who owns or who is deemed to own shares possessing more than ten percent (10%)
of the combined voting power of all classes of shares of the Company, a parent
corporation or any subsidiary corporation (each term as defined in Section 6.2), the Exercise Price per share shall not be less
than one hundred ten percent (110%) of the Fair Market Value per share on the
Grant Date.

 

 

(2)    Option Period.
The Option Period of each Option shall be fixed by the Committee. In the case
of an Incentive Stock Option granted to a 10% Owner, the Option Period shall
not exceed ten (10) years from the date the Option is granted. No Option which
is intended to be an Incentive Stock Option shall be granted more than ten (10)
years from the date the Plan is adopted by the Company or the date the Plan is
approved by the shareholders of the Company, whichever is earlier.

 

(3)    Exercisability.
Subject to Section 11.1 and Section 6.4,
an Option shall be exercisable in whole or in such installments and at such
times, as established by the Committee in an Agreement. The Committee may
provide in an Agreement for an accelerated exercise of all or part of an Option
upon such events or standards that it may determine, including one or more
Performance Measures. In addition, the Committee may at any time accelerate the
exercisability of all or part of any Option. If an Option is designated as an
Incentive Stock Option, the aggregate Fair Market Value (determined at the date
of grant of the Option) of the Stock as to which such Incentive Stock Option
which is exercisable for the first time during any calendar year (under the
Plan or any other plan of the Company or any parent corporation or subsidiary
corporation) shall not exceed $100,000. Except as otherwise provided in Article
XI in connection with acceleration events, or certain occurrences of
termination, no Award granted under this Plan to an officer or director of the
Company may be exercised, and no restrictions relating thereto may lapse,
within six months of the date of such grant if:

 

(i)
the requirements of Exchange Act Rule 16b-3(d)(1) were not satisfied with
respect to the issuance of such Award and (ii) the Committee has not otherwise
waived such limitation.

 

(4)   Method of Exercise.
Subject to the provisions of this Article VI and
the Agreement, a Participant may exercise Options, in whole or in part, during
the Option Period by giving written notice of exercise on a form provided by
the Committee to the Company specifying the number of shares of Stock subject
to the Option to be purchased. Such notice shall be accompanied by payment in
full of the purchase price by cash or certified check or such other form of
payment as the Company may accept. If permitted in the applicable Agreement,
payment in full or in part may also be made by (i) delivering Stock already
owned by the Participant (for any minimum period required by the Committee)
having a total Fair Market Value on the date of such delivery equal to the
Exercise Price; (ii) the delivery of cash by a broker-dealer as a “cashless”
exercise, provided such method of payment may not be used by an executive
officer of the Company or a member of the Board to the extent such payment
method would violate Rule 16b-3 or the Exchange Act; (iii) withholding by the
Company of Stock subject to the Option having a total Fair Market Value as of
the date of delivery equal to the Exercise Price; or (iv) any combination of
the foregoing.

 

(5)    Conditions for Issuance of
Shares. No shares of Stock shall be issued until full payment
therefore has been made. A Participant shall have all of the rights of a
shareholder of the Company holding the class of shares that is subject to such
Option (including, if applicable, the right to vote the shares and the right to
receive dividends) when the Participant has given written notice of exercise,
has paid in full for such shares, and such shares have been recorded on the
Company’s official shareholder records as having been issued and transferred.

 

 

(6)    Non-transferability of
Options. Unless otherwise specifically provided in an Agreement, no
Option shall be sold, assigned, margined, transferred, encumbered, conveyed,
gifted, alienated, hypothecated, pledged, or otherwise disposed of, other than
by will or by the laws of descent and distribution, and all Options shall be
exercisable during the Participant’s lifetime only by the Participant;
provided, however, under no circumstances may a Participant assign, transfer,
convey or otherwise dispose of an Option for consideration unless pursuant to a
Domestic Relations Order.

 

6.4
Termination of Employment. Except as
otherwise provided by the Committee in an Award Agreement, any portion of the
Option that was not vested and exercisable on the date of Termination of
Employment shall expire and be forfeited on such date, and any portion of the
Option that was vested and exercisable on date of Termination of Employment
shall also expire and be forfeited on such date; provided that if the
Termination of Employment was other than for Cause, the portion of the Option
that is vested as of the date of Termination of Employment shall expire and be
forfeited at midnight ninety (90) days from the date of such termination.

 

ARTICLE VII

STOCK APPRECIATION RIGHTS

 

7.1
General. The Committee shall have
authority to grant Stock Appreciation Rights under the Plan at any time or from
time to time. Stock Appreciation Rights may be awarded alone or in tandem with
other Awards granted under the Plan. The Committee shall consider the potential
impact of Code Section 409A on each grant of Stock Appreciation Rights and, if
determined to be necessary, shall make the terms of conditions of the Stock
Appreciation Rights, in its good faith determination, comply with the
requirements of Code Section 409A to avoid being subject to taxation under Code
Section 409A(a)(1). Subject to the Participant’s satisfaction in full of any
conditions, restrictions or limitations imposed in accordance with the Plan or
an Agreement, a Stock Appreciation Right shall entitle the Participant to
surrender to the Company the Stock Appreciation Right and to receive in Stock
the number of shares described in Section 7.3(2).

 

7.2
Grant. The grant of a Stock Appreciation
Right shall occur as of the Grant Date determined by the Committee. A Stock
Appreciation Right entitles a Participant to receive Stock as described in Section 7.3(2). An Award of Stock Appreciation Rights shall
be evidenced by, and subject to the terms of an Agreement, which shall become
effective upon execution by the Participant.

 

7.3
Terms and Conditions. Stock Appreciation
Rights shall be subject to such terms and conditions as shall be determined by
the Committee and set forth in an Agreement, including (but not limited to) the
following:

 

(1)    Period and Exercise.
The term of a Stock Appreciation Right shall be established by the Committee. A
Stock Appreciation Right shall be for such period and, subject to Section 11.1 and Section 7.3(4),
shall be exercisable in whole or in installments and at such times as
established by the Committee in an Agreement. The Committee may provide in an
Agreement for an accelerated exercise of all or part of a Stock Appreciation
Right upon such events or standards that it may determine, including one or
more Performance Measures. In addition, the Committee may at any time
accelerate the exercisability of all or part of any 

 

 

Stock
Appreciation Right. Stock Appreciation Rights shall be exercised by the
Participant’s giving written notice of exercise, on a form provided by the
Committee, to the Company specifying the portion of the Stock Appreciation
Right to be exercised.

 

(2)    Delivery of Stock.
Upon the exercise of a Stock Appreciation Right, a Participant shall receive a
number of shares of Stock equal in value to the excess of the Fair Market Value
per share of Stock over the Exercise Price per share of Stock specified in the
related Agreement, multiplied by the number of shares in respect of which the
Stock Appreciation Right is exercised. The Exercise Price per share shall not
be less than the Fair Market Value per share on the Grant Date. The aggregate
Fair Market Value per share of Stock shall be determined as of the date of
exercise of such Stock Appreciation Right.

 

(3)    Non-transferability of
Stock Appreciation Rights. Except as specifically provided in the
Plan or in an Agreement, no Stock Appreciation Rights shall be sold, assigned,
margined, transferred, encumbered, conveyed, gifted, alienated, hypothecated,
pledged or otherwise disposed of, other than by will or the laws of descent and
distribution, and all Stock Appreciation Rights shall be exercisable during the
Participant’s lifetime only by the Participant; provided, however, under no
circumstances may a Participant assign or transfer a Stock Appreciation Right
for consideration unless pursuant to a Domestic Relations Order.

 

(4)    Termination of Employment.
A Stock Appreciation Right shall be forfeited or terminated at such time as an
Option would be forfeited or terminated under the Plan, unless otherwise specifically
provided in an Agreement.

 

ARTICLE VIII

RESTRICTED STOCK

 

8.1
General. The Committee shall have
authority to grant Restricted Stock under the Plan at any time or from time to
time. The Committee shall consider the potential impact of Code Section 409A on
each grant of Restricted Stock and, if determined to be necessary, shall make
the terms and conditions of the Restricted Stock, in its good faith
determination, comply with the requirements of Code Section 409A to avoid being
subject to taxation under Code Section 409A(a)(1). The Committee may also
require the recipient of the grant to make an election under Section 83(b) of
the Code if the restricted stock so granted is subject to transfer restrictions
or a substantial risk of forfeiture. The Committee shall determine the number
of shares of Restricted Stock to be awarded to any Participant, the time or
times within which such Awards may be subject to forfeiture, and any other
terms and conditions of the Awards. Each Award shall be confirmed by, and be
subject to the terms of, an Agreement which contains the applicable terms and
conditions of the Award, including the rate or times provided by the Committee
for the lapse of any forfeiture restrictions or other conditions regarding the
Award. The Committee may provide in an Agreement for an accelerated lapse of
any such restrictions upon such events or standards that it may determine,
including one or more Performance Measures. In addition, the Committee may at
any time accelerate the lapse of any such restrictions with respect to all or
part of any Restricted Stock. Each Award of Restricted Stock shall become
effective upon execution by the Participant of an Agreement.

 

8.2
Grant, Awards and Certificates. The
grant of an Award of Restricted Stock shall occur as of the Grant Date
determined by the Committee. Restricted Stock may be awarded either 

 

 

alone
or in addition to other Awards granted under the Plan. Notwithstanding the
limitations on issuance of Stock otherwise provided in the Plan, each Participant
receiving an Award of Restricted Stock shall be issued a certificate (or other
representation of title) in respect of such Restricted Stock. Such certificate
shall be registered in the name of such Participant and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award as determined by the Committee and any restrictions
the Stock may be subject to, including any shareholder agreement then in
effect. The Committee may require that the certificates evidencing such shares
be held in custody by the Company until the restrictions thereon shall have
lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a share power, endorsed in blank, relating to
the Stock covered by such Award.

 

8.3
Terms and Conditions. Restricted Stock
shall be subject to such terms and conditions as shall be determined by the
Committee, including the following:

 

(1)    Rights. Except
as provided in Section 8.3(3) and
notwithstanding Section 4.4, the Participant
shall have, with respect to the Restricted Stock, all of the rights of a
shareholder of the Company holding the class of Stock that is the subject of
the Restricted Stock, including, if applicable, the right to vote the shares and
the right to receive any dividends. If any dividends or other distributions are
paid in shares of Stock, all such shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with respect
to which they were paid.

 

(2)    Criteria. As
described in Section 8.1 above, the Committee
may provide in an Agreement for the lapse of restrictions in installments and
may accelerate the vesting of all or any part of any Award and waive the
restrictions for all or any part of such Award; such provisions of an Agreement
or Committee action may be based on service, performance by the Participant or
by the Company or the Affiliate, including any division or department for which
the Participant is employed or such other factors or criteria as the Committee
may determine.

 

(3)    Limitations on
Transferability. Subject to the provisions of the Plan and the
Agreement, during a period set by the Committee, commencing with the date of
such Award (the “Restriction Period”), the
Participant shall not be permitted to sell, assign, margin, transfer, encumber,
convey, gift, alienate, hypothecate, pledge or otherwise dispose of Restricted
Stock; provided, however, under no circumstances may a Participant assign,
transfer, convey or otherwise dispose of Restricted Stock for consideration
unless pursuant to a Domestic Relations Order.

 

(4)    Termination of Employment.
Unless otherwise provided in an Agreement or determined by the Committee, if
the Participant incurs a Termination of Employment all shares of Restricted
Stock still subject to restriction shall be forfeited by the Participant,
except the Committee shall have the discretion to waive in whole or in part any
or all remaining restrictions with respect to any or all of such Participant’s
Restricted Stock.

 

 

ARTICLE IX

DEFERRED STOCK

 

9.1
General. The Committee shall have
authority to grant an Award of Deferred Stock under the Plan at any time or
from time to time. Deferred Stock may be awarded either alone or in addition to
other Awards granted under the Plan. The Committee may denominate a Deferred
Stock Award in either shares or units. The Committee shall consider the impact
of Code Section 409A on each grant of Deferred Stock and, if determined to be
necessary, shall make the terms and conditions of the Deferred Stock, in its
good faith determination, comply with the requirements of Code 409A to avoid
being subject to taxation under Code Section 409A(a)(1). The Committee shall
determine the number of shares of Deferred Stock to be awarded to any
Participant, the duration of the period (the “Deferral
Period”) prior to which the Common Stock will be delivered, and the
conditions under which receipt of the Stock will be deferred and any other
terms and conditions of the Awards. Each Deferred Stock Award shall be
evidenced by, and subject to the terms of, an Agreement, which will become
effective upon execution by the Participant.

 

9.2
Terms and Conditions. Deferred Stock
Awards shall be subject to such terms and conditions as shall be determined by
the Committee, including the following:

 

(1)    Rights. Any
rights, other than any rights explicitly set forth herein, with respect to
Deferred Stock shall be provided for in an Agreement.

 

(2)    Criteria. Based
on service, performance by the Participant or by the Company or the Affiliate,
including any division or department for which the Participant is employed, or
such other factors or criteria as the Committee may determine, the Committee
may provide for the lapse of deferral limitations in installments and may
accelerate the vesting of all or any part of any Award and waive the deferral
limitations for all or any part of such Award.

 

(3)    Limitations on
Transferability. Subject to the provisions of the Plan and the
Agreement, Deferred Stock Awards may not be sold, assigned, margined,
transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged, or
otherwise disposed of during the Deferral Period; provided, however, under no
circumstances may a Participant assign, transfer, convey or otherwise dispose
of Deferred Stock Award for consideration unless pursuant to a Domestic
Relations Order. Subject to the provisions of an Agreement, at the expiration
of the Deferral Period, the Committee shall deliver Stock to the Participant
pursuant to the Deferred Stock Award.

 

(4)    Termination of Employment.
Unless otherwise provided in an Agreement or determined by the Committee, if
the Participant incurs a Termination of Employment the rights to the shares
still covered by the Award shall be forfeited by the Participant, except the
Committee shall have the discretion to waive in whole or in part any or all
remaining deferral limitations with respect to any or all of such Participant’s
Deferred Stock.

 

(5)    Delivery.
Subject to the provisions of an Agreement, at the expiration of the Deferral
Period, the Committee shall deliver Stock to the Participant pursuant to the
Deferred Stock Award.

 

(6)    Election. A
Participant may elect to further defer receipt of the Deferred Stock payable
under an Award (or an installment of an Award) for a specified time (or
pursuant to 

 

 

a
fixed schedule) or until the occurrence of a permissible distribution event
under Code Section 409A, subject to such terms and conditions determined by the
Committee. Any such election must be made no later than the time provided by Section
409A(a)(4) of the Code, as determined by the Committee.

 

ARTICLE X

PERFORMANCE AWARDS

 

10.1
General. The Committee shall have
authority to grant Performance Awards under the Plan at any time or from time
to time. The Committee shall consider the impact of Code Section 409A on each
grant of a Performance Award and, if determined to be necessary, shall make the
terms and conditions of the Performance Awards, in its good faith
determination, comply with the requirements of Code Section 409A to avoid being
subject to taxation under Code Section 409A(a)(1). A Performance Unit and a
Performance Share each consist of the right to receive shares of Stock or cash,
as provided in the particular Award Agreement, upon achievement of certain
Performance Goals and may be awarded either alone or in addition to other
Awards granted under the Plan. Performance Units shall be denominated in units
of value (including dollar value of shares of Stock) and Performance Shares
shall be denominated in a number of shares of Stock.

 

Subject
to the terms of the Plan, the Committee shall have complete discretion to
determine the number of Performance Units and Performance Shares, if any,
granted to each Participant. Each Performance Award shall be evidenced by, and
be subject to the terms of, an Agreement which will become effective upon
execution by the Participant.

 

10.2
Earning Performance Awards. After the
applicable Performance Period shall have ended, the Committee shall determine
the extent to which the established Performance Goals have been achieved.

 

10.3
Termination of Employment. Unless
otherwise specifically provided in an Agreement or determined by the Committee,
in the event that a Participant’s incurs a Termination of Employment, all Performance
Awards shall be forfeited by the Participant to the Company. Any distribution
of earned Performance Awards authorized by an Agreement or determined by the
Committee may be made at the same time payments are made to Participants who
did not incur a Termination of Employment during the applicable Performance
Period.

 

10.4
Nontransferability. Unless otherwise
specifically provided in an Agreement, Performance Awards may not be sold,
assigned, margined, transferred, encumbered, conveyed, gifted, alienated,
hypothecated, pledged, or otherwise disposed of, other than by will or by the
laws of descent and distribution; provided, however, under no circumstances may
a Participant assign, transfer, convey or otherwise dispose of a Performance
Award for consideration unless pursuant to a Domestic Relations Order.

 

ARTICLE XI

CHANGE IN CONTROL PROVISIONS

 

11.1
Impact of Event. Notwithstanding any
other provision of the Plan to the contrary, other than Section 11.2,
and unless otherwise specifically provided in an Agreement, in the event of a
company sale or a registered public offering of equity securities, the
Committee may

 

 

provide,
in its discretion, that (i) the Stock Options, Stock Appreciation Rights,
Restricted Stock and Deferred Stock shall immediately vest and any Performance
Goal or other condition with respect to any Performance Shares or Performance
Units shall be deemed satisfied for such Participants who are employed by the
Company at the time of such event or (ii) the Committee may also, in its
discretion, determine that any Stock Option, Stock Appreciation Right or
Restricted Stock shall terminate or be cancelled if not exercised as of the
date of such event.

 

11.2 Additional Discretion. The Committee shall have full
discretion, notwithstanding anything herein or in an Agreement to the contrary,
with respect to an outstanding Award upon a company sale to provide that the
securities of another entity be substituted hereunder for the Stock and to make
equitable adjustment with respect thereto.

 

ARTICLE XII

PROVISIONS APPLICABLE TO SHARES ACQUIRED
UNDER THIS PLAN

 

12.1 No Company Obligation. Except to the extent specifically
required by applicable securities laws, none of the Company, an Affiliate or
the Committee shall have any duty or obligation to affirmatively disclose
material information to a record or beneficial holder of Stock or an Award, and
such holder shall have no right to be advised of any material information
regarding the Company or any Affiliate at any time prior to, upon, or in
connection with receipt or the exercise or distribution of an Award. The
Company makes no representation or warranty as to the future value of the Stock
issued or acquired in accordance with the provisions of the Plan.

 

ARTICLE XIII

MISCELLANEOUS

 

13.1 Amendments and Termination. The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or discontinuation
shall be made which would materially impair the rights of a Participant under
an Award theretofore granted without the Participant’s consent. Notwithstanding
the immediately preceding sentence, an amendment may be made without a
Participant’s consent to (a) cause the Plan or an Award to comply with
applicable law (including, but not limited to, any changes needed to avoid
taxation of an Award as a “nonqualified deferred compensation plan” under Code Section
409A or Code Section 280G) or (b) permit the Company or an Affiliate a tax
deduction under applicable law including, without limitation, Section 162(m) of
the Code. The Committee may amend, alter or discontinue the terms of any Award
theretofore granted, prospectively or retroactively, on the same conditions and
limitations (and exceptions to limitations) as apply to the Board, and further
subject to any approval or limitations the Board may impose. Notwithstanding
the foregoing, any amendments to the Plan shall require shareholder approval to
the extent required by Federal or state law or any regulations or rules promulgated
thereunder or the rules of the national securities exchange or market on which
shares of Stock are listed.

 

13.2 Unfunded Status of Plan. It is intended that the Plan be an “unfunded”
plan for incentive compensation. The Company may create trusts or other
arrangements to meet the obligations created under the Plan to deliver Stock or
make payments; provided, however, that the existence of such trusts or other
arrangements is consistent with the “unfunded” status of the Plan and all
property held thereunder and income thereon shall remain solely the property
and 

 

 

rights
of the Company (without being restricted to satisfying the obligations created
under the Plan) and shall be subject to the claims of the Company’s general
creditors. The Company’s obligations created under the Plan shall constitute a
general, unsecured obligation, payable solely out of its general assets.

 

13.3 Listing, Registration and Compliance with Laws and Regulations.
All Awards made under this Plan shall be subject to the requirement that if at
any time the Committee shall determine, in its discretion, that the listing,
registration or qualification of the Stock subject to such Award upon any
securities exchange or under any state or federal securities or other law or
regulation, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition to or in connection with the granting of
the Awards or the issuance or purchase of shares thereunder, no Awards may be
granted or exercised and no restrictions of Restricted Stock or Deferred Stock
be lifted, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee. The holders of such Awards
shall supply the Company with such certificates, representations and
information as the Company shall request and shall otherwise cooperate with the
Company in obtaining such listing, registration, qualification, consent or
approval. In the case of officers and other Persons subject to Section 16(b) of
the Exchange Act, the Committee may at any time impose any limitations upon the
exercise of an Option, Stock Appreciation Right or Restricted Stock or the
lifting of restrictions on an Award of Deferred Stock or a Performance Award
that, in the Committee’s discretion, are necessary or desirable in order to
comply with such Section 16(b) and the rules and regulations thereunder. If the
Company, as part of an offering of securities or otherwise, finds it desirable
because of federal or state regulatory requirements to reduce the period during
which any Options, Stock Appreciation Rights or Restricted Stock may be exercised,
the Committee, may, in its discretion and without the Participant’s consent, so
reduce such period on not less than 15 days written notice to the holders
thereof.

 

13.4 Provisions Relating to Internal Revenue Code Section 162(m).
To the extent that Section 162(m) of the Code applies with respect to Awards to
Covered Employees under the Plan, the Plan shall be administered, and the
provisions of the Plan shall be interpreted, in a manner consistent with Code Section
162(m). If any provision of the Plan or any Agreement relating to such an Award
does not comply or is inconsistent with the requirements of Code Section 162(m),
such provision shall be construed or deemed amended to the extent necessary to
conform to such applicable requirements. In addition, the following provisions
shall apply to the Plan or an Award to the extent necessary to obtain a tax
deduction for the Company or an Affiliate:

 

(1)    Determination of Awards.
Not later than the date required or permitted for “qualified performance-based
compensation” under Code Section 162(m), the Committee shall determine the
Participants who are Covered Employees who will receive Awards that are
intended as qualified performance-based compensation and the amount or method
for determining the amount of such compensation.

 

(2)    Limitations on Awards.
During any one calendar year period, the maximum number of shares of Stock for
which Options and Stock Appreciation Rights, in the aggregate, may be granted
to any Covered Employee shall not exceed 750,000 shares. For Performance Awards
that are intended to constitute “performance-based compensation” (as 

 

 

that term is
used in Code Section 162(m)), no more than $1,000,000 (based upon fair market
value, if applicable, on the date of grant) may be subject to such Awards
granted to any Covered Employee during any three-consecutive calendar year
period. Further, for any Restricted Stock Awards that are intended to
constitute performance-based compensation, no more than $1,000,000 (based upon
fair market value, if applicable, on the date of grant) may be subject to such
Awards granted to any Covered Employee during any three-consecutive calendar
year period. The limitations on Awards under this Section are subject to
adjustment as provided in Section 4.5 to
the extent that needed to obtain tax deductibility under Code Section 162(m).

 

(3)    Earning Performance Awards.
Subject to the provisions of Section 13.4(4) below,
payment with respect to Performance Awards for Covered Employees shall be a
direct function of the extent to which the Company’s Performance Goals have
been achieved. A Performance Award to a Participant who is a Covered Employee
shall (unless the Committee determines otherwise) provide that in the event of
the Participant’s Termination of Employment prior to the end of the Performance
Period for any reason, such Award will be payable only (a) if the applicable
Performance Goals are achieved and (b) to the extent, if any, as the Committee
shall determine.

 

(4)    Other Section 162(m) Provisions.
In the manner required by Section 162(m) of the Code, the Committee shall,
promptly after the date on which the necessary financial and other information
for a particular Performance Period becomes available, certify the extent to
which Performance Goals have been achieved with respect to any Performance
Award or Restricted Stock Award intended to qualify as performance-based
compensation under Section 162(m) of the Code. In addition, the Committee may,
in its discretion, reduce or eliminate the amount of any Performance Award
payable to any Participant, based on such factors as the Committee may deem
relevant, but the Committee may not increase the amount of any Performance
Award payable to any Participant above the amount established in accordance
with the relevant Performance Goals with respect to any Performance Award
intended to qualify as performance-based compensation.

 

13.5 Misconduct of a Participant. Notwithstanding anything to the
contrary in the Plan, the Committee, in its sole discretion, may establish
procedures, at or before the time that an Award is granted (or, with the
consent of the Participant, after such time), in the applicable Award Agreement
or in a separate agreement, providing for the forfeiture or cancellation of
such Award (whether vested or unvested), or the disgorgement of gains from the
exercise, vesting or settlement of the Award, in each case to be applied if the
Participant incurs a Termination of Employment for Cause.

 

13.6 No Additional Obligation. Nothing contained in the Plan
shall prevent the Company or an Affiliate from adopting, other or additional
compensation or benefit arrangements for its employees.

 

13.7 Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for federal
income tax purposes with respect to any Award, the Participant shall pay to the
Company (or other entity identified by the Committee), or make arrangements
satisfactory to the Company or other entity identified by the Committee
regarding the payment of, any federal, state, or local taxes of any kind
(including any employment taxes) 

 

 

required
by law to be withheld with respect to such income. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements,
and the Company and its Affiliates shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
Participant. Subject to approval by the Committee, a Participant may elect to
have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing
the Company to withhold from shares of Stock to be issued pursuant to any Award
a number of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the required statutory minimum (but
no more than such required minimum) with respect to the Company’s withholding
obligation, or (ii) transferring to the Company shares of Stock owned by the
Participant with an aggregate Fair Market Value (as of the date the withholding
is effected) that would satisfy the required statutory minimum (but no more
than such required minimum) with respect to the Company’s withholding
obligation.

 

13.8 Controlling Law. The Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with the laws
of the state of Delaware (other than its law respecting choice of law). The
Plan shall be construed to comply with all applicable law and to avoid
liability to the Company, an Affiliate or a Participant. In the event of
litigation arising in connection with actions under the Plan, the parties to
such litigation shall submit to the jurisdiction of courts located in New York
County, New York, or to the federal district court that encompasses said county.

 

13.9 Offset. Any amounts owed to the Company or an Affiliate by
the Participant of whatever nature may be offset by the Company from the value
of any Award to be transferred to the Participant, and Stock, cash or other
thing of value under this Plan or an Agreement may be held by the Company and
not transferred to such Participant unless and until all disputes between the
Company and the Participant have been fully and finally resolved and the
Participant has waived all claims to such against the Company or an Affiliate.

 

13.10
No Rights with Respect to Continuance of Employment.
Nothing contained herein shall be deemed to alter the relationship between the
Company or an Affiliate and a Participant, or the contractual relationship
between a Participant and the Company or an Affiliate if there is a written
contract regarding such relationship. Nothing contained herein shall be
construed to constitute a contract of employment between the Company or an
Affiliate and a Participant. The Company or an Affiliate and each of the
Participants continue to have the right to terminate the employment or service
relationship at any time for any reason, except as provided in a written
contract. The Company or an Affiliate shall have no obligation to retain the
Participant in its employ or service as a result of this Plan. There shall be
no inference as to the length of employment or service hereby, and the Company
or an Affiliate reserves the same rights to terminate the Participant’s
employment or service as existed prior to the individual becoming a Participant
in this Plan.

 

13.11 Limits on Repricing and Regranting of Awards.
Notwithstanding anything else contained herein except Sections 4.5,
11.2 and 13.12
hereof, unless approved by the Company’s shareholders; in no event may the
Exercise Price per share of Stock covered by an Option, or the Exercise Price
of a Stock Appreciation Right, be reduced, directly or indirectly, through the
technique commonly known as “repricing” or through the cancellation and regrant
of such Award; and no outstanding Award may be substituted for another type of
Award.

 

 

13.12 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under the Plan from time to time in substitution for
awards held by employees, directors or service providers of other corporations
who are about to become officers or employees of the Company or an Affiliate as
the result of a merger or consolidation of the employing corporation with the
Company or an Affiliate, or the acquisition by the Company or an Affiliate of
the assets of the employing corporation, or the acquisition by the Company or
Affiliate of the share of the employing corporation, as the result of which it
becomes an Affiliate. The terms and conditions of the Awards so granted may
vary from the terms and conditions set forth in this Plan at the time of such
grant as the Committee may deem appropriate to conform, in whole or in part, to
the provisions of the awards in substitution for which they are granted and to
ensure that the requirements imposed under Code Sections 409A and 424 are met.

 

13.13 Delivery of Stock Certificates. To the extent the Company
uses certificates to represent shares of Stock, certificates to be delivered to
Participants under this Plan shall be deemed delivered for all purposes when
the Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the Participant, at the
Participant’s last known address on file with the Company. Any reference in
this Section or elsewhere in the Plan or an Agreement to actual stock
certificates and/or the delivery of actual stock certificates shall be deemed
satisfied by the electronic record-keeping and electronic delivery of shares of
Stock or other mechanism then utilized by the Company and its agents for
reflecting ownership of such shares.

 

13.14 Indemnification. To the maximum extent permitted under the
Company’s Restated Articles of Incorporation and by-laws, each person who is or
shall have been a member of the Committee, or of the Board, shall be
indemnified and held harmless by the Company against and from (a) any loss,
cost, liability or expense (including attorneys’ fees) that may be imposed upon
or reasonably incurred by him or her in connection with or resulting from any
claim, action, suit or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under
this Plan or any Award Agreement, and (b) from any and all amounts paid by him
or her in settlement thereof, with the Company’s prior written approval, or
paid by him or her in satisfaction of any judgment in any such claim, action,
suit or proceeding against him or her; provided, however, that he or she shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company’s Restated Articles of Incorporation or by-laws, by contract, as a
matter of law or otherwise, or under any power that the Company may have to
indemnify them or hold them harmless.

 

13.15 Severability. If any provision of this Plan shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provision hereby, and this Plan
shall be construed as if such invalid or unenforceable provision were omitted.

 

13.16 Successors and Assigns. This Plan shall inure to the benefit
of and be binding upon each successor and assign of the Company. All
obligations imposed upon a Participant, and all rights granted to the Company
hereunder, shall be binding upon the Participant’s heirs, legal representatives
and successors.

 

 

13.17 Entire Agreement. This Plan and the Agreements constitute
the entire agreement with respect to the subject matter hereof and thereof,
provided that in the event of any inconsistency between the Plan and the
Agreement, the terms and conditions of this Plan shall control.

 

13.18 Term. No Award shall be granted under the Plan after the
tenth anniversary of the Effective Date.

 

13.19 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include the plural.

 

13.20 Headings. The headings contained in this Plan are for
reference purposes only and shall not affect the meaning or interpretation of
this Plan.Exhibit 10.1

 

 

 

 

STANDBY PURCHASE AGREEMENT

 

 

by and among

 

 

Idearc Inc.

 

 

and

 

 

Paulson & Co. Inc.

 

 

 

Dated as of November 18, 2009

 

 

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.
  DEFINITIONS

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2. STANDBY
  COMMITMENT AND PURCHASE

  	
   

  	
  8

  
	
   

  	
  2.1

  	
   

  	
  Standby Commitment and Purchase

  	
   

  	
  8

  
	
   

  	
  2.2

  	
   

  	
  Closing; Payments

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

  	
   

  	
  9

  
	
   

  	
  3.1

  	
   

  	
  Corporate Status

  	
   

  	
  9

  
	
   

  	
  3.2

  	
   

  	
  Authorization; Noncontravention

  	
   

  	
  10

  
	
   

  	
  3.3

  	
   

  	
  No Conflict

  	
   

  	
  10

  
	
   

  	
  3.4

  	
   

  	
  Capital Structure

  	
   

  	
  11

  
	
   

  	
  3.5

  	
   

  	
  SEC Reports and Company Financial Statements

  	
   

  	
  12

  
	
   

  	
  3.6

  	
   

  	
  Private Placement

  	
   

  	
  13

  
	
   

  	
  3.7

  	
   

  	
  Registration Rights

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.
  REPRESENTATIONS AND WARRANTIES OF EACH STANDBY PURCHASER

  	
   

  	
  14

  
	
   

  	
  4.1

  	
   

  	
  Corporate Status

  	
   

  	
  14

  
	
   

  	
  4.2

  	
   

  	
  Authorization; Noncontravention

  	
   

  	
  14

  
	
   

  	
  4.3

  	
   

  	
  Investment Representations

  	
   

  	
  15

  
	
   

  	
  4.4

  	
   

  	
  Claims Ownership

  	
   

  	
  15

  
	
   

  	
  4.5

  	
   

  	
  Available Funds

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.
  COVENANTS AND ADDITIONAL AGREEMENTS 

  	
   

  	
  15

  
	
   

  	
  5.1

  	
   

  	
  Confidentiality

  	
   

  	
  15

  
	
   

  	
  5.2

  	
   

  	
  Further Actions

  	
   

  	
  16

  
	
   

  	
  5.3

  	
   

  	
  Bankruptcy Matters

  	
   

  	
  16

  
	
   

  	
  5.4

  	
   

  	
  Fees and Expenses

  	
   

  	
  17

  
	
   

  	
  5.5

  	
   

  	
  Listing

  	
   

  	
  17

  
	
   

  	
  5.6

  	
   

  	
  Use of Proceeds

  	
   

  	
  17

  
	
   

  	
  5.7

  	
   

  	
  Publicity

  	
   

  	
  18

  
	
   

  	
  5.8

  	
   

  	
  Further Assurances

  	
   

  	
  18

  
	
   

  	
  5.9

  	
   

  	
  Access to Books and Records

  	
   

  	
  18

  
	
   

  	
  5.10

  	
   

  	
  Notices

  	
   

  	
  18

  
	
   

  	
  5.11

  	
   

  	
  Notice of Alternative Transaction

  	
   

  	
  18

  
	
   

  	
  5.12

  	
   

  	
  Acquisitions of Interests

  	
   

  	
  19

  
	
   

  	
  5.13

  	
   

  	
  Survival of Representations and Warranties

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.
  CONDITIONS TO OBLIGATIONS OF STANDBY PURCHASERS

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 7.
  CONDITIONS TO OBLIGATIONS OF THE COMPANY

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 8.
  TERMINATION

  	
   

  	
  22

  
	
   

  	
  8.1

  	
   

  	
  Termination

  	
   

  	
  22

  
	
   

  	
  8.2

  	
   

  	
  Effect of Termination

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.
  MISCELLANEOUS

  	
   

  	
  24

  
	
   

  	
  9.1

  	
   

  	
  No Fiduciary Representation

  	
   

  	
  24

  
	
   

  	
  9.2

  	
   

  	
  Non-Reliance

  	
   

  	
  24

  
																

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Notices

  	
  25

  
	
  9.4

  	
  Assignment

  	
  25

  
	
  9.5

  	
  Entire Agreement

  	
  26

  
	
  9.6

  	
  Waivers and Amendments

  	
  26

  
	
  9.7

  	
  Governing Law; Jurisdiction; Venue; No Jury Trial

  	
  26

  
	
  9.8

  	
  Third Party Beneficiaries

  	
  27

  
	
  9.9

  	
  Counterparts

  	
  27

  
	
  9.10

  	
  Interpretation; Exhibits and Schedules

  	
  27

  
	
  9.11

  	
  Severability

  	
  27

  
	
  9.12

  	
  No Presumption

  	
  27

  
	
  9.13

  	
  No Personal Liability

  	
  27

  
	
  9.14

  	
  Several, Not Joint, Obligations

  	
  27

  
	
  9.15

  	
  Specific Performance

  	
  28

  

 

 

ii

 

 

EXHIBITS

 

	
  Exhibit A

  	
   

  	
  —

  	
   

  	
  Existing
  Plan

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  —

  	
   

  	
  Form of
  Plan Modification

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  —

  	
   

  	
  Form of
  Standstill Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  —

  	
   

  	
  Form of
  Rights Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  —

  	
   

  	
  Approval
  Order

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit F

  	
   

  	
  —

  	
   

  	
  Form of
  Amended and Restated Bylaws

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit G

  	
   

  	
  —

  	
   

  	
  Form of
  Amended and Restated Certificate of Incorporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit H

  	
   

  	
  —

  	
   

  	
  Form of
  Registration Rights Agreement

  

 

SCHEDULES

 

	
  1

  	
   

  	
  —

  	
   

  	
  Standby
  Purchasers

  
	
  3.4(b)

  	
   

  	
  —

  	
   

  	
  Subsidiaries

  
	
  4.2(b)

  	
   

  	
  —

  	
   

  	
  Standby
  Purchasers Regulatory Filings

  
	
  6(f)

  	
   

  	
  —

  	
   

  	
  Company
  Required Approvals

  
	
  7(d)

  	
   

  	
  —

  	
   

  	
  Standby Purchasers
  Required Approvals

  

 

iii

 

STANDBY PURCHASE AGREEMENT

 

STANDBY PURCHASE AGREEMENT,
dated as of November 18, 2009 (this “Agreement”),
among Idearc Inc., Debtor and Debtor-in-Possession, a Delaware corporation (the
“Company”), and the investment funds and
accounts managed by Paulson & Co. Inc. (“Paulson”) set forth on
Schedule 1 (the “Standby
Purchasers”).  All capitalized
terms used herein have the meanings ascribed to such terms in Section 1
or ascribed to them in the Chapter 11 plan of reorganization of the Company and
its U.S. subsidiaries, dated as of September 9, 2009 and supplemented as
of October 29, 2009, a copy of which is attached hereto as Exhibit A
(the “Existing Plan”).

 

RECITALS

 

A.            The Company and its wholly-owned, direct and indirect
U.S. subsidiaries (collectively with the Company, the “Debtors”) have
filed chapter 11 petitions under Chapter 11 of Title 11 of the United States
Code, 11 U.S.C. §§101-1532 (as amended, the “Bankruptcy
Code”) in the United States Bankruptcy Court for the Northern
District of Texas (the “Bankruptcy Court”)
(such chapter 11 cases, the “Chapter 11 Cases”)
and have proposed to effectuate a financial and corporate restructuring of the
Debtors through the Existing Plan.

 

B.            The Existing Plan provides that (i) each holder of
an Allowed Secured Credit Facility Claim (the “Class 3
Holders”) will receive, on the Effective Date and in full
satisfaction, settlement, release, discharge of, in exchange for, and on
account of such Allowed Secured Credit Facility Claim, its Pro Rata share of (x) Distributable
Cash; (y) $2.75 billion in principal amount of the New Term Loans, and (z) shares
of New Common Stock representing in the aggregate 95% of the New Common Stock
to be issued and outstanding as of the Effective Date, and (ii) each
holder of an Allowed Unsecured Note Claim, an Allowed Unsecured Credit Facility
Claim and an Allowed General Unsecured Claim (the “Class 4 Holders”
and together with the Class 3 Holders, but excluding the Standby
Purchasers and their Affiliates, the “Eligible Subscribers”) will receive,
on the Effective Date and in full satisfaction, settlement, release, discharge
of, in exchange for, and on account of such Allowed Claim, its Pro Rata share
of (x) shares of New Common Stock representing 5% of the New Common Stock
to be issued pursuant to the Existing Plan and outstanding as of the Effective
Date, and (y) all distributions, if any, to be made from the Litigation
Trust to be established on the Effective Date for the sole benefit of Class 4
Claims to hold the Litigation Trust Rights.

 

C.            Certain Standby Purchasers are Class 3 Holders and Class 4
Holders, and in such capacities will receive shares of New Common Stock to be
issued pursuant to the Existing Plan.

 

D.            The Standby Purchasers desire to purchase additional
shares of New Common Stock so that the Standby Purchasers will own up to an
aggregate of 45% of the New Common Stock to be issued and outstanding as of the
Effective Date, immediately after the effectiveness of the Plan.

 

E.             The Existing Plan will be amended pursuant to (i) a
Plan Modification in the form attached hereto as Exhibit B to
provide, among other things, that the Eligible Subscribers may elect to receive
cash in lieu of shares of New Common Stock (such election, the “Plan 

 

 

Election”), and (ii) subject
to Bankruptcy Court approval, a settlement term sheet (a copy of which has been
provided to Paulson) that will provide, among other things, the amount of
shares of New Common Stock to be distributed will be 85% to Class 3
Holders and 15% to Class 4 Holders, the Class 4 Holders will receive
a cash distribution, and the senior secured lenders will waive distributions of
cash and New Common Stock for their deficiency claims included in the Class 4
Claims (collectively Exhibit B and the global settlement, the “Plan
Modification,” and the Existing Plan as amended in accordance with the Plan
Modification, the “Plan”).

 

F.             Upon the terms and subject to the conditions set forth
herein, the Standby Purchasers have agreed, severally, but not jointly, to
subscribe for and purchase from the Company, and the Company has agreed to
issue and sell to the Standby Purchasers, the number of shares of New Common
Stock for which the Eligible Subscribers have elected under the Plan Election
to receive cash.  The cash proceeds from
the sale to the Standby Purchasers of such shares of New Common Stock will be
used by the Company to fund the cash payments to the Eligible Subscribers under
the Plan Election.

 

G.            The Company and the Standby Purchasers have agreed that
the maximum number of shares of New Common Stock to be issued by the Company to
the Standby Purchasers hereunder, together with the shares of New Common Stock
to be received by the Standby Purchasers in their capacity as Class 3
Holders and Class 4 Holders and any shares of New Common Stock otherwise
beneficially owned by Paulson and the Standby Purchasers, shall not result in
the Beneficial Ownership by the Standby Purchasers in the aggregate of more
than 45% of the New Common Stock to be issued and outstanding as of the
Effective Date  (such 45% limitation is referred
to herein as the “Ownership Limitation”).  Accordingly, in the event the Eligible
Subscribers elect under the Plan Election to receive cash in lieu of shares of
New Common Stock that would otherwise result in the corresponding issuance and
sale to the Standby Purchasers of shares of New Common Stock that would exceed
the Ownership Limitation, the amount of cash to be received by the Eligible
Subscribers in lieu of shares of New Common Stock that they would otherwise have
received under the Plan Election will be reduced pro  rata so that
the number of shares of New Common Stock to be issued by the Company to the
Standby Purchasers will not result in Paulson and the Standby Purchasers
beneficially owning in excess of the Ownership Limitation.

 

H.            As a material inducement to the Company to enter into
this Agreement, the Standby Purchasers have agreed to enter into a standstill
agreement, in the form of Exhibit C (the “Standstill Agreement”).

 

I.              Upon the effectiveness of the Plan, the Company may
adopt a Rights Agreement substantially identical to Exhibit D (the “Rights
Agreement”).

 

K.            On or prior to the date hereof, the Bankruptcy Court
entered an order in the Chapter 11 Cases approving the Company’s entering into
this Agreement, the Standstill Agreement and the Registration Rights Agreement
and consummating the transactions contemplated hereby and thereby on the terms
and subject to the conditions set forth in such order, a copy of which is
attached hereto as Exhibit E (the “Approval Order”).

 

2

 

Accordingly, in
consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereby agree as follows:

 

SECTION 1.

DEFINITIONS

 

The following capitalized
terms as used in this Agreement have the respective meanings ascribed to such
terms as specified below:

 

“Action”
means any action, cause of action, claim, prosecution, investigation, suit,
litigation, grievance, arbitration or other proceeding, whether civil, criminal
or administrative, at Law or in equity, by or before any Governmental Entity.

 

“Affiliate”
of any Person means any Person that directly or indirectly controls, or is
under common control with, or is controlled by, such Person.  As used in this definition, “control”
(including with its correlative meanings, “controlled by” and “under common
control with”) shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise).

 

“Agreement”
means this Standby Purchase Agreement, as the same may be hereafter amended,
modified or supplemented.

 

“Alternative
Transaction” means any of the following: (i) the acquisition of
any shares of capital stock or any other voting securities or debt securities
of any Debtor or any interests therein, (ii) the acquisition of all or a
material portion of the assets and properties of any Debtor or interests
therein, (iii) the merger, consolidation or combination of any Debtor, (iv) the
financing or refinancing of any Debtor, including, without limitation, any
debtor-in-possession financing, (v) the liquidation, dissolution or
reorganization of any Debtor, including, without limitation, any plan or
reorganization other than the Existing Plan (as amended by the Plan
Modification), or (vi) the acquisition, directly or indirectly, by any
Debtor, or its subsidiaries, of capital stock or assets and properties of any
other Person.

 

“Amended
and Restated By-laws” means the Amended and Restated By-laws of the
Company in the form attached hereto as Exhibit F.

 

“Amended
and Restated Certificate of Incorporation” means the Amended and
Restated Certificate of Incorporation of the Company in the form attached
hereto as Exhibit G.

 

“Ancillary
Agreements” means the Registration Rights Agreement and the
Standstill Agreement.

 

“Approval Order” has
the meaning set forth in the Recitals.

 

“Approvals”
means any consents, orders, authorizations, approvals, clearances or
declarations from any Governmental Entity or other Person.

 

“Bankruptcy
Code” has the meaning set forth in the Recitals.

 

3

 

“Bankruptcy
Court” has the meaning set forth in the Recitals.

 

“Bankruptcy Rules”
means the Federal Rules of Bankruptcy Procedure and any local bankruptcy rules in
effect in the Bankruptcy Court.

 

“Beneficially
Own” and its correlatives each has the meaning ascribed to such terms
under Rule 13d-3 of the Exchange Act.

 

“Business
Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
close.

 

“Cash-Out Shares”
means the shares of New Common Stock available for distribution to Eligible
Subscribers under the Existing Plan (as amended by the Plan Modification) prior
to giving effect to the Plan Election.

 

“Chapter 11 Cases”
has the meaning set forth in the Recitals.

 

“Class 3
Holders” has the meaning set forth in the Recitals.

 

“Class 4
Holders” has the meaning set forth in the Recitals.

 

“Closing”
has the meaning set forth in Section 2.2(a).

 

“Closing
Date” has the meaning set forth in Section 2.2(a).

 

“Company”
has the meaning set forth in the Preamble and includes the Company prior to and
after the effectiveness of the Plan.

 

“Confidentiality
Agreement” has the meaning set forth in Section 5.1.

 

“Confirmation
Order” means the order of the Bankruptcy Court confirming the Plan,
in a form that is reasonably satisfactory to the Standby Purchasers.

 

“Contract”
means any contract, agreement, commitment, lease, purchase order, license,
mortgage, indenture, supplemental indenture, line of credit, note, bond, loan,
credit agreement, capital lease, sale/leaseback arrangement, concession
agreement, franchise agreement or other instrument, including all amendments,
supplements, exhibits and attachments thereto.

 

“Debtors” has the
meaning set forth in the Recitals and includes the Debtors prior to and after the
effectiveness of the Plan.

 

“Default”
means in violation or breach of, or in default under (or, with or without the
giving of notice or lapse of time, or both, would be in default) according to
the terms of the relevant document or agreement.

 

“Disclosure Statement”
means the Disclosure Statement with respect to the Plan, Solicitation Version,
Docket No. 940 in the Chapter 11 Cases.

 

“Eligible
Subscribers” has the meaning set forth in the Recitals.

 

4

 

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

 

“Existing
Plan” has the meaning set forth in the Preamble.

 

“Final
Order” means an order of the Bankruptcy Court as to which the time
to appeal, petition for certiorari, or move for reargument or rehearing has
expired and as to which no appeal, petition for certiorari, or other
proceedings for reargument or rehearing shall then be pending or as to which
any right to appeal, petition for certiorari, reargument, or rehearing shall
have been waived in writing in form and substance reasonably satisfactory to
the Standby Purchasers, or, in the event that an appeal, writ of certiorari or
reargument, or rehearing thereof has been sought, such order of the Bankruptcy
Court shall have been determined by the highest court to which such order was
appealed, or certiorari, reargument or rehearing shall have been denied and the
time to take any further appeal, petition for certiorari, or move for
reargument or rehearing shall have expired; provided, however, that the
possibility that a motion under Rule 60 of the Federal Rules of Civil
Procedure, or any analogous rule under the Bankruptcy Rules, may be filed
with respect to such order shall not preclude such order from being a Final
Order.

 

“GAAP”
means generally accepted accounting principles in the United States of America
as in effect from time to time.

 

“Governmental
Entity” means any supranational, foreign, domestic, federal,
territorial, provincial, state, municipal or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal, arbitral body or organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department or branch of any of the foregoing.

 

“HSR
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

 

“Indebtedness” means,
with respect to any person, without duplication:  (i) (A) indebtedness for borrowed
money, (B) all obligations of such person evidenced by bonds, debentures,
notes or similar instruments, (C) all obligations of such person under
interest rate or currency hedging transactions (valued at the termination value
thereof), (D) all letters of credit issued for the account of such person
and (E) obligations of such person to pay rent or other amounts under any
lease of real property or personal property, which obligations are required to
be classified as capital leases in accordance with GAAP; (ii) indebtedness
for borrowed money of any other person guaranteed, directly or indirectly, in
any manner by such person; and (iii) indebtedness of the type described in
clause (i) above secured by any Lien upon property owned by such person,
even though such person has not in any manner become liable for the payment of
such indebtedness; provided, however, that Indebtedness shall not be deemed to
include (i) any accounts payable or trade payables incurred in the
ordinary course of business of such person, or (ii) any intercompany
indebtedness between any person and any wholly owned subsidiary of such person
or between any wholly owned subsidiaries of such person.

 

“KCC” has the meaning
set forth in Section 5.3(c).

 

“Knowledge”
shall mean, as to any party, the actual knowledge of such party’s principal
executive officers.

 

5

 

“Law”
means any domestic, foreign, federal, state, local or other law, statute,
ordinance, writ, rule, regulation or governmental requirement of any kind, and
the rules, regulations and orders promulgated thereunder and any final orders,
decrees, judgments or injunction of any regulatory agency, court or other
Governmental Entity.

 

“Liens”
means any mortgage, pledge, security interest, encumbrance, lien (statutory or
other), claim, liability, charge, lease, covenant, easement, option, right of
others, hypothecation, conditional sale agreement or restriction (whether on
voting, sale, transfer, defenses, set-off or recoupment rights, disposition, or
otherwise), whether imposed by agreement, understanding, law, equity, or
otherwise.

 

“Material
Adverse Effect” means a change, effect, event, occurrence,
development, circumstance or state of facts that, either alone or in
combination with other changes, effects, events, occurrences, developments,
circumstances or state of facts, has had a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries (including foreign subsidiaries and their respective businesses)
taken as a whole; provided, however, that none of the
following shall be deemed (either alone or in combination) to constitute, and
none of the following shall be taken into account in determining whether there
has been or would be, such a material adverse effect: any adverse effect
(including any litigation, loss of employees, cancellation of or delay in
customer orders, reduction in revenue or net income or disruption of business
relationships) arising from or attributable or relating to (i) the
announcement or pendency of the issuance of the New Common Stock to the Standby
Purchasers or any of the other transactions contemplated by this Agreement, (ii) any
act of terrorism or war, or any armed hostilities, anywhere in the world, (iii) legal,
accounting, investment banking or other fees or expenses incurred in connection
with the Plan or any of the other transactions contemplated by this Agreement, (iv) the
payment of any amounts due to, or the provision of any other benefits to, any
officers or other employees under employment contracts, non-competition
agreements, employee benefit plans, severance arrangements or other
arrangements in existence as of the date of this Agreement and disclosed in the
Existing Plan or the Disclosure Statement, (v) compliance with the terms of,
or the taking of any action required by, the Existing Plan (as amended by the
Plan Modification) or this Agreement, (vi) the taking of any action by any
Standby Purchaser or any action or omission to act that has been approved or
consented to in writing by any Standby Purchaser, (vii) any breach (or
event or circumstance with notice or lapse of time would constitute a breach)
of this Agreement by any Standby Purchaser, or (viii) any change in
accounting requirements or principles required by GAAP or any change in
applicable Laws, except, in the case of the foregoing clauses (ii), and (viii),
to the extent such changes, effects, events, occurrences, developments,
circumstances or state of facts have a disproportionate effect on the business,
financial condition or results of operations of the Company and its
subsidiaries (including foreign subsidiaries and their respective businesses)
taken as a whole.

 

“Material
Contract” means any “material contract” (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC) filed by the Company under
the Securities Act or the Exchange Act, and any material amendments,
supplements or modifications to any such material contract.

 

“Ownership Limitation”
has the meaning set forth in the Recitals.

 

6

 

“Paulson” has the
meaning set forth in the Preamble.

 

“Person”
includes all natural persons, corporations, business trusts, limited liability
companies, associations, companies, partnerships, joint ventures and other entities,
as well as governments and their respective agencies and political
subdivisions.

 

“Plan”
has the meaning set forth in the Recitals, and includes any permitted
amendments, modifications or supplements thereto, subject to Section 6(h) hereof.

 

“Plan
Modification” has the meaning set forth in the Recitals.

 

“Plan
Election” has the meaning set forth in the Recitals.

 

“Plan Election Deadline”
shall mean 4:00 p.m., Central Time, on the date that is 20 days after the
date on which the Company transmits to the Eligible Subscribers the election
forms for making the Plan Election in accordance with Section 5.3(b),
subject to extension in accordance with Section 5.3(c).

 

“Purchase
Price” has the meaning set forth in Section 2.2(b).

 

“Registration
Rights Agreement” means the Registration Rights Agreement by and
among the Company, each of the Standby Purchasers and the other Persons that
become a party thereto, in the form attached hereto as Exhibit H.

 

“Representatives”
of any Person shall mean the attorneys, accountants or other agents or
employees of such Person.

 

“Retained Shares”
means the number of Cash-Out Shares that will be issued under the Plan to the
Eligible Subscribers as of the Effective Date, after giving effect to the Plan
Election and the application of the Ownership Limitation.

 

“Rights Agreement”
has the meaning set forth in the Recitals.

 

“SEC”
means the United States Securities and Exchange Commission.

 

“SEC
Reports” has the meaning set forth in Section 3.6(a).

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

“Standby
Percentage” means the percentage of the total Purchase Price to be
paid by each Standby Purchaser and the percentage of the total Standby Purchase
Shares to be received by each Standby Purchaser, as set forth on Schedule 1.

 

“Standby
Purchase” has the meaning set forth in Section 2.1(c).

 

“Standby Purchase Shares”
means the number of Cash-Out Shares for which the Eligible Subscribers have
elected to receive cash pursuant to the Plan Election, as such number of shares
may be reduced to the extent necessary to prevent the Ownership Limitation from
being exceeded.

 

7

 

“Standby
Purchasers” has the meaning assigned to it in the Preamble.

 

“Standstill Agreement”
has the meaning set forth in the Recitals.

 

“Subscription Price”
means, subject to increase pursuant to Section 5.3(c), the per
share subscription price for the New Common Stock, in the Plan Election and the
Standby Purchase (which shall be the same in both cases), which amount will be
equal to $260,000,000 divided by the aggregate number of shares of New Common
Stock to be issued and outstanding on the Effective Date, immediately after the
effectiveness of the Plan.  For example, if on the Effective Date, immediately after the
effectiveness of the Plan (after giving effect to the Plan Election and the
Standby Purchase) there are 100,000,000 shares of New Common Stock then issued
and outstanding, the Subscription Price shall be $2.60.

 

“Third
Party” means any Person other than the Company, Paulson, the Standby
Purchasers or any of their respective Affiliates.

 

“Voting
Debt” means any bonds, debentures, notes or other debt securities
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) generally in the election of directors of the Company
or other matters on which holders of the New Common Stock may vote.

 

SECTION 2.

STANDBY COMMITMENT AND PURCHASE

 

2.1           Standby Commitment and Purchase.

 

(a)           On or before the second Business Day
after the Plan Election Deadline, Paulson shall notify the Company in writing
as to (i) the amount of Claims owned of record and beneficially by
Paulson, each Standby Purchaser and their respective Affiliates and (ii) the
Claims for which Paulson, each Standby Purchaser and their respective
Affiliates have signed a confirmation to purchase such Claims, each as of the
Plan Election Deadline.

 

(b)           On or before the fifth Business Day
after the Plan Election Deadline, the Company shall notify each Standby Purchaser
in writing as to (i) the aggregate number of Cash-Out Shares, (ii) the
aggregate number of shares of New Common Stock to be issued to the Standby
Purchasers in their capacity as Claim 3 Holders and Claim 4 Holders, (iii) the
aggregate number of Retained Shares, (iv) the Subscription Price, (v) the
aggregate number of Standby Purchase Shares, (vi) the number of Standby
Purchase Shares to be purchased by each Standby Purchaser and its respective
Standby Percentage and (vii) the aggregate Subscription Price payable by
each Standby Purchaser to the Company for its Standby Purchase Shares.

 

(c)           Upon the terms and subject to the
conditions contained in this Agreement, at the Closing the Company shall issue
and sell to each Standby Purchaser, and each Standby Purchaser shall subscribe
for and purchase from the Company (independent of the obligation of any other
Standby Purchaser) its Standby Percentage of the Standby Purchase Shares (the “Standby
Purchase”).

 

8

 

2.2           Closing; Payments.

 

(a)           The completion of the Standby
Purchase (the “Closing”) shall take place at the offices of Akin Gump
Strauss Hauer & Feld LLP in New York, New York, on the date on which
all of the conditions to the occurrence of the Effective Date (other than the
condition of receipt of payment from the Standby Purchasers of the Purchase Price in respect of their
Standby Purchase) have been satisfied or waived and all of the conditions set
forth under Sections 6 and 7 have been
satisfied or waived by the Company or the Standby Purchasers (as applicable),
or at such other location or on such other date as may be mutually agreed by
the Company and the Standby Purchasers (the day on which the Closing takes
place being the “Closing Date”).  The Closing shall be deemed to be effective
as of 12:01 a.m. on the Closing Date and all documents and instruments
will be deemed to have been delivered simultaneously at such time.

 

(b)           At the Closing, each Standby
Purchaser hereby agrees, severally, but not jointly, to pay the Company the
aggregate Subscription Price for its Standby Percentage of the Standby Purchase
Shares to be purchased by such Standby Purchaser hereunder (the aggregate of
such payments by all of the Standby Purchasers, the “Purchase
Price”) by wire transfer of immediately available funds to an
account designated by the Company at least three Business Days prior to the
scheduled Closing Date.

 

(c)           At the Closing, upon receipt in full
of the aggregate Subscription Price for each Standby Purchaser’s Standby
Percentage of the Standby Purchase Shares to be purchased by each Standby
Purchaser hereunder, the Company shall deliver to such Standby Purchaser (or
its designees) stock certificates or evidence of book-entry record ownership
representing the Standby Purchase Shares to be issued by the Company to such
Standby Purchaser pursuant to this Agreement, free and clear of any Liens,
except Liens created by or otherwise resulting from actions by such Standby
Purchaser.

 

SECTION 3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the
SEC Reports, the Existing Plan, the Plan Modification or the Disclosure
Statement (excluding any forward-looking disclosures contained in such reports
under the headings “Risk Factors” or “Cautionary Note” or any similar sections
and any other forward looking statement, disclaimer or disclosure that is
similarly nonspecific and predictive or forward-looking in nature), the Company
represents and warrants to the Standby Purchasers as follows:

 

3.1           Corporate Status.  Each of the Debtors is duly incorporated or
otherwise organized, validly existing and in good standing under the Laws of
its governing jurisdiction and each (a) has all requisite corporate,
limited partnership or limited liability company power and authority to carry
on its business as it is now being conducted and (b) is duly qualified to
do business in each of the jurisdictions in which the ownership, operation or
leasing of its assets or the conduct of its business requires it to be so qualified,
except where the failure to have such corporate or other power or authority or
to be so qualified, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect.

 

9

 

3.2           Authorization; Noncontravention.

 

(a)           The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby.  The Board of Directors of the
Company has adopted resolutions at a meeting duly called and held, subject to
all necessary Approvals in the Chapter 11 Cases, (i) authorizing and
approving this Agreement, the Ancillary Agreements, the Amended and Restated
Certificate of Incorporation, the Amended and Restated Bylaws, the Rights
Agreement, the issuance of the New Common Stock to the Standby Purchasers at
the Closing and the other transactions contemplated hereby and by the Ancillary
Agreements on the terms and subject to the conditions set forth herein and
therein, and (ii) directing that the Plan, including the Amended and
Restated Certificate of Incorporation, the Amended and Restated By-Laws, the
Ancillary Agreements and the Rights Agreement, be submitted for all necessary
Approvals in the Chapter 11 Cases.

 

(b)           The execution, delivery and
performance of this Agreement and the Ancillary Agreements have been duly and
validly authorized by all necessary corporate action and, subject to the entry
of the Confirmation Order, the consummation by the Company of the transactions
contemplated hereby and thereby, including the issuance, sale and delivery of
the New Common Stock, have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
or vote of holders of any class or series of capital stock of the Company is
necessary to authorize this Agreement or the Ancillary Agreements or to consummate
the transactions contemplated hereby and thereby, including the issuance, sale
and delivery of the Standby Purchase Shares pursuant to this Agreement,
including any approval under the rules and regulations of any securities
exchange on which the Company’s equity securities are or, after the Closing
will be, traded.  This Agreement has been
duly executed and delivered by the Company and (assuming due authorization by
Paulson and each Standby Purchaser and due execution and delivery by Paulson)
constitutes, and each Ancillary Agreement, when executed and delivered by the
Company (assuming due authorization, execution and delivery by each Standby
Purchaser), will constitute, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar Laws relating to or affecting creditors’ rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at Law).  The sale and issuance of the Standby Shares
at Closing are not subject to any preemptive rights or rights of first offer.

 

3.3           No Conflict.  Subject to the entry of the Confirmation Order,
the execution, delivery and performance by the Company of this Agreement and
the Ancillary Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions of this
Agreement and the Ancillary Agreements will not, conflict with, or result in
any Default under, or give rise to an increase in, or right of termination,
cancellation or acceleration of, any obligation or to the loss of a benefit
under, or result in the suspension, revocation, impairment, forfeiture or
amendment of any term or provision of or the creation of any Lien upon any of
the properties or assets of any of the Debtors under, or require any consent or
waiver under, any provision of (i) the certificate of incorporation or
by-laws (or comparable organizational documents) of any of the Debtors (in the
case of the Company, including after the effectiveness of the Amended and
Restated Certificate of Incorporation and the Amended and Restated By-Laws), (ii) any
material Contract to which any of the Debtors or any of their

 

10

 

respective
subsidiaries is a party or by which any of its assets are bound, or (iii) any
Law, judgment, order or decree of any Governmental Entity, other than with
respect to clauses (ii) and (iii), to the extent it would
not have and would not reasonably be expected to have a Material Adverse
Effect.  Subject to the entry of the
Confirmation Order and as may be required by the HSR Act, no permit, no
Approval of, or registration, qualification, or filing with, or notice to, any
Governmental Entity is required to be obtained or made by or with respect to
any of the Debtors in connection with the execution, delivery and performance
of this Agreement or any of the Ancillary Agreements by the Company or the
consummation by the Company of the transactions contemplated by this Agreement
or the Ancillary Agreements, including the issuance of the New Common Stock.

 

3.4           Capital Structure.

 

(a)           As of the Closing Date, the
authorized capital stock of the Company will be as set forth in the Amended and
Restated Certificate of Incorporation. 
As of the Closing Date, shares of New Common Stock equal to 10% of the
aggregate number of shares of New Common Stock to be issued and outstanding on
the Effective Date, immediately after the effectiveness of the Plan, will be
reserved for issuance pursuant to an equity incentive plan as described in the
Disclosure Statement.  No shares of
preferred stock of the Company will be issued and outstanding on the Closing
Date.  The shares of New Common Stock
issuable hereunder and under the Plan will, when issued, (i) be duly
authorized, validly issued, fully paid and nonassessable, (ii) not have
been issued in violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right under any
provision of the Delaware General Corporation Law, the Amended and Restated
Certificate of Incorporation or the Amended and Restated By-Laws or any
Contract to which the Company or any of its subsidiaries is a party or by which
any of its or their respective assets are bound, and (iii) be delivered by
the Company free and clear of all Liens, except for Liens created by, or
otherwise resulting from actions by, the recipient of such shares.  As of the Closing Date, the Company will have
no Voting Debt.  As of the Closing Date
there will be no (A) outstanding obligations, options, warrants,
convertible securities, exchangeable securities, securities or rights that are
linked to the value of the New Common Stock or other rights, agreements or
commitments relating to the capital stock of the Company (but only to the
Company’s Knowledge with respect to any such obligations, options, rights,
agreements or commitments to which the Company is not a party) or obligating
the Company to issue or sell or otherwise transfer shares of capital stock of
the Company or any securities convertible into or exchangeable for any shares
of capital stock of the Company or any Voting Debt, (B) outstanding
obligations of the Company to repurchase, redeem or otherwise acquire shares of
its capital stock, (C) voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of shares of capital stock of the Company (but only to the Company’s
Knowledge with respect to any such agreements or understandings to which the
Company is not a party), except for the Standstill Agreement, or (D) rights
of first refusal, preemptive rights, subscription rights or any similar rights
under any provision of the Delaware General Corporation Law, the Amended and
Restated Certificate of Incorporation or the Amended and Restated By-Laws or
any Contract to which the Company or any of its subsidiaries is a party or by
which any of its or their respective assets are bound, except for the preemptive
rights provided for in the Amended and Restated Certificate of Incorporation,
and except, in the case of the foregoing clauses (C) and (D), as would not
reasonably be expected to materially and adversely affect the value of the 

 

11

 

New Common Stock to be
acquired by the Standby Purchasers pursuant to this Agreement.  As of the Closing Date, the Company will not
have an outstanding “poison pill” or any similar arrangement in effect giving
any Person the right to purchase any equity interest in the Company upon the
occurrence of certain events, except for the Rights Agreement.

 

(b)           Schedule 3.4(b) sets
forth, as of the date hereof and as of the Closing Date, a list of all
subsidiaries of the Company, including each such subsidiary’s name, its
jurisdiction of incorporation or organization and the percentage of its
outstanding capital stock or equity interests owned by the Company or a
subsidiary of the Company.  The shares of
outstanding capital stock or equity interests of the subsidiaries of the
Company are duly authorized, validly issued, fully paid and nonassessable, and
owned of record and beneficially by the Company or a subsidiary of the Company,
free and clear of any Liens, except those in favor of the Debtors’ senior
lenders.

 

(c)           As of the Closing Date, no subsidiary
of the Company has any Voting Debt.  As
of the Closing Date, there will be no (i) outstanding obligations,
options, warrants, convertible securities, exchangeable securities, securities
or other rights, agreements or commitments, in each case, relating to the
capital stock of the subsidiaries of the Company (but only to the Company’s
Knowledge with respect to any such obligations, options, rights, agreements or
commitments to which the Company or any of its subsidiaries is not a party) or
obligating the Company or its subsidiaries to issue or sell or otherwise
transfer shares of the capital stock of the subsidiaries of the Company or any
securities convertible into or exchangeable for any shares of capital stock of
the subsidiaries of the Company or any Voting Debt of any subsidiary of the
Company, (ii) outstanding obligations of the subsidiaries of the Company
to repurchase, redeem or otherwise acquire shares of their respective capital
stock, (iii) voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of shares of capital stock of the subsidiaries of the Company or (iv) rights
of first refusal, preemptive rights, subscription rights or any similar rights
under any provision of the Delaware General Corporation Law (or the
corresponding corporation law of such subsidiary’s jurisdiction of
organization), the governing or organizational documents of any subsidiary of
the Company or any Contract to which any subsidiary of the Company is a party
or by which any of their respective assets are bound.

 

3.5           SEC Reports and Company Financial Statements.

 

(a)           The Company has timely filed all
forms, reports, schedules, statements and other documents (including all
exhibits) required to be filed by it with the SEC under the Exchange Act or the
Securities Act since January 1, 2008 (the “SEC
Reports”).  The SEC Reports at
the time filed or, (i) in the case of any SEC Reports amended or
superseded by a filing, then on the date of such amending or superseding
filing, and (ii) in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing
respectively, (x) complied in all material respects with the requirements
of the Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC thereunder, and (y) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.  No subsidiary of the Company is a registrant
with the SEC.

 

12

 

(b)           Each of the consolidated financial
statements (including, in each case, any notes thereto) included or
incorporated by reference in the SEC Reports complied as to form in all
material respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto) and fairly presented in all material
respects the consolidated financial position, results of operations and cash
flows of the Company and its consolidated subsidiaries as at the respective
dates thereof and for the respective periods indicated therein, except as
otherwise noted therein and subject, in the case of unaudited statements, to
normal, non-material audit adjustments.

 

(c)           Except as set forth on or reserved
against in the consolidated balance sheet of the Company and its consolidated
subsidiaries as of June 30, 2009 included in the Company’s Form 10-Q
for the quarter ended June 30, 2009 including the notes thereto, none of
the Company or any of its consolidated subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities or obligations (i) incurred since June 30,
2009 in the ordinary course of business and consistent with past practice, (ii) that
are less than $20,000,000 in the aggregate or (iii) future lease
obligations as disclosed in the Company’s Form 10-K for the fiscal year
ending December 31, 2008.  Except as
disclosed in the Company’s Form 10-Q for the quarter ended June 30,
2009, neither the Company nor any of its subsidiaries has any outstanding
Indebtedness, other than intercompany loans (among wholly owned subsidiaries)
and other than Indebtedness incurred in the ordinary course of business and
consistent with past practice since June 30, 2009 in an aggregate
principal amount which does not exceed $5,000,000.

 

(d)           Neither the Company nor any of its
subsidiaries is a party to, or has any commitment to become a party to, any
joint venture, off-balance sheet partnership or any similar Contract or
arrangement (including any Contract relating to any transaction or relationship
between or among the Company and any of its subsidiaries, on the one hand, and
any unconsolidated affiliate of the Company or any of its subsidiaries,
including any structured finance, special purpose or limited purpose entity or
person, on the other hand, or any “off-balance sheet arrangements” (as defined
in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose
or effect of such Contract is to avoid disclosure of any material transaction
involving, or material liabilities of, the Company or any of its subsidiaries
in the Company’s or such subsidiary’s audited financial statements or other SEC
Reports.

 

3.6           Private Placement. 
The offer, sale, and issuance of the shares of New Common Stock in
conformity with the terms of this Agreement and the Plan qualify for exemption
from the registration requirements of Section 5 of the Securities Act and
applicable state securities laws.

 

3.7           Registration Rights.  Except as set forth in the Registration
Rights Agreement or as provided for in the Existing Plan (as amended by the
Plan Modification), the Company has not granted or agreed to grant, and is not
under any obligation to provide, any rights (including “piggy-back”
registration rights) to register under the Securities Act any of its securities
to be issued under the Plan or that may be issued subsequently, including the
New Common Stock.

 

13

 

SECTION 4.

REPRESENTATIONS AND WARRANTIES OF EACH STANDBY PURCHASER

 

For purposes of this Section 4,
Paulson hereby makes the following representations and warranties to the
Company on behalf of the Standby Purchasers:

 

4.1           Corporate Status. 
Such Standby Purchaser is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its formation and has all requisite
power and authority to carry on its business as it is now being conducted.

 

4.2           Authorization; Noncontravention.

 

(a)           Authorization.  Such Standby
Purchaser has all necessary power and authority to execute and deliver this
Agreement and the Ancillary Agreements, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery and
performance of this Agreement and the Ancillary Agreements and the consummation
by such Standby Purchaser of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate or other
action.  This Agreement has been duly
executed and delivered by such Standby Purchaser and (assuming due authorization,
execution and delivery by the Company) constitutes, and the Ancillary
Agreements, when executed and delivered by the Company and each of the Standby
Purchasers (assuming due authorization, execution and delivery by the Company
and, in the case of the Registration Rights Agreement, any party other than the
Company and the Standby Purchasers), will constitute, a valid and binding
obligation of such Standby Purchaser, enforceable against such Standby
Purchaser in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
Laws relating to or affecting creditors’ rights generally or by general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at Law).

 

(b)           No Conflict.  The execution, delivery and performance by
such Standby Purchaser of this Agreement and the Ancillary Agreements do not,
and the consummation of the transactions contemplated hereby and thereby and
compliance with the provisions of this Agreement and the Ancillary Agreements
will not, conflict with, or result in any Default under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to the
loss of a benefit under, or result in the amendment of any term or provision of
or the creation of any Lien upon any of the assets of such Standby Purchaser
under any provision of (i) the certificate of incorporation or by-laws or
any other relevant organizational documents of such Standby Purchaser, (ii) any
material Contract to which such Standby Purchaser is a party or by which any of
its assets are bound or (iii) any Law, judgment, order or decree of any
Governmental Entity, in each case applicable to such Standby Purchaser or its
assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, Defaults, rights, losses, amendments or Liens that would not
reasonably be expected to materially impair or delay the ability of such
Standby Purchaser to perform its obligations under this Agreement or the
Ancillary Agreements or carry out the transactions contemplated hereby or
thereby in accordance with the terms herein or therein.  No material permit, Approval of or
registration or filing with, or notice to, any Governmental Entity, including
under the HSR Act, is required to be obtained or made by or with respect to
such Standby Purchaser in connection with the execution, delivery and
performance of this 

 

14

 

Agreement or the Ancillary
Agreements by such Standby Purchaser or the consummation by such Standby
Purchaser of the transactions contemplated by this Agreement or the Ancillary
Agreements, except for compliance with and filings under the Exchange Act, the
Securities Act, state securities Laws or “blue-sky” laws and the rules and
regulations of The NASDAQ Stock Market as described on Schedule 4.2(b).

 

4.3           Investment Representations.  Each Standby Purchaser (a) is
acquiring the shares of New Common Stock hereunder solely for investment with
no present intention to distribute them to any person in violation of the
Securities Act or any applicable U.S. state securities laws, (b) has such
knowledge and experience in financial and business matters and in investments
of this type that it is capable of evaluating the merits and risks of the
purchasing the shares of New Common Stock hereunder and of making an informed
investment decision, has conducted a review of the business and affairs of the
Debtors that it considers sufficient and reasonable for purposes of purchasing
the shares of New Common Stock hereunder and has been provided an opportunity
to ask questions of and receive answers from Representatives of the Company
concerning the terms and conditions of this Agreement, the Ancillary Agreements
and the purchase of such New Common Stock, (c) is able to bear the
economic risk of the owning the shares of New Common Stock to be acquired
hereunder and at the present time is able to afford a complete loss of such
investment and (d) is an institutional “accredited investor” (as that term
is defined by Rule 501 under the Securities Act).

 

4.4           Claims Ownership. 
Such Standby Purchaser and its Affiliates owns of record and
beneficially the Claims of the Debtors, and has trade date confirmations as to
the Claims of the Debtors, as separately disclosed in writing by the Standby
Purchasers to the Company.  Except as to
any Claims of the Debtors subject to such trade date confirmations, such
Standby Purchaser or such Affiliates has the right to vote such Claims in the
Chapter 11 Cases and does not own of record or beneficially or have the right
to vote any other Claims or other securities of the Debtors in the Chapter 11
Cases or otherwise.

 

4.5           Available Funds. 
Such Standby Purchaser has, and will have at the Closing, sufficient
funds in its possession to permit it to acquire and pay for the shares of New
Common Stock to be purchased by it and to otherwise perform and pay for its
obligations under this Agreement.

 

SECTION 5.

COVENANTS AND ADDITIONAL AGREEMENTS

 

5.1           Confidentiality. 
Paulson and each Standby Purchaser acknowledges and agrees that (a) the
information being provided to it in connection with the consummation of the
transactions contemplated hereby is subject to the terms of a confidentiality
agreement between Paulson and the Company dated as of August 2009 (the “Confidentiality Agreement”), the terms of
which are incorporated herein by reference, and (b) it is bound by the
terms and conditions of the Confidentiality Agreement and the Confidentiality
Agreement is in full force and effect.

 

15

 

5.2           Further Actions.

 

(a)           Upon the terms and subject to the
conditions and limitations of this Agreement, including the provisions
immediately below, each party shall use its commercially reasonable efforts to
cause the Closing to occur as promptly as practicable.

 

(b)           Without limiting the generality of Section 5.2(a),
the Company shall use its commercially reasonable efforts to promptly take, or
cause to be taken, all actions and promptly do, or cause to be done, all things
necessary, proper or advisable in order to (i) obtain the Confirmation
Order with respect to the Plan, (ii) include in the Confirmation Order the
approval of the Amended and Restated Certificate of Incorporation and the
Amended and Restated By-laws and (iii) consummate the transactions
contemplated by the Plan on terms consistent with the terms set forth in the
Plan, including without limitation the filing of the Amended and Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware and the
adoption of the Amended and Restated By-laws by the Company.

 

(c)           If any objections are asserted with
respect to the Standby Purchase or the other transactions contemplated hereby
under any Law or if any suit is instituted (or threatened to be instituted) by
any applicable Governmental Entity or any private party challenging any of the
transactions contemplated hereby as violative of any Law or that would
otherwise prevent, materially impede or materially delay the consummation of
the transactions contemplated hereby, upon notice thereof each party shall
promptly notify each of the other parties hereto and shall use its reasonable
best efforts to resolve any such objections or suits which, in any case if not
resolved, would reasonably be expected to prevent, materially impede or
materially delay the consummation of the Standby Purchase or the other
transactions contemplated hereby.

 

(d)           Nothing in this Section 5.2
shall require the Standby Purchasers to agree to any change to the terms of
this Agreement, any Ancillary Agreement, the Amended and Restated Certificate
of Incorporation, the Amended and Restated By-Laws or the Plan, other than to
fill in blanks for names and dates and other, similar items of a ministerial
nature.  In the event the obligations set
forth in this Section 5.2 require any Standby Purchaser to (i) make
any payments of any money or incur any liability for fees, expenses or
otherwise to any Third Party (other than ordinary course fees to advisors that
would be incurred in connection with this Agreement absent the obligations in
this Section 5.2) or (ii) resolve objections or suits,
litigate or dispute any matter with a Third Party, the Company shall reimburse
such Standby Purchaser for all reasonable out-of-pocket costs and expenses
(including legal fees) associated therewith within 10 Business Days of
receiving a reasonably detailed invoice from such Standby Purchaser.

 

5.3           Bankruptcy Matters.

 

(a)           Promptly after the date hereof, the
Debtors shall file the Plan Modification with the Bankruptcy Court.

 

(b)           No later than two Business Days after
the date hereof, the Debtors shall commence the solicitation for the Plan
Election by distributing to the Eligible Subscribers election forms approved by
the Bankruptcy Court and continue such solicitation until the Plan Election
Deadline, at which time such election forms shall be due.

 

16

 

(c)           Paulson shall have the right at any
time prior to the Plan Election Deadline to elect to either (x) extend the
original Plan Election Deadline or (y) increase the Subscription Price and
extend the original Plan Election Deadline, by delivering written notice to the
Company.  The Company shall (i) within
one Business Day of receipt of such written notice issue a press release
concerning Paulson’s election and post a copy of such press release, a copy of
the written notice of such election by Paulson and a revised election form for
the Plan Election, each in a form acceptable to the Company and Paulson, on www.kccllc.net/Idearc
and (ii) within two Business Days of such election by Paulson, to have
Kurtzman Carson Consultants LLC (“KCC”) mail to all Eligible Subscribers
a copy of the written notice of such election by Paulson and a revised election
form for the Plan Election by first class mail (except that such materials will
be sent to the banks, brokers, nominees or other holders of the Class 4
Unsecured Note Claims by overnight delivery), with all costs and expenses
incurred by KCC in printing and mailing the written notices and revised
election forms to be paid for by Paulson, and in each case the Plan Election
Deadline shall then be extended until the date that is ten Business Days following
the date on which the materials are mailed (or sent by overnight delivery, as
applicable) to all Eligible Subscribers in accordance with the foregoing clause
(ii).  If Paulson elects to increase the
Subscription Price in accordance with this Section 5.3(c), assuming
the Closing occurs, all Eligible Subscribers that elected to receive cash
pursuant to the Plan Election would be entitled to receive the increased
Subscription Price.

 

(d)           The Company shall consult with
Paulson concerning the Confirmation Order and any other orders of the
Bankruptcy Court and bankruptcy proceedings in connection therewith and provide
the Standby Purchasers with copies of requested applications, pleadings,
notices, proposed orders and other documents relating to such proceedings as
soon as reasonably practicable prior to any submission thereof to the
Bankruptcy Court; excluding however any documents subject to applicable
privileges.

 

5.4           Fees and Expenses. The Company shall reimburse
Paulson and the Standby Purchasers for the reasonable out-of-pocket fees, costs
and expenses incurred by Paulson, the Standby Purchasers or on Paulson’s or the
Standby Purchasers’ behalf in connection with this Agreement, the Ancillary
Agreements and the consummation of the Plan, including, without limitation, the
fees and expenses of accountants and counsel to Paulson and to the Standby
Purchasers, irrespective of whether the Closing occurs and the parties
consummate the transactions contemplated by this Agreement.  If the Plan is not consummated, the Company
shall pay the foregoing fees, costs and expenses to Paulson and each Standby
Purchaser in cash as an administrative expense under Section 503 of the
Bankruptcy Code.

 

5.5           Listing. 
Promptly following the date hereof, the Company shall apply to cause the
shares of New Common Stock to be approved for listing on the NASDAQ Global
Market and shall use its commercially reasonable efforts to ensure such shares
are listed for quotation on the NASDAQ Global Market as of the Closing Date.

 

5.6           Use of Proceeds. 
The net proceeds from the sale of the Standby Purchase Shares shall be
used by the Company to fund the cash payments to be made by the Company to the
Eligible Subscribers pursuant to the Plan Election.

 

17

 

5.7           Publicity. 
The parties to this Agreement agree that no public release or
announcement concerning the transactions contemplated hereby or by the
Ancillary Agreements shall be issued by, or as a result of, the actions of any
of them without the prior consent of Paulson, with respect to the Company, and
the Company, with respect to Paulson or any Standby Purchaser; provided,
however, the Company may issue any such release or announcement as may be
required by Bankruptcy Rules or any other Law or the rules and
regulations of the NASDAQ Global Market or the SEC.  In such case, the Company shall notify
Paulson and allow Paulson reasonable time (taking into account the
circumstances) to comment on, such release or announcement in advance of such
issuance.

 

5.8           Further Assurances. 
After the Closing, each party shall, at the request of any other party
hereto and without further conditions or consideration, take such other actions
as such other party may reasonably request in order to more effectively
consummate the transactions contemplated hereby in accordance with and subject
to the terms and conditions of this Agreement, the Ancillary Agreements and the
Confirmation Order.

 

5.9           Access to Books and Records.  From the date hereof until the Closing, the
Company shall provide Paulson and its Representatives access upon reasonable
prior notice, during normal business hours, to the facilities, officers,
advisors and Representatives of the Debtors and to the Debtors’ books, records,
and Contracts, except to the extent disclosure of such documents would result
in the loss of attorney client privilege (in which case the parties will, to
the extent possible, make appropriate substitute arrangements so that the
foregoing restriction would not apply).

 

5.10         Notices. 
Between the date hereof and the Closing, each party shall give prompt
written notice to the other parties hereto of (i) the occurrence, or
failure to occur, of any event of which such party is aware which occurrence or
failure would be likely to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect
or would be likely to cause any covenant of such party contained in this
Agreement not to be satisfied, (ii) receipt of any notice or other
communication from any Third Party alleging that the consent of such party is
or may be required in connection with the transactions contemplated by this
Agreement or the Ancillary Agreements, (iii) any notice or other
communication from any Governmental Entity in connection with the transactions
contemplated by this Agreement or the Ancillary Agreements, (iv) any
Action commenced, or, to the Knowledge of such party, threatened, relating to
or involving or otherwise affecting such party or the transactions contemplated
by this Agreement or the Ancillary Agreements, and (v) any failure of such
party to comply, in any material respect, with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.

 

5.11         Notice of Alternative Transaction.  In the event that any Debtor or its
Representatives receives an unsolicited inquiry, proposal or offer with respect
to an Alternative Transaction, whether written or oral, the Company shall
provide Paulson written notice thereof within two Business Days of such
receipt, and shall promptly notify Paulson in writing of any subsequent
material developments with respect to such inquiries, proposals or offers,
which notices will include a summary of the material terms of such inquiry,
proposal or offer, including, without limitation, economic terms, conditions to
entering into a definitive agreement, and conditions to consummating the
transaction, as may be applicable.  The
Company represents and 

 

18

 

warrants
to the Standby Purchasers that, except as contemplated by the Existing Plan (as
amended by the Plan Modification) and this Agreement, as of the date of this
Agreement, the Company is not a party to any pending agreements, understandings,
negotiations or discussions with respect to any Alternative Transaction.

 

5.12         Acquisitions of Interests.  From the date of this Agreement to and
including the Closing Date, neither Paulson nor any Standby Purchaser nor any
of their respective Affiliates shall, directly or indirectly, purchase,
acquire, or enter into any agreement, arrangement or understanding with respect
to the purchase or acquisition by Paulson, any Standby Purchaser or any of
their respective Affiliates of, any Claims of any Debtor or any New Common
Stock, except pursuant to this Agreement and except for any Claims
for which Paulson has signed a confirmation to purchase such Claims as of the
date of this Agreement  which confirmations have been separately
disclosed in writing by Paulson to the Company.   Nothing in
this Agreement shall restrict or prohibit Paulson or any Standby Purchaser or
any of their respective Affiliates from (a) financing, pledging in
connection with any financing transaction, selling, or contracting to sell any
Claims of the Debtors or (b) entering into any swap or other arrangement
that transfers to another Person, in whole or in part, any of the voting or
economic consequences of ownership of any Claims of the Debtors.

 

5.13         Survival of Representations and Warranties.  Except as set forth in the immediately
succeeding sentence, the representations and warranties of the Company and each
Standby Purchaser, including Paulson on behalf of the Standby Purchasers,
contained in this Agreement or in any certificate delivered hereunder shall not
survive the Closing and shall be of no force and effect after the Closing.  Notwithstanding anything to the contrary set
forth herein, nothing contained in this Agreement shall affect a party’s rights
at law or in equity in connection with actual (and not constructive) fraud or
any knowing or willful breach or violation of any representation, warranty or
covenant under this Agreement and nothing in this Agreement will be construed
as limiting any right, defense, or affirmative defense of any party in any
proceeding involving such a claim.

 

SECTION 6.

CONDITIONS TO OBLIGATIONS OF STANDBY PURCHASERS

 

The obligation of the
Standby Purchasers to consummate the Standby Purchase shall be subject, in each
case, to the satisfaction (or waiver by Paulson) of each of the following
conditions:

 

(a)           Representations
and Warranties.  (i) The
representations and warranties of the Company contained in this Agreement
(other than in Section 3.4(a) and (c))
shall be true and correct, without giving effect to any “materiality” or “Material
Adverse Effect” qualifications therein, on and as of the date hereof and as of
the Closing Date, with the same force and effect as though made on and as of
such dates (except to the extent that any such representation or warranty is
made as of a specified date, in which case, such representation or warranty
shall be true and correct as of such specified date), except to the extent that
any failures of such representations and warranties to be so true and correct, individually
or in the aggregate, have not had or would not reasonably be expected to have a
Material Adverse Effect, and (ii) the representations and warranties of
the Company set forth in Section 3.4(a) and (c) shall
be true 

 

19

 

and correct in all respects
on and as of the date hereof and as of the Closing Date, with the same force
and effect as though made on and as of such dates, except to the extent that
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall be true and correct in all respects
as of such specified date.

 

(b)           Compliance
with Covenants.  The Company
shall have performed or complied with, in all material respects, its agreements
and covenants required to be performed or complied with under this Agreement on
or prior to the Closing.

 

(c)           Material
Adverse Effect.  There shall
have occurred following the date of this Agreement no change, effect, event,
occurrence, development, circumstance or state of facts, that has had or would
reasonably be expected to have or result in a Material Adverse Effect.

 

(d)           Officer’s
Certificate.  The Company
shall have delivered to the Standby Purchasers a certificate of its Chief
Executive Officer or Chief Financial Officer to the effect that each of the
conditions specified in this Section 6(a), (b) and
(c) are
satisfied in all respects.

 

(e)           Secretary’s Certificate.  The Company
shall have delivered to the Standby Purchasers a secretary’s certificate, duly
executed by the Secretary of the Company, certifying as to (A) the
resolutions of the board of directors of the Company approving the transactions
contemplated hereby, (B) the Company’s certificate of incorporation and
bylaws and (C) the incumbency and specimen signature of each officer of
the Company executing this Agreement and any document contemplated to be
delivered pursuant hereto on behalf of the Company.  The Company shall also have delivered to the
Standby Purchasers a certificate of good standing of the Company in its state
of organization.

 

(f)            Required
Consents.  All of the
Approvals set forth on Schedule 6(f) shall have been obtained.

 

(g)           Bankruptcy
Court Orders.  The
Confirmation Order and the Approval Order shall have been entered by the
Bankruptcy Court, each such order shall have remained in full force and effect,
and no order staying, reversing, modifying or amending either the Confirmation
Order or the Approval Order shall be in effect, and since the date hereof, none
of the Debtors shall have made a public announcement, entered into an agreement
or filed any pleading, evidencing its intention to support or otherwise
supports any transaction with respect to the reorganization or sale of any of
the Debtors or otherwise shall have taken any action that is materially
inconsistent with the transactions contemplated by the Existing Plan (as
amended by the Plan Modification), the Disclosure Statement or this Agreement.

 

(h)           Plan Amendments.  (i) Any material amendment to the
Existing Plan, the Plan or the Disclosure Statement, and (ii) any change
to the pro forma capitalization of the Company contemplated by the Existing
Plan (as amended by the Plan Modification) or the Disclosure Statement that
adversely affects the equity valuation of the Company or any modification to
the capital structure of the Company contemplated by the Existing Plan (as
amended by the Plan Modification) or the Disclosure Statement, in each case
shall be acceptable to Paulson.

 

20

 

(i)            Plan
Effectiveness.  All conditions
to the occurrence of the Effective Date shall have occurred (other than the
consummation of the Standby Purchase) or shall have been satisfied or waived in
accordance with the Plan.

 

(j)            Plan
Documents.  The final documentation
relating to the Plan and the transactions contemplated by the Plan shall be in
form and substance consistent with the Plan and the exhibits attached thereto.

 

(k)           Amended and
Restated Certificate of Incorporation.  The Amended and Restated Certificate of
Incorporation shall have been filed with the Secretary of State of the State of
Delaware, shall be in full force and effect and no action shall have been taken
to further amend, modify or repeal such Amended and Restated Certificate of
Incorporation.

 

(l)            Amended and
Restated By-laws.  The Amended
and Restated By-laws shall have been adopted by the Board of Directors of the
Company and no action has been taken to further amend, modify or repeal such
Amended and Restated By-laws.

 

(m)          Listing.  The shares of New Common Stock to be issued
to the Standby Purchasers pursuant to this Agreement and the Plan shall have
been listed and authorized for trading on the NASDAQ Global Market.

 

(n)           Ancillary
Agreements.  Each of the
Registration Rights Agreement and the Standstill Agreement shall have been duly
authorized, executed and delivered by the Company.

 

(o)           Judgments,
Decrees and Litigation.  There
shall not be in effect or exist any Law, judgment, order, injunction or decree
issued by a Governmental Entity restraining or prohibiting the consummation of
or imposing material modifications on the transactions contemplated by this
Agreement or the Plan.

 

SECTION 7.

CONDITIONS TO OBLIGATIONS OF
THE COMPANY

 

The obligation of the
Company to consummate the Standby Purchase shall be subject, in each case, to
the satisfaction (or waiver by the Company) of each of the following
conditions:

 

(a)           Representations
and Warranties.  The
representations and warranties of the Standby Purchasers and Paulson contained
in this Agreement shall be true and correct in all material respects, without
giving effect to any “materiality” qualifications therein, on and as of the
date hereof and as of the Closing Date, with the same force and effect as
though made on and as of such dates, except to the extent that any such
representation or warranty is made as of a specified date, in which case, such
representation or warranty shall be true and correct in all material respects,
without giving effect to any “materiality” qualifications therein,  as of such specified date.

 

(b)           Compliance
with Covenants.  Paulson and
all of the Standby Purchasers shall have performed or complied with, in all
material respects, all of their respective several 

 

21

 

agreements and covenants
required to be performed or complied with under this Agreement on or prior to
the Closing.

 

(c)           Officer’s
Certificates.  Paulson shall
have delivered to the Company a certificate of its Chief Executive Officer or
Chief Financial Officer to the effect that each of the conditions specified in
this Section 7(a) and (b) is satisfied in all
respects.

 

(d)           Required
Consents.  All of the
Approvals set forth in Schedule 7(d) shall have been obtained.

 

(e)           Bankruptcy
Court Orders; Plan Effectiveness. 
The Confirmation Order and the Approval Order shall have been entered by
the Bankruptcy Court and all conditions to the occurrence of the Effective Date
shall have occurred (other than the consummation of the Standby Purchase) or
shall have been satisfied or waived in accordance with the Plan.

 

(f)            Ancillary
Agreements.  Each of the
Registration Rights Agreement and the Standstill Agreement shall have been duly
authorized, executed and delivered by each of the Standby Purchasers.

 

(g)           Judgments,
Decrees and Litigation.  There
shall not be in effect or exist any Law, judgment, order, injunction or decree
issued by a Governmental Entity restraining or prohibiting the consummation of
or imposing material modifications on the transactions contemplated by this
Agreement or the Plan.

 

SECTION 8.

TERMINATION

 

8.1           Termination. 
Notwithstanding anything in this Agreement to the contrary, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing:

 

(a)           by mutual written consent of the
Company and Paulson;

 

(b)           by either the Company or Paulson if
any Law or any judgment, injunction, order or decree of any Governmental Entity
of competent jurisdiction shall restrain or prohibit the consummation of the
Closing or the Plan, and such judgment, injunction, order or decree shall
become final and nonappealable and was not entered at the request of the
terminating party or any of its Affiliates;

 

(c)           by Paulson, in the event of a breach
of any representation, warranty, covenant or agreement of the Company set forth
in this Agreement such that any condition set forth in Section 6
would be incapable of being satisfied; provided,
however that, except for breaches of the
covenants and agreements contained in Section 5.3(a), (b) and (c),
the right to terminate this Agreement pursuant to this Section 8.1(c) for
breaches of covenants or agreements that are capable of being cured shall only
be available to Paulson after the Company has received written notice of such
breach and has failed to cure such breach within five Business Days following
such notice;

 

22

 

(d)           by the Company, in the event of a
breach of any representation, warranty, covenant or agreement of Paulson or any
Standby Purchaser set forth in this Agreement such that any condition set forth
in Section 7 would be incapable of
being satisfied; provided, however, that the right to terminate this
Agreement pursuant to this Section 8.1(d) for
breaches of covenants or agreements shall only be available to the Company
after Paulson has received written notice of such breach and has failed to cure
such breach within five Business Days following such notice;

 

(e)           by Paulson, in the event that after
the date hereof any of the Debtors shall have made a public announcement,
entered into an agreement or filed any pleading evidencing its intention to
support or otherwise supports any transaction with respect to the
reorganization or sale of any of the Debtors or takes any other action that is
otherwise materially inconsistent with the transactions contemplated by this
Agreement, the Disclosure Statement or the Existing Plan (as modified by the
Plan Modification);

 

(f)            by Paulson, if without the prior
written consent of Paulson the Company shall have (i) materially amended
the Existing Plan, the Plan or the Disclosure Statement, or (ii) changed
the pro forma capitalization of the Company contemplated by the Existing Plan
(as amended by the Plan Modification) or the Disclosure Statement in a manner
that adversely affects the equity valuation of the Company or modified the
capital structure of the Company contemplated by the Existing Plan (as amended
by the Plan Modification) or the Disclosure Statement;

 

(g)           by Paulson, if there shall have
occurred following the date of this Agreement a change, effect, event,
occurrence, development, circumstance or state of facts, that has had or would
reasonably be expected to have or result in a Material Adverse Effect;

 

(h)           by Paulson, if the solicitation for
the Plan Election has not been commenced by the date that is five Business Days
following the entry of the Approval Order by the Bankruptcy Court or if such
solicitation shall not have concluded by the Plan Election Deadline;

 

(i)            by Paulson, if the Confirmation
Order shall not have been entered by the Bankruptcy Court and become a Final
Order by February 15, 2010;

 

(j)            by Paulson, if the Confirmation
Order is modified in any material respect that is adverse to the Standby
Purchasers without its consent;

 

(k)           by Paulson, if the Chapter 11 Cases
are converted to cases under chapter 7 of the Bankruptcy Code, a trustee or
examiner with expanded powers is appointed pursuant to the Bankruptcy Code or
the Bankruptcy Court enters an order pursuant to section 362 of the Bankruptcy
Code lifting the automatic stay with respect to any material portion of the
properties and assets of the Debtors; or

 

(l)            by the Company or Paulson, if the
Closing has not occurred on or prior to February 28, 2010;

 

23

 

provided, however,
that the right to terminate this Agreement under the foregoing subsections (b) through
(d) shall not be available to any party whose failure to fulfill
any of its obligations, or whose breach of any representation or warranty,
under this Agreement has been the cause of or resulted in the event or failure
otherwise giving rise to the termination right.

 

8.2           Effect of Termination.  In the event of this Agreement is duly
terminated in accordance with Section 8.1,
this Agreement shall become void and of no further force and effect, and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties, except that the provisions of Sections 5.1, 5.4 and 5.7
shall survive any termination of this Agreement.  Regardless of the termination of this
Agreement, nothing contained in this Agreement shall relieve any party hereto
from liability for any breach or inaccuracy of its representations, warranties,
covenants or agreements contained in this Agreement prior to such termination.

 

SECTION 9.

MISCELLANEOUS

 

9.1           No Fiduciary Representation.  Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that (a) the transactions
contemplated hereby are arm’s length commercial transactions between the
Company, on the one hand, and Paulson and the Standby Purchasers, on the other,
(b) in connection therewith and with the processes leading to such
transactions, Paulson and each Standby Purchaser is acting solely as a
principal and not the agent or fiduciary of the Debtors or their debtor
estates, (c) neither Paulson nor any Standby Purchaser has assumed an
advisory or fiduciary responsibility in favor of the Debtors or their debtor
estates with respect to any legal, tax, investment, accounting, regulatory or
other matters involving the transactions contemplated herein or the processes
leading thereto (irrespective of whether Paulson or such Standby Purchaser has
advised or is currently advising the Debtors on other matters), and (d) the
Debtors have consulted their own legal and financial advisors to the extent it
deemed appropriate.  The Company agrees
that it will not claim that any Standby Purchaser has rendered advisory
services of any nature or respect, or owes a fiduciary or similar duty to the
Debtors or its shareholders or debtor estates, in connection with the
transactions contemplated herein or the processes leading thereto.

 

9.2           Non-Reliance. 
Paulson and each Standby Purchaser acknowledges and agrees that: (a) the
Company has not made and is not making, and it has not relied and is not
relying upon, any representations or warranties whatsoever, express or implied,
regarding Debtors’ business or capitalization, regarding the Debtors’ past or future
performance or otherwise relating in any way to the subject matter of this
Agreement, except as expressly provided in Section 3, the Plan or
the Disclosure Statement; and (b) no Representative of the Debtors has
made, or is making, any representations or warranties whatsoever, express or
implied, regarding the Debtors’ business or capitalization, past or future
performance or otherwise relating in any way to the subject matter of this
Agreement.  Without limiting the
generality of the foregoing, Paulson and each Standby Purchaser acknowledges
and agrees that, except as set forth in the Plan or the Disclosure Statement,
the Debtors have not made and are not making, and it has not relied and is not
relying upon, any representations or warranties whatsoever, express or implied,
regarding the future revenues, future results of operations or future financial
condition of the 

 

24

 

Debtors
or regarding any projections, forecasts, estimates or budgets discussed with,
delivered to or made available to such Standby Purchaser or any of its
Representatives.

 

9.3           Notices.  Any
notice or other communication required or which may be given pursuant to this
Agreement will be in writing and either delivered personally to the addressee,
telecopied to the addressee, sent via electronic mail or mailed, certified or
registered mail, postage prepaid, and will be deemed given when so delivered
personally, telecopied, or sent via electronic mail, or, if mailed, five days
after the date of mailing, as follows:

 

(a)           if to Paulson or any Standby
Purchaser, to:

 

Paulson & Co. Inc.

1251 Avenue of the Americas, 50th Floor

New York, NY  10020

Attn:       Daniel B. Kamensky

Facsimile:  (212) 977-9505

 

with a copy to (which
shall not constitute notice):

 

Akin
Gump Strauss Hauer & Feld LLP

One Bryant Park

New York, NY 10036

Attn: Andrew Hulsh, Esq. 

Fred Hodara, Esq.

Facsimile: (212) 872-1002

 

(b)           if to the Company, to:

 

Idearc Inc. 

2200 West Airfield Drive

DFW Airport, Texas  75261-9810

Attn:       Cody Wilbanks, Executive Vice
President, General Counsel and Secretary

Facsimile:  972-453-6869

 

with a copy to (which
shall not constitute notice):

 

Fulbright &
Jaworski L.L.P.

2200 Ross Avenue, Ste. 2800

Dallas, Texas 75201

Attn:       Glen J. Hettinger, Esq.

Facsimile:  (214) 855-8200

 

9.4           Assignment. 
Except as described in this Section 9.4, this Agreement will
be binding upon and inure to the benefit of each and all of the parties to this
Agreement, and neither this Agreement nor any of the rights or interests hereunder
will be assigned nor any duties or obligations delegated by any of the parties
to this Agreement without the prior written consent of the other parties.  Notwithstanding the foregoing, any Standby
Purchaser (but not Paulson) may assign its rights and delegate its obligations
hereunder to any Affiliate thereof; provided that any 

 

25

 

such
delegation shall not release such Standby Purchaser from any of its obligations
under this Agreement.

 

9.5           Entire Agreement. 
This Agreement, including the terms of the agreements contemplated
hereby and referred to herein contain the entire agreement by and between the
Company, Paulson and the Standby Purchasers with respect to the transactions
contemplated by this Agreement and supersedes all prior written and prior or
contemporaneous oral, agreements and representations with respect thereto.

 

9.6           Waivers and Amendments.  This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions of
this Agreement may be waived, only by a written instrument signed by the
Company and Paulson or, in the case of a waiver, by (i) Paulson, in the
case of a waiver by any Standby Purchaser or (ii) the Company, in the case
of a waiver by the Company.  No delay on
the part of any party in exercising any right, power or privilege pursuant to
this Agreement will operate as a waiver thereof, nor will any waiver on the
part of any party of any right, power or privilege pursuant to this Agreement,
nor will any single or partial exercise of any right, power or privilege
pursuant to this Agreement, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege pursuant to this Agreement.  The rights and remedies provided pursuant to
this Agreement are cumulative and are not exclusive of any rights or remedies
which any party otherwise may have at law or in equity.  Notwithstanding anything to the contrary in
this Agreement, no amendment that increases a Standby Purchaser’s Standby
Percentage of the Purchase Price shall be effective against any Standby
Purchaser without such Standby Purchaser’s consent.

 

9.7           Governing Law; Jurisdiction; Venue; No Jury Trial.  This Agreement and any claim related directly
or indirectly to this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law thereof that would defer to the substantive laws
of any other jurisdiction.  The parties agree
that, during the period from the date hereof until the date on which the
Debtors’ Chapter 11 Cases are closed or dismissed (the “Bankruptcy
Period”), the Bankruptcy Court shall have exclusive jurisdiction to
resolve any controversy, claim or dispute arising out of or relating to this
Agreement or any other agreement entered into in connection herewith.  The parties further agree that, following the
Bankruptcy Period, any action or proceeding with respect to such controversy,
claim or dispute shall be brought against any of the parties exclusively in
either the United States District Court for the Southern District of New York
or any state court of the State of New York located in such district, and each
of the parties hereby consents to the personal jurisdiction of such court and
the Bankruptcy Court (and to the appropriate appellate courts) in any such
action or proceeding and waives any objection, including, without limitation,
any objection to the laying of venue or on the grounds of forum non conveniens,
which any of them may now or hereafter have to the bringing of such action or
proceeding in such respective jurisdictions. 
Each party hereby irrevocably consents to the service of process of any
of the aforesaid courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the other
parties to such action or proceeding. 
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND

 

26

 

THEREFORE
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE
TO A TRIAL BY JURY.

 

9.8           Third Party Beneficiaries.  This Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any Person, other than the
parties hereto and such permitted assigns, any legal or equitable rights hereunder.

 

9.9           Counterparts. 
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will constitute one
and the same instrument.  All such
counterparts will be deemed an original, will be construed together and will
constitute one and the same instrument.

 

9.10         Interpretation; Exhibits and Schedules.  The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. 
The term “or” is not exclusive. 
All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in
full herein.  Any capitalized terms used
in any Schedule or Exhibit but not otherwise defined therein shall have
the meaning as defined in this Agreement. 
When a reference is made in this Agreement to a Section, Exhibit or
Schedule, such reference shall be to a Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated.

 

9.11         Severability. 
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein will not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
will be enforceable to the fullest extent permitted by law.

 

9.12         No Presumption. 
The Debtors and the Standby Purchasers each participated in the
negotiation and drafting of this Agreement and has each been represented
throughout to its satisfaction by legal counsel of its choosing.  In the event any ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement.

 

9.13         No Personal Liability.  No director, officer, employee, incorporator,
stockholder, managing member, member, general partner, limited partner,
principal or other agent of any of Paulson or the Standby Purchasers shall have
any liability for any obligations of the Standby Purchasers under this
Agreement or for any claim based on, in respect of, or by reason of, the
obligations of Paulson or the Standby Purchasers hereunder.  The Company waives and releases all such
liability.  This waiver and release is a
material inducement to Paulson’s and the Standby Purchasers’ entry into this
Agreement.

 

9.14         Several, Not Joint, Obligations.  The agreements, representations, and
obligations of the Standby Purchasers under this Agreement are, in all
respects, several and not joint.

 

27

 

9.15         Specific Performance. 
The parties hereto agree that irreparable damage would occur if any
provision of this Agreement were not performed in accordance with the terms
hereof and that the parties shall be entitled to an injunction or injunctions
without the necessity of posting bond to prevent breaches of this Agreement or
to enforce specifically the performance of the terms and provisions hereof, in
addition to any other remedy to which they are entitled at Law or in
equity.  Unless otherwise expressly stated
in this Agreement, no right or remedy described or provided in this Agreement
is intended to be exclusive or to preclude a party from pursuing other rights
and remedies to the extent available under this Agreement, at Law or in equity.

 

[signature
pages follow]

 

28

 

IN WITNESS WHEREOF, the
parties have duly executed this Agreement as of the date first above written.

 

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  IDEARC
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel D. Jones

  
	
   

  	
   

  	
  Name:
  Samuel D. Jones

  
	
   

  	
   

  	
  Title:
  Executive Vice President, Chief

  
	
   

  	
                  Financial
  Officer and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  STANDBY PURCHASERS:

  
	
   

  	
   

  
	
   

  	
  PAULSON &
  CO. INC.,

  
	
   

  	
  on
  behalf of investment funds and accounts

  
	
   

  	
  managed
  by it

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael Waldorf

  
	
   

  	
   

  	
  Name:
  Michael Waldorf

  
	
   

  	
   

  	
  Title:
  Managing Director

  

 

[Signature page to Standby
Purchase Agreement]

 

 

EXHIBIT C

 

STANDSTILL
AGREEMENT

 

This Standstill Agreement (this “Agreement”) is made
as of [·], 2009 by and between (a) Idearc
Inc., a Delaware corporation (the “Company”), and (b) Paulson &
Co. Inc., a Delaware corporation  (“Paulson & Co.”),
for its own account for the limited purposes set forth herein, and on behalf of
the investment funds and accounts managed by Paulson & Co. listed on Schedule
A to this Agreement (the “Standby Purchasers”
and together with Paulson & Co., “Paulson”).

 

R E C I
T A L S

 

WHEREAS, the Company and Paulson & Co.
(on behalf of the Standby Purchasers) are parties to that certain Standby
Purchase Agreement dated as of [·], 2009 (the “Purchase Agreement”);

 

WHEREAS, pursuant to the Purchase Agreement, the
Company agreed to offer pursuant to its Chapter 11 plan of reorganization of
the Company and its subsidiaries, dated as of September 9, 2009, as
supplemented as of October [·], 2009 (the “Plan”), to each
holder of Class 3 and Class 4 claims under the Plan other than
Paulson (“Eligible
Subscribers”) the right to receive, in lieu of any and all
shares of common stock, par value $[·], of the Company (“New Common Stock”) to
be issued pursuant to the Plan, cash in an amount determined as set forth in
the Plan (the “Plan
Election”), subject to the Ownership Limitation (as defined in
the Purchase Agreement);

 

WHEREAS, pursuant to the Purchase Agreement, the
Standby Purchasers agreed to subscribe for and purchase from the Company, and
the Company agreed to issue and sell to the Standby Purchasers, the number of
shares of New Common Stock for which the Eligible Subscribers have elected
under the Plan Election to receive cash, subject to the Ownership Limitation;

 

WHEREAS, the cash proceeds of the sale of such
shares of New Common Stock to the Standby Purchasers pursuant to the Purchase
Agreement will be used by the Company to fund the cash payments to the Eligible
Subscribers under the Plan Election; and

 

WHEREAS, Paulson and the Company are entering
into this Agreement to define certain agreements between Paulson and the
Company.

 

NOW, THEREFORE, in consideration of the foregoing
recitals and the mutual promises, representations, warranties and covenants
herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.                                      Board
Representation.

 

(a)                                  The Company agrees that if Paulson
beneficially owns 20% or more of the then issued and outstanding shares of New
Common Stock at any time during the period commencing on the Effective Date and
ending on the 180th day after the Effective Date, Paulson shall be
entitled during such period to nominate one (1) individual (such

 

1

 

individual, and any successor to such individual as contemplated in Section 1(a)(iii),
the “Paulson Nominee”)
for election as a member of the Board of Directors of the Company (the “Board”); and specifically the
Company agrees to:

 

(i)                                     as promptly as practicable and in no
event later than 10 days following the nomination of the Paulson Nominee as
contemplated in this Section 1,
(i) increase the size of the Board by one seat and (ii) appoint the
Paulson Nominee as a director of the Company whose term shall expire on the
earlier of (A) such time, if any, as Paulson ceases to beneficially own
20% or more of the issued and outstanding shares of New Common Stock for a
period of 30 consecutive days and (B) at the annual meeting of
stockholders to be held in 2011, subject to re-election or re-appointment of
the Paulson Nominee as provided in Sections 1(a)(ii) and 1(a)(iii) below,
respectively;

 

(ii)                                  unless Paulson has at any time prior to
the Termination Date ceased to beneficially own 20% or more of the issued and
outstanding shares of New Common Stock for a period of 30 consecutive days, at
each annual meeting of stockholders of the Company to be held prior to the
Termination Date, the Company (1) will cause the slate of nominees
standing for election, and recommended by the Board, at each such meeting to
include the Paulson Nominee, (2) will nominate and reflect in the proxy
statement on Schedule 14A for each such meeting the nomination of the Paulson
Nominee for election as a director of the Company at each such meeting, and (3) cause
all proxies received by the Company to be voted in the manner specified by such
proxies and, to the extent permitted under applicable law and stock exchange
rules, cause all proxies for which a vote is not specified to be voted for the
Paulson Nominee; and

 

(iii)                               if the Paulson Nominee ceases to be a
director of the Company other than due to Paulson ceasing to beneficially own
20% or more of the issued and outstanding shares of New Common Stock for a
period of 30 consecutive days at any time prior to the Termination Date,
Paulson may propose to the Company a replacement nominee for election as a
director of the Company, in which event such individual shall be appointed to
fill the vacancy created as a result of the prior Paulson Nominee ceasing to be
a director of the Company.

 

(b)                                 The Company agrees that promptly
following the appointment or election of the Paulson Nominee, the Company will,
upon written request by Paulson, cause the Paulson Nominee to be included as a
member of any committee of the Board on which the Paulson Nominee is eligible
to serve under applicable law or stock exchange or market policy; provided,
that Paulson and the Company agree that the following actions will require
approval of a majority of directors of the Company who are independent of
Paulson and management of the Company, which independent directors may comprise
a committee of the Board: (i) the amendment or waiver of any provision of
this Agreement, (ii) consent to the assignment of Paulson’s rights under
this Agreement or consent to the relief of Paulson’s obligations under this
Agreement, (iii) the amendment or waiver of any provision of the Rights
Agreement (defined in Section 4(a))
or the Registration Rights Agreement between the Company, Paulson and the
holders of New Common Stock named therein and dated as of the date of this
Agreement, in each case to the extent 

 

2

 

any such amendment or waiver affects Paulson, and (iv) redemption
of the rights issued under the Rights Agreement.

 

(c)                                  Paulson will provide, as promptly as
reasonably practicable, all information relating to the Paulson Nominee (and
other information, if any) to the extent required under applicable law to be
included in any proxy statement of the Company and in any other solicitation
materials to be delivered to stockholders of the Company in connection with a
stockholders meeting as contemplated by Section 1(a)(ii).

 

2.                                      Voting. 
Paulson agrees that effective as of the Commencement Date and continuing
until the Termination Date:

 

(a)                                  it will cause to be present, in person or
represented by proxy, all Voting Securities that Paulson beneficially owns at
all stockholder meetings of the Company so that all Voting Securities that
Paulson beneficially owns may be counted for the purposes of determining the
presence of a quorum at such meetings;

 

(b)                                 if and for so long as Paulson
beneficially owns in excess of 25% of the then issued and outstanding shares of
New Common Stock, on any and all matters submitted to a vote of the holders of
New Common Stock Paulson (1) may vote up to 25% of the shares of New
Common Stock then issued and outstanding in its discretion, and (2) shall
vote, or cause to be voted, any shares of New Common Stock that Paulson
beneficially owns in excess of such 25% in the same proportion as the other
holders of New Common Stock vote their shares of New Common Stock with
respect to such matters; provided, that notwithstanding the foregoing:

 

(i)                                     with respect to the election of nominees
to the Board, Paulson (1) may vote up to 15%
of the then issued and outstanding shares of New Common Stock in its discretion at the
annual meeting of the stockholders of the Company to be held in 2011, (2) may vote up to 20% of the then issued and outstanding shares of New Common Stock in its
discretion at each annual meeting of the stockholders of the Company to be held
prior to the Termination Date (other than the annual meeting to be held in
2011), and (3) shall vote, or cause to be voted, any shares of New Common
Stock that Paulson beneficially owns in excess of such 15% and 20%, as
applicable, in the same proportion as other holders of shares of New Common
Stock vote their shares of New Common Stock with respect to the election of
nominees to the Board at each annual meeting of the stockholders of the Company
held prior to the Termination Date; provided, that in all cases, Paulson may
vote all of its shares of New Common Stock in favor of the election of the
Paulson Nominee;

 

(ii)                                  with respect to a proposed Change of
Control Transaction that Paulson desires to vote in favor of, Paulson may vote
all shares of New Common Stock that Paulson beneficially owns in favor of such
Change of Control Transaction if such Change of Control Transaction treats
Paulson and its Affiliates the same as all other holders of New Common Stock
and if pursuant to such Change of Control Transaction Paulson will dispose of
its shares of New Common Stock;

 

3

 

(iii)                               with respect to a proposed Change of Control
Transaction that Paulson does not desire to vote in favor of, but which Change
of Control Transaction has been recommended by the Board for approval by the
Company’s stockholders, Paulson (1) may vote up to 30% of the then issued
and outstanding shares of New Common Stock in respect of such Change of Control
Transaction in its sole discretion, and (2) shall vote, or cause to be
voted, any shares of New Common Stock that Paulson beneficially owns in excess
of such 30% in the same proportion as the other holders of New Common Stock
vote their shares of New Common Stock with respect to such Change of Control
Transaction; and

 

(iv)                              notwithstanding Sections 2(b)(ii) and (iii),
except as provided in the immediately succeeding sentence, if Paulson or an
Affiliate of Paulson has any interest in the Person or Persons (other than the
Company) that is a party in a Change of Control Transaction (other than a Debt
Interest) or if such Change of Control Transaction treats Paulson or its
Affiliates differently than all other holders of New Common Stock, then Paulson
shall vote, or cause to be voted, all shares of New Common Stock that Paulson
beneficially owns in the same proportion as the holders of New Common Stock who
do not have an interest in any Person or Persons (other than the Company) that
is a party in such Change of Control Transaction vote their shares of New
Common Stock with respect to such Change of Control Transaction.  Notwithstanding the foregoing, Paulson shall
not be subject to the restrictions set forth in this Section 2(b)(iv) prior
to the Termination Date at such time, if any, as Paulson shall beneficially own
less than 20% of the then issued and outstanding shares of New Common Stock for
a period of 30 consecutive days.

 

(c)                                  Paulson agrees that with respect to the
voting of shares of its New Common Stock over which Paulson has discretion as
contemplated in Section 2(b), Paulson
shall vote contemporaneously with the voting by other stockholders of the
Company.  Paulson agrees that with
respect to the voting of shares of its New Common Stock over which Paulson does
not have discretion as contemplated in Section 2(b),
Paulson shall take such action as may be necessary to cause such shares of New
Common Stock to be automatically voted in accordance with the terms of Section 2(b).

 

(d)                                 Paulson hereby revokes any and all other
proxies and voting agreements given by Paulson with respect to the Voting
Securities and will cause its Affiliates to revoke any and all proxies and
voting agreements given by any such Affiliate with respect to the Voting
Securities.

 

3.                                      Standstill.

 

(a)                                  Paulson hereby agrees that effective as
of the Commencement Date and continuing until the earlier of (x) such
time, if any, as Paulson beneficially owns less than 20% of the then issued and
outstanding shares of New Common Stock for a period of 30 consecutive days and (y) the
Termination Date, neither Paulson nor any of its Affiliates will, acting alone,
as part of a “group” (within the meaning of Section 13(d)(3) of the
Exchange Act) or otherwise in concert with any other Person, unless
specifically requested in writing by the Board on an unsolicited basis:

 

4

 

(i)                                     after the Purchase Period (as defined
below), acquire, or agree to acquire, offer to acquire, or seek or propose to
acquire beneficial ownership of any New Common Stock or any rights or options
to acquire any New Common Stock (including from a third Person); or

 

(ii)                                  initiate, propose, finance, negotiate,
seek to effect, guarantee the financing of, assist any other Person  in obtaining financing for, or knowingly
cause (1) any proxy contest or other proposal to obtain board
representation, (2) any stockholder proposal, whether made pursuant to Rule 14a-8
or Rule 14a-4 under the Exchange Act or otherwise or (3) any Change
of Control Transaction, except that Paulson may do any of the foregoing with
respect to a proposed Change of Control Transaction if such proposed Change of
Control Transaction is subject to the voting requirements set forth in Section 2(b); or

 

(iii)                               except with respect to a proposed Change of Control
Transaction expressly subject to the voting requirements set forth in Section 2(b), “solicit” (within
the meaning of Rule 14a-1(l) under the Exchange Act) any proxies to vote,
or seek to influence any other Person with respect to the voting of any Voting
Securities on any of the matters set forth in Section 3(a)(ii);
or

 

(iv)                              except with respect to a proposed Change
of Control Transaction expressly subject to the voting requirements set forth
in Section 2(b), take any action
that would require the Company under applicable law, rule or stock
exchange policy to make a public announcement regarding any of the matters set
forth in Section 3(a)(ii); or

 

(v)                                 except with respect to a proposed Change
of Control Transaction expressly subject to the voting requirements set forth
in Section 2(b), form, join or
participate in any “group” (within the meaning of Section 13(d)(3) of
the Exchange Act) with respect to any Voting Securities; or

 

(vi)                              nominate an individual or individuals for
election to the Board at any meeting (or by written consent in lieu of a
meeting) of stockholders of the Company, other than as expressly provided in
this Agreement with respect to the Paulson Nominee, or effect or attempt to
effect the removal of any members of the Board (other than the Paulson
Nominee); provided, that compliance by Paulson with the provisions of Sections 1 or 2(b) shall
not constitute a violation of this provision; or

 

(vii)                           other than as expressly provided in this Agreement
with respect to the Paulson Nominee, directly or indirectly seek to elect,
appoint or otherwise place (or seek to have elected, appointed or otherwise
placed) a representative of Paulson on the Board, it being the express
agreement of Paulson and the Company that Paulson shall be entitled to only one
seat on the Board, subject to the conditions set forth in this Agreement, prior
to the Termination Date; or

 

(viii)                        seek to call, or to request the call of, a special
meeting of the stockholders of the Company; or

 

5

 

(ix)                                deposit any securities of the Company
into a voting trust, or subject any securities of the Company to any agreement
or arrangement with respect to the voting of such securities (other than
pursuant to Section 2
of this Agreement), or other agreement or arrangement having similar effect
to which, in each case, a Person who is not an Affiliate of Paulson is a party;
or

 

(x)                                   execute any written stockholder consent
with respect to the Company, except in accordance with Section 2  of
this Agreement; or

 

(xi)                                except with respect to a proposed Change
of Control Transaction expressly subject to the voting requirements set forth
in Section 2(b), seek or request
permission to do any of the foregoing, make, initiate, take or participate in
any demand, request, action (legal or otherwise) or proposal to amend, waive or
terminate any provision of this Agreement; or

 

(xii)                             disclose any intention, plan or arrangement inconsistent
with the foregoing.

 

(b)                                 Notwithstanding the foregoing provisions
of this Section 3,
the parties to this Agreement acknowledge and agree that:

 

(i)                                     on the Effective Date or at any time
during the period from the Effective Date to the date that is 270 days after
the Effective Date (the “Purchase
Period”), Paulson may acquire beneficial ownership of additional
shares of New Common Stock; provided, that in no event, before, during or after
the Purchase Period, may Paulson acquire or beneficially own in excess of 45%
of the shares of New Common Stock then issued and outstanding (inclusive of the
shares of New Common Stock issued to Paulson by the Company on the Effective
Date in exchange for all of the Class 3 and Class 4 claims of Paulson
pursuant to the Plan); provided further, that Paulson may acquire beneficial
ownership of additional shares of New Common Stock (including after the
Purchase Period) pursuant to Paulson’s exercise of its preemptive rights set
forth in Section 11, subject to
the 45% beneficial ownership limitation set forth above in this Section 3(b)(i);

 

(ii)                                  the provisions of Section 3(a) shall
not restrict the actions of Paulson taken in respect of a Change of Control
Transaction the terms of which require as a condition to consummation of such
Change of Control Transaction compliance with the applicable voting
restrictions set forth in Sections
2(b)(ii), (iii) and (iv) (and which condition is not
waived); and

 

(iii)                               the provisions of Section 3(a) will
not limit in any respect Paulson’s ability to privately make proposals to the
Board with respect to any of the actions, activities, or matters otherwise
restricted by Section 3(a).

 

6

 

4.                                      Non-Interference.

 

(a)                                  The Company will not, by amendment of its
Amended and Restated Certificate of Incorporation (the “Charter”),
its Amended and Restated Bylaws (the “Bylaws”),
or its Rights Agreement (together, the “Rights Agreement”),
or through any other means, circumvent or seek to circumvent the observance or
performance by the Company of any of its obligations under the terms of this
Agreement, including, without limitation, by challenging in any manner the
terms of the Charter, the Bylaws, or the Rights Agreement or the validity or
enforceability of this Agreement on any grounds (including as being against
public policy, as having been improperly induced or otherwise), whether by the
initiation of any legal proceeding for such purpose, or by the intervention,
participation or attempted intervention or participation in any manner in any
other legal proceeding initiated by another Person or otherwise.

 

(b)                                 Paulson will not by any means, circumvent
or seek to circumvent the observance or performance by Paulson of any of its
obligations under the terms of this Agreement, including, without limitation,
by challenging in any manner the terms of the 
Charter, the Bylaws, or the Rights Agreement or the validity or
enforceability of this Agreement on any grounds (including as being against
public policy, as having been improperly induced or otherwise), whether by the
initiation of any legal proceeding for such purpose, or by the intervention,
participation or attempted intervention or participation in any manner in any
other legal proceeding initiated by another Person or otherwise.

 

(c)                                  Notwithstanding the foregoing, the
Company and Paulson each acknowledges and agrees that the invalidity or
unenforceability of any provision of the Charter or the Bylaws will not
constitute or give rise to a breach of Section 1(a)(i) of
this Agreement or a right of either the Company or Paulson to terminate this
Agreement based on such breach.

 

(d)                                 The Company agrees that until the earlier
of (x) such time, if any, as Paulson beneficially owns less than 20% of
the then issued and outstanding shares of New Common Stock for a period of 30
consecutive days and (y) the Termination Date, without the prior written
consent of Paulson & Co., if Paulson (as defined in the Rights
Agreement) has not become an Acquiring Person (as defined in the Rights
Agreement), neither the Company nor the Rights Agent (as defined in the Rights
Agreement) shall modify, supplement or amend Section 1(t) of the
Rights Agreement or otherwise modify, supplement or amend the Rights Agreement
in any manner that would adversely affect the rights, interests, duties or
obligations of Paulson (as defined in the Rights Agreement) under the Rights
Agreement in a manner that relates to the determination as to whether Paulson
(as defined in the Rights Agreement) is a “Grandfathered Person” (as defined in
the Rights Agreement) or “Acquiring Person” (as defined in the Rights
Agreement) under the Rights Agreement.

 

5.                                      Publicity.

 

(a)                                  Neither the Company nor Paulson will,
directly or indirectly, make or issue or cause to be made or issued any
disclosure, announcement or statement (including without limitation the filing
of any document or report with the SEC or any other governmental agency or any
disclosure to any journalist, member of the media or 

 

7

 

securities analyst) concerning the other party or any of its respective
past, present or future general partners, managers, directors, officers or
employees, which disparages any of such party’s respective past, present or
future general partners, managers, directors, officers or employees as
individuals (recognizing that each party will be free to (i) comment in
good faith regarding the business of the other party, provided any such comment
shall not otherwise violate the terms of this Agreement, and (ii) after
consultation with counsel, make any disclosure that it determines in good faith
is required to be made under applicable law).

 

6.                                      Paulson’s
Representations and Warranties.  Paulson
represents and warrants to the Company that:

 

(a)                                  the execution, delivery and performance
of this Agreement by Paulson have been duly and validly authorized by all
necessary corporate action on the part of Paulson; this Agreement has been duly
executed by Paulson, is a valid and binding agreement of Paulson, and is
enforceable against Paulson in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law); and

 

(b)                                 the execution, delivery and performance
by Paulson of this Agreement does not violate or conflict with or result in a
breach of or constitute (or with notice or lapse of time or both constitute) a
default or result in the creation or imposition of, or give rise to, any lien,
charge, restriction, claim, encumbrance or adverse penalty of any nature
whatsoever under Paulson’s organizational documents or under any agreement or
instrument to which Paulson is a party or by which any of its properties or
assets is bound or under any law or any order of any court or other agency of
government.

 

7.                                      Company’s
Representations and Warranties.  The Company
represents and warrants to Paulson that:

 

(a)                                  the execution, delivery and performance
of this Agreement by the Company have been duly and validly authorized by all
necessary corporate action on the part of the Company; this Agreement has been
duly executed by the Company, is a valid and binding agreement of the Company,
and is enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);

 

(b)                                 the execution, delivery and performance
by the Company of this Agreement does not violate or conflict with or result in
a breach of or constitute (or with notice or lapse of time or both constitute)
a default or result in the creation or imposition of, or give rise to, any
lien, charge, restriction, claim, encumbrance or adverse penalty of any nature
whatsoever under the Charter, the Bylaws or under any agreement or instrument
to which the Company is a party or by which any of its properties or assets is
bound or under any law or any order of any court or other agency of government;
and

 

8

 

(c)                                  upon confirmation of the Plan, the New
Common Stock will be the only authorized and outstanding class of capital stock
of the Company.

 

8.                                      Certain
Definitions.  As used in this Agreement, the following
terms have the meanings indicated:

 

(a)                                  The term “Accredited
Investor” means an “Accredited Investor,” as such term is
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

 

(b)                                 The term “Affiliate” means, with respect to any
Person, any other Person, directly or indirectly, controlling, controlled by,
or under common control with, such Person. 
For purposes of this definition, the term “control” (including the
correlative terms “controlling”, “controlled by” and “under common control with”)
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

 

(c)                                  Whether a Person “beneficially owns” or
“beneficially owned,” is the “beneficial owner” of
or has “beneficial
ownership” of securities for the purposes of this Agreement
shall be determined in the same manner as that set forth for determining a
beneficial owner of a security under Rule 13d-3 of the Exchange Act,
except that a Person will also be deemed to be the beneficial owner of all
securities which such Person has the right to acquire pursuant to the exercise
of any rights in connection with any securities or any agreement, regardless of
when such rights may be exercised and whether they are conditional.

 

(d)                                 The term “Change of Control Transaction” means any
transaction or series of related transactions that results in any of the
following: (i) any Person or “group” (within the meaning of Section 13(d)(3) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly,
of Voting Securities of the Company representing at least a majority of the
combined voting power of the Company’s then outstanding securities; (ii) during
any period of two (2) consecutive years (not including any period prior to
the execution of this Agreement), individuals who at the beginning of such
period constitute the Board (together with any new director whose election by
the Board or nomination for election by the Company’s stockholders was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute at least a majority of the members of the Board; and (iii) a
sale or disposition by the Company of all or substantially all of the assets of
the Company and its subsidiaries taken as a whole (including the stock of any
subsidiaries of the Company).

 

(e)                                  The terms “Commencement Date” means the date during
the Purchase Period when Paulson’s beneficial ownership of New Common Stock
first reaches at least 20% of the then issued and outstanding shares of New
Common Stock.

 

9

 

(f)                                    The term “Debt Interest” means an interest as a
holder of indebtedness, which indebtedness (1) is not convertible or
exchangeable for equity, (2) has no voting rights on matters submitted to
the stockholders of the issuer of such indebtedness (including the election of
directors), and (3) does not result in Paulson or its Affiliates being
deemed to be an Affiliate of the issuer of such indebtedness.

 

(g)                                 The term “Effective Date” means the effective date
of the Plan pursuant to the terms thereof.

 

(h)                                 The term “Equity
Securities” means New Common Stock or equity securities
convertible into or exercisable or exchangeable for New Common Stock, but
excluding Exempted Securities.

 

(i)                                     The term “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

(j)                                     The term “Exempted
Securities” means New Common Stock or equity securities
convertible into or exercisable or exchangeable for New Common Stock issued (i) as
consideration for any asset, right, entity or business acquired by the Company or
any of its subsidiaries, including in connection with a merger, exchange offer,
joint venture, license transaction or exchange of shares, (ii) in
accordance with any stock option or other equity-based compensation plan of the
Company or its subsidiaries or upon exercise, conversion or exchange of any
stock option or other equity interest issued thereunder, (iii) as a
dividend or other distribution to equityholders of the Company generally, (iv) in
connection with a stock split or (v) in connection with the exchange,
exercise or conversion of any equity interest that is outstanding (1) immediately
upon the date of this Agreement, (2) thereafter, so long as Paulson had an
opportunity to exercise the preemptive rights granted to Paulson with respect
to the underlying equity interest or (3) thereafter, to the extent that
such equity interest was issued pursuant to any of clauses (i), (ii), (iii) or
(iv).

 

(k)                                  The term “Person” will be interpreted broadly to
include, without limitation, any corporation, company, “group” (within the
meaning of Section 13(d)(3) of the Exchange Act), partnership,
limited liability company, other entity or individual.

 

(l)                                     The term “Termination Date” means the fourth
anniversary of the Effective Date.

 

(m)                               The term “Voting Securities” means securities of
the Company with the power to vote with respect to the election of directors
generally, including, without limitation, the New Common Stock.

 

9.                                      Notices. 
All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and
shall be deemed to have been given when delivered personally to the recipient
or sent to the recipient by facsimile (if sent by facsimile prior to 5:00 p.m.
local time of the recipient on a business day or, if not, on the next business
day), or one (1) business day after deposit with a reputable overnight
courier service (charges prepaid), or three (3) business days after being
mailed to the recipient by 

 

10

 

certified or registered mail, return receipt requested
and postage prepaid.  Such notices,
demands and other communications shall be sent to the Company and Paulson at
the following addresses:

 

If to the Company:

 

Idearc Inc.

2200 West Airfield Drive

P. O. Box 619810

DFW Airport, Texas 75261

Attention:

Facsimile:

 

with copies to (which shall not constitute notice):

 

Fulbright & Jaworski L.L.P.

2200 Ross Avenue, Suite 2800

Dallas, Texas 75201

Attention: Glen J. Hettinger

Facsimile: (214) 855-8200

 

If to Paulson:

 

Paulson & Co. Inc.

1251 Avenue of the Americas, 50th Floor

New York, New York 
10020

Attention: Daniel B. Kamensky

Facsimile: (212) 977-9505

 

with copies to (which shall not constitute notice):

 

Akin Gump Strauss Hauer & Feld LLP

One Bryant Park

New York, New York 10036

	
  Attention:

  	
  Andrew
  Hulsh

  
	
   

  	
  Fred
  Hodara

  
	
  Facsimile:

  	
  (212) 872-1002

  

 

10.                               Expiration.  This Agreement shall expire on the
Termination Date, subject to Section 12(a).

 

11.                               Preemptive Rights.

 

(a)                                  So long as Paulson and its controlled
Affiliates beneficially own in excess of 20% of the shares of New Common Stock
then outstanding, and subject to the terms and conditions of Section 11(b), the Company
shall not issue additional Equity Securities (an “Issuance”)
unless, prior to such Issuance, the Company notifies Paulson in writing of the
proposed Issuance and grants to Paulson, or at Paulson’s election, one or more
of its Affiliates, the right (the “Right”) to
subscribe for and purchase in whole or in part, at 

 

11

 

the same price and upon the same terms and conditions as set forth in
the notice of such Issuance, a portion of such additional Equity Securities
proposed to be issued in the Issuance such that immediately after giving effect
to the Issuance and the exercise of the Right (including, for purposes of this
calculation, the issuance of shares of New Common Stock upon conversion,
exchange or exercise of any Equity Security issued in the Issuance and subject
to the Right), the shares of New Common Stock that Paulson and its Affiliates
beneficially own (rounded to the nearest whole share) shall represent the same
percentage of the aggregate number of shares of New Common Stock outstanding as
was beneficially owned by Paulson and its Affiliates immediately prior to the
Issuance.  In the event Equity Securities
are issued as part of a unit with other securities, the Right will apply to
such unit and not separately to any component of such unit.

 

(b)                                 The Right may be exercised by Paulson,
or, at Paulson’s election, one or more of its Affiliates, as the case may be,
provided that the Person exercising the Right must (i) be an Accredited
Investor and (ii) deliver written notice to the Company of such exercise
of the Right which is received by the Company within twenty (20) business days
after the date on which Paulson receives notice from the Company of the
proposed Issuance.  The closing of the
purchase and sale pursuant to the exercise of the Right shall occur on the date
scheduled by the Company for the Issuance, which may not be earlier than ten (10) business
days and no later than sixty (60) business days after the Company receives
notice of the exercise of the Right.

 

(c)                                  Nothing in this
Section 11 shall be deemed to
prevent any Person from purchasing for cash or the Company from issuing any
additional Equity Securities without first complying with the provisions of
this Section 11; provided that, (i) the
Board has determined in good faith that (a) the Company needs a prompt cash
investment, (b) no alternative financing on terms no less favorable to the
Company in the aggregate than such purchase is available on a no less timely
basis, and (c) the delay caused by compliance with the provisions of this Section 11 in connection with
such investment would be reasonably likely to materially adversely affect the
Company; (ii) the Company gives prompt notice to Paulson of such
investment as soon as practicable, and in any event at least five (5) business
days prior to the consummation of such investment; and (iii) the
purchasing holder or the Company enables Paulson to exercise its rights to
purchase its pro rata share as promptly as practicable following the initial
prompt cash investment.  For purposes of
this Section 11(c), the term “pro
rata share” shall be based on Paulson’s and its Affiliates’ beneficial
ownership of outstanding Equity Securities relative to the total number of
outstanding Equity Securities, in each case prior to the issuance by the
Company of Equity Securities in the transaction contemplated by this Section 11(c).

 

12.                               Miscellaneous.

 

(a)                                  Survival.  The representations and warranties, covenants and
agreements contained in this Agreement shall survive the execution of this
Agreement and any investigation at any time by or on behalf of Paulson or the
Company.  The provisions of Section 11 and, to the extent necessary for the
interpretation or enforcement of Section 11,
Sections 8, 9 and 12,
of this Agreement shall survive the expiration of this Agreement.

 

12

 

(b)                                 Entire Agreement. 
This Agreement contains the entire agreement between the parties hereto
concerning the subject matter hereof and supersedes all prior written and prior
or contemporaneous oral agreements between the parties with respect to such
matters.

 

(c)                                  Amendment. 
The agreements set forth in this Agreement may be modified or waived
only by a separate writing by the Company and Paulson expressly so modifying or
waiving such agreements.

 

(d)                                 No Waiver. 
No failure or delay by the Company in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.

 

(e)                                  Assignment. 
Any assignment or attempted assignment of this Agreement by Paulson
without the prior written consent of the Company shall be void.

 

(f)                                    Severability. 
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction 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.

 

(g)                                 Specific Performance. 
The parties hereto agree that money damages would not be a sufficient
remedy for any breach of this Agreement and that each of the parties hereto
shall be entitled to specific performance and injunctive or other equitable
relief as a remedy for any such breach, and each party further agrees to waive
any requirement for the security or posting of any bond in connection with such
remedy.  Such remedy shall not be deemed
to be the exclusive remedy for breach of this Agreement but shall be in
addition to all other remedies available at law or equity.

 

(h)                                 THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED IN ACCORDANCE WITH, AND ENFORCED BY THE LAWS OF THE STATE OF
DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES HERETO (I) IRREVOCABLY
CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE
FOR ANY SUITS, ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATED TO THIS
AGREEMENT AND IRREVOCABLY WAIVE ALL OBJECTIONS TO SUCH JURISDICTION, INCLUDING,
WITHOUT LIMITATION, ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (II) AGREE THAT
THIS AGREEMENT HAS BEEN ENTERED INTO IN EXPRESS RELIANCE UPON 6 DEL. C. SS.
2708, AND (III) IRREVOCABLY AND UNCONDITIONALLY CONSENT TO SERVICE OF
PROCESS IN, SUBMIT TO THE EXCLUSIVE JURISDICTION OF, AND AGREE TO APPEAR IN,
THE COURT OF CHANCERY IN THE STATE OF DELAWARE IN WILMINGTON, DELAWARE, WITH
RESPECT 

 

13

 

TO ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

 

*   *  
*   *

 

14

 

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.

 

	
   

  	
  IDEARC INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PAULSON & CO. INC.

  
	
   

  	
  FOR ITS OWN ACCOUNT FOR THE LIMITED PURPOSE OF
  AGREEING TO BE BOUND SOLELY BY SECTIONS 2, 3, 4(B), 4(C) AND, TO THE
  EXTENT NECESSARY FOR THE INTERPRETATION OR ENFORCEMENT OF ANY OF THE
  FOREGOING, SECTIONS 8, 9, 10 AND 12 OF THIS AGREEMENT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PAULSON & CO. INC.

  
	
   

  	
  ON BEHALF OF INVESTMENT FUNDS AND ACCOUNTS

  
	
   

  	
  MANAGED BY IT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

15

 

SCHEDULE A

 

16

 
EXHIBIT D
 
 
IDEARC INC.
 
AND
 
COMPUTERSHARE TRUST COMPANY, N.A., as Rights Agent
 
 
RIGHTS AGREEMENT
 
 
dated as of
 
                      , 2009
 

 

TABLE OF CONTENTS
 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1

  	
  Certain Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2

  	
  Appointment of Rights
  Agent

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 3

  	
  Issue of Right
  Certificates

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 4

  	
  Form of Right
  Certificates

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 5

  	
  Countersignature and
  Registration

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 6

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

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 7

  	
  Exercise of Rights:
  Purchase Price; Expiration Date of Rights

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 8

  	
  Cancellation and
  Destruction of Right Certificates

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 9

  	
  Reservation and
  Availability of Shares of Preferred Stock

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 10

  	
  Preferred Stock Record
  Date

  	
  17

  
	
   

  	
   

  	
   

  
	
  Section 11

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

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 12

  	
  Certificate of Adjusted
  Purchase Price or Number of Shares

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 13

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

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 14

  	
  Fractional Rights and
  Fractional Shares

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 15

  	
  Rights of Action

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 16

  	
  Agreement of Right
  Holders

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 17

  	
  Right Certificate
  Holder Not Deemed a Stockholder

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 18

  	
  Concerning the Rights
  Agent

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 19

  	
  Merger or Consolidation
  or Change of Name of Rights Agent

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 20

  	
  Duties of Rights Agent

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 21

  	
  Change of Rights Agent

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 22

  	
  Issuance of New Right
  Certificates

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 23

  	
  Redemption

  	
  35

  

 

 

	
  Section 24

  	
  Exchange

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 25

  	
  Notice of Certain
  Events

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 26

  	
  Notices

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 27

  	
  Supplements and
  Amendments

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 28

  	
  Successors

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 29

  	
  Benefits of this
  Agreement

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 30

  	
  Determinations and
  Actions by the Board

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 31

  	
  Severability

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 32

  	
  Governing Law

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 33

  	
  Descriptive Headings;
  References

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 34

  	
  Counterparts

  	
  41

  
	
   

  	
   

  	
   

  
	Section 35
	Force Majeure
	41

 
Exhibit A
Form of Certificate of Designations of Series A Junior Participating Preferred Stock of Idearc Inc.
 
Exhibit B
Form of Right Certificate
Form of Assignment
Form of Election to Purchase
 
Exhibit C
Summary of Rights to Purchase Preferred Stock

 

 

RIGHTS AGREEMENT

 

This
Rights Agreement, dated as of
                
      , 2009 (this “Agreement”), is
between IDEARC INC., a Delaware corporation (the “Company”), and COMPUTERSHARE
TRUST COMPANY, N.A.,
a national banking association (the “Rights Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Board of Directors of the Company
(the “Board”) has authorized and declared a dividend distribution of one
preferred share purchase right (a “Right”) for each outstanding share of
Common Stock (as defined below) outstanding as of 5:00 p.m.,
Eastern time, on                 
      , 2009 (the “Record Date”)
and has authorized the issuance of one Right (subject to adjustment) in respect
of each share of Common Stock issued between the Record Date and the earliest
of the Distribution Date, the Redemption Date and the Expiration Date (as such
terms are hereinafter defined) and under certain other circumstances, each
Right representing the right to purchase one one-thousandth of one share of Series A
Junior Participating Preferred Stock of the Company having the rights and
preferences set forth in the form of Certificate of Designations of Series A
Junior Participating Preferred Stock of Idearc Inc., attached hereto as Exhibit A,
upon the terms and subject to the conditions hereinafter set forth;

 

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

 

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

 

(a)           “Acquiring Person” shall mean any
Person (other than a Company Entity or a Grandfathered Person) who or that
shall be or become the Beneficial Owner of 20% or more of the shares of Common
Stock then outstanding.  Notwithstanding
the foregoing:

 

(i)            no Person shall become an “Acquiring
Person” as the result of an acquisition of Common Stock by a Company Entity
that, by reducing the number of shares outstanding, increases the proportionate
number of shares Beneficially Owned by a Person to 20% or more of the shares of
Common Stock then outstanding; provided, however, that if such
Person becomes the Beneficial Owner of 20% or more of the shares of Common
Stock then outstanding by reason of share acquisitions by Company Entities and
shall, after such share acquisitions by Company Entities, become the Beneficial
Owner of any additional shares of Common Stock (other than by reason of a stock
dividend, stock split or other corporate action effected by the Company), then
such Person shall be deemed to be an “Acquiring Person,” except as
otherwise provided in Section 1(a)(ii), unless upon consummation of
the acquisition of such additional shares of Common Stock such Person does not
beneficially own 20% or more of the shares of Common Stock then outstanding;

 

(ii)           if (A) the Board determines in good
faith that a Person who or that has satisfied the conditions for becoming an “Acquiring
Person” pursuant to the foregoing provisions of this Section 1(a) did
so inadvertently (including, without limitation, because (1) such Person
was unaware that such Person had become the Beneficial Owner of 20% or more of
the shares of 

 

 

Common Stock then outstanding or (2) such Person
was aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, (B) such Person (and/or its Affiliates and Associates) divests a
sufficient number of shares of Common Stock (including, in the case solely of
Derivative Common Shares (as such term is hereinafter defined), by terminating
one or more subject derivative transactions or disposing of a sufficient number
of subject derivative securities) so that such Person would no longer satisfy
the conditions for being an “Acquiring Person” pursuant to the foregoing
provisions of this Section 1(a), and (C) such determination by
the Board is made and such divestment by such Person (and/or its Affiliates and
Associates) is completed prior to the time when the first Right is distributed
by the Rights Agent pursuant to Section 3(a), then such Person
shall not be an “Acquiring Person” and shall be deemed to have never
been an “Acquiring Person” for all purposes of this Agreement (such
that, for the avoidance of doubt, no Distribution Date shall occur, or be
deemed to have occurred, as a result thereof and no adjustment pursuant to Section 11(a)(ii) or
Section 13 shall be made in respect thereof); provided, however,
that if such Person, after such determination and divestment, becomes the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding
by reason of becoming the Beneficial Owner of any additional shares of Common
Stock, then such Person shall be deemed to be an “Acquiring Person”
unless a subsequent determination and divestment is made pursuant to this Section 1(a)(ii);
and

 

(iii)          if
a Person would be deemed to be an Acquiring Person upon the adoption of this
Agreement because such Person is the Beneficial Owner of 20% or more of the
shares of Common Stock then outstanding on the date of this Agreement, such
Person will not be deemed an Acquiring Person for any purposes of this
Agreement unless and until such Person acquires Beneficial Ownership of one or
more additional shares of Common Stock after the date of this Agreement (other
than pursuant to a dividend or distribution paid in shares of Common Stock or
pursuant to a split or subdivision of the outstanding Common Stock), unless
upon becoming the Beneficial Owner of such additional shares of Common Stock,
such Person is not then the Beneficial Owner of 20% or more of the shares of
Common Stock then outstanding.

 

(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)           “Agreement” shall have the meaning
set forth in the preamble hereto.

 

(d)           “Associate,” when used to indicate a
relationship with any Person, shall mean each, any and all of the following:

 

(i)            any firm, corporation, limited liability
company, partnership, joint venture, bank, trust or other entity of which such
Person is an officer or partner;

 

(ii)           any firm, corporation, limited liability
company, partnership, joint venture, bank, trust or other entity of which such
Person is, directly or indirectly, the Beneficial Owner of 10% or more of any
class of equity securities; provided, however, that any such
firm, corporation, limited liability company, partnership, joint venture, bank,
trust or other entity shall 

 

2

 

not be an “Associate” of a Person if, and only
for so long as, such Person (A) satisfies the criteria set forth in both Rule 13d-1(b)(1)(i) and
Rule 13d-1(b)(1)(ii) of the General Rules and Regulations under
the Exchange Act, (B) has reported Beneficial Ownership of the equity
securities of such firm, corporation, limited liability company, partnership,
joint venture, bank, trust or other entity on Schedule 13G under the Exchange
Act and is not required to report its ownership of such equity securities on
Schedule 13D under the Exchange Act, (C) is the Beneficial Owner of less
than 20% of the shares of Common Stock then outstanding (including any such
shares that are beneficially owned by such Person’s Affiliates and Associates
after giving effect to this proviso) and (D) has not reported and is not
required to report its ownership of Common Stock on Schedule 13D under the
Exchange Act;

 

(iii)          any
trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity; and

 

(iv)          any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such Person.

 

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

 

(i)            that such Person, or any of such Person’s
Affiliates or Associates, beneficially owns, directly or indirectly, within the
meaning of Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement;

 

(ii)           that 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 or the
satisfaction of other conditions) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities), written or otherwise, or upon the exercise of conversion rights,
exchange rights, warrants, options or other rights (other than the Rights); provided,
however, that a Person shall not be deemed the “Beneficial Owner”
of, or to “beneficially own,” (1) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such Person’s Affiliates
or Associates until such tendered securities are accepted for purchase or
exchange or (2) securities that such Person has a right to acquire on the
exercise of Rights at any time prior to the time that such Person becomes an
Acquiring Person; or (B) the right to vote pursuant to any agreement,
arrangement or understanding, written or otherwise; provided, however,
that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own,” any security under this clause (B) if the agreement, arrangement
or understanding to vote such security (x) 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 of the Exchange Act and (y) is not then reportable on Schedule
13D under the Exchange Act (or any comparable or successor report);

 

(iii)          that are beneficially owned, directly or indirectly,
by any other Person (or any of such other Person’s Affiliates or Associates)
with which such Person (or any of such Person’s Affiliates or Associates) has (A) any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a 

 

3

 

revocable proxy as described in the proviso to Section 1(e)(ii)(B)) or disposing
of any securities of the Company or (B) any agreement, arrangement or
understanding (whether or not in writing) to cooperate in obtaining, changing
or influencing the control of the Company; provided, however,
that (1) nothing in this Section 1(e) shall cause a Person
engaged in business as an underwriter of securities to be the “Beneficial Owner”
of, or to “beneficially own,” any securities acquired through such
Person’s participation in good faith in a firm commitment underwriting until
the expiration of forty (40) days after the date of such acquisition, and then
only if such securities continue to be owned by such Person at the expiration
of such forty (40) day period, (2) no Person who is an officer, director
or employee of a Company Entity shall be deemed, solely by reason of such
Person’s status or authority as such, to be the “Beneficial Owner”
of, or to “beneficially own,” any securities (including, without
limitation, in a fiduciary capacity) beneficially owned by such Company Entity
or by any other officer, director or employee of such Company Entity and (3) a
Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own,” any securities held by such Person in trust accounts, managed
accounts and the like, or otherwise held in a fiduciary capacity, that are
beneficially owned by third Persons who are not Affiliates or Associates of
such Person; or

 

(iv)          that are the subject of a
derivative transaction entered into by such Person (or any of such Person’s
Affiliates or Associates), or a derivative security acquired by such Person (or
any of such Person’s Affiliates or Associates), that gives such Person (or any
of such Person’s Affiliates or Associates) the economic equivalent of ownership
of an amount of such securities due to the fact that the value of the
derivative is explicitly determined by reference to the price or value of such
securities, or that provides such Person (or any of such Person’s Affiliates or
Associates) an opportunity, directly or indirectly, to profit, or to share in
any profit, derived from any change in the value of such securities, in any
case without regard to whether (a) such derivative conveys any voting
rights in such securities to such Person (or any of such Person’s Affiliates or
Associates), (b) the derivative is required to be, or capable of being,
settled through delivery of such securities or (c) such Person (or any of
such Person’s Affiliates or Associates) may have entered into other
transactions that hedge the economic effect of such derivative.  In determining the number of shares of Common
Stock beneficially owned by virtue of the operation of this Section 1(e)(iv),
the subject Person shall be deemed to beneficially own (without duplication)
the notional or other number of shares of Common Stock specified in the
documentation evidencing the derivative position as being subject to be
acquired upon the exercise or settlement of the applicable right or as the
basis upon which the value or settlement amount of such right, or the
opportunity of the holder of such right to profit or share in any profit, is to
be calculated in whole or in part, and in any case (or if no such number of
shares of Common Stock is specified in such documentation or otherwise), as
determined by the Board in good faith to be the number of shares of Common
Stock to which the derivative position relates. 
Such shares of Common Stock that are deemed so beneficially owned
pursuant to the operation of this Section 1(e)(iv) shall be
referred to herein as “Derivative Common Shares.”

 

Notwithstanding anything in
this Section 1(e) 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 that such Person would be deemed to own
beneficially hereunder.

 

4

 

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

 

(g)           “close of business” on any given
date shall mean 5:00 p.m., Eastern time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00 p.m., Eastern
time, on the next succeeding Business Day.

 

(h)           “Common Stock” shall mean the
common stock, $0.01 par value (or as such par value may be changed from
time to time), of the Company.

 

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

 

(j)            “Company” shall have the meaning
set forth in the preamble hereto.

 

(k)           “Company Entity” shall mean (i) the
Company, (ii) any subsidiary of the Company or (iii) any employee
benefit plan of the Company or of any subsidiary of the Company, or any entity
organized, appointed or established pursuant to the terms of any such plan.

 

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

 

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

 

(n)           “Definitive Acquisition Agreement”
shall mean any agreement entered into by the Company that is conditioned on the
approval by the holders of not less than a majority of the outstanding shares
of Common Shock at a meeting of stockholders with respect to (i) a merger,
consolidation, recapitalization, reorganization, share exchange, business
combination or similar transaction involving the Company or (ii) the
acquisition in any manner, directly or indirectly, of more than 50% of the
consolidated total assets (including, without limitation, equity securities of
its subsidiaries) of the Company.

 

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

 

(p)           “equivalent preferred stock” shall
have the meaning set forth in Section 11(b).

 

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

 

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

 

(s)           “Expiration Date” shall mean the
close of business on the earlier of (i)                 
      , 2012 and (ii)                 
      , 2010 if and only if Stockholder Approval
has not been obtained on or prior to such date.

 

(t)            “Grandfathered Person” shall mean (i) Paulson &
Co., Inc. (including any successor thereto, by operation of law or
otherwise, but excluding any assignee, distributee or transferee thereof, in
each case by operation of law or otherwise) (the “Institutional Investor”),

 

5

 

(ii) any controlled Affiliates of the
Institutional Investor (including any successor to any such Affiliate or any
assignee, distributee or transferee of any such Affiliate, in each case by
operation of law or otherwise, for so long as such successor, assignee,
distributee or transferee remains a controlled Affiliate of the Institutional
Investor, but excluding any other successor to any such Affiliate or other
assignee, distributee or transferee of any such Affiliate, in each case by
operation of law or otherwise) (collectively, the “Paulson Controlled
Affiliates”) and (iii) the several investment funds and accounts
managed by the Institutional Investor and/or any Paulson Controlled Affiliates
(such funds and accounts, together with the Institutional Investor and any
Paulson Controlled Affiliates, collectively, “Paulson”) for so long as
Paulson is not the Beneficial Owner of more than the Permitted Percentage (as
defined below) of the shares of Common Stock then outstanding; provided,
however, that Paulson shall not become an “Acquiring Person” as
the result of an acquisition of Common Stock by a Company Entity that, by
reducing the number of shares outstanding, increases the proportionate number
of shares Beneficially Owned by Paulson to more than the Permitted Percentage
of the shares of Common Stock then outstanding; provided, further,
that if Paulson becomes the Beneficial Owner of more than the Permitted
Percentage of the shares of Common Stock then outstanding by reason of share
acquisitions by Company Entities and shall, after such share acquisitions by
Company Entities have been publicly disclosed or have been disclosed to (or
otherwise actually known by) Paulson, become the Beneficial Owner of any
additional shares of Common Stock (other than by reason of a stock dividend,
stock split or other corporate action effected by the Company), then Paulson
shall be deemed to be an “Acquiring Person,” except as otherwise
provided in Section 1(a)(ii) (substituting “more than the
Permitted Percentage” for “20% or more” in each case in that subsection),
unless upon consummation of the acquisition of such additional shares of Common
Stock Paulson does not beneficially own more than the Permitted Percentage of
the shares of Common Stock then outstanding.

 

For purposes of this Section 1(t), the “Permitted
Percentage” shall mean the lower of (1) forty-five percent (45%) and (2) the
percentage of the outstanding shares of Common Stock that are Beneficially
Owned by Paulson at the close of business on the day that is 270 days
immediately following the effective date of the consummation of the
transactions contemplated by that certain Standby Purchase Agreement, dated as
of
                  
      , 2009, by and between Paulson and the
Company.

 

(u)           “Independent Directors” shall mean
members of the Board who are not officers, employees or Affiliates (or
designees of Affiliates) of the Company.

 

(v)           “invalidation time” shall have the
meaning set forth in Section 11(a)(ii).

 

(w)          “NASDAQ” shall mean the NASDAQ
National Market System.

 

(x)            “Outside Meeting Date” shall have
the meaning set forth in Section 23(b).

 

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

 

(z)            “Preferred Stock” shall mean the Series A
Junior Participating Preferred Stock of the Company having the rights and
preferences set forth in the form of Certificate of 

 

6

 

Designations of Series A
Junior Participating Preferred Stock of Idearc Inc., attached hereto as Exhibit A
and, to the extent that there are not a sufficient number of shares of Series A Junior Participating
Preferred Stock of the Company authorized to permit the
full exercise of the Rights, any other series of preferred stock of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A
Junior Participating Preferred Stock of the Company.

 

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

 

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

 

(cc)         “Qualified Offer” shall mean an
offer determined by a majority of the Independent Directors to have each of the
following characteristics:

 

(i)            a fully financed, all-cash tender offer,
or an exchange offer offering shares of common stock of the offeror, or a
combination thereof, in each such case for all of the outstanding shares of
Common Stock at the same per-share consideration;

 

(ii)           an offer that has commenced within the
meaning of Rule 14d-2(a) under the Exchange Act;

 

(iii)          an
offer whose per-share offer price exceeds the greatest of (A) the highest
reported market price per share of the Common Stock during the 24 months
immediately preceding the commencement of the offer (within the meaning of Rule 14d-2(a) under
the Exchange Act), (B) the highest price per share of the Common Stock
paid by the Person making the offer (or any of such Person’s Affiliates) during
the 24 months immediately preceding the commencement of the offer (within the
meaning of Rule 14d-2(a) under the Exchange Act) or prior to the
expiration of the offer, (C) an amount that is 25% higher than the
12-month moving average per share price of the Common Stock (determined as of
the Trading Day immediately preceding the date of commencement of the offer
(within the meaning of Rule 14d-2(a) under the Exchange Act)), (D) an
amount that is 25% higher than the closing price (as “closing price” is
determined pursuant to Section 11(d)(i)) per share of the Common
Stock on the Trading Day immediately preceding the commencement of the offer
(within the meaning of Rule 14d-2(a) under the Exchange Act) and (E) if,
at the time that the offer is commenced (within the meaning of Rule 14d-2(a) under
the Exchange Act), any other offer that is a Qualified Offer has been commenced
and remains open, the price per share of the Common Stock offered in such
earlier Qualified Offer; provided, however, that, to the extent
that an offer that includes common stock of the offeror, such per-share offer
price of the offer will be determined by valuing such common stock of the
offeror at the lowest reported market price for such common stock of the
offeror during the five (5) trading days immediately preceding and the
five (5) trading days immediately following the commencement of the offer
(within the meaning of Rule 14d-2(a) under the Exchange Act);

 

(iv)          an offer that, within twenty (20)
Business Days after the commencement date of the offer (or within ten (10) Business
Days after any increase in the offer consideration), does not result in a
nationally recognized investment banking firm retained by the Board

 

7

 

rendering an opinion to the Board that the
consideration being offered to the stockholders of the Company is either unfair
or inadequate;

 

(v)           if the offer includes shares of common
stock of the offeror, an offer pursuant to which (A) the offeror shall permit
representatives of the Company (including a nationally-recognized investment
banking firm retained by the Board and legal counsel and an accounting firm
designated by the Company) to have access to such offeror’s books, records,
management, accountants, financial advisors, counsel and other appropriate
outside advisors for the purposes of permitting such representatives to conduct
a due diligence review of the offeror in order to permit the Board to evaluate
the offer and make an informed decision and, if requested by the Board, to
permit such investment banking firm (relying as appropriate on the advice of
such legal counsel) to be able to render an opinion to the Board with respect
to whether the consideration being offered to the stockholders of the Company
is fair from a financial point of view and (B) within ten (10) Business
Days after such representatives of the Company (including a
nationally-recognized investment banking firm retained by the Board and legal
counsel and an accounting firm designated by the Company) shall have notified
the Company and the offeror that it had completed such due diligence review to
its satisfaction (or, following completion of such due diligence review, within
ten (10) Business Days after any increase in the consideration being
offered), such investment banking firm does not render an opinion to the Board
that the consideration being offered to the stockholders of the Company is
either unfair or inadequate and such investment banking firm does not, after
the expiration of such ten (10) Business Day period, render an opinion to
the Board that the consideration being offered to the stockholders of the
Company has become either unfair or inadequate based on a subsequent disclosure
or discovery of a development or developments that have had or are reasonably
likely to have a material adverse effect on the value of the common stock of
the offeror;

 

(vi)          an offer that is subject to only the
minimum tender condition described below in Section 1(cc)(ix) and
other customary terms and conditions, which conditions shall not include any
financing, funding or similar conditions or any requirements with respect to
the offeror or its agents being permitted any due diligence with respect to the
books, records, management, accountants or other outside advisors of the
Company;

 

(vii)         an
offer pursuant to which the Company has received an irrevocable, legally
binding written commitment of the offeror that the offer will remain open for
at least one hundred twenty (120) days and, if a Special Meeting is duly
requested in accordance with Section 23(b), for at least ten (10) Business
Days after the date of the Special Meeting or, if no Special Meeting is held
within ninety (90) days following receipt of the Special Meeting Notice in
accordance with Section 23(b), for at least ten (10) Business
Days following such ninety (90) day period;

 

(viii)        an
offer pursuant to which the Company has received an irrevocable, legally
binding written commitment of the offeror that, in addition to the minimum time
periods specified above in Section 1(cc)(vii), the offer, if it is
otherwise to expire prior thereto, will be extended for at least twenty (20)
Business Days after any increase in the consideration being offered or after
any bona fide alternative offer is commenced within the meaning of Rule 14d-2(a) under
the Exchange Act; provided, however, that such offer need not
remain open, as a result of Section 1(cc)(vii) and this Section 1(cc)(viii),
beyond (A) the time that any other offer 

 

8

 

satisfying the criteria for a Qualified Offer is then
required to be kept open under such Section 1(cc)(vii) and
this Section 1(cc)(viii) or (B) the expiration date, as
such date may be extended by public announcement (with prompt written notice to
the Rights Agent) in compliance with Rule 14e—1 under the Exchange Act, of
any other tender offer for the Common Stock with respect to which the Board has
agreed to redeem the Rights immediately prior to acceptance for payment of
Common Stock thereunder (unless such other offer is terminated prior to its
expiration without any Common Stock having been purchased thereunder) or (C) one
(1) Business Day after the stockholder vote with respect to approval of
any Definitive Acquisition Agreement has been officially determined and
certified by the inspectors of elections;

 

(ix)           an offer that is conditioned on a minimum
of at least two-thirds of the outstanding shares of the Common Stock not held
by the Person making such offer (and such Person’s Affiliates and Associates)
being tendered and not withdrawn as of the offer’s expiration date, which
condition shall not be waivable;

 

(x)            an offer pursuant to which the Company
has received an irrevocable, legally binding written commitment of the offeror
to consummate, as promptly as practicable upon successful completion of the
offer, a second step transaction whereby all shares of the Common Stock not
tendered into the offer will be acquired at the same consideration per share
actually paid pursuant to the offer, subject to stockholders’ statutory
appraisal rights, if any;

 

(xi)           an offer pursuant to which the Company
and its stockholders have received an irrevocable, legally binding written
commitment of the offeror that no amendments will be made to the offer to
reduce the consideration being offered or to otherwise change the terms of the
offer in a way that is adverse to a tendering stockholder;

 

(xii)          an
offer (other than an offer consisting solely of cash consideration) pursuant to
which the Company has received the written representation and certification of
the offeror and the written representations and certifications of the offeror’s
Chief Executive Officer and Chief Financial Officer, acting in such capacities,
that (A) all facts about the offeror that would be material to making an
investor’s decision to accept the offer have been fully and accurately
disclosed as of the date of the commencement of the offer within the meaning of
Rule 14d-2(a) under the Exchange Act, (B) all such new facts
will be fully and accurately disclosed on a prompt basis during the entire
period during which the offer remains open, and (C) all required Exchange
Act reports will be filed by the offeror in a timely manner during such period;
and

 

(xiii)         if
the offer includes non-cash consideration, (A) the non-cash portion of the
consideration offered must consist solely of common stock of a Person that is a
publicly-owned United States corporation, (B) such common stock must be
freely tradable and listed or admitted to trading on either the New York Stock
Exchange or NASDAQ, (C) no stockholder approval of the issuer of such
common stock is required to issue such common stock, or, if such approval is
required, such approval has already been obtained, (D) no Person (including
such Person’s Affiliates and Associates) beneficially owns 20% or more of the
voting stock of the issuer of such common stock at the time of commencement of
the offer or at any time during the term of the offer, (E) no other class
of voting stock or other voting securities of the issuer of such common stock
is outstanding and (F) the issuer of such common stock meets the
registrant eligibility requirements for use of Form S-3 for registering
securities under the Securities Act, 

 

9

 

including the filing of all required Exchange Act
reports in a timely manner during the twelve calendar months prior to the date
of commencement of such offer.

 

For
the purposes of Section 1(cc)(i), “fully financed” shall mean
that the offeror has sufficient funds for the offer and related expenses which
shall be evidenced by (1) firm, unqualified, legally binding written
commitments from responsible financial institutions having the necessary
financial capacity, accepted by the offeror, to provide funds for such offer
subject only to customary terms and conditions (for the avoidance of doubt it
being understood that a provision relating to the sharing with a financing
source of any break-up or termination fee shall be considered customary), (2) cash
or cash equivalents then available to the offeror, set apart and maintained
solely for the purpose of funding the offer with an irrevocable, legally
binding written commitment being provided by the offeror to the Board to
maintain such availability until the offer is consummated or withdrawn or (3) a
combination of the foregoing; which evidence has been provided to the Company
prior to, or upon, commencement of the offer. 
If an offer becomes a Qualified Offer in accordance with this Section 1(cc),
but subsequently ceases to be a Qualified Offer as a result of the failure at a
later date of such offer to continue to satisfy any of the requirements of this
Section 1(cc), such offer shall cease to be a Qualified Offer and
the provisions of Section 23(b) shall no longer be applicable
to such offer, provided that the actual redemption of the Rights pursuant to Section 23(b) shall
not have already occurred.

 

(dd)         “Record Date” shall have the
meaning set forth in the recitals hereof.

 

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

 

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

 

(gg)         “Redemption Resolution” shall have
the meaning set forth in Section 23(b).

 

(hh)         “Right” shall have the meaning set
forth in the recitals hereof.

 

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

 

(jj)           “Rights Agent” shall have the
meaning set forth in the preamble hereto.

 

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

 

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

 

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

 

(nn)         “Senior Voting Stock” shall have
the meaning set forth in Section 13(b).

 

(oo)         “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 an “Acquiring Person” for purposes of this Agreement.

 

10

 

(pp)         “Special Independent Committee”
means a special committee of the Board comprised of each Independent Director who
is not a director, officer, employee, Affiliate or designee of a Grandfathered
Person.

 

(qq)         “Special Meeting” shall have the
meaning set forth in Section 23(b).

 

(rr)           “Special Meeting Notice” shall
have the meaning set forth in Section 23(b).

 

(ss)         “Special Meeting Period” shall
have the meaning set forth in Section 23(b).

 

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

 

(uu)         “Stockholder Approval” shall mean
the approval of this Agreement by the affirmative vote of a majority of all the
votes cast at a meeting of stockholders of the Company, duly held in accordance
with the Company’s Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws (as each may be amended from time to time) and
applicable law, at which a quorum is present.

 

(vv)         “subsidiary” of a Person shall
mean any corporation or other entity of which securities or other ownership
interests having ordinary voting power sufficient to elect a majority of the
board of directors or other persons performing similar functions are
beneficially owned, directly or indirectly, by such Person or any other
subsidiary of such Person.

 

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

 

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

 

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

 

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

 

Section 3.               Issue of Right Certificates.

 

(a)           Until the close of business
on the earlier of (i) the tenth (10th) day after the Shares Acquisition Date or (ii) the
tenth (10th) Business Day
(or such later date as may be determined by action of the Board prior to the
Shares Acquisition Date) after the date of the commencement of, or first public
announcement of the intent to commence, by any Person (other than a Company
Entity), a tender or exchange offer the consummation of which would result in
any Person (other than a Company Entity) becoming an Acquiring Person
(including any such date that is after the date of this Agreement and prior to
the issuance of the Rights) (the earlier of the dates in subsections (i) and
(ii) hereof being herein referred to as the “Distribution Date”), (A) the
Rights will be evidenced (subject to the provisions of Section 3(b))
by the certificates for the Common Stock registered in the names of the holders
thereof (which certificates shall be deemed also to 

 

11

 

be Right Certificates) and
not by separate Right Certificates, and the record holders of Common Stock represented
by such certificates shall be the record holders of the Rights represented
thereby, and (B) the Rights will be transferable only in connection with
the transfer of the Common Stock.  Prior
to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.  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 so
requested by written notice and provided with a stockholder list and all other
relevant information that the Rights Agent may reasonably request, send), by
first class, postage-prepaid mail, to each record holder of Common Stock as of
the close of business on the Distribution Date (other than an Acquiring Person
or any Affiliate or Associate of an 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 share
of Common Stock so held.  As of and after
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.  The Company shall promptly
notify the Rights Agent in writing upon the occurrence of the Distribution
Date.  Until such notice is received by
the Rights Agent, the Rights Agent may presume conclusively for all purposes
that the Distribution Date has not occurred.

 

(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 Stock, in substantially the form attached hereto as Exhibit C
(the “Summary of Rights”), by first class, postage-prepaid mail or other
means used by the Company to deliver proxy statements to its stockholders, to
each record holder of Common Stock as of the close of business on the Record
Date at the address of such holder shown on the records of the Company.  With respect to shares of Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders
thereof together with a copy of the Summary of Rights.  Until the Distribution Date (or if earlier,
the Redemption Date or the Expiration Date), the surrender for transfer of any
certificate for Common Stock 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 Stock represented thereby.

 

(c)           Rights shall be
issued in respect of all shares of Common Stock issued or disposed of
(including, without limitation, upon disposition of Common Stock out of
treasury stock or issuance or reissuance of Common Stock out of authorized but
unissued shares) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date and the Expiration Date, or in certain
circumstances provided in Section 22, after the Distribution
Date.  Certificates issued for Common
Stock (including, without limitation, upon transfer of outstanding Common
Stock, disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares) after the
Record Date but prior to the earliest of the Distribution Date, the Redemption
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 the Rights Agreement between Idearc Inc. and Computershare Trust Company, N.A., as Rights
Agent, dated as of                 
      , 2009, as the same may be
supplemented or amended from time to time (the “Rights Agreement”), 

 

12

 

the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal executive offices of Idearc Inc.  Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate.  Computershare Trust Company, N.A. will mail to
the holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. 
Under certain circumstances, as set forth in the Rights Agreement,
Rights acquired or beneficially owned by any Person who becomes an Acquiring Person
or any Affiliate or Associate of an Acquiring Person (as such terms are defined
in the Rights Agreement) and their transferees will become null and void and
will not longer be transferable.

 

With
respect to such certificates containing the foregoing legend, until the earliest of the
Distribution Date, the Redemption Date and the Expiration Date, the Rights associated with the Common
Stock represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any of such certificates, except as
otherwise provided herein, shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.

 

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

 

Notwithstanding
this Section 3(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 shares and of assignment to
be printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate (but that do not affect the rights, duties or obligations of the
Rights Agent as set forth in this Agreement) and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or automated quotation
system on which the Rights may from time to time be listed, or to conform to
usage.  Subject to the provisions of Section 22,
the Right Certificates, in each case, on their face shall entitle the holders
thereof to purchase such number of shares of the Preferred Stock as shall be
set forth therein at the price per share set forth therein (the “Purchase
Price”), but the number of such shares (and the type of securities or other
property issuance upon exercise of the Rights) 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 in the manner provided
in the Amended and Restated By-Laws of the Company (as it may be amended from
time to time) for Common Stock certificates. 

 

13

 

The Right Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless so countersigned.

 

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

 

Following
the Distribution Date, and receipt by the Rights Agent of (i) written
notice of the Distribution Date pursuant to Section 3(a), and (ii) a
stockholder list and all relevant information reasonably requested by the
Rights Agent pursuant to Section 3(a), the Rights Agent will keep
or cause to be kept, at its office designated for such purposes, 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 Section 7(e) and Section 14,
at any time after the close of business on the Distribution Date, and prior to
the close of business on the earlier of the Redemption Date and the Expiration
Date, any Right Certificate or Right Certificates (other than Right
Certificates representing Rights that have become null and void pursuant to Section 11(a)(ii) or
that have been exchanged pursuant to Section 24) 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 share of Preferred Stock (or, following such time,
other securities, cash or assets as the case may be) 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 of the Rights Agent designated for such
purposes.  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.  As a condition to such transfer, division,
combination or exchange, the Company may require payment by the surrendering
holder of a sum sufficient to cover any tax or charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.  The Rights Agent shall
have no duty or obligation to take any action under any section of this
Agreement that requires the payment by a Rights holder of applicable taxes and/or
charges unless and until it is satisfied that all such taxes and/or charges
have been paid.

 

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 the case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the 

 

14

 

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 owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.

 

Notwithstanding
any other provision of this Agreement to the contrary, the Company and the
Rights Agent may amend this Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Right Certificates.

 

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

 

(a)           The registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof properly completed and duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purposes together
with payment of the Purchase Price for each one one-thousandth of one share of
the Preferred Stock (or Common Stock, other securities, cash or assets, as the
case may be) as to which the Rights are exercised, at or prior to the earliest
of (i) the Expiration Date, (ii) the time at
which the Rights are redeemed as provided in Section 23 (“Redemption
Date”), or (iii) the time at which such Rights are exchanged as
provided for in Section 24.

 

(b)           The Purchase Price for each one
one-thousandth of one share of the Preferred Stock pursuant to the exercise of
a Right shall initially be
$        .00, shall be subject to
adjustment from time to time as provided in Section 11 and Section 13,
and shall be payable in lawful money of the United States of America in
accordance with Section 7(c).

 

(c)           Upon receipt of a Right Certificate
representing exercisable Rights, with the form of election to purchase properly
completed and duly executed, accompanied by payment of the aggregate Purchase
Price for shares to be purchased and an amount equal to any applicable tax or
charge required to be paid by the holder of such Right Certificate in
accordance with Section 6 in cash, or by certified check or cashier’s
check payable to the order of the Company, the Rights Agent shall thereupon (i) (A) promptly
requisition from any transfer agent of the Preferred Stock of the Company, or
make available if the Rights Agent is the transfer agent of the Preferred
Stock, certificates for the number of one one-thousandths of a share of the
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) promptly
requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, promptly requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14, (iii) after receipt of such
certificates or depositary receipts, promptly cause the same to be delivered to
or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder, and 

 

15

 

(iv) when appropriate, after receipt, promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate.

 

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

 

(e)           Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the purported transfer
or exercise of Rights pursuant to Section 6 or this Section 7
unless the registered holder shall have properly completed and duly executed
the form of assignment or election to purchase on the reverse side of the Right
Certificate surrendered for such transfer or exercise and shall have provided
such additional evidence of the identity of the Beneficial Owner (or such
former or proposed Beneficial Owner) thereof or such Beneficial Owner’s
Affiliates or Associates as the Company or the Rights Agent shall reasonably
request.

 

Section 8.               Cancellation and Destruction of Right Certificates. 
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination, redemption 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
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.               Reservation and Availability of Shares of Preferred Stock. 
The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Stock, or its
authorized and issued Preferred Stock held in its treasury, the number of
shares of the Preferred Stock that will be sufficient to permit the exercise in
full of all outstanding Rights in accordance with this Agreement.

 

So
long as the Preferred Stock (and, following the time that a Person becomes an
Acquiring Person, shares of Common Stock or other securities) issuable upon the
exercise of Rights may be listed or admitted to trading on any national
securities exchange or automated quotation system, 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 for trading on
such exchange or automated quotation system upon official notice of issuance
upon such exercise.

 

The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all shares of the Preferred Stock (and, following the
time that a Person becomes an Acquiring Person, shares of Common Stock or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such (subject to payment of the 

 

16

 

Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.

 

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

 

The
Company shall, if legally required, (i) prepare and file, as soon as
reasonably possible following the Distribution Date, a registration statement
under the Securities Act with respect to the securities purchasable upon
exercise of or exchangeable for the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as reasonably possible
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Securities
Act) until the earlier of (x) the date as of which the Rights are no
longer exercisable for such securities and (y) the Expiration Date.  The Company also shall take all such action
as may be required or as is appropriate under the securities or blue sky laws
of such jurisdictions as may be necessary or appropriate with respect to the
securities purchasable upon the exercise of or exchangeable for the
Rights.  The Company may temporarily
suspend, for a period not to exceed one hundred twenty (120) days following the
Distribution Date, the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective.  Upon any such suspension of exercisability of
Rights referred to in this paragraph, 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.  The Company shall
notify the Rights Agent whenever it makes a public announcement pursuant to
this Section 9 and give the Rights Agent a copy of such
announcement.  Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction unless the requisite qualification or exemption
in such jurisdiction shall have been obtained and until a registration
statement under the Securities Act (if required) shall have been declared
effective.

 

Section 10.             Preferred Stock Record Date.  Each Person
in whose name any certificate for shares of the Preferred Stock is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Stock represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights, together with the form of election to purchase properly
completed and duly executed, was duly surrendered and payment of the Purchase
Price (and any applicable taxes or charges) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock transfer books of the Company are closed, such Person shall be
deemed to have

 

17

 

become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock 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 stockholder of the Company with respect to shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

 

Section 11.             Adjustment of Purchase Price, Number of Shares or Number of Rights. 
The Purchase Price, the number and kind or class of shares of stock of
the Company 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 Record Date (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares of Preferred Stock or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
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 that, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, the holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of Preferred Stock
issuable upon exercise of one Right.  If
an event occurs that would require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall
be in addition to, and shall be made prior to, any adjustment required pursuant
to Section 11(a)(ii).

 

(ii)           Subject to Section 24, in the event any
Person becomes an Acquiring Person, each holder of a Right shall thereafter
have a right to receive, upon exercise thereof at a price equal to the Purchase
Price in effect immediately prior to such Person becoming an Acquiring Person
multiplied by the number of one one-thousandths of a share of Preferred Stock
for which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of shares of Preferred Stock, such number of shares of
Common Stock as shall equal the result obtained by (A) multiplying such
Purchase Price by the number of one one-thousandths of a share of Preferred
Stock for which a Right is then exercisable and dividing that product by (B) 50%
of the current market price per share of the Common Stock on the date of the
occurrence of such event; provided, however, that if the
transaction that would otherwise give rise to the adjustment is also subject to
the provisions of Section 13, then only the provisions of Section 13
shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii); provided
further, however, that the Purchase Price (as so adjusted) and
the number of shares of Common Stock so receivable upon exercise of a Right
(or, at the option of the Company, such number of one one-

 

18

 

thousandths of a share of
Preferred Stock) shall thereafter be subject to further adjustment as
appropriate in accordance with Section 11(f).  In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action that would eliminate or diminish the benefits intended to
be afforded by the Rights. 
Notwithstanding anything in this Agreement to the contrary, however,
from and after the time (the “invalidation time”) when any Person first
becomes an Acquiring Person, any Rights that are or were acquired or
beneficially owned by any Acquiring Person (or any Affiliate or Associate of
any Acquiring Person), including, without limitation, any such Rights when held
by (1) a transferee of any Acquiring Person (or any such Affiliate or
Associate) who becomes a transferee after the invalidation time, (2) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
became a transferee prior to or concurrently with the invalidation time
pursuant to either (x) 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, written or otherwise, regarding the
transferred Rights or (y) a transfer that the Board determines is part of
a plan, arrangement or understanding, written or otherwise, that has the
purpose or effect of avoiding the provisions of this Section 11(a)(ii),
or (3) a subsequent transferee of any Person described in the foregoing
clauses (1) or (2), shall be null and void without any further action and
any holder of such Rights shall thereafter have no right to exercise 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 Rights 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 invalidation time, no
Right Certificate shall be issued pursuant to Section 3, Section 6
or Section 7(d) that represents Rights beneficially owned by
an Acquiring Person whose Rights would be null and void pursuant to the
preceding sentence or any Associate or Affiliate thereof; no Right Certificate
shall be issued at any time upon the transfer of any Rights to an Acquiring
Person whose Rights would be null and void pursuant to the preceding sentence
or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Right Certificate delivered to the
Rights Agent for transfer to an Acquiring Person or any Associate or Affiliate
whose Rights would be null and void pursuant to the provisions of this
paragraph shall be cancelled.

 

(iii)          The
Company may, at its option, substitute for a share of Common Stock issuable
upon the exercise of Rights in accordance with Section 11(a)(ii) a
number of shares of Preferred Stock or fraction thereof such that the current
market price per share of one share of Preferred Stock multiplied by such
number or fraction is equal to the current market price per share of one share
of Common Stock.  In the event that there
shall not be sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii), the Board 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
shares of Common Stock issuable upon the exercise of a Right in accordance with
Section 11(a)(ii) (the “Current Value”) over (2) the
Purchase Price in effect immediately prior to such Person becoming an Acquiring
Person multiplied by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such Person
becoming an Acquiring Person and (B) with respect to each Right (other
than Rights that have become null and void pursuant to Section 11(a)(ii)),
make adequate provision to substitute for 

 

19

 

the shares of Common Stock issuable in accordance with
Section 11(a)(ii) upon exercise of the Right and payment of
the applicable Purchase Price, (1) cash, (2) a reduction in such
Purchase Price, (3) shares of Preferred Stock or other equity securities
of the Company (including, without limitation, shares or fractions of shares of
preferred stock that, by virtue of having dividend, voting and liquidation
rights substantially comparable to those of the shares of Common Stock, are
deemed in good faith by the Board to have substantially the same value as the
shares of Common Stock (such shares of Preferred Stock 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 that, when
added to the value of the shares of Common Stock 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 upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board; 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 date on which
any Person becomes an Acquiring Person (the date on which any Person becomes an
Acquiring Person 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, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of shares of
Preferred Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  If, upon any Person becoming an Acquiring
Person, the Board shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized for issuance
upon exercise in full of the Rights, then, if the Board 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
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) and the last sentence of this Section 11(a)(iii),
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 shares of Common Stock shall
be the current market price per share 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 market price per share of the Common Stock.  The Board may, but shall not be required to,
establish procedures to allocate the right to receive shares of Common Stock
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 Stock
entitling them (for a period expiring within forty-five (45)
calendar days after such record date) to subscribe for or purchase Preferred
Stock (or shares 

 

20

 

having economically
equivalent rights, privileges and preferences as the Preferred Stock (“equivalent
preferred stock”)) or securities convertible into Preferred Stock or
equivalent preferred stock at a price per share of Preferred Stock or
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the current market price per share of the Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
shares of Preferred Stock and equivalent preferred stock outstanding on such
record date plus the number of shares of Preferred Stock that the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number
of shares of Preferred Stock and equivalent preferred stock outstanding on such
record date plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible); 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 securities
issuable upon exercise of one Right.  In
case such subscription price may be paid in 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, whose determination shall be described
in a written statement filed with the Rights Agent.  Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation.  Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price that 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 Preferred Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than (i) a regular periodic
cash dividend, the record date for which occurs at a time when there is no
Acquiring Person, or (ii) a regular periodic cash dividend, the record
date for which occurs at a time when there is an Acquiring Person, at a rate
not in excess of 125% of the rate of the last cash dividend theretofore paid or
(iii) a dividend payable in Preferred Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b)), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current market price per
share of the Preferred Stock on such record date, less the fair market value
(as determined in good faith by the Board, whose determination shall be
described in a written 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 share of Preferred Stock and
the denominator of which shall be such current market price per share of the
Preferred Stock; 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 Preferred Stock issuable upon exercise of
one Right.  Such adjustments shall be
made successively whenever such a record date is fixed; and in the event that
such 

 

21

 

distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price that would then be in effect if such
record date had not been fixed.

 

(d)           (i)  For the purpose of any
computation hereunder, the “current market price per share” of any
security (a “Security”) on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the thirty (30)
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that in the event that the
current market price per share of the Security is determined during the 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 shares of such Security, or (B) any
subdivision, combination or reclassification of such Security, and prior to the
expiration of thirty (30) Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current market price per
share 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
ask prices, regular way, in either case (1) as reported by the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange, or (2) if the Security
is not listed or admitted to trading on the New York Stock Exchange, as
reported by 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 (3) 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 ask prices in the over-the-counter market, as reported by NASDAQ or
such other system then in use, or (4) if on any such date the Security is
not quoted by any such organization, the average of the closing bid and ask
prices as furnished by a professional market maker making a market in the
Security selected by the Board or (5) if on any such date, no such market
maker is making a market in such Security, the fair market value of the
Security on such date as determined in good faith by the Board.  The term “Trading Day” shall mean a
day on which the principal national securities exchange on which the Security
is listed or admitted to trading is open for the transaction of business or, if
the Security is not listed or admitted to trading on any national securities exchange,
a Business Day.

 

(ii)  For the purpose of any computation
hereunder, if the Preferred Stock is publicly traded, the “current market
price per share” of Preferred Stock shall be determined in the same manner
as set forth above for Common Stock in Section 11(d)(i).  If the Preferred Stock is not publicly traded
or if the current market price per share of Preferred Stock cannot be
determined in the manner provided above but the Common Stock is publicly
traded, the “current market price per share” of Preferred Stock shall be
conclusively deemed to be the current market price per share of Common Stock
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the Record Date), multiplied by one thousand.  If neither the Common Stock nor the Preferred
Stock is publicly held or so listed or traded, the “current market price per
share” of Preferred Stock shall mean the fair value per share as determined
in good faith by the Board, whose determination shall be described in a written
statement filed with the Rights Agent.

 

22

 

(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 that
by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share (other than Preferred Stock) or ten-millionth of a share of
Preferred Stock, as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (A) three years from the date
of the transaction that mandates such adjustment or (B) the Expiration
Date.

 

(f)            If as a result of an adjustment made
pursuant to Section 11(a), the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company or of any Principal Party other than shares of the Preferred Stock,
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 shares of the Preferred Stock contained in Section 11(a),
Section 11(b), Section 11(c), Section 11(e),
Section 11(h), Section 11(i) and Section 11(m),
and the provisions of Section 7, Section 9, Section 10,
Section 13 and Section 14 with respect to the shares of
the Preferred Stock shall apply on like terms to any such other shares.

 

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

 

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

 

(i)            The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one one-thousandths of a share
of the Preferred Stock 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 share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. 
Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
ten-millionth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after the adjustment of the Purchase Price.  The 

 

23

 

Company shall make a public announcement of its
election to adjust the number of Rights (with prompt written notice thereof to
the Rights Agent), indicating the record date for the adjustment to be made
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement.  If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. 
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.

 

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

 

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

 

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

 

(m)          Notwithstanding anything in this Section 11
to the contrary, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this Section 11,
as and to the extent that it, in its sole discretion, shall determine to be
advisable in order that any consolidation or subdivision of the Preferred
Stock, issuance wholly for cash of any shares of the Preferred Stock at less
than the current market price, issuance wholly for cash of any shares of the
Preferred Stock or securities that by their terms are 

 

24

 

convertible into or exchangeable for Preferred Stock,
dividends on the Preferred Stock payable in Preferred Stock or issuance of
rights, options or warrants referred to hereinabove in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.

 

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

 

(o)           The Company agrees that, after the Shares
Acquisition Date, it will not, except as permitted by Section 23, Section 24
or Section 27, 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.

 

Section 12.             Certificate of Adjusted Purchase Price or Number of Shares. 
Whenever an adjustment is made as provided in Section 11 and
Section 13, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief written statement of the
facts accounting for such adjustment, (b) promptly file with the Rights
Agent and with each transfer agent for the Common Stock and the Preferred Stock
a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 26.  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment or statement contained
therein and shall have no duty or liability with respect to and shall not be
deemed to have knowledge of such adjustment or event unless and until it shall
have received such certificate.

 

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

 

(a)           In the event that, following the time at
which any Person becomes an Acquiring Person, (i) the Company shall
consolidate with, or merge with and into, any other Person (other than one or
more of its wholly-owned subsidiaries), (ii) any Person (other than one or
more of its wholly-owned subsidiaries) shall consolidate with or merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection 

 

25

 

with such merger, all or part of the Common Stock
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, and in each
such case, proper provision shall be made so that (A) each holder of a
Right (other than Rights that have been null and void pursuant to Section 11(a)(ii))
shall thereafter have the right to receive, upon the exercise thereof at the
Purchase Price in effect immediately prior to such Person becoming an Acquiring
Person multiplied by the number of one one-thousandths of a share of Preferred
Stock for which a Right would then be exercisable (whether or not such Right
was then exercisable) (each as adjusted thereafter pursuant to Section 11(a)(i),
Section 11(b), Section 11(c), Section 11(f),
Section 11(h), Section 11(i) and Section 11(m)),
in accordance with the terms of this Agreement and in lieu of shares of
Preferred Stock, such number of shares of validly issued, fully paid,
non-assessable and freely tradable Senior Voting Stock (as hereinafter defined)
of the Principal Party (as hereinafter defined) (including the Company as
successor thereto or as the surviving corporation), not subject to any liens,
encumbrances, rights of call or first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying such Purchase Price by
the then number of one one-thousandths of share of Preferred Stock for which a
Right would then be exercisable (whether or not such Right was then
exercisable) (each as adjusted thereafter pursuant to Section 11(a)(i),
Section 11(b), Section 11(c), Section 11(f),
Section 11(h), Section 11(i) and Section 11(m))
and dividing that product by (2) 50% of the current market price per share
of the Senior Voting Stock of such Principal Party (determined in the manner
described in Section 11(d)) on the date of consummation of such
consolidation, merger, sale or transfer; provided that the Purchase Price and
the number of shares of Senior Voting Stock of such Principal Party issuable
upon exercise of each Right shall be further adjusted as provided in Section 11(f) to
reflect any events occurring in respect of such Principal Party after the date
of such consolidation, merger, sale or transfer; (B) the 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, it being specifically
intended that the provisions of Section 11 shall apply to such
Principal Party following the occurrence of such consolidation, merger, sale or
transfer; and (D) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Senior Voting Stock in accordance with Section 9, with each
reference to Preferred Stock in Section 9 being deemed to be a
reference to the shares of its Senior Voting Stock) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Senior Voting Stock thereafter deliverable upon the exercise of
the Rights; provided 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 as provided
in this Section 13(a), such cash, shares, rights, warrants and
other property that such holder would have been entitled to receive had such
holder, at the time of such transaction, owned the Senior Voting Stock 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 

 

26

 

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)           “Principal Party” shall mean (i) in the
case of any transaction described in Section 13(a)(i) or Section 13(a)(ii),
(A) the Person that is the issuer of any securities into which shares of
Common Stock are converted in such merger or consolidation (or, if there is
more than one such issuer, the issuer of such securities that has the greatest
aggregate market value of securities outstanding), or (B) if no securities
are so issued, (1) 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,
such Person who has the greatest aggregate market value of securities
outstanding) or (2) 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 (3) the Person resulting from the
consolidation and (ii) in the case of any transaction described
in Section 13(a)(iii), the Person that is the other party to such
transaction or, if more than one, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction; provided, however, that in any such case, if the
Senior Voting Stock of such Person is not at such time and has not been
continuously over the preceding 12-month period registered under Section 12
of the Exchange Act, then (w) if such Person is a direct or indirect
subsidiary of another Person the Senior Voting Stock of which is and has been
so registered, the term “Principal Party” shall refer to such other
Person; or (x) if such Person is a subsidiary, directly or indirectly, of
more than one Person and the Senior Voting Stock of any two or more of such
Persons is and has been so registered, the term “Principal Party” shall
refer to whichever of such Persons is the issuer of the Senior Voting Stock
having the greatest aggregate market value of shares outstanding; or (y) 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 (w) and (x) above shall apply to
each of the owners having an interest in such joint venture as if such joint
venture were a subsidiary of both or all of such joint venturers and the
Principal Party in each such chain shall bear the obligations set forth in this
Section 13 in the same ratio as their direct or indirect interests
in such joint venture bear to the total of such interests.  “Senior Voting Stock” shall mean the
capital stock (or equity interest) of the Principal Party with the greatest
voting power.

 

(c)           The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such Principal Party or Parties shall have executed and delivered to the Rights
Agent a supplemental agreement providing for the terms set forth in Section 13(a) and
Section 13(b) and further providing that, as soon as
practicable after the date of any consolidation, merger or sale or transfer of
assets mentioned in Section 13(a), the Principal Party or Parties
will (i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, will use its best efforts (A) to cause
such registration statement to become effective as soon as practicable after
such filing, (B) 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 (C) to similarly comply with applicable state securities laws,
and use its best efforts to list (or continue the listing of) the Rights and
the securities purchasable upon exercise of the Rights on a national securities
exchange; (ii) will deliver to holders of the Rights historical financial
statements for the Principal Party or Parties and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10
(or any successor

 

27

 

form) under the Exchange Act
and (iii) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Stock of the Principal Party subject to
purchase upon exercise of outstanding Rights.

 

(d)                                 If the
Principal Party has a provision in any of its authorized securities or in its
certificate of incorporation or by-laws or other instrument 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, shares of Senior Voting Stock or
Senior Voting Stock equivalents of such Principal Party at less than the
then-current market price per share thereof or securities exercisable for, or
convertible into, Senior Voting Stock or Senior Voting Stock equivalents of
such Principal Party at less than such then-current market price or (ii) providing
for any special payment, tax or similar provision in connection with the
issuance of the Senior Voting Stock of such Principal Party pursuant to the
provisions of this Section 13, then, in such event, the Company
hereby covenants and 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 a Person first becomes an Acquiring Person, enter
into any transaction of the kind referred to in this Section 13 if (x) at
the time of such transaction there are any rights, warrants, instruments or
securities outstanding or any agreements or arrangements that, as a result of
the consummation of such transaction, would eliminate or substantially diminish
the benefits intended to be afforded by the Rights, (y) prior to,
simultaneously with or immediately after such transaction, the stockholders of
the Person who constitutes, or would constitute, the Principal Party for
purposes of Section 13(b) shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates or
Associates or (z) the form or nature of organization of the Principal
Party would preclude or limit the exercisability of the Rights.  The provisions of this Section 13
shall similarly apply to successive mergers or consolidations or sales or other
transfers.

 

Section 14.                                      Fractional Rights and Fractional Shares.

 

(a)                                  The Company shall not be required to
issue fractions of Rights or to distribute Right Certificates that 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 ask prices, regular way, in either case (i) as reported by the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange, or (ii) if
the Rights are not listed or 

 

28

 

admitted to trading on the New York Stock Exchange, as
reported by 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 (iii) 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 ask
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use, or (iv) if on any such date the Rights are not quoted
by any such organization, the average of the closing bid and ask prices as
furnished by a professional market maker making a market in the Rights selected
by the Board or (v) if on any such date, no such market maker is making a
market in the Rights, the fair market value of the Rights on such date as
determined in good faith by the Board.

 

(b)                                 The Company shall not be required to
issue fractions of shares of Preferred Stock (other than fractions that are
integral multiples of one one-thousandth of a share of Preferred Stock) upon
exercise or exchange of the Rights or to distribute certificates that evidence
fractional shares of Preferred Stock (other than fractions that are integral
multiples of one one-thousandth of a share of Preferred Stock).  Fractions of shares of Preferred Stock in
integral multiples of one one-thousandth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as beneficial owners of shares of Preferred Stock.  In lieu of fractional shares that are not integral
multiples of one one-thousandth of a share of Preferred Stock, the Company
shall pay to the registered holders of Right Certificates with regard to which
such fractional shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole share of Preferred
Stock.  For purposes of this Section 14(b),
the current market value of a whole share of Preferred Stock shall be the
closing price of a share of Preferred Stock (as determined pursuant to the
second sentence of Section 11(d)(i)) for the Trading Day
immediately prior to the date of such exercise or exchange).

 

(c)                                  The Company shall not be required to
issue fractions of shares of Common Stock upon exercise or exchange of the
Rights or to distribute certificates that evidence fractional shares of Common
Stock.  In lieu of such fractional
shares, the Company shall pay to the registered holders of Right Certificates
with regard to which such fractional shares would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a
whole share of Common Stock.  For
purposes of this Section 14(c), the current market value of a whole
share of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i)) 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 such holder’s right to receive any fractional
Rights or any fractional shares upon exercise of a Right (except as above
provided).

 

(e)                                  Whenever a payment for fractional Rights
or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly
prepare and deliver to the Rights Agent a certificate setting forth in
reasonable detail the facts related to such payments and the prices 

 

29

 

and/or formulas utilized in calculating such payments,
and (ii) provide sufficient monies to the Rights Agent in the form of
fully collected funds to make such payments.

 

Section 15.                                      Rights of Action.  All rights of
action in respect of this Agreement are vested in the respective registered
holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of any certificate evidencing
shares of the Common Stock), without the consent of the Rights Agent or of the
registered holder of any other Right Certificate (or, prior to the Distribution
Date, of any certificate evidencing shares of the Common Stock), may, in such
holder’s own behalf and for such holder’s own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce this Agreement, or otherwise act in respect of such holder’s right to
exercise the Rights evidenced by such Right Certificate (or, prior to the
Distribution Date, by such certificate evidencing the Common Stock) in the
manner provided in such Right Certificate and in this Agreement.  Without limiting the foregoing or any
remedies available to the registered holders of Rights, it is specifically
acknowledged that the registered 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.

 

Notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any registered holder of a Right or other
Person as a result of the Company’s or the Rights Agent’s inability to perform
any of their respective obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, judgment, decree or ruling
(whether interlocutory or final) issued by a court or by a governmental,
regulatory, self-regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation.

 

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
Stock;

 

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

 

(c)                                  the Company and the Rights Agent may deem
and treat the Person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Stock 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
associated Common Stock certificates made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary.

 

30

 

Section 17.                                      Right Certificate Holder Not Deemed a Stockholder. 
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Preferred
Stock or any other securities of the Company that may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 23, Section 24
or Section 25), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.

 

Section 18.                                      Concerning the Rights Agent. 
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 for, and to hold it harmless against, any loss, liability, or
expense (including, without limitation, the reasonable fees and expenses of
legal counsel), incurred without gross negligence, bad faith or willful misconduct
on the part of the Rights Agent for any action taken, suffered or omitted by
the Rights Agent in connection with the acceptance, administration and
performance of its duties under this Agreement, including the costs and
expenses of defending against any claim of liability in the premises and the
enforcement of this indemnification. 
This indemnification shall survive the termination of this Agreement,
the exercise of or expiration of the Rights and the resignation, replacement or
removal of the Rights Agent.

 

The
Rights Agent shall be protected and shall incur no liability for or in respect
of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document 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.

 

Section 19.                                      Merger or Consolidation or Change of Name of Rights
Agent.  Any Person into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any Person resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any Person succeeding to the
appropriate business of the Rights Agent or any successor Rights Agent shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such Person would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21.  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 

 

31

 

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.

 

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 expressly 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 the
legal counsel (who may be legal counsel for the Company), and the advice or
opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken, suffered or omitted by it in
accordance with such advice or 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 Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the Chairman of
the Board, the President, any Vice President, the Treasurer or the Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full and complete authorization and protection to the Rights Agent for any
action taken, suffered or omitted by it under the provisions of this Agreement
in reliance upon such certificate.

 

(c)                                  The Rights Agent shall be liable
hereunder for only its own gross negligence, bad faith or willful
misconduct.  Anything to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, consequential or incidental loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the likelihood of such loss or damage.  Any liability of the Rights Agent under this
Agreement will be limited to the aggregate amount of fees paid by the Company
to the Rights Agent.

 

(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 

 

32

 

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 Rights (including any
Rights becoming null and void pursuant to Section 11(a)(ii)) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Section 3, Section 11, Section 13,
Section 23 or Section 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right Certificates after
actual notice that such change or adjustment is required); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of the Preferred Stock to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of the Preferred Stock 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 the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and such instructions shall be full authorization and protection to the Rights
Agent and the Rights Agent shall not be liable for or in respect of any action
taken, suffered or omitted by it in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions.  The Rights Agent shall be fully authorized
and protected in relying upon the most recent instructions received by any such
officer.  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, suffered or
omitted by the Rights Agent under this Agreement and the date on and/or after
which such action shall be taken or suffered or such omission shall be
effective.  The Rights Agent shall not be
liable for any action taken or suffered 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 (5) Business
Days after the date any officer of the Company actually receives such
application, unless any such officer 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 to be taken,
suffered or omitted.

 

(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
Person.

 

33

 

(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, absent gross
negligence, bad faith or willful misconduct in the selection and continued
employment thereof.

 

(j)                                     If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates that the Rights are
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

 

(k)                                  The Rights Agent shall have no
responsibility to the Company, any holders of Rights or any holders of shares
of Preferred Stock or other securities for interest or earnings on any monies
held by the Rights Agent pursuant to this Agreement, except as otherwise
specifically agreed in a separate writing by the Company and the Rights Agent.

 

(l)                                     The Rights Agent shall not be required to
take notice or be deemed to have notice of any event or condition hereunder,
including, but not limited to, a Distribution Date, a Redemption Date, any
adjustment of the Purchase Price, the existence of an Acquiring Person or any
other event or condition that may require action by the Rights Agent, unless
the Rights Agent shall be specifically notified in writing of such event or
condition by the Company, and all notices or other instruments required by this
Agreement to be delivered to the Rights Agent must, in order to be effective,
be received by the Rights Agent as specified in Section 26, and in
the absence of such notice so delivered, the Rights Agent may conclusively
assume no such event or condition exists.

 

Section 21.                                      Change of Rights Agent.  The Rights
Agent or any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon thirty (30) days’ notice in writing mailed to
the Company and to each transfer agent of the Common Stock and the Preferred
Stock by registered or certified mail. 
In the event the transfer agency relationship in effect between the
Company and the Rights Agent terminates, the Rights Agent will be deemed to
have resigned automatically and be discharged from its duties under this
Agreement as of the effective date of such termination.  The Company may remove the Rights Agent or
any successor Rights Agent upon thirty (30) days’ notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock and the Preferred Stock by registered or
certified mail.  The Company will provide
notice of any resignation (including any automatic resignation) or removal of
any Rights Agent to the holders of the Right Certificates by first class mail
as soon as practicable after such event. 
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit such holder’s Right
Certificate for inspection by the Company), then the registered holder of any
Right 

 

34

 

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 Person (or an Affiliate of such a
Person) organized and doing business under the laws of the United States or of
the State of Texas or the State of  Massachusetts
(or of any other state of the United States so long as such Person is
authorized to do business as a banking institution in the State of Texas or the
State of  Massachusetts), in good standing, that
is authorized under such laws to exercise corporate trust powers or stock
transfer powers and is subject to supervision or examination by federal or
state authority and that 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 predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Right Certificates.  Failure to
give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.

 

Section 22.                                      Issuance of New Right Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company, at its option, may issue new Right Certificates
evidencing Rights in such form as may be approved by the Board 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 Stock following the Distribution Date and prior to the
Expiration Date, the Company may, with respect to shares of Common Stock so
issued or sold pursuant to (a) the exercise of stock options, (b) under
any employee plan or arrangement, (c) the exercise, conversion or exchange
of securities, notes or debentures issued by the Company or (d) a
contractual obligation of the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale.

 

Section 23.                                      Redemption.

 

(a)                                  The Board (with the concurrent approval
by a majority of the members of the Special Independent Committee) may, at its
option, at any time prior to the Shares Acquisition Date, redeem all but not
less than all of the then outstanding Rights at a redemption price of $0.001
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the Record Date (such redemption price
being hereinafter referred to as the “Redemption Price”).  The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board in
its sole discretion may establish.  The
Company may, at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the current market price of the Common Stock at the time of
redemption as determined pursuant to Section 11(d)(i)) or any other
form of consideration deemed appropriate by the Board, or any combination
thereof.

 

35

 

(b)                                 If the Company receives a Qualified Offer
and the Board has not redeemed the outstanding Rights or exempted such
Qualified Offer from the terms of this Agreement or called a special meeting of
stockholders for the purpose of voting on whether or not to exempt such
Qualified Offer from the terms of this Agreement, in each case by the end of
ninety (90) days following the commencement of such Qualified Offer, and if the
Company receives, not earlier than ninety (90) days nor later than one hundred
twenty (120) days following the commencement of such Qualified Offer, a written
notice complying with the terms of this Section 23(b) (the “Special
Meeting Notice”), properly executed by the holders of record (or their duly
authorized proxy) of 10% or more of the shares of Common Stock then outstanding
(excluding shares of Common Stock beneficially owned by the Person making the
Qualified Offer and such Person’s Affiliates and Associates), directing the
Board to submit to a vote of stockholders at a special meeting of the
stockholders of the Company (a “Special Meeting”) a resolution
authorizing the redemption of all, but not less than all, of the then outstanding
Rights at the Redemption Price (the “Redemption Resolution”), then the
Board shall take such actions as are necessary or desirable to cause the
Redemption Resolution to be submitted to a vote of stockholders within ninety
(90) Business Days following receipt by the Company of the Special Meeting
Notice (the “Special Meeting Period”), including by including a proposal
relating to adoption of the Redemption Resolution in the proxy materials of the
Company for the Special Meeting; provided, however, that if the
Company, at any time during the Special Meeting Period and prior to a vote on
the Redemption Resolution, enters into a Definitive Acquisition Agreement, the
Special Meeting Period may be extended (and any Special Meeting called in
connection therewith may be cancelled) if the Redemption Resolution will be
separately submitted to a vote at the same meeting as the Definitive
Acquisition Agreement.  For purposes of a
Special Meeting Notice, the record date for determining eligible holders of
record of the Common Stock shall be the ninetieth (90th) day following the commencement of a Qualified
Offer.  Any Special Meeting Notice must
be delivered to the Secretary of the Company at the principal executive offices
of the Company and must set forth, as to the stockholders of record executing
such Special Meeting Notice, (i) the name and address of such
stockholders, as they appear on the Company’s books and records, (ii) the
number of shares of Common Stock that are owned of record by each of such
stockholders and (iii) in the case of Common Stock that is owned
beneficially by another Person, an executed certification by the holder of
record that such holder has executed such Special Meeting Notice only after
obtaining instructions to do so from such beneficial owner.  Subject to the requirements of applicable
law, the Board may take a position in favor of or opposed to the adoption of
the Redemption Resolution, or no position with respect to the Redemption
Resolution, as it determines to be appropriate in the exercise of its fiduciary
duties.  In the event that (A) no
Person has become an Acquiring Person prior to the effective date of redemption
referred to below in this sentence, (B) the Qualified Offer continues to
be a Qualified Offer prior to the last day of the Special Meeting Period (the “Outside
Meeting Date”) and (C) either (1) the Special Meeting is not held
on or prior to the Outside Meeting Date or (2) at the Special Meeting at
which a quorum is present, the holders of a majority of the shares of Common
Stock outstanding as of the record date for the Special Meeting selected by the
Board (excluding shares of Common Stock beneficially owned by the Person making
the Qualified Offer and such Person’s Affiliates and Associates) vote in favor
of the Redemption Resolution, then all of the Rights shall be deemed redeemed
at the Redemption Price by such failure to hold the Special Meeting or as a
result of the adoption of the Redemption Resolution by the stockholders of the
Company (or the Board shall take such other action as may be necessary to
prevent the existence 

 

36

 

of the Rights from interfering with the consummation
of the Qualified Offer), such redemption to be effective, as the case may be, (x) as
of the close of business on the Outside Meeting Date  if
a Special Meeting is not held on or prior to such date or (y) if a Special
Meeting is held on or prior to the Outside Meeting Date, as of the date on
which the results of the vote adopting the Redemption Resolution at the Special
Meeting are certified as official by the appointed inspectors of election for
the Special Meeting.

 

(c)                                  Immediately upon the action of the Board
ordering the redemption of the Rights pursuant to Section 23(a) or
the effectiveness of a redemption of the Rights pursuant to Section 23(b),
in either case, without any further action and without any notice, the right to
exercise the Rights will terminate and each Right will thereafter represent
only the right to receive the Redemption Price. 
The Company shall promptly give public notice of any such redemption
and, within ten (10) days after such action causing a redemption of the
Rights pursuant to Section 23(a) or Section 23(b),
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 Stock.  Any notice that is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made.  Notwithstanding the foregoing, the
failure to give, or any defect in, any notice required to be made or given
pursuant to this Section 23(c) shall not affect the validity
of the redemption of the Rights.

 

(d)                                 Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights
at any time in any manner other than that specifically set forth in this Section 23
or in Section 24, and other than in connection with the repurchase
of Common Stock prior to the Distribution Date.

 

Section 24.                                      Exchange.

 

(a)                                  The Board may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 11(a)(ii))
for shares of Common Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the Record Date (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board
shall not be empowered to effect such exchange at any time after any Acquiring
Person, together with all Affiliates and Associates of such Acquiring Person,
becomes the Beneficial Owner of 50% or more of the voting power of the shares
of Common Stock then outstanding.  From
and after the occurrence of an event specified in Section 13(a),
any Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be only exercisable in accordance with Section 13 and
may not be exchanged pursuant to this Section 24(a).  The exchange of the Rights by the Board may
be made effective at such time, on such basis and with such conditions as the
Board in its sole discretion may establish.

 

(b)                                 Immediately upon the effectiveness of the
action of the Board ordering the exchange of any Rights pursuant to Section 24(a) and
without any further action and without any 

 

37

 

notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange.  The Company promptly shall
mail a notice of any such exchange by first class mail to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent.  Any notice that 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 Common Stock
for Rights will be effected and, in the event of any partial exchange, the
number of Rights that will be exchanged. 
Any partial exchange shall be effected pro rata based on the number of
Rights (other than Rights that have become null and void pursuant to the
provisions of Section 11(a)(ii)) held by each holder of Rights.

 

(c)                                  The Company may, at its option,
substitute for a share of Common Stock issuable upon the exchange of Rights in
accordance with Section 24(a) a number of shares of Preferred
Stock (or equivalent preferred stock) or fraction thereof such that the current
market price per share of one share of Preferred Stock (or equivalent preferred
stock) multiplied by such number or fraction is equal to the current market
price per share of Common Stock as of the date of such exchange.  In the event that there shall be insufficient
shares of Common Stock issued but not outstanding or authorized but unissued
(and unreserved) to permit an exchange of Rights in accordance with Section 24(a),
the Company shall substitute, to the extent of such insufficiency, for each
share of Common Stock that would otherwise be issuable upon the exchange of
Rights in accordance with Section 24(a) a number of shares of
Preferred Stock (or equivalent preferred stock) or fraction thereof such that
the current market price per share of one share of Preferred Stock (or
equivalent preferred stock) multiplied by such number or fraction is equal to
the current market price per share of Common Stock as of the date of such
exchange.

 

Section 25.                                      Notice of Certain Events. 
In case the Company shall propose at any time following the Distribution
Date (a) to pay any dividend payable in stock of any class to the holders
of its Preferred Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last cash dividend theretofore paid), (b) to
offer to the holders of its Preferred Stock rights or warrants to subscribe for
or to purchase any additional shares of the Preferred Stock or shares of stock
of any class or any other securities, rights or options, (c) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision or combination of outstanding Preferred Stock), (d) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) to, any
other Person, (e) to effect the liquidation, dissolution or winding up of
the Company or (f) to declare or pay any dividend on the shares of Common
Stock payable in shares of Common Stock or to effect a subdivision, combination
or consolidation of the shares of Common Stock (by reclassification or otherwise
than by payment of dividends in shares of Common Stock), then, in each such
case, the Company shall give to each holder of a Right Certificate, in
accordance with Section 26, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,

 

38

 

consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Stock and/or the Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least ten (10) days
prior to the record date for determining holders of the Preferred Stock for
purposes of such action, and in the case of any such other action, at least ten
(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 Stock and/or the
Preferred Stock, whichever shall be the earlier.  In case the event set forth in Section 11(a)(ii) or
Section 13 shall occur, then the Company shall as soon as
practicable thereafter give to each holder of a Right, in accordance with Section 26,
a notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) or
Section 13, as applicable.

 

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 overnight delivery service or first class
mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:

 

Idearc Inc.

2200 West Airfield
Drive

D/FW Airport,
Texas 75261

Attention:  Corporate Secretary

 

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

 

Computershare
Trust Company, N.A.

250 Royall Street

Canton, Massachusetts 02021

Attention:  Client Services

 

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 overnight delivery
service or first class mail, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the Company.

 

Section 27.                                      Supplements and Amendments. 
Except as otherwise provided in this Section 27, for so long
as the Rights are then redeemable, the Company may from time to time in its
sole and absolute discretion, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this Agreement in any respect
without the approval of any holders of the Rights.  At any time when the Rights are no longer
redeemable, except as otherwise provided in this Section 27, the Company
(by action of the Board) may, and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights in order to (a) cure any ambiguity, (b) correct or
supplement 

 

39

 

any provision contained herein that may be defective
or inconsistent with any other provisions herein, (c) shorten or lengthen
any time period hereunder or (d) change or supplement the provisions
hereunder in any manner that the Company may deem necessary or desirable; provided,
however, that at any time when the Rights are no longer redeemable, this
Agreement shall not be supplemented or amended in any manner that would
adversely affect the interests of the holders of Rights (which shall not
include Rights that have become null and void pursuant to the provisions of Section 11(a)(ii))
as such, cause this Agreement to become amendable other than in accordance with
this Section 27 or cause the Rights to again become redeemable.  Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment; provided that such
supplement or amendment does not adversely affect the rights, duties or
obligations of the Rights Agent under this Agreement.

 

Notwithstanding anything contained in this Agreement
to the contrary, the Rights Agent may, but shall not be obligated to, enter
into any supplement or amendment that affects the Rights Agent’s own rights,
duties, obligations or immunities under this Agreement.

 

Notwithstanding anything contained in this Agreement
to the contrary, no amendment to Section 1(t), and no other
supplement or amendment to this Agreement that specifically relates to one or
more Grandfathered Persons, may be effected without the approval of a majority
of the members of the Special Independent Committee.

 

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

 

Section 29.                                      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 registered holders of
the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock).  Notwithstanding
anything to the contrary set forth in this Agreement, Paulson shall be an
intended third party beneficiary with respect to Section 1(t).

 

Section 30.                                      Determinations and Actions by the Board. 
The Board shall have the exclusive power and authority to administer
this Agreement and to exercise the rights and powers specifically granted to
the Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (a) interpret the provisions of this Agreement and (b) make
all determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights, to exchange or not exchange the Rights, or to amend this
Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) that are
done or made by the Board in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights 

 

40

 

Agent, the holders of the Rights, as such, and all
other Persons and (y) not subject the Board to any liability to the
holders of the Rights or any other Person.

 

Section 31.                                      Severability.  If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board determines in its good faith
judgment that severing the invalid language from this Agreement would adversely
affect the purpose or effect of this Agreement, the right of redemption set
forth in Section 23 shall be reinstated (with prompt notice to the
Rights Agent) and shall not expire until the close of business on the tenth (10th) Business Day following the date of such
determination by the Board.  Without
limiting the foregoing, if any provision requiring a specific group of
directors of the Company to act is held by any court of competent jurisdiction
or other governmental or judicial authority to be invalid, void or
unenforceable, such determination shall then be made by the full Board in
accordance with applicable law and the Company’s Amended and Restated
Certificate of Incorporation and Amended and Restated By-laws (as each may be
amended from time to time).

 

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 Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.

 

Section 33.                                      Descriptive Headings; References. 
Descriptive headings of the several sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof. 
Except as otherwise specifically provided, any reference to any section
or exhibit will be deemed to refer to such section of or exhibit to this
Agreement.

 

Section 34.                                      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 35.                                      Force Majeure. 
Notwithstanding anything to the contrary contained herein, the Rights
Agent shall not be liable for any delays or failures in performance resulting
from acts beyond its reasonable control including, without limitation, acts of
God, terrorist acts, shortage of supply, breakdowns or malfunctions,
interruptions or malfunction of computer facilities, or loss of data due to
power failures or mechanical difficulties with information storage or retrieval
systems, labor difficulties, war, or civil unrest.

 

{Remainder
of Page Left Intentionally Blank}

 

41

 

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

 

	
  Attest:

  	
  IDEARC
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  COMPUTERSHARE
  TRUST COMPANY, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

42

 

Exhibit A

 

Form of
Certificate of Designations of Series A Junior Participating Preferred
Stock of Idearc Inc.

 

{See Attached}

 

 

Exhibit B

 

Form of Right Certificate
 

	
  Certificate No. R-                

  	
                   Rights

  

 
NOT EXERCISABLE AFTER                        , 2012 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT, AT THE OPTION OF THE COMPANY, TO REDEMPTION AT $0.001 PER RIGHT OR TO EXCHANGE, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS AND THEIR AFFILIATES AND ASSOCIATES (AS SUCH TERMS ARE DEFINED IN SECTION 1 OF THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
 

Right Certificate

 

IDEARC 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 Rights Agreement dated as of                 
      , 2009  (the “Rights Agreement”) between IDEARC INC., a Delaware corporation (the “Company”),
and Computershare Trust Company, N.A., a national banking association (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 the close
of business (as such term is defined in the Rights Agreement) on                 
      , 2012 at the office of the Rights Agent,
or its successors as Rights Agent, designated for such purposes, one
one-thousandth of one fully paid and non-assessable share of the Series A
Junior Participating Preferred Stock (the “Preferred Stock”) of the
Company, at a purchase price of $        .00  per one one-thousandth of one share (the “Purchase Price”),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.  The
number of Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a share of Preferred Stock that 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                 
      , 2009, based on the shares of the
Preferred Stock of the Company as constituted at such date.

 

As
provided in the Rights Agreement, the Purchase Price, the number and kind or
class of shares of stock of the Company that may be purchased upon the exercise
of the Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.

 

1

 

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 office of the Rights
Agent.

 

This
Right Certificate, with or without other Right Certificates, upon surrender at
the office of the Rights Agent designated for such purposes, 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 the 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 may, but are not required to, be (i) redeemed by the Company
at its option at a redemption price of $0.001 per Right or (ii) exchanged
by the Company in whole or in part for shares of Preferred Stock or Common
Stock, par value $0.01 per share, of the Company.

 

No
fractional shares of the Preferred Stock or Common Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions that
are integral multiples of one one-thousandth of one 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 Right Certificate shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of the Preferred Stock or of any other
securities of the Company that may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right Certificate
shall have been exercised as provided in the Rights Agreement.

 

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

 

2

 

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

 

Dated
as of                               ,
20        .

 

	
  Attest:

  	
  IDEARC
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  COMPUTERSHARE
  TRUST COMPANY, N.A.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signature

  	
   

  	
   

  	
   

  
						

 

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)

 

FOR
VALUE RECEIVED                                                                                         
hereby sells, assigns and transfers unto                                                                                                                                                                                                                

 

(Please print name and
address of transferee)

 

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

 

Dated:                                
      , 20   

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

(Signature must conform in all respects to the name
of holder as written upon the face  of
this Right Certificate, without alteration or enlargement or any change
whatsoever.)

 

 

Signature Guaranteed:

 

Signatures
must be guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended.

 

 

(to be completed
if applicable)

 

The
undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

4

 

FORM OF ELECTION TO PURCHASE

 

(To be executed by
the registered holder if such holder desires to exercise the Right Certificate)

 

TO:  IDEARC INC.

 

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

 

	
  [Please insert social
  security or other identifying number]

  	
   

  

 

 

(Please print name
and address)

 

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

 

	
  [Please insert social
  security or other identifying number]

  	
   

  

 

 

(Please print name
and address)

 

Dated:                                
      , 20       

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

(Signature must conform in all respects to the name
of holder as written upon the face of this Right Certificate, without
alteration or enlargement or any change whatsoever.)

 

 

Signature Guaranteed:

 

Signatures
must be guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended.

 

 

(to be completed
if applicable)

 

The
undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

5

 

Exhibit C

 

IDEARC INC.

 

SUMMARY OF RIGHTS
TO PURCHASE PREFERRED STOCK

 

On                 
      , 2009, the Board of Directors of IDEARC INC. (the “Company”) declared a
dividend distribution of one preferred stock purchase right (a “Right”)
for each outstanding share of common stock, $0.01 par value, of the Company (the “Common
Stock”).  The distribution is payable
at 5:00 p.m., Eastern time, on                 
      , 2009 to the stockholders of record at 5:00 p.m.,
Eastern time, on                 
      , 2009 (the “Record Date”).  Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share of the Company’s Series A
Junior Participating Preferred Stock (the “Preferred Stock”) at a price
of $        .00 per one one-thousandth
of a share of Preferred Stock (the “Purchase Price”), subject to
adjustment.  The description and terms of
the Rights are set forth in a Rights Agreement dated                 
      , 2009 (the “Rights Agreement”),
between the Company and Computershare Trust Company, N.A., as Rights Agent (the
“Rights Agent”).

 

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                 
      , 2009. 
Copies of the Rights Agreement are available free of charge from the
Rights Agent, Computershare Trust Company, N.A. 
The following summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.

 

Until the close of
business on 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 with a copy of this Summary of Rights.  The “Distribution Date” will be the
earlier to occur of (i) the tenth (10th)
day following a public announcement that a person or group of affiliated or
associated persons (an “Acquiring Person”) has acquired beneficial
ownership (which includes for this purpose stock referenced in derivative
transactions and securities) of 20% or more of the outstanding shares of the
Common Stock (the “Shares Acquisition Date”) or (ii) the tenth (10th) business day (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 or associated persons becomes an Acquiring Person) after
the commencement of, or announcement of an intention to commence, a tender
offer or exchange offer the consummation that would result in any person
becoming an Acquiring Person.  The
several investment funds and accounts managed by Paulson & Co. Inc.,
together with any affiliates thereof (collectively, “Paulson”) will not
be deemed to be an “Acquiring Person” so long as Paulson does not beneficially
own more than a specified percentage of the outstanding shares of the Common
Stock (which percentage will in no event exceed 45%) and meets certain other
conditions specified in the Rights Agreement.

 

The Rights Agreement
provides that, until the Distribution Date (or earlier redemption or expiration
of the Rights), the Rights will be transferable only in connection with the
transfer of the Common Stock.  Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new 

 

1

 

issuance of the Common
Stock, will contain a notation incorporating the Rights Agreement by
reference.  Until the Distribution Date
(or earlier redemption or expiration of the Rights), the surrender for transfer
of any of the Common Stock certificates outstanding as of the Record Date, even
without a copy of this Summary of Rights, will also constitute the transfer of
the Rights associated with the 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.

 

The Rights are not
exercisable until the Distribution Date. 
The Rights will expire on the earlier of (i)                 
      , 2012 and (ii)                 
      , 2010, if and only if Stockholder Approval
has not been obtained on or prior to such date (as applicable, the “Expiration
Date”), unless the Expiration Date is extended or unless earlier redeemed
or exchanged by the Company, in each case as described below.

 

Each share of Preferred
Stock purchasable upon exercise of the Rights will have a preferential
quarterly dividend rate equal to the greater of $1.00  per share and 1,000 times the dividend
declared on one share of the Common Stock. 
In the event of liquidation, the holders of the Preferred Stock will
receive a preferential liquidation payment of $1,000 per share plus accrued and
unpaid dividends thereon, but will be entitled to receive an aggregate
liquidation payment equal to 1,000 times the payment made on one 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 shares of Common Stock are
exchanged, each share of Preferred Stock will be entitled to receive 1,000
times the amount received per one share of Common Stock.  The Rights are protected by customary
anti-dilution provisions.  Because of the
nature of the Preferred Stock 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.

 

The Purchase Price
payable, and the number of shares of the 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) upon
the grant to holders of the Preferred Stock of certain rights or warrants to
subscribe for shares of the 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 periodic cash dividends out of earnings or retained
earnings at a rate not in excess of 125% of the rate of the last cash dividend
theretofore paid or dividends payable in the Preferred Stock) or of
subscription rights or warrants (other than those referred to above).

 

The number of outstanding
Rights and the number of one one-thousandths of a share of Preferred Stock
issuable upon exercise of each Right are also subject to adjustment in the
event of a stock split of the Common Stock or a stock dividend on the Common
Stock payable in 

 

2

 

shares of Common Stock or
subdivisions, consolidations or combinations as of the Common Stock occurring,
in any such case, prior to the Distribution Date.

 

In the event that the
Company is acquired in a merger or other business combination transaction or
50% or more of its assets or earning power are sold after a person or group has
become an Acquiring Person, proper provision will be made so that each holder
of a Right will thereafter have the right to receive, upon the exercise thereof
at the Purchase Price, that number of shares of the senior voting stock of the
acquiring company that at the time of such transaction would have a market
value of two times the Purchase Price.  In
the event that any person or group of affiliated or associated persons becomes
an Acquiring Person, proper provision will be made so that each holder of a
Right, other than Rights that were or are beneficially owned by the Acquiring
Person (which will thereafter be null and void), will thereafter have the right
to receive upon exercise that number of shares of the Common Stock having a
market value of two times the Purchase Price.

 

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 that 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 market price of the Preferred
Stock or Common Stock, as applicable, on the last trading date prior to the
date of exercise.

 

At any time after any
person or group becomes an Acquiring Person and prior to the acquisition by
such person or group of 50% or more of the outstanding shares of Common Stock,
the Board may exchange the Rights (other than Rights owned by such person or
group that will have become null and void) in whole or in part, at an exchange
ratio of one share of Common Stock (or, if there is an insufficient number of
issued but not outstanding or authorized but unissued shares of Common Stock to
permit such exchange, then one one-thousandth of a Preferred Share) per Right
(subject to adjustment).

 

At any time prior to 5:00 p.m.,
Eastern time, on the earlier of (i) the Shares Acquisition Date and (ii) the
Expiration Date, the Board may redeem the Rights in whole, but not in part, at
a price of $0.001 per Right (the “Redemption Price”).  In addition, if a Qualified Offer (as
described below) is made, the record holders of 10% or more of the outstanding
shares of Common Stock may direct the Board to call a special meeting of stockholders
to consider a resolution authorizing a redemption of all Rights.  If the special meeting is not held within
ninety (90) days of being called or if, at the special meeting, the holders of
a majority of the shares of Common Stock outstanding (other than shares held by
the offeror and its affiliated and associated persons) vote in favor of the
redemption of the Rights, then the Board will redeem the Rights or take such
other action as may be necessary to prevent the Rights from interfering with
the consummation of the Qualified Offer.

 

A Qualified Offer is an
offer determined by a majority of the independent directors on the Board to be
a fully financed offer for all outstanding shares of Common Stock at a per
share offer price that exceeds the greatest of certain price thresholds
specified in the Rights Agreement and that the Board, upon the advice of a
nationally recognized investment banking firm, does not 

 

3

 

deem to be either unfair
or inadequate.  A Qualified Offer is
conditioned upon a minimum of at least two-thirds of the outstanding shares of
Common Stock not held by the offeror (and its affiliated and associated
persons) being tendered and not withdrawn, with a commitment to acquire all
shares of Common Stock not tendered for the same consideration.  If the Qualified Offer includes non-cash
consideration, such consideration must consist solely of freely-tradeable
common stock of a publicly traded company, and the board and its
representatives must be given access to conduct a due diligence review of the
offeror to determine whether the consideration is fair and adequate.  A Qualified Offer must also remain open for
at least one hundred twenty (120) days following commencement.

 

Immediately upon the
action of the Board to redeem or exchange the Rights, the Company shall make
announcement thereof, and upon such action, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price, or the shares of Common Stock or Preferred Stock
exchangeable for the Rights, as applicable.

 

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

 

4

 

EXHIBIT F

 

 

 

AMENDED
AND RESTATED BY-LAWS

 

OF

 

IDEARC
INC.

 

 

Effective
as of December [    ], 2009

 

 

 

 

AMENDED
AND RESTATED BY-LAWS

 

OF

 

IDEARC
INC.

 

Table of Contents

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Article I

  	
  Offices and Fiscal Year

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Registered Office

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.02.

  	
  Other Offices

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.03.

  	
  Fiscal Year

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Article II 

  	
  Stockholders

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Place of Meeting

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.02.

  	
  Annual Meetings

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.03.

  	
  Special Meetings

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.04.

  	
  Notice of Meeting

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.05.

  	
  Director Nominations
  and Other Business

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.06.

  	
  Quorum, Adjournment and
  Manner of Acting

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.07.

  	
  Treasury Stock

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.08.

  	
  Organization

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.09.

  	
  Conduct of Business

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.10.

  	
  Voting

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.11.

  	
  Voting Lists

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.12.

  	
  Inspectors of Election

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Article III 

  	
  Board of Directors

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Powers

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.02.

  	
  Number

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.03.

  	
  Term of Office

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.04.

  	
  Vacancies

  	
   

  	
  10

  
					

 

i

 

	
  Section 3.05.

  	
  Removal

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.06.

  	
  Resignations

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.07.

  	
  Organization

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.08.

  	
  Place of Meeting

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.09.

  	
  Regular Meetings

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.10.

  	
  Special Meetings

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.11.

  	
  Notice

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.12.

  	
  Quorum, Manner of
  Acting and Adjournment

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.13.

  	
  Unanimous Written
  Consent

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.14.

  	
  Conference Telephone
  Meetings

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.15.

  	
  Committees of the Board

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.16.

  	
  Compensation

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.17.

  	
  Chairman of the Board

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.18.

  	
  Institutional Nominated
  Director

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Article IV 

  	
  Officers

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Officers

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.02.

  	
  Election and Term of
  Office

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.03.

  	
  Removal and Resignation

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.04.

  	
  Vacancies

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.05.

  	
  Compensation

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.06.

  	
  Chief Executive Officer

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.07.

  	
  President

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.08.

  	
  Vice Presidents

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.09.

  	
  Secretary

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.10.

  	
  Treasurer

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.11.

  	
  Assistant Secretaries
  and Assistant Treasurers

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Article V 

  	
  Stock

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Uncertificated Shares

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.02.

  	
  Transfer

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.03.

  	
  Lost, Stolen, Destroyed
  or Mutilated Certificates

  	
   

  	
  15

  
					

 

ii

 

	
  Section 5.04.

  	
  Record Holder of Shares

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.05.

  	
  Record Date

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VI 

  	
  Indemnification

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Right to
  Indemnification

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.02.

  	
  Presumptions and Effect
  of Certain Proceedings

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.03.

  	
  Advancement of Expenses

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.04.

  	
  Remedies of the
  Indemnitee

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.05.

  	
  Definitions

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.06.

  	
  Insurance

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.07.

  	
  Scope of
  Indemnification

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.08.

  	
  Reliance on Provisions

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.09.

  	
  Indemnification of
  Other Employees

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.10.

  	
  Severability

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.11.

  	
  Contract Rights

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VII 

  	
  General Provisions

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Dividends

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.02.

  	
  Contracts

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.03.

  	
  Proxies

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.04.

  	
  Corporate Seal

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.05.

  	
  Facsimile Signatures

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.06.

  	
  Checks, Notes, Etc

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.07.

  	
  Reliance upon Books,
  Reports and Records

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.08.

  	
  Waiver of Notice

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.09.

  	
  Corporate Records

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.10.

  	
  Amendment of By-laws

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.11.

  	
  Approval of Independent Directors

  	
   

  	
  22

  
					

 

iii

 

AMENDED AND RESTATED BY-LAWS

 

OF

 

IDEARC INC.

 

(a
Delaware corporation)

 

ARTICLE I

OFFICES AND FISCAL YEAR

 

Section 1.01.          Registered Office.  The corporation’s registered office in the
State of Delaware is The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. 
The name of its registered agent at such address is The Corporation
Trust Company.  The registered office
and/or registered agent of the corporation may be changed from time to time by
resolution of the board of directors and a certificate certifying the change is
filed in the manner provided by applicable law.

 

Section 1.02.          Other Offices.  The corporation may also have offices at such
other places, either within or without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation
may require.

 

Section 1.03.          Fiscal Year.  The fiscal year of the corporation will end
on the 31st day of December of each year, or such
other period as determined by resolution of the board of directors.

 

ARTICLE II

STOCKHOLDERS

 

Section 2.01.          Place of Meeting.  All meetings of the stockholders will be held
at such place, if any, within or without the State of Delaware as may be
designated by the board of directors in the notice of such meeting.

 

Section 2.02.          Annual Meetings.  The board of directors will fix and designate
the date and time of the annual meeting of the stockholders.  At said meeting the stockholders then
entitled to vote shall elect directors and shall transact such other business
properly brought before the meeting.

 

Section 2.03.          Special Meetings.

 

(a)           Except as otherwise required by
applicable law or provided in the certificate of incorporation, special
meetings of stockholders may be called at any time by the board of directors
pursuant to a resolution approved by a majority of the entire board of
directors or as provided in Section 2.03(b) of these by-laws, and
special meetings of stockholders may not be called by any other person or
persons.

 

(b)           Special meetings of stockholders
shall be called by the board of directors upon written request to the secretary
of the corporation by one or more record holders of shares of the corporation’s
stock representing in the aggregate not less than twenty percent (20%) of the
total number of shares of stock entitled to vote on the matter or matters to be
brought before the proposed special meeting

 

 

(collectively, an “Eligible Stockholder”).  A request to the secretary of the corporation
shall be signed by the Eligible Stockholder, or a duly authorized agent(s) of
such Eligible Stockholder, requesting the special meeting and shall comply with
the other notice procedures set forth in section 2.05(b)(ii) of these
by-laws.  Any special meeting request by
an Eligible Stockholder that does not comply with the provisions of this
section 2.03(b) and section 2.05(b)(ii) will be denied.

 

(c)           A special meeting of stockholders
requested by an Eligible Stockholder in accordance with section 2.03(b) of
these by-laws shall be held at such date, time and place within or without the
state of Delaware as may be fixed by the board of directors; provided, however,
that the date of any such special meeting shall be not more than ninety (90)
days after the request to call the special meeting is received by the secretary
of the corporation.  Notwithstanding the
foregoing, a special meeting of stockholders requested by an Eligible
Stockholder shall not be held if the board of directors has called or calls for
an annual meeting of stockholders to be held within ninety (90) days after the
secretary of the corporation receives the request for the special meeting and
the board of directors determines in good faith that the business of such
annual meeting includes (among any other matters properly brought before the
annual meeting) the business specified in the request.  A stockholder may revoke a request for a
special meeting of stockholders at any time by written revocation delivered to
the secretary of the corporation, and if, following such revocation, there are
un-revoked requests from stockholders holding in the aggregate less than the
requisite number of shares entitling the Eligible Stockholder to request the
calling of a special meeting of stockholders, the board of directors, in its
discretion, may cancel the special meeting of stockholders.  Business transacted at a special meeting of
stockholders requested by an Eligible Stockholder shall be limited to the
matters described in the special meeting request; provided, however that
nothing herein shall prohibit the board of directors from submitting matters to
the stockholders at any special meeting of stockholders requested by an
Eligible Stockholder.

 

Section 2.04.          Notice of Meeting.

 

(a)           Notices.  All notices of meetings of stockholders will
be sent or otherwise given in accordance with section 2.04(b) of these
by-laws not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The notice will specify the place (if any), date, and hour
of the meeting and the means of remote communications, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at
the meeting and (i) in the case of a special meeting, the general nature
of the business to be transacted (no business other than that specified in the
notice may be transacted) or (ii) in the case of the annual meeting, those
matters which the board of directors, at the time of giving the notice, intends
to present for action by the stockholders (but any other matter properly
presented at the meeting may be submitted for stockholder action). The notice
of any meeting at which directors are to be elected will include the name of
any nominee or nominees who, at the time of the notice, the board of directors
intends to present for election.

 

(b)           Manner of Giving Notice;
Affidavit of Notice. Notice of any meeting of stockholders will be
given either personally, by mail, express mail, courier service or, with the
actual or constructive consent of the stockholder entitled to receive such
notice, by facsimile, electronic mail or other means of electronic
transmission. If sent by mail, express mail or courier service, such notice
will be sent, postage or charges prepaid and addressed to the stockholder at
the address of that stockholder appearing on the books of the corporation or
given by the stockholder to the corporation for the purpose of notice, and such
notice will be deemed to have been given. Notice given by electronic
transmission pursuant to this subsection will be deemed given: (i) if by
facsimile telecommunication, when directed to a facsimile telecommunication
number at which the stockholder has actually or

 

2

 

constructively consented to
receive notice; (ii) if by electronic mail, when directed to an electronic
mail address at which the stockholder has actually or constructively consented
to receive notice; (iii) if by posting on an electronic network together
with separate notice to the stockholder of such specific posting, upon the
later of (A) such posting and (B) the giving of such separate notice,
and (iv) if by any other form of electronic transmission, when directed to
the stockholder.

 

An affidavit of the mailing
or other means of giving any notice of any stockholders’ meeting, executed by
the secretary, assistant secretary or any transfer agent or mailing agent of
the corporation giving the notice, will be prima facie evidence of the giving
of such notice or report.

 

Section 2.05.          Director Nominations and Other
Business.

 

(a)           Annual Meetings of
Stockholders.

 

(i)            Nominations of persons for election
to the board of directors of the corporation and the proposal of other business
to be considered by the stockholders may be made at an annual meeting of
stockholders only (A) pursuant to the corporation’s notice of meeting (or
any supplement thereto), (B) by or at the direction of the board of
directors pursuant to a resolution approved by a majority of the entire board
of directors, or (C) by any stockholder of the corporation who (1) was
a stockholder of record of the corporation at the time the stockholder notice
provided for in this section 2.05 is delivered to the secretary of the
corporation and at the time of the annual meeting, (2) shall be entitled
to vote at such annual meeting, and (3) complies with the notice
procedures set forth in this section 2.05(a) as to such director
nomination or other business; clause (C) above shall be the exclusive
means for a stockholder to make director nominations or submit business (other
than matters properly brought under Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) before an annual meeting
of stockholders.

 

(ii)           For director nominations or any other
business to be properly brought before an annual meeting by a stockholder
pursuant to section 2.05(a)(i)(C) above, the stockholder, in addition to
any other applicable requirements, must have given timely notice thereof in
writing to the secretary of the corporation and any such proposed business must
constitute a proper matter for stockholder action.  To be timely, a stockholder notice must be
delivered to the secretary of the corporation at the principal executive
offices of the corporation not later than the close of business on the
ninetieth (90th)  day nor earlier
than the close of business on the one
hundred twentieth (120th) day prior to the first anniversary of the
preceding year’s annual meeting (provided, however, that in the event that the
date of the annual meeting is more than thirty (30) days before or more than
sixty (60) days after such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day
prior to such annual meeting and not later than the close of business on the
later of (A) the ninetieth (90th)
day prior to the date of such annual meeting, or (B) the twentieth (20th)
day following the day on which public announcement of the date of such annual
meeting is first made by the corporation). 
In no event shall any adjournment or postponement of the annual meeting
of stockholders or the announcement thereof commence a new time period (or
extend any time period) for the giving of a stockholder notice as described
above.

 

(iii)          For director nominations or any other
business to be properly brought before an annual meeting by a stockholder
pursuant to section 2.05(a)(i)(C) above, the stockholder notice must also
be in proper form.  To be in proper form,
the stockholder notice (whether pursuant to this section 2.05(a) or
section 2.05(b) below) must be in writing and:

 

3

 

(A)          As to each person, if
any, whom the stockholder proposes to nominate for election as a director of
the corporation, (1) set forth all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to and in accordance with Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder, (2) include such person’s written
consent to being named in the proxy statement as a director nominee and to
serve as a director if elected, (3) set forth a description of all direct
and indirect compensation and other material monetary agreements, arrangements
and understandings and any other material relationships, between or among such
stockholder and beneficial owner, if any, and their respective affiliates and
associates, or others acting in concert therewith, on the one hand, and each
proposed nominee, and his or her respective affiliates and associates, or
others acting in concert therewith, on the other hand, including, without
limitation, all information that would be required to be disclosed pursuant to
Item 404 of Regulation S-K if the stockholder making the nomination and any
beneficial owner on whose behalf the nomination is made, if any, or any
affiliate or associate thereof or person acting in concert therewith, were the “registrant”
for purposes of Item 404 and the nominee were a director or executive officer
of such registrant, and (4) include the completed and signed
questionnaire, representation and agreement required by section 2.05(c)(iv) below;

 

(B)           If the stockholder
notice relates to any business (other than the nomination of persons for
election as directors) that the stockholder proposes to bring before the annual
meeting, set forth (1) a brief description of the business desired to be
brought before the annual meeting, (2) the reasons for conducting such
business at the annual meeting, (3) the text of the proposal or business
(including the text of any resolutions proposed for consideration and in the
event that such business includes a proposal to amend the by-laws of the
corporation, the language of the proposed amendment), (4) any material
interest in such business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made, and (5) a description of all
agreements, arrangements and understandings between such stockholder and
beneficial owner, if any, and any other person or persons (including their
names) in connection with the proposal of such business by such stockholder;
and

 

(C)           As to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the director nomination or proposal is made, set forth (1) the name and
address of such stockholder, as they appear on the corporation’s books, and of
such beneficial owner, if any, (2) as of the date of the stockholder
notice, (a) the class or series and number of shares of capital stock of
the corporation that are, directly or indirectly, owned beneficially and of
record by such stockholder and by such beneficial owner, if any, (b) any
option, warrant, convertible security, stock appreciation right, or similar
right with an exercise or conversion privilege or a settlement payment or
mechanism at a price related to any class or series of capital stock of the
corporation or with a value derived in whole or in part from the value of any
class or series of capital stock of the corporation, whether or not such
instrument or right shall be subject to settlement in the underlying class or
series of capital stock of the corporation or otherwise (each, a “Derivative
Instrument”) directly or indirectly owned beneficially by such stockholder and
by such beneficial owner, if any, and any other direct or indirect opportunity
held or owned beneficially by such stockholder and by such beneficial owner, if
any, to profit or share in any profit derived from any increase or decrease in
the value of the capital stock of the corporation, (c) any proxy,
contract, arrangement, understanding, or relationship pursuant to which such
stockholder or beneficial owner, if any, has a right to vote any shares of
capital stock of the corporation, (d) any short interest in any security
of the corporation (for purposes of this section 2.05, a person shall be deemed
to have a short interest in a security if such person directly or indirectly,
through a contract, arrangement, understanding, relationship or otherwise, has
the opportunity to profit or share in any

 

4

 

profit derived
from any decrease in the value of the subject security), and (e) any right
to dividends on the shares of capital stock of the corporation owned
beneficially by such stockholder or such beneficial owner, if any, which right
is separated or separable from the underlying shares, (3) any other
information relating to such stockholder and beneficial owner, if any, that would
be required to be disclosed in a proxy statement or other filings required to
be made in connection with solicitation of proxies for election of directors in
a contested election pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder, (4) a representation that the
stockholder is a holder of record of stock of the corporation entitled to vote
at such meeting and intends to appear (or will direct a qualified
representative of the stockholder to appear) in person or by proxy at the
meeting to propose such business or director nomination, and (5) a
representation whether the stockholder and the beneficial owner, if any,
intends or is part of a group that intends (a) to deliver a proxy
statement and/or form of proxy to holders of at least the percentage of the
corporation’s outstanding capital stock required to approve or adopt the
proposal and/or elect the nominee, or (b) otherwise to solicit proxies
from stockholders in support of such proposal and/or director nomination.

 

With respect to the information required to be
included in the stockholder notice pursuant to this section 2.05(a)(iii)(C)(2)(a) through
(e), the stockholder notice shall also include any such interests held by
members of such stockholder’s and such beneficial owner’s, if any, immediate
family sharing the same household.  The
information included in the stockholder notice pursuant to this section
2.05(a)(iii)(C)(2)(a) through (e) with respect to the stockholder and
beneficial owner, if any, and their immediate family members, shall be
supplemented by such stockholder and such beneficial owner, if any, (x) not
later than ten (10) days after the record date for the annual meeting, to
disclose the ownership of such stockholder and such beneficial owner, if any,
as of the record date, (y) ten (10) days before the annual meeting
date, and (z) immediately prior to the commencement of the annual meeting,
by delivery to the secretary of the corporation of such supplemented
information.

 

The corporation may require any proposed nominee to
furnish such other information as it may reasonably require (x) to
determine whether such proposed nominee is eligible under applicable law,
securities exchange rule or regulation to serve as a director of the
corporation, and (y) to determine whether such nominee qualifies as an “independent
director” or “audit committee financial expert” under applicable law,
securities exchange rule or regulation, or any publicly disclosed
corporate governance guideline or committee charter of the corporation.

 

(iv)          Notwithstanding anything in the second
sentence of section 2.05(a)(ii) above to the contrary, in the event that
the number of directors to be elected to the board of directors of the
corporation at an annual meeting is increased and there is no public
announcement by the corporation naming all of the nominees for director or
specifying the size of the increased board of directors at least ninety (90)
days prior to the first anniversary of the preceding year’s annual meeting, a
stockholder notice required by this section 2.05 shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary of the corporation at the
principal executive offices of the corporation not later than the close of
business on the twentieth (20th) day following the day on which such public
announcement is first made by the corporation.

 

(b)           Special Meetings of Stockholders.

 

(i)            With respect to special meetings of stockholders
called by the board of directors pursuant to a resolution approved by a
majority of the entire board of directors, only such business shall be
conducted at the special meeting of stockholders as shall have been properly
brought before

 

5

 

the special meeting pursuant to the corporation’s
notice of meeting (or any supplement thereto). 
In the event such special meeting of stockholders is called for the
purpose of electing one or more directors to the board of directors, any
stockholder who (A) is a stockholder of record of the corporation at the
time of the special meeting, and (B) otherwise entitled to vote in such
election of directors, may nominate a person or persons for election to such
position(s) as specified in the corporation’s notice of special meeting,
if such stockholder delivers a written notice in the same form as required by
section 2.05(a)(iii) above with respect to a director nomination (together
with the completed and signed questionnaire, representation and agreement
required by section 2.05(c)(iv) below) to the secretary of the corporation
at the principal executive offices of the corporation not earlier than the
close of business on the one hundred twentieth (120th) day prior to the date of
such special meeting and not later than the close of business on the later of (1) the
ninetieth (90th)  day prior to
the date of such special meeting, or (2) the twentieth (20th) day
following the day on which public announcement is first made by the corporation
of the date of the special meeting and of the nominees proposed by the board of
directors to be elected at such special meeting.  Neither an Eligible Stockholder, nor any
other stockholders, have a right to propose other business to be considered at
a special meeting of stockholders called by the board of directors pursuant to
a resolution approved by a majority of the entire board of directors.  In no event shall the public announcement of
an adjournment or postponement of the special meeting commence a new time
period (or extend any time period) for the giving of a stockholder notice as
described above.

 

(ii)           With respect to special meetings of stockholders
called by an Eligible Stockholder, the stockholder request given pursuant to Section 2.03(b) of
these by-laws must contain the information required by section 2.05(a)(iii) above
(together with the completed and signed questionnaire, representation and
agreement required by section 2.05(c)(iv) below, as applicable).  For purpose of this section 2.05(b)(ii), any
references in section 2.05(a)(iii)(A)-(C) of these by-laws to “stockholder”
and “annual meeting” shall mean the “Eligible Stockholder” and “special
meeting,” respectively.

 

(c)           General.

 

(i)            Only such persons who are nominated
in accordance with the procedures set forth in this section 2.05 shall be
eligible to be elected at an annual or special meeting of stockholders of the
corporation to serve as directors of the corporation and only such other
business shall be conducted at a meeting of stockholders as shall have been
properly brought before the meeting in accordance with the procedures set forth
in this section 2.05.  Except as
otherwise provided by law, the certificate of incorporation of the corporation
or these by-laws, the person presiding over the meeting shall have the power
and duty to (A) determine whether a director nomination or any other
business to be brought before the meeting was made or proposed in accordance
with the procedures set forth in this section 2.05, and (B) declare that a
director nomination shall be disregarded or that other business shall not be
transacted at the meeting if such nomination or other business was not made or
proposed in compliance with this section 2.05. 
Notwithstanding the foregoing provisions of this section 2.05, unless
otherwise required by law, if the stockholder (or a qualified representative of
the stockholder) does not appear at the annual or special meeting of
stockholders of the corporation to present a director nomination or other business,
such nomination shall be disregarded and such other business shall not be
transacted, notwithstanding that proxies with respect to such vote may have
been received by the corporation.  For
purposes of this Section 2.05, to be considered a qualified representative
of the stockholder, a person must be a duly authorized officer, manager or
partner of such stockholder or authorized by a writing executed by such
stockholder or an electronic transmission delivered by such stockholder to act
for such stockholder as proxy at the meeting of stockholders and such person
must

 

6

 

produce evidence that he or she is a duly authorized
officer, manager or partner of such stockholder or evidence of such writing or
electronic transmission, or a reliable reproduction of the writing or
electronic transmission, at the meeting of stockholders.

 

(ii)           For purposes of this section 2.05, “public
announcement” shall include disclosure in a press release reported by the Dow
Jones News Service, Associated Press, or comparable national news service or in
a document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14, or 15(d) of the Exchange Act and
the rules and regulations promulgated thereunder.

 

(iii)          Nothing in this section 2.05 shall be deemed to affect
any rights of stockholders to request the inclusion of proposals in the
corporation’s proxy statement pursuant to Rule 14a-8 (or any successor
thereto) promulgated under the Exchange Act.

 

(iv)          To be eligible to be a nominee for
election as a director of the corporation, the potential director candidate (a “Candidate”)
must deliver (in accordance with the time periods prescribed for delivery of
the stockholder notice under this section 2.05) to the secretary of the
corporation at the principal executive offices of the corporation a written
questionnaire with respect to the background and qualification of such
Candidate and the background of any other person or entity on whose behalf the
director nomination is being made (which form of questionnaire shall be
provided by the secretary of the corporation upon written request) and a
written representation and agreement (in the form provided by the secretary of
the corporation upon written request) that such Candidate (A) is not and
will not become a party to (1) any agreement, arrangement or understanding
with, and has not given any commitment or assurance to, any person or entity as
to how such Candidate, if elected as a director of the corporation, will act or
vote on any issue or question (a “Voting Commitment”) that has not been
disclosed to the corporation in writing, or (2) any Voting Commitment that
could limit or interfere with such Candidate’s ability to comply, if elected as
a director of the corporation, with such Candidate’s fiduciary duties under
applicable law, (B) is not and will not become a party to any agreement,
arrangement or understanding with any person or entity other than the
corporation with respect to any direct or indirect compensation, reimbursement
or indemnification in connection with service or action as a director of the
corporation that has not been disclosed therein, (C) will comply with any
stock ownership guidelines that may be in effect for directors from time to
time, and (D) in such Candidate’s individual capacity and on behalf of any
person or entity on whose behalf the director nomination is being made, would
be in compliance, if elected as a director of the corporation, and will comply
with all applicable publicly disclosed corporate governance, conflict of
interest, confidentiality and stock trading policies and guidelines of the
corporation.

 

Section 2.06.          Quorum,
Adjournment and Manner of Acting.

 

(a)           Quorum
and Adjournment.  Except as otherwise
provided by applicable law or the certificate of incorporation, the holders of
a majority of the total voting power of all classes of the then-outstanding
capital stock of the corporation entitled to vote thereat, represented in
person or by proxy, shall constitute a quorum at meetings of stockholders,
except that when specified business is to be voted on by a class or series of
stock voting as a class, the holders of a majority of the then-outstanding
shares of such class or series shall constitute a quorum of such class or
series for the transaction of such business. 
If a quorum is not present or represented at any meeting of the
stockholders, the chairman of the meeting or the holders of a majority of the
total voting power of the stock so present shall have the power to adjourn the
meeting from time to time.  No notice of
the time and place of adjourned meetings need be given except as required by
law; provided, however, that if

 

7

 

the
date of any adjourned meeting is more than thirty (30) days after the date for
which the meeting was originally noticed, or if a new record date is fixed for
the adjourned meeting, notice of (i) the place, if any, date and time of
the adjourned meeting, (ii) the means of remote communications, if any, by
which stockholders and proxy holders may be deemed to be present in person and
vote at such adjourned meeting and (iii) the general nature of the
business to be considered shall be given in conformity herewith.  The stockholders present at a duly called
meeting at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.

 

(b)           Manner of Acting.  Election of directors at all meetings of the
stockholders at which directors are to be elected, shall be by written or
electronic ballot, and, subject to the rights of the holders of any series of
preferred stock to elect directors under specified circumstances, a plurality
of the votes cast thereat shall elect directors.  In all matters other than the election of
directors, the affirmative vote of the holders of at least a majority of the
total voting power of the shares present in person or represented by proxy at
the meeting and entitled to vote on the matter shall be the act of the
stockholders, unless the question is one upon which, by express provision of
applicable law, the certificate of incorporation, any certificate of
designations, or these by-laws, a different vote is required, in which case
such express provision shall govern and control the decision of the
question.  No stockholder shall, under
any circumstances, be entitled to exercise any right of cumulative voting.

 

Section 2.07.          Treasury Stock.  The corporation shall not vote, directly or
indirectly, shares of its own capital stock owned by it or any subsidiary; and
such shares shall not be counted in determining the total number of outstanding
shares of the corporation’s capital stock.

 

Section 2.08.          Organization.  At every meeting of the stockholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, such other officer or director
of the corporation designated by the board of directors, shall act as chairman
of the meeting of the stockholders.  The
secretary of the corporation, or, in the absence of the secretary, an assistant
secretary of the corporation, or in the absence of the secretary and the
assistant secretaries, a person appointed by the chairman of the meeting, shall
act as secretary of the meeting of the stockholders.

 

Section 2.09.          Conduct of Business.  The chairman of the meeting of stockholders
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting, the conduct of discussion as
seems to him or her in order, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting and matters which are to be voted on by ballot.  The chairman of the meeting shall have the
power to adjourn the meeting to another place, if any, date and time.

 

Section 2.10.          Voting.

 

(a)           General Rule.  Unless otherwise provided in the certificate
of incorporation or in any certificate of designations, each stockholder shall
be entitled to one vote, in person or by proxy, for each share of capital stock
having voting power held by such stockholder.

 

(b)           Voting by Proxy.  At all meetings of stockholders, a
stockholder may vote by proxy executed in writing (or in such manner prescribed
by applicable law) by the stockholder, or by his or her duly authorized
attorney in fact, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.  A proxy shall be irrevocable if it states

 

8

 

that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable
power.  A proxy must be filed with the
secretary of the corporation or his or her representative at or before the time
of the meeting.

 

(c)           No Stockholder Action by Written
Consent.  Except as otherwise
provided by the certificate of incorporation, any action required or permitted
to be taken by stockholders may be effected only at a duly called annual or
special meeting of stockholders and may not be effected by a written consent or
consents by stockholders in lieu of such a meeting.

 

Section 2.11.          Voting Lists.  The officer who has charge of the stock
ledger of the corporation shall prepare, or direct the preparation of, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting. 
The list shall be arranged in alphabetical order, showing the address of
each stockholder and the number of shares registered in the name of each
stockholder.  Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting in the manner provided by applicable law.  The stock list shall also be open to the
examination of any stockholder during the whole time of the meeting as provided
by applicable law.

 

Section 2.12.          Inspectors of Election.  In advance of any meeting of stockholders,
the board of directors may appoint one or more inspectors, who need not be
stockholders, to act at the meeting and to make a written report thereof.  The board of directors may designate one or
more persons as alternate inspectors to replace any inspector who fails to
act.  If no inspector or alternate is
able to act at a meeting of stockholders, the chairman of the meeting shall
appoint one or more inspectors to act at the meeting.  Each inspector, before discharging his or her
duties, shall take and sign an oath to faithfully execute the duties of
inspector with strict impartiality and according to the person’s best
ability.  The inspectors shall have the
duties prescribed by law.

 

ARTICLE III

BOARD OF DIRECTORS

 

Section 3.01.          Powers.  All powers vested by law in the corporation
shall be exercised by or under the authority of, and the business and affairs
of the corporation shall be managed under the direction of, the board of directors.

 

Section 3.02.          Number.  Subject to the rights of the Institutional
Investor under the Standstill Agreement (as such capitalized terms are defined
in section 3.18 of these by-laws) and the holders of any series of preferred
stock to elect directors under specified circumstances, the number of directors
shall be fixed, and may be increased or decreased from time to time,
exclusively by a resolution adopted by a majority of the directors then serving
on the board of directors; provided, that the number of directors shall not be
less than seven (7) nor more than eleven (11).

 

Section 3.03.          Term of Office.  Directors shall hold office until the next
annual meeting of stockholders and until their successors have been elected and
qualified, except in the event of such director’s earlier death, resignation,
retirement, disqualification or removal, including, without limitation, removal
pursuant to section 3.18 of these by-laws. 
Notwithstanding the foregoing, the term of office of the initial
directors, including any Institutional Nominated Director (as defined in
section 3.18 of these by-laws), shall expire at the annual meeting of
stockholders to be held in 2011, which meeting shall be held no earlier than April 1,
2011 and no later than June 30, 2011. 
Each non-employee director shall retire at the annual meeting of
stockholders following his or her 70th birthday.

 

9

 

Section 3.04.          Vacancies.  Subject to applicable law, the rights of the
Institutional Investor under the Standstill Agreement and the rights of the
holders of any series of preferred stock, and unless the board of directors
otherwise determines, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the board of
directors resulting from death, resignation, retirement, disqualification, or
removal from office or other cause shall be filled solely by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the board of directors, or by the sole remaining
director.  Any director so chosen shall
hold office until his or her successor shall be elected and qualified or until
such director’s earlier death, resignation, retirement, disqualification, or
removal.  No decrease in the number of
directors shall shorten the term of any incumbent director.

 

Section 3.05.          Removal.  Any director or the entire board of directors
may be removed from office at any time, with or without cause, but only by the
affirmative vote of the holders of not less than a majority of the total voting
power of all classes of the then-outstanding capital stock of the corporation
entitled to vote generally in the election of directors at a special meeting
duly called for such purpose.  The
foregoing does not diminish or impair the right of the board of directors to
disqualify and remove the Institutional Nominated Director pursuant to section
3.18 of these by-laws.

 

Section 3.06.          Resignations.  Any director or committee member may resign
at any time by giving written notice to the corporation.  Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.

 

Section 3.07.          Organization.  At every meeting of the board of directors,
the chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, such other officer or director
of the corporation designated by the board of directors, shall act as chairman
of the meeting of the board of directors. 
The secretary of the corporation, or, in the absence of the secretary,
an assistant secretary of the corporation, or in the absence of the secretary
and the assistant secretaries, a person appointed by the chairman of the
meeting, shall act as secretary of the meeting of the entire board of
directors.  Notwithstanding any other
provision in this section 3.07 of these by-laws to the contrary, in the case of
executive sessions of the non-management directors, the chairman of the meeting
and the secretary of the meeting shall be a non-management director.

 

Section 3.08.          Place of Meeting.  Meetings of the board of directors, both
regular and special, shall be held at such place, if any, within or without the
State of Delaware, as the board of directors may from time to time determine,
or as may be designated in a notice of the meeting.

 

Section 3.09.          Regular Meetings.  Regular meetings of the board of directors
shall be held at such date, time and place, if any, as shall be designated from
time to time by resolution of the board of directors.

 

Section 3.10.          Special Meetings.  Special meetings of the board of directors
shall be held whenever called (a) by the chairman of the board, (b) by
a majority of the directors then in office, (c) by the chief executive
officer of the corporation, or (d) by a director; provided, however, that
when special meetings of the board are called by any director pursuant to
section 3.10(d) of these by-laws, there may only be one such special
meeting of the board of directors every quarter.  The persons authorized to call special
meetings of the board of directors may fix the date, time and place, if any, of
the meetings.

 

10

 

Section 3.11.                             Notice.  Notice of any
special meeting of the board of directors shall be given to each director at
his or her business or residence (as he or she may specify) personally or by
telephone to each director or sent by mail, express mail, courier service,
confirmed facsimile, electronic mail or other means of electronic transmission,
postage or charges prepaid, addressed to each director at that director’s
address as it is shown on the record of the corporation.  If mailed by first-class mail, such notice
shall be deemed adequately delivered when deposited in the United States mail
so addressed, with postage thereon prepaid, at least four (4) days before
such meeting.  If given by overnight mail
or courier service, such notice shall be deemed adequately delivered when the
notice is delivered to the overnight mail or courier service company at least
48 hours before such meeting.  If given
by telephone, hand delivery, confirmed facsimile transmission, electronic mail
or other means of electronic transmission, such notice shall be deemed
adequately delivered when the notice is transmitted at least 48 hours before
such meeting.  The notice shall state the
time, date and place of the special meeting of the board of directors.  Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the board of directors need
be specified in the notice of such meeting, except for amendments to these
by-laws, as provided in section 7.10 of these by-laws.  Whenever any notice is required to be given,
a waiver thereof in writing, signed by the director or directors entitled to
said notice, or a waiver by electronic transmission by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.  Attendance by a
director at a meeting shall constitute a waiver of notice of such meeting.

 

Section 3.12.                             Quorum, Manner of Acting and Adjournment. 
Except as otherwise provided in section 3.04 of these by-laws, by
applicable law or by the certificate of incorporation, at all meetings of the
board of directors, (a) the presence of a majority of the total number of
directors shall constitute a quorum for the transaction of business, and (b) the
vote of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the board of directors.  If a quorum is not present at any meeting of
the board of directors, a majority of the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.

 

Section 3.13.                             Unanimous Written Consent. 
Unless otherwise restricted by the certificate of incorporation, any
action required or permitted to be taken at any meeting of the board of
directors or a committee thereof may be taken without a meeting, if all members
of the board of directors or the committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the board of directors or the committee.

 

Section 3.14.                             Conference Telephone Meetings. 
Members of the board of directors, or any committee thereof, may
participate in a meeting of the board of directors, or such committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.

 

Section 3.15.                             Committees of the Board.  The board of
directors may designate one or more committees of the board of directors.  Subject to the rights of the Institutional
Investor under the Standstill Agreement to cause the Institutional Nominated
Director to serve on committees, each committee shall consist of one or more directors
and committee members may be removed from a committee by a majority vote of
the directors then in office.  The board of directors may designate one
or more directors as alternate members of any committee, who may replace any
absent member at any meeting of the committee. 
To the extent permitted by applicable law and provided in resolutions of
the board of directors, each committee shall have and may exercise the powers
of the board of directors in

 

11

 

overseeing the business and affairs of the corporation.  Each committee of the board of directors
shall keep regular minutes of its proceedings and report the same to the board
of directors when requested.  A majority
of the committee members at a meeting shall constitute a quorum of the
committee and the vote of a majority of the members present shall be the act of
the committee.

 

Section 3.16.                             Compensation.  The board of
directors or a committee thereof shall have the authority to fix the amount of compensation
of directors and any committee members.

 

Section 3.17.                             Chairman of the Board.  The full
board of directors may at its discretion elect a chairman of the board from
among the non-management directors.  The
chairman of the board may be removed from that capacity by a majority vote of
the full board of directors.  The
chairman of the board, if there be one, shall preside at all meetings of the
board of directors and of the stockholders of the corporation.  In the chairman of the board’s absence, such
officer or other director of the corporation designated by the board of
directors shall act as chairman of any such meeting.  The chairman of the board shall perform all
other duties normally incident to the position of chairman of the board or as
may be prescribed by the board of directors or these by-laws.

 

Section 3.18.                             Institutional Nominated Director. 
In the event that (a) a director (such individual, the “Institutional Nominated
Director”) was nominated by Paulson & Co. Inc. and the several
investment funds and accounts managed by it (collectively, the “Institutional
Investor”) pursuant to that certain Standstill Agreement, dated as of
[                ],
2009, by and among the corporation and the Institutional Investor (as may be
amended or modified, the “Standstill Agreement”), and (b) at any time
thereafter the Institutional Investor ceases to beneficially own 20% or more of
the issued and outstanding common stock of the corporation for 30 consecutive
days (the “Beneficial Ownership Change”), the board of directors (excluding the
Institutional Nominated Director) shall have up to 45 days from the date such
directors had actual knowledge of the occurrence of the Beneficial Ownership
Change to notify the Institutional Nominated Director in writing that the
Beneficial Ownership Change has resulted in the Institutional Nominated
Director being disqualified and removed from service on the board of directors
effective immediately without further action. 
In the event the board of directors does not send notice of
disqualification and removal to the Institutional Nominated Director within
such 45 day period, the Institutional Nominated Director may continue to serve
his or her term as a director. 
Notwithstanding the foregoing, the Institutional Investor and the
Institutional Nominated Director shall provide written notice of the Beneficial
Ownership Change to the secretary of the corporation and the other directors
within ten (10) days of the occurrence of the Beneficial Ownership
Change.  If such written notice is not
received by the secretary of the corporation and the other directors within ten
(10) days of the Beneficial Ownership Change, such failure to notify shall
result in the Institutional Nominated Director being automatically disqualified
and removed from service on the board of directors immediately without further
action, including without a requirement of notice from the board of
directors.  Without limiting the
foregoing, any Institutional Nominated Director who becomes disqualified to
serve on the board of directors will upon request of the corporation provide a
written resignation from the board of directors.

 

ARTICLE IV

OFFICERS

 

Section 4.01.                             Officers.  The officers
of the corporation shall be appointed by the board of directors and may consist
of a chief executive officer, chief financial officer, one or more vice
presidents, a secretary, and any other officers, including but not limited to a
president and a treasurer,

 

12

 

as may be deemed necessary or advisable by the board of directors, each
of whom shall hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined by the board of directors.  Any two or more offices may be held by the
same person.  None of the officers need
be a director, and none of the officers need be a stockholder of the
corporation.

 

Section 4.02.                             Election and Term of Office. 
The officers of the corporation shall be elected annually by the board
of directors at its first regular meeting held shortly before or after the
annual meeting of stockholders or as soon thereafter as conveniently
possible.  Each officer shall hold office
until his or her successor is chosen and qualified or until his or her death or
the effective date of his or her resignation or removal.

 

Section 4.03.                             Removal and Resignation.  Any officer
or agent elected or appointed by the board of directors may be removed with or
without cause by the affirmative vote of a majority of the board of directors,
but such removal shall be without prejudice to the contractual rights, if any,
of the person so removed.  Any officer
may resign at any time by giving written notice to the corporation.  Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.

 

Section 4.04.                             Vacancies.  Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise, may be filled at any time and from time to time by the board of
directors for the unexpired portion of the term.

 

Section 4.05.                             Compensation.  The
compensation of all officers and agents of the corporation shall be fixed by
the board of directors or pursuant to its direction; and no officer shall be
prevented from receiving compensation by reason of serving as a director.

 

Section 4.06.                             Chief Executive Officer.  The chief
executive officer of the corporation and, subject to the control of the board
of directors, shall in general supervise and control the business and affairs
of the corporation, have general and active supervision over the corporation’s
several officers, agents, and employees, and have such other powers and be
subject to such other duties as the board of directors may from time to time
prescribe.  The chief executive officer
shall have the power to appoint and remove subordinate officers, agents and
employees, except those elected or appointed by the board of directors.  The chief executive officer shall keep the
board of directors fully informed and shall consult them concerning the
business of the corporation, and in general shall perform all other duties
normally incident to the office of chief executive officer and such other
duties as may be prescribed by the board of directors from time to time.

 

Section 4.07.                             President.  Subject to
the discretion of the board of directors to elect or not elect a president and
to the supervisory powers of the chief executive officer in the event of such
election, the president, if any, will act in a general executive capacity and
will assist the chief executive officer in the administration and operation of
the corporation’s business and general supervision of its policies and
affairs.  The president shall perform all
such other duties as may be prescribed by the board of directors from time to
time.

 

Section 4.08.                             Vice Presidents.  In the
absence of the president, or in the event of his or her inability or refusal to
act, the vice presidents (in order of their seniority) shall perform the duties
and exercise the powers of the president. 
The vice presidents shall perform such other duties as from time to time
may be assigned to them by the chief executive officer and the board of
directors.

 

13

 

Section 4.09.                             Secretary.  The secretary
shall (a) keep the minutes of the meetings of the stockholders, the board
of directors and committees of directors (except as otherwise provided in
section 3.07 of these by-laws regarding executive sessions), (b) see that
all notices are duly given in accordance with the provisions of these by-laws
and as required by applicable law, (c) be custodian of the corporate
records and of the seal of the corporation, and see that the seal of the
corporation or a facsimile thereof is affixed to any certificates for shares
prior to the issue thereof and to all documents, the execution of which on
behalf of the corporation under its seal is duly authorized in accordance with
the provisions of these by-laws, (d) keep or cause to be kept a register
of the mailing address of each stockholder which shall be furnished by such
stockholder, (e) have general charge of the stock transfer books of the
corporation and (f) in general, perform all duties normally incident to
the office of secretary and such other duties as from time to time may be
assigned by the chief executive officer or the board of directors.

 

Section 4.10.                             Treasurer.  If required by
the board of directors and if a treasurer is appointed, the treasurer shall
give a bond for the faithful discharge of his or her duties in such sum and
with such surety or sureties as the board of directors shall determine.  The treasurer, if one is appointed, shall (a) have
charge and custody of, and be responsible for, all funds and securities of the
corporation, (b) receive and give receipts for moneys due and payable to
the corporation from any source whatsoever and deposit all such moneys in the
name of the corporation in such banks, trust companies or other depositories as
shall be selected by the board of directors, and (c) in general, perform
all the duties incident to the office of treasurer and such other duties as
from time to time may be assigned to him or her by the chief executive officer
and the board of directors.

 

Section 4.11.                             Assistant Secretaries and Assistant Treasurers. 
The assistant secretaries and assistant treasurers, if appointed, shall,
in general, perform such duties as shall be assigned to them by the secretary
or the treasurer, respectively, by the chief executive officer or by the board
of directors.  The assistant secretaries
and assistant treasurers shall, in the absence of the secretary or treasurer,
respectively, perform all functions and duties that such absent officers may
delegate, but such delegation shall not relieve the absent officer from the
responsibilities and liabilities of his or her office.  The assistant treasurers shall, if required by
the board of directors, give bonds for the faithful discharge of their duties
in such sums and with such surety or sureties as the board of directors shall
determine.

 

ARTICLE V

STOCK

 

Section 5.01.                             Uncertificated Shares.  Except as
otherwise provided in a resolution approved by the board of directors, all
shares of capital stock of the corporation issued after the date hereof shall
be uncertificated.  In the event the
board of directors elects to provide in a resolution that certificates shall be
issued to represent any shares of capital stock of the corporation, such
certificates shall be numbered and shall be signed by, or in the name of the
corporation by, the chairman of the board or chief executive offer or chief
financial officer, and by the treasurer or an assistant treasurer or the secretary
or an assistant secretary.  Any or all of
the signatures on a certificate may be a facsimile signature.  In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.

 

14

 

Section 5.02.                             Transfer.  Transfers of
shares shall be made upon the books of the corporation (i) only by the
holder of record thereof, or by a duly authorized agent, transferee or legal
representative and (ii) in the case of certificated shares, upon the
surrender to the corporation of the certificate or certificates for such
shares.  No transfer shall be made that
is inconsistent with the provisions of applicable law.

 

Section 5.03.                             Lost, Stolen, Destroyed or Mutilated
Certificates.  The corporation may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation and alleged to have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming that the certificate of stock has been lost, stolen, destroyed
or mutilated.  When authorizing such
issuance of a new certificate or certificates, the corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, destroyed or mutilated certificate or certificates,
or such owner’s legal representative, to indemnify the corporation in such
manner as the corporation shall require and/or to give the corporation a bond,
in such form and amount as the corporation may direct, as indemnity against any
claim that may be made against the corporation with respect to the certificate
or certificates alleged to have been lost, stolen, destroyed or mutilated or
the issuance of such new certificate or certificates.

 

Section 5.04.                             Record Holder of Shares.  The
corporation shall be entitled to treat the holder of record of any share or
shares of the corporation’s capital stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise required
by applicable law.

 

Section 5.05.                             Record Date.

 

(a)                                  In order that the corporation may
determine the stockholders entitled to notice of any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and which record date shall,
unless otherwise required by applicable law, not be more than sixty (60) nor
less than ten (10) days before the date of such meeting.  If the board of directors so fixes a date,
such date shall also be the record date for determining the stockholders
entitled to vote at such meeting.  If no
record date is fixed by the board of directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.  A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the board of directors
may fix a new record date for determination of stockholders entitled to vote at
the adjourned meeting, and in such case shall also fix as the record date for
stockholders entitled to notice of such adjourned meeting the same or an
earlier date as that fixed for determination of stockholders entitled to vote
in accordance herewith at the adjourned meeting.

 

(b)                                 In order that the corporation may
determine the stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall not be more than sixty (60)
days prior to such other action.  If no
such record date is fixed, the record date for determining

 

15

 

stockholders for any such purpose shall be at the close of business on
the day on which the board of directors adopts the resolution relating thereto.

 

ARTICLE VI

INDEMNIFICATION

 

Section 6.01.                             Right to Indemnification. 
The corporation, to the fullest extent permitted or required by the
General Corporation Law of the State of Delaware (the “DGCL”) or other
applicable law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, unless applicable law otherwise requires, only to
the extent that such amendment permits the corporation to provide broader
indemnification rights than such law permitted the corporation to provide prior
to such amendment), shall indemnify and hold harmless any person who is or was
made a party, or is threatened to be made a party, or who is or was involved in
any manner (including, without limitation, as a witness), in any threatened,
pending or completed investigation, claim, action, suit or proceeding, whether
civil, criminal, administrative, or investigative (including, without
limitation, any action, suit or proceeding by or in the right of the
corporation to procure a judgment in its favor) (collectively, a “Proceeding”),
by reason of the fact that such person, or a person of whom he or she is or was
the legal representative, is or was a director or officer of the corporation,
or who while a director or officer of the corporation is or was serving at the
request of the corporation as a director, officer, partner, principal, member,
manager, fiduciary, employee, trustee or agent of another corporation or of a
partnership, limited liability company, joint venture, trust or other
enterprise (including service with respect to employee benefit plans maintained
or sponsored by the corporation) (collectively, an “Indemnitee”), whether the
basis of such Proceeding is alleged action in an official capacity as a
director, officer, partner, principal, member, manager, fiduciary, employee,
trustee or agent or in any other capacity while serving as a director, officer,
partner, principal, member, manager, fiduciary, employee, trustee or agent, against
all expenses, liabilities and losses (including, without limitation, attorneys’
fees, costs, charges, and related disbursements, judgments, fines, taxes,
excise taxes or penalties under the Employee Retirement Income Security Act of
1974, as amended from time to time, penalties and amounts paid or to be paid in
settlement) (collectively, “Expenses”) actually and reasonably incurred by the
Indemnitee in connection with such Proceeding; provided, however, that, except
as provided in this Article VI with respect to proceedings to enforce
rights to indemnification, the corporation shall indemnify an Indemnitee in
connection with a Proceeding (or part thereof) initiated by or on behalf of
such Indemnitee only if the initiation of such Proceeding (or part thereof) was
authorized by the board of directors. 
Each person who is or was serving as a director, officer, partner,
principal, member, manager, fiduciary, employee, trustee or agent of a
subsidiary of the Corporation shall be deemed to be serving, or have served, at
the request of the Corporation.

 

Section 6.02.                             Presumptions and Effect of Certain Proceedings. 
An Indemnitee seeking indemnification shall be presumed to be entitled
to indemnification upon submission of a written request, and thereafter the corporation
shall have the burden of proof to overcome that presumption in reaching a
contrary determination.  In any event, if
the corporation shall not have made a determination within 30 days after
receipt of a written request therefor, the Indemnitee seeking indemnification
shall be deemed to be, and shall be, entitled to indemnification unless (a) the
Indemnitee intentionally misrepresented or failed to disclose a material fact
in the written request for indemnification or (b) such indemnification is
prohibited by the DGCL.  The termination
of any Proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnitee (i) did not act in good faith and in a manner which
the Indemnitee reasonably believed to be in, or at least not opposed to, the
best interests of the corporation

 

16

 

or (ii) with respect to any criminal action or proceeding, had
reasonable cause to believe that such conduct was unlawful.  Furthermore, the knowledge or actions or
failure to act of any other director, officer, employee or agent of the
corporation or other enterprise, as applicable, shall not be imputed to the
Indemnitee for purposes of determining the Indemnitee’s entitlement to
indemnification under this Article VI.

 

Section 6.03.                             Advancement of Expenses.  Expenses  incurred by an Indemnitee in defending a
Proceeding shall be paid by the corporation in advance of the final disposition
of such Proceeding and within 15 days of receipt by the secretary of the
corporation of (a) a written request therefor setting forth the basis for
such indemnification and (b) if required by law at the time such written
request is made, an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall ultimately be determined that the Indemnitee is not entitled
to be indemnified by the corporation as authorized in this Article VI.  Such advances shall be made on an unsecured
basis, shall be interest-free and shall be made without regard to the
Indemnitee’s ability to repay such amounts and without regard to the Indemnitee’s
ultimate entitlement to indemnification under this Article VI or
otherwise.

 

Section 6.04.                             Remedies of the Indemnitee.

 

(a)                                  If a determination is made that the
Indemnitee is not entitled to indemnification or advancement of Expenses under
this Article VI, (i) the Indemnitee shall be entitled to seek an
adjudication of entitlement to such indemnification or advancement of Expenses
either, at the Indemnitee’s sole option, (A) in an appropriate court of
the State of Delaware or any other court of competent jurisdiction or (B) in
an arbitration to be conducted by a single arbitrator pursuant to the rules of
the American Arbitration Association, (ii) any such judicial proceeding or
arbitration shall be de novo and the Indemnitee shall not be prejudiced by
reason of such adverse determination, and (iii) in any such judicial
proceeding or arbitration, the corporation shall have the burden of proving by
clear and convincing evidence that the Indemnitee is not entitled to
indemnification or advancement of Expenses under this Article VI.

 

(b)                                 If a determination shall have been made
or deemed to have been made that the Indemnitee is entitled to indemnification,
the corporation shall be obligated to pay the amounts constituting such
indemnification within 15 days after such determination has been made or deemed
to have been made and shall be conclusively bound by such determination unless (i) the
Indemnitee intentionally misrepresented or failed to disclose a material fact
in the written request for indemnification or (ii) such indemnification is
prohibited by the DGCL.  In the event
that (A) advancement of Expenses is not timely made pursuant to section
6.03 of these by-laws or (B) payment of indemnification is not made within
15 days after a determination of entitlement to indemnification has been made
or deemed to have been made pursuant to this Article VI, the Indemnitee
shall be entitled to seek judicial enforcement of the corporation’s obligation
to pay the Indemnitee such advancement of Expenses and indemnification.  It shall be a defense to any such action for
judicial enforcement (other than an action brought to enforce a claim for
Expenses incurred in defending any Proceeding in advance of its final
disposition where the written request therefor and the required undertaking, if
any is required, has been received by the secretary of the corporation) that
the Indemnitee has not met the standard of conduct set forth in the DGCL, but
the burden of proving such defense, by clear and convincing evidence, will be
on the corporation.  Neither the failure
of the corporation to have made a determination prior to the commencement of
such action that indemnification of the Indemnitee is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in the DGCL, nor an actual determination by the corporation

 

17

 

that the Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the Indemnitee
has not met the applicable standard of conduct.

 

(c)                                  The corporation shall be precluded from
asserting in any judicial proceeding or arbitration commenced pursuant to this
section 6.04 of these by-laws that the procedures and the presumptions of this Article VI
are not valid, binding and enforceable and shall stipulate in any such court or
before any such arbitrator that the corporation is bound by all the provisions
of this Article VI.

 

(d)                                 The corporation shall indemnify the
Indemnitee against, and the Indemnitee shall be entitled to recover from the
corporation, any Expenses actually and reasonably incurred in connection with
any judicial adjudication, judicial enforcement or arbitration commenced
pursuant to this section 6.05 of these by-laws to enforce his or her rights
under, or to recover damages for breach of, this Article VI.

 

Section 6.05.                             Definitions.  For
purposes of this Article VI:

 

(a)                                  “corporation” shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger that, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VI with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.

 

(b)                                 “Disinterested Director” means a director
of the corporation who is not or was not a party to the Proceeding in respect
of which indemnification is sought by the Indemnitee.

 

(c)                                  Actions “in or at least not opposed to
the best interests of the corporation” shall include, without limitation,
actions taken in good faith and in a manner the Indemnitee reasonably believed
to be in or not opposed to the best interests of the participants and
beneficiaries of an employee benefit plan.

 

Section 6.06.                             Insurance.  The
corporation shall purchase and maintain insurance on behalf of any person who
is or was a director or officer of the corporation, or who while a director or
officer is or was serving at the request of the corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise (“D&O Insurance”), against any liability
asserted against the person and incurred by the person in any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power or the obligation to indemnify such person against such
liability under the provisions of this Article VI.  Notwithstanding the foregoing, the
corporation shall have no obligation to obtain or maintain D&O Insurance if
the corporation determines in good faith that such insurance is not reasonably
available, the premium costs for such insurance are materially disproportionate
to the amount of coverage provided, the coverage provided by such insurance is
limited by exclusions so as to provide a materially insufficient benefit, or
such person is covered by substantially similar insurance maintained by a
subsidiary of the corporation or by another person pursuant to a contractual
obligation owed to the corporation.

 

Section 6.07.                             Scope of Indemnification. 
The rights conferred in this Article VI shall not be exclusive of
any other right that any person may have or hereafter acquire under any
statute, provision

 

18

 

of these by-laws, the certificate of incorporation, a certificate of
designations, any agreement, vote of stockholders or Disinterested Directors,
or otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office or while employed by or acting as
agent for the corporation.  The rights provided
by or granted pursuant to this Article VI shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such person.

 

Section 6.08.                             Reliance on Provisions.  Each person
who shall act as a director or officer of the corporation, or as the legal
representative of such person, or who while a director or officer serves at the
request of the corporation as a director, officer, partner, principal, member,
manager, fiduciary, employee, trustee or agent of another corporation or of a
partnership, limited liability company, joint venture, trust or other
enterprise, shall be deemed to be doing so in reliance upon rights of
indemnification provided by this Article VI.  Any repeal or modification of the provisions
of this Article VI shall not adversely affect any right or benefit of any
potential Indemnitee existing at the time of such repeal or modification.

 

Section 6.09.                             Indemnification of Other Employees.  The corporation may, to the extent authorized
from time to time by the board of directors, grant rights to indemnification,
and rights to advancement by the corporation of any Expenses actually and
reasonably incurred in defending any Proceeding, to any employee or agent of
the corporation to the fullest extent of the provisions of this Article VI
with respect to the indemnification of and advancement of Expenses to directors
and officers of the corporation.

 

Section 6.10.                             Severability.  If this Article VI
or any portion thereof shall be held to be invalid, illegal or unenforceable on
any ground by any court of competent jurisdiction, then (a) the
corporation shall nevertheless indemnify each Indemnitee as to all Expenses
actually and reasonably incurred or suffered by such person in connection with
any Proceeding, including, without limitation, a grand jury proceeding, to the
fullest extent permitted by (i) any applicable portion of this Article VI
that shall not have been invalidated, (ii) the DGCL or (iii) any
other applicable law, and (b) to the fullest extent possible, the
provisions of this Article VI (including, without limitation, each portion
of any paragraph of this Article VI containing any such provision held to
be invalid, illegal or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.

 

Section 6.11.                             Contract Rights.  The
provisions of this Article VI shall be deemed to be a contract right
between the corporation and each person who is entitled to indemnification or
advancement of Expenses pursuant to this Article VI at any time while this
Article VI and the relevant provisions of the DGCL or other applicable law
are in effect, and any repeal or modification of this Article VI or any
such law shall not in any way diminish any rights to indemnification of such
person or the obligations of the corporation arising hereunder with respect to
any Proceeding arising out of, or relating to, any actions, transactions or
facts occurring prior to the final adoption of such modification or repeal.

 

19

 

ARTICLE VII

GENERAL PROVISIONS

 

Section 7.01.                             Dividends.  Subject to
the restrictions contained in applicable law or the certificate of
incorporation, the board of directors may declare and pay dividends upon the
shares of capital stock of the corporation.

 

Section 7.02.                             Contracts.  Except as
otherwise provided by applicable law, the certificate of incorporation, or
these by-laws, any contracts or other instruments may be executed and delivered
in the name and on the behalf of the corporation by such officer or officers of
the corporation as the board of directors may from time to time direct.  Such authority may be general or confined to
specific instances as the board of directors may determine.  The chairman of the board, the chief
executive officer or such other persons as the board of directors so determines
may execute bonds, contracts, deeds, leases and other instruments to be made or
executed for or on behalf of the corporation. 
Subject to any restrictions imposed by the board of directors, the chief
executive officer or such other persons as the board of directors so determines
may delegate contractual powers to others under his or her jurisdiction, it
being understood, however, that any such delegation of power shall not relieve
such person of responsibility with respect to the exercise of such delegated
power.

 

Section 7.03.                             Proxies.  Unless
otherwise provided by resolution adopted by the board of directors, the chief
executive officer or any other appropriate officer of the corporation may from
time to time appoint an attorney or attorneys or agent or agents of the
corporation, in the name and on behalf of the corporation, to cast the votes
that the corporation may be entitled to cast as the holder of stock or other
securities in any other corporation, any of whose stock or other securities may
be held by the corporation, at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing, in the name of
the corporation as such holder, to any action by such other corporation, and
may instruct the person or persons so appointed as to the manner of casting
such votes or giving such consent, and may execute or cause to be executed, in
the name and on behalf of the corporation and under its corporate seal or
otherwise, all such written proxies or other instruments as he or she may deem
necessary or proper.

 

Section 7.04.                             Corporate Seal.  The
corporation shall have a corporate seal, which shall have inscribed thereon the
name of the corporation, the year of its organization and the words “Corporate
Seal, Delaware.”  The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.

 

Section 7.05.                             Facsimile Signatures.  In addition
to the provisions for use of facsimile signatures elsewhere specifically
authorized in these by-laws, facsimile signatures of any director or officer of
the corporation may be used whenever and as authorized by the board of
directors or a committee thereof.

 

Section 7.06.                             Checks, Notes, Etc.  All checks,
notes and evidences of indebtedness of the corporation shall be signed by such
person or persons as the board of directors may from time to time designate.

 

Section 7.07.                             Reliance upon Books, Reports and Records. 
Each director, board committee member and officer of the corporation
shall, in the performance of his or her duties, be fully protected in relying
in good faith upon the books of account or other records of the corporation and
upon such information, opinions, reports or documents presented to the
corporation by any of its other officers,

 

20

 

employees, board committees, or by any other person as to matters that
such director, board committee member or officer reasonably believes are within
such other person’s professional or expert competence and who has been selected
with reasonable care by or on behalf of the corporation.

 

Section 7.08.                             Waiver of Notice.  Whenever any
notice is required to be given to any stockholder or director of the
corporation under the provisions of the DGCL or these by-laws, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.  Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. 
Neither the business to be transacted nor the purpose of any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in a waiver of notice.

 

Section 7.09.                             Corporate Records.

 

(a)                                  Examination by Stockholders. 
Every stockholder shall, upon written demand under oath stating the
purpose thereof, have a right to examine, in person or by agent or attorney,
during the normal hours for business, for any proper purpose, the stock ledger,
list of stockholders, books or records of account, and records of the
proceedings of the stockholders, directors or board committees, and to make
copies or extracts therefrom.  A “proper
purpose” shall mean a purpose reasonably related to such person’s interest as a
stockholder.  In every instance where an
attorney or other agent shall be the person who seeks the right to inspection,
the demand under oath shall be accompanied by a power of attorney or such other
writing that authorizes the attorney or other agent to so act on behalf of the
stockholder.  The demand under oath shall
be directed to the corporation at its registered office in Delaware or at its
principal place of business.  Where the
stockholder seeks to inspect the books and records of the corporation, other
than its stock ledger or list of stockholders, the stockholder shall first
establish (i) that the stockholder has complied with the provisions of
this section 7.09 of these by-laws respecting the form and manner of making
demand for inspection of such documents and (ii) that the inspection
sought is for a proper purpose.  Where
the stockholder seeks to inspect the stock ledger or list of stockholders of
the corporation and has complied with the provisions of this section 7.09 of
these by-laws respecting the form and manner of making demand for inspection of
such documents, the burden of proof shall be upon the corporation to establish
that the inspection sought is for an improper purpose.

 

(b)                                 Examination by Directors. 
Each director shall have the right to examine the corporation’s stock
ledger, a list of its stockholders and its other books and records for a
purpose reasonably related to the person’s position as a director.

 

Section 7.10.                             Amendment of By-laws.  These by-laws
may be altered, amended or repealed or new by-laws may be approved at any
meeting of the board of directors or of the stockholders, provided notice of
the proposed change was given in the notice of the meeting and, in the case of
a meeting of the board of directors, in a notice given not less than two days
prior to the meeting; provided, however, that, in the case of alterations,
amendments, repeals or the adoption of new by-laws by the board of directors,
notwithstanding any other provisions of these by-laws or any provision of
applicable law that might otherwise permit a lesser vote or no vote, the
affirmative vote of a majority of the members of the board of directors shall
be required to alter, amend or repeal any provision of these by-laws or to
approve new by-laws.  In the case of
alterations, amendments, repeals or the adoption of new by-laws by
stockholders, the affirmative vote of the holders of at least a majority of the
total voting power of

 

21

 

the then outstanding shares of capital stock of the corporation
entitled to vote thereon, voting as a single class, shall be required to alter,
amend or repeal any provision of these by-laws or to approve new by-laws.

 

Section 7.11.                             Approval of Independent Directors. 
The following actions will require approval of a majority of directors
of the corporation who are independent of the Institutional Investor and
management of the corporation, which independent directors may comprise a
committee of the board of directors:

 

(a)                                  the amendment or waiver of any provision
of the Standstill Agreement (“Standstill Agreement”) by and between the
corporation and the Institutional Investor;

 

(b)                                 consent to the assignment of the
Institutional Investor’s rights under the Standstill Agreement or consent to
the relief of the Institutional Investor’s obligations under the Standstill
Agreement;

 

(c)                                  the amendment or waiver of any provision
of the Rights Agreement (the “Rights Agreement”) between the corporation and
Computershare Trust Company, N.A. or the Registration Rights Agreement between
the corporation, the Institutional Investor and the holders of common stock
named therein, in each case to the extent any such amendment or waiver affects
Institutional Investor, and

 

(d)                                 redemption of the rights issued under the
Rights Agreement.

 

22

 

EXHIBIT G

 

AMENDED
AND RESTATED

CERTIFICATE
OF INCORPORATION

OF

IDEARC INC.

 

Idearc Inc., a corporation organized and existing under the laws
of the State of Delaware (the “Corporation”), hereby certifies as follows:

 

1.                                       The name of the Corporation is Idearc
Inc.  The Corporation was originally
incorporated under the name “Verizon Directories Disposition Corporation” and
the original certificate of incorporation (the “Original Certificate of
Incorporation”) was filed with the Secretary of State of the State of Delaware
on June 20, 2006.

 

2.                                       This Amended and Restated Certificate of
Incorporation (this “Certificate of Incorporation”) has been duly adopted in
accordance with Sections 242, 245 and 303 of the General Corporation Law of the
State of Delaware (the “DGCL”).

 

3.                                       This Certificate of Incorporation has
been duly executed and acknowledged by an officer of the Corporation in
accordance with the provisions of Sections 242, 245 and 303 of the DGCL.

 

4.                                       Pursuant to Sections 242, 245 and
303 of the DGCL, this Certificate of Incorporation amends, integrates and
restates all of the provisions of the Original Certificate of Incorporation.

 

5.                                       Pursuant to Section 103 of the DGCL,
this Certificate of Incorporation shall become effective at 12:01 a.m.
(Central time) on December [31], 2009.

 

6.                                       The text of the Original Certificate of
Incorporation is hereby amended and restated to read in its entirety as
follows:

 

 

AMENDED
AND RESTATED

CERTIFICATE
OF INCORPORATION

OF

[                    ]
INC.

 

ARTICLE I

NAME

 

The
name of the Corporation is [                    ]
Inc.

 

ARTICLE
II

REGISTERED OFFICE AND AGENT

 

The
Corporation’s registered office in the State of Delaware is The Corporation
Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.  The name of its registered agent at such
address is The Corporation Trust Company.

 

ARTICLE III

PURPOSE

 

The Corporation’s purpose is to engage in any lawful
act or activity for which corporations may be organized under the DGCL.

 

ARTICLE
IV

CAPITAL STOCK

 

A.                                  Authorized Shares. 
The Corporation shall be authorized to issue
[                          ]
shares of capital stock, of which (i) [                      ]
shares shall be common stock, par value $.01 per share (the “Common Stock”),
and (ii) [                      ]
shares shall be preferred stock, par value $.01 per share (the “Preferred Stock”).

 

B.                                    Authority of
Board to Fix Terms of Preferred Stock.  The Corporation’s Board of Directors (the “Board”) is
hereby authorized to provide for the issuance of shares of Preferred Stock at
any time and from time to time in one or more series, by resolutions and by
filing a certificate of designations pursuant to the applicable provisions of
the DGCL, to establish from time to time the number of shares to be included in
each such series, and to fix the designations, powers, preferences and rights
of shares of each such series and the qualifications, limitations and
restrictions thereof.

 

C.                                    Voting Rights.  Except as required by the DGCL or as
otherwise provided herein or in any certificate of designations, voting power
for the election of directors and for all other 

 

1

 

purposes shall be vested exclusively in the holders of
the Common Stock.  Except as otherwise
provided herein or in any certificate of designations, at every meeting of the
stockholders of the Corporation each holder of Common Stock shall be entitled
to one vote, in person or by proxy, for each share of Common Stock standing in
such holder’s name on the transfer books of the Corporation, on all matters
submitted to a vote of stockholders; provided, however, except as otherwise
required by the DGCL, holders of Common Stock shall not be entitled to vote on
any amendment to this Certificate of Incorporation (including any certificate
of designations) that relates solely to the terms of one or more outstanding
series of Preferred Stock if the holders of such affected series are entitled,
either separately or together as a class with the holders of one or more other
such series, to vote thereon.

 

D.                                   Dividends.  Subject to the other provisions of this Certificate of
Incorporation and any certificate of designations, the holders of Common Stock
shall be entitled to receive dividends and other distributions in cash, stock
of any entity or property of the Corporation, when and as declared out of
assets or funds of the Corporation legally available therefor, at such times
and in such amounts as the Board may determine in its sole discretion.  Holders of shares of Common Stock shall be
entitled to share equally, share for share, in such dividends.

 

E.                                     Liquidation.  If any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation occurs,
then after payment or provision for payment of the debts and other liabilities
of the Corporation, and subject to the rights, powers and preferences of any
outstanding series of Preferred Stock, the remaining assets of the Corporation
available for distribution to stockholders shall be distributed pro rata to the
holders of Common Stock.  Neither the
merger nor consolidation of the Corporation, nor the voluntary sale,
conveyance, lease, license, exchange or transfer (for cash, shares of stock,
securities, other consideration or a combination thereof) of all or part of its
assets, shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation within the meaning of this Section E
of Article IV.

 

F.                                      No Preemptive
Rights; No Cumulative Voting. 
No holder of shares of capital stock of any class or series of the
Corporation or holder of any security or obligation convertible into shares of
capital stock of any class or series of the Corporation shall have any
preemptive right whatsoever to subscribe for, purchase or otherwise acquire
shares of capital stock of any class or series of the Corporation, whether now
or hereafter authorized; provided, however, this provision shall not (i) prohibit
the Corporation from granting, contractually or otherwise, to any such holder,
rights similar to preemptive rights entitling such holder to purchase
additional securities of the Corporation or (ii) otherwise limit or
otherwise modify any rights of any such holder pursuant to any such contract or
other agreement.  Stockholders of the Corporation
shall not be entitled to exercise any right of cumulative voting with respect
to any shares of capital stock of the corporation.

 

G.                                    The Corporation shall not issue any class
of non-voting equity securities unless and solely to the extent permitted by
section 1123(a)(6) of the United States Bankruptcy Code (the “Bankruptcy
Code”) as in effect on the date of filing Certificate of Incorporation with the
Secretary of State of the State of Delaware; provided, however,
that this Paragraph G of Article IV (i) will have no further force
and effect beyond that required under section 1123(a)(6) of the Bankruptcy
Code; (ii) will have such force and effect, if any, only for so long as
section 

 

2

 

1123(a)(6) of the Bankruptcy Code is in effect
and applicable to the Corporation; and (iii) in all events may be amended
or eliminated in accordance with applicable law from time to time in effect.

 

ARTICLE V

STOCKHOLDER ACTION

 

Any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of the stockholders
of the Corporation, and the ability of the stockholders to consent in writing
to the taking of any action is specifically denied.  Except as otherwise required
by law, special meetings of stockholders of the Corporation may only be called (i) by
the Board pursuant to a resolution approved by a majority of the entire Board
or (ii) by a stockholder or stockholders holding in excess of 30% of the
total number of shares of stock entitled to vote on the matter or matters to be
brought before the proposed special meeting pursuant to a written request to
the secretary and in the manner provided in the Bylaws of the Corporation (the “Bylaws”).

 

ARTICLE
VI

BOARD OF DIRECTORS

 

A.                                   Responsibilities. 
The business and affairs of the Corporation shall be managed under the
direction of the Board.

 

B.                                     Number.  The number of
directors of the Corporation shall be fixed, and may be altered from time to time,
in the manner provided in the Bylaws.

 

C.                                     Initial Term. 
The term of office of the initial directors shall expire at the annual
meeting of stockholders to be held in 2011, which meeting shall be held no
earlier than April 1, 2011 and no later than June 30, 2011.

 

D.                                    Elections of Directors. 
Elections of directors need not be by written ballot, unless the Bylaws
so provide.

 

E.                                      Vacancies.  Subject to
applicable law and any certificate of designations, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies in the board of directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be
filled solely by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board, or by the sole
remaining director, and any director so elected shall hold office until the
expiration of the term of office of the director whom he or she has replaced or
until his or her successor shall be elected and qualified or until such
director’s earlier death, resignation, retirement, disqualification, or
removal.  No decrease in the number of
directors shall shorten the term of any incumbent director.

 

3

 

ARTICLE VII

INDEMNIFICATION AND LIMITATION OF LIABILITY

 

A.                                   Limitation of Director’s Liability. The Corporation hereby eliminates, to
the fullest extent permitted by law (as contemplated by Section 102(b)(7) of
the DGCL), the personal liability of any person who serves as a director of the
Corporation to the Corporation and/or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that this Article VII
shall not eliminate or limit the liability of a director: (i) for any
breach of the director’s duty of loyalty to the Corporation or its
stockholders, (ii) for any acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL or (iv) for any transaction from which the director derived an
improper personal benefit.  If the DGCL is hereafter amended to authorize
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the elimination or
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended DGCL. 
Any repeal or modification of this Section A of Article VII by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any elimination or limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.

 

B.                                     Right to Indemnification. 
The Corporation, to the fullest extent permitted or required by the DGCL
or other applicable law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, unless applicable law otherwise requires,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), shall indemnify and hold harmless any person
who is or was made a party, or is threatened to be made a party, or who is or
was involved in any manner (including, without limitation, as a witness), in
any threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative, or investigative
(including, without limitation, any action, suit or proceeding by or in the
right of the Corporation to procure a judgment in its favor) (collectively, a “Proceeding”),
by reason of the fact that such person, or a person of whom he or she is or was
the legal representative, is or was a director or officer of the Corporation,
or who while a director or officer of the Corporation is or was serving at the
request of the Corporation as a director, officer, partner, principal, member,
manager, fiduciary, employee, trustee or agent of another corporation or of a
partnership, limited liability company, joint venture, trust or other
enterprise (including service with respect to employee benefit plans maintained
or sponsored by the Corporation) (collectively, an “Indemnitee”), whether the
basis of such Proceeding is alleged action in an official capacity as a
director, officer, partner, principal, member, manager, fiduciary, employee,
trustee or agent or in any other capacity while serving as a director, officer,
partner, principal, member, manager, fiduciary, employee, trustee or agent,
against all expenses, liabilities and losses (including, without limitation,
attorneys’ fees, costs, charges and related disbursements, judgments, fines,
taxes, excise taxes or penalties under the Employee Retirement Income Security
Act of 1974, as amended from time to time, penalties, and amounts paid or to be
paid in settlement) (collectively, “Expenses”) actually and reasonably
incurred by the Indemnitee in connection with such Proceeding; provided,
however, that, except as provided in this Article VII with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify an Indemnitee in connection with a Proceeding (or part thereof)
initiated by or on 

 

4

 

behalf of such Indemnitee only if the initiation of
such Proceeding (or part thereof) was authorized by the Board.  Each person who is or was serving as a
director, officer, partner, principal, member, manager, fiduciary, employee, trustee
or agent of a subsidiary of the Corporation shall be deemed to be serving, or
have served, at the request of the Corporation.

 

C.                                     Presumptions and Effect of Certain
Proceedings.  An Indemnitee seeking indemnification shall
be presumed to be entitled to indemnification upon submission of a written
request, and thereafter the Corporation shall have the burden of proof to
overcome that presumption in reaching a contrary determination.  In any event, if the Corporation shall not
have made a determination within 30 days after receipt of a written request
therefor, the Indemnitee seeking indemnification shall be deemed to be, and
shall be, entitled to indemnification unless (i) the Indemnitee
intentionally misrepresented or failed to disclose a material fact in the
written request for indemnification or (ii) such indemnification is
prohibited by the DGCL.  The termination
of any Proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnitee (a) did not act in good faith and in a manner which
the Indemnitee reasonably believed to be in, or at least not opposed to, the
best interests of the Corporation or (b) with respect to any criminal
action or proceeding, had reasonable cause to believe that such conduct was
unlawful.  Furthermore, the knowledge or
actions or failure to act of any other director, officer, employee or agent of
the Corporation or other enterprise, as applicable, shall not be imputed to the
Indemnitee for purposes of determining the Indemnitee’s entitlement to
indemnification under this Article VII.

 

D.                                    Advancement of Expenses. 
Expenses incurred by an Indemnitee in defending a Proceeding shall be
paid by the Corporation in advance of the final disposition of such Proceeding
and within 15 days of receipt by the secretary of the Corporation of (i) a
written request therefor setting forth the basis for such indemnification and (ii) if
required by law at the time such written request is made, an undertaking by or
on behalf of the Indemnitee to repay such amount if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified by the
Corporation as authorized in this Article VII.  Such advances shall be made on an unsecured
basis, shall be interest-free and shall be made without regard to the
Indemnitee’s ability to repay such amounts and without regard to the Indemnitee’s
ultimate entitlement to indemnification under this Article VII or
otherwise.

 

E.                                      Remedies of the Indemnitee.

 

(i)                                     If a determination is made that the
Indemnitee is not entitled to indemnification or advancement of Expenses under
this Article VII, (a) the Indemnitee shall be entitled to seek an
adjudication of entitlement to such indemnification or advancement of Expenses
either, at the Indemnitee’s sole option, (1) in an appropriate court of
the State of Delaware or any other court of competent jurisdiction or (2) in
an arbitration to be conducted by a single arbitrator pursuant to the rules of
the American Arbitration Association, (b) any such judicial proceeding or
arbitration shall be de novo and the Indemnitee shall not be prejudiced by
reason of such adverse determination, and (c) in any such judicial
proceeding or arbitration, the Corporation shall have the burden of proving by
clear and convincing evidence that the Indemnitee is not entitled to
indemnification or advancement of Expenses under this Article VII.

 

5

 

(ii)                                  If a determination shall have been made
or deemed to have been made that the Indemnitee is entitled to indemnification,
the Corporation shall be obligated to pay the amounts constituting such
indemnification within 15 days after such determination has been made or deemed
to have been made and shall be conclusively bound by such determination unless (a) the
Indemnitee intentionally misrepresented or failed to disclose a material fact
in the written request for indemnification or (b) such indemnification is
prohibited by the DGCL.  In the event
that (1) advancement of Expenses is not timely made pursuant to Section D
of this Article VII or (2) payment of indemnification is not made
within 15 days after a determination of entitlement to indemnification has been
made or deemed to have been made pursuant to this Article VII, the
Indemnitee shall be entitled to seek judicial enforcement of the Corporation’s
obligation to pay the Indemnitee such advancement of Expenses and
indemnification.  It shall be a defense
to any such action for judicial enforcement (other than an action brought to
enforce a claim for Expenses incurred in defending any Proceeding in advance of
its final disposition where the written request therefor and the required
undertaking, if any is required, has been received by the secretary of the
Corporation) that the Indemnitee has not met the standard of conduct set forth
in the DGCL, but the burden of proving such defense, by clear and convincing
evidence, will be on the Corporation. Neither the failure of the Corporation to
have made a determination prior to the commencement of such action that
indemnification of the Indemnitee is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in the DGCL, nor an
actual determination by the Corporation that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.

 

(iii)                               The Corporation shall be precluded from
asserting in any judicial proceeding or arbitration commenced pursuant to this Section E
of Article VII that the procedures and the presumptions of this Article VII
are not valid, binding and enforceable and shall stipulate in any such court or
before any such arbitrator that the Corporation is bound by all the provisions
of this Article VII.

 

(iv)                              The Corporation shall indemnify the
Indemnitee against, and the Indemnitee shall be entitled to recover from the
Corporation, any Expenses actually and reasonably incurred in connection with
any judicial adjudication, judicial enforcement, or arbitration commenced
pursuant to this Section E of Article VII to enforce his or her
rights under, or to recover damages for breach of, this Article VII.

 

F.                                      Definitions. 
For purposes of this Article VII:

 

(i)                                     “Corporation” shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger that, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article VII with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.

 

6

 

(ii)                                  “Disinterested Director” means a director
of the Corporation who is not or was not a party to the Proceeding in respect
of which indemnification is sought by the Indemnitee.

 

(iii)                               Actions “in, or at least not opposed to,
the best interests of the Corporation” shall include, without limitation,
actions taken in good faith and in a manner the Indemnitee reasonably believed
to be in or not opposed to the best interests of the participants and
beneficiaries of an employee benefit plan.

 

G.                                     Insurance.  The
Corporation shall purchase and maintain insurance on behalf of any person who
is or was a director or officer of the Corporation, or who while a director or
officer  is or was serving at the request of
the Corporation as a director, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise (“D&O
Insurance”), against any liability asserted against the person and incurred by
the person in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power or the obligation to
indemnify such person against such liability under the provisions of this Article VII.  Notwithstanding the foregoing, the
Corporation shall have no obligation to obtain or maintain D&O Insurance if
the Corporation determines in good faith that such insurance is not reasonably
available, the premium costs for such insurance are materially disproportionate
to the amount of coverage provided, the coverage provided by such insurance is
limited by exclusions so as to provide a materially insufficient benefit, or
such person is covered by substantially similar insurance maintained by a
subsidiary of the Corporation or by another person pursuant to a contractual
obligation owed to the Corporation.

 

H.                                    Scope of Article VII.  The rights
conferred in this Article VII shall not be exclusive of any other right
that any person may have or hereafter acquire under any statute, provision of
this Certificate of Incorporation, any certificate of designations, the Bylaws,
any agreement, vote of stockholders or Disinterested Directors, or otherwise, both as to action in an official capacity
and as to action in another capacity while holding such office or while
employed by or acting as agent for the Corporation.  The rights provided by or granted pursuant to
this Article VII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such person.

 

I.                                         Reliance on Provisions. 
Each person who shall act as a director or officer of the Corporation,
or as the legal representative of such person, or who while a director or
officer  serves at the request of the
Corporation as a director, officer, partner, principal, member, manager,
fiduciary, employee, trustee or agent of another corporation or of a
partnership, limited liability company, joint venture, trust or other
enterprise, shall be deemed to be doing so in reliance upon rights of
indemnification provided by this Article VII.  Any repeal or modification of the provisions
of this Article VII shall not adversely affect any right or benefit of any
potential Indemnitee existing at the time of such repeal or modification.

 

J.                                        Indemnification of Other Employees. 
The Corporation may, to the extent authorized from time to time by the
Board, grant rights to indemnification, and rights to advancement by the
Corporation of any Expenses actually and reasonably incurred in defending any
Proceeding, to any employee or agent of the Corporation to the fullest extent
of the 

 

7

 

provisions of this Article VII with respect to
the indemnification of and advancement of Expenses to directors and officers of
the Corporation.

 

K.                                    Severability. 
If this Article VII or any portion thereof shall be held to be
invalid, illegal or unenforceable on any ground by any court of competent
jurisdiction, then (i) the Corporation shall nevertheless indemnify each
Indemnitee as to all Expenses actually and reasonably incurred or suffered by
such person in connection with any Proceeding, including, without limitation, a
grand jury proceeding, to the fullest extent permitted by (a) any
applicable portion of this Article VII that shall not have been
invalidated, (b) the DGCL or (c) any other applicable law, and (ii) to
the fullest extent possible, the provisions of this Article VII
(including, without limitation, each portion of any paragraph of this Article VII
containing any such provision held to be invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.

 

L.                                      Contract Rights. 
The provisions of this Article VII shall be deemed to be a contract
right between the Corporation and each person who is entitled to
indemnification or advancement of Expenses pursuant to this Article VII at
any time while this Article VII and the relevant provisions of the DGCL or
other applicable law are in effect, and any repeal or modification of this Article VII
or any such law shall not in any way diminish any rights to indemnification of
such person or the obligations of the Corporation arising hereunder with
respect to any Proceeding arising out of, or relating to, any actions,
transactions or facts occurring prior to the final adoption of such
modification or repeal.

 

ARTICLE
VIII

AMENDMENT OF BYLAWS

 

In furtherance and not in limitation of the powers
conferred by the DGCL, the Board is expressly authorized to make, adopt,
repeal, alter, amend and rescind the Bylaws by resolutions adopted by a
majority of the directors or as otherwise provided in the Bylaws.

 

ARTICLE
IX

 

AMENDMENT
OF CERTIFICATE OF INCORPORATION

 

The
Corporation reserves the right, at any time and from time to time, to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by the laws of the
State of Delaware.  All rights,
preferences and privileges of any nature conferred upon stockholders,
directors, or any other persons or entities by and pursuant to this Certificate
of Incorporation in its present form or as hereafter amended are granted
subject to the right reserved in this Article IX; provided, however, any
amendment or repeal of Article VII of this Certificate of Incorporation
shall only be prospective and shall not adversely affect any right or
protection existing hereunder at the time of the alleged occurrence of any
action or omission to act giving rise to liability or indemnification.

 

8

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Incorporation to be signed by
[                          ],
its [                          ],
this [      ] day of December, 2009.

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

9

 

EXHIBIT H

 

 

REGISTRATION RIGHTS AGREEMENT

 

by and among

 

IDEARC INC.

 

and

 

THE HOLDERS NAMED HEREIN

 

 

Dated as of [·], 2009

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.   Definitions

  	
  1

  
	
   

  	
   

  
	
  2.   Securities Act Shelf Registration

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Shelf Registration

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Effective Registration Statement

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.   Securities Act Registration on Request

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Request

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Registration of Other Securities

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Registration Statement Form

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Effective Registration Statement

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Selection of Underwriters

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Priority in Registration

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Shelf Registrations

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  4.   Piggyback Registration

  	
  10

  
	
   

  	
   

  
	
  5.   Expenses

  	
  11

  
	
   

  	
   

  
	
  6.   Registration Procedures

  	
  11

  
	
   

  	
   

  
	
  7.   Underwritten Offerings

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Requested Underwritten Offerings

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Piggyback Underwritten Offerings: Priority

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Selling Holders to be Parties to Underwriting Agreement

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Holdback Agreements

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  8.   Preparation: Reasonable Investigation

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Registration Statements

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Confidentiality

  	
  19

  

 

i

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  9.   Postponements

  	
  19

  
	
   

  	
   

  
	
  10.   Indemnification

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Indemnification by the Company

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Indemnification by the Offerors and Sellers

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Notices of Losses, etc.

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Contribution

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Indemnification Payments

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  11.   Registration Rights to Others

  	
  23

  
	
   

  	
   

  
	
  12.   Adjustments Affecting Registrable Common Stock

  	
  23

  
	
   

  	
   

  
	
  13.   Exchange Act Reports

  	
  23

  
	
   

  	
   

  
	
  14.   Rule 144 and Rule 144A

  	
  23

  
	
   

  	
   

  
	
  15.   Amendments and Waivers

  	
  24

  
	
   

  	
   

  
	
  16.   Nominees for Beneficial Owners

  	
  24

  
	
   

  	
   

  
	
  17.   Assignment

  	
  24

  
	
   

  	
   

  
	
  18.   Calculation of Percentage or Number of Shares of
  Registrable Common Stock

  	
  25

  
	
   

  	
   

  
	
  19.   Termination of Registration Rights

  	
  25

  
	
   

  	
   

  
	
  20.   Miscellaneous

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Further Assurances

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Headings

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Conflicting Instructions

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Remedies

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Entire Agreement

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Notices

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Governing Law

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Venue; No Jury Trial

  	
  26

  

 

ii

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  Severability

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Counterparts

  	
  27

  

 

SCHEDULES:

 

SCHEDULE A – ORIGINAL
HOLDERS

SCHEDULE B – NOTICES

 

EXHIBIT:

 

EXHIBIT A – FORM OF
SELLING STOCKHOLDER QUESTIONNAIRE

 

iii

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT, dated as of [·], 2009 (this
“Agreement”), is entered into by and among Idearc Inc., a Delaware
corporation (the “Company”), Paulson & Co. Inc., a Delaware
corporation, on behalf of the several investment funds and accounts managed by
it ( “Paulson”), and each other holder of Registrable Common Stock (as
hereinafter defined) which (i) together with its Affiliates (as defined
below), beneficially owns at least five percent (5%) of the then outstanding
shares of Registrable Common Stock and (ii) is a signatory to this
Agreement (the “Other Holders”; each of Paulson and, for so long as the
ownership requirement set forth in clause (i) is satisfied, each Other
Holder, individually, a “Holder” and, collectively, the “Holders”).

 

This Agreement is being entered into in connection
with the acquisition of Common Stock (as hereinafter defined) on the date
hereof by Paulson and the Other Holders (collectively, the “Original Holders”)
pursuant to the Plan (as hereinafter defined) and, with respect to Paulson,
pursuant to that certain Standby Purchase Agreement, dated as of [·], 2009,
by and between Paulson and the Company. 
The Original Holders are listed on Schedule A hereto.

 

To induce the Original Holders to vote in favor of
the Plan, and to accept the issuance of Common Stock by the Company under the
Plan, the Company has undertaken to register Registrable Common Stock under the
Securities Act (as hereinafter defined) and to take certain other actions with
respect to the Registrable Common Stock. 
This Agreement sets forth the terms and conditions of such undertaking.

 

In consideration of the premises and the mutual
agreements set forth herein, the parties hereto hereby agree as follows:

 

1.   Definitions.  Unless otherwise defined herein, capitalized
terms used herein and in the recitals above shall have the following meanings:

 

“Affiliate” of a Person means any Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such other Person.  For purposes of this definition, “control”
means the ability of one Person to direct the management and policies of
another Person.

 

“Agreement” has the meaning set forth in the
preamble hereto.

 

“beneficial ownership” (and related terms
such as “beneficially owned” or “beneficial owner”) has the meaning set forth
in Rule 13d-3 under the Exchange Act.

 

“Board of Directors” means the board of
directors of the Company.

 

“Business Day” means any day except a
Saturday, Sunday or other day on which commercial banks in New York City are
authorized or required by law to be closed.

 

“Commission” means the U.S. Securities and
Exchange Commission.

 

 

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

 

“Company” has the meaning set forth in
the preamble hereto.

 

“Company Indemnitee” has the meaning set
forth in Section 10(a) hereof.

 

“Effective Date” means the effective date of
the Plan pursuant to the terms thereof.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, or any
similar or successor statute.

 

“Expenses” means all expenses incident to the
Company’s performance of or compliance with its obligations under this
Agreement, including, without limitation, all registration, filing, listing,
stock exchange and FINRA fees (including, without limitation, all fees and
expenses of any “qualified independent underwriter” required by the rules of
FINRA), all fees and expenses of complying with state securities or blue sky
laws (including, without limitation, the fees, disbursements and other charges
of counsel for the underwriters in connection with blue sky filings), all word
processing, duplicating and printing expenses, messenger, telephone and
delivery expenses, all rating agency fees, the fees, disbursements and other
charges of counsel for the Company and of its independent public accountants,
including, without limitation, the expenses incurred in connection with “cold
comfort” letters required by or incident to such performance and compliance,
the fees and expenses incurred in connection with the listing of the securities
to be registered on each securities exchange or national market system on which
similar securities issued by the Company are then listed, any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, the reasonable fees, disbursements and other charges of one firm of
counsel in each applicable jurisdiction (per registration statement prepared)
to the Holders making a request pursuant to Section 2(a), 3(a) or 4
hereof (selected by the Holders beneficially owning a majority of the shares of
Registrable Common Stock covered by such registration), the fees and expenses
of any special experts retained by the Company in connection with such
registration, and the fees and expenses of other Persons retained by the
Company, but excluding underwriting discounts and commissions and applicable
transfer taxes, if any, in each case relating to the shares of Registrable
Common Stock sold by the Selling Holders, which discounts, commissions and
transfer taxes shall be borne by the seller or Selling Holders; provided,
that, if the Company shall, in accordance with Section 4 or Section 9
hereof, not register any securities with respect to which it had given written
notice of its intention to register to Holders, notwithstanding anything to the
contrary in the foregoing, all reasonable out-of-pocket expenses incurred by
such requesting Holders in connection with such registration (other than the
reasonable fees, disbursements and other charges of counsel other than the one
firm of counsel referred to above) shall be deemed to be Expenses.

 

“FINRA” shall mean the Financial Industry
Regulatory Authority.

 

“Holder” and “Holders” have the
meanings set forth in the preamble hereto.

 

“Initial Shelf” has the meaning set forth in Section 3(a) hereof.

 

2

 

“Initiating Holder” has the meaning set forth
in Section 3(a) hereof.

 

“Initiating Request” has the meaning set
forth in Section 3(a) hereof.

 

“Loss” and “Losses” have the meanings
set forth in Section 10(a) hereof.

 

“Minimum Ownership Trigger” has the meaning
set forth in Section 2(a) hereof.

 

“Offering Documents” has the meaning set
forth in Section 10(a) hereof.

 

“Original Holders” has the meaning set forth
in the preamble hereto.

 

“Other Holders” has the meaning set forth in
the preamble hereto.

 

“Person” means any individual, corporation,
partnership, limited liability company, firm, joint venture, association, joint
stock company, trust, unincorporated organization, governmental or regulatory
body or subdivision thereof or other entity.

 

“Piggyback Requesting Holder” has the meaning
set forth in Section 4 hereof.

 

“Plan” means the Plan of Reorganization
confirmed by order of the United States Bankruptcy Court for the Northern
District of Texas, Dallas Division, dated [·], 2009, in the chapter 11 case commenced by the
Company and certain of its Subsidiaries.

 

“Public Offering” means a public offering and
sale of Common Stock pursuant to an effective registration statement under the
Securities Act.

 

“Questionnaire” has the meaning set forth in Section 2(a) hereof.

 

“Registrable Common Stock” means any share of
Common Stock beneficially owned by the Holders from time to time, provided,
however, that a share of Common Stock will cease to be Registrable
Common Stock (i) after it has been sold under a registration statement
effected pursuant hereto, (ii) after it has been sold to the public in
compliance with Rule 144 promulgated under the Securities Act, or (iii) if
it may be sold to the public in compliance with Rule 144 promulgated under
the Securities Act; provided that, in the case of clause (iii), a share
of Common Stock beneficially owned by a Holder from time to time will cease to
be Registrable Common Stock only at such time, if any, as all shares of
Registrable Common Stock beneficially owned by such Holder are able to be sold
in a single transaction under Rule 144.

 

“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any similar
or successor statute.

 

“Selling Holder Indemnitee” has the meaning
set forth in Section 10(b) hereof.

 

“Selling Holders” means the Holders
requesting to be registered pursuant hereto.

 

“Shelf Filing Date” has the meaning set forth
in Section 2(a) hereof.

 

“Shelf Registration” has the meaning set
forth in Section 2(a) hereof.

 

3

 

“Shelf Registration Statement” has the
meaning set forth in Section 2(a) hereof.

 

“Subsidiary” shall mean, with respect to any
Person, any corporation, limited liability company, partnership, association or
other business entity of which fifty percent (50%) or more of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote generally in the election of directors, managers or
trustees thereof, or fifty percent (50%) or more of the equity interest
therein, is at the time owned or controlled, directly or indirectly, by any
Person or one or more of the other Subsidiaries of such Person or a combination
thereof.

 

“Transfer” means any direct or indirect
transfer, sale, offer, assignment, exchange, distribution, mortgage, pledge,
hypothecation or other disposition.  “Transferor”
and “Transferee” have correlative meanings.

 

2.   Securities
Act Shelf Registration.

 

(a)   Shelf
Registration.  Subject to Paulson and
its Affiliates beneficially owning more than 20% of the then outstanding
Registrable Common Stock on the Effective Date or at any time between the
Effective Date and the date that is 270 days after the Effective Date (the “Minimum
Ownership Trigger”), within thirty (30) days after the Company is eligible
to file a registration statement on Form S-3 (the “Shelf Filing Date”),
the Company shall file a shelf registration statement (as it may be amended or
supplemented from time to time, a “Shelf Registration Statement”)
pursuant to Rule 415 promulgated under the Securities Act (a “Shelf
Registration”) providing for the sale by Paulson and its Affiliates (in
accordance with the requirements of this Section 2(a)) of any and all  of the Registrable Common Stock beneficially owned by
Paulson and its Affiliates and for the sale of any and all of the Registrable
Common Stock beneficially owned by the Other Holders who comply with the
requirements of this Section 2(a). 
The Company shall use its best efforts to have such Shelf Registration
Statement declared effective by the Commission as soon as practicable.  Subject to Section 9(b), the Company
agrees to use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective under Rule 415 of the Securities Act
until the earliest to occur of (i) the third anniversary of the date such
Shelf Registration Statement initially is declared effective by the Commission
(plus a number of Business Days equal to the number of Business Days, if any,
that the Shelf Registration Statement is not kept effective (including any days
for which the use of the prospectus is suspended pursuant to Section 9(b))
after the initial date of its effectiveness and prior to the third anniversary
thereof), (ii) the day after the date on which all of the Registrable
Common Stock covered by the Shelf Registration Statement has been sold pursuant
to the Shelf Registration Statement or (iii) the first date on which there
shall cease to be any Registrable Common Stock covered by such Shelf
Registration Statement.  The Company
further agrees, if necessary, to supplement or amend the Shelf Registration
Statement, if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration or by the
Securities Act or by any other rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to the Holders whose
Registrable Common Stock is included in such Shelf Registration Statement
copies of any such supplement or amendment promptly after its being issued or
filed with the Commission.

 

4

 

Notwithstanding
any other provision hereof, no Selling Holders’ Registrable Common Stock shall
be included in the Shelf Registration Statement unless and until such Selling
Holder furnishes to the Company a fully completed notice and questionnaire
substantially in the form attached hereto as Exhibit A (the “Questionnaire”)
and such other information in writing as the Company may reasonably request in
writing for use in connection with the Shelf Registration Statement and any
related application to be filed with or under state securities laws.  At
least thirty (30) days prior to the filing of the Shelf Registration Statement,
the Company will provide to the Holders notice of its intention to file the
Shelf Registration Statement, the form of Questionnaire and such other
information the Company may reasonably request to be provided by the Holders.
 In order to be named as a selling stockholder in the Shelf Registration
Statement at the time of effectiveness of the Shelf Registration Statement and
to include in the Shelf Registration Statement all Registrable Common Stock
requested to be included for sale by the Selling Holders, each Selling Holder
must no later than twenty (20) days following its receipt of notice sent by the
Company as set forth in the previous sentence, furnish to the Company in
writing the completed Questionnaire and such other information reasonably
requested by the Company and the Company will include information in the
completed Questionnaire and such other information, if any, in the Shelf
Registration Statement, as necessary and in a manner so that upon effectiveness
of the Shelf Registration Statement, the Selling Holder will be permitted to
deliver the Shelf Registration Statement to purchasers of the Seller Holder’s
Registrable Common Stock.  From and after
the date that the Shelf Registration Statement becomes effective, upon receipt
of a completed Questionnaire and such other information that the Company may
reasonably request in writing, if any, the Company shall (i) as promptly
as practicable after the date on which the Questionnaire is delivered, and in
any event within the later of (x) 10 Business Days after receipt of such Questionnaire
or (y)  10 Business Days after the expiration of any suspension pursuant
to Section 9(b) in effect when the Questionnaire is delivered, file
any amendments or supplements to the Shelf Registration Statement necessary for
such Selling Holder to be named as a selling stockholder and to include in the
Shelf Registration Statement all Registrable Common Stock requested to be
included for sale by such Selling Holder or, if not permitted to name such
Selling Holder as a selling stockholder by supplement, file any necessary
post-effective amendment to the Shelf Registration Statement or prepare and, if
required by applicable law, file any amendment or supplement to any document so
that such Selling Holder is named as a selling stockholder, and use its
reasonable best efforts to cause such post-effective amendment to be declared
effective as promptly as practicable; provided that the Company shall
not be obligated to file more than one (1) post-effective amendment for
Paulson and one (1) post-effective amendment for Other Holders in any
ninety (90) day period.

 

(b)   Effective
Registration Statement.  A Shelf
Registration pursuant to Section 2(a) hereof shall not be deemed to
have been effected

 

(i)            unless
a registration statement with respect thereto has been declared effective by
the Commission and remains effective in compliance with the provisions of the
Securities Act and the laws of any state or other jurisdiction applicable to
the disposition of Registrable Common Stock covered by such registration statement
until such time as all of such Registrable Common Stock have been disposed of
in accordance with such registration statement or there shall cease to be any
Registrable Common Stock covered by such Shelf Registration Statement (provided
that such period need not exceed the applicable period provided for in Section 2(a)),
or

 

5

 

(ii)           if,
after it has become effective, such registration is subject to any stop order,
injunction or other order or requirement of the Commission or other
governmental or regulatory agency or court preventing the sale of securities
under such registration statement for any reason (other than a violation of
applicable law solely by any Selling Holder and has not thereafter become
effective).

 

3.   Securities
Act Registration on Request.

 

(a)   Request.  At any time and from time to time when a
Shelf Registration Statement filed by the Company pursuant to Section 2(a) hereof
(the “Initial Shelf”) is not effective, any Holder (the “Initiating
Holder”) may make a written request (the “Initiating Request”) to
the Company for the registration with the Commission under the Securities Act
(on Form S-3 or, if Form S-3 is not then available to the Company, Form S-1
or any other appropriate form) covering the sale  of
all or part of the Registrable Common Stock then held by the Initiating Holder,
which request shall specify the number of shares to be disposed of by the
Initiating Holder, the proposed plan of distribution therefor and whether or not
a Shelf Registration Statement is being requested.  Upon the receipt of any Initiating Request
for registration pursuant to this Section 3(a), the Company promptly shall
notify in writing all other Holders of the receipt of such request and will use
its reasonable best efforts to effect, at the earliest practicable date, such
registration under the Securities Act of

 

(i)            the
Registrable Common Stock which the Company has been so requested to register by
the Initiating Holder, and

 

(ii)           all
other Registrable Common Stock which the Company has been requested to register
by any other Holders by written request given to the Company within twenty (20)
days after the giving of written notice by the Company to such other Holders of
the Initiating Request (or ten (10) days if the Company states in such
written notice or gives telephonic notice to such other Holders, with written
confirmation to follow promptly thereafter, stating that (i) such
registration will be on Form S-3 (or, if Form S-3 is not then
available to the Company, Form S-1 or any other appropriate form) and (ii) such
shorter period of time is required because of a planned filing date),

 

all to the extent necessary to permit the
disposition (in accordance with Section 3(c) hereof) of the
Registrable Common Stock to be so registered; provided, that,

 

(A)          the Company shall not be required to
effect more than a total of six (6) registrations pursuant to this Section 3(a) requested
by Paulson (if the Minimum Ownership Trigger has been met; otherwise three (3) registrations)
and three (3) registrations requested by all Other Holders,

 

(B)           if the intended method of
distribution is an underwritten Public Offering, the Company shall not be
required to effect such registration pursuant to this Section 3(a) unless
such underwriting shall be conducted on a “firm commitment” basis,

 

(C)           the Company shall not be required to
effect any registration pursuant to this Section 3(a) more than two
times in any 12-month period,

 

6

 

(D)          any Selling Holder whose Registrable
Common Stock was to be included in any such registration pursuant to this Section 3(a),
by written notice to the Company, may withdraw such request, and the Company
shall not effect such registration in the event that the Selling Holders that
have not elected to withdraw beneficially own, in the aggregate, less than the
percentage of the shares of Registrable Common Stock required to initiate a
request under this Section 3(a),

 

(E)           the Company shall not be required to
effect any registration to be effected pursuant to this Section 3(a) unless
either (x) at least five percent (5%) of the shares of Common Stock
outstanding at the time of such request are to be included in such registration
or (y) the market value of the shares of Common Stock to be included in
such registration statement (measured as of the date of the Initiating Request)
is at least ten million dollars ($10,000,000), and

 

(F)           a Shelf Registration effected under
this Section 3(a) shall comply with the procedures set forth in the
second paragraph of Section 2(a).

 

(b)   Registration
of Other Securities.  Whenever the
Company shall effect a registration pursuant to Section 3(a) hereof,
no securities other than (i) Registrable Common Stock and (ii) subject
to Section 3(f), Common Stock to be sold by the Company for its own
account shall be included among the securities covered by such registration
unless the Selling Holders beneficially owning not less than a majority of the
shares of Registrable Common Stock to be covered by such registration shall
have consented in writing to the inclusion of such other securities.

 

(c)   Registration
Statement Form.  Except as provided
in Section 3(a), registrations under Section 3(a) hereof shall
be on such appropriate registration statement form prescribed by the Commission
under the Securities Act as shall be selected by the Company and as shall
permit the disposition of the Registrable Common Stock pursuant to an
underwritten offering unless the Selling Holders beneficially owning at least a
majority of the shares of Registrable Common Stock requested to be included in
such registration statement determine otherwise, in which case pursuant to the
method of distribution determined by such Selling Holders.  The Company agrees to include in any such
registration statement filed pursuant to Section 3(a) hereof all
information which the Selling Holders beneficially owning at least a majority
of shares of the Registrable Common Stock covered by such registration
statement effected pursuant hereto, upon advice of counsel, shall reasonably
request.  The Company shall use its
reasonable best efforts to become eligible to use Form S-3 and, after
becoming eligible to use Form S-3, shall use its reasonable best efforts
to remain eligible to use Form S-3.

 

(d)   Effective
Registration Statement.  A
registration requested pursuant to Section 3(a) hereof shall not be
deemed to have been effected

 

(i)            unless
a registration statement with respect thereto has been declared effective by
the Commission and remains effective in compliance with the provisions of the
Securities Act and the laws of any state or other jurisdiction applicable to
the disposition of Registrable Common Stock covered by such registration
statement

 

7

 

until
such time as all of such Registrable Common Stock have been disposed of in
accordance with such registration statement or there shall cease to be any
Registrable Common Stock covered by such registration statement, provided,
that, except with respect to any Shelf Registration, such period need
not exceed ninety (90) days (plus a number of Business Days equal to the number
of Business Days, if any, that the registration statement is not kept effective
(including any days for which the use of the prospectus is suspended pursuant
to Section 9(b)) after the initial date of its effectiveness and prior to
the expiration of such ninety (90) day period), and, provided, further,
that with respect to any Shelf Registration, such period need not extend beyond
the period provided for in Section 3(g) hereof,

 

(ii)           if,
after it has become effective, such registration is subject to any stop order,
injunction or other order or requirement of the Commission or other
governmental or regulatory agency or court preventing the sale of securities
under such registration statement for any reason (other than a violation of
applicable law solely by any Selling Holder  and has not thereafter become effective) or

 

(iii)          if,
in the case of an underwritten offering, the conditions to closing specified in
an underwriting agreement to which the Company is a party are not satisfied or
waived other than by reason of any breach or failure by any Selling Holder.

 

The Selling Holders to be included in a registration
statement pursuant to Section 3(a) may at any time terminate such
request for registration in accordance with Section 3(a)(ii)(D).

 

(e)   Selection
of Underwriters.  Notwithstanding
anything to the contrary set forth in this Agreement, in connection with any
registration requested by Paulson pursuant to Section 3(a) or any
registration pursuant to which Paulson exercises its piggyback rights pursuant
to Section 4 hereof (other than in the case of any offering or
registration initiated by the Company for its own account), Paulson shall have
the right in its sole discretion to require that the sale of its Registrable
Common Stock included in such registration be made in an underwritten offering
on a “firm commitment” basis.  The
underwriter or underwriters of each underwritten offering, if any, of the
Registrable Common Stock to be registered pursuant to Section 2(a) or
3(a) hereof shall be selected by Paulson or, if Paulson and its Affiliates
do not beneficially own a majority of the shares of Registrable Common Stock to
be registered, then the Selling Holders beneficially owning at least a majority
of the shares of Registrable Common Stock to be registered.  In the case of any offering or registration
initiated by the Company for its own account or any other offering not effected
pursuant to Section 2(a) or 3(a) hereof, including any offering
pursuant to which the Holders shall have piggyback rights pursuant to Section 4
hereof, the Company shall select a nationally recognized underwriter (or
underwriters) for such offering in its sole discretion; provided that,
the Company shall not identify any Holder or subsequent purchaser of
Registrable Common Stock as an underwriter in any public disclosure with the
Commission or any trading market without the prior written consent of such
Holder or such subsequent purchaser, as the case may be.  If the Company is required by law to identify
any such party as an underwriter in any public disclosure or filing with the
Commission or any trading market, it must notify such party in advance and such
party shall have the option, in its sole discretion, to consent to such
identification as an underwriter within five (5) Business Days or such
party shall

 

8

 

be deemed to have consented to have its Registrable
Common Stock removed from the applicable registration statement.

 

(f)    Priority in Registration.  If a registration pursuant to
Section 2(a) or 3(a) hereof involves an underwritten Public
Offering, and the managing underwriter of such underwritten offering shall
advise the Company in writing (with a copy to each Selling Holder requesting
that Registrable Common Stock be included in such registration statement) that,
in its opinion, the number of shares of Registrable Common Stock requested to
be included in such registration exceeds the number of such securities that can
be sold in such offering within a price range stated to such managing
underwriter by Selling Holders beneficially owning at least a majority of the
shares of Registrable Common Stock requested to be included in such
registration to be acceptable to such Selling Holders (such writing to state
the basis of such opinion and the approximate number of securities which the
managing underwriter believes may be included in such offering without such
effect), then the Company shall include in such registration, to the extent of
the number of shares which the Company is so advised the managing underwriter
believes can be sold in such offering, (i) first, all Registrable Common
Stock requested to be registered or included in an underwritten Public Offering
pursuant to Section 2(a) or 3(a) by Paulson and its Affiliates
(if the Minimum Ownership Trigger has been met), if any, (ii) second, all
Registrable Common Stock requested to be registered or included in an
underwritten Public Offering pursuant to Section 2(a) or 3(a) pro  rata
among the Other Holders (or the Holders if clause (i) is not operable
because the Minimum Ownership Trigger has not been met) on the basis of the
number of shares of Registrable Common Stock requested to be registered by all
such Other Holders (or such Holders if clause (i) is not operable because
the Minimum Ownership Trigger has not been met), if any, (iii) third,
securities that the Company proposed to issue and sell for its own account, if
any, and (iv) fourth, other securities, if any.

 

(g)   Shelf Registrations.  If one or more demands made pursuant to Section 3(a) hereof
are for a Shelf Registration, the period for which the Shelf Registration
Statement in connection with the first Shelf Registration requested pursuant to
Section 3(a) must remain effective need not extend beyond one (1) year
from the date on which such Shelf Registration Statement initially was declared
effective by the Commission and the period for which any subsequent Shelf
Registration Statement in connection with the subsequent Shelf Registration
requested pursuant to Section 3(a) must remain effective need not
extend beyond nine (9) months from the date on which such Shelf Registration
Statement initially was declared effective by the Commission (plus, in each
case, a number of Business Days equal to the number of Business Days, if any,
that the Shelf Registration Statement is not kept effective (including any days
for which the use of the prospectus is suspended pursuant to Section 9(b))
after the initial date of its effectiveness and prior to such first-year or
nine-month, as the case may be, anniversary thereof). The Company further
agrees, if necessary, to supplement or amend the Shelf Registration Statement,
if required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration or by the
Securities Act or by any other rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to the Holders whose
Registrable Common Stock is included in such Shelf Registration Statement
copies of any such supplement or amendment promptly after its being issued or
filed with the Commission.

 

9

 

4.   Piggyback Registration.  If the Company, at any time when a Shelf
Registration Statement covering all outstanding shares of Registrable Common
Stock is not effective, proposes to register Common Stock under the Securities
Act by registration on any forms (other than Form S-4 or S-8 or any
successor or similar form(s)), whether or not pursuant to registration rights
granted to other holders of its securities and whether or not for sale for its
own account, it shall give prompt written notice to all of the Holders of its
intention to do so and of such Holders’ rights under this Section 4, which
notice, in any event, shall be given at least 30 days prior to such proposed
registration.  Upon the written request
of any Holder receiving notice of such proposed registration (each, a “Piggyback
Requesting Holder”) made within 20 days after the receipt of any such
notice (or 10 days if the Company states in such written notice or gives
telephonic notice to the Holders, with written confirmation to follow promptly
thereafter, stating that (i) such registration will be on Form S-3
(or, if Form S-3 is not then available to the Company, Form S-1 or
any other appropriate form) and (ii) such shorter period of time is
required because of a planned filing date), which request shall specify the
Registrable Common Stock intended to be disposed of by such Piggyback
Requesting Holder and the minimum offering price per share at which such
Piggyback Requesting Holder is willing to sell its Registrable Common Stock,
the Company shall, subject to Section 7(b) hereof, effect the
registration under the Securities Act of all Registrable Common Stock which the
Company has been so requested to register by the Piggyback Requesting Holders
thereof; provided that,

 

(A)          prior to the effective date
of the registration statement filed in connection with such registration or, in
the case of a Shelf Registration Statement, prior to the delivery of a
preliminary prospectus related to such offering, and, in any event, promptly
following receipt of notification by the Company from the managing underwriter
(if an underwritten offering) of a range of prices at which such securities are
likely to be sold, the Company shall so advise each Piggyback Requesting Holder
of such price, and if such price is below the minimum price which shall be
acceptable to such Piggyback Requesting Holder, such Piggyback Requesting
Holder shall then have the right irrevocably to withdraw its request to have
its Registrable Common Stock included in such registration statement, by
delivery of written notice of such withdrawal to the Company within five (5) Business
Days of its being advised of such price, without prejudice to the rights of any
such Piggyback Requesting Holder to include Registrable Common Stock in any
future registration (or registrations) pursuant to this Section 4 or to
cause such registration to be effected as a registration under Section 3(a) hereof,
as the case may be;

 

(B)           if at any time after giving
written notice of its intention to register the offer for sale of any
securities and prior to the effective date of the registration statement filed
in connection with such registration or, in the case of a Shelf Registration
Statement, prior to the consummation of such offering, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Piggyback Requesting Holder and (i) in the case of a
determination not to register, the Company shall be relieved of its obligation
to register any Registrable Common Stock in connection with such registration
(but not from any obligation of the Company to pay the Expenses in connection

 

10

 

therewith), without
prejudice, however, to the rights of any Piggyback Requesting Holder to include
Registrable Common Stock in any future registration (or registrations) pursuant
to this Section 4 or, if applicable, to cause such registration to be
effected as a registration under Section 3(a) hereof, as the case may
be, and (ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Common Stock, for the same
period as the delay in registering such other securities; and

 

(C)           if such registration was
initiated by the Company for its own account and involves an underwritten
offering, each Piggyback Requesting Holder shall sell its Registrable Common
Stock on the same terms and conditions as those that apply to the Company, and
the underwriters of each such underwritten offering shall be a nationally
recognized underwriter (or underwriters) selected by the Company in its sole
discretion.

 

No registration effected under this Section 4
shall relieve the Company of its obligation to effect any registration upon
request under Section 3(a) hereof and no registration effected
pursuant to this Section 4 shall be deemed to have been effected pursuant
to Section 3(a) hereof.

 

5.  
Expenses.  Except as provided in
the last paragraph of Section 6, the Company shall pay all Expenses in
connection with any registration initiated pursuant to Sections 2(a), 3(a) or
4 hereof, whether or not such registration shall become effective and whether
or not all or any portion of the Registrable Common Stock originally requested
to be included in such registration are ultimately included in such
registration.

 

6.  
Registration Procedures.  If and
whenever the Company is required to effect any registration under the
Securities Act as provided in Sections 2(a), 3(a) and 4 hereof, the
Company shall, as expeditiously as possible:

 

(a)           prepare and file with the
Commission (promptly and, in the case of any registration pursuant to Section 3(a),
in any event on or before the date that is (i) thirty (30) days after the
date of any Initiating Request or (ii) if, as of such thirtieth (30th) day, the Company does not
have the audited financial statements required to be included in the
registration statement, ten (10) days after the receipt by the Company
from its independent public accountants of such audited financial statements,
which the Company shall use its reasonable best efforts to obtain as promptly
as practicable) the requisite registration statement to effect such
registration and thereafter use its reasonable best efforts to cause such
registration statement to become and remain effective; provided, however, that the Company may
discontinue any registration of its securities that are not shares of
Registrable Common Stock (and, pursuant to, and under the circumstances
specified in, Sections 4 and 9(b) hereof, its securities that are shares
of Registrable Common Stock) at any time prior to the effective date of the
registration statement relating thereto;

 

(b)           prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be

 

11

 

necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Common Stock covered by such registration statement until such time
as all of such Registrable Common Stock has been disposed of in accordance with
the method of disposition set forth in such registration statement; provided,
that, except with respect to any Shelf Registration, such period need
not extend beyond ninety (90) days after the effective date of the registration
statement (plus a number of Business Days equal to the number of Business Days,
if any, that the registration statement is not kept effective (including any
days for which the use of the prospectus is suspended pursuant to Section 9(b))
after the initial date of its effectiveness and prior to the expiration of such
ninety- (90) day period); and provided, further, that with
respect to the Initial Shelf, such period need not extend beyond the applicable
period provided for  in Section 2(a) hereof
and, with respect to any Shelf Registration other than the Initial Shelf, such
period need not exceed the applicable period provided for in Section 3(g) hereof;

 

(c)           furnish to each seller of
Registrable Common Stock covered by such registration statement and their
representatives designated pursuant to Section 8(a), if any, and each
underwriter, if any, such number of copies of such drafts and final conformed
versions of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits and any documents
incorporated by reference), such number of copies of such drafts and final
versions of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
including without limitation notification of whether such registration
statement or amendment or supplement thereto will be reviewed by the Commission
or any other regulatory authority, as such seller of Registrable Common Stock
covered by such registration statement or any underwriter may reasonably
request in writing; provided, that all drafts of such registration
statement or amendment or supplement thereto shall be furnished to each seller
of Registrable Common Stock covered by such registration statement and their
representatives designated pursuant to Section 8(a) whether or not so
requested;

 

(d)           use its reasonable best
efforts (i) to register or qualify all Registrable Common Stock and other
securities, if any, covered by such registration statement under such other
securities or blue sky laws of such states or other jurisdictions of the United
States of America as the Selling Holders covered by such registration statement
shall reasonably request in writing, (ii) to keep such registration or
qualification in effect for so long as such registration statement remains in
effect and (iii) to take any other action that may be necessary or reasonably
advisable to enable such sellers to consummate the disposition in such
jurisdictions of the securities to be sold by such sellers, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not but
for the requirements of this subsection (d) be obligated to be so
qualified, to subject itself to taxation in such jurisdiction or to consent to
general service of process in any such jurisdiction;

 

12

 

(e)           use its reasonable best
efforts to cause all Registrable Common Stock covered by such registration
statement to be registered with or approved by such other federal or state
governmental agencies or authorities as may be necessary upon the advice of
counsel to the Company or counsel to the seller of Registrable Common Stock or
Selling Holders to enable the seller or sellers thereof to consummate the
disposition of such Registrable Common Stock;

 

(f)            use its best efforts to
obtain and, if obtained, furnish to each seller of Registrable Common Stock,
and each such seller’s underwriters, if any, a signed

 

(i)            opinion
of counsel for the Company, dated the effective date of such registration
statement (and, if such registration involves an underwritten offering, dated
the date of the closing under the underwriting agreement and addressed to the
underwriters), reasonably satisfactory (based on the customary form and
substance of opinions of issuers’ counsel customarily given in such an
offering) in form and substance to such seller, and

 

(ii)           “cold
comfort” letter, dated the effective date of such registration statement (and,
if such registration involves an underwritten offering, dated the date of the
closing under the underwriting agreement and addressed to the underwriters) and
signed by the independent public accountants who have certified the Company’s
financial statements included or incorporated by reference in such registration
statement, reasonably satisfactory (based on the customary form and substance
of “cold comfort” letters of issuers’ independent public accountant customarily
given in such an offering) in form and substance to such seller, 

 

in each case, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the accountants’ comfort
letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer’s counsel and in
accountants’ comfort letters delivered to underwriters in such types of
offerings of securities;

 

(g)           notify each seller of
Registrable Common Stock and other securities covered by such registration
statement, if any, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made and for which the Company chooses to
suspend the use of the registration statement and prospectus pursuant to Section 9(b),
and, in accordance with Section 9(b), at the written request of any such
seller of Registrable Common Stock, promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus, as supplemented or amended,
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or

 

13

 

necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made;

 

(h)           use its reasonable best
efforts to obtain the withdrawal of any order suspending the effectiveness of a
registration statement relating to the Registrable Common Stock at the earliest
possible moment;

 

(i)            otherwise comply with all
applicable rules and regulations of the Commission and any other
governmental agency or authority having jurisdiction over the offering, and
make available to its stockholders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve (12) months, but not
more than eighteen (18) months, beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder, and furnish to each
seller of Registrable Common Stock and to the managing underwriter, if any, at
least ten (10) days prior to the filing thereof (or such shorter time
period reasonably necessary in light of applicable legal requirements) a copy
of any amendment or supplement to such registration statement or prospectus;

 

(j)            use its reasonable best
efforts to cause all Registrable Common Stock covered by a registration
statement (i) to be listed on a national securities exchange on which
similar securities issued by the Company are then listed, if the listing of
such Registrable Common Stock is then permitted under the rules of such
exchange, or (ii) if the Company is not required pursuant to clause (i) above
to list Registrable Common Stock on a specific national securities exchange,
use its reasonable best efforts to list the Registrable Common Stock on a
national securities exchange and, without limiting the generality of the
foregoing, use its reasonable best efforts to arrange for at least two (2) market
makers to register with FINRA as such with respect to such Registrable Common
Stock;

 

(k)           provide a transfer agent and
registrar for the Registrable Common Stock covered by a registration statement
no later than the effective date thereof;

 

(l)            enter into such agreements
(including an underwriting agreement in customary form) and take such other
actions as the Selling Holders beneficially owning at least a majority of the
shares of Registrable Common Stock covered by such registration statement shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Common Stock, including customary indemnification;

 

(m)          if requested by the managing
underwriter(s) or the Selling Holders beneficially owning at least a
majority of the shares of Registrable Common Stock being sold in connection
with an underwritten offering, promptly incorporate in a prospectus supplement
or post-effective amendment such information provided to the Company in writing
as the managing underwriter(s) and the Selling Holders beneficially owning
at least a majority of the Registrable Common Stock being sold agree should be
included therein relating to the plan of distribution with respect to such
Registrable Common Stock, including without limitation, information with
respect to the number of shares of

 

14

 

Registrable Common Stock
being sold to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten offering
of the Registrable Common Stock to be sold in such offering, and make all
required filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and

 

(n)           cooperate with the Selling
Holders and the managing underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Common Stock
to be sold and not bearing any restrictive legends, and enable such Registrable
Common Stock to be in such share amounts and registered in such names as the
managing underwriter(s) or, if none, the Selling Holders beneficially
owning at least a majority of the shares of Registrable Common Stock being
offered for sale, may request at least three Business Days prior to any sale of
Registrable Common Stock to the underwriters.

 

As a condition to the obligations of the Company to
complete any registration pursuant to this Agreement with respect to the Registrable
Common Stock of a Selling Holder, such Selling Holder must furnish to the
Company in writing such information regarding itself, the Registrable Common
Stock held by it and the intended methods of disposition of the Registrable
Common Stock held by it as is necessary to effect the registration of such
Selling Holders’ Registrable Common Stock and is requested in writing by the
Company.  Except as otherwise required by
Section 2(a), at least thirty (30) days prior to the first anticipated
filing date of a registration statement for any registration under this
Agreement, the Company will notify in writing each Holder of the information
referred to in the preceding sentence which the Company is requesting from such
Holder whether or not such Holder has elected to have any of its Registrable
Common Stock included in the registration statement.  If, within ten (10) days prior to the
anticipated filing date, the Company has not received the requested information
from such Holder, then the Company may file the registration statement without
including Registrable Common Stock of such Holder if, in the opinion of the
Company’s counsel, such information is required to be included in such
registration statement.

 

Each Holder agrees that as of the date that a final
prospectus is made available to it for distribution to prospective purchasers
of Registrable Common Stock it shall cease to distribute copies of any
preliminary prospectus prepared in connection with the offer and sale of such
Registrable Common Stock.  Each Holder
further agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6(g) and a
suspension of the use of the registration statement and prospectus pursuant to Section 9(b),
such Holder shall forthwith discontinue such Holder’s disposition of
Registrable Common Stock pursuant to the registration statement and prospectus
relating to such Registrable Common Stock until such Holder’s receipt of the
copies of the supplemented or amended prospectus contemplated by Section 6(g) and,
if so directed by the Company, shall deliver to the Company (at the Company’s
expense) all copies, other than permanent file copies, then in such Holder’s
possession of the prospectus relating to such Registrable Common Stock at the
time of receipt of such notice.  If any
event of the kind described in Section 6(g) occurs and such event is
the fault solely of a Holder (or Holders), such Holder (or Holders) shall pay
all Expenses attributable to

 

15

 

the preparation, filing and
delivery of any supplemented or amended prospectus contemplated by Section 6(g).

 

7.   Underwritten Offerings.

 

(a)   Requested Underwritten Offerings. 
If requested by the underwriters in connection with a request for a
registration (that is not a Shelf Registration) under Section 2(a) or
3(a) hereof or any underwritten “takedown” of securities under a Shelf
Registration Statement filed pursuant to Section 2(a) or 3(a), the
Company shall enter into a firm commitment underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to the Company, a majority of the Selling Holders whose
Registrable Common Stock is to be included in such registration and the
underwriters and to contain such representations and warranties by the Company
and the Selling Holders and such other terms as are customary in agreements of
that type, including, without limitation, indemnification and contribution to
the effect and to the extent provided in Section 10 hereof.

 

(b)   Piggyback Underwritten Offerings: Priority.

 

(i)            If
the Company proposes to register any of its securities under the Securities Act
for its own account as contemplated by Section 4 hereof and such
securities are to be distributed by or through one or more underwriters, and if
the managing underwriter of such underwritten offering shall advise the Company
in writing (with a copy to the Piggyback Requesting Holders) that if all the
Registrable Common Stock requested to be included in such registration were so
included, in its opinion, the number and type of securities proposed to be
included in such registration would exceed the number and type of securities
which the managing underwriter believes could be sold in such offering within a
price range acceptable to the Company (such writing to state the basis of such
opinion and the approximate number and type of securities which the managing
underwriter believes may be included in such offering without such effect),
then the Company shall include in such registration pursuant to Section 4,
to the extent of the number of securities which the Company is so advised the
managing underwriter believes can be sold in such offering, (x) first,
securities that the Company proposes to issue and sell for its own account, (y) second,
Registrable Common Stock requested to be registered by Piggyback Requesting
Holders pursuant to Section 4 hereof, pro rata among
the Piggyback Requesting Holders on the basis of the number of shares of
Registrable Common Stock requested to be registered by all such Piggyback
Requesting Holders, if any, and (z) third , other securities, if any.

 

(ii)           If
the Company proposes to register any of its securities under the Securities Act
other than for its own account as contemplated by Section 4 hereof and
such securities are to be distributed by or through one or more underwriters,
and if the managing underwriter of such underwritten offering shall advise the
Company in writing (with a copy to the Piggyback Requesting Holders) that if
all Registrable Common Stock requested to be included in such registration were
so included, in its opinion, the number and type of securities proposed to be
included in such registration would exceed the number and type of securities
which the managing underwriter believes could be sold in such offering within a
price range stated to such managing underwriter by Selling

 

16

 

Holders
beneficially owning at least a majority of the shares of Registrable Common
Stock requested to be included in such registration to be acceptable to such
Selling Holders (such writing to state the basis of such opinion and the
approximate number and type of securities which the managing underwriter
believes may be included in such offering without such effect), then the
Company shall include in such registration pursuant to Section 4, to the
extent of the number of securities which the Company is so advised the managing
underwriter believes can be sold in such offering, (w) first, Registrable
Common Stock requested to be registered by Paulson and its Affiliates pursuant
to Section 4 hereof (if the Minimum Ownership Trigger has been met), if
any, (x) second, Registrable Common Stock requested to be registered by
Piggyback Requesting Holders (other than Paulson and its Affiliates where
clause (w) is operable because the Minimum Ownership Trigger has been met
but including Paulson and its Affiliates where clause (w) is not operable
because the Minimum Ownership Trigger has not been met) pursuant to Section 4
hereof, pro rata among the Piggyback
Requesting Holders (other than Paulson and its Affiliates where clause (w) is
operable because the Minimum Ownership Trigger has been met but including
Paulson and its Affiliates where clause (w) is not operable because the
Minimum Ownership Trigger has not been met) on the basis of the number of
shares of Registrable Common Stock requested to be registered by all such
Piggyback Requesting Holders (other than Paulson and its Affiliates where
clause (w) is operable because the Minimum Ownership Trigger has been met
but including Paulson and its Affiliates where clause (w) is not operable
because the Minimum Ownership Trigger has not been met), if any, (y) third,
securities that the Company proposed to issue and sell for its own account, if
any, and (z) fourth, other securities, if any.

 

Any Selling Holder may withdraw its request to have
all or any portion of its Registrable Common Stock included in any such
offering by notice to the Company within ten (10) Business Days after
receipt of a copy of a notice from the managing underwriter pursuant to this Section 7(b).

 

(c)   Selling Holders to be Parties to Underwriting
Agreement.  Each Selling Holder whose Registrable Common
Stock is to be distributed by underwriters in an underwritten offering
contemplated by subsections (a) or (b) of this Section 7 shall
be a party to the underwriting agreement between the Company, such underwriters
and any such Selling Holder in form and substance reasonably satisfactory to
such Selling Holder and, at its option, may reasonably require that any or all
of the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such Selling Holder (except to the extent any such
provision contradicts the terms of this Agreement) and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Selling Holder.  No such Selling Holder
shall be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such Selling Holder, such Selling Holder’s Registrable
Common Stock and such Selling Holder’s intended method of distribution.

 

(d)   Holdback Agreements.  Each Holder
agrees, unless otherwise agreed to by the managing underwriter for any
underwritten offering pursuant to this Agreement, not to effect any

 

17

 

sale or distribution of any equity securities of the
Company or securities convertible into or exchangeable or exercisable for
equity securities of the Company, including any sale under Rule 144 under
the Securities Act, during the ten (10) days prior to the date on which an
underwritten registration of Registrable Common Stock pursuant to Section 2(a),
3 or 4 hereof has become effective and until the earlier of (a) the date
on which all Registrable Common Stock to be sold pursuant to such underwritten
registration has been sold by the underwriters and (b) ninety (90) days
after the effective date of such underwritten registration or such shorter
period of time acceptable to the managing underwriter of such underwritten
offering, if any, except as part of such underwritten registration or to the
extent that such Holder is prohibited by applicable law from agreeing to withhold
securities from sale or is acting in its capacity as a fiduciary or an
investment adviser.  Without limiting the
scope of the term “fiduciary,” a Holder shall be deemed to be acting as a
fiduciary or an investment adviser if its actions or the securities proposed to
be sold are subject to the Employee Retirement Income Security Act of 1974, as
amended, the Investment Company Act of 1940, as amended, or the Investment
Advisers Act of 1940, as amended, or if such securities are held in a separate
account under applicable insurance law or regulation.

 

The Company agrees (i) not to effect any sale
or distribution of any equity securities of the Company, or securities
convertible into or exchangeable or exercisable for equity securities of the
Company (except pursuant to registrations on Form S-4 or Form S-8 or
any successor thereto), during the ten (10) days prior to the date on
which an underwritten registration of Registrable Common Stock pursuant to Section 2(a),
3 or 4 hereof has become effective and until the earlier of (a) the date
on which all Registrable Common Stock to be sold pursuant to such underwritten
registration has been sold by the underwriters and (b) ninety (90) days
after the effective date of such underwritten registration or such shorter period
of time approved in writing by the managing underwriter of such underwritten
offering, if any, except as part of such underwritten registration, and (ii) to
cause each holder of any equity securities, or securities convertible into or
exchangeable or exercisable for equity securities, in each case, acquired from
the Company at any time on or after the date of this Agreement (other than in a
Public Offering or sale under Rule 144 promulgated under the Securities
Act), who is a director or employee of or a consultant to the Company or who
has received registration rights from the Company, to agree not to effect any
sale or distribution of such securities during the applicable period (or such
shorter period of time approved in writing by the managing underwriter of such
underwritten offering, if any).

 

8.   Preparation: Reasonable
Investigation.

 

(a)   Registration Statements.  In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company shall (i) give
representatives (designated to the Company in writing) of each Selling Holder
or group of Selling Holders, the underwriters, if any, and one firm of counsel,
one firm of accountants and one firm of other agents retained on behalf of all
underwriters and one firm of counsel, one firm of accountants and one firm of
other agents retained by Selling Holders beneficially owning a majority of the
shares of Registrable Common Stock covered by such registration statement on
behalf of all Selling Holders, the reasonable opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, (ii) upon
reasonable advance notice to the Company,

 

18

 

give each of them such reasonable access to all
financial and other records, corporate documents and properties of the Company
and its Subsidiaries, as shall be necessary, in the reasonable opinion of such
Selling Holders’ and such underwriters’ counsel, to conduct a reasonable due
diligence investigation for purposes of the Securities Act, and (iii) upon
reasonable advance notice to the Company, provide such reasonable opportunities
to discuss the business of the Company with its officers, directors, employees
and the independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of such Selling
Holders’ and such underwriters’ counsel, to conduct a reasonable due diligence
investigation for purposes of the Securities Act.

 

(b)   Confidentiality.  Each Selling
Holder shall maintain the confidentiality of any confidential information
received from or otherwise made available by the Company to such Selling Holder
in its capacity as such.  Information
that (i) is or becomes available to a Selling Holder from a public source
other than as a result of a disclosure by such Selling Holder or any of its
Affiliates, (ii) is disclosed to a Selling Holder by a third-party source
who the Selling Holder reasonably believes is not bound by an obligation of
confidentiality to the Company or (iii) is or becomes required to be
disclosed by a Selling Holder by law, including by court order, shall not be
deemed to be confidential information for purposes of this Agreement.  The Selling Holders shall not grant access,
and the Company shall not be required to grant access, to information under
this Section 8 to any Person who will not agree to maintain the
confidentiality (to the same extent a Selling Holder is required to maintain
confidentiality) of any confidential information received from or otherwise
made available to it by the Company or the Selling Holders under this
Agreement.

 

9.   Postponements.

 

(a)  Without limiting any other rights of the
Holders under this Agreement, if the Company shall fail to file any
registration statement to be filed pursuant to a request for registration under
Section 3(a) hereof within the time prescribed therefor, (i) any
Selling Holder whose Registrable Common Stock was to be included in such
registration shall have the right to withdraw such request and (ii) one or
more Selling Holders requesting registration shall have the right to withdraw
such request to file a registration statement if and only if the Selling
Holders that have not elected to withdraw beneficially own, in the aggregate,
less than the percentage of shares of Registrable Common Stock required to
initiate a request under Section 3(a). 
Any withdrawal shall be made by giving written notice to the Company
within twenty (20) days after the date on which a registration statement would
otherwise have been required to have been filed with the Commission under
clause (i) of Section 6(a) hereof (i.e., 20 days after the date
that is thirty (30) days after the date of the relevant Initiating Request, or,
if, as of such thirtieth (30th) day, the Company does not have the audited financial statements
required to be included in the registration statement, thirty (30) days after
the receipt by the Company from its independent public accountants of such
audited financial statements).  In the
event of a withdrawal described in clause (ii) of this Section 9(a),
the request for registration shall not be counted for purposes of determining
the number of registrations to which the Holders are entitled pursuant to Section 3(a) hereof.  The Company shall pay all Expenses incurred
in connection with any withdrawal described in clauses (i) and (ii) of
this Section 9(a).

 

19

 

(b)  The Company shall
not be obligated to file any registration statement, or file any amendment or
supplement to any registration statement, and may suspend the registration
process and/or any Selling Holder’s ability to use a prospectus, at any time (but
not to exceed one time in any twelve-month period) when the Company, in the
good faith judgment of its Board of Directors, reasonably believes that
(i) the continuation of the registration process thereof at the time
requested would adversely affect a pending or proposed material financing or a
material acquisition, merger, recapitalization, consolidation, reorganization
or similar transaction, or negotiations, discussions or pending proposals with
respect thereto or (ii) the registration statement and any prospectus
contains or would contain a material misstatement of fact or omission as a
result of an event that has occurred or is continuing.  The filing of a registration statement, or
any amendment or supplement thereto, by the Company cannot be deferred, and the
Selling Holders’ rights to make sales pursuant to an effective registration
statement cannot be suspended, pursuant to the provisions of the preceding
sentence, (x) in the case of clause (i) above, for more than ten
(10) days after the abandonment or consummation of any of the proposals or
transactions set forth in such clause (i), (y) in the case of clause
(ii) above, following such time as the Company no longer believes, in its
good faith judgment, that the registration statement and any prospectus
contains or would contain a material misstatement of fact or omission as a
result of an event that has occurred or is continuing; provided that the
Company will use its reasonable best efforts to update the disclosure in such
registration statement and prospectus (whether by amendment or by incorporation
by reference) as soon as practicable such that the registration statement and
prospectus will not contain a material misstatement of fact or omission, or
(z) in any event, in the case of either clause (i) or clause
(ii) above, for more than one hundred twenty (120) days after the date of
the Board of Directors’ determination; provided that the Company may not
suspend any Selling Holder’s ability to use a prospectus pursuant to this
Section 9(b) (including but not limited to as set forth in
Section 6(g)) for more than an aggregate of ninety (90) days in any
365-day period.  The Company shall give
notice to the Selling Holders that the registration process has been suspended
and upon notice duly given pursuant to Section 20(f) hereof, each
Selling Holder agrees not to sell any Registrable Common Stock pursuant to any
registration statement until such Selling Holder’s receipt of copies of the
supplemented or amended prospectus, or until it is advised in writing by the
Company that the prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such prospectus.  The
Company shall not specify the nature of the event giving rise to a suspension
in any notice to the Selling Holders of the existence of such a suspension. If
the Company suspends the Selling Holders’ rights to make sales pursuant hereto,
the applicable registration period shall be extended by the number of days of
such suspension.

 

10.   Indemnification.

 

(a)   Indemnification
by the Company.  In connection with
any registration statement filed by the Company pursuant to Section 2(a),
3(a) or 4 hereof, to the fullest extent permitted by law the Company
shall, and hereby agrees to, indemnify and hold harmless, each Holder and
seller of any Registrable Common Stock covered by such registration statement
and each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls (within the
meaning of the Exchange Act) such Holder or seller or any such underwriter, and
their respective stockholders, directors, managers, officers, employees,
partners, agents and Affiliates (each, a “Company Indemnitee” for
purposes of this

 

 

20

 

Section 10(a)), against any losses,
claims, damages, liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof and whether or not such indemnified party is a
party thereto), joint or several, and expenses, including, without limitation,
the reasonable fees, disbursements and other charges of legal counsel and
reasonable costs of investigation, to which such Company Indemnitee may become
subject under the Securities Act or otherwise (collectively, a “Loss” or
“Losses”), insofar as such Losses arise out of, are based upon or relate
to (i) any breach of any representation or warranty made by the Company in
this Agreement or any other certificate, instrument or document contemplated
hereby, (ii) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement or any other certificate, instrument or
document contemplated hereby, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered or otherwise offered or sold under the
Securities Act or otherwise, any preliminary prospectus, final prospectus or
summary prospectus related thereto, or any amendment or supplement thereto (or
in any document incorporated by reference in any of the foregoing)
(collectively, “Offering Documents”), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in the light of the circumstances in
which they were made not misleading or any violation by the Company of any
federal or state law, rule or regulation applicable to the Company and
relating to action required of or inaction by the Company in connection with
any such registration; provided that, in the case of the foregoing
clause (iii), the Company shall not be liable to any Company Indemnitee in any
such case to the extent that any such Loss arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such Offering Documents in reliance upon and in conformity with
information furnished to the Company in a writing duly executed by such Company
Indemnitee specifically stating that it is expressly for use therein.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Company
Indemnitee and shall survive the transfer of such securities by such Company
Indemnitee.

 

(b)   Indemnification
by the Offerors and Sellers.  In
connection with any registration statement filed by the Company pursuant to
Section 2(a), 3(a) or 4 hereof in which a Selling Holder has
registered for sale Registrable Common Stock, each such Selling Holder or
seller of Registrable Common Stock shall, and hereby agrees to, on a several
and not joint basis, indemnify and hold harmless to the fullest extent
permitted by law the Company and each of its directors, officers, employees, agents,
partners, stockholders, Affiliates and each other Person, if any, who controls
(within the meaning of the Exchange Act) the Company and each other seller and
such seller’s employees, directors, managers, officers, stockholders, partners,
agents and Affiliates (each, a “Selling Holder Indemnitee” for purposes
of this Section 10(b)), against all Losses insofar as such Losses arise
out of, are based upon or relate to any untrue statement or alleged untrue
statement of a material fact contained in any Offering Documents or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in the light of
circumstances in which they were made not misleading, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with information furnished
to the Company in a writing duly executed by such Selling Holder or seller of
Registrable Common Stock expressly for use therein; provided, however,
that the liability of such indemnifying party under this
Section 10(b) shall be limited to the amount of the net proceeds
received by such indemnifying party in the sale of Registrable Common Stock
giving

 

21

 

rise to such liability.  Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Selling
Holder Indemnitee and shall survive the transfer of such securities by such
indemnifying party.

 

(c)   Notices
of Losses, etc.  Promptly after
receipt by an indemnified party of written notice of the commencement of any
action or proceeding involving a Loss referred to in the preceding subsections
of this Section 10, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, however, that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subsections of this
Section 10, except to the extent that the indemnifying party is materially
and actually prejudiced by such failure to give notice.  In case any such action is brought against an
indemnified party, the indemnifying party shall be entitled to participate in
and, unless in such indemnified party’s reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such Loss, to assume and control the defense thereof, in each case at its
own expense, jointly with any other indemnifying party similarly notified, to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after its assumption of the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation, unless in such
indemnified party’s reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defense thereof.  No
indemnifying party shall be liable for any settlement of any such action or
proceeding effected without its written consent, which shall not be
unreasonably withheld.  No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such Loss or
which requires action on the part of such indemnified party or otherwise
subjects the indemnified party to any obligation or restriction to which it
would not otherwise be subject.

 

(d)   Contribution.  If the indemnification provided for in this
Section 10 shall for any reason be unavailable to an indemnified party
under subsection (a) or (b) of this Section 10 in respect of any
Loss, then, in lieu of the amount paid or payable under subsection (a) or
(b) of this Section 10, the indemnified party and the indemnifying
party under subsection (a) or (b) of this Section 10 shall
contribute to the aggregate Losses (including legal or other expenses
reasonably incurred in connection with investigating the same) (i) in such
proportion as is appropriate to reflect the relative fault of the Company and
the prospective Selling Holders covered by the registration statement which
resulted in such Loss or action in respect thereof, with respect to the
statements, omissions or action which resulted in such Loss or action in
respect thereof, as well as any other relevant equitable considerations, or
(ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as shall be appropriate to reflect the
relative benefits received by the Company, on the one hand, and such prospective
sellers, on the other hand, from their sale of Registrable Common Stock; provided
that, for purposes of this clause (ii), the relative benefits received by the
prospective sellers shall be deemed not to exceed the net proceeds received by
such sellers.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be

 

22

 

entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.  The obligations, if any, of the Selling
Holders to contribute as provided in this subsection (d) are several in
proportion to the relative value of their respective Registrable Common Stock
covered by such registration statement and not joint.  In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
Loss effected without such Person’s consent, which shall not be unreasonably
withheld.

 

(e)   Indemnification
Payments.  The indemnification and
contribution required by this Section 10 shall be made by periodic
payments of the amount thereof during the course of any investigation or
defense, as and when any Loss is incurred and is due and payable.

 

11.   Registration Rights to Others.

 

If the Company shall at any
time hereafter provide to any holder of any securities of the Company rights
with respect to the registration of such securities under the Securities Act or
the Exchange Act, such rights shall not be in conflict with or adversely affect
any of the rights provided to the Holders in, or conflict (in a manner that
adversely affects the Holders) with any other provisions included in, this
Agreement.

 

12.   Adjustments Affecting Registrable
Common Stock.

 

Without the written consent
of the Holders beneficially owning a majority of the outstanding shares of
Registrable Common Stock, the Company shall not effect or permit to occur any
combination, subdivision or reclassification of Registrable Common Stock that
would materially adversely affect the ability of the Holders to include such
Registrable Common Stock in any registration of its securities under the
Securities Act contemplated by this Agreement or the marketability of such
Registrable Common Stock under any such registration or other offering.

 

13.  
Exchange Act Reports.

 

So long as any Holder
beneficially owns Registrable Common Stock, if the Company is not required to
file reports pursuant to Section 13(a) or Section 15(d) of
the Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a  discussion and analysis of such financial statements
in form and substance similar to those that would otherwise be required to be
included in reports required by Section 13(a) or
Section 15(d) of the Exchange Act, as well as any other information
required thereby, in the time period that such filings would have been required
to have been made under the Exchange Act.

 

14.   Rule 144 and Rule 144A.

 

If the Company has a class
of equity securities registered under the Exchange Act, the Company shall take
all actions reasonably necessary to enable the Holders to sell Registrable
Common Stock without registration under the Securities Act to the maximum
extent permitted by the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time,
(b) Rule 144A under the Securities Act, as such Rule may be 

 

23

 

amended from time to time, or (c) any
similar rules or regulations hereafter adopted by the Commission,
including, without limiting the generality of the foregoing, filing on a timely
basis all reports required to be filed under the Exchange Act.  Upon the written request of any Holder, the
Company shall deliver to such Holder a written statement as to whether it has
complied with such requirements.

 

15.   Amendments and Waivers.

 

Any provision of this
Agreement may be amended, modified or waived if, but only if, the written
consent to such amendment, modification or waiver has been obtained
(i) except as provided in clauses (ii), (iii) and (iv) below,
from the Holders of at least two-thirds of the shares of Registrable Common
Stock affected by such amendment, modification or waiver, (ii) in the case
of any amendment, modification or waiver of any provision of Section 5, 9
or 10 hereof or this Section 15 or any provisions as to the number of
requests for registration to which Paulson and its Affiliates are entitled
under Section 3 hereof, from Paulson, (iii) in the case of any
amendment, modification or waiver of any provision of Section 5, 9 or 10
hereof or this Section 15 or any provisions as to the number of requests
for registration to which the Other Holders are entitled under Section 3
hereof, from the Other Holders beneficially owning at least a majority of the
outstanding shares of Registrable Common Stock held by the Other Holders, and
(iv) in the case of any other amendment, modification or waiver of any
provision of this Agreement which adversely affects any right and/or obligation
under this Agreement of Paulson and its Affiliates or the Other Holders, from
Paulson or the Other Holders beneficially owning at least a majority of the
outstanding shares of Registrable Common Stock held by the Other Holders,
respectively.  Any amendment,
modification or waiver of any provision of this Agreement requires the approval
of the Company, and any amendment, modification or waiver of any provision of
this Agreement that affects Paulson shall be approved by a majority of the
directors of the Company independent of Paulson and management of the Company.

 

16.   Nominees for Beneficial Owners.

 

In the event that any
Registrable Common Stock is held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Common Stock for purposes
of any request or other action by any Holder or Holders pursuant to this
Agreement or any determination of the number or percentage of shares of
Registrable Common Stock held by any Holder or Holders contemplated by this
Agreement.  If the beneficial owner of
any Registrable Common Stock so elects, the Company may require assurances
reasonably satisfactory to it of such owner’s beneficial ownership of such
Registrable Common Stock.

 

17.   Assignment.

 

The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and permitted assigns.  Any Holder may Transfer to any Transferee
(and any transferee of such Holder may Transfer to any subsequent Transferee)
(in each case as permitted under applicable law) its Registrable Common Stock
and its rights and obligations under this Agreement, provided that such
Transferee shall agree in writing prior to the assignment to be bound by this
Agreement as if it were an original party

 

24

 

hereto, whereupon such Transferee shall for
all purposes be deemed to be a Holder under this Agreement but only if the
Transferor Transfers to such Transferee at least five percent (5%) of the
shares of Registrable Common Stock outstanding as of the date of this
Agreement.  Except as provided above or
otherwise permitted by this Agreement, neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by any Holder without the prior written consent of the other parties
hereto.  The Company may not assign this
Agreement or any right, remedy, obligation or liability arising hereunder or by
reason hereof without the consent of Paulson and the Holders beneficially
owning a majority of the outstanding shares of Registrable Common Stock.

 

18.   Calculation of Percentage or Number
of Shares of Registrable Common Stock.

 

For purposes of this
Agreement, all references to a percentage or number of shares of Registrable
Common Stock or Common Stock shall be calculated based upon the number of
shares of Registrable Common Stock or Common Stock, as the case may be,
outstanding at the time such calculation is made and shall exclude any
Registrable Common Stock or Common Stock, as the case may be, beneficially
owned by the Company or any Subsidiary of the Company.  For the purposes of calculating any
percentage or number of shares of Registrable Common Stock or Common Stock as
contemplated by the previous sentence, the terms “Holder”, “Original Holder”
and “Initiating Holder” shall include all Affiliates thereof (other than the
Company and its Subsidiaries) beneficially owning any shares of Registrable
Common Stock or Common Stock.

 

19.   Termination of Registration Rights.  This Agreement, including, without
limitation, the Company’s obligations under Sections 2(a), 3(a) and 4
hereof to register Common Stock for sale under the Securities Act shall
terminate on the first date on which there are no Holders parties this
Agreement.  Notwithstanding any termination
of this Agreement pursuant to this Section 19, the parties’ obligations
under Section 5 and Section 10 hereof shall continue in full force
and effect.

 

20.   Miscellaneous.

 

(a)   Further
Assurances.  The Company shall
execute such documents and other papers and perform such further acts as may be
reasonably required or advisable to carry out the provisions of this Agreement
and the transactions contemplated hereby.

 

(b)   Headings.  The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.

 

(c)   Conflicting
Instructions.  A Person is deemed to
be a holder of Registrable Common Stock whenever such Person owns of record
Registrable Common Stock.  If the Company
receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Common Stock, the Company will act
upon the basis of instructions, notice or election received from the registered
owner of such Registrable Common Stock.

 

(d)   Remedies.  Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its

 

25

 

rights under this Agreement.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and the Company hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.

 

(e)   Entire
Agreement.  This Agreement
constitutes the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and there are no restrictions,
promises, representations, warranties, covenants, or undertakings with respect
to the subject matter hereof, other than those expressly set forth or referred
to herein.  This Agreement supersedes all
prior agreements and understandings between the parties hereto with respect to
the subject matter hereof.

 

(f)    Notices.  All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or two Business Days after
being delivered to a recognized courier (whose stated terms of delivery are two
Business Days or less to the destination of such notice), or five calendar days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as set forth on Schedule B hereto to the
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto.

 

(g)   Governing
Law.  This Agreement 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 therein.

 

(h)   Venue;
No Jury Trial.  The parties agree
that any action or proceeding with respect to any controversy, claim or dispute
arising out of or relating to this Agreement or any other agreement entered
into in connection herewith shall be brought against any of the parties
exclusively in either the United States District Court for the Southern
District of New York or any state court of the State of New York located in
such district, and each of the parties hereby consents to the personal
jurisdiction of such court (and to the appropriate appellate courts) in any
such action or proceeding and waives any objection, including, without
limitation, any objection to the laying of venue or on the grounds of forum non
conveniens, which any of them may now or hereafter have to the bringing of such
action or proceeding in such respective jurisdictions.  Each party hereby irrevocably consents to the
service of process of any of the aforesaid courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the other parties to such action or proceeding.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY.

 

(i)    Severability.  Notwithstanding any provision of this
Agreement, neither the Company nor any other party hereto shall be required to
take any action which would be in violation of any applicable federal or state
securities law.  The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity, legality or

 

26

 

enforceability of any other provision of this
Agreement in such jurisdiction or the validity, legality or enforceability of
this Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder shall
be enforceable to the fullest extent permitted by law.

 

(j)    Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.

 

[Remainder of this
page intentionally left blank.]

 

27

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.

 

	
   

  	
  IDEARC INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  PAULSON & CO. INC., on behalf of the several investment
  funds and accounts managed by it

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  [NAME OF HOLDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO REGISTRATION RIGHTS
AGREEMENT]

 

 

SCHEDULE A

 

	
  Original
  Holders

  
	
   

  
	
   

  

 

 

SCHEDULE B

 

NOTICES

 

If to the Company, to:

 

Idearc
Inc.

2200
West Airfield Drive

P.O. Box
619810

DFW
Airport, Texas 75261-9810

Tel:  972-453-3718

Fax:  972-453-6869

Attention:  Cody Wilbanks

 

with
a copy to (which shall not constitute notice):

 

Fulbright &
Jaworski L.L.P.

2200
Ross Avenue, Suite 2800

Dallas,
Texas 75201-2784

Fax:  214-855-8200

Attention:  Glen Hettinger

 

If
to Paulson, to:

 

Paulson &
Co. Inc.

1251
Avenue of the Americas, 50th Floor

New
York, NY  10020

Fax:
(212) 977-9505

Attention:  Daniel B. Kamensky

 

with
a copy to (which shall not constitute notice):

 

Akin
Gump Strauss Hauer & Feld LLP

One
Bryant Park

New
York, New York 10036

Fax:  (212) 872-1002

Attention: 
Andrew Hulsh

Fred Hodara

 

If
to the Other Holders, to:

 

such Holder, at such Holder’s address or to
such Holder’s telephone or telecopy number reflected in the Company’s books and
records,

 

and, with respect to the Original Holders and
their permitted Transferees, with a copy to (which shall not constitute
notice):

 

 

Simpson
Thacher & Bartlett LLP

425
Lexington Avenue

New York, New York 10017

Attention:  Peter J. Gordon, Esq.

Fax:                           (212) 455-2502

 

 

EXHIBIT A

 

FORM OF SELLING STOCKHOLDER QUESTIONNAIRE

 

The undersigned
beneficial owner (the “Selling Stockholder”) of shares (the “Registrable
Common Stock”) of common stock, par value $0.01 per share, of Idearc Inc.
(the “Company”), hereby gives notice to the Company of its intention to
sell or otherwise dispose of Registrable Common Stock beneficially owned by it
and listed below in Item 3 (unless otherwise specified under Item 3)
pursuant to the Shelf Registration Statement. 
The undersigned, by signing and returning this Selling Stockholder
Questionnaire, understands that it will be bound by the terms and conditions of
this Selling Stockholder Questionnaire and the Registration Rights Agreement,
dated as of [·], 2009, among the Company and the
Holders named therein (the “Registration Rights Agreement”).  Capitalized terms used and not defined herein
shall have the meaning ascribed to them in the Registration Rights Agreement.

 

In accordance with
the Registration Rights Agreement, Selling Stockholders that do not complete
this Selling Stockholder Questionnaire and deliver it to the Company as
provided below will not be named selling stockholders in the prospectus and
therefore will not be permitted to sell any Registrable Common Stock pursuant
to the Shelf Registration Statement.

 

Pursuant to the
Registration Rights Agreement, the undersigned has agreed to indemnify and hold
harmless the Company’s directors, the Company’s officers and each person, if
any, who controls the Company within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against
certain losses arising in connection with statements concerning the undersigned
made in the Shelf Registration Statement or the related prospectus in reliance
upon the information provided in this Selling Stockholder Questionnaire.  The undersigned hereby acknowledges its
obligations under the Registration Rights Agreement to indemnify and hold
harmless certain persons set forth therein.

 

Certain legal
consequences arise from being named a selling stockholder in the Shelf
Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners
are advised to consult their own securities law counsel regarding the
consequences of being named or not named as a selling stockholder in the Shelf
Registration Statement and the related prospectus.

 

The undersigned
hereby provides the following information to the Company and represents and
warrants that such information is accurate and complete:

 

	
  (1)

  	
  (a)

  	
  Full Legal Name of Selling Stockholder:

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Full Legal Name of
  Registered Holder (if not the same as (a) above) through which
  Registrable Common Stock listed in (3) below is held:

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Full Legal Name of DTC
  Participant  (if applicable and if not
  the same as (b) above) through which Registrable Common Stock listed in (3) below
  is held:

  
	
   

  	
   

  	
   

  
	
  (2)

  	
  Address for Notices to
  Selling Stockholder:

  

 

A-1

 

	
   

  	
   

  
	
   

  	
  Telephone (including area
  code):

  
	
   

  	
  Fax (including area code):

  
	
   

  	
  Contact Person:

  
	
  (3)

  	
  Beneficial Ownership of
  Registrable Common Stock:

  
	
   

  	
   

  
	
   

  	
  (a)

  	
  Type and Principal
  Amount/Number of Registrable Common Stock beneficially owned:

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  CUSIP No(s). of such
  Registrable Common Stock beneficially owned:

  
	
   

  	
   

  	
   

  
	
  (4)

  	
  Beneficial Ownership of
  Other Securities of the Company Owned by the Selling Stockholder:

  
	
   

  	
  Except as set forth below in
  this Item (4), the undersigned is not the beneficial or registered owner
  of any securities of the Company other than the Registrable Common Stock
  listed above in Item (3).

  
	
   

  	
  (a)

  	
  Type and Amount of Other
  Securities beneficially owned by the Selling Stockholder:

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  CUSIP No(s). of such Other
  Securities beneficially owned:

  
	
   

  	
   

  	
   

  
	
  (5)

  	
  Relationship with the
  Company:

  
	
   

  	
  Except as set forth below,
  neither the undersigned nor any of its affiliates, officers, directors or
  principal equity holders (5% or more) has held any position or office or has
  had any other material relationship with the Company (or its predecessors or
  affiliates) during the past three years.

  
	
   

  	
  State any exceptions here:

  
	
  (6)

  	
  Is the Selling Stockholder
  a registered broker-dealer?

  
	
   

  	
  Yes                             ̈

  No                                o

  If “Yes”, please answer subsection (a) and subsection (b):

  (a)                Did the Selling
  Stockholder acquire the Registrable Common Stock as compensation for
  underwriting/broker-dealer activities to the Company?

  Yes                  ̈

  No                      ̈

  (b)               If you answered “No” to
  question 6(a), please explain your reason for acquiring the Registrable
  Common Stock:

   

  
	
  (7)

  	
  Is the Selling Stockholder
  an affiliate of a registered broker-dealer?

  
	
   

  	
  Yes                             ̈

  No                                 ̈

  If “Yes”, please identify the registered broker-dealer(s), describe
  the nature of the affiliation(s) and answer subsection (a) and
  subsection (b):

   

  (a)                Did the Selling
  Stockholder purchase the Registrable Common Stock in the ordinary course of
  business (if no, please explain)?

  Yes                    ̈

  No                        ̈                                       Explain:

  

 

A-2

 

	
   

  	
  (b)               Did the Selling
  Stockholder have an agreement or understanding, directly or indirectly, with
  any person to distribute the Registrable Common Stock at the same time the
  Registrable Common Stock were originally purchased (if yes, please explain)?

  Yes                       ̈                                                Explain:

  No                           ̈

  
	
  (8)

  	
  Is the Selling Stockholder
  a non-public entity?

  
	
   

  	
  Yes                             ̈

  No                                 ̈

  If “Yes”, please answer
  subsection (a):

  (a)                Identify the natural
  person or persons that have voting or investment control over the Registrable
  Common Stock that the non-public entity owns:

   

  
	
  (9)

  	
  Plan of Distribution:

  
	
   

  	
  Except as set forth below, the
  undersigned Selling Stockholder (including its donees and pledgees) intends
  to distribute the Registrable Common Stock listed above in Item (3) pursuant
  to the Shelf Registration Statement only as follows (if at all):  Such Registrable Common Stock may be sold
  from time to time directly by the undersigned Selling Stockholder or,
  alternatively, in accordance with the Registration Rights Agreement, through
  underwriters, broker-dealers or agents. 
  If the Registrable Common Stock is sold through underwriters or
  broker-dealers, the Selling Stockholders will be responsible for underwriting
  discounts or commissions or agent commissions.  Such Registrable Common Stock may be sold
  in one or more transactions at fixed prices, at prevailing market prices at
  the time of sale, at varying prices determined at the time of sale, or at
  negotiated prices.  Such sales may be
  effected in transactions (which may involve cross or block transactions) (i) on
  any national securities exchange or quotation service on which the
  Registrable Common Stock may be listed or quoted at the time of sale, (ii) in
  the over-the-counter market, (iii) in transactions otherwise than on
  such exchanges or services or in the over-the-counter market, or (iv) through
  the writing of options.  In connection
  with sales of the Registrable Common Stock or otherwise, the undersigned
  Selling Stockholder may enter into hedging transactions with broker-dealers,
  which may in turn engage in short sales of the Registrable Common Stock in
  the course of hedging positions they assume. 
  The undersigned Selling Stockholder may also sell Registrable Common
  Stock short and deliver Registrable Common Stock to close out short positions,
  or loan or pledge Registrable Common Stock to broker-dealers that in turn may
  sell such securities.

  
	
   

  	
  State any exceptions here:

  

 

The undersigned
Selling Stockholder acknowledges that it understands its obligations to comply
with the provisions of the Exchange Act, and the rules thereunder relating
to stock manipulation, particularly Regulation M thereunder (or any
successor rules or regulations), in connection with any offering of
Registrable Common Stock pursuant to the Shelf Registration Agreement.  The undersigned agrees that neither it nor
any person acting on its behalf will engage in any transaction in violation of
such provisions.

 

Pursuant to the
Registration Rights Agreement, the Company has agreed under certain
circumstances to indemnify the Selling Stockholder against certain liabilities.

 

A-3

 

In the event the
undersigned transfers all or any portion of the Registrable Common Stock listed
in Item (3) above after the date on which such information is
provided to the Company other than pursuant to the Shelf Registration
Statement, the undersigned agrees to notify the transferee(s) at the time
of the transfer of its rights and obligations under this Selling Stockholder
Questionnaire and the Registration Rights Agreement.

 

In accordance with
the undersigned’s obligation under the Registration Rights Agreement to provide
such information as may be required by law or by the staff of the Commission
for inclusion in the Shelf Registration Statement, the undersigned agrees to
promptly notify the Company of any inaccuracies or changes in the information
provided herein that may occur subsequent to the date hereof at any time while
the Shelf Registration Statement remains effective.  All notices hereunder and pursuant to the
Registration Rights Agreement shall be made in writing, by hand-delivery,
first-class mail, or air courier guaranteeing overnight delivery to the address
set forth below.

 

By signing below,
the undersigned consents to the disclosure of the information contained herein
in its answers to Items (1) through (9) above and the inclusion
of such information in the Shelf Registration Statement and the related
prospectus.  The undersigned understands
that such information will be relied upon by the Company in connection with the
preparation or amendment of the Shelf Registration Statement and the related
prospectus.

 

By signing below,
the undersigned agrees that if the Company notifies the undersigned in
accordance with and pursuant to the Registration Rights Agreement that Shelf
Registration Statement is not available, the undersigned will in accordance
with and pursuant to the Registration Rights Agreement suspend use of the
prospectus until notice from the Company that the prospectus is again available.

 

Once this Selling
Stockholder Questionnaire is executed by the undersigned and received by the
Company, the terms of this Selling Stockholder Questionnaire, and the
representations, warranties and agreements contained herein, shall be binding
on, shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives and assigns of the Company and the
undersigned with respect to the Registrable Common Stock beneficially owned by
the undersigned and listed in Item (3) above.  This Selling Stockholder Questionnaire shall
be governed in all respects by the laws of the State of New York.

 

IN WITNESS
WHEREOF, the undersigned, by authority duly given, has caused this Selling
Stockholder Questionnaire to be executed and delivered either in person or by
its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

A-4

 

	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

PLEASE RETURN THE COMPLETED AND EXECUTED 

SELLING STOCKHOLDER QUESTIONNAIRE TO THE COMPANY AT:

 

Idearc Inc.

2200 West Airfield Drive

P.O. Box 619810

DFW Airport, Texas 75261-9810

Tel: 
972-453-3718

Fax: 
972-453-6869

Attention: 
Cody Wilbanks

 

A-5

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