Document:

Exhibit
4.1

 

EXECUTION
COPY

 

HSN, INC.

 

and

 

The Bank of New York Mellon,

as Rights Agent

 

Rights Agreement

 

Dated as of December 23, 2008

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Certain Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights Agent

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issuance of Rights Certificates

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Rights Certificates

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and Registration

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 6.

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

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Exercise of Rights; Purchase Price; Expiration Date of Rights

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Cancellation and Destruction of Rights Certificates

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Reservation and Availability of Capital Stock

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Preferred Stock Record Date

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 11.

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

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted Purchase Price or Number of Shares

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 13.

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

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional Rights and Fractional Shares

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Rights Holders

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Rights Certificate Holder Not Deemed a Stockholder

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights Agent

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger or Consolidation or Change of Name of Rights Agent

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New Rights Certificates

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 23.

  	
  Redemption and Termination

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 24.

  	
  Exchange

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notice of Certain Events

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Notices

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Supplements and Amendments

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
  37

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Determinations and Actions by the Board of Directors, etc

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Benefits of this Agreement

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Severability

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Governing Law

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Counterparts

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Interpretation

  	
  38

  

 

ii

 

RIGHTS AGREEMENT

 

RIGHTS AGREEMENT, dated as of December 23, 2008
(the “Agreement”), between HSN, Inc., a Delaware corporation (the “Company”),
and The Bank of New York Mellon, a New York banking corporation, as Rights
Agent (the “Rights Agent”).

 

W I T N E S E T H

 

WHEREAS, the Board of Directors of the Company (the “Board”) has authorized and declared a dividend
distribution of one right (a “Right”) for each share of common stock,
par value $0.01 per share, of the
Company (the “Common Stock”) outstanding (it being understood that shares held by direct
or indirect wholly owned Subsidiaries of the Company shall not be considered as outstanding) at the Close of Business on January 5, 2009
(the “Record Date”),
and has authorized the issuance of one Right
(as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof)
for each share of Common Stock issued between the Record Date (whether
originally issued or delivered from the
Company’s treasury) and the Distribution Date (as hereinafter defined), each Right initially representing the
right to purchase one one-thousandth of a
share of Series A Junior Participating Preferred Stock of the Company (the “Preferred Stock”) having the
rights, powers and preferences set forth in the form of Certificate of Designation, Preferences and Rights
attached hereto as Exhibit A,
upon the terms and subject to the conditions hereinafter set forth.

 

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

 

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

 

(a)           “Acquiring Person” shall mean
any Person who or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 15% or more of the Common Stock then
outstanding, but shall not include:

 

(i)            the
Company;

 

(ii)           any
Subsidiary of the Company;

 

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

 

(iv)          any
Exempt Person;

 

(v)           any
Person who becomes the Beneficial Owner of 15% or more of the Common Stock then
outstanding as a result of a reduction in the number of shares of Common Stock
outstanding due to the repurchase of shares of Common Stock by the Company
unless and until such Person, after becoming aware that such Person has become
the Beneficial Owner of 15% or more of the then outstanding Common Stock,
acquires beneficial ownership of 

 

 

additional shares of Common Stock representing 1% or
more of the Common Stock then outstanding; or

 

(vi)          any
Exempt Person who ceases to be an Exempt Person as a result of a reduction in
the number of shares of Common Stock outstanding due to the repurchase of
shares of Common Stock by the Company unless and until such Exempt Person,
after becoming aware that it has ceased to be an Exempt Person as a result of
such reduction, acquires beneficial ownership of such number of additional
shares of Common Stock which represents 1% or more of the Common Stock
outstanding at the time of acquisition of any such additional shares pursuant
to this clause (vi);

 

provided, however, that if
the Board of Directors of the Company determines in good faith that a Person
who would otherwise be an “Acquiring Person” as defined pursuant to the
foregoing provisions of this subsection (a) has become such inadvertently,
and such Person promptly (and in any
event within 5 Business Days after being so requested by the Company) divests
or enters into an irrevocable commitment satisfactory to the Board promptly
(and in any event within 5 Business Days or such shorter period as shall be
determined by the Board) to divest, and thereafter divests as required by such
commitment, a sufficient number of shares of Common Stock so that such
Person would no longer be an “Acquiring Person,” as defined pursuant to the
foregoing provisions of this subsection (a), then such Person shall not be
deemed to be an “Acquiring Person” for any purposes of this Agreement.

 

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

 

(c)           Subject to subsection (v) of
this Section 1, “Affiliate” and “Associate” shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

 

(d)           “Applicable Percentage” shall
have the meaning set forth in the Spinco Agreement.

 

(e)           Subject to subsection (s)(i) of
this Section 1, 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,
directly or indirectly, has the right
to acquire (whether such right is exercisable immediately or only after the passage of time or upon
the satisfaction of one or more
conditions (whether or not within the control of such Person)) pursuant to any agreement, arrangement
or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants or
options, or otherwise, and including
any securities of the Company represented by “when-issued” trading thereof; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” (A) securities
tendered pursuant to a tender or
exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered
securities are accepted for
purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of
a Triggering Event (as  

 

2

 

hereinafter defined), or (C) securities issuable upon exercise of
Rights from and after the
occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the
Distribution Date (as hereinafter
defined) or pursuant to Section 3(a) or Section 22 hereof (the “Original Rights”) or
pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights;

 

(ii)           that such Person or any of such Person’s Affiliates
or Associates, directly or indirectly, has the right to vote or dispose of or
has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, or
to “beneficially own,” any security under this clause (ii) as a result of
an agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is not
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); provided, further, that in
determining whether a Person is the “Beneficial Owner” of, or “beneficially
owns,” any security under this clause (ii), a hedging transaction between
Liberty and a counterparty that is in accordance with Section 5(d)(v) of
the Spinco Agreement shall not on its own be deemed to create a “group” between
Liberty and such counterparty; or

 

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

 

provided, however, that
nothing in this subsection (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 days after the date of such acquisition,
and then only if such securities
continue to be owned by such Person at such
expiration of forty days.

 

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

 

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

 

3

 

(h)           “Capital Stock” shall mean,
any and all shares, interests, participations, rights in, or other equivalents
(however designated and whether voting and/or nonvoting) of the Company and any
rights (other than debt securities convertible into capital stock), warrants or
options to acquire such capital stock, whether now outstanding or issued after
the date of this Agreement.

 

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

 

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

 

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

 

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

 

(m)          “Current Market Price” shall
have the meaning determined in accordance with Section 11(d)(i) hereof.

 

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

 

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

 

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

 

(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) hereof.

 

(s)           “Exempt Person” shall
mean:

 

(i)            Liberty; provided, that Liberty shall be
considered an Exempt Person only if and so long as the shares of Common Stock
Beneficially Owned (for purposes of this definition only, as such term is
defined in the Spinco Agreement) by Liberty do not exceed the Applicable
Percentage (as from time to time in effect) of the Common Stock then
outstanding (except that 

 

4

 

Liberty shall not cease to be an Exempt Person by reason of a purchase
of shares of Common Stock in excess of the Applicable Percentage to the extent
such purchase is in a Rights Offering (as defined in the Spinco Agreement) or
an offer that was made generally available to holders of equity securities of
the Company);  provided,
further, that Liberty shall cease to be an Exempt Person immediately at
such time as the Applicable Percentage is less than 15%; and

 

(ii)           each
Person (other than Liberty) that Beneficially Owns on the Rights Announcement
Date a number of shares of Common Stock representing more than 15% of the
Common Stock then outstanding; provided, that each such Person shall be
considered an Exempt Person only if and so long as the shares of Common Stock
Beneficially Owned by such Person do not exceed (A) the number of shares which are Beneficially Owned by
such Person on the Rights Announcement Date, plus (B) any
additional shares of Common Stock representing not more than (1) 3%
of the Common Stock then outstanding, if such Person is an
institution that reports its ownership of Common Stock to the SEC on Schedule
13G pursuant to Rule 13d-1(b)(1) or advises the Company in writing of
its intention and eligibility to do so (except that if, on the Rights
Announcement Date, such Person owns more than 19% of the Common Stock then
outstanding, such Person shall be considered an Exempt Person only if
and so long as the shares of Common Stock Beneficially Owned by such Exempt
Person do not exceed the number of
shares which are Beneficially Owned by such Person on the Rights
Announcement Date plus 1% of the Common Stock then outstanding), or (2) if
otherwise, 1% of the Common Stock then outstanding; provided, further,
that such Person shall cease to be an Exempt Person immediately at such time as
such Person ceases to be the Beneficial Owner of more than 15% of the Common
Stock then outstanding.

 

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

 

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

 

(v)           “Liberty” shall mean the
Liberty Parties (as defined in the Spinco Agreement) and their Affiliates (for
purposes of this definition only, as such term is defined in the Spinco
Agreement).

 

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

 

(x)            “Preferred Stock” shall mean
shares of Series A Junior Participating Preferred Stock, par value $0.01
per share, of the Company, and, to the extent that there are not a sufficient
number of shares of Series A Junior Participating Preferred Stock
authorized to permit the full exercise of the Rights, any other series of
preferred stock of the 

 

5

 

Company designated for such purpose containing terms
substantially similar to the terms of the Series A Junior Participating
Preferred Stock.

 

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

 

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

 

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

 

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

 

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

 

(dd)         “Rights Announcement Date” shall
mean the date on which the Company files a Current Report on Form 8-K that
contains this Agreement as an exhibit.

 

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

 

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

 

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

 

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

 

(ii)           “Spinco Agreement” shall mean
the Spinco Agreement, dated May 13, 2008, between IAC/InterActiveCorp,
Liberty Media Corporation, LMC Silver King, Inc., Liberty HSN II, Inc.,
LMC USA VIII, Inc., LMC USA IX, Inc., LMC USA XI, Inc., LMC USA
XII, Inc., LMC USA XIII, Inc., LMC USA XIV, Inc., LMC USA XV, Inc.,
Liberty Tweety, Inc., BDTV Inc., BDTV II Inc., BDTV III Inc., BDTV IV Inc.
and Barry Diller.

 

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

 

(kk)         “Stock Acquisition Date” shall
mean the first date of public announcement (which, for purposes of this
definition, shall include a report filed or amended pursuant to Section 13(d) under
the Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.

 

6

 

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

 

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

 

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

 

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

 

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

 

Section 2.                                            Appointment
of Rights Agent.  The Company hereby appoints the Rights Agent to act as
rights 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.  The Rights
Agent shall have no duty to supervise, and in no event shall be liable for, the
acts or omissions of any such co-Rights Agent.

 

Section 3.                                            Issuance
of Rights Certificates.

 

(a)                                  Until
the earlier of (i) the Close of Business on the 10th Business Day after the Stock Acquisition
Date, and (ii) the Close of Business on the 10th Business Day (or such later date as the
Board shall determine) after the
date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by
the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if, upon consummation thereof, such
Person would become an Acquiring Person (the
earlier of (i) and (ii) being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the
provisions of subsection (b) of this Section 3) by the certificates for the Common Stock registered in
the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights), and (y) the
Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock
(including a transfer to the Company). 
As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested and provided
with all necessary information, send) by first-class, insured, postage-prepaid
mail, to each record holder of the Common
Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records
of the Company or the transfer agent or registrar for the shares of Common
Stock, one or more Rights certificates,
in substantially the form of Exhibit B hereto (the “Rights
Certificates”), evidencing one Right for 

 

7

 

each share of Common Stock
so held,  subject to
adjustment as provided herein.  In the
event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time
of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu
of any fractional Rights.  As of and after the Distribution Date, the
Rights will be evidenced solely
by such Rights Certificates, and the Rights will be transferable separately
from the transfer of Common Shares.  The
Company shall promptly notify
the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given
orally, the Company shall confirm same in writing on or prior to the Business
Day next following.  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)                                 The
Company will make available, as promptly as practicable following the Record
Date, a copy of a Summary of Rights, in substantially the form attached hereto
as Exhibit C (the “Summary of Rights”) to any holder of
Rights who may so request from time to time prior to the Expiration Date.  With respect to certificates for the Common
Stock outstanding as of the Record Date, or issued subsequent to the Record
Date, unless and until the Distribution Date shall occur, the Rights will be
evidenced by such certificates for the Common Stock and the registered holders
of the Common Stock shall also be the registered holders of the associated
Rights.  Until the earlier of the
Distribution Date and the Expiration Date, the transfer of any certificates
representing shares of Common Stock in respect of which Rights have been issued
shall also constitute the transfer of the Rights associated with such shares of
Common Stock.

 

(c)                                  Rights
shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company’s treasury or transferred to
third parties by wholly owned Subsidiaries
of the Company) after the Record Date but prior to the earlier of the Distribution Date and the
Expiration Date.  Certificates
representing such shares of
Common Stock shall also be deemed to be certificates for Rights, and shall bear a legend in substantially
the following form if such certificates are issued after the Record Date but prior to the earlier
of the Distribution Date and the Expiration
Date:

 

This certificate also evidences and entitles the
holder hereof to
certain Rights as set forth in the Rights Agreement between HSN, Inc. (the “Company”) and The
Bank of New York Mellon, as Rights Agent, dated as of December 23, 2008,
as it may be amended from time to
time (the “Rights Agreement”), the terms
of which are hereby incorporated herein by reference and a copy of which is on file at the office of
the Company designated for such
purpose.  Under certain circumstances, as
set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer be evidenced by this
certificate.  The Company will mail to the holder of this
certificate a copy of the Rights Agreement,
as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor.  Under certain circumstances set forth in the Rights Agreement, Rights issued
to, or held by, any Person who
is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms 

 

8

 

are
defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any subsequent holder,
may become null and void.

 

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

 

Section 4.                                            Form of
Rights Certificates.

 

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

 

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

 

The Rights represented by this Rights Certificate are
or were beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate 

 

9

 

of an Acquiring Person (as such terms are defined in
the Rights Agreement).  Accordingly, this
Rights Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) of the Rights
Agreement.

 

Section 5.                                            Countersignature
and Registration.

 

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

 

(b)                                 Following
the Distribution Date, upon receipt by the Rights Agent of notice to that
effect and all other relevant information referred to in Section 3(a), the
Rights Agent will keep, or cause to be kept, at its office designated for such
purpose, books for registration and transfer of the Rights Certificates issued
hereunder.  Such books shall show the
names and addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights Certificates and
the date of each of the Rights Certificates.

 

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

 

(a)                                  Subject
to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Certificates (other than Rights Certificates representing Rights
that may have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may
be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of
a transfer) to purchase.  Any
registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the office of the Rights Agent designated for such purpose.  The Right Certificates are 

 

10

 

transferable only on the
registry books of the Rights Agent. 
Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder shall
have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate,
shall have provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof and of the Rights
evidenced thereby and the Affiliates and Associates of such Beneficial Owner
(or former Beneficial Owner) as the Company or the Rights Agent shall
reasonably request and shall have paid a sum sufficient to cover
any tax or charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights
Certificates.  Thereupon the Rights Agent
shall, subject to Section 4(b), Section 7(e), Section 14
and Section 24, countersign and deliver to the Person entitled
thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested, registered in such name or names as may be
designated by the surrendering registered holder.  The Rights Agent shall promptly
forward any such sum collected by it to the Company or to such Persons as the
Company shall specify by written notice. 
The Rights Agent shall have no duty or obligation under any Section of
this Agreement which requires the payment of taxes or charges unless and until
it is satisfied that all such taxes and/or charges have been paid.

 

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

 

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

 

(a)                                  Subject
to Section 7(e) hereof, at any time after the Distribution Date the registered holder of any Rights
Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein including the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 23(a) hereof) in whole or in part upon surrender of the Rights Certificate, with the form of election
to purchase and the certificate
on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office of the
Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one
one-thousandths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then
exercisable, and an amount equal to any tax or charge required to be paid under Section 9(e), at or prior to the
earlier of (i) 5:00 P.M.,
New York City time, on December 23, 2018, or such earlier or later date as may be established by the Board
prior to the expiration of the Rights
(such date, as it may be extended by the Board, the “Final Expiration
Date”), and (ii) the time at which the
Rights are redeemed or exchanged as provided in Section 23 and Section 24 hereof (the earlier of (i) and
(ii) being herein referred to as the “Expiration Date”).  Except
for those provisions herein which expressly survive the termination of this
Agreement, this Agreement shall terminate upon the earlier of the Expiration
Date and such time 

 

11

 

as all outstanding Rights
have been exercised hereunder (other than Rights which have become null and
void pursuant to the provisions of Section 7(e) hereof).

 

(b)                                 The
Purchase Price for each one one-thousandth of a share of Preferred Stock
pursuant to the exercise of a Right initially shall be $60.00, and shall be
subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof
and shall be payable in lawful money of the United States of America in
accordance with subsection (c) below.

 

(c)                                  Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase and the certificate properly completed  and duly executed, accompanied by payment,
with respect to each Right so exercised, of the Purchase Price per one
one-thousandth of a share of Preferred Stock (or other shares, securities, cash
or other assets, as the case may be) to be purchased as set forth below and an
amount equal to any applicable tax or charge required to be paid under Section 9(e),
the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is the transfer agent
for such shares) certificates for the total number of one one-thousandths of a
share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes each such transfer agent to comply with all such requests, or (B) if
the Company shall have elected to deposit the total number of shares of
Preferred Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Preferred Stock
as are to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company hereby directs each such depositary
agent to comply with such request, (ii) when necessary to comply with this
Rights Agreement, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts,
cause the same to be delivered to or, upon the order of the registered holder
of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) when necessary to comply with this
Rights Agreement, after receipt thereof, deliver such cash to or upon the order
of the registered holder of such Rights Certificate.  The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) and any
taxes or charges required to be paid under Section 9(e) hereof, shall
be made in cash or by certified check, cashier’s check, bank draft or money
order payable to the order of the Company. 
In the event that the Company
is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other property are available for
distribution by the Rights Agent,
if and when necessary to comply with this Agreement.  The Company reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.

 

(d)                                 In
case the registered holder of any Rights Certificate shall exercise less than
all the Rights evidenced thereby, a new Rights Certificate evidencing the
Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such 

 

12

 

Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.

 

(e)                                  Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding that has as a
primary purpose or effect the avoidance of this Section 7(e), shall become
null and void without any further action and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. 
The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or any other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any of its Affiliates, Associates or
transferees hereunder.

 

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

 

Section 8.                                            Cancellation
and Destruction of Rights Certificates.

 

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

 

13

 

Section 9.               Reservation
and Availability of Capital Stock.

 

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

 

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

 

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

 

(d)           The Company covenants and
agrees that it will take
all such action as may be necessary to ensure that all one one-thousandths of a
share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other 

 

14

 

securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to payment of the Purchase Price and compliance with all
other applicable provisions of this Agreement), be duly and validly authorized and issued and fully paid
and nonassessable.

 

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

 

Section 10.             Preferred Stock Record Date.  Each Person in whose name any certificate for a
number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of record of such
fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price
(and all applicable taxes or charges) was duly made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the
case may be) transfer books of
the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise)
on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer
books of the Company are open.  Prior to
the exercise of the Rights evidenced
thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company
with respect to shares for which the
Rights shall be exercisable, including the right to vote, to receive dividends or other
distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as
provided herein.

 

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

 

(a)           (i)            In
the event that the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Preferred Stock payable in shares of 

 

15

 

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

 

(ii)           In
the event any Person shall, at any time after the Rights Announcement Date,
become an Acquiring Person, unless the event causing such Person to become an
Acquiring Person is a transaction set forth in Section 13(a) hereof,
then, promptly following the later of the occurrence of such event and the
Record Date, proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one one-thousandths of a share of Preferred Stock, such number of
shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first
occurrence, shall thereafter be referred to as the “Purchase  Price” for each such Right and for all purposes of this Agreement) by 50% of the Current Market Price
(determined pursuant to Section 11(d) hereof)
per share of Common Stock on the date of such first occurrence (such number of shares, the “Adjustment
Shares”).  The Company shall give the Rights Agent written notice of
the identity of any such
Acquiring Person, Associate or Affiliate, or the nominee of any of the foregoing, and the Rights Agent may
rely on such notice in carrying
out its duties under this Agreement and shall be deemed not to have any knowledge of the identity of any
such Acquiring Person, Associate
or Affiliate, or the nominee of any of the foregoing, unless and until it shall have received such
notice.

 

(iii)          In
the event that the number of treasury shares plus the number of shares of
Common Stock that are authorized by the Company’s Amended and Restated
Certificate of Incorporation, as amended, but not outstanding or reserved for
issuance for purposes other than upon exercise of 

 

16

 

the Rights, is not
sufficient to permit the exercise in full of the Rights in accordance with the
foregoing clause (ii) of this Section 11(a), the Company shall (A) determine
the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), and (B) with respect to each Right
(subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of
the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation,
shares, or units of shares, of preferred stock, such as the Preferred Stock that the Board has deemed
to have essentially the same
value or economic rights as shares of Common Stock (such shares of preferred stock being referred to
as “Common Stock  Equivalents”)), (4) debt securities of the Company,
(5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase
Price), where such aggregate value has been determined by the Board based upon the advice of a
nationally recognized investment banking
firm selected by the Board; provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant
to clause (B) above within 30 days following the later of (x) the first occurrence of a Section 11(a)(ii) Event
and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger Date”), then
the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash
have an aggregate value equal to the Spread. 
For purposes of the
preceding sentence, the term “Spread” shall mean the excess of (i) the Current Value over (ii) the
Purchase Price.  If the Board determines in good faith that it is likely
that sufficient additional shares
of Common Stock could be authorized for issuance upon exercise in full of the Rights, the 30-day period set
forth above may be extended to
the extent necessary, but not more than 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 30-day period, as it may be extended, is herein called the “Substitution
Period”).  To the extent that the Company determines that action
should be taken pursuant to the
first and/or third sentences of this Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof,
that such action shall apply
uniformly to all outstanding Rights, and (2) may suspend the
exercisability of the Rights
until the expiration of the Substitution Period in order to seek such stockholder approval for such
authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to
determine the value thereof.  In the event of any such suspension, the
Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time
as the suspension is no longer in effect. 
The Company shall notify
the Rights Agent whenever it makes a public announcement pursuant to this Section 11(a)(iii) and
give the Rights Agent a copy of
such announcement.  For purposes of this Section 11(a)(iii),
the value of 

 

17

 

each Adjustment Share shall be the Current Market Price per  share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the per share or
per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of
the Common Stock on such date.

 

(b)           In case the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase (for a period
expiring within 45 calendar days after such record date) Preferred Stock (or
shares having the same rights, privileges and preferences as the shares of
Preferred Stock (“Equivalent Preferred Stock”)) or securities
convertible into Preferred Stock or Equivalent Preferred Stock at a price per
share of Preferred Stock or per share of Equivalent Preferred Stock (or having
a conversion price per share, if a security convertible into Preferred Stock or
Equivalent Preferred Stock) less than the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on
such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of shares of Preferred Stock 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
outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or Equivalent Preferred Stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible).  In case such subscription price may be paid
by delivery of consideration,
part or all of which may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights.  Shares of Preferred Stock owned by or held
for the account of the Company shall
not be deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is
fixed, and in the event that
such rights or warrants are not so issued, 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 without limitation any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving corporation),
cash (other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or evidences of indebtedness, or of subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Current Market Price (as
determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock, 

 

18

 

and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock.  Such
adjustments shall be made successively whenever such a record date is fixed,
and in the event that such distribution is not so made, the Purchase Price
shall be adjusted to be the Purchase Price that would have been in effect if
such record date had not been fixed.

 

(d)           (i)  The Current Market Price
per share of Common Stock on any date shall be deemed to be (1) for the
purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof,
the average of the daily closing prices per share of such Common Stock for the
30 consecutive Trading Days immediately prior to, but not including, such date,
and (2) for purposes of computations made pursuant to Section 11(a)(iii) hereof,
the average of the daily
closing prices per share of such Common Stock for the 10 consecutive Trading Days immediately
following, but not including, such date; provided, however, that
in the event that the Current Market Price per share of the Common Stock is determined during a period
following the announcement by
the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities
convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and the ex-dividend date for such dividend or
distribution, or the record date
for such subdivision, combination or reclassification shall not have occurred prior to, but not
including, the commencement of the requisite 30 Trading Day or 10 Trading Day period, as set forth above, then, and in each such case, the Current Market
Price shall be properly adjusted to take into account ex-dividend trading. 
The closing price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq
Stock Market or, if the shares of Common Stock are not listed or admitted to trading on the Nasdaq Stock Market, as
reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal national securities exchange on
which the shares of Common Stock are
listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system
then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average
of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock selected by the Board.  If on any such date no market maker is making a market in the Common Stock,
the fair value of such shares on such date as determined in good faith by the Board shall be used.  The term “Trading Day” shall mean a day on which the principal
national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not
listed or admitted to trading on any national securities exchange, a Business Day. 
If the Common Stock is not publicly held or not so listed or traded, Current Market Price per share shall mean
the fair value per share as
determined in good faith by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive
for all purposes.

 

(ii)           For
the purpose of any computation hereunder, the Current Market Price per share of
Preferred Stock shall be 

 

19

 

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

 

(e)           Anything herein to the
contrary notwithstanding, no adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 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 or one-millionth of a share of Preferred Stock,
as the case may be.  Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) 3 years from the date of the transaction that
mandates such adjustment, and (ii) the Expiration Date.

 

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

 

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

 

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

 

20

 

share covered by a Right immediately prior to such
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.

 

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

 

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

 

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

 

21

 

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

 

(m)          Anything in this Section 11 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that in their good faith
judgment the Board shall determine to be advisable in order that any (i) consolidation
or subdivision of the Preferred Stock, (ii) issuance wholly for cash of
any shares of Preferred Stock at less than the Current Market Price, (iii) issuance
wholly for cash of shares of Preferred Stock or securities that by their terms
are convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends, or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Company to holders of its Preferred
Stock shall not be taxable to such stockholders.

 

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

 

(o)           The Company covenants and agrees
that, after the Distribution Date, it will not, except as permitted by Section 23
or Section 27 hereof, take (or permit any Subsidiary to take) any action if
at the time such action is taken it is reasonably foreseeable that such action
will diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.

 

22

 

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

 

Section 12.                                    Certificate of
Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made or an event
affecting the Rights or their exercisability (including without limitation an
event which causes Rights to become null and void) occurs as provided in
Section 11 or Section 13 hereof, the Company shall (a) promptly
prepare a certificate setting forth such adjustment or describing such event,
and a brief, reasonably detailed statement of the facts, computations and
methodology accounting for such adjustment, (b) promptly file with the
Rights Agent, and with each transfer agent for the Preferred Stock and the
Common Stock, a copy of such certificate, and (c) if a Distribution Date
has occurred, mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with
Section 25 and Section 26 hereof. 
The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment or statement therein contained and shall have
no duty or liability with respect to, and shall not be deemed to have knowledge
of, any adjustment or any such event unless and until it shall have received
such a certificate.

 

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

 

(a)                                  In
the event that any Person shall become an Acquiring Person and, directly or
indirectly, (x) the Company shall consolidate with, or merge with and
into, any other Person (other than a Subsidiary of the Company in a transaction
that complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger,
(y) any Person (other than a Subsidiary of the Company in a transaction
that complies with Section 11(o) hereof) shall consolidate with, or merge
with or into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets, cash
flow or earning power aggregating more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of that complies with
Section 11(o) hereof), then, and 

 

23

 

in each such case,
proper provision shall be made so that: (i) each holder of a Right, except
as provided in Section 7(e) hereof, shall thereafter have the right
to receive, upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid, non-assessable and freely tradeable shares of Common Stock
of the Principal Party (as such term is hereinafter defined), not subject to
any liens, encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying the then current
Purchase Price by the number of one one-thousandths of a share of Preferred
Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of
a Section 13 Event, multiplying the number of such one one-thousandths of
a share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence of a Section 11(a)(ii) Event),
and (2) dividing that product (which, following the first occurrence of a
Section 13 Event, shall be referred to as the “Purchase Price” for each
Right and for all purposes of this Agreement) by 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall thereafter be
liable for, and shall assume, by virtue of such Section 13 Event, all the
obligations and duties of the Company pursuant to this Agreement;
(iii) the term “Company” shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of
Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.

 

(b)                                 “Principal
Party” shall mean:

 

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

 

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

 

provided,
however, that in any such case described in clause (i) or (ii),
(1) if the Common Stock of such Person is not at such time or has not been
continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, “Principal Party” shall refer to such other Person; and (2) if
such Person is a Subsidiary, directly 

 

24

 

or indirectly, of
more than one Person, the Common Stock of two or more of which are and have
been so registered, “Principal Party” shall refer to whichever of such Persons
is the issuer of the Common Stock having the greatest aggregate market value.

 

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

 

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

 

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

 

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

 

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

 

(d)                                 In
case the Principal Party which is to be a party to a transaction referred to in
this Section 13 has provision in any of its authorized securities or in
its Certificate of Incorporation or By-laws or other instrument governing its
corporate affairs, which provision would have the effect of (i) causing
such Principal Party to issue, in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then Current Market Price
per share (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such Principal Party at
less than such then Current Market Price (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special
payment, tax or similar provisions in connection with the issuance of the
Common Stock of such Principal Party 

 

25

 

pursuant to the
provisions of Section 13; then, in such event, the Company shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.

 

Section 14.                                    Fractional
Rights and Fractional Shares.

 

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

 

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

 

(c)                                  Following
the occurrence of a Triggering Event, the Company shall not be required to
issue fractions of shares of Common Stock upon exercise of 

 

26

 

the Rights or to
distribute certificates that evidence fractional shares of Common Stock.  In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one share of Common
Stock.  For purposes of this
Section 14(c), the current market value of one share of Common Stock shall
be the closing price per share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) on the Trading Day immediately prior to the
date of such exercise.

 

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

 

(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
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.  The Rights Agent
shall be fully protected in relying upon such a certificate and shall have no
duty with respect to, and shall not be deemed to have knowledge of any payment
for fractional Rights or fractional shares under any Section of this
Agreement relating to the payment of fractional Rights or fractional shares
unless and until the Rights Agent shall have received such a certificate and
sufficient monies.

 

Section 15.                                      Rights of
Action.  All
rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent under Section 18 and Section 20, are vested
in the respective registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common Stock); and any registered
holder of any Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), without the consent of the Rights Agent or of the holder of any
other Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in its own behalf and for its own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, its right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. 
Without limiting the foregoing or any remedies available to the holders
of Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations hereunder and injunctive
relief against actual or threatened violations of the obligations hereunder of
any Person subject to this Agreement.

 

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

 

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

 

27

 

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

 

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

 

(d)                                 notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, judgment,
decree or ruling (whether interlocutory or final) issued by a court of
competent jurisdiction 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; provided,
however, the Company must use its best efforts to have any such injunction,
order, judgment, decree or ruling lifted or otherwise overturned as soon as
possible.

 

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

 

Section 18.                                    Concerning the
Rights Agent.

 

(a)                                  The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and to reimburse the Rights Agent for all
reasonable expenses, counsel fees and disbursements and other disbursements
incurred in the preparation, delivery, amendment, 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,
judgment, fine, penalty, claim, demand, settlement, damage, cost, liability or
expense, including, without limitation, the 

 

28

 

reasonable fees
and expenses of legal counsel, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent (which gross negligence, bad
faith or willful misconduct must be determined by a final, non-appealable
order, judgment, decree or ruling of a court of competent jurisdiction), for
any action taken, suffered or omitted by the Rights Agent pursuant to this
Agreement or in connection with the acceptance, administration, exercise and
performance of its duties under this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.  The costs and expenses incurred in enforcing
this right of indemnification shall be paid by the Company.  Any liability of the Rights Agent under this
Agreement will be limited to the amount of fees paid by the Company to the
Rights Agent.  The provisions of this
Section 18 and Section 20 below shall survive the termination of this
Agreement, the exercise or expiration of the Rights, and the resignation,
replacement or removal of the Rights Agent.

 

(b)                                 The
Rights Agent shall be fully protected and authorized and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its acceptance and administration of this Agreement and the
exercise and performance of its duties hereunder, in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20.  The
Rights Agent shall not be deemed to have knowledge of any event of which it was
supposed to receive notice thereof hereunder, and the Rights Agent shall be
fully protected and shall incur no liability for failing to take any action in
connection therewith unless and until it has received such notice.

 

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

 

(a)                                  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 shareholder services business of
the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto; but only if such
Person would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof.  In
case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.

 

(b)                                 In
case at any time the name of the Rights Agent shall be changed and at such time
any of the Rights Certificates shall have been countersigned but not 

 

29

 

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

 

Section 20.                                    Duties of Rights
Agent.  The Rights Agent undertakes
to perform only the duties and obligations expressly imposed by this Agreement
(and no implied duties), upon the following terms and conditions, by all of
which the Company and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:

 

(a)                                  The
Rights Agent may consult with legal counsel (who may be legal counsel for the
Company or an employee of the Rights Agent), and the advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any
action taken, suffered or omitted by it and 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 (including, without
limitation, the identity of any Acquiring Person and the determination of
Current Market Price) be proved or established by the Company prior to taking,
suffering or omitting to take any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full and
complete authorization and protection to the Rights Agent and the Rights Agent
shall incur no liability for or in respect of any action taken, suffered by it
under the provisions of this Agreement in reliance upon such certificate.

 

(c)                                  The
Rights Agent shall be liable hereunder to the Company and any other Persons
only for its own gross negligence, bad faith or willful misconduct (which gross
negligence, bad faith or willful misconduct must be determined by a final,
non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction).  In no case, however, will
the Rights Agent be liable for special, indirect, punitive, incidental or
consequential losses or damages of any kind whatsoever (including but not
limited to lost profits), even if the Rights Agent has been advised of the
possibility or likelihood of such losses or damages.

 

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

 

(e)                                  The
Rights Agent shall not have any liability for or be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor 

 

30

 

shall it be
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming null and void pursuant to Section 11(a)(ii) hereof)
or any change or adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Section 3, 11, 13, 23 or 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
Rights Certificates after receipt of the certificate described in
Section 12, upon which the Rights Agent may rely); 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 Common Stock or Preferred Stock
to be issued pursuant to this Agreement or any Rights Certificate or as to
whether any shares of Common Stock or Preferred Stock will, when so issued, be
validly authorized and issued, fully paid and nonassessable.

 

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

 

(g)                                 The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any one of the Chairman
of the Board, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to
apply to such officers for advice or instructions in connection with its
duties, and 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 from any such officers.  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 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, affiliate, 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 the Rights Agent were not Rights
Agent under this Agreement.  Nothing
herein shall preclude the Rights Agent or any such stockholder, affiliate,
director, 

 

31

 

officer or
employee of the Rights Agent from acting in any other capacity for the Company
or for any other Person.

 

(i)                                     The
Rights Agent may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself (through its directors,
officers and employees) 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 or any other Person resulting from any such act, default, neglect or
misconduct, absent gross negligence, bad faith or willful misconduct in the
selection and continued employment thereof (which gross negligence, bad faith
or willful misconduct must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction).

 

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

 

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

 

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 at least 30 days’ notice in writing mailed to the Company, and
to each transfer agent of the Common Stock and Preferred Stock known to the
Rights Agent, by registered or certified mail, and, if such resignation occurs
after the Distribution Date, to the registered holders of the Rights
Certificates by first-class mail.  The
Company may remove the Rights Agent or any successor Rights Agent upon at least
30 days’ notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by
first-class mail.  If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his Rights Certificate for
inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a Person organized and doing business under the laws of the
United States or any State thereof, in good standing, which is authorized under
such laws to exercise corporate trust, stock transfer or stockholder services
powers and which at the time of its appointment as Rights Agent has, or with
its parent has, a combined capital and 

 

32

 

surplus of at
least $25,000,000 or (b) an affiliate of a Person described in clause
(a) of this sentence.  After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent under this Agreement without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and, if such appointment occurs after the Distribution Date,
mail a notice thereof in writing to the registered holders of the Rights
Certificates.  Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

 

Section 22.                                      Issuance of
New Rights Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with
respect to shares of Common Stock so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, granted or awarded as
of the Distribution Date, or upon the exercise, conversion or exchange of
securities hereinafter issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment shall
otherwise have been made in lieu of the issuance thereof.

 

Section 23.                                      Redemption and
Termination.

 

(a)                                  The
Board may, at its option, at any time prior to the earlier of (i) the
Stock Acquisition Date, and (ii) the Final Expiration Date,
(x) redeem all but not less than all of the then outstanding Rights at a
redemption price of $0.001 per Right (rounded up to the nearest whole $0.01 in
the case of any holder whose holdings are not in a multiple of ten), as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the “Redemption Price”) or
(y) amend this Agreement to change the Final Expiration Date to another
date, including an earlier date.  The
Company may, at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the Current Market Price, as defined in
Section 11(d)(i) hereof, of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the Board.

 

33

 

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

 

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 7(e) hereof) for Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board shall not be empowered
to effect such exchange at any time
after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any Person holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common
Stock then outstanding.

 

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

 

(c)                                  In
the event that there shall not be sufficient shares of Common Stock issued but
not outstanding or authorized but unissued to permit any exchange of 

 

34

 

Rights as contemplated in accordance with this Section 24,
the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exchange of the
Rights.  In the event the Company shall, after good faith effort, be unable to take all such action as may be
necessary to authorize such additional
shares of Common Stock, the Company shall substitute, for each share of Common
Stock that would otherwise be issuable
upon exchange of a Right, a number of shares of Preferred Stock or fraction thereof such that the Current
Market Price of one share of Preferred
Stock multiplied by such number or fraction is equal to the Current Market Price of one share of Common Stock as of the
date of issuance of such share of Preferred
Stock or fraction thereof.

 

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

 

Section 25.                                      Notice
of Certain Events.

 

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

 

35

 

of the taking of such
proposed action or the date of
participation therein by the holders of the shares of Preferred Stock, whichever shall be the earlier.

 

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

 

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 Rights
Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is delivered in writing to the Rights Agent by the Company) as
follows:

 

HSN, Inc.

1 HSN Drive

St.
Petersburg, FL  33729

Attention:
General Counsel

 

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

 

The
Bank of New York Mellon

480
Washington Boulevard, 29th Floor

Jersey
City, NJ 07310

Attn:
Kayur D. Patel

 

With a
copy to:

 

The
Bank of New York Mellon

480
Washington Boulevard, 29th Floor

Jersey
City, NJ 07310

Attention:
General Counsel

Facsimile:
(201) 680-4610

 

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

 

36

 

Section 27.                                      Supplements
and Amendments.  Prior to the Stock Acquisition Date, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement
without the approval of any holders of certificates representing
shares of Common Stock.  From and after the Stock Acquisition Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of
Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other provisions herein, or (iii) to change
or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person).  Upon the delivery of a certificate from an
appropriate officer of the
Company and, if requested by the Rights Agent, an opinion of counsel, which
states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such
supplement or amendment.  Notwithstanding
anything 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.  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.

 

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

 

Section 29.                                      Determinations
and Actions by the Board of Directors, etc. 
For all purposes of this Agreement, any calculation of the number of
shares of Common Stock or any other class of capital stock outstanding at any
particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of
the General Rules and Regulations under the Exchange Act.  The Board shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including the right and
power to (i) interpret the provisions of this Agreement and (ii) make
all determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are
done or made by the Board in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board, or any of the directors on the Board to any
liability to the holders of the Rights.  The
Rights Agent is entitled always to assume that the Company’s Board of Directors
acted in good faith and shall be fully protected and incur no liability in
reliance thereon.

 

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

 

37

 

Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of the
Common Stock).

 

Section 31.                                      Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be 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 hereof shall be reinstated
and shall not expire until the Close of Business on the 10th
Business Day following the date of such determination by the Board; and provided
further, that that if any such excluded term, provision, covenant or
restriction shall adversely affect the rights, immunities, duties or
obligations of the Rights Agent, the Rights Agent shall be entitled to resign
immediately.

 

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

 

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

 

Section 34.                                      Interpretation.  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.  Whenever the words “include,” “includes” or “including”
are used in this Agreement they shall be deemed to be followed by the words “without
limitation.”  The words “hereof,” “herein”
and “herewith” and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, subsection, paragraph and
exhibit references are to the articles, sections, paragraphs and exhibits of
this Agreement unless otherwise specified. 
The meaning assigned to each term defined herein shall be equally
applicable to both the singular and the plural forms of such term, and words denoting
any gender shall include all genders. 
Where a word or phrase is defined herein, each of its other grammatical
forms shall have a corresponding meaning. 
Nothing in this Agreement is intended as a waiver of any provision of
the Spinco Agreement.

 

[Signature page follows.]

 

38

 

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

 

 

	
   

  	
  HSN, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  :

  	
  By:

  	
   

  	
  /s/ James P. Warner

  
	
   

  	
  Name:

  	
   James P. Warner

  
	
   

  	
  Title:

  	
   Executive Vice President and

  
	
   

  	
   

  	
   General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK MELLON,

  as Rights Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Kayur D. Patel

  
	
   

  	
  Name:

  	
   Kayur D. Patel

  
	
   

  	
  Title:

  	
   Relationship Manager

  

 

Signature Page to Rights Agreement

 

 

EXHIBIT A

 

FORM OF

CERTIFICATE OF DESIGNATION, PREFERENCES AND

RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

of

 

HSN, INC.

 

Pursuant to Section 151 of the General Corporation Law

of the State of Delaware

 

We, the undersigned, [        ]
, [TITLE], and [          ] ,
[TITLE], of HSN, Inc., a Delaware corporation (hereinafter called the “Corporation”),
pursuant to the provisions of Sections 103 and 151 of the General Corporation
Law of the State of Delaware, do hereby make this Certificate of Designation
and do hereby state and certify that pursuant to the authority expressly vested
in the Board of Directors of the Corporation by the Amended and Restated
Certificate of Incorporation, the Board of Directors duly adopted the following
resolutions:

 

RESOLVED, that, pursuant to Section FOURTH, B. of the Amended and
Restated Certificate of Incorporation (which authorizes 25,000,000 shares of
preferred stock, $0.01 par value per share (“Preferred Stock”) of which
none have already been designated), the Board of Directors hereby fixes the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions, of a series of Preferred Stock;

 

RESOLVED, that pursuant to the authority
vested in the Board  of
Directors of this Corporation in accordance with the provisions of its Amended and Restated Certificate of
Incorporation, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount thereof and the voting powers,
preferences and rights of the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:

 

Section 1.                                            Designation
and Amount.  The shares of such
series shall be designated as “Series A
Junior Participating Preferred Stock” and the number of shares constituting such series shall be 100,000.

 

Section 2.                                            Dividends
and Distributions.

 

(a)                                                                                                                                  Subject
to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A
Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior
Participating Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the 1st day of March, June, September and
December in each year (each
such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the 

 

A-1

 

greater of (i) $0.10 or (ii) subject to the
provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times
the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on
the Common Stock of the
Corporation since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share
of Series A Junior Participating Preferred Stock.  In the event the Corporation shall at any time after December 29, 2008 (the “Rights
Announcement Date”) (A) declare
any dividend on Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, or (C) combine
the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to which holders of shares of Series A
Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (ii) of
the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such
event.

 

(b)                                                                                                                                 The
Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as
provided in Section 2(a) above immediately after it declares a
dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $0.10 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

 

(c)                                                                                                                                  Dividends
shall begin to accrue and be cumulative on outstanding shares of Series A
Junior Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is
a date after the record date for the determination of holders of shares of Series A
Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date.  Accrued but unpaid dividends
shall not bear interest.  Dividends paid
on the shares of Series A Junior Participating Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. 
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.

 

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

 

A-2

 

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

 

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

 

(c)                                                                                                                                  (i)                                     If
at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount
equal to 6 quarterly dividends thereon, the occurrence of such contingency
shall mark the beginning of a
period (herein called a “default period”) which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly
dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment.  During each default period, all holders of Preferred Stock (including
holders of the Series A
Junior Participating Preferred Stock) with dividends in arrears in an amount equal to 6 quarterly dividends
thereon, voting as a class, irrespective
of series, shall have the right to elect 2 directors.

 

(ii)                                  During
any default period, such voting
right of the holders of Series A Junior Participating Preferred Stock may be exercised
initially at a special meeting called
pursuant to Section 3(c)(iii) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders,
provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any,
to increase, in certain cases,
the authorized number of directors shall be exercised unless the holders of 10% in number of shares of Preferred Stock outstanding
shall be present in person or by
proxy.  The absence of a quorum of the
holders of Common Stock shall not
affect the exercise by the holders of Preferred Stock of such voting right.  At any
meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the
right, voting as a class, to elect
directors to fill such vacancies, if any, in the Board of Directors as may then exist up to 2
directors or, if such right is
exercised at an annual meeting, to elect 2 directors.  If the number which may be so elected at any
special meeting does not amount
to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number
of directors as shall be
necessary to permit the election by them of the required number. 
After the holders of the Preferred Stock shall have exercised their right to elect directors in any default period and during the continuance of
such period, the number of directors
shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided
or pursuant to 

 

A-3

 

the rights of any equity securities ranking senior to or pari passu
with the Series A Junior Participating Preferred Stock.

 

(iii)                               Unless the holders of Preferred Stock shall, during an existing default
period, have previously exercised
their right to elect directors, the Board of Directors may order, or
any stockholder or stockholders
owning in the aggregate not less
than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the
holders of Preferred Stock, which
meeting shall thereupon be called by the President, a Vice-President or the Secretary of the
Corporation.  Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are
entitled to vote pursuant to this Section 3(c)(iii) shall be given to each holder of record of
Preferred Stock by mailing a copy
of such notice to such holder at its last address as the same appears on the books of the Corporation.  Such meeting shall be called for a time not earlier than 20 days and not later
than 60 days after such order or
request or in default of the calling of such meeting within 60 days after such order or request, such
meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total
number of shares of Preferred
Stock outstanding.  Notwithstanding the
foregoing provisions of this Section 3(c)(iii),
no such special meeting shall be
called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the
stockholders.

 

(iv)                              In
any default period, the holders of Common Stock, and other classes of stock of
the Corporation if applicable, shall continue to be entitled to elect the whole
number of directors until the holders of Preferred Stock shall have exercised
their right to elect 2 directors voting as a class, after the exercise of which
right (x) the directors so elected by the holders of Preferred Stock shall
continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy
in the Board of Directors may (except as provided in Section 3(c)(ii)) be
filled by vote of a majority of the remaining directors theretofore elected by
the holders of the class of stock which elected the director whose office shall
have become vacant.  References in this Section 3(c) to
directors elected by the holders
of a particular class of stock shall include directors elected by such directors to fill vacancies as provided in
clause (y) of the foregoing sentence.

 

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

 

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

 

A-4

 

Section 4.                                            Certain
Restrictions.

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 5.                                            Reacquired
Shares.  Any shares of Series A
Junior Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the
acquisition thereof.  All such shares
shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued

 

A-5

 

as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions
on issuance set forth herein.

 

Section 6.                                            Liquidation,
Dissolution or Winding Up.  (a) Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares
of Series A Junior Participating Preferred Stock shall have received an amount equal to $1.00 per
share of Series A Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends
and distributions thereon,
whether or not declared, to the date of such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of the Series A Liquidation Preference,
no additional distributions shall
be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall
have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 1,000 (as appropriately
adjusted as set forth in Section 6(c) below to reflect such events as stock splits, stock
dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii), the “Adjustment
Number”). 
Following the payment of the full amount of the Series A
Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock
and Common Stock, respectively, holders
of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.

 

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

 

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

 

Section 7.                                            Consolidation,
Merger, etc.  In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same

 

A-6

 

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

 

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

 

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

 

Section 10.                                      Amendment.  At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, the Amended and Restated
Certificate of Incorporation of the Corporation shall not be amended (whether
by merger or otherwise) in any manner which would materially alter or change
the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a
class.

 

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

 

Section 12.                                      Certain
Definitions.  As used herein with
respect to the Series A Junior Participating Preferred Stock, the term “Common
Stock” means the common stock, par value $0.01 per share, of the
Corporation at the date hereof or any other class of stock resulting from
successive changes or reclassification of the common stock.

 

A-7

 

IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true
under the penalties of perjury this 23rd day of December, 2008.

 

	
   

  	
   

  
	
   

  	
  [NAME]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [NAME]

  	
   

  

 

A-8

 

EXHIBIT B

 

[Form of Rights Certificate]

 

	
  Certificate No. R-

  	
  Rights

  

 

NOT
EXERCISABLE AFTER DECEMBER 23, 2018, UNLESS EXTENDED PRIOR THERETO BY THE BOARD OF DIRECTORS OF THE COMPANY, OR
EARLIER IF REDEEMED BY THE COMPANY.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT
THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.  [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF
AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT).  ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
SUCH AGREEMENT.](1)

 

Rights Certificate

 

HSN, 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 December 23,
2008 (the “Rights Agreement”), by and between HSN, Inc. a Delaware
corporation (the “Company”), and The Bank of New York Mellon, a New York
banking corporation, as Rights Agent (the “Rights Agent”), to purchase
from the Company at any time prior to 5:00 P.M. (New York City time) on December 23,
2018 (unless such date is extended prior thereto by the Board of Directors) at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of Series A Junior Participating Preferred Stock (the “Preferred
Stock”) of the Company, at a purchase price of $60.00 per one one-thousandth
of a share (the “Purchase Price”), upon presentation and surrender of
this Rights Certificate with the Form of Election to Purchase and related
Certificate properly completed and duly executed.  The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of December 23, 2008, based on the
Preferred Stock as constituted at such date.

 

Upon the occurrence of a Section 11(a)(ii) Event (as such
term is defined in the Rights Agreement), if the Rights evidenced by this
Rights Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms 

 

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

 

B-1

 

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

 

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

 

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

 

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

 

Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.001 per Right at any time prior to the earlier of (i) the
Stock Acquisition Date, and (ii) the Final Expiration Date (as each such
term is defined in the Rights Agreement). 
In addition, under certain circumstances following the Stock Acquisition
Date, the Rights may be exchanged, in whole or in part, for shares of the
Common Stock, or shares of preferred stock of the Company having essentially
the same value or economic rights as such shares.  Immediately upon the action of the Board of
Directors of the Company authorizing any such exchange, and without any further
action or any notice, the Rights (other than Rights which are not subject to
such exchange) will terminate and the Rights will only enable holders to
receive the shares issuable upon such exchange.

 

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 of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions that are integral multiples of one one-thousandth of a
share 

 

B-2

 

of Preferred Stock). 
In lieu of fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth of a share of Preferred Stock, the Company may
pay to the registered holder of this Rights Certificate at the time such Rights
are exercised as herein provided an amount in cash equal to the same fraction
of the current market value of one one-thousandth of a share of Preferred
Stock.  The Company reserves the right to
require prior to the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement) that a number of Rights be exercised so that only
whole shares of Preferred Stock will be issued.

 

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

 

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

 

B-3

 

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

 

Dated
as of
                      ,

 

	
  ATTEST:

  	
  HSN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
  Secretary

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  The Bank of New York Mellon,

  	
   

  
	
  as Rights Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Authorized Signature

  	
   

  
					

 

B-4

 

[Form of Reverse Side of Rights Certificate]

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if

such holder desires
to transfer the

Rights Certificate.)

 

FOR VALUE RECEIVED
                                                                    
hereby sells, assigns and transfers unto 

 

                                                                                                         

(Please print name and
address of transferee)

 

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

 

Dated:                    ,

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  

 

Signature
Guaranteed:

 

B-5

 

Certificate

 

The undersigned hereby certifies by checking the appropriate boxes
that:

 

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

 

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

 

Dated:
                  ,

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  

 

Signature
Guaranteed:

 

 

NOTICE

 

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

 

B-6

 

FORM OF ELECTION TO PURCHASE

 

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

 

To:  HSN, INC.:

 

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

 

Please
insert social security
 or other identifying number

 

	
   

  
	
  (Please print name and
  address)

  
	
   

  	
   

  
	
   

  

 

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

 

Please
insert social security

or other identifying number

 

	
   

  
	
  (Please print name and
  address)

  
	
   

  	
   

  
	
   

  
	
   

  
	
   

  

 

Dated: 
                          ,    

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  

 

Signature
Guaranteed:

 

B-7

 

Certificate

 

The undersigned hereby certifies by checking the appropriate boxes
that:

 

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

 

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

 

Dated:                      ,   

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  

 

Signature
Guaranteed:

 

 

NOTICE

 

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

 

B-8

 

EXHIBIT C

 

SUMMARY OF RIGHTS TO PURCHASE
 PREFERRED STOCK

 

The Board of Directors of HSN, Inc. (the “Company”) has
authorized and declared a dividend distribution of one right (a “Right”)
for each outstanding share of common stock, par value $0.01 per share, of the
Company (the “Common Stock”) to stockholders of record at the close of
business on January 5, 2009 (the “Record Date”).  Each Right entitles the registered holder to
purchase from the Company a unit consisting of one one-thousandth of a share (a
“Unit”) of Series A Junior Participating Preferred Stock, par value
$0.01 per share (the “Series A Preferred Stock”) at a Purchase
Price of $60.00 per Unit, subject to adjustment.  The description and terms of the Rights are
set forth in a Rights Agreement (the “Rights Agreement”), dated as of December 23,
2008, between the Company and The Bank of New York Mellon, a New York banking
corporation, as Rights Agent.  The Series A Preferred Stock is
established pursuant to a Certificate of Designation, Preferences and Rights
(the “Certificate of Designation”), which is being filed by the Company
with the Secretary of State of the State of Delaware on December 29, 2008.

 

Initially, the Rights will be attached to all shares of Common Stock
then outstanding, and no separate Rights Certificates will be distributed.  Subject to certain exceptions specified in
the Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an “Acquiring Person”) has acquired beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the “Stock
Acquisition Date”), other than as a result of repurchases of stock by the
Company or acquisitions by certain Exempt Persons (as defined below) or (ii) 10
business days (or such later date as the Board shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an Acquiring Person. 
An “Exempt Person” means (i) Liberty Media Corporation and
its affiliates (“Liberty”), except that Liberty will be considered an
Exempt Person only if and so long as the shares of Common Stock beneficially
owned by Liberty do not exceed specified ownership levels designated in the
Spinco Agreement between IAC/InteractiveCorp, Liberty and certain other persons
named therein (provided that
Liberty will immediately cease to be an Exempt Person when the applicable
specified ownership level is less than 15%), and (ii) each person
(other than Liberty) that beneficially owns on the date on which the Company
has filed a Current Report on Form 8-K that contains the Rights Agreement
as an exhibit (the “Rights Announcement Date”) a number of shares of
Common Stock representing more than 15% of the outstanding shares of Common
Stock, except that each such person will be considered an Exempt Person only if
and so long as the shares of Common Stock beneficially owned by such person do
not exceed (A) the number of
shares which are beneficially owned by such person on the Rights
Announcement Date, plus (B) any additional shares of Common Stock
representing not more than (1) if such person is an institution not
seeking to control or influence the Company, 3% of the shares of Common
Stock then outstanding (except that if
such person owns more than 19% of the Common Stock then outstanding on the
Rights Announcement Date, such person will be considered an Exempt 

 

C-1

 

Person only if and so long as the shares of Common
Stock beneficially owned by such person do not exceed the number of shares which are beneficially owned by
such person on the Rights Announcement Date plus 1% of the
Common Stock then outstanding), or (2) if otherwise, 1% of the shares of
Common Stock then outstanding (provided that a person will cease to be an
Exempt Person immediately at such time as such person ceases to be the
beneficial owner of more than 15% of the shares of Common Stock then outstanding).

 

Until the Distribution Date, (i) the Rights will be evidenced by
the Common Stock certificates and will be transferred with and only with such
Common Stock certificates, (ii) new Common Stock certificates issued after
the Record Date will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for
Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.  Pursuant to the Rights Agreement, the Company
reserves the right to require prior to the occurrence of a Triggering Event (as
defined below) that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.

 

The Rights are not exercisable until the Distribution Date and will
expire at 5:00 P.M. (New York City time) on December 23, 2018 (the “Final
Expiration Date”), unless the Rights Agreement is earlier terminated
or such date is extended or the Rights are earlier redeemed or exchanged by the
Company as described below.

 

As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.

 

In the event that a person becomes an Acquiring Person, each holder of
a Right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value (as determined pursuant to the Rights Agreement) equal
to two times the exercise price of the Right. 
Notwithstanding any of the foregoing, following the
occurrence of the event described in this paragraph, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were, beneficially
owned by any Acquiring Person will be null and void.

 

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

 

At any time after a person or group becomes
an Acquiring Person and prior to the acquisition by such person or group of 50%
or more of the outstanding Common Stock, the 

 

C-2

 

Board may exchange the
Rights (other than Rights owned by such person or group which have become null
and void), in whole or in part, for Common Stock at an exchange ratio of one
share of Common Stock per Right (subject to adjustment).  If an insufficient number of shares of Common
Stock are available for such exchange despite the Company’s good faith efforts
to authorize additional shares of Common Stock, the Company will substitute a
number of shares of Preferred Stock or a fraction thereof for each share of
Common Stock that would otherwise be issuable.

 

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

 

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

 

At any time prior to the Stock Acquisition Date, the Company may redeem
the Rights in whole, but not in part, at a price of $0.001 per Right (payable
in cash, Common Stock or other consideration deemed appropriate by the Board of
Directors) or amend the Rights Agreement to change the Final Expiration Date to
another date, including without limitation an earlier date.  Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the $0.001 redemption
price.

 

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

 

Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Stock Acquisition Date.  After the Stock Acquisition Date, the
provisions of the Rights Agreement may only be amended by the Board in order to
cure any ambiguity, to correct any defect or inconsistency or to make changes
which do not adversely affect the interests of holders of Rights.

 

Copies of the form of Certificate of Designation and the Rights
Agreement have been or will be filed with the Securities and Exchange Commission as an Exhibit to
a Registration Statement on Form 8-A
of the Company and as an Exhibit to a Current Report on 

 

C-3

 

Form 8-K. 
A copy of the Rights Agreement is available free of charge from the Rights Agent.  This
description of the Rights Agreement and the Rights does not purport to be
complete and is qualified by reference to the Rights Agreement.

 

C-4Exhibit 10.31

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”)
is effective as of this 26th day of June, 2008, by and between the Seneca
Gaming Corporation (“Parent”), a
governmental instrumentality of the Seneca Nation of Indians of New York (the “Nation”) and Robert Chamberlain (“Executive”).

 

WHEREAS, Parent desires that Executive serve as the
Senior Vice President of Design and Construction of Parent and each of the
Seneca Niagara Falls Gaming Corporation (“SNFGC”), the
Seneca Territory Gaming Corporation (“STGC”), and the
Seneca Erie Gaming Corporation (“SEGC”), each a
wholly-owned subsidiary of Parent and a governmental instrumentality of the
Nation (collectively, the “Subsidiaries”
and together with Parent, “Employer”); and

 

WHEREAS, Executive desires to serve as Senior Vice
President of Design and Construction of Employer in accordance with the terms
and conditions of this Agreement.

 

IT IS HEREBY AGREED AS FOLLOWS:

 

1.                                       Employment.
Employer hereby employs Executive as its Senior Vice President of Design and
Construction.  Executive shall report and
be accountable to and work under the authority of the President and Chief
Executive Officer and the Board of Directors of Parent (the “Board”). 
Executive shall perform such duties and have such responsibilities that
are customary for such position and including those that may be specified from
time to time by the President and Chief Executive Officer and/or the Board that
are not inconsistent with such position.

 

2.                                       Term.  The term of this Agreement shall commence as
of June 26, 2008 (the “Commencement Date”)
and terminate on June 25, 2011 (the “Termination
Date”), unless renewed by a subsequent written agreement of the
parties.  The parties agree that they
shall enter into good faith discussions regarding renewal/non-renewal of this
Agreement no later than twelve (12) months prior to the Termination Date.  In the event such discussions are ongoing as
of the Termination Date, this Agreement shall renew on a month-to-month basis,
provided, that, under all circumstances, the other party shall be entitled to
no less than one hundred eighty (180) days notice prior to the effectiveness of
the other party’s non-renewal, if applicable.

 

3.                                       Compensation.

 

(a)                                  Executive shall be paid an
annual base salary (“Base Compensation”)
of Five Hundred Fifty Thousand Dollars ($550,000.00) for Employer’s fiscal year
ending September 30, 2008.  Employer
shall review said salary on an annual basis (prior to or in connection with the
close of its fiscal year) at which time Employer shall determine in its sole
discretion whether or not said salary shall be increased and the timing
thereof.  Said salary shall be payable in
periodic payments in accordance with Employer’s regular payroll practices.

 

(b)                                 Executive shall be provided
with coverage under Employer’s employee benefit insurance programs and
retirement programs, if any, at least equal to the coverage provided to other
senior executive officers of Employer.

 

 

(c)                                  Executive shall
also be eligible to receive performance or incentive compensation, which is
approved by the Board in its sole discretion. 
Said additional performance or incentive compensation, if any, shall be
in addition to and shall not lessen or reduce the Base Compensation.

 

(d)                                 Should
Executive become unable to perform the duties required under this Agreement as
a result of temporary, documented medical disability, he shall be eligible to
continue to receive his Base Compensation for a period of up to one hundred and
eighty (180) days.

 

4.                                       Licensing Issues.  Executive represents and warrants to Employer
that he shall maintain in good standing such licenses as may be required
pursuant to the Nation-State Gaming Compact between the Nation and the State of
New York (the “Compact”) and/or the Nation’s or Employer’s gaming ordinances as
in effect on the date hereof, as may be necessary to enable him to engage in
his employment hereunder.

 

5.                                       Termination.

 

(a)                                  Executive’s
employment hereunder may be terminated by Parent only under the following
circumstances and such termination by Parent shall be a termination with
respect to Parent and each of the Subsidiaries, unless otherwise determined by
the Board:

 

(i)                                     upon revocation
or disapproval of such licenses for Executive as are required pursuant to the
Compact and/or by the Nation’s or Employer’s gaming ordinances, provided, that,
in the event Executive appeals the grounds for such revocation, disapproval or
suspension, Employer shall suspend Executive without compensation during the
pendency of such appeal, with reinstatement of Executive and reimbursement of
such compensation by Employer in the event such appeal is successful.  The foregoing shall not act as a limitation
on the rights and/or obligations of the parties otherwise included in this
Agreement;

 

(ii)                                  Executive shall
commit an act constituting “Cause,” which is defined to mean an act of
dishonesty by Executive intended to result in gain or personal enrichment of
Executive or others at Employer’s expense, or the deliberate and intentional
refusal by Executive (except by reason of disability) to perform his duties
hereunder, or by acts constituting gross negligence in the performance of such
duties, or the failure to perform any material term or condition of this
Agreement after written notice thereof from Company and a reasonable
opportunity to cure such failure (as determined by Company and specified in the
notice of breach); or

 

(iii)                               Executive shall
die or Employer shall for any reason within Employer’s or the Nation’s control
permanently cease to conduct casino gaming on Nation Territory.  For purposes of this 

 

2

 

Agreement,
“Nation Territory” shall include current or future Nation territory where
Employer conducts or will conduct its gaming operations as of the date
Executive’s employment is terminated.

 

(b)                                 If Executive’s
employment should be terminated under Section 5(a) above (or any
subsection) then Employer shall at that time pay Executive (or his estate, as
applicable) Base Compensation earned through the date Executive is terminated,
whereupon Employer shall have no further liability or obligation to Executive
under this Agreement or otherwise.

 

(c)                                  If Executive’s
employment should be terminated by Parent for any reason other than those
specified in Section 5(a) above (it being understood that a purported
termination for Cause which is contested by Executive and finally determined
not to have been proper shall be treated as a termination under this Section 5(c)),
then Employer shall: (i) pay Executive his Base Compensation earned, but
unpaid, through the date Executive is terminated, (ii)  continue to pay
Executive his Base Compensation in effect as of the date of termination for a
period following his termination (the “Severance Period”) equal to the lesser
of (A) eighteen (18) months or (B) the remainder of the period ending
on the Termination Date, and (iii) to the extent elected by Executive, pay
for the cost of (A) Executive’s premiums for continuation healthcare
coverage under Section 4980B of the Internal Revenue Code of 1986, as
amended (“COBRA”), and (B) the premiums for Exec-u-Care® or any similar
executive medical reimbursement insurance plan maintained by Employer on the
date Executive’s employment is terminated, for the lesser of (1) the
Severance Period, (2) until Executive is no longer eligible for COBRA
continuation coverage, or (3) until Executive obtains comparable
healthcare benefits from any other employer during the Severance Period,
whereupon Employer shall have no further liability or obligation to Executive
under this Agreement or otherwise; provided, however, that
Executive shall have a duty to mitigate damages as follows: during the
Severance Period, Executive shall endeavor to mitigate damages by seeking
employment with duties and salary comparable to those provided for herein, and
if he shall obtain such employment, he shall reimburse Employer the amount of
the compensation he has received from such other entity for such period, but
not to exceed the amount of the compensation Employer shall have paid him for
such period.

 

(d)                                 Executive may
terminate his employment for any reason upon one-hundred-twenty (120) days
written notice to Parent.  If Executive
terminates his employment pursuant to this paragraph 5(d), Employer shall pay
Executive the Base Compensation earned through the date of termination,
whereupon Employer shall have no further liability or obligation to Executive
under this Agreement or otherwise.

 

(e)                                  Executive
acknowledges and agrees that the payments set forth in this section 5
constitute liquidated damages for termination of his employment during the
employment term and such liquidated damages shall be his only remedy with
respect to any claim, including, without limitation, breach of contact, he may
have under this Agreement and that prior to receiving any such payments under Section 

 

3

 

5
and as a material condition thereof, Executive shall sign and agree to be bound
by a general release of claims against Employer related to Executive’s
employment (and termination of employment) with Employer in substantially the
form as attached hereto as Exhibit A as may be modified by Employer
in good faith to reflect changes in law or its employment practices.  Notwithstanding any other provision of this
Agreement to the contrary, Executive acknowledges and agrees that other than
any claim for the liquidated damages contemplated hereunder, he waives any
rights to be awarded any other damages with respect to any claim he may have
under this Agreement, including, without limitation, compensatory or punitive
damages.

 

6.                                       Restrictive
Covenants.

 

(a)                                  Executive
acknowledges that:  (i) as a result
of Executive’s employment  with Employer,
he will obtain secret, proprietary and confidential information concerning the
business of Employer, including, without limitation, business and marketing
plans, strategies, employee lists, patron lists, operating procedures, business
relationships (including persons, corporations or other entities performing
services on behalf of or otherwise engaged in business transactions with
Employer), accounts, financial data, know-how, computer software and related
documentation, trade secrets, processes, policies and/or personnel, and other
information relating to Employer (“Confidential Information”);
(ii) the Confidential Information has been developed and created by
Employer at substantial expense and the Confidential Information constitutes
valuable proprietary assets and Employer will suffer substantial damage and
irreparable harm which will be difficult to compute if, during the Restricted
Period, Executive should enter a Competitive Business (as defined herein) in
violation of the provisions of this Agreement; (iii) Employer will suffer
substantial damage which will be difficult to compute if, during the Restricted
Period, Executive should solicit or interfere with Employer’s employees or
patrons, or should divulge Confidential Information relating to the business of
Employer; (iv) the provisions of this Section 6 are reasonable and
necessary for the protection of the business of Employer; (v) Employer
would not have hired or employed Executive unless he signed this Agreement; and
(vi) the provisions of this Agreement will not preclude Executive from other
gainful employment.  “Competitive
Business” shall mean any gaming establishment which provides to its
patrons games of chance such as slot machines, card games, roulette, and
similar games in the State of New York or within the 100 mile radius of Nation
Territory.

 

(b)                                 Executive
acknowledges and agrees that the unauthorized disclosure or misuse of
Confidential Information will cause substantial damage to Employer.  Therefore, Executive agrees not to, at any
time, either during the term of the Agreement or thereafter, divulge, use,
publish or in any other manner reveal, directly or indirectly, to any person,
firm or corporation any Confidential Information obtained or learned by
Executive during the course of his employment with Employer, with regard to the
operational, financial, business or other affairs and activities of Employer,
their officers, directors or employees and the entities with which they have
business relationships, except (i) as may be necessary to the 

 

4

 

performance of Executive’s duties with Employer, (ii) with Parent’s
express written consent, (iii) to the extent that any such information is
in the public domain other than as a result of Executive’s breach of any of
obligations hereunder, or (iv) where required to be disclosed by court
order, subpoena or other government process and, in such event, Executive shall
cooperate with Employer in attempting to keep such information confidential.

 

(c)                                  During
Executive’s employment with Employer and for eighteen (18) months after his
termination of employment for any reason (the “Restricted
Period”), Executive, without the prior written permission of Parent,
shall not, directly or indirectly, (i) enter into the employ of or render
any services to any person, engaged in a Competitive Business; or (ii) become
associated with or interested in any Competitive Business as an individual,
partner, shareholder, member, creditor, director, officer, principal, agent,
employee, trustee, consultant, advisor or in any other relationship or
capacity.   This paragraph 6(c) shall
not prevent Executive from owning common stock in a publicly traded corporation
which owns or manages a casino provided Executive does not take an active role
in the ownership or management of such corporation and his ownership interest
represents less than 3% of the voting securities and/or economic value of such
corporation.

 

(d)                                 By
executing this Agreement, Executive acknowledges that he understands that
Employer’s ability to operate its business depends upon its ability to attract
and retain skilled people and that Employer has and will continue to invest
substantial resources in training such individuals.  Therefore, during the Restricted Period, Executive
shall not, without the prior written permission of Parent, directly or
indirectly solicit, employ or retain, or have or cause any other person or
entity to solicit, employ or retain, any person who is employed or is providing
personal services to Employer.

 

(e)                                  By executing
this Agreement, Employee acknowledges that Executive understands that Employer’s
ability to operate its business depends upon its ability to attract and retain
vendors and patrons.  Therefore, during
the Restricted Period, Executive shall not, directly or indirectly, solicit,
contact, interfere with, or endeavor to entice away from Employer any of its
current or potential patrons or any such persons or entities that were patrons
of Employer within the one year period immediately prior to Executive’s
termination of employment.  Executive
further agrees that, during the Restricted Period, Executive shall not,
directly or indirectly, endeavor to entice away from Employer any of its
current or potential vendors or any such persons or entities that were vendors
of Employer within the one year period immediately prior to Employee’s
termination of employment.

 

(f)                                    Executive
acknowledges and agrees during his employment and for all time thereafter that
he will not defame or publicly criticize the services, business, integrity, veracity
or personal or professional reputation of Employer and its officers, directors,
employees, affiliates, or agents thereof in either a professional or personal
manner.  Employer acknowledges and agrees
that during Executive’s employment and for all time thereafter, Employer will
not defame or publicly 

 

5

 

criticize Executive either in a professional or personal manner, except
as may be necessary to defend Employer from comments made by or on behalf of Executive.

 

(g)                                 If
Executive commits a breach, or threatens to commit a breach, of any of the
provisions of this paragraph 6 of the Agreement, Employer shall have the right
and remedy to have the provisions specifically enforced by any court having
jurisdiction, it being acknowledged and agreed by Executive that the services
being rendered hereunder to Employer are of a special, unique and extraordinary
character and that any such breach or threatened breach will cause irreparable
injury to Employer and that money damages will not provide an adequate remedy
to Employer.  Such right and remedy shall
be in addition to, and not in lieu of, any other rights and remedies available
to Employer at law or in equity. 
Accordingly, Executive consents to the issuance of an injunction,
whether preliminary or permanent, consistent with the terms of this Agreement.

 

(h)                                 If,
at any time, the provisions of this Agreement shall be determined to be invalid
or unenforceable under any applicable law, by reason of being vague or unreasonable
as to area, duration or scope of activity, this Agreement shall be considered
divisible and shall become and be immediately amended to only such area,
duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter and
Executive and Employer agree that this Agreement as so amended shall be valid
and binding as though any invalid or unenforceable provision had not been
included herein.

 

7.                                       Miscellaneous.

 

(a)                                  Executive
agrees that during the term of this
Agreement  unless earlier terminated,
he will commit his full time and energies to the duties imposed hereby; provided,
that, with the prior written approval of the Board, Executive may expend
as much of his personal time on his own ventures or investments, so long as: (i) such
time is not substantial and does not interfere with his ability to perform his
duties hereunder; (ii) such activities do not compete or conflict with the
business of Employer or create a personal conflict of interest to Executive and
(iii) such venture or investment does not transact any business with
Employer without prior disclosure to, and approval by, the Board.

 

(b)                                 Executive
represents to Employer that there are no restrictions or agreements to which he
is a party which would be violated by his execution of this Agreement and his
employment hereunder.

 

(c)                                  No provisions of this Agreement may be amended, modified, or
waived unless such amendment or modification is agreed to in writing signed by
Executive and by a duly authorized officer of Parent, and such waiver is set
forth in writing and signed by the party to be charged.  No waiver by any party hereto at any time of
any breach by the other party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or 

 

6

 

subsequent
time.  No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly in this
Agreement.  The respective rights and
obligations of the parties hereunder of this Agreement shall survive Executive’s
termination of employment and the termination of this Agreement to the extent
necessary for the intended preservation of such rights and obligations.

 

(d)                                 The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of New York
without regard to its conflicts of law principles.

 

(e)                                  Except as
provided in paragraph 6(g) of this Agreement, any dispute, controversy or
claim arising out of or relating to this Agreement shall be settled by binding
arbitration in Niagara Falls, New York in accordance with the Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in the United States District Court for the
Western District of New York.  The
parties agree that the only remedies available to Executive under this
Agreement are those that are set forth in paragraph 5 and the arbitrator shall
have no authority to award any other damages, including, without limitation,
punitive and/or compensatory damages.

 

(f)                                    For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:

 

If
to Executive:

 

 

 

 

If to Parent:

 

345 Third Street

Niagara Falls, New York (Seneca Nation Territory)
14303

Attn:  General
Counsel

 

or
to such other address as any party may have furnished to the others in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

 

(g)                                 The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

 

7

 

(h)                                 This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

 

(i)                                     Except as otherwise provided herein, this Agreement sets
forth the entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto in
respect of such subject matter.  Except
as otherwise provided herein, the Original Employment Agreement and any other
prior agreement of the parties hereto in respect of the subject matter
contained herein is hereby terminated and cancelled.

 

(j)                                     All payments hereunder shall be subject to any required
withholding of federal, state and local taxes pursuant to any applicable law or
regulation.

 

(k)                                  The section headings in this Agreement are for convenience
of reference only, and they form no part of this Agreement and shall not affect
its interpretation.

 

8.                                       Waiver of Sovereign Immunity.

 

(a)                                  Parent grants a waiver of its sovereign immunity from suit
exclusively to Executive (and his estate in the event of his death) for the
purpose of enforcing this Agreement, or permitting or compelling arbitration
and other remedies as provided herein. 
This waiver is solely for the benefit of the aforesaid parties and for
no other person or entity.  For this
limited purpose, Parent consents to be sued solely with respect to the
enforcement of any decision by an arbitrator relating to this Agreement as
provided in paragraph 7(e) of this Agreement in the United States District
Court for the Western District of New York.

 

(b)                                 Parent hereby waives any requirement of exhaustion of tribal
remedies, and agrees that it will not present any affirmative defense in any
dispute based on any alleged failure to exhaust such remedies.  Without in any way limiting the generality of
the foregoing, Parent expressly authorizes any governmental authorities who
have the right and duty under applicable law to take any action authorized or
ordered by any court, to take such action, including, without limitation,
repossessing any property and equipment subject to a security interest or
otherwise giving effect to any judgment entered; provided, however
that Parent does not hereby waive the defense of sovereign immunity with
respect to any action by third parties.

 

(c)                                  Parent’s waiver of immunity from suit is irrevocable and
specifically limited to the remedies provided in paragraph 5 of this Agreement
regarding liquidated damages.  Any
monetary award related to any such action shall be satisfied solely from the
net income of Parent.

 

(d)                                 Notwithstanding anything in this Agreement to the contrary,
this waiver is to be interpreted in a manner consistent with Parent’s ability
to enter into this Agreement, including, without limitation, this paragraph 8,
as provided in the 

 

8

 

Charter of Parent, as it may be amended
from time to time.  Accordingly, the
Nation shall not be liable for the debts or obligations of Parent, and Parent
shall have no power to pledge or encumber the assets of the Nation.  Furthermore, this paragraph 8 does not
constitute a waiver of any immunity of the Nation or a delegation to Parent of
the power to make any such waiver. This paragraph 8 shall be strictly construed
with a view toward protecting the Nation’s assets from the reach of creditors
and others.

 

 

	
  EXECUTED, as of the date first written above.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SENECA GAMING CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Name: E. Brian Hansberry

  	
   

  
	
  Title: President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXECUTIVE

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name: Robert Chamberlain

  	
   

  
			

 

9

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