Document:

exv4w19

 

EXHIBIT 4.19

McKESSON CORPORATION

and

THE BANK OF NEW YORK,

Rights Agent

Rights Agreement

Dated as of October 22, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Section 1.	 	Certain Definitions
	 	 	5	 
	Section 2.	 	Appointment of Rights Agent
	 	 	10	 
	Section 3.	 	Issuance of Rights Certificates
	 	 	10	 
	Section 4.	 	Form of Rights Certificates
	 	 	12	 
	Section 5.	 	Countersignature and Registration
	 	 	13	 
	Section 6.	 	Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates
	 	 	13	 
	Section 7.	 	Exercise of Rights; Purchase Price; Expiration Date of Rights
	 	 	14	 
	Section 8.	 	Cancellation and Destruction of Rights Certificates
	 	 	16	 
	Section 9.	 	Reservation and Availability of Capital Stock
	 	 	16	 
	Section 10.	 	Preferred Stock Record Date
	 	 	18	 
	Section 11.	 	Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights
	 	 	18	 
	Section 12.	 	Certificate of Adjusted Purchase Price or Number of Shares
	 	 	27	 
	Section 13.	 	Consolidation, Merger or Sale or Transfer of Assets Cash Flow or Earning Power
	 	 	27	 
	Section 14.	 	Fractional Rights and Fractional Shares
	 	 	29	 
	Section 15.	 	Rights of Action
	 	 	30	 
	Section 16.	 	Agreement of Rights Holders
	 	 	31	 
	Section 17.	 	Rights Certificate Holder Not Deemed a Stockholder
	 	 	31	 
	Section 18.	 	Concerning the Rights Agent
	 	 	32	 
	Section 19.	 	Merger or Consolidation or Change of Name of Rights Agent
	 	 	32	 
	Section 20.	 	Duties of Rights Agent
	 	 	33	 
	Section 21.	 	Change of Rights Agent
	 	 	34	 
	Section 22.	 	Issuance of New Rights Certificates
	 	 	35	 
	Section 23.	 	Redemption and Termination
	 	 	36	 
	Section 24.	 	Exchange
	 	 	37	 
	Section 25.	 	Notice of Certain Events
	 	 	38	 
	Section 26.	 	Notices
	 	 	39	 
	Section 27.	 	Supplements and Amendments
	 	 	39	 
	Section 28.	 	Successors
	 	 	40	 
	Section 29.	 	Determinations and Actions by the Board of Directors, etc
	 	 	40	 
	Section 30.	 	Benefits of this Agreement
	 	 	40	 

 

 

	 	 	 	 	 	 	 
	Section 31.	 	Severability
	 	 	40	 
	Section 32.	 	Governing Law
	 	 	41	 
	Section 33.	 	Counterparts
	 	 	41	 
	Section 34.	 	Descriptive Headings
	 	 	41	 

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EXHIBITS

	 	 	 	 	 
	Exhibit A —

	 	Form of Rights Certificate	 	 
	

	 	 	 	 
	Exhibit B —

	 	Form of Summary of Rights	 	 

4

 

RIGHTS AGREEMENT

          This RIGHTS AGREEMENT, dated as of October 22, 2004 (the “Agreement”), is
entered into between McKesson Corporation, a Delaware corporation (the
“Company”), and The Bank of New York, a Delaware corporation (the “Rights
Agent”).

          WHEREAS, on July 28, 2004 (the “Rights Dividend Declaration Date”), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of common
stock, par value $.01 per share, of the Company (the “Common Stock”)
outstanding at the Close of Business on October 22, 2004 (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 of the Company 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-hundredth (1/100) 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 Article IV of the Company’s Restated Certificate of
Incorporation, upon the terms and subject to the conditions hereinafter set
forth (the “Rights”).

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

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

               (a) “Acquiring Person” shall mean (x) any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of fifteen percent (15%) or more of the shares of 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 Person who
becomes the Beneficial Owner of fifteen percent (15%) or more of the shares of
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 or at a time when the rights are not redeemable, unless
and until such Person, after becoming aware that such Person has become the
Beneficial Owner of fifteen percent (15%) or more of the then outstanding
shares of Common Stock, acquires beneficial ownership of additional shares of
Common Stock representing one percent (1%) or more of the shares of Common
Stock then outstanding, (v) any such Person who has reported or is required to
report such ownership (but less than twenty percent (20%)) on Schedule 13G
under the Securities Exchange Act of 1934, as amended and in
effect on the date of the Agreement (the “Exchange Act”) (or any
comparable or successor report) or on Schedule 13D under the Exchange Act (or
any comparable or successor report) which Schedule 13D does not state any
intention to or reserve the right to control or influence the management or
policies of the Company or engage in any of the actions specified in Item 4 of
such schedule (other than the disposition of the Common Stock) and, within ten
(10) Business Days of being requested by the Company to advise it regarding the
same, certifies to the

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Company that such Person acquired shares of Common Stock
in excess of fourteen and nine-tenths percent (14.9%) inadvertently or without
knowledge of the terms of the Rights and who or which, together with all
Affiliates and Associates, thereafter does not acquire additional shares of
Common Stock while the Beneficial Owner of fifteen percent (15%) or more of the
shares of Common Stock then outstanding; provided, however, that if the Person
requested to so certify fails to do so within ten (10) Business Days, then such
Person shall become an Acquiring Person immediately after such ten
(10)-Business-Day period, (vi) any Person who is, as of October 22, 2004, the
Beneficial Owner of fifteen percent (15%) or more of the shares of Common Stock
then outstanding, so long as such Person thereafter does not, while the
Beneficial Owner of fifteen percent (15%) or more of the shares of Common Stock
then outstanding, acquire additional shares of Common Stock representing one
percent (1%) or more of the shares of Common Stock then outstanding, unless any
such acquisition of additional shares is pursuant to (A) a stock dividend or
distribution by the Company or (B) a Qualified Offer (as defined in Section
11(a) (ii)); provided, however, that such Person shall cease to be excluded
from the definition of Acquiring Person pursuant to this clause (vi) at such
time, if any, as such Person ceases to be the Beneficial Owner of fifteen
percent (15%) or more of the shares of Common Stock then outstanding, or (y)
any Person who or which has entered into any agreement or arrangement with the
Company or any Subsidiary of the Company providing for an Acquisition
Transaction (as defined in Section 1(b) hereof).

               (b) “Acquisition Transaction” shall mean (x) a merger, consolidation or
similar transaction involving the Company or any of its Subsidiaries as a
result of which stockholders of the Company will no longer own a majority of
the outstanding shares of Common Stock of the Company or a publicly traded
entity which controls the Company or, if appropriate, the entity into which the
Company may be merged, consolidated or otherwise combined (based solely on the
shares of Common Stock received or retained by such stockholders, in their
capacity as stockholders of the Company, pursuant to such transaction), (y) a
purchase or other acquisition of all or a substantial portion of the assets of
the Company and its Subsidiaries, or (z) a purchase or other acquisition of
securities representing fifteen percent (15%) or more of the shares of Common
Stock then outstanding.

               (c) “Adjustment Shares” shall have the meaning set forth in Section
11(a)(ii) hereof.

               (d) “Adverse Person” shall mean any Person declared to be an Adverse
Person by the Board of Directors upon a determination that the criteria set
forth in Section 11(a)(ii)(B) apply to such Person.

               (e) “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.

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

          (i) which such Person or any of such Person’s Affiliates or
Associates, directly or indirectly, has the right to acquire
(whether such right is

6

 

exercisable immediately or only after the
passage of time) 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; 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 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) which 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 subparagraph
(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); or

          (iii) which 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 subparagraph (ii) of this paragraph (f)) or
disposing of any voting securities of the Company; provided,
however, that nothing in this paragraph (f) shall cause a Person
engaged in business as an underwriter of securities to be the
“Beneficial Owner” of, or to “beneficially own,” any securities
acquired through such Person’s participation in good faith in a
firm commitment underwriting until the expiration of forty (40)
days after the date of such acquisition, and then only if such
securities continue to be owned by such Person at such expiration
of forty (40)
days and provided further, however, that any stockholder of
the Company, with affiliate(s), associate(s) or other person(s)
who may be deemed representatives of it serving as director(s) of
the Company, shall not be deemed to beneficially own securities
held by other Persons as a result of (i) persons affiliated or
otherwise associated with such stockholder serving as directors or
taking any action in

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connection therewith, (ii) discussing the
status of its shares with the Company or other stockholders of the
Company similarly situated or (iii) voting or acting in a manner
similar to other stockholders similarly situated, absent a
specific finding by the Board of Directors of an express agreement
among such stockholders to act in concert with one another as
stockholders so as to cause, in the good faith judgment of the
Board of Directors, each such stockholder to be the Beneficial
Owner of the shares held by the other stockholder(s).

               (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 are authorized or
obligated by law or executive order to close.

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

               (i) “Common Stock” shall have the meaning ascribed in the recitals, 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.

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

               (k) “Current Market Price” shall have the meaning set forth in Section
11(d)(i) hereof.

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

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

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

               (o) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended and in effect on the date of the Agreement.

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

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

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

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               (s) “Person” shall mean any individual, firm, corporation, partnership or
other entity.

               (t) “Preferred Stock” shall have the meaning ascribed in the recitals,
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 Company designated for
such purpose containing terms substantially similar to the terms of the Series
A Junior Participating Preferred Stock.

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

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

               (w) “Qualified Offer” shall have the meaning set forth in Section
11(a)(ii) hereof.

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

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

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

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

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

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

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

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

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

               (gg) “Stock Acquisition Date” shall mean the earlier of (i) the first date
of public announcement (which, for purposes of this definition, shall include,
without limitation, 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 pursuant to clause (x) of the

9

 

definition of Acquiring
Person other than pursuant to a Qualified Offer, and (ii) the date that an
Acquiring Person has become such pursuant to clause (y) of the definition of
Acquiring Person.

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

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

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

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

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

               (mm) “Value Enhancement Procedures” shall have the meaning set forth in
Section 23(c) hereof.

          Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-rights agents as it may deem
necessary or desirable, upon ten (10) days’ prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and in no event 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 tenth Business
Day after the Stock Acquisition Date (or, if the tenth Business Day after the
Stock Acquisition Date occurs before the Record Date, the Close of Business on
the Record Date), (ii) the Close of Business on the tenth Business Day (or such
later date as the Board of Directors shall determine) after the date of the
commencement of 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) within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, or any successor provision thereto, if upon
consummation thereof, such Person would become an Acquiring Person, or (iii)
the Close of Business on the tenth Business Day after the Board of Directors of
the Company determines, pursuant to the criteria set forth in Section
11(a)(ii)(B) hereof, that a Person is an Adverse Person, in any instance other
than pursuant to a Qualified Offer, (the earliest of (i), (ii) or (iii) being
herein referred to as the “Distribution Date”), (x) the Rights will be
evidenced (subject to the provisions of paragraphs (b) and (c) of this Section
3) by the certificates for the Common Stock registered in the names of the
holders of the Common Stock (which certificates

10

 

for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates,
and (y) the Rights will be transferable only in connection with the transfer of
the underlying shares of Common Stock (including a transfer to the Company).
As soon as practicable after the Distribution Date, the Rights Agent will send
by first-class, insured, postage-prepaid mail, to each record holder of 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, one or more rights
certificates, in substantially the form of Exhibit A hereto (the “Rights
Certificates”), evidencing one Right for 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.

               (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 B (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 but prior to the earlier of the
Distribution Date or the Expiration Date, 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 or 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) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock shall also be
deemed to be certificates for Rights, and shall bear the following legend:

THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE
HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN THE
RIGHTS AGREEMENT BETWEEN
McKESSON CORPORATION (THE “COMPANY”) AND THE RIGHTS
AGENT THEREUNDER (THE “RIGHTS AGREEMENT”), THE TERMS
OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE
AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICES OF THE COMPANY. 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

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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 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 or (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 A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or 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. 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-hundredths (1/100) of a share of
Preferred Stock as shall be set forth therein at the price set forth therein
(such exercise price per one one-hundredth (1/100) 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),
Section 11(p) or Section 22 hereof that represents Rights beneficially owned
by: (i) an Acquiring Person or an Adverse Person or any Associate or Affiliate
of an Acquiring Person or an Adverse Person, (ii) a transferee of an Acquiring
Person or an Adverse 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 an Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person or Adverse Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person or Adverse Person to holders of equity interests in such Acquiring
Person or to any Person with whom such Acquiring Person or Adverse Person has
any continuing agreement, arrangement or understanding regarding the

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transferred Rights or (B) a transfer which the Board of Directors has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:

THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE
OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON, ADVERSE PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON OR
ADVERSE 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 or Vice-Chairman of its Board of Directors, its Chief Executive
Officer, its President or any Vice President, its Chief Financial Officer or
any Assistant Treasurer, or its Secretary or any Assistant Secretary, 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, the Rights Agent will keep, or cause
to be kept, at its principal office or offices designated as the appropriate
place for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the 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.

13

 

               (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
Certificates may be transferred, split up, combined or exchanged for any other
Rights Certificates, entitling the registered holder to purchase a like number
of one one-hundredths (1/100) 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 any Rights 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
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender any Rights Certificates to be transferred, split up,
combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any
such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e),
Section 14 and Section 24 hereof, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.

               (b) 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 reasonably 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, without
limitation, the restrictions on exercisability set forth in Section 9(c),
Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon surrender
of the Rights Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the principal office or offices 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-hundredths (1/100) 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, at or prior to the earlier of (i)
the Close of Business on October 22, 2014, or such later date as may be
established by the Board of Directors prior to the expiration of the Rights
(such date, as it may be extended by the Board of Directors, the “Final
Expiration Date”), or (ii) the time at which the Rights are redeemed or
exchanged as provided in Section 23

14

 

and Section 24 hereof (the earlier of (i)
and (ii) being herein referred to as the “Expiration Date”).

               (b) The Purchase Price for each one one-hundredth (1/100) of a share of
Preferred Stock pursuant to the exercise of a Right initially shall be $100,
subject to adjustment from time to time as provided in Section 11 and Section
13(a) hereof and shall be payable in accordance with paragraph (c) below.

               (c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the
Purchase Price per one one-hundredth (1/100) 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 transfer
tax, 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-hundredths (1/100) of a
share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes its 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-hundredths (1/100) 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 will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if
any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such 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) after receipt
thereof, deliver such cash, if any, 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) shall be made in
cash or by certified bank check or bank draft 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
appropriate. 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 and
delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.

               (e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i)

15

 

an Acquiring Person, or Adverse Person, or an
Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a
transferee of an Acquiring Person or Adverse Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring Person or Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person or Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person or Adverse Person becoming such
and receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to holders of equity
interests in such Acquiring Person or Adverse Person or to any Person with whom
the Acquiring Person or Adverse Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors has determined is part of a plan, arrangement or
understanding which 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 Adverse 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 upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have (i) completed and signed 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) or Affiliates or
Associates thereof as the Company shall reasonably request.

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

          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 Section 11(a)(ii) 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 Section 11(a)(ii) Event,

16

 

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.

               (b) So long as the shares of Preferred Stock (and, following the
occurrence of a Section 11(a)(ii) 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 Securities 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 Securities 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 ninety (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. 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-hundredths (1/100) of a share of
Preferred Stock (and, following the occurrence of a Section 11(a)(ii) Event,
Common Stock and/or other 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), 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 federal and state transfer 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-hundredths (1/100) 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 which may be payable in respect of any transfer or
delivery of

17

 

Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths (1/100) 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-hundredths (1/100) 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
such tax shall have been paid (any such tax being payable by the holder of such
Rights Certificates at the time of surrender) or until it has been established
to the Company’s satisfaction that no such tax is due.

          Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for a number of one one-hundredths (1/100) 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 transfer taxes) was 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, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.

          Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of 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 the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided 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

18

 

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 which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

               (ii) In the event:

               (A) any Person shall, at any time after the Rights
Dividend Declaration 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,
or is an acquisition of shares of Common Stock pursuant to a
tender offer or an exchange offer for all outstanding shares
of Common Stock at a price and on terms determined by at
least a majority of the members of the Board of Directors
who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an
Acquiring Person, after receiving advice from one or more
investment banking firms, to be (a) at a price which is fair
to
stockholders and not inadequate (taking into account
all factors which such members of the Board of Directors
deem relevant, including, without limitation, prices which
could reasonably be achieved if the Company or its assets
were sold on an orderly basis designed to realize maximum
value) and (b) otherwise in the best interests of the
Company and its stockholders (a “Qualified Offer”), or

               (B) the Board of Directors of the Company shall declare
any Person to be an Adverse Person, upon a determination
that such Person, alone or together with its Affiliates and
Associates, has, at any time after the Rights Dividend
Declaration Date, become the Beneficial Owner of an amount
of Common Stock that the Board of Directors determines to be
substantial (which amount shall in no event be less than 10%
of the shares of Common Stock then outstanding) and a
determination by at least a majority of the members of the
Board of Directors who are not officers of the Company,
after reasonable inquiry and investigation, including
consultation with such persons as the directors shall deem
appropriate, that (a) such Beneficial Ownership by such
Person is intended to cause the Company to repurchase the
Common Stock beneficially owned by such Person or to cause
pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide
such Person with short-term financial gain under
circumstances where the Board of Directors determines that
the best long-term interests of the Company and its
stockholders would not be served by taking such action or
entering into such transactions or series of transactions at
that time or (b) such Beneficial Ownership is causing or
reasonably likely to

19

 

cause a material adverse impact
(including, but not limited to, impairment of relationships
with customers or impairment of the Company’s ability to
maintain its competitive position) on the business or
prospects of the Company,

                         then, promptly following the occurrence of such event, 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-hundredths (1/100) 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-hundredths (1/100) 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 Right and for all purposes of
this Agreement) by fifty percent (50%) of the Current Market Price
(determined pursuant to Section 11(d) hereof) per share of Common
Stock on the date of such first occurrence (such number of shares,
the “Adjustment Shares”).

               (iii) In the event that the number of shares of Common Stock
which is authorized by the Company’s Restated Certificate of
Incorporation, but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights, is not sufficient
to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section 11(a), the Company
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, which the Board of Directors
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 of Directors
based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors; provided,
however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first occurrence
of a Section 11(a)(ii) Event and (y) the date on which the
Company’s right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the “Section
11(a)(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

20

 

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 of Directors 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 thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, is
herein called the “Substitution Period”). To the extent that the
Company determines that 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. For purposes of this
Section 11(a)(iii), the value of each Adjustment Share shall be
the Current Market Price (as determined pursuant to Section 11(d)
hereof) 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 forty-five (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 which the
aggregate offering price of the total number of shares of Preferred Stock
and/or Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and 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

21

 

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 of Directors, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights. Shares of Preferred
Stock owned by or held for the account of the Company 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 which would then be in effect if such record date had
not been fixed.

               (c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
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 of
Directors, 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, 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 which would have
been in effect if such record date had not been fixed.

          (d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current
Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock
for the thirty (30) consecutive Trading Days immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices
per share of such Common Stock for the ten (10) consecutive Trading Days
immediately following 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 the
commencement of the requisite thirty (30) Trading Day or ten (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

22

 

day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the 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 the National Association of Securities Dealers
Automated Quotation System (“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 of Directors. 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 of Directors
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 of Directors, 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
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 one hundred (100) (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 of Directors, 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 one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried

23

 

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) three (3) years from the date of the transaction which mandates such
adjustment, or (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-hundredths
(1/100) 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-hundredths
(1/100) of a share of Preferred Stock (calculated to the nearest one-millionth)
obtained by (i) multiplying (x) the number of one one-hundredths (1/100) of a
share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.

               (i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-hundredths (1/100) 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-hundredths (1/100) 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 of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (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

24

 

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 countersigned
in the manner provided for herein (and may bear, at the option of the Company,
the adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in the
public announcement.

               (j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths (1/100) 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-hundredth (1/100) of a share and the number of one one-hundredths (1/100)
of a share which were expressed in the initial Rights Certificates issued
hereunder.

               (k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
one-hundredths (1/100) of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of one one-hundredths
(1/100) of a share of Preferred Stock at such adjusted Purchase Price.

               (l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-hundredths (1/100) 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-hundredths (1/100) 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 of Directors shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to

25

 

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 which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than fifty percent (50%) of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger or sale, the stockholders
of the Person who 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.

               (p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the earlier of the Distribution Date or the Expiration 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.

               (q) The failure by the Board of Directors of the Company to declare a
Person to be an Adverse Person following such Person becoming the Beneficial
Owner of 10% or more of the outstanding Common Stock shall not imply that such
Person is not an Adverse Person or limit the Board of Directors’ right at any
time in the future to declare such Person to be an Adverse Person.

26

 

          Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the 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 hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.

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

               (a) In the event that, following the Stock Acquisition Date, 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 which
complies with Section 11(o)
hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding shares of 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 fifty percent (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 which complies with Section 11(o) hereof), then, and in each such case
(except as may be contemplated by Section 13(d) hereof), 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 tradable 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-hundredths (1/100) 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-hundredths (1/100) 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 fifty percent (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

27

 

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), 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), 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, (1) if the
Common Stock of such Person is not at such time and has not been
continuously over the preceding twelve (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) in case such Person is a
Subsidiary, directly 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 which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will

               (i) prepare and file a registration statement under the
Securities Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form,
and will use its best efforts to cause such registration statement
to (A) become effective as soon as practicable after

28

 

such filing
and (B) remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Expiration Date;
and

               (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 which 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 which have not theretofore
been exercised shall thereafter become exercisable in the manner described in
Section 13(a).

               (d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock which is a Qualified
Offer as such term is defined in Section 11(a)(ii) hereof (or a wholly owned
subsidiary of any such Person or Persons), (ii) the price per share of Common
Stock offered in such transaction is not less than the price per share of
Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such tender offer or exchange offer and (iii) the form of
consideration being offered to the remaining holders of shares of Common Stock
pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.

          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(i) or Section 11(p)
hereof, or to distribute Rights Certificates which 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 New York Stock Exchange or, if the

29

 

Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights, selected by the Board of Directors.
If on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined in good faith by the Board
of Directors shall be used.

               (b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth (1/100) of a share of Preferred Stock) upon exercise of the
Rights or to distribute certificates which
evidence fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-hundredth (1/100) of a share of Preferred
Stock). In lieu of fractional shares of Preferred Stock that are not integral
multiples of one one-hundredth (1/100) 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-hundredth (1/100) of a
share of Preferred Stock. For purposes of this Section 14(b), the current
market value of one one-hundredth (1/100) of a share of Preferred Stock shall
be one one-hundredth (1/100) 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 the
Rights or to distribute certificates which 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 (1) 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
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.

          Section 15. Rights of Action. All rights of action in respect of this
Agreement 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 his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or

30

 

otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting
the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement.

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

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

               (b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates 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, subject to the last sentence of Section 7(e)
hereof, shall be required to 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, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as 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-hundredths (1/100) of a share of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate

31

 

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

               (b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for 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.

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

               (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust, stock transfer or other stockholder 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
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.

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

32

 

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

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

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

               (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or Adverse
Person and the determination of Current Market Price) be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be 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 authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

               (c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.

               (d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the 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 be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall
it be responsible for any adjustment required under the provisions of Section
11, Section 13 or Section 24 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after actual notice of any such
adjustment); 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

33

 

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 the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Secretary, any Assistant Secretary, the Chief Financial Officer,
the Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.

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

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

               (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 its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.

               (k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed 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 thirty (30) days’ notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the

34

 

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 thirty
(30) days’ notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
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 thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a legal business entity organized and doing business under the
laws of the United States or of the State of California or of any other state
of the United States, in good standing, having an office in the State of
California, which is authorized under such laws to exercise corporate trust,
stock transfer or stockholder services powers and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$100,000,000 or (b) an affiliate of a legal business entity 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 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 of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the 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 of Directors, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights

35

 

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 of Directors may, at its option, at any time prior to the
earlier of (i) the Close of Business on the tenth Business Day following the
Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred
prior to the Record Date, the Close of Business on the tenth Business Day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the “Redemption
Price”). Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company’s right of redemption hereunder
has expired. 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 of Directors.

               (b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors 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.

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

36

 

          Section 24. Exchange.

               (a) The Board of Directors 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 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 of
Directors 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 entity 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 fifty
percent (50%) or more of the Common Stock then outstanding.

               (b) Immediately upon the action of the Board of Directors 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; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
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 void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.

               (c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or Equivalent Preferred Stock, as such
term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-hundredth (1/100) of a
share of Preferred Stock (or Equivalent Preferred Stock) for each share of
Common Stock, as appropriately adjusted to reflect stock splits, stock
dividends and other similar transactions after the date hereof.

               (d) 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
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.

               (e) 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

37

 

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
(e), 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), or (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, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which 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 fifty percent (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 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 twenty (20) days prior to the record date
for determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.

               (b) In case a Section 11(a)(ii) Event 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, 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 paragraph to Preferred Stock
shall be deemed thereafter to refer to Common Stock and/or, if appropriate,
other securities.

38

 

          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 filed in writing by
the Rights Agent with the Company) as follows:

	 
	McKesson Corporation

One Post Street

San Francisco, California 94104

Attention: Corporate Secretary

Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
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 filed in writing by the Rights Agent with the Company) as follows:

	 
	The Bank of New York

101 Barclay Street

New York, NY 10286

Attention: Stock Transfer Administration

          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.

          Section 27. Supplements and Amendments.

               (a) Prior to the Distribution Date, and subject to the provisions of
Section 27(b) hereof, 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 Distribution Date, and subject to the provisions of Section
27(b) hereof, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder, or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person, an Adverse Person or an Affiliate or Associate of an
Acquiring Person or an Adverse Person). Upon the delivery of a certificate
from an appropriate officer of the Company 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. 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.

39

 

               (b) Notwithstanding anything herein to the contrary, no supplement or
amendment shall be made to this Agreement at a time when the Rights are not
redeemable, except as contemplated by clause (i) or (ii) of Section 27(a)
hereof.

          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 of
Directors shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power 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, to
declare than a Person is an Adverse Person 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 of Directors in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board of Directors,
or any of the directors on the Board of Directors, to any liability to the
holders of the Rights.

          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 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 of Directors
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the Close of Business on the tenth Business Day
following the date of such determination by the Board of Directors. Without
limiting the foregoing, if any provision requiring a specific group of
directors to act is held to by any court of competent jurisdiction or

40

 

other
authority to be invalid, void or unenforceable, such determination shall then
be made by the Board of Directors in accordance with applicable law and the
Company’s Amended and Restated Certificate of Incorporation and Bylaws.

          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.

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

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

          [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

41

 

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

	 	 	 	 	 
	 	McKESSON CORPORATION

 	 
	 	By:  	/s/ Ivan D. Meyerson
 	 
	 	 	Name:  	Ivan D. Meyerson 	 
	 	 	Title:  	Executive Vice President,
General Counsel and Secretary 	 
	 
	 	THE BANK OF NEW YORK

 	 
	 	By:  	/s/ Steven R. Myers
 	 
	 	 	Name:  	Steven R. Myers 	 
	 	 	Title:  	Vice President 	 
	 

[Rights Agreement Signature page]

A - 1

 

Exhibit A

Form of Rights Certificate

			
	Certificate No. R-
	 	Rights

NOT EXERCISABLE AFTER OCTOBER 22, 2014 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ADVERSE
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 ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE 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

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

 

 

Rights Certificate

McKESSON CORPORATION

          This
certifies that                         , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of October 22, 2004 (the “Rights Agreement”),
between McKesson Corporation, a Delaware corporation (the “Company”), and The
Bank of New York, a [New York corporation] (the “Rights Agent”), to purchase
from the Company at any time prior to 5:00 P.M. (Eastern time) on October 22,
2014 (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-hundredth (1/100) 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 $100 per one
one-hundredth (1/100) of a share (the “Purchase Price”), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of October 22, 2004, based on the
Preferred Stock as constituted at such date. The Company reserves the right to
require prior to the occurrence of a Triggering Event (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.

          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, an Adverse Person or an
Affiliate or Associate of any such Acquiring Person or Adverse Person (as such
terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person, Adverse Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, an Adverse Person,
or an Affiliate or Associate of an Acquiring Person or Adverse 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

A - 2

 

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 principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths (1/100) 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 (unless the board of Directors shall have made a
determination that a Person is an Adverse Person) be redeemed by the Company at
its option at a redemption price of $.01 per Right at any time prior to the
earlier of the Close of Business on (i) the tenth Business Day following the
Stock Acquisition Date (as such time period may be extended pursuant to the
Rights Agreement), and (ii) the Final Expiration Date. 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
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.

          No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth (1/100) of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

A - 3

 

 

A - 4

 

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

Dated as of                         .

	 	 	 	 	 
	ATTEST:	 	McKESSON CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	
 

	 	 	 	
 
	Secretary

	 	 	 	Name:

Title:
	 
	 	 	 	 
	Countersigned:
	 	 	 	 
	 
	 	 	 	 
	THE BANK OF NEW YORK
	 	 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	

	 	 	 	 
	Authorized Signature
	 	 	 	 

 

 

Form of Reverse Side of Rights Certificate

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)

          FOR
VALUE RECEIVED                                                                                
                                                                                   
    

hereby sells, assigns and transfers unto                                                                             
                                                                                   
    

                                                                                
                                                                                   

(Please print name and
address of transferee)

                                                                                
                                                                                   

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

	 	 	 
	Dated:

	 	 
	 
	 
	 
	 
	

	 	
 
	 
	 	Signature

Signature Guaranteed:

 

 

Certificate

          The undersigned hereby certifies by checking the appropriate boxes 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.

 

 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise

Rights represented by the Rights Certificate.)

To: McKesson Corporation:

          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:

 

 

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.

 

 

Exhibit B

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED STOCK

          On July 28, 2004, the Board of Directors of McKesson Corporation (the
“Company”) declared a dividend distribution of one Right for each outstanding
share of Company Common Stock to stockholders of record at the Close of
Business on October 22, 2004 (the “Record Date”). Each Right entitles the
registered holder to purchase from the Company a unit consisting of one
one-hundredth (1/100) of a share (a “Unit”) of Series A Junior Participating
Preferred Stock, par value $.01 per share (the “Series A Preferred Stock”) at a
Purchase Price of $100 per Unit, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement (the “Rights
Agreement”) between the Company and The Bank of New York, as Rights Agent.

          Initially, the Rights will be attached to all Common Stock certificates
representing shares 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) ten (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 fifteen percent
(15%) or more of the outstanding shares of Common Stock other than as a result
of repurchases of stock by the Company, certain inadvertent actions by
institutional or certain other stockholders or the beneficial ownership by a
person of fifteen percent (15%) or more of the outstanding Common Stock as of
October 22, 2004, or the date a Person has entered into an agreement or
arrangement with the Company or any Subsidiary of the Company providing for an
Acquisition Transaction (the “Stock Acquisition Date”), (ii) ten (10) business
days (or such later date as the Board of Directors shall determine) following
the commencement of a tender offer or exchange offer that would result in a
person or group becoming an Acquiring Person, or (iii) ten business days after
the Board of Directors of the Company determines any person, alone or together
with its affiliates and associates, has become the Beneficial Owner of an
amount of Common Stock which the Board of Directors determines to be
substantial (which amount shall in no event be less than 10% of the shares of
Common Stock outstanding) and at least a majority of the Board of Directors who
are not officers of the Company, after reasonable inquiry and investigation,
including consultation with such persons as such directors shall deem
appropriate, shall determine that (a) such beneficial ownership by such person
is intended to cause the Company to repurchase the Common Stock beneficially
owned by such person or to cause pressure on the Company to take action or
enter into a transaction or series of transactions intended to provide such
person with short- term financial gain under circumstances where the Board of
Directors determines that the best long-term interests of the Company and its
stockholders would not be served by taking such action or entering into such
transactions or series of transactions at that time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of the Company’s ability to maintain its competitive position) on
the business or prospects of the Company (any such person being referred to
herein and in the Rights Agreement as an “Adverse

 

 

Person”). An Acquisition Transaction is defined in the Rights Agreement
as (x) a merger, consolidation or similar transaction involving the Company or
any of its Subsidiaries as a result of which stockholders of the Company will
no longer own a majority of the outstanding shares of Common Stock of the
Company or a publicly traded entity which controls the Company or, if
appropriate, the entity into which the Company may be merged, consolidated or
otherwise combined (based solely on the shares of Common Stock received or
retained by such stockholders, in their capacity as stockholders of the
Company, pursuant to such transaction), (y) a purchase or other acquisition of
all or a substantial portion of the assets of the Company and its Subsidiaries,
or (z) a purchase or other acquisition of securities representing fifteen
percent (15%) or more 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. (Eastern time) on October 22, 2014, unless 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. Except as otherwise determined
by the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.

          In the event that (i) a Person becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair and not inadequate and to otherwise
be in the best interests of the Company and its stockholders, after receiving
advice from one or more investment banking firms (a “Qualified Offer”), or (ii)
the Board of Directors determines that a person is an Adverse 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 equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of the
event set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person or Adverse Person (or by certain related parties) will be
null and void. However, Rights are not exercisable following the occurrence of
the event set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below.

          For example, at an exercise price of $200 per Right, each Right not owned
by an Acquiring Person or by an Adverse Person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its
holder to purchase $400 worth of Common Stock (or other consideration, as noted
above) for $200. Assuming that the Common Stock had a

B - 2

 

per share value of $40 at such time, the holder of each valid Right would
be entitled to purchase 10 shares of Common Stock for $200.

          In the event that, at any time following the Stock Acquisition Date, (i)
the Company engages in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than with an entity
which acquired the shares pursuant to a Qualified Offer), (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) fifty percent (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 second preceding
paragraph are referred to as the “Triggering Events.”

          At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board of Directors may exchange the Rights (other
than Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one share of Common Stock, or one
one-hundredth (1/100) of a share of Preferred Stock (or of a share of a class
or series of the Company’s preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).

          At any time until ten (10) business days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price
of $.01 per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). The Company may not redeem the Rights
if the Board of Directors has previously declared a person to be an Adverse
Person. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price.

          Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that
the Rights become exercisable for 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 prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board of Directors in
order to cure any ambiguity, to make changes which do not adversely affect the
interests of holders of Rights (excluding the interests of an Acquiring Person,
an Adverse Person or certain related parties), or to shorten or lengthen any
time period under the Rights Agreement. The foregoing notwithstanding, no
amendment may be made to the Rights Agreement during the Special Period or at a
time when the Rights are not redeemable, except to cure any ambiguity or
correct or supplement any provision contained

B - 3

 

in the Rights Agreement which may be defective or inconsistent with any
other provision therein.

          A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form
8-A/Current Report on Form 8-K. A copy of the Rights Agreement is available
free of charge from the Rights Agent. This summary description of the Rights
does not purport to be complete and is qualified in its entirety by reference
to the Rights Agreement, which is incorporated herein by reference.

B - 4<PAGE>
                                                                     EXHIBIT 4.4

                          FIRST SUPPLEMENTAL INDENTURE

         THIS FIRST SUPPLEMENTAL INDENTURE dated as of August 5, 2004 between
Nortek, Inc., a Delaware corporation (the "Company"), and U.S. Bank National
Association, as successor-in-interest to State Street Bank and Trust Company, as
trustee under the Indenture referred to below (the "Trustee").

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture dated as of June 12, 2001 (the "Indenture"), providing for
the issuance of an aggregate principal amount of $250 million of 9-7/8% Senior
Subordinated Notes due June 15, 2011 (the "Notes");

         WHEREAS, the Company proposes to amend the Indenture and the Notes (the
"Proposed Amendments"), as contemplated hereby;

         WHEREAS, the Company has obtained the consent of the Holders of the
Notes pursuant to the Offer to Purchase and Consent Solicitation Statement dated
July 20, 2004, as amended, supplemented or modified (the "Consent Solicitation
Statement"), to the Proposed Amendments upon the terms and subject to the
conditions set forth therein;

         WHEREAS, pursuant to Section 9.02 of the Indenture, the Company may
amend or supplement the Indenture and the Notes as contemplated hereby provided
that the Holders of at least a majority in aggregate principal amount of the
Notes then outstanding have consented;

         WHEREAS, the Company has received and delivered to the Trustee the
consent of the Holders of at least a majority in aggregate principal amount of
the Notes to the Proposed Amendments;

         WHEREAS, the Company has been authorized by a resolution of its board
of directors to enter into this First Supplemental Indenture;

         WHEREAS, all other acts and proceedings required by law, by the
Indenture, and by the certificate of incorporation and by-laws of the Company to
make this First Supplemental Indenture a valid and binding agreement for the
purposes expressed herein, in accordance with its terms, have been duly done and
performed;

         WHEREAS, pursuant to Section 9.06, the Trustee has received an
Officers' Certificate and Opinion of Counsel and authorized to execute and
deliver this First Supplemental Indenture;

         WHEREAS, following the execution of this First Supplemental Indenture,
the terms hereof will become operative upon the acceptance for purchase by the
Company of Notes validly tendered in the tender offer contemplated by the
Consent Solicitation Statement (the "Consent Condition"); and

         WHEREAS, the terms of this First Supplemental Indenture shall be null
and void if the Consent Condition does not occur.

                                       1
<PAGE>
         NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

         That, for and in consideration of the premises herein contained and in
order to effect the proposed amendments contained in the Consent Solicitation
Statement, pursuant to Sections 9.02 and 9.06 of the Indenture, the Company
agrees with the Trustee as follows:

                                    ARTICLE 1

                        Amendment of Indenture and Notes

         1.1 Amendment of Indenture. Effective as of the Operative Date, this
First Supplemental Indenture amends the Indenture as provided for herein. If the
Operative Date does not occur on or prior to the date that IS 90 days following
the date of this First Supplemental Indenture, then the terms of this First
Supplemental Indenture shall be null and void and the Indenture shall continue
in full force and effect without any modification hereby.

         1.2 Amendment of Section 1.01.

         (a) Pursuant to Section 9.02 of the Indenture, Section 1.01 of the
Indenture is hereby amended by deleting in their entirety the definitions of
"Acquired Indebtedness," "Allowable Subsidiary Loans," "Average Life,"
"Broan-NuTone Canada, Inc. Credit Facility," "Consolidated Amortization
Expense," "Consolidated Cash Flow," "Consolidated Cash Flow Coverage Ratio,"
"Consolidated Depreciation Expense," "Consolidated Income Tax Expense,"
"Consolidated Interest Expense," "Consolidated Net Worth," "Disinterested
Director," "Eligible Inventory," "Eligible Receivables," "Existing
Indebtedness," "Existing Investments," "Non-Recourse Debt," "Permitted
Investments," "Permitted Liens," "Principal Property," "Purchase Money
Obligations," "Significant Subsidiary," "Special Common Stock," and "Wholly
Owned Subsidiary" contained in the Indenture.

         (b) Pursuant to Section 9.02 of the Indenture, Section 1.01 of the
Indenture is hereby amended by deleting in its entirety the definition of "Asset
Sale" and replacing it with the following:

         "ASSET SALE" means, with respect to any Person, the sale, lease,
conveyance or other transfer or disposition by such person of any of its assets
or properties (including by way of a sale-and-leaseback and including the sale,
issuance or other transfer of any of the Capital Stock of any Subsidiary of such
person), in a single transaction or through a series of related transactions,
for aggregate consideration received by such Person or a Subsidiary of such
Person (but if such Person is the Company or any Restricted Subsidiary of the
Company, only if such Subsidiary is a Restricted Subsidiary of the Company), net
out-of-pocket costs relating thereto (including, without limitation, legal,
accounting and investment banking fees and sales commissions), in excess of
$5,000,000. For purposes of this definition, consideration shall include,
without limitation, any indebtedness for borrowed money of such Person or such
Subsidiary that is assumed by the transferee of any assets or any such
indebtedness of any Subsidiary of such Person whose stock is purchased by the
transferee. Notwithstanding anything to the contrary in the foregoing provisions
of this definition, the term "Asset Sale", with respect to any Person, shall not
include (i) the sale, lease or other transfer or disposition of assets

                                       2
<PAGE>
acquired and held for resale in the ordinary course of business; (ii) the sale,
lease or other transfer or disposition of assets in accordance with the
provisions of Article V hereof; (iii) the sale, lease or other transfer or
disposition of damaged, worn-out or obsolete property in the ordinary course of
business or other property no longer necessary for the proper conduct of the
business of such Person or its Subsidiaries; (iv) the abandonment of assets or
properties which are no longer useful in the business of such Person or its
Subsidiaries and are not readily saleable; (v) the granting of any Lien; (vi)
any sale, lease, assignment or other disposition by such Person or its
Subsidiaries if such Person has outstanding senior debt securities all of which
are rated BBB- or higher by S&P and have not been placed on credit watch by S&P
for a possible downgrade or are rated Baa3 or higher by Moody's and have not
been placed on credit watch by Moody's for a possible downgrade; or (vii) the
sale or other transfer or disposition of receivables in connection with an asset
securitization transaction by such Person or its Subsidiaries.

         (c) Pursuant to Section 9.02 of the Indenture, Section 1.01 of the
Indenture is hereby amended by deleting in its entirety the definition of
"Restricted Subsidiary" and replacing it with the following:

         "RESTRICTED SUBSIDIARY" means any Subsidiary of Nortek unless such
         Subsidiary shall have been designated as an Unrestricted Subsidiary by
         resolution of the Board of Directors of Nortek as provided in and in
         compliance with the definition of "Unrestricted Subsidiary." Nortek
         shall evidence any such designation to the Trustee by promptly filing
         with the Trustee an Officers' Certificate certifying that such
         designation has been made.

          (d) Pursuant to Section 9.02 of the Indenture, Section 1.01 of the
Indenture is hereby amended by deleting in its entirety the definition of
"Unrestricted Subsidiary" and replacing it with the following:

         "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated as an
         Unrestricted Subsidiary by resolution by the Board of Directors, and
         any Subsidiary of any Unrestricted Subsidiary. Nortek shall evidence
         any such designation to the Trustee by filing with the Trustee within
         45 days of such designation an Officers' Certificate certifying that
         such designation has been made.

         1.3 Amendment of Section 1.02. Pursuant to Section 9.02 of the
Indenture, Section 1.02 of the Indenture is hereby amended and restated in its
entirety as follows:

<TABLE>
<CAPTION>
                                                                    DEFINED IN
                   TERM                                             SECTION
                   ----                                             -------
<S>                                                                 <C>
                  "Act"                                             1.05
                  "Acceleration Notice"                             6.02
                  "Bankruptcy law"                                  7.07
</TABLE>

                                       3
<PAGE>
<TABLE>
<S>                                                                 <C>
                  "Blockage Notice"                                 10.04
                  "Cash Proceeds"                                   4.13
                  "Change of Control"                               4.12
                  "Change of Control Offer"                         4.12
                  "Change of Control Payment"                       4.12
                  "Change of Control Payment Date"                  4.12
                  "Covenant Defeasance"                             8.03
                  "DTC"                                             2.03
                  "Event of Default"                                6.01
                  "Excess Proceeds"                                 4.13
                  "Excess Proceeds Offer"                           4.13
                  "Exchange Act"                                    4.12
                  "IAIs"                                            2.01
                  "Legal Defeasance"                                8.02
                  "Legal Holiday"                                   11.08
                  "Offshore Notes Exchange Date"                    2.01
                  "Paying Agent"                                    2.03
                  "Payment Blockage Period"                         10.04
                  "QIB Global Note"                                 2.01
                  "QIBs"                                            2.01
                  "Register"                                        2.03
                  "Registrar"                                       2.03
                  "Regulation S Purchasers"                         2.01
</TABLE>

                                       4
<PAGE>
<TABLE>
<S>                                                                 <C>
                  "Rule 144A"                                       2.01
                  "Temporary Regulation S Global Note"              2.01
</TABLE>

         1.4 Amendment of Section 3.01.Pursuant to Section 9.02 of the
Indenture, Section 3.01 of the Indenture is hereby amended and restated in its
entirety to read as follows:

SECTION 3.01 Right to Redeem; Notices to Trustee

         At any time on and after June 15, 2006, the Company, at its option, may
redeem the Notes for cash in accordance with this Article III and the provisions
of paragraph 5 of the Notes. If the Company elects to redeem Notes pursuant to
paragraph 5 of the Notes, it shall notify the Trustee in writing of the
Redemption Date, the principal amount of Notes to be redeemed and the Redemption
Price.

         The Company shall give the notice to the Trustee provided for in this
Section 3.01 at least seven days before the Redemption Date, provided such
notice shall be deemed to have been given if it is received by the Trustee on or
before 11:00 a.m., New York City time, on a Business Day, and any such notice
received by the Trustee after such time shall be deemed to have been given on
the next Business Day (unless a shorter notice shall be satisfactory to the
Trustee).

         1.5 Amendment of Section 3.02. Pursuant to Section 9.02 of the
Indenture, Section 3.02 of the Indenture is hereby amended and restated in its
entirety to read as follows:

SECTION 3.02 Selection of Notes to be Redeemed

         If less than all the outstanding Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed by lot or, if such method is
prohibited by the rules of any stock exchange on which the Notes are then
listed, any other method the Trustee considers reasonable. The Trustee shall
make the selection at least seven but not more than 60 days before the
Redemption Date from outstanding Notes not previously called for redemption.
Notes and portions of them the Trustee selects shall be in principal amount of
$1,000 or an integral multiple of $1,000. Provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption. The Trustee shall notify the Company promptly of the Notes or
portions of Notes to be redeemed.

         1.6 Amendment of Section 3.03. Pursuant to Section 9.02 of the
Indenture, Section 3.03 of the Indenture is hereby amended and restated in its
entirety to read as follows:

SECTION 3.03 Notice of Redemption

         At least five days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by
first-class mail, postage prepaid, to each Holder of Notes to be redeemed at the
Holder's last address as it shall appear on the registry book. A copy of such
notice shall be mailed to the Trustee on the same day the notice is mailed to
Holders of Notes.

                                       5
<PAGE>
                  The notice shall identify the Notes to be redeemed and shall
state:

                  (1) the Redemption Date;

                  (2) the Redemption Price;

                  (3) the CUSIP number (subject to the provisions of Section
2.11 hereof);

                  (4) the name and address of the Paying Agent;

                  (5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;

                  (6) if fewer than all the outstanding Notes are to be
redeemed, the identification and principal amounts of the particular Notes to be
redeemed; and

                  (7) that, unless the Company defaults in making such
redemption payment, together with accrued and unpaid interest and Liquidated
Damages, if any, to the Redemption Date, interest will cease to accrue on Notes
called for redemption on and after the Redemption Date.

                  At the Company's written request, made at least seven days
prior to the Redemption Date in accordance with the provisions applicable to
notice of the redemption in Section 3.01, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that in all cases, the text of such notice of redemption shall be
prepared or approved by the Company and the Trustee shall have no responsibility
whatsoever with regard to such notice being accurate or correct.

         1.7 Amendment of Section 4.02. Pursuant to Section 9.02 of the
Indenture, Section 4.02 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.02. [INTENTIONALLY OMITTED]

         1.8 Amendment of Section 4.03. Pursuant to Section 9.02 of the
Indenture, Section 4.03 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.03. Compliance Certificates.

         (1) The Issuer shall deliver to the Trustee, within 90 days after the
close of each fiscal year commencing with the fiscal year ending December 31,
2003, an Officers' Certificate stating that a review of the activities of the
Issuer and its Subsidiaries has been made under the supervision of the signing
Officers with a view to determining whether the Issuer has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer's knowledge, the Issuer during such preceding fiscal year has kept,
observed, performed and fulfilled each and every such covenant and no Default
occurred during such year and at the date of such certificate there is no
Default that has occurred and is continuing or, if such signers do know of such
Default, the

                                       6
<PAGE>
certificate shall describe its status with particularity. The Officers'
Certificate shall also notify the Trustee should the Issuer elect to change the
manner in which it fixes its fiscal year end.

         (2) The Company shall deliver to the Trustee as soon as possible and in
any event within 15 days after the Company becomes aware of the occurrence of
each Default or Event of Default, which is continuing, an Officers' Certificate
setting forth the details of such Default or Event of Default, and the action
which the Company proposes to take with respect thereto.

         (3) Delivery of reports, and other documents and information to the
Trustee pursuant to this Indenture is for informational purposes only and the
Trustee's receipt of such documents and information shall not constitute
constructive notice of any information contained therein, including the
Company's compliance with any of its covenants under this Indenture (as to which
the Trustee is entitled to rely conclusively on Officers' Certificates delivered
to it).

         1.9 Amendment of Section 4.04. Pursuant to Section 9.02 of the
Indenture, Section 4.04 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.04. [INTENTIONALLY OMITTED]

         1.10 Amendment of Section 4.05. Pursuant to Section 9.02 of the
Indenture, Section 4.05 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.05. [INTENTIONALLY OMITTED]

         1.11 Amendment of Section 4.06. Pursuant to Section 9.02 of the
Indenture, Section 4.06 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.06. [INTENTIONALLY OMITTED].

         1.12 Amendment of Section 4.07. Pursuant to Section 9.02 of the
Indenture, Section 4.07 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.07. [INTENTIONALLY OMITTED]

         1.13 Amendment of Section 4.08. Pursuant to Section 9.02 of the
Indenture, Section 4.08 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.08.  [INTENTIONALLY OMITTED]

         1.14 Amendment of Section 4.09. Pursuant to Section 9.02 of the
Indenture, Section 4.09 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.09. [INTENTIONALLY OMITTED]

         1.15 Amendment of Section 4.10. Pursuant to Section 9.02 of the
Indenture, Section 4.10 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.10. [INTENTIONALLY OMITTED]

                                       7
<PAGE>
         1.16 Amendment of Section 4.11. Pursuant to Section 9.02 of the
Indenture, Section 4.11 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.11. [INTENTIONALLY OMITTED]

         1.17 Amendment of Section 4.14. Pursuant to Section 9.02 of the
Indenture, Section 4.14 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.14. [INTENTIONALLY OMITTED]

         1.18 Amendment of Section 4.16. Pursuant to Section 9.02 of the
Indenture, Section 4.16 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.16. [INTENTIONALLY OMITTED]

         1.19 Amendment of Section 4.17. Pursuant to Section 9.02 of the
Indenture, Section 4.17 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.17. [INTENTIONALLY OMITTED]

         1.20 Amendment of Section 4.18. Pursuant to Section 9.02 of the
Indenture, Section 4.18 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.18. [INTENTIONALLY OMITTED]

         1.21 Amendment of Section 4.20. Pursuant to Section 9.02 of the
Indenture, Section 4.20 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.20 [INTENTIONALLY OMITTED]

         1.22 Amendment of Section 4.21. Pursuant to Section 9.02 of the
Indenture, Section 4.21 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.21 [INTENTIONALLY OMITTED]

         1.23 Amendment of Section 4.22. Pursuant to Section 9.02 of the
Indenture, Section 4.22 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 4.22. [INTENTIONALLY OMITTED]

         1.24 Amendment of Section 5.01. Pursuant to Section 9.02 of the
Indenture, Section 5.01 of the Indenture is hereby amended and restated in its
entirety to read as follows:

Section 5.01.[INTENTIONALLY OMITTED]

         1.25 Amendment of Section 5.02. Pursuant to Section 9.02 of the
Indenture, Section 5.02 of the Indenture is hereby amended and restated in its
entirety to read as follows:

                                       8
<PAGE>
SECTION 5.02 Successor Corporation Substituted

         Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of Nortek and its Subsidiaries on a consolidated
basis, the successor Person formed by such consolidation or into which Nortek is
merged or the successor Person to which such transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, Nortek under
the Subordinated Note Indenture with the same effect as if such successor Person
had been named as the Issuer in the Subordinated Note Indenture, and when a
successor Person assumes all the obligations of its predecessor under the
Subordinated Note Indenture or the Subordinated Notes, the predecessor shall be
released from those obligations; provided, however, that in the case of a
transfer by lease, the predecessor shall not be released from the payment of
principal of, premium, if any, interest and Liquidated Damages, if any, on the
Subordinated Notes; provided, further, that the successor Person shall expressly
assume, by an indenture supplemental to this Indenture, executed and delivered
to the Trustee, all the obligations of the Issuer under the Notes and this
Indenture, and this Indenture remains in full force and effect.

         1.26 Amendment of Section 6.01. Pursuant to Section 9.02 of the
Indenture, Section 6.01 of the Indenture is hereby amended and restated in its
entirety to read as follows:

SECTION 6.01 Events of Default

                  An "Event of Default" occurs if one of the following shall
         have occurred and be continuing:

                                    (1) the Company defaults in the payment,
                           when due and payable, whether or not prohibited by
                           Article X hereof, of (i) interest on or Liquidated
                           Damages, if any, with respect to any Note and the
                           default continues for a period of 30 days, or (ii)
                           principal of or premium, if any, on any Notes when
                           the same becomes due and payable at maturity, by
                           acceleration, on the Redemption Date, on the Change
                           of Control Payment Date, on any payment date
                           respecting an Excess Proceeds Offer or otherwise.

                                    (2) [INTENTIONALLY OMITTED]

                                    (3) the Company fails to comply with any of
                           its covenants or agreements in the Notes or this
                           Indenture (other than those referred to in clause (1)
                           above) and such failure continues for the period and
                           after receipt by the Company of the notice specified
                           below;

                                    (4) [INTENTIONALLY OMITTED]

                                    (5) the Company or any of its Significant
                           Subsidiaries that is a Restricted Subsidiary (or any
                           group of Restricted Subsidiaries that, taken
                           together, would constitute a Significant Subsidiary)
                           pursuant to or within the meaning of any bankruptcy
                           law:

                                       9
<PAGE>
                                    (A) commences a voluntary case or
                           proceeding;

                                    (B) consents to the entry of an order for
                           relief against it in an involuntary case or
                           proceeding;

                                    (C) consents to the appointment of a
                           custodian of it or for all or substantially all of
                           its property;

                                    (D) makes a general assignment for the
                           benefit of its creditors; or

                                    (E) admits in writing its inability to pay
                           its debts generally as they become due.

                                    (6) a court of competent jurisdiction enters
                           an order or decree under any bankruptcy law that:

                                    (A) is for relief against the Company or any
                           of its Significant Subsidiaries that is a Restricted
                           Subsidiary (or any group of Restricted Subsidiaries
                           that, taken together, would constitute a Significant
                           Subsidiary) in an involuntary case or proceeding;

                                    (B) appoints a custodian of the Company or
                           any of its Significant Subsidiaries that is a
                           Restricted Subsidiary (or any group of Restricted
                           Subsidiaries that, taken together, would constitute a
                           Significant Subsidiary) for all or substantially all
                           of its properties; or

                                    (C) orders the liquidation of the Company or
                           any of its Significant Subsidiaries that is a
                           Restricted Subsidiary (or any group of Restricted
                           Subsidiaries that, taken together, would constitute a
                           Significant Subsidiary),

                  and such order or decree with respect to clause (A), (B), or
                  (C) remains unstayed and in effect for 60 days.

                                    (7) [INTENTIONALLY OMITTED]

                  A Default specified in Section 6.01(3) above is not an Event
         of Default until the Trustee notifies the Company, or the Holders of at
         least 25% in aggregate principal amount of the Notes at the time
         outstanding notify the Company and the Trustee, of the Default and the
         Company does not cure such Default within 30 days after receipt of such
         notice. Any such notice must specify the Default, demand that it be
         remedied and state that such notice is a "Notice of Default."

                  In the case of any Event of Default (other than as a result of
         the failure to comply with Section 4.12 hereof) occurring by reason of
         any willful action (or inaction) taken (or not taken) by or on behalf
         of the Company with the intention of avoiding payment of the

                                       10
<PAGE>
         premium which the Company would have to pay if the Company then had
         elected to redeem the Notes pursuant to paragraph 5 of the Notes, an
         equivalent premium shall also become and be immediately due and payable
         to the extent permitted by law, anything in this Indenture or in the
         Notes contained to the contrary notwithstanding.

                  In the case of an Event of Default as a result of a failure to
         comply with Section 4.12 hereof occurring by reason of any willful
         action (or inaction) taken (or not taken) by or on behalf of the
         Company with the intention of avoiding payment of the premium which the
         Company would have to pay pursuant to Section 4.12 hereof, such premium
         shall also become and be immediately due and payable at such time as
         the principal of and interest on the Notes become due and payable
         pursuant to Section 6.02 hereof to the extent permitted by law,
         anything in this Indenture or in the Notes contained to the contrary
         notwithstanding.

         1.27 Amendment of Section 8.05.Pursuant to Section 9.02 of the
Indenture, Section 8.05 of the Indenture is hereby amended and restated in its
entirety to read as follows:

SECTION 8.05 Conditions to Legal Defeasance or Covenant Defeasance

          The following shall be the conditions to the application of either
Section 8.03 or 8.04 hereof to the outstanding Notes:

                (1) The Company shall irrevocably have deposited or caused to be
      deposited with the Trustee (or another trustee satisfying the requirements
      of Section 7.10 hereof who shall agree to comply with the provisions of
      this Article VIII applicable to it) as trust funds in trust for the
      purpose of making the following payments, specifically pledged as security
      for, and dedicated solely to, the benefit of the Holders of such Notes,
      (i) cash in U.S. Dollars, (ii) U.S. Government Obligations, or (iii) a
      combination thereof, in such amounts, as will be sufficient in each case,
      in the opinion of a nationally recognized firm of independent public
      accountants expressed in a written certification thereof delivered to the
      Trustee, to pay and discharge and which shall be applied by the Trustee
      (or other qualifying trustee) to pay and discharge the principal of,
      premium, if any, interest on and Liquidated Damages, if any, with respect
      to the outstanding Notes on the stated maturity or on the applicable date
      fixed for redemption, as the case may be, of such principal or installment
      of principal of, premium, if any, interest on and Liquidated Damages, if
      any, with respect to such Notes, and the Company shall have specified
      whether the Notes are being defeased to maturity or to a particular date
      fixed for redemption;

                (2) [INTENTIONALLY OMITTED]

                (3) [INTENTIONALLY OMITTED]

                (4) [INTENTIONALLY OMITTED]

                (5) [INTENTIONALLY OMITTED]

                                       11
<PAGE>
                (6) [INTENTIONALLY OMITTED]

                (7) [INTENTIONALLY OMITTED]

                (8) The Company shall have delivered to the Trustee an Officers'
      Certificate and an Opinion of Counsel in the United States (on which the
      Trustee may conclusively rely), each stating that all conditions precedent
      to either the Legal Defeasance under Section 8.03 hereof or the Covenant
      Defeasance under Section 8.04 hereof (as the case may be) have been
      complied with as contemplated by this Section 8.05.

         1.28 Amendments to the Subordinated Notes.

         (a) Pursuant to Section 9.02 of the Indenture, Section 4 of the
Subordinated Notes is hereby amended and restated in its entirety to read as
follows:

          SECTION 4. Indenture. The Company issued the Notes under an Indenture,
dated as of June 12, 2001 (the "Indenture"), between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended and as in effect on the date of the Indenture (the "TIA") and as
provided in the Indenture. Capitalized terms used herein and not defined herein
have the meaning ascribed thereto in the Indenture. The Notes are subject to all
such terms, and Holders are referred to the Indenture and the TIA for a
statement of those terms.

          The Notes are senior subordinated, unsecured obligations of the
Company. This Note is one of the Series A Notes referred to in the Indenture
issued in an aggregate principal amount of $250,000,000. The Notes include the
Series A Notes issued on the date of the Indenture up to an aggregate principal
amount of $250,000,000, additional Series A Notes issued in accordance with the
Indenture, and any Series B Notes issued in exchange for the Series A Notes. The
Series A Notes, the additional Series A Notes and the Series B Notes are treated
as a single class of securities under the Indenture.

         (b) Pursuant to Section 9.02 of the Indenture, Section 6 of the
Subordinated Notes is hereby amended and restated in its entirety to read as
follows:

         SECTION 6. Notice of Redemption. Notice of redemption will be mailed at
least five days but not more than 60 days before the Redemption Date by
first-class mail, postage prepaid, to each Holder of Notes to be redeemed at the
Holder's registered address. Notes in denominations larger than $1,000 of
principal amount may be redeemed in part but only in integral multiples of
$1,000 of principal amount.

         (c) Pursuant to Section 9.02 of the Indenture, Section 12 of the
Subordinated Notes is hereby amended and restated in its entirety to read as
follows:

         SECTION 12. Defaults and Remedies. Under the Indenture, Events of
Default include a default in payment of the principal of, premium, if any,
interest on or Liquidated Damages, if any, with respect to the Notes when the
same becomes due and payable subject, in the case of interest and Liquidated
Damages, if any, to the grace period contained in the Indenture. If an

                                       12
<PAGE>
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of the Notes at the time outstanding,
may declare all the Notes to be due and payable immediately.

         Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes
unless it receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the Notes at
the time outstanding may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of any continuing Default
except a Default in payment of amounts specified in the immediately preceding
paragraph if it determines that withholding notice is in their interest.

                                    ARTICLE 2

                                   The Trustee

         2.1 Privileges and Immunities of Trustee. The Trustee accepts the
amendment of the Indenture and the Notes effected by this First Supplemental
Indenture but only upon the terms and conditions set forth in the Indenture,
including the terms and provisions defining and limiting the liabilities and
responsibilities of the Trustee, which terms and provisions shall in like manner
define and limit its liabilities and responsibilities in the performance of the
trust created by the Indenture as hereby amended. The Trustee shall not be
responsible for the adequacy or sufficiency of the First Supplemental Indenture,
for the due execution thereof by the Company or for the recitals contained
herein, which are the Company's responsibility.

                                    ARTICLE 3

                                  Miscellaneous

         3.1 Ratification. Except as expressly amended and supplemented by this
First Supplemental Indenture, the Indenture and each Note shall remain unchanged
and in full force and effect. Upon the Acceptance, this First Supplemental
Indenture shall be construed as supplemental to the Indenture and each Note and
shall form a part thereof.

         3.2 Governing Law. This First Supplemental Indenture shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed therein.

         3.3 Counterparts. This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.

         3.4 Operative Date. Notwithstanding the execution of this Supplemental
Indenture on the date hereof, the amendments set forth in this Supplemental
Indenture shall not become operative unless and until the Company accepts Notes
for purchase pursuant to the Offer (the

                                       13
<PAGE>
date and time of such acceptance being referred to herein as the "Operative
Date"), written notice of which acceptance shall be given to the Trustee by the
Company as soon as reasonably practicable after the Operative Date. At the
Operative Date, the amendments to the Indenture effected hereby shall be deemed
fully operative without any further notice or action on the part of the Company,
the Trustee, any Holder or any other Person.

                                       14
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first above written.

                         NORTEK, INC.,
                                  as the Issuer

                         By:     /s/ Kevin W. Donnelly
                                 ----------------------
                         Name:  Kevin W. Donnelly
                         Title:  VP, General Counsel & Secretary

                         U.S. BANK NATIONAL ASSOCIATION,
                         as Trustee

                         By:    /s/ Todd R. DiNezza
                                -------------------------
                         Name:  Todd R. DiNezza
                         Title:  Assistant Vice President

                                       15

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