-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WYz07NgX0u81hQsZXM6xc2b4wxiBAflHAawMPMl7H6mnfAvX2XzZuVv1L4FkoAAl ntHh5eO9STzXbuYGojcWnw== 0000898318-97-000041.txt : 19971218 0000898318-97-000041.hdr.sgml : 19971218 ACCESSION NUMBER: 0000898318-97-000041 CONFORMED SUBMISSION TYPE: 8-A12B/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19971217 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SERVICE INDUSTRIES INC CENTRAL INDEX KEY: 0000070538 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 580364900 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-A12B/A SEC ACT: SEC FILE NUMBER: 001-03208 FILM NUMBER: 97739981 BUSINESS ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 BUSINESS PHONE: 4048531000 MAIL ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 8-A12B/A 1 FORM 8-A/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-A/A ______________ AMENDING FORM 8-A DATED MAY 11, 1988 (AS AMENDED ON MAY 17, 1988) FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 NATIONAL SERVICE INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 58-0364900 (State of incorporation or (I.R.S. Employer organization) Identification No.) 1420 Peachtree Street, N.E. Atlanta, Georgia 30309 (Address of principal executive (Zip Code) offices) Securities to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange to be so registered on which each class is to be registered Preferred Stock Purchase Rights New York Stock Exchange Securities to be registered pursuant to Section 12(g) of the Act: None (Title of Class) AMENDMENT NO. 2 TO FORM 8-A FILED MAY 11, 1988 (as amended on May 17, 1988) The undersigned registrant hereby amends Item 1 of its Registration of Certain Classes of Securities Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934 on Form 8-A, filed May 11, 1988 (as amended on May 17, 1988) (the "Form 8-A"), as set forth below: Item 1 of the Form 8-A is amended by substituting the following: Item 1. Description of Securities to be Registered. On May 9, 1988, the Board of Directors of National Service Industries, Inc. (the "Company") declared a dividend distribution of one Right for each outstanding share of common stock, $1.00 par value (the "Common Stock"), of the Company to stockholders of record at the close of business on May 19, 1988 (the "Record Date"). On December 17, 1997, the Board of Directors of the Company adopted certain amendments to the terms of the Rights. Except as set forth below, each Right (as amended), when exercisable, entitles the registered holder to purchase from the Company one one-thousandth of a share of a series of convertible preferred stock, designated as Series A Participating Preferred Stock, $0.05 stated value (the "Preferred Stock"), at a price of $160 (the "Purchase Price"), subject to adjustment. The description and terms of the Rights, as amended, are set forth in an Amended and Restated Rights Agreement (the "Rights Agreement") between the Company and Wachovia Bank, N.A., 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. Until the earlier to occur of (i) the first date of public announcement that, without the prior consent of the Company, a Person (as defined in the Rights Agreement), alone or together with its Affiliates and Associates (as defined in the Rights Agreement), has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of Common Stock of the Company (the "Stock Acquisition Date"); (ii) the close of business on the tenth (10th) business day (unless such date is extended by the Board of Directors) following the commencement of (or a public announcement of an intention to make) a tender offer or exchange offer which would result in any Person or group of related Persons becoming an Acquiring Person, without the prior consent of the Company or (iii) twenty business days prior to the date on which a Transaction (as such term is hereinafter defined) is reasonably expected to become effective or be consummated (the earliest of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Stock certificates outstanding as of December 17, 1997, by such Common Stock certificates. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with Common Stock certificates. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates issued after December 17, 1997 (or as soon thereafter as practicable), upon transfer, replacement or new issuance of Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any Common Stock certificates outstanding as of December 17, 1997 even without such a notation, will also constitute the transfer of the Rights associated with the Common Stock represented by such certificates. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and the separate Rights Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date and will expire at the close of business on May 19, 2008, unless earlier redeemed by the Company as described below. The Purchase Price payable and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights, are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for Preferred Stock, certain convertible securities or securities having the same or more favorable rights, privileges and preferences as the Preferred Stock at less than the current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends out of earnings or retained earnings) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustments in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional Rights will be issued, and in lieu thereof, an adjustment in cash will be made based on the market price of the Rights on the last trading day prior to the date on which such fractional Rights would otherwise be issuable. In the event that any Person becomes an Acquiring Person (unless pursuant to a tender offer or exchange offer for all outstanding shares of Common Stock at a price and on terms determined, prior to the purchase of shares under such tender or exchange offer, by at least a majority of the members of the Disinterested Directors to be both adequate and otherwise in the best interests of the Company and its stockholders (a "Permitted Offer")), proper provision shall be made so that each holder of a Right will thereafter have the right for a 60-day period after the later of the date of such event, or the effectiveness of an appropriate registration statement, to receive upon exercise of the Right that number of units of one one-thousandths of a share of Preferred Stock (or, under certain circumstances, shares of Common Stock or other securities) having an average market value during a specified time period (immediately prior to the occurrence of a Person becoming an Acquiring Person) of two times the Purchase Price of the Right (such right being called the "Flip-In Right"). Disinterested Directors are directors of the Company who are not (i) officers or employees of the Company, (ii) Acquiring Persons or Affiliates or Associates thereof, or representatives of any of them, or (iii) any Person who was directly or indirectly proposed or nominated as a director of the Company by a Transaction Person. 2 In the event that, at any time on or following the Stock Acquisition Date, or, if a Transaction is proposed, the Distribution Date, the Company is, directly or indirectly, acquired in a merger or other business combination transaction or 50% or more of the Company's assets or earning power are sold (in one transaction or a series of transactions), proper provision shall be made so that each holder of a Right (except a Right voided as set forth herein) shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price of the Right, that number of shares of common stock of the acquiring company (or, in the event there is more than one acquiring company, the acquiring company receiving the greatest portion of the assets or earning power transferred) which, at the time of such transaction, would have a market value of two times the Purchase Price of the Right (such right being called the "Flip-Over Right"). The holder of a Right will continue to have the Flip-Over Right whether or not such holder exercises the Flip-In Right. Upon the occurrence of any of the events giving rise to the exercisability of the Flip-Over Right or the Flip-In Right, any Rights that are or were at any time owned by an Acquiring Person or a Transaction Person (as hereinafter defined) engaging in any of such transactions or receiving the benefits thereof on or after the time the Acquiring Person or Transaction Person becomes such shall become null and void insofar as they relate to the Flip-Over Right or the Flip-In Right. The number of outstanding Rights associated with each share of Common Stock and the voting and economic rights of each one one-thousandth of a share of Preferred Stock issuable upon exercise of each Right are also subject to adjustment in the event of a stock split of the Common Stock or a stock dividend on the Common Stock payable in Common Stock or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution Date. At any time prior to the earlier to occur of (i) the close of business on the Stock Acquisition Date or (ii) the expiration of the Rights, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"), which redemption shall be effective upon the action of the Board of Directors. Additionally, following the Stock Acquisition Date and the expiration of the period during which the Flip-In is exercisable, the Company may redeem the then outstanding Rights in whole, but not in part, at the Redemption Price, provided that such redemption is in connection with a merger or other business combination transaction or series of transactions involving the Company in which all holders of Common Stock are treated alike, but not involving an Acquiring Person or Transaction Person or any Affiliates or Associates thereof. Upon the effective date of the redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. In the event that a majority of the Board of Directors of the Company in office following a meeting of stockholders or stockholder action by written consent are not nominated by the Board of Directors serving immediately prior to such meeting or action, then for 365 days following such meeting or action the Rights may not be redeemed or amended if such 3 redemption or amendment is reasonably likely to facilitate a merger, combination or sale of assets or earning power of the Company (a "Transaction") with a Person who (A) either (i) is or will become an Acquiring Person or (ii) is a party involved in a merger or consolidation with, or a sale of assets by, the Company or affiliate or associate thereof if the Transaction were to be consummated and (B) who has directly or indirectly proposed or nominated a member of the Board who is in office at the time the Transaction is being considered (a "Transaction Person"). The Rights may not be redeemed thereafter if during such 365-day period the Company enters into any agreement reasonably likely to facilitate a Transaction with a Transaction Person and the redemption is reasonably likely to facilitate a Transaction with a Transaction Person. At any time after a Person becomes an Acquiring Person but before such Acquiring Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding, the Company may, at its option, exchange all or part of the then outstanding and exercisable Rights (other than those owned by the Acquiring Person, together with any Affiliates and Associates of such Acquiring Person, which have become null and void) at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction involving either the Common Stock or the Preferred Stock occurring after the date hereof (the "Exchange Ratio"). The Board of Directors may only exchange Rights if a majority of the Disinterested Directors authorize such exchange. Immediately upon the action of the Board of Directors ordering the exchange of any Rights 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 Preferred Stock purchasable upon exercise of the Rights will be nonredeemable and junior to any other series of preferred stock the Company may issue (unless otherwise provided in the terms of such stock). Each share of Preferred Stock will have a preferential quarterly dividend in an amount equal to 1,000 times the dividend declared on each share of Common Stock, but in no event less than $10.00. In the event of liquidation, the holders of Preferred Stock will receive a preferred liquidation payment per share equal to the greater of 1,000 times the Purchase Price per Right or 1,000 times the payment made per each share of Common Stock. Subject to certain adjustments to reflect an increase or decrease in the number of outstanding shares of Common Stock, each one one-thousandth of a share of Preferred Stock shall, for a period of 90 days after issuance, be convertible into one share of Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the shares of Common Stock on all matters submitted to a vote of the shareholders of the Company. With regard to any election for the Company's Board of Directors, however, the maximum number of votes for the election of directors exercised by shares of preferred stock (including the Preferred Stock) shall not exceed the number of votes for the election of directors represented by authorized and issued shares of Common Stock less one, and the number of votes for the election of directors exercised by shares of preferred stock (including the Preferred Stock) shall be reduced as necessary on a pro-rata basis to effectuate this result. If the Company fails to pay dividends on the Preferred Stock for a specified period (a "default period"), the holders of 4 Preferred Stock shall have the additional right to elect two (2) directors to the Board of Directors until such default period expires. In any default period, the total number of directors on the Board of Directors shall not be less than five (5) directors. In the event of any merger, consolidation or other transaction in which shares of Common Stock are exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount and type of consideration received per share of Common Stock. The rights of the Preferred Stock as to dividends, liquidation and voting, and in the event of mergers and consolidations, are protected by customary anti-dilution provisions. Fractional shares of Preferred Stock will be issuable; however, the Company may elect to distribute depositary receipts in lieu of such fractional shares. In lieu of fractional shares other than fractions that are multiples of one one-thousandths of a share, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the date of exercise. 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. Except as set forth above, the terms of the Rights may be amended by the Board of Directors of the Company and the Rights Agent, (i) prior to the Distribution Date in any manner, and (ii) on or after the Distribution Date to cure any ambiguity, to shorten or lengthen any time period under the Rights Agreement, to correct or supplement any provision of the Rights Agreement which may be defective or inconsistent with any other provisions, or in any manner not adversely affecting the interests of the holders of the Rights. Attached hereto as Exhibit 1 and incorporated herein by reference is a copy of the form of Amended and Restated Rights Agreement between the Company and Wachovia Bank, N.A. specifying the terms of the Rights and the exhibits thereto, as follows: Exhibit A - The Amended Certificate of Designation; Exhibit B - The Form of Rights Certificate; and Exhibit C - The Summary of Rights to Purchase Preferred Shares. The foregoing description of the Rights is qualified in its entirety by reference to the Amended and Restated Rights Agreement. 5 Item 2. Exhibits 1. Form of Amended and Restated Rights Agreement dated as of December 17, 1997 between the Company and Wachovia Bank, N.A. which includes, as Exhibit A thereto, the form of Amended Certificate of Designation specifying the terms of the Preferred Stock and, as Exhibit B thereto, the form of Rights Certificate, and as Exhibit C thereto, the Summary of Rights to Purchase Preferred Shares. 2. Press Release dated December 17, 1997 announcing the adoption of the Amended and Restated Rights Agreement. 6 SIGNATURE Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized. NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Kenyon W. Murphy Name: Kenyon W. Murphy Title: Vice President, Secretary, and Associate Counsel Dated: December 17, 1997 7 EXHIBIT INDEX Exhibit Description Page 4.1. Form of Amended and Restated 9 Rights Agreement dated as of December 17, 1997 between the Company and Wachovia Bank, N.A. which includes, as Exhibit A thereto, the form of Amended Certificate of Designation specifying the terms of the Preferred Stock and, as Exhibit B thereto, the form of Rights Certificate, and as Exhibit C thereto, the Summary of Rights to Purchase Preferred Shares. 99.1. Press release dated December 98 17, 1997 announcing adoption of the Amended and Restated Rights Agreement. 8 EX-4.1 2 AMENDED AND RESTATED RIGHTS AGREEMENT EXHIBIT 4.1 NATIONAL SERVICE INDUSTRIES, INC. and WACHOVIA BANK, N.A. Rights Agent AMENDED AND RESTATED RIGHTS AGREEMENT Dated as of December 17, 1997 TABLE OF CONTENTS Page Section 1. Certain Definitions 2 Section 2. Appointment of Rights Agent 7 Section 3. Issue of Rights Certificates 8 Section 4. Form of Rights Certificates 10 Section 5. Countersignature and Registration 11 Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates 12 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 13 Section 8. Cancellation and Destruction of Rights Certificates 17 Section 9. Reservation and Availability of Preferred Stock 17 Section 10. Preferred Stock Record Date 19 Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights 20 Section 12. Certificate of Adjusted Purchase Price or Number of Shares 32 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power 32 Section 14. Additional Covenants 36 Section 15. Fractional Rights and Fractional Shares 37 Section 16. Rights of Action 39 Section 17. Agreement of Rights Holders 40 Section 18. Rights Certificate Holder Not Deemed a Stockholder 41 Section 19. Concerning the Rights Agent 41 Section 20. Merger or Consolidation or Change of Name of Rights Agent 42 Section 21. Duties of Rights Agent 43 Section 22. Change of Rights Agent 46 Section 23. Issuance of New Rights Certificates 48 Section 24. Redemption and Termination 48 Section 25. Exchange 51 Section 26. Notice of Certain Events 53 Section 27. Notices 54 Section 28. Supplements and Amendments 55 Section 29. Determination and Actions by the Board of Directors, etc. 57 Section 30. Successors 58 Section 31. Benefits of this Agreement 58 Section 32. Severability 58 Section 33. Governing Law 58 i Section 34. Counterparts 58 Section 35. Descriptive Headings 58 Exhibit A - Form of Amended Certificate of Designation of Series A Participating Preferred Stock A-1 Exhibit B - Form of Rights Certificate B-1 Exhibit C - Form of Summary of Rights C-1 ii DEFINED TERM CROSS REFERENCE SHEET Acquiring Person Section 1(a) Act Section 1(b) Adjusted Number of Shares Section 11(a)(iii) Adjusted Purchase Price Section 11(a)(iii) Adjustment Shares Section 11(a)(ii) Affiliate Section 1(c) Appointment of Rights Agent Section 2 Associate Section 1(c) Beneficial Owner Section 1(d) Beneficially Own Section 1(d)(ii) Business Day Section 1(e) Capital Stock Equivalent Section 11(a)(iii) Close of Business Section 1(f) Common Stock Section 1(g) Company Preface Current Market Price Section 11(d)(i) Disinterested Director Section 1(h) Distribution Date Section 3(a) Equivalent Preferred Stock Section 11(b) Exchange Act Section 1(c) Exchange Ratio Section 25(a) Expiration Date Section 7(a) Final Expiration Date Section 7(a) Permitted Offer Section 1(k) Person Section 1(l) Pre-Amendment Right Preface Preferred Stock Section 1(m) Principal Party Section 13(b)(ii) Prior Rights Agreement Preface Proration Factor Section 11(a)(iii) Purchase Price Section 4(a) Record Date Preface iii Redemption Date Section 7(a) Redemption Price Section 24(a) Right Preface Rights Agent Preface Rights Agreement Section 3(c) Rights Certificate Section 3(a) Section 11(a)(ii) Event Section 1(p) Section 13 Event Section 1(q) Security Section 11(d)(i) Stock Acquisition Date Section 1(r) Subsidiary Section 1(s) Summary of Rights Section 3(b) Then Outstanding Section 1(d)(iii) Trading Day Section 11(d)(i) Transaction Section 1(t) Transaction Person Section 1(u) Triggering Event Section 1(v) Voting Power Section 1(w) iv AMENDED AND RESTATED RIGHTS AGREEMENT This Amended and Restated Rights Agreement, dated as of December 17, 1997, between National Service Industries, Inc., a Delaware corporation (the "Company"), and Wachovia Bank, N.A. (the "Rights Agent"). W I T N E S S E T H WHEREAS, on May 9, 1988, the Board of Directors of the Company authorized and declared a dividend distribution of one right (a "Pre-Amendment Right") for each share of Common Stock, $1.00 par value per share, of the Company (the "Common Stock") outstanding on May 19, 1988 (the "Record Date"), and contemplated the issuance of one right for each share of Common Stock of the Company issued between the Record Date and the earliest of the Distribution Date and, the Expiration Date (as such terms are hereinafter defined), each Pre-Amendment Right representing the right to purchase one one-hundredth of a share of Series A Participating Preferred Stock of the Company having the rights, powers and preferences set forth in the form of Certificate of Designation attached as Exhibit A to the Rights Agreement dated May 9, 1988 between the Company and the Rights Agent (the "Prior Rights Agreement"), upon the terms and subject to the conditions set forth therein; WHEREAS, on December 17, 1997, the Board of Directors of the Company determined that it is advisable and in the best interests of the Company and its stockholders to amend and restate in its entirety the Prior Rights Agreement as set forth herein and the Pre-Amendment Rights shall henceforth be governed by the terms and subject to the conditions set forth herein and that each Pre- Amendment Right shall hereafter be referred to as one Right (a "Right") and each Right shall represent the right to purchase one one-thousandth of a share of Series A Participating Preferred Stock of the Company having the rights, powers and preferences set forth in the form of Amended Certificate of Designation attached hereto as Exhibit A, upon the terms and subject to the conditions set forth herein; and NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates (as such term is hereinafter defined) and Associates (as such term is hereinafter defined) of such Person without the prior approval of at least a majority of the Disinterested Directors shall be the Beneficial Owner (as such term is hereinafter defined) of securities representing 15% or more of the shares of Common Stock then outstanding (other than as a result of a Permitted Offer (as hereinafter defined)) or who was such a Beneficial Owner at any time after the date hereof, whether or not such Person continues to be the Beneficial Owner of securities representing 15% or more of the outstanding shares of Common Stock. Notwithstanding the foregoing, (A) the term Acquiring Person shall not include (i) the Company, (ii) any Subsidiary (as such term is hereinafter defined) of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company or (iv) any Person or entity organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan and (B) no Person shall become an "Acquiring Person" (i) as a result of the acquisition of shares of Common Stock by the Company which, by reducing the number of shares of Common Stock outstanding, increases the proportional number of shares beneficially owned by such Person together with all Affiliates and Associates of such Person, provided, that if (1) a Person would become an Acquiring Person (but for the operation of this subclause (i)) as a result of the acquisition of shares of Common Stock by the Company, and 2 (2) after such share acquisition by the Company, such Person, or an Affiliate or Associate of such Person, becomes the Beneficial Owner of any additional shares of Common Stock (except as the result of a stock split, stock dividend, recapitalization or similar transaction), then such Person shall be deemed an Acquiring Person or; (ii) if (1) within five Business Days after such Person would otherwise have become an Acquiring Person (but for the operation of this subclause (ii)), such Person notifies the Board of Directors that such Person did so inadvertently, and (2) within two Business Days after such notification (or such greater period of time as may be determined by action of the Board of Directors, but in no event greater than five Business Days), such Person divests itself of a sufficient number of shares of Common Stock so that such Person is the Beneficial Owner of less than 15% of the outstanding shares of Common Stock. (b) "Act" shall mean the Securities Act of 1933, as amended and as in effect on the date of this Agreement. (c) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"). (d) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own," any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right or obligation to acquire (whether such right or obligation is exercisable or effective 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, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial 3 Owner" of, or to "beneficially own," securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote 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 if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable 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), or with which such Person or any of such Person's Affiliates have otherwise formed a group, related to the acquisition, holding, voting (except pursuant to a revocable proxy or consent as described in clause (B) of subparagraph (ii) of this paragraph (d)) or disposing of any securities of the Company (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities). Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. 4 (e) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Georgia or North Carolina are authorized or obligated by law or executive order to close. (f) "Close of business" on any given date shall mean 5:00 P.M., Eastern Standard Time ("E.S.T."), on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., E.S.T., on the next succeeding Business Day. (g) "Common Stock" when used with reference to the Company shall mean the Common Stock, $1.00 par value, of the Company, or, in the event of a subdivision, combination or consolidation with respect to such shares of Common Stock, the shares of Common Stock resulting from such subdivision, combination or consolidation. "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person or, if such Person is a subsidiary of another Person, of the Person or Persons which ultimately control such first-mentioned Person. (h) "Disinterested Director" means any director of the Board of Directors of the Company who is not (a) an officer or employee of the Company, (b) an Acquiring Person, an Affiliate or Associate of an Acquiring Person, or a Person acting directly or indirectly on behalf of, or as a representative of, or in concert with, an Acquiring Person, or an Affiliate or Associate of an Acquiring Person or (c) any Person who was directly or indirectly proposed or nominated as a director of the Company by a Transaction Person. (i) "Distribution Date" shall have the meaning set forth in Section 3 hereof. (j) "Final Expiration Date" shall have the meaning set forth in Section 7 hereof. 5 (k) "Permitted Offer" shall mean a tender or exchange offer for all outstanding shares of Common Stock at a price and on terms determined, prior to the purchase of shares under such tender or exchange offer, by at least a majority of the Disinterested Directors to be adequate and otherwise in the best interests of the Company and its shareholders (other than the Person or any Affiliate or Associate thereof on whose behalf the offer is being made) taking into account all factors that such directors may deem relevant. (l) "Person" shall mean any individual, firm, corporation, partnership, joint venture, association, trust, limited liability company or other entity, and shall include any successor (by merger or otherwise) of such entity. (m) "Preferred Stock" shall mean the Series A Participating Preferred Stock, $0.05 stated value, of the Company. (n) "Purchase Price" shall have the meaning set forth in Section 4 hereof. As set forth in Section 7(b) hereof, the Purchase Price shall initially be $160, subject to adjustment as provided herein. (o) "Record Date" shall mean May 19, 1988. (p) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) hereof. (q) "Section 13 Event" shall mean any event described in clause (x), (y) or (z) of Section 13(a) hereof. (r) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such; provided, that if such Person is determined not to have become an Acquiring Person pursuant to Section 1(a) hereof, then no Stock Acquisition Date shall be deemed to have occurred. 6 (s) "Subsidiary" of any Person shall mean any corporation or other Person of which a majority of the voting power of the voting equity securities or equity interests is owned, directly or indirectly, by such Person, or which is otherwise controlled by such Person. (t) "Transaction" shall mean any merger, consolidation or sale of assets described in Section 13(a) hereof or any acquisition of Common Stock of the Company which would result in a Person becoming a Transaction Person. (u) "Transaction Person" with respect to a Transaction shall mean (i) any Person who (A) is or will become an Acquiring Person or a Principal Party (as such term is defined in Section 13(b) hereof) if the Transaction were to be consummated and (B) directly or indirectly proposed or nominated a director of the Company which director is in office at the time of consideration of the Transaction (a Person shall be deemed to have indirectly nominated a director if it has proposed becoming or indicated an intention to become an Acquiring Person or a Principal Party and a third party proposes, nominates or appoints a director for the purpose of facilitating a Transaction with such Person), or (ii) an Affiliate or Associate of such a Person. (v) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. (w) "Voting Power" shall mean the voting power of all securities of the Company then outstanding and generally entitled to vote for the election of directors of the Company. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Stock) 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. In the event the Company 7 appoints one or more Co-Rights Agents, the respective duties of the Rights Agents and any Co-Rights Agents shall be as the Company shall determine. Section 3. Issue of Rights Certificates. (a) Until the earlier of (i) the Stock Acquisition Date, (ii) the close of business on the tenth Business Day after the date of the commencement of, or first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, or 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 or of any Subsidiary of the Company for or pursuant to the terms of any such plan) to commence (which intention to commence remains in effect for five Business Days after such announcement), a tender or exchange offer the consummation of which would result in any Person becoming an Acquiring Person, unless such date is extended by the Board of Directors of the Company which date shall not be later than the earlier of the dates specified in (i) and (iii) or (iii) twenty business days prior to the date on which a Transaction is reasonably expected to become effective or be consummated (the earliest of such dates being herein referred to as the "Distribution Date"), (x) the Rights shall be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights (and the right to receive certificates therefor) shall be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company); provided, however, that if a tender offer is terminated prior to the occurrence of a Distribution Date, then no Distribution Date shall occur as a result of such tender offer. As soon as practicable after the Distribution Date, the Rights Agent shall 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, a 8 certificate for Rights, in substantially the form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each share of Common Stock so held. As of and after the Distribution Date, the Rights shall be evidenced solely by such Rights Certificates. (b) With respect to certificates for the Common Stock outstanding as of the date of this Agreement, until the Distribution Date (or earlier redemption, expiration or termination of the Rights), the Rights shall 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 Distribution Date (or earlier redemption, expiration or termination of the Rights), the surrender for transfer of any of the certificates for the Common Stock outstanding on or after the Record Date shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. Upon the request of the holder of any shares of Common Stock or, after the Distribution Date, the holder of any Rights, the Company shall, at its expense, provide a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the "Summary of Rights"). (c) Certificates issued for shares of Common Stock (including, without limitation, certificates issued upon transfer or exchange of Common Stock or reacquired shares of Common Stock referred to in the last sentence of this paragraph (c) or shares which become outstanding) after the date of this Agreement, but prior to the earlier of the Distribution Date or the Expiration Date (as such term is hereinafter defined), shall be deemed also to be certificates for Rights, and shall have impressed, printed, stamped, written or otherwise affixed onto them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Amended and Restated Rights Agreement between National Service Industries, Inc. and Wachovia Bank, N.A. and any amendment or restatement thereof (the "Rights Agent") dated as of 9 December 17, 1997 (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 National Service Industries, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may expire, or may be evidenced by separate certificates and will no longer be evidenced by this certificate. National Service Industries, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to or held by any Person who is, was or becomes an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and certain related persons whether currently held by or on behalf of such Person or by any subsequent holder of such Rights may become null and void. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. In the event that the Company purchases or acquires any shares of Common Stock prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on 10 which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 23 hereof, the Rights Certificates, whenever distributed, on their face shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the price per one one-thousandth of a share of Preferred Stock set forth therein (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) or Section 23 hereof that represents Rights which are null and void pursuant to Section 7(e) of this Agreement and any Rights Certificates 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, a Transaction Person or an Affiliate or an Associate of an Acquiring Person or a Transaction Person (as such terms are defined in the Rights Agreement) or certain related Persons. Accordingly, this Rights Certificate and the Rights represented hereby are null and void. The provisions of Section 7(e) of this Rights Agreement shall be operative whether or not the foregoing legend is contained on any such Rights Certificate. Section 5. Countersignature and Registration. The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, any Vice Chairman of the Board, its President, its Chief Executive Officer or any Vice President, or its Treasurer, 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 and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have 11 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. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at the offices designated by the Rights Agent, 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 certificate number 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. Subject to the provisions of Section 4(b), Section 7(e) and Section 15 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Rights Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or, following a Triggering Event, other securities, as the case may be) as the Rights Certificate or Rights Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Rights Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights 12 Certificate or Rights Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate 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) and Section 15 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. 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 shall execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder 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, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the appropriate form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office of the 13 Rights Agent, together with payment of the Purchase Price for the total number of one one-thousandths of a share of Preferred Stock (or other securities, as the case may be) as to which such surrendered Rights are exercised, at or prior to the earliest of (i) the close of business on May 19, 2008 (the "Final Expiration Date"), or (ii) the time at which the Rights are redeemed as provided in Section 24 hereof (the "Redemption Date"), or (iii) the time at which the Rights are exchanged as provided in Section 25 hereof, or (iv) the consummation of a transaction contemplated by Section 13(d) hereof (such earliest time being herein referred to as the "Expiration Date"). Notwithstanding any other provision of this Agreement, any Person who prior to the Distribution Date becomes a record holder of shares of Common Stock may exercise all of the rights of a registered holder of a Rights Certificate with respect to the Rights associated with such shares of Common Stock in accordance with and subject to the provisions of this Agreement, including the provisions of Section 7(e) hereof, as of the date such Person becomes a record holder of shares of Common Stock. (b) The Purchase Price for each one one-thousandth share of Preferred Stock pursuant to the exercise of a Right shall initially be $160, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the appropriate form of election to purchase and the certificate duly executed, accompanied by payment of the Purchase Price for the shares (or other securities, as the case may be) to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 6 hereof by certified check or cashier's check or money order payable to the order of the Company, the Rights Agent shall, subject to Section 21(k), thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights 14 Agent is the transfer agent) certificates for the number of shares 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, in its sole discretion, shall have elected to deposit the shares of Preferred Stock issuable upon exercise of the Rights hereunder into a depositary, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company shall direct the depositary agent to comply with such requests, (ii) when appropriate, requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 15, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt promptly deliver such cash to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue other securities (including shares of Common Stock) of the Company pursuant to Section 11(a), the Company shall make all arrangements necessary so that such other securities are available for distribution by the Rights Agent, if and when appropriate. In addition, in the case of an exercise of the Rights by a holder pursuant to Section 11(a)(ii), the Rights Agent shall return such Rights Certificate to the registered holder thereof after imprinting, stamping or otherwise indicating thereon that the rights represented by such Rights Certificate no longer include the rights provided by Section 11(a)(ii) of the Rights Agreement and if less than all the Rights represented by such Rights Certificate were so exercised, the Rights Agent shall indicate on the Rights Certificate the number of Rights represented thereby which continue to include the rights provided by Section 11(a)(ii). 15 (d) In case the registered holder of any Rights Certificate shall exercise (except pursuant to Section 11(a)(ii)) less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 15 hereof, or the Rights Agent shall place an appropriate notation on the Rights Certificate with respect to those Rights exercised. (e) Notwithstanding anything in this Agreement to the contrary, from and after the time an Acquiring Person or a Transaction Person first becomes such, any Rights beneficially owned by (i) an Acquiring Person, a Transaction Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person or a Transaction Person (or of any Affiliate or Associate thereof) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person or a Transaction Person (or of any Affiliate or Associate thereof) who becomes a transferee prior to or concurrently with the Acquiring Person or a Transaction Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person or a Transaction Person to holders of equity interests in such Acquiring Person or a Transaction Person or to any Person with whom the Acquiring Person or a Transaction Person has a continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company 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 16 no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person, a Transaction Person or 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 the certificate contained in the appropriate form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise shall have been properly completed and duly executed by the registered holder thereof and the Company shall have been provided with 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 (other than a partial 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 Rights 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 Preferred Stock. (a) The Company covenants and agrees that at all times prior to the occurrence of a Section 11(a)(ii) Event it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock, or any authorized and issued 17 shares of Preferred Stock held in its treasury, the number of shares of Preferred Stock that will be sufficient to permit the exercise in full of all outstanding Rights and, after the occurrence of a Section 11(a)(ii) Event, shall, to the extent reasonably practicable, so reserve and keep available a sufficient number of shares of Common Stock (and/or other securities) which may be required to permit the exercise in full of the Rights pursuant to this Agreement. (b) So long as the shares of Preferred Stock (and, after the occurrence of a Section 11(a)(ii) Event, shares of Common Stock or other securities) issuable 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 (or other securities) reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company covenants and agrees that it shall take all such action as may be necessary to ensure that all shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares or other securities (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares or securities. (d) The Company further covenants and agrees that it shall 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 or of any certificates for shares 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 Rights Certificates to a person other than, or in respect of the issuance or delivery of certificates or depositary receipts for the shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of, the registered 18 holder of the Rights Certificates evidencing Rights surrendered for exercise, or to issue or deliver any certificates or depositary receipts for shares of Preferred Stock, (or Common Stock and/or other securities, as the case may be) upon the exercise of any Rights, until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. (e) The Company shall use its best efforts to (i) file, as soon as practicable following the Stock Acquisition Date (or, if required by law, at such earlier time following the Distribution Date as so required), a registration statement under the Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act and the rules and regulations thereunder) until the date of the expiration of the rights provided by Section 11(a)(ii). The Company will also take such action as may be appropriate under the blue sky laws of the various states. Section 10. Preferred Stock Record Date. Each person in whose name any certificate for shares 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 the 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 any 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 on, and such certificate shall be dated, the next 19 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, as such, shall not be entitled to any rights of a shareholder 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 in Section 7(e), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock 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, 20 combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon the exercise of one Right. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii). (ii) In the event that any Person, alone or together with its Affiliates and Associates, shall become an Acquiring Person, then proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof), shall, for a period of 60 days after the later of the occurrence of any such event or the effective date of an appropriate registration statement under the Act pursuant to Section 9 hereof, have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price, in accordance with the terms of this Agreement, such number of shares of Common Stock of the Company (or in the discretion of the Board of Directors, one one-thousandth of a share of Preferred Stock) as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths of a share of Preferred Stock for which a Right is then exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product by 50% of the then current market price per one share of Common Stock (determined pursuant to Section 11(d) hereof) on the date of such first occurrence (such number of shares being referred to as the "Adjustment Shares"); provided, however, that if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of Section 13 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii). (iii) In the event that there shall not be sufficient treasury shares or authorized but unissued (and unreserved) shares of Common Stock to permit the exercise 21 in full of the Rights in accordance with the foregoing subparagraph (ii) and the Rights become so exercisable (and the Board has determined to make all or some of the Rights exercisable into fractions of a share of Preferred Stock), notwithstanding any other provision of this Agreement, to the extent necessary and permitted by applicable law, each Right shall thereafter represent the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, (x) a number of (or fractions of) shares of Common Stock (up to the maximum number of shares of Common Stock which may permissibly be issued) and (y) a number of one one-thousandths of a share of Preferred Stock or a number of (or fractions of) other equity securities of the Company (or, in the discretion of the Board of Directors, debt) which the Board of Directors of the Company has determined to have the same aggregate current market value (determined pursuant to Sections 11(d)(i) and (ii) hereof, to the extent applicable) as one share of Common Stock (such number of, or fractions of, shares of Preferred Stock or other equity securities or debt of the Company) being referred to as a "capital stock equivalent", equal in the aggregate to the number of Adjustment Shares; provided, however, if there are unavailable sufficient shares (or fractions of shares) of Common Stock and/or capital stock equivalents, then the Company shall, to the extent permitted by applicable law, take all such action as may be necessary to authorize additional shares of Common Stock or capital stock equivalents for issuance upon exercise of the Rights, including the calling of a meeting of shareholders; and provided, further, that the Company shall issue no capital stock equivalent upon exercise of the Rights until the Company has first issued all authorized and unreserved shares of Common Stock; and provided, further, that if the Company is unable to cause sufficient shares of Common Stock and/or capital stock equivalents to be available for issuance upon exercise in full of the Rights, then each Right shall thereafter represent the right to receive the Adjusted Number of Shares upon exercise at the Adjusted Purchase Price (as such terms are hereinafter defined). As used herein, the term "Adjusted Number of 22 Shares" shall be equal to that number of shares (or fractions of shares) of Common Stock (and/or capital stock equivalents) equal to the product of (x) the number of Adjustment Shares and (y) a fraction, the numerator of which is the number of shares of Common Stock (and/or capital stock equivalents) available for issuance upon exercise of the Rights and the denominator of which is the aggregate number of Adjustment Shares otherwise issuable upon exercise in full of all Rights (assuming there were sufficient shares of Common Stock available) (such fraction being referred to as the "Proration Factor"). The "Adjusted Purchase Price" shall mean the product of the Purchase Price and the Proration Factor. The Board of Directors may, but shall not be required to, establish procedures to allocate the right to receive Common Stock and capital stock equivalents upon exercise of the Rights among holders of Rights. (b) If the Company shall fix a record date for the issuance of rights (other than the Rights), options or warrants to all holders of Preferred Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Stock (or shares having the same or more favorable rights, privileges and preferences as the Preferred Stock ("equivalent preferred stock")) or securities convertible into Preferred Stock or equivalent preferred stock at a price per share of Preferred Stock or 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 then current market price (as determined in Section 11(d)) 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 23 such current market price per share of Preferred Stock 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); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon the exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) If the Company shall fix a record date for the making of a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, 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 subscription rights or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as 24 determined in Section 11(d)) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on 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 distributable in respect of one share of Preferred Stock and the denominator of which shall be such current market price per share of the Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, the "current market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares or (B) any subdivision, combination or reclassification of such Security, and prior to the expiration of 30 Trading Days after the ex- dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the 25 average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other exchange or market system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Security, the fair value of the Security on such date as determined in good faith by the Board of Directors of the Company shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day. Subject to Section 11(d)(ii) hereof, if any Security is not publicly held or so listed or traded, the "current market price" of such Security shall mean the fair market value per share determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent. (ii) For the purpose of any computation hereunder, the "current market price" per share (or one one-thousandth of a share) of Preferred Stock shall be determined in the same manner as set forth above in clause (i) of this Section 11(d). If 26 the current market price per share (or one one-thousandth of a 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 one-thousand (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations or similar transactions with respect to the Common Stock occurring after the date of this Agreement) multiplied by the current market price per share of Common Stock as determined pursuant to Section 11(d)(i) and the current market price per one one-thousandth of a share of Preferred Stock shall be equal to the current market price per share of the Common Stock (as appropriately adjusted). If neither the Common Stock nor the Preferred Stock is publicly held or 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 of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-thousandth of a share of Preferred Stock, or one ten-thousandth of a share of Common Stock or other share Security, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment or (ii) the Final Expiration Date. 27 (f) If as a result of any provision of 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 of the Company other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10, 13 and 15 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest one ten-thousandth) obtained by (i) multiplying (x) the number of one one-thousandths of a share of Preferred Stock covered by a Right immediately prior to this adjustment of the Purchase Price by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one- thousandths of a share of Preferred Stock purchasable upon the 28 exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest 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 10 days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 15 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 shares of Preferred Stock issuable upon the exercise of the Rights, the Rights 29 Certificates theretofore and thereafter issued may continue to express the Purchase Price per share and the number of shares 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 or par value, if any, of the number of one one-thousandths of a share of Preferred Stock, Common Stock or other securities 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 such number of fully paid and nonassessable one one-thousandths of a share of Preferred Stock, Common Stock or other securities at such adjusted Purchase Price. If upon any exercise of the Rights, a holder is to receive a combination of Common Stock and capital stock equivalents, a portion of the consideration paid upon such exercise, equal to at least the then par value of a share of Common Stock of the Company, shall be allocated as the payment for each share of Common Stock of the Company so received. (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-thousandths of a share of Preferred Stock, Common Stock or other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a share of Preferred Stock, Common Stock or other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. 30 (m) Anything to the contrary in this Section 11 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 it in its sole discretion shall determine to be advisable in order that (i) any 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 hereinabove in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such shareholders. (n) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the date of this Agreement and prior to the Distribution Date (i) declare or pay a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine or consolidate the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of the outstanding Common Stock, then in any such case, 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 of 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. The adjustments provided for in this Section 11(n) shall be made successively 31 whenever such a dividend is declared or paid or such a subdivision, combination, consolidation or reclassification is effected. (o) The exercise of Rights under Section 11(a)(ii) shall only result in the loss of rights under Section 11(a)(ii) to the extent so exercised and shall not otherwise affect the rights represented by the Rights under this Rights Agreement, including the rights represented by Section 13. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 and 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) mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 26 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 or Earning Power. (a) In the event that, on or following the Stock Acquisition Date, or, if a Transaction is proposed, the Distribution Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person, (y) any Person shall consolidate with the Company or merge with and into the Company and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such merger, all or part of the 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 all holders of shares of Common Stock are not treated alike or following the merger or consolidation the holders of Common Stock immediately prior to the transaction do not hold in the same proportion all of the Voting Power of the corporation surviving the transaction or (z) the Company shall sell, mortgage or otherwise transfer (or 32 one or more of its Subsidiaries shall sell, mortgage or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person then, and in each such case, proper provision shall be made so that (i) following the Distribution Date, 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 a price equal to the then current Purchase Price, in accordance with the terms of this Agreement such number of shares of freely tradeable Common Stock of the Principal Party (as hereinafter defined), free and clear of liens, rights of call or first refusal, encumbrances or other adverse claims, as shall be equal to the result obtained by (x) multiplying the then current Purchase Price by the number of one one-thousandths of a share of Preferred Stock for which a Right is then exercisable and dividing that product by (y) 50% of the then current market price per share of the Common Stock of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of consummation of such Section 13 Event, (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply to such Principal Party; and (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 accordance with Section 9 hereof) 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. (b) "Principal Party" shall mean 33 (i) in the case of any transaction described in clause (x) or (y) of the first sentence of this 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 (including, if applicable, the Company, if it is the surviving corporation); 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 or earning power transferred pursuant to such transaction or transactions; provided, however, that in any of the foregoing cases, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary or Affiliate of another Person, "Principal Party" shall refer to such other Person; (2) in case such Person is a Subsidiary, directly or indirectly, or Affiliate of more than one Person, the shares of 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; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a "Subsidiary" of both or all of such joint venturers and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests. (c) The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and each Principal Party and each other Person who may become a Principal Party as a result of a Section 13 Event shall have a 34 sufficient number of its authorized shares of its Common Stock that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any Section 13 Event, the Principal Party at its own expense shall: (i) prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; (ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate; and (iii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all material 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. The rights under this Section 13 shall be in addition to the rights to exercise Rights and adjustments under Section 11(a)(ii) and shall survive any exercise thereunder. (d) The Company shall not consummate any Section 13 Event which shall be a Transaction unless prior thereto certificates evidencing the Rights have been distributed in accordance with Section 3(a) to holders of shares of Common Stock twenty 35 Business Days prior to the date on which the Transaction becomes effective or is consummated. (e) Notwithstanding anything in this Agreement to the contrary, the provisions of this Section 13 shall not be applicable to a transaction described in clauses (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 Permitted Offer (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 Common Share paid to all holders of Common Stock whose shares were purchased pursuant to such Permitted Offer; and (iii) the form of consideration offered in such transaction is the same as the form of consideration paid pursuant to such Permitted Offer. Upon consummation of any such transaction contemplated by this subsection (d), all Rights hereunder shall expire. Section 14. Additional Covenants. (a) After the Distribution Date, the Company covenants and agrees that it shall not (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which does not violate Section 14(b) hereof); (ii) merge with or into any other Person (other, than a Subsidiary of the Company in a transaction which does not violate Section 14(b) hereof); or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than 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 does not violate Section 14(b) hereof), if (x) at the time of or immediately after such consolidation, merger, sale or transfer there are any charter or by-law provisions or any rights, warrants or other instruments outstanding or agreements in effect or other actions taken, which would diminish or otherwise eliminate the benefits intended to be afforded by the Rights 36 or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the shareholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13 hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this subsection. (b) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 24 or Section 28 hereof, take (or permit any Subsidiary to take) any action the purpose of which is to, or if at the time such action is taken it is reasonably foreseeable that the effect of such action is to materially diminish or otherwise eliminate the benefits intended to be afforded by the Rights. Section 15. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights, or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid 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 the purposes of this Section 15(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 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 37 national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used and shall be binding on the Rights Agent. (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are one one-thousandths or integral multiples of one one- thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are one one- thousandths or integral multiples of one one-thousandth of a share of Preferred Stock). Fractions of shares of Preferred Stock in integral multiples of one one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the shares of Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not one one-thousandths or integral multiples of one one- thousandth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one- thousandth of a share of Preferred Stock. For purposes of this Section 15(b), the current market value of one one-thousandth of a 38 share of Preferred Stock shall be the closing price of one-one- thousandth 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 one of the transactions or events specified in Section 11 giving rise to the right to receive shares of Common Stock, capital stock equivalents (other than Preferred Stock) or other securities upon the exercise of a Right, the Company shall not be required to issue fractions of shares or units of such shares of Common Stock, capital stock equivalents or other securities upon exercise of the Rights or to distribute certificates which evidence fractions of such shares of Common Stock, capital stock equivalents or other securities. In lieu of fractional shares or units of such shares of Common Stock, capital stock equivalents or other securities, 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 a share or unit of such shares of Common Stock, capital stock equivalents or other securities. For purposes of this Section 15(c), the current market value shall be determined in the manner set forth in Section 11(d) hereof for the Trading Day immediately prior to the date of such exercise and, if such capital stock equivalent is not traded, each such capital stock equivalent shall have the value of one one-thousandth of a share of Preferred Stock. (d) Except as otherwise expressly provided herein, the holder of a Right by the acceptance of the Right expressly waives the right to receive any fractional Right or any fractional share upon exercise of a Right. Section 16. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 19 hereof, 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 39 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 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. Holders of Rights shall be entitled to recover the reasonable costs and expenses, including attorneys' fees, incurred by them in any bona fide action to enforce the provisions of this Agreement provided such Holders prevail in such action either by judicial determination or settlement. Section 17. 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 of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate form fully executed; (c) subject to Section 6 and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name the 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 40 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 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 a beneficial interest in 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. Section 18. 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 shares of Preferred Stock, Common 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 shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25 hereof), or to receive dividends or other distributions or to exercise any preemptive 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 19. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder as agreed, 41 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 arising therefrom, directly or indirectly. 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 set forth in Section 21. Section 20. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or all or substantially all of the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 22 hereof. In case at the time such successor Rights Agent shall 42 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 the 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. 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, 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 21. 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 selected by it (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 an Acquiring Person) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless 43 other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, any Vice Chairman of the Board, its President, the Chief Executive Officer, 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 (except as to the fact that it has countersigned the Rights Certificates) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any 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 change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e) hereof or any adjustment required under the provisions of Section 11 or 13 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 be responsible for any determination by the Board of Directors of the Company of the current market value of the Rights or Preferred Stock or Common Stock pursuant to 44 the provisions of Section 15 hereof; 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 Preferred Stock, shares of Common Stock or other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Preferred Stock, shares of Common Stock or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder and certificates delivered pursuant to any provision hereof from any one of the Chairman of the Board, any Vice Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and is authorized 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 shareholder, 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. 45 (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, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or to the holders of the Rights resulting from any such act, omission, default, neglect or misconduct, provided 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 hereunder 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 of transfer without first consulting with the Company. Section 22. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock and Preferred Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall 46 otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the 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 corporation organized and doing business under the laws of the United States or of any state of the United States, so long as such corporation complies with the applicable rules and requirements of the New York Stock Exchange, as such rules and requirements may be amended or modified from time to time, is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 (or such lower number as approved by the Board) or (b) an affiliate of a corporation 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 Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 22, however, or any defect therein, shall not affect the legality or validity of the 47 resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 23. 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 its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the 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 Expiration Date, 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, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Company shall not be obligated to issue any such Right Certificates 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 Right Certificate would be issued, and (ii) no Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 24. Redemption and Termination. (a) (i) Subject to Section 24(a)(iii) the Board of Directors of the Company may, at its option, at any time prior to the earlier of (x) the Stock Acquisition Date or (y) 5:00 P.M., E.S.T., on 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 48 transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The Company may, at its option, pay the Redemption Price either in shares of Common Stock (based on the "current market price" per share, as defined in Section 11(d)(i) hereof, of the shares of Common Stock at the time of redemption) or cash; provided that if the Company elects to pay the Redemption Price in shares of Common Stock, the Company shall not be required to issue any fractional shares of Common Stock and the number of shares of Common Stock issuable to each holder of Rights shall be rounded down to the next whole share. (ii) In addition, subject to Section 24(a)(iii), the Board of Directors of the Company may, at its option, at any time following the Stock Acquisition Date and the expiration of the period during which the rights of holders of Rights pursuant to Section 11(a)(ii) hereof may be exercised as a result of the occurrence of such Stock Acquisition Date but prior to any Section 13 Event redeem all but not less than all of the then outstanding Rights at the Redemption Price in connection with any such event in which all holders of Common Stock are treated alike and not involving an Acquiring Person or a Transaction Person or an Affiliate or Associate of an Acquiring Person or any Person in which the Acquiring Person or an Affiliate or Associate of an Acquiring Person has an interest, or any other Person acting directly or indirectly on behalf of or in concert with any such Acquiring Person, Associate or Affiliate (other than involvement by an Acquiring Person, Affiliate, Associate or such other Person solely as a holder of shares of Common Stock (of the Company) being treated like all other such holders) or following the occurrence of an event set forth in, and the expiration of any period during which the holder of Rights may exercise the rights under, Section 11(a)(ii) if and for as long as the Acquiring Person is not thereafter the Beneficial Owner of securities representing ten percent or more of the voting power of all securities of the Company generally entitled to vote for the election of directors of the Company. 49 (iii) Notwithstanding anything to the contrary in this Agreement, including, without limitation, the provisions of Section 24(a)(i) and (ii), in the event that a majority of the Board of Directors of the Company is comprised of (i) persons elected at a meeting or by written consent of stockholders who were not nominated by the Board of Directors in office immediately prior to such meeting or action by written consent, and/or (ii) successors of such persons elected to the Board of Directors for the purpose of either facilitating a Transaction with a Transaction Person or circumventing directly or indirectly the provisions of this Section 24(a)(iii), then (I) the Rights may not be redeemed for a period of 365 days following the effectiveness of such election if such redemption is reasonably likely to have the purpose or effect of facilitating a Transaction with a Transaction Person and (II) the Rights may not be redeemed following such 365 day period if (x) such redemption is reasonably likely to have the purpose of facilitating a Transaction with a Transaction Person and (y) during such 365 day period, the Company enters into any agreement, arrangement or understanding with any Transaction Person which is reasonably likely to have the purpose or effect of facilitating a Transaction with any Transaction Person. (b) Immediately upon the date for redemption set forth (or determined in the manner specified in) in a resolution of the Board of Directors of the Company 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. Within ten days after the action of the Board of Directors ordering any such 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 the Rights Agent and to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is 50 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. 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 24 and other than in connection with the purchase of Common Stock prior to the Distribution Date. (c) The Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the Rights in accordance with this Agreement and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent of the Common Stock, and upon such action, all outstanding Rights Certificates shall be null and void without any further action by the Company. Section 25. Exchange. (a) Subject to Section 25(e), the Board of Directors of the Company 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) and 11(a)(ii) hereof) for Common Stock of the Company at an exchange ratio of one Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend, recapitalization or similar transaction involving either the Common Stock or the Preferred Stock 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, any entity holding Common Stock for or pursuant to the terms of any such plan or any trustee, 51 administrator or fiduciary of such a plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Stock then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to Section 25(a) hereof 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 Sections 7(e) and 11(a)(ii) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 25, the Company, at its option, may substitute Preferred Stock (or equivalent preferred shares, as such term is defined in Section 11(b) hereof) for some or all of the Common Stock exchangeable for Rights, at the initial rate of one one-thousandth of a share of Preferred Stock (or equivalent preferred share) for each share of Common Stock, as appropriately adjusted to reflect adjustments in the voting rights of the Preferred Stock pursuant to the terms 52 thereof, so that the fraction of a share of Preferred Stock delivered in lieu of each share of Common Stock shall have the same voting rights as one share of Common Stock. (d) The Board shall not authorize any exchange transaction referred to in Section 25(a) hereof unless at the time such exchange is authorized there shall be sufficient Common Stock and/or Preferred Stock issued but not outstanding, or authorized but unissued, to permit the exchange of Rights as contemplated in accordance with this Section 25. (e) The Board of Directors may only exchange Rights pursuant to Section 25(a) hereof if a majority of the Disinterested Directors authorizes such exchange. Section 26. Notice of Certain Events. (a) In case the Company shall propose (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 does not violate Section 14(b) 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 or more transactions, of 50% or more 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 does not violate Section 14(b) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall 53 give to each holder of a Rights Certificate, in accordance with Section 27 hereof, a notice of such proposed action, to the extent feasible, and file a certificate with the Rights Agent to that effect, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least 20 days prior to the date 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 of a Section 11(a)(ii) Event, then (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, in accordance with Section 27 hereof, a notice of the occurrence of such event, which notice 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 Section 26(a) to Preferred Stock shall be deemed thereafter to refer also, if appropriate, to Common Stock and/or, if appropriate, other securities of the Company. Section 27. 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 with the Rights Agent) as follows: 54 National Service Industries, Inc. 1420 Peachtree Street, N.E. Atlanta, Georgia 30309 Facsimile: 404/853-1015 Attention: Secretary Subject to the provisions of Section 22, 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 with the Company) as follows: Wachovia Bank, N.A. 301 N. Church Street -- Shareholder Services Dept., Second Floor Winston-Salem, North Carolina 27101 Facsimile: 910/770-4832 Attention: Shareholder Services Manager 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 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 28. Supplements and Amendments. Prior to the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing Common Stock. From and after the Distribution Date, the Company and the Rights Agent, shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be 55 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 Right Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, however, that this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. 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 28, the Rights Agent shall execute such supplement or amendment provided that such supplement or amendment does not adversely affect the rights or obligations of the Rights Agent under Sections 19 or 21 under this Agreement and such amendment or supplement shall be effective regardless of whether or when executed by the Rights Agent. 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. Notwithstanding anything contained in this Rights Agreement to the contrary, in the event that a majority of the Board of Directors of the Company is comprised of (i) persons elected at a meeting or by written consent of stockholders who were not nominated by the Board of Directors in office immediately prior to such meeting or written consent, and/or (ii) successors of such persons elected to the Board of Directors for the purpose of either facilitating a Transaction with a Transaction Person or circumventing directly or indirectly the provisions of this Section 28, then (I) for a period of 365 days following the effectiveness of such action, this Rights Agreement shall not be amended or supplemented in any manner reasonably likely to have the purpose or effect of facilitating a Transaction with a Transaction Person and 56 (II) no amendments or supplements may be made following such 365- day period if (x) such amendment or supplement is reasonably likely to have the purpose of facilitating a Transaction with a Transaction Person and (y) during such 365-day period, the Company enters into any agreement, arrangement or understanding with any Transaction Person which is reasonably likely to have the purpose or effect of facilitating a Transaction with any Transaction Person . Section 29. Determination and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock or any other securities of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or 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, without limitation, a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights Certificates and all other parties, and (y) not subject the Board to any liability to the holders of the Rights Certificates. 57 Section 30. 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 31. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, 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, the Common Stock). Section 32. 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. Section 33. 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 to be made and to be performed entirely within such State. Section 34. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 35. 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. 58 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: NATIONAL SERVICE INDUSTRIES,INC. [Seal] By: Name: Name: Title: Title: Attest: WACHOVIA BANK, N.A. [Seal] By: Name: Name: Title: Title: 59 Exhibit A AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A PARTICIPATING PREFERRED STOCK of NATIONAL SERVICE INDUSTRIES, INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware National Service Industries, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY: That (i) pursuant to the authority conferred upon the Board of Directors by the Restated Certificate of Incorporation, the Board of Directors on May 9, 1988, adopted a resolution creating a series of 500,000 shares of No Par Value Preferred Stock designated as Series A Participating Preferred Stock, (ii) the Corporation filed a Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock on May 12, 1988 (the "Certificate of Designation"), and (iii) no shares of the Series A Participating Preferred Stock have been issued. The Corporation DOES HEREBY FURTHER CERTIFY: That pursuant to the authority conferred upon the Board of Directors by Article FOURTH of the Restated Certificate of Incorporation and Section 151(g) of the General Corporation Law of the State of Delaware, the Board of Directors on December 17, 1997, adopted the following resolution amending the Certificate of Designation originally filed with the Secretary of State of Delaware on May 12, 1988, that created a series of preferred stock designated as "Series A Participating Preferred Stock:" RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation by Article FOURTH of the Restated Certificate of Incorporation, the Certificate of Designation originally filed with the Secretary of State of the State of Delaware on May 12, 1988, that created a series of preferred stock designated as "Series A Participating Preferred Stock" of the Corporation be, and it hereby is, amended, and that the designation and amount thereof and the powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Participating Preferred Stock," which shall have a stated value of $0.05 per share, and the number of shares constituting such series shall be 500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. Section 2. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock in preference to the holders of shares of Common Stock, par value $1.00 per share (the "Common Stock"), of the Corporation and any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of October, January, April and July in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00, or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock. In the event the Corporation shall at any time after May 1, 1988 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series A-2 A Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Participating Preferred Stock unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by- share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the shareholders of the Corporation; provided, however, that with regard to any election for the Corporation's Board of Directors (except as provided for in paragraph (C) of this Section 3), the maximum number of votes for the election of directors exercised by shares of Preferred Stock (including the Series A Participating Preferred Stock) shall not exceed the number of votes for the election of directors represented by authorized and issued shares of Common Stock entitled to vote less one, and the number of votes for the election of directors exercised by shares of Preferred Stock (including the Series A Participating Preferred Stock) shall be reduced as necessary on a pro-rata basis to effectuate this result. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (C) (i) If at any time dividends on any Series A Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the A-3 Series A Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of shareholders, and thereafter at annual meetings of shareholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if, any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Participating Preferred Stock. (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any shareholder or shareholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Corporate Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 10 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any shareholder or shareholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the shareholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors A-4 voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) In any default period, the total number of Directors on the Board of Directors shall not be less than five (5) Directors. (vi) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in, or pursuant to, the Restated Certificate of Incorporation or By-Laws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however to change thereafter in any manner provided by law or in the Restated Certificate of Incorporation or By-Laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors, even though less than a quorum. (D) Except as set forth herein, holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which A-5 dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Participating Preferred Stock or any shares of stock ranking on a parity with the Series A Participating Preferred Stock except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Conversion Rights. (A) Subject to the provision for adjustment hereinafter set forth, each one one-thousandth of a share of Series A Participating Preferred Stock shall, for a period of 90 days after issuance, be convertible at the option of the respective holders thereof, at the office of the Corporation and at such other place or places, if any, as the Board of Directors may determine, without the payment of further consideration, into one (1) share of Common Stock of the Corporation. (B) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding common Stock into a smaller number of shares, then in each such case the one (1) share of Common Stock into which each one one-thousandth of a share of Series A Participating Preferred Stock shall be convertible shall be adjusted by multiplying such share by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (C) At such times as the conversion rights are exercised for Series A Participating Preferred Stock, the Corporation shall, to the extent that unreserved authorized and unissued or A-6 treasury shares of Common Stock are available, reserve sufficient shares of Common Stock to permit the conversion of such Series A Participating Preferred Stock into Common Stock. In the event that sufficient unreserved authorized and unissued or treasury shares of Common Stock are not available to permit such reservation and conversion, the Corporation shall use reasonable efforts to obtain shareholder approval of an increase in the number of authorized shares of Common Stock to permit the aforementioned reservation and conversion of Series A Participating Preferred Stock into Common Stock. Section 6. Reacquired Shares. Any shares of Series A Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 7. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Participating Preferred Stock shall have received per share, the greater of 1,000 times the exercise price per Right or 1,000 times the payment made per share of Common Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Participating Preferred Stock and Common Stock, respectively, holders of Series A Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets A-7 available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to l,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event. Section 9. Redemption. The shares of Series A Participating Preferred Stock shall not be redeemable. Section 10. Ranking. The Series A Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 11. Amendment. The Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds (66 2/3%) of the outstanding shares of Series A Participating Preferred Stock voting separately as a class. Section 12. Fractional Shares. Series A Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, A-8 to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Participating Preferred Stock. A-9 IN WITNESS WHEREOF, I have executed and subscribed this Amended Certificate of Designation and do affirm the foregoing as true under the penalties of perjury, this 17th day of December, 1997. NATIONAL SERVICE INDUSTRIES, INC. By: Name: Title: A-10 Exhibit B [Form of Rights Certificate] Certificate No. R- __________Rights NOT EXERCISABLE AFTER May 19, 2008 OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN. 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. THE RIGHTS ARE SUBJECT TO EXCHANGE, AT THE OPTION OF THE COMPANY, AT ONE COMMON SHARE PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME (A) AN ACQUIRING PERSON, (B) AN ASSOCIATE, AFFILIATE OR TRANSFEREE OF AN ACQUIRING PERSON OR (C) A TRANSACTION PERSON, AFFILIATE, ASSOCIATE OR TRANSFEREE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY ARE NULL AND VOID.]* Rights Certificate NATIONAL SERVICE INDUSTRIES, INC. This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Amended and Restated Rights Agreement dated as of December 17, 1997 (the "Rights Agreement") between National Service Industries, Inc., a Delaware corporation (the "Company"), and Wachovia Bank, N.A. (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such _____________________ * The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentences. term is defined in the Rights Agreement) and prior to 5:00 P.M. (Eastern Standard Time) on May 19, 2008 at the principal office of the Rights Agent in Winston-Salem, North Carolina, one one- thousandth of a fully paid, nonassessable share of Series A Participating Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of $160 per one one-thousandth of a share (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the appropriate Form of Election to Purchase 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 set forth above, are the number and Purchase Price as of December 17, 1997, based on the Preferred Stock as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number 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. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal office of the Company and are also available upon written request to the Company. This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office of the Rights Agent, may be exercised for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised (other than pursuant to Section 11(a)(ii) of the Rights Agreement) in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or B-2 Rights Certificates for the number of whole Rights not exercised. If this Rights Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii) of the Rights Agreement, the holder shall be entitled to receive this Rights Certificate duly marked to indicate that such exercise has occurred as set forth in the Rights Agreement. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $.01 per Right. Subject to the provisions of the Rights Agreement, the Company, at its option, may elect to mail payment of the redemption price to the registered holder of the Right at the time of redemption, in which event this certificate may become void without any further action by the Company. No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are one one-thousandth or integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder, as such, of any 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 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 shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 26 of the Rights Agreement), or to receive dividends or other distributions, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised. B-3 This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. B-4 WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ____________, _____. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: Name: Name: Title: Title: Countersigned: WACHOVIA BANK, N.A. Authorized Signatures B-5 (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 sell, 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: , 19__ Signature Signature Guaranteed: B-6 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was (i) an Acquiring Person, (ii) an Affiliate, Associate or transferee of any such Acquiring Person (as such terms are defined in the Rights Agreement) or (iii) a Transaction Person or an Affiliate, Associate (as such terms are defined in the Rights Agreement) or transferee thereof; (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 or was (i) an Acquiring Person, (ii) an Affiliate, Associate or transferee of any such Acquiring Person (as such terms are defined in the Rights Agreement) or (iii) a Transaction Person or an Affiliate, Associate (as such terms are defined in the Rights Agreement) or transferee thereof. Dated: , 19__ Signature NOTICE The signature to the foregoing Assignment must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration, or enlargement or any change whatsoever. In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person, Transaction Person or any Affiliate, Associate or transferee of such Acquiring Person or Transaction Person (as such terms are defined in the Rights Agreement), and such Assignment or Election to Purchase will not be honored. B-7 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Rights Certificate pursuant to Section 11(a)(ii) of the Rights Agreement.) To NATIONAL SERVICE INDUSTRIES, INC.: The undersigned hereby irrevocably elects to exercise ________ Rights represented by this Rights Certificate to purchase the shares of Common Stock (or such other securities of the Company) issuable upon the exercise of the Rights and requests that certificates for such shares be issued in the name of: (Please insert social security or other identifying number) (Please print name and address) The Rights Certificate indicating the balance, if any, of such Rights which may still be exercised pursuant to each of Section 11(a)(ii) and Section 13 of the Rights Agreement shall be returned to the undersigned unless such person requests that the Rights Certificate be registered in the name of and delivered to: Please insert social security or other identifying number (complete only if Rights Certificate is to be registered in a name other than the undersigned) (Please print name and address) Dated: , 19__ Signature Signature Guaranteed: B-8 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was (i) an Acquiring Person, (ii) an Affiliate, Associate or transferee of any such Acquiring Person (as such terms are defined in the Rights Agreement) or (iii) a Transaction Person or an Affiliate, Associate (as such terms are defined in the Rights Agreement) or transferee thereof; (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 or was (i) an Acquiring Person, (ii) an Affiliate, Associate or transferee of any such Acquiring Person (as such terms are defined in the Rights Agreement) or (iii) a Transaction Person or an Affiliate, Associate (as such terms are defined in the Rights Agreement) or transferee thereof. Dated: , 19__ Signature NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration, or enlargement or any change whatsoever. In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person, Transaction Person or any Affiliate, Associate or transferee of such Acquiring Person or Transaction Person (as such terms are defined in the Rights Agreement), and such Assignment or Election to Purchase will not be honored. B-9 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to to exercise the Rights Certificate other than pursuant to Section 11(a)(ii) of the Rights Agreement.) To NATIONAL SERVICE INDUSTRIES, INC.: The undersigned hereby irrevocably elects to exercise _________ Rights represented by this Rights Certificate to purchase the shares of Preferred Stock (or such other securities of the Company or any other Person) issuable upon the exercise of the Rights and requests that certificates for such shares be issued in the name of: (Please insert social security or other identifying number) (Please print name and address) The Rights Certificate indicating the balance, if any, of such Rights which may still be exercised pursuant to each of Section 11(a)(ii) and Section 13 of the Rights Agreement shall be returned to the undersigned unless such person requests that the Rights Certificate be registered in the name of and delivered to: Please insert social security or other identifying number (complete only if Rights Certificate is to be registered in a name other than the undersigned) (Please print name and address) Dated: , 19__ Signature Signature Guaranteed: B-10 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was (i) an Acquiring Person, (ii) an Affiliate, Associate or transferee of any such Acquiring Person (as such terms are defined in the Rights Agreement) or (iii) a Transaction Person or an Affiliate, Associate (as such terms are defined in the Rights Agreement) or transferee thereof; (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 or was (i) an Acquiring Person, (ii) an Affiliate, Associate or transferee of any such Acquiring Person (as such terms are defined in the Rights Agreement) or (iii) a Transaction Person or an Affiliate, Associate (as such terms are defined in the Rights Agreement) or transferee thereof. Dated: , 19__ Signature NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration, or enlargement or any change whatsoever. In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person, Transaction Person or Affiliate, Associate or transferee of such Acquiring Person or Transaction Person (as such terms are defined in the Rights Agreement), and such Assignment or Election to Purchase will not be honored. B-11 Exhibit C SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES On May 9, 1988, the Board of Directors of National Service Industries, Inc. (the "Company") declared a dividend distribution of one Right for each outstanding share of common stock, $1.00 par value (the "Common Stock"), of the Company to stockholders of record at the close of business on May 19, 1988 (the "Record Date"). On December 17, 1997, the Board of Directors of the Company adopted certain amendments to the terms of the Rights. Except as set forth below, each Right (as amended), when exercisable, entitles the registered holder to purchase from the Company one one-thousandth of a share of a series of convertible preferred stock, designated as Series A Participating Preferred Stock, $0.05 stated value (the "Preferred Stock"), at a price of $160 (the "Purchase Price"), subject to adjustment. The description and terms of the Rights, as amended, are set forth in an Amended and Restated Rights Agreement (the "Rights Agreement") between the Company and Wachovia Bank, N.A., 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. Until the earlier to occur of (i) the first date of public announcement that, without the prior consent of the Company, a Person (as defined in the Rights Agreement), alone or together with its Affiliates and Associates (as defined in the Rights Agreement), has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of Common Stock of the Company (the "Stock Acquisition Date"); (ii) the close of business on the tenth (10th) business day (unless such date is extended by the Board of Directors) following the commencement of (or a public announcement of an intention to make) a tender offer or exchange offer which would result in any Person or group of related Persons becoming an Acquiring Person, without the prior consent of the Company or (iii) twenty business days prior to the date on which a Transaction (as such term is hereinafter defined) is reasonably expected to become effective or be consummated (the earliest of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Stock certificates outstanding as of December 17, 1997, by such Common Stock certificates. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with Common Stock certificates. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates issued after December 17, 1997 (or as soon thereafter as practicable), upon transfer, replacement or new issuance of Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any Common Stock certificates outstanding as of December 17, 1997 even without such a notation, will also constitute the transfer of the Rights associated with the Common Stock represented by such certificates. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and the separate Rights Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date and will expire at the close of business on May 19, 2008, unless earlier redeemed by the Company as described below. The Purchase Price payable and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights, are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for Preferred Stock, certain convertible securities or securities having the same or more favorable rights, privileges and preferences as the Preferred Stock at less than the current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends out of earnings or retained earnings) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustments in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional Rights will be issued, and in lieu thereof, an adjustment in cash will be made based on the market price of the Rights on the last trading day prior to the date on which such fractional Rights would otherwise be issuable. In the event that any Person becomes an Acquiring Person (unless pursuant to a tender offer or exchange offer for all outstanding shares of Common Stock at a price and on terms determined, prior to the purchase of shares under such tender or exchange offer, by at least a majority of the members of the Disinterested Directors to be both adequate and otherwise in the best interests of the Company and its stockholders (a "Permitted Offer")), proper provision shall be made so that each holder of a Right will thereafter have the right for a 60-day period after the later of the date of such event, or the effectiveness of an appropriate registration statement, to receive upon exercise of the Right that number of units of one one-thousandths of a share of Preferred Stock (or, under certain circumstances, shares of Common Stock or other securities) having an average market value during a specified time period (immediately prior to the occurrence of a Person becoming an Acquiring Person) of two times the Purchase Price of the Right (such right being called the "Flip-In Right"). Disinterested Directors are directors of the Company who are not (i) officers or employees of the Company, (ii) Acquiring Persons or Affiliates or Associates thereof, or representatives of any of them, or (iii) any Person who was directly or indirectly proposed or nominated as a director of the Company by a Transaction Person. In the event that, at any time on or following the Stock Acquisition Date, or, if a Transaction is proposed, the Distribution Date, the Company is, directly or indirectly, acquired in a merger or other business combination transaction or 50% or more of the Company's assets or earning power are sold (in one transaction or a series of transactions), proper provision shall be C-2 made so that each holder of a Right (except a Right voided as set forth herein) shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price of the Right, that number of shares of common stock of the acquiring company (or, in the event there is more than one acquiring company, the acquiring company receiving the greatest portion of the assets or earning power transferred) which, at the time of such transaction, would have a market value of two times the Purchase Price of the Right (such right being called the "Flip- Over Right"). The holder of a Right will continue to have the Flip-Over Right whether or not such holder exercises the Flip-In Right. Upon the occurrence of any of the events giving rise to the exercisability of the Flip-Over Right or the Flip-In Right, any Rights that are or were at any time owned by an Acquiring Person or a Transaction Person (as hereinafter defined) engaging in any of such transactions or receiving the benefits thereof on or after the time the Acquiring Person or Transaction Person becomes such shall become null and void insofar as they relate to the Flip-Over Right or the Flip-In Right. The number of outstanding Rights associated with each share of Common Stock and the voting and economic rights of each one one-thousandth of a share of Preferred Stock issuable upon exercise of each Right are also subject to adjustment in the event of a stock split of the Common Stock or a stock dividend on the Common Stock payable in Common Stock or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution Date. At any time prior to the earlier to occur of (i) the close of business on the Stock Acquisition Date or (ii) the expiration of the Rights, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"), which redemption shall be effective upon the action of the Board of Directors. Additionally, following the Stock Acquisition Date and the expiration of the period during which the Flip-In is exercisable, the Company may redeem the then outstanding Rights in whole, but not in part, at the Redemption Price, provided that such redemption is in connection with a merger or other business combination transaction or series of transactions involving the Company in which all holders of Common Stock are treated alike, but not involving an Acquiring Person or Transaction Person or any Affiliates or Associates thereof. Upon the effective date of the redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. In the event that a majority of the Board of Directors of the Company in office following a meeting of stockholders or stockholder action by written consent are not nominated by the Board of Directors serving immediately prior to such meeting or action, then for 365 days following such meeting or action the Rights may not be redeemed or amended if such redemption or amendment is reasonably likely to facilitate a merger, combination or sale of assets or earning power of the Company (a "Transaction") with a Person who (A) either (i) is or will become an Acquiring Person or (ii) is a party involved in a merger or consolidation with, or a sale of assets by, the Company or affiliate or associate thereof if the Transaction were to be C-3 consummated and (B) who has directly or indirectly proposed or nominated a member of the Board who is in office at the time the Transaction is being considered (a "Transaction Person"). The Rights may not be redeemed thereafter if during such 365-day period the Company enters into any agreement reasonably likely to facilitate a Transaction with a Transaction Person and the redemption is reasonably likely to facilitate a Transaction with a Transaction Person. At any time after a Person becomes an Acquiring Person but before such Acquiring Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding, the Company may, at its option, exchange all or part of the then outstanding and exercisable Rights (other than those owned by the Acquiring Person, together with any Affiliates and Associates of such Acquiring Person, which have become null and void) at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction involving either the Common Stock or the Preferred Stock occurring after the date hereof (the "Exchange Ratio"). The Board of Directors may only exchange Rights if a majority of the Disinterested Directors authorize such exchange. Immediately upon the action of the Board of Directors ordering the exchange of any Rights 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 Preferred Stock purchasable upon exercise of the Rights will be nonredeemable and junior to any other series of preferred stock the Company may issue (unless otherwise provided in the terms of such stock). Each share of Preferred Stock will have a preferential quarterly dividend in an amount equal to 1,000 times the dividend declared on each share of Common Stock, but in no event less than $10.00. In the event of liquidation, the holders of Preferred Stock will receive a preferred liquidation payment per share equal to the greater of 1,000 times the Purchase Price per Right or 1,000 times the payment made per each share of Common Stock. Subject to certain adjustments to reflect an increase or decrease in the number of outstanding shares of Common Stock, each one one-thousandth of a share of Preferred Stock shall, for a period of 90 days after issuance, be convertible into one share of Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the shares of Common Stock on all matters submitted to a vote of the shareholders of the Company. With regard to any election for the Company's Board of Directors, however, the maximum number of votes for the election of directors exercised by shares of preferred stock (including the Preferred Stock) shall not exceed the number of votes for the election of directors represented by authorized and issued shares of Common Stock less one, and the number of votes for the election of directors exercised by shares of preferred stock (including the Preferred Stock) shall be reduced as necessary on a pro-rata basis to effectuate this result. If the Company fails to pay dividends on the Preferred Stock for a specified period (a "default period"), the holders of Preferred Stock shall have the additional right to elect two (2) directors to the Board of Directors until such default period expires. In any default period, the total number of directors on the Board of Directors shall not be less than five (5) directors. C-4 In the event of any merger, consolidation or other transaction in which shares of Common Stock are exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount and type of consideration received per share of Common Stock. The rights of the Preferred Stock as to dividends, liquidation and voting, and in the event of mergers and consolidations, are protected by customary anti-dilution provisions. Fractional shares of Preferred Stock will be issuable; however, the Company may elect to distribute depositary receipts in lieu of such fractional shares. In lieu of fractional shares other than fractions that are multiples of one one-thousandths of a share, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the date of exercise. 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. Except as set forth above, the terms of the Rights may be amended by the Board of Directors of the Company and the Rights Agent, (i) prior to the Distribution Date in any manner, and (ii) on or after the Distribution Date to cure any ambiguity, to shorten or lengthen any time period under the Rights Agreement, to correct or supplement any provision of the Rights Agreement which may be defective or inconsistent with any other provisions, or in any manner not adversely affecting the interests of the holders of the Rights. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Form 8-A/A amending the Company's Registration Statement on Form 8-A, previously filed on May 11, 1988 (as subsequently amended on May 17, 1988). A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and its qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference. C-5 EX-99.1 3 PRESS RELEASE EXHIBIT 99.1 December 17, 1997 NSI 1st QUARTER `98 EPS UP 13.0% DIVIDEND INCREASED Atlanta, GA - National Service Industries (NYSE: NSI) today announced earnings per share of 61 cents for 1998's first quarter, which ended November 30, 1997. This performance was a 13.0 percent increase over last year's 54 cents. In addition, the board of directors increased the regular quarterly dividend by 3.3 percent to 31 cents per share (an annual rate of $1.24 per share). The dividend is payable on January 7, 1998 to shareholders of record on December 26, 1997. This is NSI's 36th consecutive annual dividend increase. "As anticipated, reported sales were down slightly. However, excluding divested units, sales grew by double digits," stated James S. Balloun, chairman and chief executive officer of National Service Industries. "Lithonia Lighting continued to lead the way in performance and allowed us to deliver overall improved earnings, in spite of lower margins in the chemical business. We continued to distribute excess cash to our shareholders by increasing our dividend and repurchasing 1.2 million shares. We are encouraged by our first quarter performance, and we are committed to delivering earnings per share growth in line with our 1997 results." 1998 First Quarter Results On an "as reported" basis, first quarter sales decreased 4.7 percent to $487.6 million from the previous year's revenues. Excluding divested businesses, sales grew by 12.8 percent. Net income of $26.7 million was 7.4 percent higher than a year ago. The higher net income and a 2.4 million reduction in average shares outstanding allowed earnings per share to increase 13.0 percent over last year's first quarter results. Performance by Segment The lighting equipment segment once again led the company in performance with reported sales of $268.7 million, up 18.1 percent over last year's first quarter sales of $227.4 million. Operating income increased 29.3 percent to $27.6 million. The strong growth in sales and income reflected continued demand in the non-residential construction market. Another key contributor to the exceptional sales growth was the market acceptance of a newly redesigned fluorescent parabolic fixture along with related revenues from associated products. First quarter chemical segment sales increased 10.9 percent to $105.9 million, due largely to the Enforcer acquisition in last year's third quarter. Operating income decreased to $8.6 million from last year's $10.9 million due in part to anticipated seasonal losses in the retail distribution channel. Also contributing to the reduced profitability were higher manufacturing costs, up-front expenses associated with increased penetration of the retail sales channel, and initiatives underway to improve the effectiveness of the sales force. During the quarter, the segment purchased the stock of Pure Corporation for $6.0 million. Pure is a specialty chemical company whose core business is concentrated primarily in Indiana, Pennsylvania, and New York. Subsequent to the quarter's end, NSI named Patrick O'Keefe as president of Zep Manufacturing Company, effective December 1, 1997. O'Keefe formerly served as president and chief executive officer of Huttig Sash and Door Company, a subsidiary of Crane Company. Harry Maziar, Zep's former president, was previously named chairman of the Chemical Group of NSI. Textile rental segment sales declined 40.0 percent from last year's sales of $130.1 million as a result of the divestiture of National Linen Service's (NLS) uniform plants. Reported operating income declined to $6.1 million from last year's $8.1 million. Excluding the divested units, sales of $78.1 million were even with last year. Related operating income increased by $1.0 million, and related operating profit margins improved to 7.9 percent from 6.5 percent. The margin improvement was due to incremental pricing and improved costs. Since the 1997 2 divestiture, NLS operations are operating more efficiently and are delivering positive economic profit. Envelope segment sales increased 11.6 percent to $35.0 million, and operating profits increased 19.9 percent to $2.5 million due largely to higher sales unit volume. Interest income improved due to the proceeds derived from the sale of the textile rental and insulation assets. Other Board News NSI's board of directors has extended the term of the existing Shareholder Rights Plan to May 19, 2008 and adopted certain amendments to the Plan to enhance its effectiveness. The rights become exercisable if any person or group acquires 15.0 percent or more of NSI's common stock, par value $1.00 per share. The NSI board may redeem the rights prior to the acquisition of 15.0 percent of the company's stock or in certain other circumstances at $.01 per right. The Plan, which was originally adopted in 1988, is intended to ensure that NSI's shareholders receive fair treatment in the event of any proposed acquisition of the company and to discourage certain coercive or abusive takeover tactics. The company's annual meeting of shareholders will convene at 10:00 a.m. at the Woodruff Arts Center in Atlanta on Wednesday, January 7, 1998. In addition to historical information contained herein, this press release contains forward-looking statements which may vary materially from actual results. Factors that could cause actual results to differ are set forth in this and prior press releases and in NSI's most recent annual report and Form 10-K. * * * National Service Industries, Inc., with fiscal year 1997 sales of $2.0 billion, has four business segments - lighting equipment, chemicals, textile rental, and envelopes. NSI has reported increased income and earnings per share in 34 of the last 36 years. Dividends have been increased for 36 consecutive years and paid for the past 62 years without a decrease. 3 NATIONAL SERVICE INDUSTRIES, INC. SUMMARY OF OPERATIONS (Unaudited)
THREE MONTHS ENDED NOVEMBER 30 SALES AND SERVICE OPERATING PROFIT (LOSS) REVENUES (Amounts in thousands, except per-share 1997 1996 1997 1996 data) _____________________________________________________________________________________________________ Lighting Equipment $268,658 $227,447 $27,637 $21,372 Chemical 105,859 95,482 8,614 10,923 Textile Rental 78,006 130,130 6,131 8,137 Envelopes 35,001 31,351 2,534 2,113 Other -- 27,483 -- 1,579 __________________________ _________________________ $487,524 $511,893 44,916 44,124 ========================== Corporate (4,563) (4,134) Interest income (expense), net 2,002 (650) ________________________ Income before taxes 42,355 39,340 Income taxes 15,687 14,506 ________________________ Net income $26,668 $24,834 ======================== Earnings per share $.61 $.54 Dividends paid per share $.30 $.29 Average shares outstanding during period 43,600 45,957 Actual shares outstanding end of period 43,034 45,527
NATIONAL SERVICE INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
NOVEMBER AUGUST NOVEMBER AUGUST 30 31 30 31 (Amounts in thousands, 1997 1997 1997 1997 except per-share data) ______________________________________________ __________________________________________________ Assets Liabilities and Stockholders' Equity Current Assets: Cash and short-term Current Liabilities $ 252,792 $ 282,000 investments $ 160,087 $ 262,425 Long-term Debt, less Receivables, net 262,144 258,689 current maturities 26,442 26,197 Inventories and linens in Deferred Income Taxes 43,058 34,093 service 259,614 239,851 Other current assets 29,003 19,793 Other Long-Term ______________________ Liabilities 89,632 92,249 Total Current Assets 710,848 780,758 Stockholders' Equity 632,157 671,813 710,848 780,758 ______________________ $1,044,081 $1,106,352 ======================= Property, Plant, and Current Ratio 2.8 2.8 Equipment, net 241,159 236,730 Percent of Debt to Other Assets 92,074 88,864 Total Capitalization 5.1% 4.6% ______________________ Stockholders' Equity $14.69 $15.20 Total Assets $1,044,081 $1,106,352 per Share
====================== CONDENSED CONSOLIDATED CASH FLOWS (Unaudited)
THREE MONTHS ENDED THREE MONTHS ENDED NOVEMBER 30 NOVEMBER 30 (Amounts in thousands) 1997 1996 1997 1996 _____________________________________________ __________________________________________________ Cash Provided by (Used for): Cash Provided by (Used for): Operations- Financing- Net income $ 26,668 $ 24,834 Debt $ 84 $ (30) Depreciation and Treasury shares, amortization 11,831 14,832 net (52,836) (33,429) Other operating Dividends (13,301) (13,435) activities (59,234) 7,080 Other financing ______________________ activities -- (786) Cash Provided by ----------------------- Operations (20,735) 46,746 Cash Used for ______________________ Financing (66,053) (47,680) _______________________ Investing- Change in short-term investments 53,216 -- ______________________________________________ Capital expenditures (14,034) (9,830) Effect of Exchange Rate Acquisitions (6,077) (1,876) on Cash (187) 336 Divestitures and sale of ______________________________________________ assets 2,939 3,805 Net Change in Cash (49,122) (7,812) Other investing Cash at Beginning of activities 1,809 687 Year 57,123 58,662 ______________________ ______________________ Cash Provided by $ 37,853 (7,214) Cash at End of Year $ 8,001 $ 50,850 ====================== ======================
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