-----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, QTgHJnhMM57YgRNVQnMQuTjWWqq6Hb85m6lHIaFPvcDuNqO75NwM1cpywTWOUCOy xiFlunoW8trHwHvQ3p1nnA== 0000891020-96-001009.txt : 19960823 0000891020-96-001009.hdr.sgml : 19960823 ACCESSION NUMBER: 0000891020-96-001009 CONFORMED SUBMISSION TYPE: 10-12G/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19960822 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED DIGITAL INFORMATION CORP CENTRAL INDEX KEY: 0000770403 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 911618616 STATE OF INCORPORATION: WA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-12G/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21103 FILM NUMBER: 96619283 BUSINESS ADDRESS: STREET 1: 1201 WILLOWS ROAD STREET 2: P O BOX 97057 CITY: REDMOND STATE: WA ZIP: 98073-9757 BUSINESS PHONE: 2068818004 MAIL ADDRESS: STREET 1: 10201 WILLOWS ROAD STREET 2: P O BOX 97057 CITY: REDMOND STATE: WA ZIP: 98073-9757 10-12G/A 1 AMENDMENT 2 TO FORM 10 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10/A (AMENDMENT NO. 2) GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ ADVANCED DIGITAL INFORMATION CORPORATION (Exact name of registrant as specified in its charter) WASHINGTON 91-1618616 (State or other jurisdiction (I.R.S. employer identification number) of incorporation or organization) 10201 WILLOWS ROAD REDMOND, WASHINGTON 98052 (Address of principal (Zip code) executive offices)
(206) 881-8004 (Registrant's telephone number, including area code) Securities to be registered pursuant to Section 12(b) of the Act: NONE Securities to be registered pursuant to Section 12(g) of the Act: COMMON STOCK, NO PAR VALUE PREFERRED STOCK PURCHASE RIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE ---------------- This Amendment No. 2 is being filed due to the inadvertent omission in Amendment No. 1 of the signature page. Except for this Explanatory Note and the inclusion of the signature page, this Amendment No. 2 is identical to Amendment No. 1. 3 ADVANCED DIGITAL INFORMATION CORPORATION
ITEM NO. ITEM CAPTION - -------------------------------------------------------------------------------------------- Item 15(b) Exhibits 2.1 Form of Separation Agreement between ADIC and Interpoint Corporation 3.1 Restated Articles of Incorporation of ADIC 3.2 Restated Bylaws of ADIC 4.1 Form of Common Stock Certificate* 4.2 Rights Agreement, dated as of August 12, 1996, between ADIC and ChaseMellon Shareholder Services, L.L.C., as Rights Agent 4.3 Certificate of Designation of Rights and Preferences of Series A Participating Cumulative Preferred Stock, incorporated by reference to Exhibit A to Exhibit 4.2 4.4 Form of Right Certificate, incorporated by reference to Exhibit B to Exhibit 4.2 10.1 Lease Agreement between K-M Properties and Advanced Digital Information Corporation, dated as of May 11, 1995 (incorporated by reference to Exhibit 10.3 of the Interpoint Corporation Annual Report on Form 10-K for the fiscal year ended October 31, 1995) 10.2 Form of Tax Allocation Agreement between ADIC and Interpoint Corporation 10.3 ADIC 1996 Stock Option Plan 10.4 ADIC 1996 Transition Plan 21.1 Subsidiaries of the Registrant 27.1 Financial Data Schedule**
- --------------- * to be filed by amendment ** previously filed 4 SIGNATURE Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 2 to registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. ADVANCED DIGITAL INFORMATION CORPORATION By: CHARLES H. STONECIPHER ------------------------------------ Charles H. Stonecipher Senior Vice President and Chief Operating Officer Redmond, Washington August 22, 1996 5 INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY NUMBER DESCRIPTION NUMBERED PAGE - ------ ----------------------------------------------------------------------- ------------- 2.1 Form of Separation Agreement between ADIC and Interpoint Corporation... 3.1 Restated Articles of Incorporation of ADIC............................. 3.2 Restated Bylaws of ADIC................................................ 4.1 Form of Common Stock Certificate*...................................... 4.2 Rights Agreement, dated as of August 12, 1996, between ADIC and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.............. 4.3 Certificate of Designation of Rights and Preferences of Series A Participating Cumulative Preferred Stock, incorporated by reference to Exhibit A to Exhibit 4.2............................................... 4.4 Form of Right Certificate, incorporated by reference to Exhibit B to Exhibit 4.2............................................................ 10.1 Lease Agreement between K-M Properties and Advanced Digital Information Corporation, dated as of May 11, 1995 (incorporated by reference to Exhibit 10.3 of the Interpoint Corporation Annual Report on Form 10-K for the fiscal year ended October 31, 1995)............................ 10.2 Form of Tax Allocation Agreement between ADIC and Interpoint Corporation............................................................ 10.3 ADIC 1996 Stock Option Plan............................................ 10.4 ADIC 1996 Transition Plan.............................................. 21.1 Subsidiaries of the Registrant......................................... 27.1 Financial Data Schedule**..............................................
- --------------- * to be filed by amendment ** previously filed EX-2.1 2 FORM OF SEPARATION AGREEMENT 1 Exhibit 2.1 SEPARATION AGREEMENT This SEPARATION AGREEMENT (this "Agreement"), dated as of August __, 1996, is made by and between INTERPOINT CORPORATION, a Washington corporation ("Interpoint") and ADVANCED DIGITAL INFORMATION CORPORATION, a wholly owned subsidiary of Interpoint and a Washington corporation ("ADIC"). RECITALS A. Interpoint has entered into an Agreement and Plan of Merger among Crane Co., a Delaware corporation ("Crane"), Crane Acquisition Corp., a Washington corporation and a wholly owned subsidiary of Crane ("Acquisition Sub"), and Interpoint dated as of July 1, 1996 (the "Merger Agreement"), providing for the merger of Interpoint with Acquisition Sub. It is a condition precedent to the closing of the Merger that Interpoint spinoff ADIC to Interpoint shareholders. B. The Board of Directors of Interpoint has determined that it is appropriate and desirable to separate ADIC from Interpoint by distributing as a dividend to the holders of shares of common stock, no par value per share, of Interpoint (the "Interpoint Common Stock") immediately prior to the effective time of the Merger all outstanding shares of common stock, no par value per share, of ADIC (the "ADIC Common Stock"). C. Interpoint and ADIC have determined that it is necessary and desirable to set forth the principal corporate transactions required to effect such separation and dividend distribution and to set forth other agreements that will govern certain other matters following such distribution. This Agreement together with the Tax Allocation Agreement (as defined below) constitute the "Spinoff Agreements" as such term is used in the Merger Agreement. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): Action: any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal. ADIC 1996 Transition Plan: the ADIC 1996 Transition Plan to be adopted by ADIC pursuant to which shares of ADIC Common Stock may be issued to holders of Adjusted 2 ADIC Options and which is expected to provide substantially identical benefits to the Interpoint Stock Option Plans. ADIC Business: the data storage business and any other businesses conducted by ADIC or any ADIC Subsidiary in the past, at the date hereof or in the future. ADIC Employee: any individual employed (or retained as a consultant, agent, advisor or independent contractor) by ADIC or any ADIC Subsidiary on, before or following the Distribution Date, including Peter van Oppen, but only during the time such individual was or is employed (or retained) by ADIC or a ADIC Subsidiary. ADIC Europe: ADIC Europe SARL, a wholly owned subsidiary of Interpoint organized under the laws of France. ADIC Holder: any holder of an Interpoint Stock Option who (i) is an employee of ADIC or an ADIC Subsidiary, (ii) whose last employment prior to the Distribution Date was with ADIC or an ADIC Subsidiary and (iii) any beneficiary of any individual specified in clauses (i) or (ii) above. ADIC Liabilities: collectively, (i) all the Liabilities of ADIC under this Agreement, (ii) all the Liabilities, whenever arising (whether prior to, on or following the Effective Time), arising out of or in connection with or otherwise relating to the management or conduct of the ADIC Business, including without limitation, the products made, sold or distributed by ADIC or any ADIC Subsidiary prior to, on or following the Distribution Date, the former, present or future assets of ADIC or any ADIC Subsidiary or the former, present or future ADIC Employees (but only with respect to the time any such individual was a ADIC Employee), and (iii) all the Liabilities arising out of or based upon any untrue statement of material fact contained in the Information Statement or in the portion of the Proxy Statement/Prospectus describing the ADIC Business or otherwise relating to ADIC, or the omission or alleged omission to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, but excluding all Liabilities relating to matters described in the Disclosure Letter. ADIC Subsidiary: ADIC Europe, ADIC International, any other Subsidiary of ADIC on or before the Distribution Date, and any Subsidiary of ADIC which may thereafter be organized or acquired. Adjusted ADIC Option: an Interpoint Stock Option, adjusted as provided in Section 3.03(a). Adjusted Interpoint Option: an Interpoint Stock Option, adjusted as provided in Section 3.03(a) Affiliate: as defined in Rule 12b-2 promulgated under the Exchange Act, as such Rule is in effect on the date hereof. -2- 3 Code: the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, including any successor legislation. Commission: the Securities and Exchange Commission. Disclosure Letter: the Disclosure Letter delivered by Interpoint to Crane pursuant to the Merger Agreement Distribution: the distribution prior to the effective time of the Merger on the Distribution Date to holders of record of shares of Interpoint Common Stock as of that time of the shares of ADIC Common Stock owned by Interpoint on the basis of one share of ADIC Common Stock for each outstanding share of Interpoint Common Stock. Distribution Agent: First Interstate, N.A., or other entity appointed by Interpoint to distribute shares of ADIC Common Stock pursuant to the Distribution. Distribution Date: the date determined by Interpoint's Board of Directors as of which the Distribution will be effected, which will be the date on which the Merger is effective. Distribution Record Date: the date determined by Interpoint's Board of Directors as the record date for the Distribution, which will be the same date as the Distribution Date. Effective Time: the time on the Distribution Date when Interpoint delivers to the Distribution Agent instructions directing the Distribution Agent to effect the Distribution. ERISA: the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation. Exchange Act: the Securities Exchange Act of 1934, as amended. Indemnifiable Losses: any and all losses, Liabilities, claims, damages, costs or expenses (including, without limitation, reasonable attorney's fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any Actions or threatened Actions), but excluding any taxes covered by the Tax Allocation Agreement. Information Statement: the information statement containing information about ADIC and the ADIC Business to be distributed to Interpoint shareholders in connection with the Distribution. Insurance Proceeds: those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of the insured, in either case net of any applicable premium adjustment, retrospectively rated premium, deductible, retention, cost or reserve paid or held by or for the benefit of such insured. -3- 4 Insured Claims: those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Interpoint Policies, whether or not subject to deductibles, co-insurance, uncollectability or retrospectively rated premium adjustments, but only to the extent that such Liabilities are within applicable policy limits, including aggregates. Interpoint 401(k) Plan: the Interpoint Corporation Savings and Investment Plan. Interpoint Business: the custom microelectronics and power products business and any other businesses conducted by Interpoint or any Interpoint Subsidiary other than the ADIC Business, in the past, at the date hereof or in the future. Interpoint Employee: any individual employed (or retained as a consultant, agent, advisor or independent contractor) by Interpoint (not including any subsidiaries) or a Interpoint Subsidiary on, before or following the Distribution Date, but only during the time such individual was or is employed (or retained) by Interpoint (not including any subsidiaries) or a Interpoint Subsidiary. Interpoint Holder: any holder of an Interpoint Stock Option (i) who is an employee at Interpoint or an Interpoint Subsidiary, (ii) whose last employment prior to the Distribution Date was with Interpoint (not including ADIC or any ADIC Subsidiary) or a Interpoint Subsidiary and (iii) any beneficiary of any individual specified in clauses (i) and (ii) above. Interpoint Liabilities: collectively, (i) all the Liabilities of Interpoint under this Agreement, (ii) all the Liabilities, whenever arising (whether prior to, on or following the Effective Time), arising out of or in connection with or otherwise relating to the management or conduct of the Interpoint Business, including, without limitation, the products made, sold or distributed by any Interpoint Subsidiary prior to, on or following the Distribution Date, the former, present or future assets of Interpoint or any Interpoint Subsidiary (other than assets of ADIC or any ADIC Subsidiary) or the former, present or future Interpoint Employees (but only with respect to the time any such individual was a Interpoint Employee) and (iii) all the Liabilities arising out of or based upon any untrue statement of material fact contained in the Proxy Statement/Prospectus , or the omission or alleged omission to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, other than liabilities arising out of or based upon the incorporation of the Information Statement in the Proxy Statement/Prospectus and the description of the ADIC Business or otherwise relating to ADIC in the Proxy Statement/Prospectus. Interpoint MIP Plan: the Interpoint Management Incentive Plan. Interpoint Policies: all insurance policies and insurance contracts of any kind, including, without limitation, primary and excess policies, comprehensive general liability policies, workers' compensation insurance policies, and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder, in effect for periods prior to the Effective Time which are owned or maintained by or on behalf of -4- 5 Interpoint or any of its predecessors which relate to both the Interpoint Business and the ADIC Business. Interpoint Profit Sharing Plan: the Interpoint Profit Sharing Plan for the fiscal year ending October 31, 1996. Interpoint Stock Option Plans: the Interpoint 1995 Stock Option and Award Plan, 1985 Incentive Stock Option Plan, 1981 Amended Incentive Stock Option Plan and Nonqualified Stock Option Plan. Interpoint Stock Option: an option to purchase shares of Interpoint Common Stock granted pursuant to any of the Interpoint Stock Option Plans. Interpoint Subsidiary: any subsidiary of Interpoint on or before the Distribution Date and any subsidiary of Interpoint which may thereafter be organized or acquired, other than ADIC or any ADIC Subsidiary. IRS: the Internal Revenue Service. Liabilities: any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any court, any governmental or other regulatory or administrative agency or commission or any award of any arbitration tribunal, and those arising under any contract, commitment or undertaking, but excluding any taxes covered by the Tax Allocation Agreement. Merger: the merger of Acquisition Sub with and into Interpoint pursuant to the Merger Agreement. Nasdaq National Market: the National Association of Securities Dealers, Inc., Nasdaq National Market. New ADIC 401(k) Plan: a Qualified Plan to be sponsored or maintained by ADIC which will provide benefits for ADIC Employees, including former ADIC Employees, who, as of the Effective Time, are participants in or otherwise entitled to benefits under the Interpoint 401(k) Plan and which is expected to provide substantially identical benefits to the Interpoint 401(k) Plan. Opinions: the opinions of Perkins Coie and Milbank, Tweed, Hadley and McCloy, counsel to Interpoint and Crane, respectively, as to certain tax aspects of the Distribution. Option Cash Out Program: the program to cash out certain Interpoint Stock Options described in Section 3.03. -5- 6 Plan: any plan, policy, arrangement or contract providing benefits for any group of employees or former employees or individual employee or former employee, or the beneficiary or beneficiaries of any such employee or former employee, whether formal or informal, written or unwritten and whether or not legally binding, including, without limitation, any means, whether or not legally required, pursuant to which any benefit is provided by an employer or any employee or former employee to the beneficiary or beneficiaries of any such employee or former employee. Proxy Statement/Prospectus: the proxy statement/prospectus to be sent to the holders of shares of Interpoint Common Stock in connection with the Special Meeting of Shareholders of Interpoint to be held to vote on the approval of the Merger Agreement. Qualified Plan: a Plan which is an employee pension benefit plan (within the meaning of Section 3(2) of ERISA) and which constitutes or is intended in good faith to constitute a qualified plan under Section 401(a) of the Code, including, without limitation, the Plans listed on Schedule A. Securities Act: the Securities Act of 1933, as amended. Subsidiary: any entity at least 51% of the total outstanding voting interests of which are owned, directly or indirectly, by another entity. Tax Allocation Agreement: the Tax Allocation Agreement dated as of the date of this Agreement between Interpoint and ADIC. Welfare Plan: any Plan, including, without limitation, the Plans listed on Schedule B, which is not a Qualified Plan and which provides medical, health, disability, accident, life insurance, death, dental, severance or any other welfare benefit within the meaning of Section 3(1) of ERISA. References to an "Exhibit" or to a "Schedule" are, unless otherwise specified, to one of the Exhibits or Schedules attached to this Agreement, and references to a "Section" are, unless otherwise specified, to one of the Sections of this Agreement. ARTICLE II DISTRIBUTION AND RELATED TRANSACTIONS 2.01 INTERPOINT BOARD ACTION The Board of Directors of Interpoint shall, in its discretion, establish the Distribution Record Date and the Distribution Date and any procedures necessary or appropriate to effect the Distribution. Such action shall not create any obligation on the part of Interpoint to effect the Distribution or in any way limit Interpoint's power of termination set forth in Section 7.07 or alter the consequences of any such termination from those specified in such Section. -6- 7 2.02 THE DISTRIBUTION Immediately prior to the Effective Time on the Distribution Date, ADIC shall issue to Interpoint as a stock dividend a number of shares of ADIC Common Stock such that, at the Effective Time, Interpoint will own that number of shares of ADIC Common Stock equal to the number of shares of Interpoint Common Stock outstanding at the Effective Time. At the Effective Time, subject to the conditions and rights of termination set forth in this Agreement, Interpoint shall deliver to the Distribution Agent a share certificate representing all the then outstanding shares of ADIC Common Stock and shall deliver to the Distribution Agent instructions to distribute, on or as soon as practicable following the Distribution Date, one share of ADIC Common Stock for each share of Interpoint Common Stock held by holders of record of shares of Interpoint Common Stock on the Distribution Record Date. ADIC shall provide all share certificates that the Distribution Agent requires in order to effect the Distribution. The Distribution will, for all purposes, be deemed to have been effected at the time Interpoint delivers such instructions to the Distribution Agent. 2.03 ELIMINATION OF INTERCOMPANY ACCOUNTS The net amounts of all intercompany receivables, payables and indebtedness between ADIC or any ADIC Subsidiary, on the one hand, and Interpoint or any Interpoint Subsidiary, on the other hand as of the Effective Time, will be satisfied in full by dividend or capital contribution, as appropriate, and without the need for any further documentation, as of the Effective Time. 2.04 TRANSFER OF ASSETS Prior to the Effective Time, Interpoint shall transfer to ADIC all of its interest in ADIC Europe and in Visual Technologies, Limited. 2.05 ASSUMPTION AND SATISFACTION OF LIABILITIES Except as otherwise set forth herein, from and after the Effective Time, (a) Interpoint shall, and shall cause the Interpoint Subsidiaries to assume and pay, perform or discharge in due course all Interpoint Liabilities and (b) ADIC shall, and shall cause the ADIC Subsidiaries to, assume and pay, perform or discharge in due course all the ADIC Liabilities. 2.06 RESIGNATIONS Interpoint shall use its best efforts to cause all Interpoint Employees, except for Peter van Oppen, to resign, effective as of the Effective Time, from all positions as officers or directors of ADIC or as officers or directors of any ADIC Subsidiary in which they serve. ADIC shall use its best efforts to cause all ADIC Employees to resign, effective as of the Effective Time, from all positions as directors or officers of Interpoint or any Interpoint Subsidiary in which they serve. -7- 8 2.07 FURTHER ASSURANCES In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest Interpoint or ADIC with full title to all properties, assets, rights, approvals, immunities and franchises pertaining to the Interpoint Business or the ADIC Business, as the case may be, the proper officers and each party to this Agreement shall take all such necessary action. Without limiting the foregoing, Interpoint and the Interpoint Subsidiaries and ADIC and the ADIC Subsidiaries shall use their best efforts to obtain all consents and approvals, to enter into all amendatory agreements and to make all filings and applications and take all other actions which may be required for the consummation of the transactions contemplated by this Agreement, including, without limitation, all applicable regulatory filings. 2.08 NO REPRESENTATIONS OR WARRANTIES Each of the parties hereto understands and agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, making any representation or warranty whatsoever, including, without limitation, as to title, value or legal sufficiency. 2.09 GUARANTEES Except as otherwise provided in Article III hereof with respect to employee benefit matters, Interpoint and ADIC shall each use their best efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, Interpoint or any Interpoint Subsidiary removed as guarantor of or obligor for indebtedness or obligations for which ADIC or any ADIC Subsidiary is primarily liable and ADIC or any ADIC Subsidiary removed as guarantor of or obligor for indebtedness or obligations for which Interpoint or any Interpoint Subsidiary is primarily liable. Without limiting the generality of the foregoing, Interpoint shall use its best efforts to have the assets of ADIC and any ADIC Subsidiary released as collateral under Interpoint's bank line of credit and ADIC shall use its best efforts to have Interpoint released as a guarantor of the lease relating to ADIC's principal office. Interpoint shall indemnify, defend and hold harmless ADIC from and against any and all Liabilities of ADIC arising from a guarantee or other obligation of ADIC in respect of indebtedness or obligations for which Interpoint (or any Interpoint Subsidiary) is primarily liable. ADIC shall indemnify and hold harmless Interpoint from and against any and all Liabilities of Interpoint arising from a guarantee or other obligation of Interpoint in respect of indebtedness or obligations for which ADIC (or any ADIC Subsidiary) is primarily liable. 2.10 LITIGATION (a) With respect to all Actions now pending or which may hereafter be commenced or threatened which may result in an Interpoint Liability, Interpoint and ADIC shall each use their best efforts to have Interpoint or an Interpoint Subsidiary substituted as parties to such Action in the place of and for ADIC, any ADIC Subsidiary or any ADIC -8- 9 Employee and to have ADIC, any ADIC Subsidiary and any ADIC Employee removed as parties to such Action following the Distribution Date. (b) With respect to all Actions now pending or which may hereafter be commenced or threatened which may result in a ADIC Liability, Interpoint and ADIC shall each use their best efforts to have ADIC or an ADIC Subsidiary substituted as parties to such Action in the place of and for Interpoint, any Interpoint Subsidiary or any Interpoint Employee and to have Interpoint, any Interpoint Subsidiary and any Interpoint Employee removed as parties to such Action following the Distribution Date. (c) At all times from and after the Distribution Date, each of ADIC and Interpoint shall use reasonable efforts to make available to the other upon written request its and its Subsidiaries' officers, directors, employees and agents as witnesses to the extent that such persons may reasonably be required in connection with any Actions in which the requesting party may from time to time be involved (without reimbursement for such persons' salaries). (d) The provisions of this Section 2.10 shall be in addition to, and not in limitation of, the provisions of Article V, and compliance with the provisions of this Section 2.10 shall not affect the obligations of the parties under Article V. 2.11 COMPLIANCE WITH TAX OPINIONS REPRESENTATIONS Interpoint shall, and shall cause each Interpoint Subsidiary to, comply with each representation and statement made, or to be made, to Perkins Coie and Milbank, Tweed, Hadley & McCloy in connection with the Opinions. ADIC shall, and shall cause each ADIC Subsidiary to, comply with each representation and statement made, or to be made, to Perkins Coie and Milbank, Tweed, Hadley & McCloy in connection with the Opinions. Interpoint represents and warrants to ADIC, and ADIC represents and warrants to Interpoint, that it has no present intention to take any action inconsistent with the representations and statements referred to in this Section 2.11. 2.12 PUBLICITY Any existing printed material implicitly or explicitly showing any affiliation or connection between Interpoint and ADIC as of the date such material is used may be used by Interpoint and ADIC only for a period ending six months after the Distribution Date. After the Distribution Date, neither party hereto shall otherwise represent to third parties that it has a present business affiliation with the other. 2.13 PARKING For so long as Interpoint and ADIC are utilizing the facilities located at 10301 Willows Road and 10201 Willows Road, respectively, Interpoint agrees to allow ADIC Employees, and ADIC agrees to allow Interpoint Employees, to utilize excess employee parking capacity at such facilities. The agreement contained in this Section 2.13 is subject to -9- 10 the availability of such excess parking capacity and may be terminated at any time by Interpoint or ADIC if there is no excess parking capacity at the applicable facility. Any claims or other liabilities relating to the use of such excess parking capacity at ADIC by Interpoint Employees, or at Interpoint by ADIC Employees, as the case may be, constitute Interpoint Liabilities and ADIC Liabilities, respectively, and are subject to the provisions of Article 5 of this Agreement. ARTICLE III EMPLOYEE BENEFITS 3.01 401(K) PLAN (a) As soon as practicable after the date hereof and effective as of the Effective Time, ADIC shall take, or cause to be taken, all action necessary and appropriate to establish and administer the New ADIC 401(k) Plan, which will be a Qualified Plan, and to provide benefits thereunder for all ADIC Employees, including former ADIC Employees, who, as of the Effective Time, were participants in or otherwise entitled to benefits under the Interpoint 401(k) Plan. ADIC agrees that each such ADIC Employee will be, to the extent applicable, entitled, for all purposes under the new ADIC 40l(k) Plan, to be credited with the term of service credited to such ADIC Employee as of the Effective Time under the terms of the Interpoint 401(k) Plan. (b) Interpoint agrees to prepare and provide to ADIC, as soon as practicable after the Effective Time, a list of the ADIC Employees, including former ADIC Employees, who were participants in or otherwise entitled to benefits under the Interpoint 401(k) Plan as of the Effective Time, together with a listing of each such ADIC Employee's term of service for eligibility and vesting purposes under such Plan and a listing of each such ADIC Employee's "Estimated Account Balance" thereunder. An ADIC Employee's "Estimated Account Balance" is his or her account balances under the Interpoint 401(k) Plan as of the last day of the quarter immediately preceding the quarter in which the Distribution occurs plus employee salary deferral contributions, loan payments, employer matching contributions and any other contributions made to the Interpoint 401(k) Plan by or on behalf of such ADIC Employee during the quarter in which the Distribution occurs, less any withdrawals or new loans made from such accounts during such quarter, plus estimated earnings allocable to such accounts for such quarter. Interpoint and ADIC agree to provide one another with such additional information in the possession of one company and not already in the possession of the other as may be reasonably requested by either of them and necessary in order for ADIC to establish and administer effectively the New ADIC 401(k) Plan. For purposes of this Section 3.01, "quarter" means any of the three month periods ending on the last day of August, November, February or May. (c) Interpoint agrees to direct the trustee of the trust funding the Interpoint 401(k) Plan to transfer, on the first business day of the quarter commencing after the quarter in which -10- 11 the Distribution occurs, to the trustee or other funding agent of the New ADIC 401(k) Plan, an amount equal to the total Estimated Account Balances of all ADIC Employees, including former ADIC Employees. As soon as administratively practicable after the reconciliation of the Interpoint 401(k) Plan trust to participant accounts for the quarter in which the Distribution occurs has been completed by the recordkeeper of the Interpoint 401(k) Plan, Interpoint shall direct the trustee of that trust to transfer any amounts remaining in the Interpoint 401(k) Plan accounts of ADIC Employees, including former ADIC Employees, to the trustee or other funding agent of the New ADIC 401(k) Plan and shall provide ADIC with a listing of the account balances of each ADIC Employee, including each former ADIC Employee, under the Interpoint 401(k) Plan as of the last day of the quarter in which the Distribution occurs. ADIC agrees that, following such transfer, each ADIC Employee on whose behalf assets were transferred will be credited with an account balance under the New ADIC 401(k) Plan equal to the amount transferred from the Interpoint 401(k) Plan to the New ADIC 401(k) Plan on behalf of such ADIC Employee (adjusted, as necessary, for any investment gains or losses incurred (and for any other transaction occurring) with respect to such account under the New ADIC 401(k) Plan from the date of the initial transfer of assets through the date of the final transfer of assets to the New ADIC 401(k) Plan from the Interpoint 401(k) Plan). (d) Interpoint and ADIC shall, in connection with the transfers described in this Section 3.01, cooperate in making any and all appropriate filings required under the Code or ERISA, and the regulations thereunder, and any applicable securities laws, and take all such action as may be necessary and appropriate to cause such transfers to take place at the times specified in this Section 3.01. (e) Except for liabilities and obligations arising under ERISA or the Code (including, but not limited to, Sections 409, 502(i) and 502(l) of ERISA and Sections 4972 and 4975 of the Code) with respect to events, actions or inactions occurring prior to the final transfer referred to in Section 3.01(c) (other than liabilities and obligations relating to events, actions or inactions occurring with respect to the Advanced Digital Information Corporation 401(k) Retirement Plan prior to the June 8, 1996 transfer of such plan's assets to the Interpoint 401(k) Plan) and liabilities and obligations arising out of, related to or in any way connected with matters disclosed in the Disclosure Letter, after the final transfer referred to in Section 3.01(c) occurs, Interpoint and the Interpoint Subsidiaries shall cease to have any liability or obligation whatsoever with respect to ADIC Employees under the Interpoint 401(k) Plan, and ADIC shall assume or retain, as the case may be, and shall be solely responsible for, all liabilities and obligations whatsoever with respect to ADIC Employees under the Interpoint 401(k) Plan and shall be solely responsible for all liabilities or obligations whatsoever under the New ADIC 401(k) Plan; provided, however, that if as a result of the IRS audit disclosed in the Disclosure Letter, the IRS requires that any action(s) be taken with respect to the ADIC Employees' account balances transferred to the New ADIC 401(k) Plan from the Interpoint 401(k) Plan to retain the Interpoint 401(k) Plan's and/or the New ADIC 401(k) Plan's tax-qualified status, then Interpoint will take (or will direct the trustee of the Interpoint 401(k) Plan to take) such action(s) with respect to the Interpoint 401(k) Plan and -11- 12 ADIC will direct the trustee of the New ADIC 401(k) Plan to make such distributions from ADIC Employees' account balances under the New ADIC 401(k) Plan as the IRS may require to retain the Interpoint 401(k) Plan's and the New ADIC 401(k) Plan's tax-qualified status with respect to the account balances transferred to the New ADIC 401(k) Plan from the Interpoint 401(k) Plan. ADIC shall either be responsible for or make all required contributions, no later than the later of the Effective Time and the date such contributions are legally required to be made, in respect of ADIC Employees with respect to the Interpoint 401(k) Plan to the extent not previously made. 3.02 WELFARE PLANS (a) Interpoint and the Interpoint Subsidiaries shall assume or retain all Liabilities and obligations whatsoever for benefits of Interpoint Employees and their spouses and dependents under any Welfare Plan. Except as provided in Section 3.02(b), as of the Effective Time or as soon thereafter as may be agreed upon by Interpoint, ADIC and the applicable insurance carriers, but no later than December 31, 1996, ADIC shall cease to co-sponsor any Welfare Plans with Interpoint or any Interpoint Subsidiary; provided, however, that ADIC Employees and their spouses and dependents participating in Interpoint Welfare Plans co-sponsored by ADIC or an ADIC Subsidiary shall remain entitled to benefits under (and in accordance with the terms of) such Welfare Plans for covered expenses incurred and benefits accrued prior to the time at which their participation in such Welfare Plans ceases. With respect to the insured medical and dental plan(s) co-sponsored by Interpoint and ADIC for eligible employees and their spouses and dependents, ADIC agrees to pay a pro rata share (based on number of participants) of any claims runoff for benefits incurred prior to the time ADIC Employees and their spouses and dependants cease to participate in such plan(s) that requires additional payments to the insurance company over and above the amount reserved on Interpoint's books for such purpose at the Effective Time, and Interpoint agrees that it will refund to ADIC, at such time as such reserve is no longer subject to runoff claims for benefits incurred prior to the time ADIC Employees and their spouses and dependants cease to participate in such plan(s), a pro rata share (based on number of participants) of any portion of such reserve that is not utilized to pay such benefits. ADIC shall also be responsible for providing COBRA coverage under Code Section 4980B for former ADIC Employees and their covered dependents who are entitled to COBRA coverage on and after the date ADIC ceases to co-sponsor the Interpoint medical and dental plan(s). ADIC shall also be liable for any retiree medical coverage liabilities to retired ADIC Employees and their dependents, and for any severance benefits payable to any ADIC Employee under an severance pay plan or policy. (b) Interpoint shall permit ADIC and any ADIC Subsidiaries to co-sponsor any Interpoint Welfare Plan(s) (except for any severance pay plan) for such period following the Effective Time as may be agreed upon by Interpoint, ADIC and the applicable insurance carriers, but not later than December 31, 1996; provided that ADIC and any ADIC Subsidiaries shall pay the costs associated with such co-sponsorship for ADIC Employees and their spouses and dependants on the same basis as Interpoint pays the costs associated with such co-sponsorship for Interpoint Employees and their spouses and dependants. -12- 13 3.03 STOCK OPTION PLANS (a) Interpoint shall take, or cause to be taken, all actions necessary and appropriate to effect the Option Cash Out Program, pursuant to which (i) each Interpoint Stock Option held by an Interpoint Holder will be cancelled and in exchange therefor the Interpoint Holder will receive a cash payment equal to the difference between the exercise price of such option and the average of the high and low sale prices of the Interpoint Common Stock on each of the 10 trading days prior to (but not including the date of) the Effective Time (the "Interpoint Average Stock Price") and (ii) each Interpoint Stock Option held by an ADIC Holder will be adjusted by Interpoint so as to represent two separate options, one to purchase Interpoint Common Stock and the other to purchase ADIC Common Stock (an "Adjusted Interpoint Option" and an "Adjusted ADIC Option," respectively). Each Adjusted Interpoint Option will be cancelled and in exchange therefor the ADIC Holder will receive a cash payment equal to the difference between (1) the exercise price of such Adjusted Interpoint Option (determined as described below) and (2) the Aggregate Share Distribution Amount (as defined in the Merger Agreement) divided by the number of shares of Interpoint Common Stock outstanding immediately prior to the Merger. Each Adjusted ADIC Option will be exercisable for the same number of shares as was originally covered by the related Interpoint Stock Option prior to the Effective Time, and will have substantially the same other terms as such Interpoint Stock Option except for the exercise price and except that Adjusted ADIC Options will be administered pursuant to the ADIC 1996 Transition Plan. The exercise price of each Adjusted Interpoint Option will be determined by multiplying the per share exercise price of the original option by a fraction the numerator of which is the Aggregate Share Distribution Amount and the denominator of which is the Interpoint Average Stock Price . The exercise price per share of the Adjusted ADIC Option will be the difference between the exercise price of the original Interpoint Stock Option and the exercise price of the Adjusted Interpoint Option. (b) For purposes of this Section 3.03, all members of Interpoint's Board of Directors who are not Interpoint Employees will be deemed to be ADIC Holders. 3.04 INTERPOINT MIP AND PROFIT SHARING Interpoint and ADIC will, to the extent practicable, each continue accruing for payments under, and shall make payments in accordance with, the Interpoint MIP and Interpoint Profit Sharing Plan for the fiscal year ended October 31, 1996. Each of ADIC and Interpoint shall be responsible for the determination and payment of awards to their respective employees for the fiscal year ended October 31, 1996. The payments to be made to Peter van Oppen under the Interpoint MIP and Interpoint Profit Sharing Plan will be made by Interpoint. 3.05 OTHER BALANCE SHEET ADJUSTMENTS To the extent not otherwise provided in this Agreement, Interpoint and ADIC shall take such action as is necessary to effect an adjustment to the books of Interpoint and ADIC so that, as of the Effective Time, the prepaid expense balances and accrued employee liabilities -13- 14 with respect to any employee liability or obligation assumed or retained as of the Effective Time (except to the extent a later time is agreed upon as provided in this Agreement) by Interpoint and the Interpoint Subsidiaries, on the one hand, and ADIC and the ADIC Subsidiaries, on the other hand, are appropriately reflected on the respective consolidated balance sheets as of the Effective Time, respectively, of Interpoint and ADIC. 3.06 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS No provision of this Agreement, including, without limitation, the agreement of Interpoint or ADIC that it, or any Interpoint Subsidiary or ADIC Subsidiary, will make a contribution or payment to or under any Plan herein referred to for any period, shall be construed as a limitation on the right of Interpoint or ADIC or any Interpoint Subsidiary or ADIC Subsidiary to amend or terminate such Plan which Interpoint or ADIC or any Interpoint Subsidiary or ADIC Subsidiary would otherwise have under the terms of such Plan or otherwise, and no provision of this Agreement shall be construed to create a right in any employee or former employee or beneficiary of such employee or former employee under a Plan which such employee or former employee or beneficiary would not otherwise have under the terms of the Plan itself. ARTICLE IV INSURANCE 4.01 CONTINUATION OF ADIC RIGHTS UNDER INTERPOINT POLICIES Interpoint and ADIC agree that, following the Effective Time, ADIC shall retain all rights of an insured party (to the extent ADIC is an insured party) under each of the Interpoint Policies with respect to any injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Effective Time by any party in or in connection with the conduct of the ADIC Business or against ADIC or any ADIC Subsidiary, to the extent that such injury, loss, liability, damage or expense may arise out of insured or insurable occurrences or events under one or more of the Interpoint Policies. If, subsequent to the Effective Time, any person, corporation, firm or entity shall assert such a claim against ADIC or any ADIC Subsidiary, Interpoint shall at the time such claim is asserted be deemed to assign, without need of further documentation, to ADIC any and all rights of an insured party under the applicable Interpoint Policy with respect to such asserted claim, specifically including rights of indemnity, if any, and the right, if any, to be defended by or at the expense of the insurer; provided, however, that nothing in this paragraph shall be deemed to constitute (or to reflect) the assignment of the Interpoint Policies, or any of them, to ADIC. 4.02 ADMINISTRATION AND ALLOCATIONS (a) Administration. From and after the Effective Time, Interpoint shall be responsible for accounting for premiums,indemnity payments, deductibles and retentions, as appropriate under the terms and conditions of each of the Interpoint Policies; distributing -14- 15 Insurance Proceeds as contemplated by this Agreement; reporting to insurers its own Insured Claims and those Insured Claims which ADIC has reported to it; and processing and managing Insured Claims made under the Interpoint Policies based upon supporting information and documentation provided by the party submitting such Insured Claim; provided that Interpoint's retention of the administrative responsibilities for the Interpoint Policies listed in this paragraph (a) will not relieve the party submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely and in a timely manner. Each of Interpoint and ADIC shall administer and pay any costs related to defending its respective Insured Claims under the Interpoint Policies to the extent such defense costs are not covered under such policies, and will be responsible for obtaining or reviewing the appropriateness of releases upon settlement of its respective Insured Claims under the Interpoint Policies. The retention of the Interpoint Policies by Interpoint is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured under the Interpoint Policies, including, but not limited to, ADIC and any of its operations, and any ADIC Subsidiary or Affiliate. (b) Insurance Premiums. (i) Prepaid Premiums. Upon the written request of ADIC, Interpoint shall promptly direct the insurance carrier for each Interpoint Policy on which premiums will be prepaid as of the Effective Time to credit the amount of each such prepayment made by ADIC against the premiums to be paid by ADIC on the comparable policy to be effective for ADIC following the Distribution. ADIC shall not receive such credit for any such prepaid premium that was not paid by ADIC prior to the Effective Time. (ii) Premium Adjustment for Package Policy. In the event that upon the cancellation or termination of the "package policy" there are additional premiums payable, or entitlement to return of premiums previously paid, with respect to such policy as a result of the actual sales of Interpoint and ADIC, then such amounts shall be paid by, or refund paid to, Interpoint and/or ADIC, as the case may be, to the extent that such additional payment or refund arises due to sales of that party.. (c) Allocation of Policy Limits. Interpoint and ADIC agree that where ADIC Liabilities are specifically covered under Interpoint Policies in effect for periods prior to the Effective Time, then from and after the Effective Time ADIC may claim for Insured Claims under each such Interpoint Policy as and to the extent that such insurance is available up to the full extent of the applicable fixed dollar coverage limits of the policy, subject to the terms of this Section 4.02(c). Except with respect to Interpoint Policies providing for directors and officers liability insurance coverage which are not be subject to the remainder of this Section 4.02(c), in the event that the aggregate of Insured Claims by Interpoint and ADIC have exhausted the fixed dollar coverage limits under a particular Interpoint Policy, taking into account defense costs to the extent such costs are applied against such limits of such policy, then the party that has utilized more than its "allocable portion" (as defined below) of the fixed dollar coverage limits under such Policy (the "benefitted party") shall indemnify the party -15- 16 which utilized less than its allocable portion of such fixed dollar coverage limits (the "nonexceeding party") for any subsequent claim by the nonexceeding party (including, without limitation, defense costs related to such claim) arising out of an insured or insurable occurrence or event under such Interpoint Policy which would have been an Insured Claim but for the fact that the limits of such Interpoint Policy were exceeded, up to the difference between such parties allocable portion of the fixed dollar coverage limits under such Interpoint Policy and the amount of such fixed dollar coverage limits (excluding defense costs to the extent such costs are not applied against the fixed dollar coverage limits) actually utilized by the nonexceeding party (the "maximum reimbursement amount"). The nonexceeding party shall submit to the benefitted party the same information and documentation that it would have been required to submit to the insurance carrier under the applicable Interpoint Policy within the same time frames provided for in such Interpoint Policy, and the benefitted party shall, within 30 days of receipt of documentation supporting such claim, either pay such claim or give written notice denying the claim to the nonexceeding party. ADIC's "allocable portion" is the percentage of consolidated Interpoint sales attributable to the ADIC business for the 1996 fiscal year prior to the Merger, and Interpoint's "allocable portion" is the percentage of consolidated Interpoint sales attributable to the Interpoint Business for the same period. In the event the benefitted party denies any claim, then the parties shall select an independent insurance coverage expert within 30 days of the notice of denial. If the parties are unable to agree on an independent insurance coverage expert, then each party shall select one independent insurance coverage expert within 45 days of the notice of denial, and a third independent insurance coverage expert shall be selected by mutual agreement of the first two independent insurance coverage experts within 60 days of the notice of denial. If the parties agree on the selection of an independent insurance coverage expert, such expert so selected, or if the parties do not so agree, the third independent insurance coverage expert so selected, shall interpret the terms, provisions and conditions of the applicable Interpoint Policy and shall determine, within 45 days of being selected, whether the claim would have been an Insured Claim under such Interpoint Policy and the amount of reimbursement that the nonexceeding party will receive in settlement of such claim; provided, however, that the aggregate amount of claims paid by a benefitted party under this paragraph (c) shall not exceed the maximum reimbursement amount. The decision of the independent insurance coverage expert will be final and binding on the parties, and no appeal may be taken from that decision. Fees and costs for attorneys, experts and all independent insurance coverage experts will be borne equally by the parties. This agreement of the parties to submit disputes between them to the procedures set forth in this paragraph (c) will not be deemed a waiver of legal defenses, including, but not limited to, statutes of limitations, that either party may have. Except as set forth in this paragraph (c) or in paragraph (d) of this Section 4.02, Interpoint and ADIC will not be liable to one another for claims by the other not reimbursed by insurers for any other reason whatsoever not within the control of Interpoint or ADIC, as -16- 17 the case may be, including, but not limited to, coinsurance provisions, deductibles, quota share deductibles, self-insured retentions, bankruptcy or insolvency of an insurance carrier, Interpoint Policy limitations or restrictions, any coverage disputes, any failure to timely claim by ADIC or Interpoint or any defect in such claim or its processing. (d) Allocation of Insurance Deductibles. Insured Claims by both Interpoint and ADIC shall be subject to, and shall apply toward the satisfaction of, the full amount of applicable deductibles or self-insured retentions under the Interpoint Policies; provided that, if the aggregate deductibles or self-insured retentions under any Interpoint Policy (other than a Interpoint Policy providing for directors and officers liability coverage) are exceeded and one company benefits from the deductibles or retentions paid by the other, then the benefitted company shall reimburse the other company to the extent of such benefit up to its allocable portion of such aggregate deductible or retention within 30 days of receipt of such benefit. (e) Allocation of Insurance Proceeds. Interpoint shall direct the insurance carriers to pay Insurance Proceeds with respect to claims, costs and expenses under the Interpoint Policies directly to ADIC with respect to ADIC Insured Claims and directly to Interpoint with respect to Interpoint's Insured Claims. The parties agree to use their best efforts to cooperate with respect to insurance matters. 4.03 AGREEMENT FOR SHARED DEFENSE In the event that Insured Claims of both ADIC and Interpoint exist relating to the same occurrence, ADIC and Interpoint agree to jointly defend such Insured Claim; provided, that, if, in the reasonable judgment of one party, a conflict of interest between Interpoint and ADIC exists in respect of such Insured Claim or if the other party assumes responsibility for such Insured Claim with any reservations or exceptions, the party which concludes that a conflict exists or that has not assumed responsibility for such Insured Claim will have the right to employ separate counsel reasonably satisfactory to the other party. In that event, the fees and expenses of such separate counsel will be paid by the party retaining such counsel unless the other party shall have indemnified such party against such fees and expenses pursuant to this Agreement or otherwise. Nothing in this Section 4.03 shall be construed to limit or otherwise alter in any way the indemnity obligations of the parties to this Agreement, by operation of law or otherwise. 4.04 DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICIES Interpoint shall comply with its obligations as set forth in Section 6.10 of the Merger Agreement with respect to Interpoint Policies providing for directors and officers liability coverage. -17- 18 ARTICLE V INDEMNIFICATION 5.01 INDEMNIFICATION BY INTERPOINT Except as otherwise set forth herein, Interpoint shall indemnify, defend and hold harmless ADIC, each of its directors, officers, employees and agents, each Affiliate of ADIC and each of the heirs, executors, successors and assigns of any of the foregoing (the "ADIC Indemnitees") from and against any and all Indemnifiable Losses of the ADIC Indemnitees arising out of, by reason of or otherwise in connection with the Interpoint Liabilities. 5.02 INDEMNIFICATION BY ADIC Except as otherwise set forth herein, ADIC shall indemnify, defend and hold harmless Interpoint, each of its directors, officers, employees and agents, each Affiliate of Interpoint and each of the heirs, executors, successors and assigns of any of the foregoing (the "Interpoint Indemnitees") from and against any and all Indemnifiable Losses of the Interpoint Indemnitees arising out of, by reason of or otherwise in connection with the ADIC Liabilities. 5.03 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS The amount which any party (an "Indemnifying Party") is or may be required to pay to any other party (an "Indemnitee") pursuant to Section 5.01 or Section 5.02 shall be reduced (retroactively or prospectively) by any insurance proceeds or other amounts actually recovered by or on behalf of such Indemnitee, in reduction of the related Indemnifiable Loss. If an Indemnitee shall have received the payment required by this Agreement from an Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently actually receive insurance proceeds or other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of such insurance proceeds or other amounts actually received, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable Loss. 5.04 PROCEDURE FOR INDEMNIFICATION (a) If an Indemnitee shall receive notice or otherwise learn of the assertion by a person (including, without limitation, any governmental entity) who is not a party to this Agreement or the Merger Agreement of any claim or of the commencement by any such person of any Action (a "Third Party Claim") with respect to which an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof promptly after becoming aware of such Third Party Claim; provided, however, that the failure of any Indemnitee to give notice as provided in this Section 5.04 shall not relieve the applicable Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is -18- 19 prejudiced by such failure to give notice. Such notice shall describe the Third Party Claim in reasonable detail and shall indicate the amount (estimated if necessary) of the Indemnifiable Loss that has been or may be sustained by such Indemnitee. (b) Subject to the proviso of the following sentence, an Indemnifying Party shall defend or seek to settle or compromise, at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, any Third Party Claim. Within 30 days of the receipt of notice from an Indemnitee in accordance with Section 5.04(a) (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the applicable Indemnitee whether the Indemnifying Party will assume responsibility for defending such Third Party Claim, which notice must specify any reservations or exceptions with respect to such assumption of responsibility; provided, however, that an Indemnifying Party may elect not to assume responsibility for defending a Third Party Claim only in the event of a good faith dispute that a claim was appropriately tendered under Section 5.01 or 5.02, as the case may be, in which case the Indemnitee may defend or seek to compromise or settle such Third Party Claim. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third Party Claim, such Indemnifying Party will not be liable to such Indemnitee under this Article V for any legal or other expenses (except expenses approved in advance by the Indemnifying Party) subsequently incurred by such Indemnitee in connection with the defense thereof; provided, that, if the defendants in any such claim include both the Indemnifying Party and one or more Indemnitees and in such Indemnitees' reasonable judgment a conflict of interest between such Indemnitees and such Indemnifying Party exists in respect of such claim or if the Indemnifying Party shall assume responsibility for such claim with any reservations or exceptions, such Indemnitees will have the right to employ separate counsel reasonably satisfactory to the Indemnifying Party to represent such Indemnitees, and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel) will be paid by such Indemnifying Party. (c) If an Indemnifying Party elects to defend or to seek to compromise any Third Party Claim, the appropriate Indemnitee shall (x) cooperate in all reasonable respects with the Indemnifying Party in connection with such defense, (y) not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party's prior written consent and (z) agree to any settlement, compromise or discharge of such Third Party Claim which the Indemnifying Party may recommend and which by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and which releases the Indemnifying Party completely in connection with such Third Party Claim. (d) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances with respect to which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim. Such Indemnitee shall cooperate -19- 20 with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. (e) With respect to any Third Party Claim for which the Indemnifying Party assumes responsibility for defense, the Indemnifying Party shall inform the Indemnitee, upon the reasonable written request of the Indemnitee, of the status of efforts to resolve such Third Party Claim. With respect to any Third Party Claim for which the Indemnifying Party does not assume such responsibility, the Indemnitee shall inform the Indemnifying Party, upon the reasonable written request of the Indemnifying Party, of the status of efforts to resolve such Third Party Claim. 5.05 SURVIVAL OF INDEMNITIES The obligations of Interpoint and ADIC under this Article V shall survive the sale or other transfer by it of any assets or businesses or the assignment by it of any Liabilities, with respect to any Indemnifiable Loss of the other related to such assets, businesses or Liabilities. All obligations of Interpoint and ADIC under this Article V shall terminate five years after the Distribution Date, except with respect to claims for which one party has provided notice to the other prior to the end of such five-year period. ARTICLE VI ACCESS TO INFORMATION 6.01 PROVISION OF CORPORATE RECORDS Interpoint shall use its best efforts to arrange, as soon as practicable following the Distribution Date, for the transportation to ADIC of all original agreements, documents, books, records and files relating to or affecting ADIC, any ADIC Subsidiary or the ADIC Business (collectively "Records"), to the extent such items are not already in the possession of ADIC or a ADIC Subsidiary, subject to the following exceptions: (i) ADIC recognizes that certain Records may contain incidental information relating to Interpoint and the Interpoint Subsidiaries or may relate primarily to subsidiaries or divisions of Interpoint other than ADIC and the ADIC Subsidiaries, and that Interpoint may retain such Records and provide copies of the relevant portions thereof to ADIC; and (ii) Interpoint may retain any tax returns, reports, forms or work papers, and ADIC will be provided with copies of such returns, reports, forms or work papers only to the extent that they relate to or affect ADIC and the ADIC Subsidiaries' returns or tax liability. -20- 21 6.02 ACCESS TO INFORMATION From and after the Distribution Date, each of Interpoint and ADIC shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified information, to the personnel, properties, books and records of such party and its subsidiaries insofar as such access is reasonably required by the other party. 6.03 CONFIDENTIALITY Each of Interpoint and the Interpoint Subsidiaries on the one hand, and ADIC and the ADIC Subsidiaries on the other hand, shall hold, and shall cause its respective consultants and advisors to hold, in strict confidence, all information concerning the other in its possession (except to the extent that such information has been (a) in the public domain through no fault of such party or (b) later lawfully acquired from other sources by such party) to the extent such information (i) relates to the period up to the Effective Time, (ii) relates to this Agreement or (iii) is obtained from the other party pursuant to this Agreement, and each party shall not release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors, unless compelled to disclose by judicial or administrative process or, as advised by its counsel, by other requirements of law. ARTICLE VII MISCELLANEOUS 7.01 COMPLETE AGREEMENT; CONSTRUCTION This Agreement and the Tax Allocation Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and thereof, and supersedes all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between the provisions of this Agreement and the provisions of the Tax Allocation Agreement, the provision of the Tax Allocation Agreement will be controlling. To the extent any liability for any tax is not covered by the provisions of the Tax Allocation Agreement, such liability will be treated as a Liability hereunder. 7.02 SURVIVAL OF AGREEMENTS Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement will survive the Distribution Date. 7.03 GOVERNING LAW This Agreement will be governed by and construed in accordance with the laws of the State of Washington, without regard to the principles of conflicts of laws thereof. -21- 22 7.04 NOTICES All notices and other communications hereunder must be in writing and must be delivered by hand, mailed by registered or certified mail (return receipt requested) or sent by facsimile transmission to the parties at the following addresses (or at such other addresses for a party as may be specified by like notice) and will be deemed given on the date on which such notice is received: To Interpoint: 10301 Willows Road Redmond, Washington 98052 Attn: Chief Executive Officer Fax: (206) 869-7402 To ADIC: 10201 Willows Road Redmond, Washington 98052 Attn: Chief Executive Officer Fax: (206) 881-2296 7.05 AMENDMENTS This Agreement may not be modified or amended except by an agreement in writing signed by the parties. 7.06 SUCCESSORS AND ASSIGNS Except in connection with a merger (including the Merger) or consolidation or the sale of all or substantially all the assets of a party hereto, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by either party hereto without the prior written consent of the other, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided, however, that the provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. 7.07 TERMINATION This Agreement may be terminated and the Distribution abandoned at any time prior to the Distribution Record Date by and in the sole discretion of the Board of Directors of Interpoint without the approval of ADIC or of Interpoint's shareholders. In the event of such termination, no party will have any liability of any kind to any other party. -22- 23 7.08 NO THIRD PARTY BENEFICIARIES Except for the provisions of Article V relating to Indemnitees and as otherwise expressly provided herein, this Agreement is solely for the benefit of the parties hereto and their respective successors and permitted assigns and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 7.09 TITLE AND HEADINGS Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 7.10 LEGAL ENFORCEABILITY Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party hereto, each party hereto acknowledges that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder are specifically enforceable. 7.11 COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. 23 24 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. INTERPOINT CORPORATION By ----------------------- Its -------------------- ADVANCED DIGITAL INFORMATION CORPORATION By ----------------------- Its -------------------- 24 EX-3.1 3 RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 ADVANCED DIGITAL INFORMATION CORPORATION RESTATED ARTICLES OF INCORPORATION Pursuant to provisions of RCW 23B.10.070, the following constitutes Restated Articles of Incorporation of Advanced Digital Information Corporation, a Washington corporation. ARTICLE 1. NAME The name of this corporation is Advanced Digital Information Corporation. ARTICLE 2. DURATION This corporation is organized under the Washington Business Corporation Act and has perpetual existence. ARTICLE 3. POWERS This corporation has any and all powers that a corporation formed under the Washington Business Corporation Act, or any amendment thereto or substitute therefor, may at the time lawfully exercise. ARTICLE 4. CAPITAL STOCK 4.1 AUTHORIZED CAPITAL The total authorized stock of this corporation consists of 40,000,000 shares of Common Stock, no par value, and 2,000,000 shares of Preferred Stock, no par value. 4.2 ISSUANCE OF PREFERRED STOCK IN SERIES The Preferred Stock may be issued from time to time in one or more series, the shares of each series to have the designation, voting power, preferences, limitations and relative rights as are set forth herein or in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors. 4.2.1 AUTHORITY OF THE BOARD OF DIRECTORS Authority is hereby expressly granted to the Board of Directors of this corporation, subject to the provisions of this Article 4 and to the limitations prescribed by law, to authorize the issue of one or more series of Preferred Stock. The authority of the Board of - -------------------------------------------------------------------------------- ADIC RESTATED ARTICLES OF INC. PAGE 1 2 Directors with respect to each series of Preferred Stock includes, but is not limited to, the determination or fixing of the following: (a) The number of shares of such series; (b) The designation of such series; (c) The dividends of such series, the conditions and dates upon which such dividends are payable, the relation which such dividends bear to the dividends payable on any other class or classes of stock and whether such dividends are cumulative or noncumulative; (d) Whether the shares of such series are subject to redemption by this corporation and, if so subject to redemption, the terms and conditions of such redemption; (e) The terms and amounts of any sinking fund provided for the purchase or redemption of the shares of such series; (f) Whether or not the shares of such series are convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of stock of this corporation and, if provision is made for conversion or exchange, the terms and conditions of such conversion or exchange; (g) The extent, if any, to which the holders of the shares of such series are entitled to vote with respect to the election of directors or otherwise, including the right to elect a specified number or class of directors, the number or percentage of votes required for certain actions, and the extent to which a vote by class or series is required for certain actions; (h) The restrictions, if any, on the issue or reissue of any shares of such series; (i) The rights of the holders of the shares of such series upon the dissolution of, or upon the distribution of the assets of, this corporation; and (j) The extent, if any, to which any committee of the Board of Directors may establish the designation of and the voting power, preferences, limitations and relative rights of the shares of such series. 4.2.2 DIVIDENDS Subject to any preferential rights granted for any series of Preferred Stock, the holders of shares of the Common Stock are entitled to receive dividends, out of the funds of this corporation legally available therefor, at the rate and at the time or times, whether cumulative or noncumulative, as may be provided by the Board of Directors. The holders - -------------------------------------------------------------------------------- ADIC RESTATED ARTICLES OF INC. PAGE 2 3 of shares of the Preferred Stock are entitled to receive dividends to the extent provided herein or by the Board of Directors in designating the particular series of Preferred Stock. The holders of shares of the Common Stock are not entitled to receive any dividends thereon other than the dividends referred to in this section. 4.2.3 VOTING The holders of shares of the Common Stock, on the basis of one vote per share, have the right to vote for the election of members of the Board of Directors of this corporation and the right to vote on all other matters, except those matters on which a separate class of this corporation's shareholders vote by class or series to the exclusion of the holders of the shares of the Common Stock. To the extent provided herein or by resolution or resolutions of the Board of Directors providing for the issue of a series of Preferred Stock, the holders of each such series have the right to vote for the election of members of the Board of Directors of this corporation and the right to vote on all other matters, except those matters in which a separate class of this corporation's shareholders vote by class or series to the exclusion of the holders of the shares of such series. 4.2.4 ISSUANCE OF SHARES This corporation may from time to time issue and dispose of any of the authorized and unissued shares of the Common Stock or the Preferred Stock for such consideration as may be fixed from time to time by the Board of Directors, without action by the shareholders. The Board of Directors may provide for payment therefor to be received by this corporation in cash, property, services or such other consideration as is approved by the Board of Directors. Any and all such shares of the Common Stock or the Preferred Stock of this corporation, the issuance of which has been so authorized, and for which consideration so fixed by the Board of Directors has been paid or delivered, will be deemed fully paid stock and will not be liable to any further call or assessment thereon. ARTICLE 5. PREEMPTIVE RIGHTS No preemptive rights exist with respect to shares of stock or securities convertible into shares of stock of this corporation. ARTICLE 6. CUMULATIVE VOTING The right to cumulate votes in the election of Directors does not exist with respect to shares of stock of this corporation. ARTICLE 7. BYLAWS The Board of Directors has the power to adopt, amend or repeal the Bylaws of this corporation, subject to approval by a majority of the Continuing Directors (as defined in Article 13). The shareholders also have the power to adopt, amend or repeal the Bylaws of - -------------------------------------------------------------------------------- ADIC RESTATED ARTICLES OF INC. PAGE 3 4 this corporation by the affirmative vote of the holders of not less than two-thirds of the outstanding shares and, to the extent, if any, provided by a resolution or resolutions of the Board of Directors providing for the issuance of a series of Common Stock or Preferred Stock, not less than two-thirds of the outstanding shares entitled to vote thereon, voting as a class. ARTICLE 8. REGISTERED OFFICE AND AGENT The name of the registered agent of this corporation and the address of its registered office are as follows: Peter H. van Oppen Advanced Digital Information Corporation 10201 Willows Road Redmond, WA 98052 ARTICLE 9. DIRECTORS The number of Directors of this corporation will be determined in the manner provided by the Bylaws and may be increased or decreased from time to time in the manner provided therein. The Board of Directors will be divided into three classes, with said classes to be as equal in number as is possible. At the first election of Directors to such classified Board of Directors, each Class 1 Director will be elected to serve until the next ensuing annual meeting of shareholders, each Class 2 Director will be elected to serve until the second ensuing annual meeting of shareholders and each Class 3 Director will be elected to serve until the third ensuing annual meeting of shareholders. At each annual meeting of shareholders following the meeting at which the Board of Directors is initially classified, the number of Directors equal to the number of Directors in the class whose term expires at the time of such meeting will be elected to serve until the third ensuing annual meeting of shareholders. Notwithstanding any of the foregoing provisions of this Article, Directors will serve until their successors are elected and qualified or until their earlier death, resignation or removal from office, or until there is a decrease in the number of Directors. The Directors of this corporation may be removed only for cause. Any such removal must be approved by the holders of not less than two-thirds of the shares entitled to elect the Director or Directors whose removal is sought in the manner provided by the Bylaws. ARTICLE 10. AMENDMENTS TO ARTICLES OF INCORPORATION This corporation reserves the right to amend or repeal by the affirmative vote of the holders of a majority of the outstanding shares and, to the extent, if any, provided by a resolution or resolutions of the Board of Directors providing for the issuance of a series of Common Stock or Preferred Stock, a majority of the outstanding shares entitled to vote - -------------------------------------------------------------------------------- ADIC RESTATED ARTICLES OF INC. PAGE 4 5 thereon, voting as a class, any of the provisions contained in these Articles of Incorporation in any manner now or hereafter permitted by law; provided, however, that amendment or repeal of Article 7, Article 9, Article 10, Article 12 or Article 13 shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares. The rights of the shareholders of this corporation are granted subject to this reservation. ARTICLE 11. LIMITATION OF DIRECTOR LIABILITY To the full extent that the Washington Business Corporation Act, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of Directors, a Director of this corporation will not be liable to this corporation or its shareholders for monetary damages for conduct as a Director. Any amendments to or repeal of this Article 11 will not adversely affect any right or protection of a Director of this corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment or repeal. ARTICLE 12. SPECIAL MEETINGS OF SHAREHOLDERS The Chairman of the Board of Directors, the President or the Board of Directors may call special meetings of the shareholders for any purpose. Further, a special meeting of the shareholders will be held if the holders of not less than 10% of all the votes entitled to be cast on any issue proposed to be considered at such special meeting have dated, signed and delivered to the Secretary of this corporation one or more written demands for such meeting, describing the purpose or purposes for which it is to be held, provided, however, that upon qualification of the corporation as a "public company" under Title 23B RCW the percentage of votes required to call a special meeting will be 50%. ARTICLE 13. SPECIAL VOTING REQUIREMENTS In addition to any affirmative vote required by law, by these Restated Articles of Incorporation or otherwise, any "Business Combination" (as hereinafter defined) involving this corporation will be subject to approval in the manner set forth in this Article 13. 13.1 DEFINITIONS For the purposes of this Article 13: (a) "Business Combination" means (i) a merger, share exchange or consolidation of this corporation or any of its Subsidiaries with any other corporation; (ii) the sale, lease, exchange, mortgage, pledge, transfer or other disposition or encumbrance, whether in one transaction or a series of transactions, by this corporation or any of its Subsidiaries of all or a substantial part of this corporation's assets otherwise than in the usual and regular course of business; or (iii) any agreement, contract or other arrangement providing for any of the foregoing transactions. - -------------------------------------------------------------------------------- ADIC RESTATED ARTICLES OF INC. PAGE 5 6 (b) "Continuing Director" means any member of the Board of Directors who was a member of the Board of Directors on August 1, 1996 or who is elected to the Board of Directors after such date upon the recommendation of a majority of the Continuing Directors voting separately and as a subclass of Directors on such recommendation. (c) "Subsidiary" means a domestic or foreign corporation, a majority of the outstanding voting shares of which are owned, directly or indirectly, by this corporation. 13.2 VOTE REQUIRED FOR BUSINESS COMBINATIONS 13.2.1 SUPERMAJORITY VOTE Except as provided in subsections 13.2.2 and 13.2.3 hereof, the affirmative vote of the holders of not less than two-thirds of the outstanding shares entitled to vote thereon and, to the extent, if any, provided by resolution adopted by the Board of Directors authorizing the issuance of a class or series of Common Stock or Preferred Stock, the affirmative vote of the holders of not less than two-thirds of the outstanding shares of such class or series, voting as a separate voting group, will be required for the adoption or authorization of a Business Combination. 13.2.2 MAJORITY VOTE Notwithstanding subsection 13.2.1 hereof, if a Business Combination has been approved by a majority of the Continuing Directors, voting separately and as a subclass of Directors, and if such Business Combination is otherwise required to be approved by this corporation's shareholders pursuant to the provisions of the Washington Business Corporation Act or of these Restated Articles of Incorporation other than this Article 13, then the affirmative vote of the holders of not less than a majority of the outstanding shares entitled to vote thereon and, to the extent, if any, provided by resolution adopted by the Board of Directors authorizing the issuance of a class or series of Common Stock or Preferred Stock, the affirmative vote of the holders of not less than a majority of the outstanding shares of such class or series, voting as a separate voting group, will be required for the adoption or authorization of such Business Combination. 13.2.3 NO SHAREHOLDER VOTE Notwithstanding subsection 13.2.1 or 13.2.2 hereof, if a Business Combination is approved by a majority of the Continuing Directors, voting separately and as a subclass of Directors, and if such Business Combination is not otherwise required to be approved by this corporation's shareholders pursuant to the provisions of the Washington Business Corporation Act or of these Restated Articles of Incorporation, then no vote of the shareholders of this corporation will be required for approval of such Business Combination. - -------------------------------------------------------------------------------- ADIC RESTATED ARTICLES OF INC. PAGE 6 7 DATED: August 9, 1996 ADVANCED DIGITAL INFORMATION CORPORATION By: /s/ PETER H. VAN OPPEN ----------------------------------------- Peter H. van Oppen, President - -------------------------------------------------------------------------------- ADIC RESTATED ARTICLES OF INC. PAGE 7 EX-3.2 4 RESTATED BYLAWS 1 EXHIBIT 3.2 RESTATED BYLAWS OF ADVANCED DIGITAL INFORMATION CORPORATION Originally adopted on: July 22, 1996 Amendments are listed on page i 2 ADVANCED DIGITAL INFORMATION CORPORATION AMENDMENTS DATE OF SECTION EFFECT OF AMENDMENT AMENDMENT - -------------- ----------------------------------------- --------------------- -i- 3 TABLE OF CONTENTS SECTION 1. OFFICES..........................................................1 SECTION 2. SHAREHOLDERS.....................................................1 2.1 Annual Meeting..................................................1 2.2 Special Meetings................................................1 2.3 Date, Time and Place of Meeting.................................1 2.4 Notice of Meeting...............................................1 2.5 Business for Shareholders' Meetings.............................2 2.5.1 Business at Annual Meetings..........................2 2.5.2 Business at Special Meetings.........................3 2.5.3 Notice to Corporation................................3 2.6 Waiver of Notice................................................3 2.7 Fixing of Record Date for Determining Shareholders..............3 2.8 Voting Record...................................................4 2.9 Quorum..........................................................4 2.10 Manner of Acting...............................................4 2.11 Proxies........................................................4 2.12 Voting of Shares...............................................5 2.13 Voting for Directors...........................................5 2.14 Action by Shareholders Without a Meeting.......................5 SECTION 3. BOARD OF DIRECTORS...............................................5 3.1 General Powers..................................................5 3.2 Number and Tenure...............................................5 3.3 Nomination and Election.........................................6 3.3.1 Nomination...........................................6 3.3.2 Election.............................................7 3.4 Annual and Regular Meetings.....................................7 3.5 Special Meetings................................................7 3.6 Meetings by Communication Equipment.............................7 3.7 Notice of Special Meetings......................................7 3.7.1 Personal Delivery....................................7 3.7.2 Delivery by Mail.....................................7 3.7.3 Delivery by Private Carrier.........................8 3.7.4 Facsimile Notice....................................8 3.7.5 Delivery by Telegraph................................8 3.7.6 Oral Notice..........................................8 3.8 Waiver of Notice................................................8 3.8.1 In Writing...........................................8 3.8.2 By Attendance........................................8 3.9 Quorum..........................................................8 3.10 Manner of Acting...............................................9 -ii- 4 3.11 Presumption of Assent.........................................9 3.12 Action by Board or Committees Without a Meeting...............9 3.13 Resignation...................................................9 3.14 Removal.......................................................9 3.15 Vacancies.....................................................9 3.16 Executive and Other Committees................................10 3.16.1 Creation of Committees.............................10 3.16.2 Authority of Committees............................10 3.16.3 Audit Committee....................................10 3.16.4 Compensation Committee.............................10 3.16.5 Quorum and Manner of Acting........................11 3.16.6 Minutes of Meetings................................11 3.16.7 Resignation........................................11 3.16.8 Removal............................................11 3.17 Compensation..................................................11 SECTION 4. OFFICERS........................................................12 4.1 Appointment and Term...........................................12 4.2 Resignation....................................................12 4.3 Removal........................................................12 4.4 Contract Rights of Officers....................................12 4.5 Vacancies......................................................12 4.6 Chairman of the Board..........................................12 4.7 President......................................................13 4.8 Vice President.................................................13 4.9 Secretary......................................................13 4.10 Treasurer.....................................................13 4.11 Salaries......................................................14 SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS...........................14 5.1 Contracts......................................................14 5.2 Loans to the Corporation.......................................14 5.3 Checks, Drafts, Etc............................................14 5.4 Deposits.......................................................14 SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER......................14 6.1 Issuance of Shares.............................................14 6.2 Certificates for Shares........................................14 6.3 Stock Records..................................................15 6.4 Restriction on Transfer........................................15 6.5 Transfer of Shares.............................................15 6.6 Lost or Destroyed Certificates.................................15 -iii- 5 SECTION 7. BOOKS AND RECORDS...............................................15 SECTION 8. ACCOUNTING YEAR.................................................16 SECTION 9. SEAL............................................................16 SECTION l0. INDEMNIFICATION................................................17 10.1 Right to Indemnification......................................17 10.2 Restrictions on Indemnification...............................17 10.3 Advancement of Expenses.......................................17 10.4 Right of Indemnitee to Bring Suit.............................18 10.5 Procedures Exclusive..........................................18 10.6 Nonexclusivity of Rights......................................18 10.7 Insurance, Contract and Funding...............................18 10.8 Indemnification of Employee and Agent of the Corporation......18 10.9 Person Serving Other Entities.................................19 SECTION 11. AMENDMENTS.....................................................19 -iv- 6 RESTATED BYLAWS OF ADVANCED DIGITAL INFORMATION CORPORATION SECTION 1. OFFICES The principal office of the corporation is its principal place of business or such other place as the corporation's Board of Directors (the "Board") may designate. The corporation may have such other offices, either within or without the state of Washington, as the Board may designate or as the business of the corporation may require from time to time. SECTION 2. SHAREHOLDERS 2.1 ANNUAL MEETING The annual meeting of the shareholders shall be held each year within 90 to 180 days after the fiscal year end of the corporation at a date, time and location determined by resolution of the Board of Directors, for the purpose of electing Directors and transacting such other business as may properly come before the meeting. At any time prior to the commencement of the annual meeting, the Board may postpone the annual meeting for a period of up to one hundred twenty 120 days from the date fixed for such meeting in accordance with this subsection 2.1. 2.2 SPECIAL MEETINGS The Chairman of the Board, the President or the Board may call special meetings of the shareholders for any purpose. Further, a special meeting of the shareholders will be held if the holders of not less than 10% of all the votes entitled to be cast on any issue proposed to be considered at such special meeting have dated, signed and delivered to the Secretary one or more written demands for such meeting, describing the purpose or purposes for which it is to be held; provided, however, that upon qualification of the corporation as a "public company" under Title 23B RCW the percentage of votes required to call a special meeting will be 50%. 2.3 DATE, TIME AND PLACE OF MEETING Except as otherwise provided, all meetings of shareholders will be held on such date and at such time and place within or without the state of Washington as designated by the Board, by any persons entitled to call a meeting hereunder or in a waiver of notice signed by all of the shareholders entitled to notice of the meeting. 2.4 NOTICE OF MEETING Written notice stating the place, day and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called must be given by or at the direction of the Board, the Chairman of the Board, the President or the Secretary to each -1- 7 shareholder entitled to notice of or to vote at the meeting not less than 10 nor more than 60 days before the meeting, except that notice of a meeting to act on an amendment to the Articles of Incorporation, a plan of merger or share exchange, the sale, lease, exchange or other disposition of all or substantially all of the corporation's assets other than in the regular course of business or the dissolution of the corporation must be given not less than 20 nor more than 60 days before such meeting. Such notice may be transmitted by mail, private carrier, personal delivery, telegraph, teletype or communications equipment which transmits a facsimile of the notice to like equipment which receives and reproduces such notice. If these forms of written notice are impractical in the view of the Board, the Chairman of the Board, the President or the Secretary, written notice may be transmitted by an advertisement in a newspaper of general circulation in the area of the corporation's principal office. If such notice is mailed, it will be deemed effective when deposited in the official government mail, first-class postage prepaid, properly addressed to the shareholder at such shareholder's address as it appears in the corporation's current record of shareholders. Notice given in any other manner will be deemed effective when dispatched to the shareholder's address, telephone number or other number appearing on the records of the corporation. Any notice given by publication as herein provided will be deemed effective five days after first publication. 2.5 BUSINESS FOR SHAREHOLDERS' MEETINGS 2.5.1 BUSINESS AT ANNUAL MEETINGS In addition to the election of directors, other proper business may be transacted at an annual meeting of shareholders, provided that such business is properly brought before such meeting. To be properly brought before an annual meeting, business must be (a) brought by or at the direction of the Board or (b) brought before the meeting by a shareholder pursuant to written notice thereof, in accordance with subsection 2.5.3 hereof, and received by the Secretary not fewer than 60 nor more than 90 days prior to the date specified in subsection 2.1 hereof for such annual meeting (or, if less than 60 days' notice or prior public disclosure of the date of the annual meeting is given or made to the shareholders, not later than the tenth day following the day on which the notice of the date of the annual meeting was mailed or such public disclosure was made). Any such shareholder notice must set forth (i) the name and address of the shareholder proposing such business; (ii) a representation that the shareholder is entitled to vote at such meeting and a statement of the number of shares of the corporation which are beneficially owned by such shareholder; (iii) a representation that the shareholder intends to appear in person or by proxy at the meeting to propose such business; and (iv) as to each matter the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, the language of the proposal (if appropriate), and any material interest of the shareholder in such business. No business shall be conducted at any annual meeting of shareholders except in accordance with this subsection 2.5.1. If the facts warrant, the Board, or the chairman of an annual meeting of shareholders, may determine and declare (a) that a proposal does not constitute proper business to be transacted at the meeting or (b) that business was not properly brought before the meeting in accordance with the provisions of this subsection 2.5.1 and, if, in either case, it is so determined, any such business shall not be transacted. The procedures set forth in this subsection 2.5.1 for business to be properly brought before an annual meeting by a shareholder are in addition to, and -2- 8 not in lieu of, the requirements set forth in Rule 14a-8 under Section 14 of the Securities Exchange Act of 1934, as amended, or any successor provision. 2.5.2 BUSINESS AT SPECIAL MEETINGS At any special meeting of the shareholders, only such business as is specified in the notice of such special meeting given by or at the direction of the person or persons calling such meeting, in accordance with subsection 2.4 hereof, may come before such meeting. 2.5.3 NOTICE TO CORPORATION Any written notice required to be delivered by a shareholder to the corporation pursuant to subsection 2.2, subsection 2.5.1 or subsection 2.5.2 hereof must be given, either by personal delivery or by registered or certified mail, postage prepaid, to the Secretary at the corporation's principal office. 2.6 WAIVER OF NOTICE Whenever any notice is required to be given to any shareholder under the provisions of these Bylaws, the Articles of Incorporation or the Washington Business Corporation Act ("WBCA"), a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Further, notice of the time, place and purpose of any meeting will be deemed to be waived by any shareholder by attendance thereat in person or by proxy, unless such shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting. 2.7 FIXING OF RECORD DATE FOR DETERMINING SHAREHOLDERS For the purpose of determining shareholders entitled (a) to notice of or to vote at any meeting of shareholders or any adjournment thereof, (b) to demand a special meeting, or (c) to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board may fix in advance a date as the record date for any such determination. Such record date may not be more than 70 days, and in case of a meeting of shareholders, may not be less than 10 days prior to the date on which the particular action requiring such determination is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting, the record date shall be the day immediately preceding the date on which notice of the meeting is first given to shareholders. Such a determination shall apply to any adjournment of the meeting unless the Board fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date is fixed for the determination of shareholders entitled to receive payment of any stock dividend or distribution (other than one involving a purchase, redemption or other acquisition of the corporation's shares) the record date shall be the date the Board authorizes the stock dividend or distribution. -3- 9 2.8 VOTING RECORD At least 10 days before each meeting of shareholders, a complete record of the shareholders entitled to vote at such meeting, or any adjournment thereof, shall be made, arranged by voting group and by each class or series of shares therein, with the address of and number of shares held by each shareholder. This record shall be kept on file at the registered office of the corporation for 10 days prior to such meeting and shall be kept open at such meeting for the inspection of any shareholder or any shareholder's agent. 2.9 QUORUM A majority of the votes entitled to be cast on a matter by the holders of shares that, pursuant to the Articles of Incorporation or the WBCA, are entitled to vote and be counted collectively upon such matter, represented in person or by proxy, constitutes a quorum of such shares at a meeting of shareholders. If less than a majority of such votes are represented at a meeting, a majority of the votes so represented may adjourn the meeting from time to time without further notice if the new date, time or place is announced at the meeting before adjournment. Any business may be transacted at a reconvened meeting that might have been transacted at the meeting as originally called, provided a quorum is present or represented thereat. Once a share is represented for any purpose at a meeting other than solely to object to holding the meeting or transacting business thereat, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment thereof (unless a new record date is or must be set for the adjourned meeting), notwithstanding the withdrawal of enough shareholders to leave less than a quorum. 2.10 MANNER OF ACTING If a quorum is present, action on a matter other than the election of Directors shall be approved if the votes cast in favor of the action by the shares entitled to vote and be counted collectively upon such matter exceed the votes cast against such action by the shares entitled to vote and be counted collectively thereon, unless the Articles of Incorporation or the WBCA requires a greater number of affirmative votes. 2.11 PROXIES A shareholder may vote by proxy executed in writing by the shareholder or by his or her attorney-in-fact or agent or other officer or agent authorized to tabulate votes. Such proxy is effective when received by the Secretary of the corporation before or at the time of the meeting. A proxy becomes invalid 11 months after the date of its execution, unless otherwise provided in the proxy. A proxy with respect to a specified meeting entitles the holder thereof to vote at any reconvened meeting following adjournment of such meeting, but is not valid after the final adjournment thereof. -4- 10 2.12 VOTING OF SHARES Except as provided in the Articles of Incorporation or in Section 2.13 hereof, each outstanding share entitled to vote with respect to the subject matter of an issue submitted to a meeting of shareholders is entitled to one vote upon each such issue. 2.13 VOTING FOR DIRECTORS Each shareholder entitled to vote at an election of Directors may vote, in person or by proxy, the number of shares owned by such shareholder for as many persons as there are Directors to be elected and for whose election such shareholder has a right to vote. 2.14 ACTION BY SHAREHOLDERS WITHOUT A MEETING Any action which could be taken at a meeting of the shareholders may be taken without a meeting if a written consent setting forth the action so taken is signed by all shareholders entitled to vote with respect to the subject matter thereof. If not otherwise fixed by the Board, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent. A shareholder may withdraw a consent only by delivering a written notice of withdrawal to the corporation prior to the time that all consents are in the possession of the corporation. Action taken by written consent of shareholders without a meeting is effective when all consents are in the possession of the corporation, unless the consent specifies a later effective date. Any such consent shall be inserted in the minute book as if it were the minutes of a meeting of the shareholders. SECTION 3. BOARD OF DIRECTORS 3.1 GENERAL POWERS All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the Board, except as may be otherwise provided in these Bylaws, the Articles of Incorporation or the WBCA. 3.2 NUMBER AND TENURE The Board shall be composed of not less than two nor more than eight Directors, the specific number to be set by resolution of the Board, provided that the Board may be less than such number until vacancies are filled. No decrease in the number of Directors shall have the effect of shortening the term of any incumbent Director. The Board will be divided into three classes, with said classes to be as equal in number as is possible. At the first election of Directors to such classified Board, each Class 1 Director will be elected to serve until the next ensuing annual meeting of shareholders, each Class 2 Director will be elected to serve until the second ensuing annual meeting of shareholders and each Class 3 Director will be elected to serve until the third ensuing annual meeting of shareholders. At each annual meeting of shareholders following the meeting at which the Board is initially classified, the number of Directors equal to the number of Directors in the class whose term expires at the time -5- 11 of such meeting will be elected to serve until the third ensuing annual meeting of shareholders. Notwithstanding any of the foregoing provisions of this Section 3.2, Directors will serve until their successors are elected and qualified or until their earlier death, resignation or removal from office or until there is a decrease in the number of Directors. Directors need not be shareholders of the corporation or residents of the state of Washington and need not meet any other qualifications. 3.3 NOMINATION AND ELECTION 3.3.1 NOMINATION Only persons who are nominated in accordance with the following procedures are eligible for election as Directors. Nominations for the election of Directors may be made (a) by or at the direction of the Board or (b) by any shareholder of record entitled to vote for the election of Directors at such meeting provided that such shareholder provides written notice (in accordance with subsection 2.5.3 hereof) of such shareholder's intention to make such nomination to the Secretary not later than (i) with respect to an election to be held at an annual meeting of the shareholders, not fewer than 60 nor more than 90 days prior to the date specified in subsection 2.1 hereof for such annual meeting (or if less than 60 days' notice or prior public disclosure of the date of such annual meeting is given or made to the shareholders, not later than the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made) and (ii) with respect to an election to be held at a special meeting of the shareholders for the election of Directors, the close of business on the seventh business day following the date on which notice of such meeting is first given to shareholders. Any such shareholder's notice must set forth (a) the name and address of the shareholder who intends to make a nomination; (b) a representation that the shareholder is entitled to vote at such meeting and a statement of the number of shares of the corporation which are beneficially owned by such shareholder; (c) a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) as to each person the shareholder proposes to nominate for election or re-election as a Director, the name and address of such person and such other information regarding such nominee as would be required in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had such nominee been nominated by the Board, and a description of any arrangements or understandings, between the shareholder and such nominee and any other persons (including their names), pursuant to which the nomination is to be made; and (e) the consent of each such nominee to serve as a Director if elected. If the facts warrant, the Board, or the chairman of a shareholders' meeting at which Directors are to be elected, may determine that a nomination was not made in accordance with the foregoing procedure and, if it is so determined, the defective nomination shall be disregarded. The right of shareholders to make nominations pursuant to the foregoing procedure is subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation. The procedures set forth in this subsection 3.3 for nomination for the election of Directors by shareholders are in addition to, and not in limitation of, any procedures now in effect or hereafter adopted by or at the direction of the Board or any committee thereof. -6- 12 3.3.2 ELECTION At each election of Directors, the persons receiving the greatest number of votes will be the Directors. 3.4 ANNUAL AND REGULAR MEETINGS An annual Board meeting shall be held without notice immediately after and at the same place as the annual meeting of shareholders. By resolution, the Board, or any committee thereof, may specify the time and place either within or without the state of Washington for holding regular meetings thereof without other notice than such resolution. 3.5 SPECIAL MEETINGS Special meetings of the Board or any committee designated by the Board may be called by or at the request of the Chairman of the Board, the President, the Secretary or, in the case of special Board meetings, any two Directors and, in the case of any special meeting of any committee designated by the Board, by the Chairman thereof. The person or persons authorized to call special meetings may fix any place either within or without the state of Washington as the place for holding any special Board or committee meeting called by them. 3.6 MEETINGS BY COMMUNICATION EQUIPMENT Members of the Board or any committee designated by the Board may participate in a meeting of such Board or committee by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means constitutes presence in person at a meeting. 3.7 NOTICE OF SPECIAL MEETINGS Notice of a special Board or committee meeting stating the place, date and time of the meeting shall be given to a Director in writing or orally at least two days before the meeting. Neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice of such meeting. 3.7.1 PERSONAL DELIVERY If notice is given by personal delivery, it is effective when delivered to a Director. 3.7.2 DELIVERY BY MAIL If notice is delivered by mail, it shall be deemed effective three days after it is deposited in the official government mail, as evidenced by the postmark, properly addressed to a Director at his or her address shown on the records of the corporation with postage prepaid. -7- 13 3.7.3 DELIVERY BY PRIVATE CARRIER If notice is given by private carrier, it shall be deemed effective when delivered to a Director at his or her address shown on the records of the corporation. 3.7.4 FACSIMILE NOTICE If notice is delivered by wire or wireless equipment which transmits a facsimile of the notice, the notice shall be deemed effective when dispatched to a Director at his or her telephone number or other number appearing on the records of the corporation. 3.7.5 DELIVERY BY TELEGRAPH If notice is delivered by telegraph, it shall be deemed effective when the content thereof is dispatched by the telegraph company for delivery to a Director at his or her address shown on the records of the corporation. 3.7.6 ORAL NOTICE If notice is delivered orally, by telephone or in person, it shall be deemed effective when personally given to the Director. 3.8 WAIVER OF NOTICE 3.8.1 IN WRITING Whenever any notice is required to be given to any Director under the provisions of these Bylaws, the Articles of Incorporation or the WBCA, a waiver thereof in writing, signed by the person or persons entitled to such notice and delivered to the corporation, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board or any committee designated by the Board need be specified in the waiver of notice of such meeting. 3.8.2 BY ATTENDANCE A Director's attendance at or participation in a Board or committee meeting constitutes a waiver of notice of such meeting, unless the Director at the beginning of the meeting, or promptly upon his or her arrival, objects to holding the meeting or transacting business thereat and does not thereafter vote for or assent to action taken at the meeting. 3.9 QUORUM A majority of the number of Directors fixed by or in the manner provided in these Bylaws constitutes a quorum for the transaction of business at any Board meeting but, if less than a majority are present at a meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. -8- 14 3.10 MANNER OF ACTING If a quorum is present when the vote is taken, the act of the majority of the Directors present at a Board meeting at which there is a quorum shall be the act of the Board, unless the vote of a greater number is required by these Bylaws, the Articles of Incorporation or the Washington Business Corporation Act. 3.11 PRESUMPTION OF ASSENT A Director of the corporation who is present at a Board or committee meeting at which any action is taken shall be deemed to have assented to the action taken unless (a) the Director objects at the beginning of the meeting, or promptly upon the Director's arrival, to holding the meeting or transacting any business thereat, (b) the Director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (c) the Director delivers written notice of the Director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation within a reasonable time after adjournment of the meeting. The right of dissent or abstention is not available to a Director who votes in favor of the action taken. 3.12 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING Any action which could be taken at a meeting of the Board or of any committee designated by the Board may be taken without a meeting if a written consent setting forth the action so taken is signed by each of the Directors or by each committee member either before or after the action is taken and delivered to the corporation. Action taken by written consent of Directors without a meeting is effective when the last Director signs the consent, unless the consent specifies a later effective date. Any such written consent shall be inserted in the minute book as if it were the minutes of a Board or a committee meeting. 3.13 RESIGNATION Any Director may resign at any time by delivering written notice to the Chairman of the Board, the President, the Secretary or the Board. Any such resignation takes effect at the time specified therein, or, if the time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation is not necessary to make it effective. 3.14 REMOVAL At a meeting of shareholders called expressly for that purpose, one or more members of the Board (including the entire Board) may be removed with or without cause by a vote of the holders of a majority of the shares then entitled to vote on the election of Directors, unless the Articles of Incorporation permit removal for cause only. 3.15 VACANCIES Subject to the provisions of Section 3.14 hereof and unless the Articles of Incorporation provide otherwise, any vacancy occurring on the Board may be filled by the shareholders, the Board or, if the Directors in office constitute fewer than a quorum, by the affirmative vote of a -9- 15 majority of the remaining Directors. Any vacant office held by a Director elected by the holders of one or more classes or series of shares entitled to vote and be counted collectively thereon shall be filled only by the vote of the holders of such class or series of shares. A Director elected to fill a vacancy shall serve only until the next election of Directors by the shareholders. 3.16 EXECUTIVE AND OTHER COMMITTEES 3.16.1 CREATION OF COMMITTEES The Board, by resolution adopted by a majority of the number of Directors fixed by or in the manner provided in these Bylaws, may appoint standing or temporary committees, including an Executive Committee, from its own number and invest such committees with such powers as it may see fit, subject to such conditions as may be prescribed by the Board, these Bylaws and applicable law. 3.16.2 AUTHORITY OF COMMITTEES Each committee shall have and may exercise all of the authority of the Board to the extent provided in the resolution of the Board designating the committee and any subsequent resolutions pertaining thereto and adopted in like manner, except that no such committee shall have the authority to: (1) authorize or approve a distribution except according to a general formula or method prescribed by the Board, (2) approve or recommend to shareholders actions or proposals required by the WBCA to be approved by shareholders, (3) fill vacancies on the Board or any committee thereof, (4) adopt, amend or repeal these Bylaws, (5) approve a plan of merger, consolidation, or exchange of shares not requiring shareholder approval, or (6) amend the Articles of Incorporation pursuant to RCW 23B.10.020, or (7) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the Board may authorize a committee or a senior executive officer of the corporation to do so within limits specifically prescribed by the Board. 3.16.3 AUDIT COMMITTEE In addition to any committees appointed pursuant to this Section 3.16, there shall be an Audit Committee, appointed annually by the Board, consisting of at least two Directors who are not members of management. It shall be the responsibility of the Audit Committee to review the scope and results of the annual independent audit of books and records of the corporation, to review compliance with all corporate policies which have been approved by the Board and to discharge such other responsibilities as may from time to time be assigned to it by the Board. The Audit Committee shall meet at such times and places as the members deem advisable, and shall make such recommendations to the Board as they consider appropriate. 3.16.4 COMPENSATION COMMITTEE The Board may, in its discretion, designate a Compensation Committee consisting of not less than two Directors as it may from time to time determine. The duties of the Compensation Committee shall consist of the following: (a) to establish and review periodically, but not less -10- 16 than annually, the compensation of the officers of the corporation and to make recommendations concerning such compensation to the Board; (b) to consider incentive compensation plans for the employees of the corporation; (c) to carry out the duties assigned to the Compensation Committee under any stock option plan or other plan approved by the corporation; (d) to consult with the President concerning any compensation matters deemed appropriate by the President or the Compensation Committee; and (e) to perform such other duties as shall be assigned to the Compensation Committee by the Board. 3.16.5 QUORUM AND MANNER OF ACTING A majority of the number of Directors composing any committee of the Board, as established and fixed by resolution of the Board, constitutes a quorum for the transaction of business at any meeting of such committee but, if less than a majority is present at a meeting, a majority of such Directors present may adjourn the meeting from time to time without further notice. Except as may be otherwise provided in the WBCA, the act of a majority of the members of a committee present at a meeting at which a quorum is present shall be the act of the committee. 3.16.6 MINUTES OF MEETINGS All committees shall keep regular minutes of their meetings and shall cause them to be recorded in books kept for that purpose. 3.16.7 RESIGNATION Any member of any committee may resign at any time by delivering written notice thereof to the Chairman of the Board, the President, the Secretary, the Board, or the Chairman of such committee. Any such resignation takes effect at the time specified therein, or, if the time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation is not necessary to make it effective. 3.16.8 REMOVAL The Board may remove from office any member of any committee elected or appointed by it but only by the affirmative vote of not less than a majority of the number of Directors fixed by or in the manner provided in these Bylaws. 3.17 COMPENSATION By Board resolution, Directors and committee members may be paid their expenses, if any, of attendance at each Board or committee meeting, or a fixed sum for attendance at each Board or committee meeting, or a stated salary as Director or a committee member, or a combination of the foregoing. No such payment shall preclude any Director or committee member from serving the corporation in any other capacity and receiving compensation therefor. -11- 17 SECTION 4. OFFICERS 4.1 APPOINTMENT AND TERM The officers of the corporation shall be those officers appointed from time to time by the Board or by any other officer empowered to do so. The Board shall have sole power and authority to appoint executive officers. As used herein, the term "executive officer" shall mean the President, any Vice President in charge of a principal business unit, division or function or any other officer who performs a policy-making function. The Board or the President may appoint such other officers and assistant officers to hold office for such period, have such authority and perform such duties as may be prescribed. The Board may delegate to any other officer the power to appoint any subordinate officers and to prescribe their respective terms of office, authority and duties. Any two or more offices may be held by the same person. Unless an officer dies, resigns or is removed from office, he or she shall hold office until his or her successor is appointed. 4.2 RESIGNATION Any officer may resign at any time by delivering written notice to the corporation. Any such resignation takes effect at the time specified therein, or, if the time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation is not necessary to make it effective. 4.3 REMOVAL Any officer or agent elected or appointed by the Board may be removed by the Board whenever in its judgment the best interests of the corporation would be served thereby, with or without cause. An officer or assistant officer, if appointed by another officer, may be removed by any officer authorized to appoint officers or assistant officers. 4.4 CONTRACT RIGHTS OF OFFICERS The appointment of an officer does not itself create contract rights. 4.5 VACANCIES A vacancy in any office because of death, resignation, removal, disqualification, creation of a new office or any other cause may be filled by the Board for the unexpired portion of the term or for a new term established by the Board. 4.6 CHAIRMAN OF THE BOARD If elected, the Chairman of the Board shall perform such duties as shall be assigned to him or her by the Board from time to time and shall preside over meetings of the Board and shareholders unless another officer is appointed or designated by the Board as Chairman of such meetings. -12- 18 4.7 PRESIDENT The President shall be the chief executive officer of the corporation unless some other officer is so designated by the Board, shall preside over meetings of the Board and shareholders in the absence of a Chairman of the Board, and, subject to the control, shall supervise and control all of the assets, business and affairs of the corporation. The President may sign certificates for shares of the corporation, deeds, mortgages, bonds, contracts or other instruments, except when the signing and execution thereof have been expressly delegated by the Board or by these Bylaws to some other officer or agent of the corporation or are required by law to be otherwise signed or executed by some other officer or in some other manner. In general, the President shall perform all duties incident to the office of President and such other duties as are prescribed by the Board from time to time. 4.8 VICE PRESIDENT In the event of the death of the President or his or her inability to act, the Vice President (or, if there is more than one Vice President, the Vice President who was designated by the Board as the successor to the President, or, if no Vice President is so designated, the Vice President first elected to such office) shall perform the duties of the President, except as may be limited by resolution of the Board, with all the powers of and subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary or any Assistant Secretary, certificates for shares of the corporation. Vice Presidents shall have, to the extent authorized by the President or the Board, the same powers as the President to sign deeds, mortgages, bonds, contracts, or other instruments. Vice Presidents shall perform such other duties as from time to time may be assigned to them by the President or by the Board. 4.9 SECRETARY If appointed, the Secretary shall be responsible for preparation of minutes of the meetings of the Board and shareholders, maintenance of the corporation records and stock registers, and authentication of the corporation's records, and shall in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the President or by or at the direction of the Board. In the absence of the Secretary, an Assistant Secretary may perform the duties of the Secretary. 4.10 TREASURER If required by the Board, the Treasurer shall provide a bond for the faithful discharge of his or her duties in such amount and with such surety or sureties as the Board shall determine. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in banks, trust companies or other depositories selected in accordance with the provisions of these Bylaws; and in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the President or by the Board. In the absence of the Treasurer, an Assistant Treasurer may perform the duties of the Treasurer. -13- 19 4.11 SALARIES The salaries of the officers shall be fixed from time to time by the Board or by any person or persons to whom the Board has delegated such authority. No officer shall be prevented from receiving such salary by reason of the fact that he or she is also a Director of the corporation. SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS 5.1 CONTRACTS The Board may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances. 5.2 LOANS TO THE CORPORATION No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board. Such authority may be general or confined to specific instances. 5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, or agent or agents, of the corporation and in such manner as is from time to time determined by resolution of the Board. 5.4 DEPOSITS All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board may select. SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER 6.1 ISSUANCE OF SHARES No shares of the corporation shall be issued unless authorized by the Board, or by a committee designated by the Board and empowered to do so. 6.2 CERTIFICATES FOR SHARES Certificates representing shares of the corporation shall be signed by the President or any Vice President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Secretary and shall include on their face written notice of any restrictions which may be imposed on the transferability of such shares. All certificates shall be consecutively numbered or otherwise identified. -14- 20 6.3 STOCK RECORDS The stock transfer books shall be kept at the registered office or principal place of business of the corporation or at the office of the corporation's transfer agent or registrar. The name and address of each person to whom certificates for shares are issued, together with the class and number of shares represented by each such certificate and the date of issue thereof, shall be entered on the stock transfer books of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. 6.4 RESTRICTION ON TRANSFER Except to the extent that the corporation has obtained an opinion of counsel acceptable to the corporation that transfer restrictions are not required under applicable securities laws, or has otherwise satisfied itself that such transfer restrictions are not required, all certificates representing shares of the corporation shall bear a legend on the face of the certificate, or on the reverse of the certificate if a reference to the legend is contained on the face, which reads substantially as follows: "The securities evidenced by this certificate have not been registered under the Securities Act of 1933 or any applicable state law, and no interest therein may be sold, distributed, assigned, offered, pledged or otherwise transferred unless (a) there is an effective registration statement under such Act and applicable state securities laws covering any such transaction involving said securities or (b) this corporation receives an opinion of legal counsel for the holder of these securities (concurred in by legal counsel for this corporation) stating that such transaction is exempt from registration or this corporation otherwise satisfies itself that such transaction is exempt from registration. Neither the offering of the securities nor any offering materials have been reviewed by any administrator under the Securities Act of 1933, or any applicable state law." 6.5 TRANSFER OF SHARES The transfer of shares of the corporation shall be made only on the stock transfer books of the corporation pursuant to authorization or document of transfer made by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney-in-fact authorized by power of attorney duly executed and filed with the Secretary of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificates for a like number of shares shall have been surrendered and cancelled. 6.6 LOST OR DESTROYED CERTIFICATES In the case of a lost, destroyed or mutilated certificate, a new certificate may be issued therefor upon such terms and indemnity to the corporation as the Board may prescribe. SECTION 7. BOOKS AND RECORDS The corporation shall: -15- 21 (a) Keep as permanent records minutes of all meetings of its shareholders and the Board, a record of all actions taken by the shareholders or the Board without a meeting, and a record of all actions taken by a committee of the Board exercising the authority of the Board on behalf of the corporation. (b) Maintain appropriate accounting records. (c) Maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each; provided, however, such record may be maintained by an agent of the corporation. (d) Maintain its records in written form or in another form capable of conversion into written form within a reasonable time. (e) Keep a copy of the following records at its principal office: 1. the Articles of Incorporation and all amendments thereto as currently in effect; 2. the Bylaws and all amendments thereto as currently in effect; 3. the minutes of all meetings of shareholders and records of all action taken by shareholders without a meeting, for the past three years; 4. the financial statements described in Section 23B.16.200(1) of the WBCA for the past three years; 5. all written communications to shareholders generally within the past three years; 6. a list of the names and business addresses of the current Directors and officers; and 7. the most recent annual report delivered to the Washington Secretary of State. SECTION 8. ACCOUNTING YEAR The accounting year of the corporation shall be the 12-month period ending October 31, provided that if a different accounting year is at any time selected for purposes of federal income taxes, the accounting year shall be the year so selected. SECTION 9. SEAL The Board may provide for a corporate seal which shall consist of the name of the corporation, the state of its incorporation and the year of its incorporation. -16- 22 SECTION 10. INDEMNIFICATION 10.1 RIGHT TO INDEMNIFICATION Each person who was, is or is threatened to be made a named party to or is otherwise involved (including, without limitation, as a witness) in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereinafter a "proceeding"), by reason of the fact that he or she is or was a Director or officer of the corporation or, that being or having been such a Director or officer or an employee of the corporation, he or she is or was serving at the request of the corporation as a Director, officer, partner, trustee, employee or agent of another corporation or of a partnership, joint venture, trust, employee benefit plan or other enterprise (hereinafter an "indemnitee"), whether the basis of a proceeding is alleged action in an official capacity as such a Director, officer, partner, trustee, employee or agent or in any other capacity while serving as such a Director, officer, partner, trustee, employee or agent, shall be indemnified and held harmless by the corporation against all expense, liability and loss (including counsel fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith, and such indemnification shall continue as to an indemnitee who has ceased to be a Director, officer, partner, trustee, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators. Except as provided in subsection 10.2 of this Section with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if a proceeding (or part thereof) was authorized or ratified by the Board. The right to indemnification conferred in this Section 10.1 shall be a contract right. 10.2 RESTRICTIONS ON INDEMNIFICATION No indemnification shall be provided to any such indemnitee for acts or omissions of the indemnitee finally adjudged to be intentional misconduct or a knowing violation of law, for conduct of the indemnitee finally adjudged to be in violation of Section 23B.08.310 of the Washington Business Corporation Act, for any transaction with respect to which it was finally adjudged that such indemnitee personally received a benefit in money, property or services to which the indemnitee was not legally entitled or if the corporation is otherwise prohibited by applicable law from paying such indemnification, except that if Section 23B.08.560 or any successor provision of the WBCA is hereafter amended, the restrictions on indemnification set forth in this subsection 10.2 shall be as set forth in such amended statutory provision. 10.3 ADVANCEMENT OF EXPENSES The right to indemnification conferred in this Section shall include the right to be paid by the corporation the expenses incurred in defending any proceeding in advance of its final disposition (hereinafter an "advancement of expenses"). An advancement of expenses shall be made upon delivery to the corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by -17- 23 final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this subsection 10.3. 10.4 RIGHT OF INDEMNITEE TO BRING SUIT If a claim under subsection 10.1 or 10.3 of this Section is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part, in any such suit or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. The indemnitee shall be presumed to be entitled to indemnification under this Section upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking has been tendered to the corporation) and thereafter the corporation shall have the burden of proof to overcome the presumption that the indemnitee is so entitled. 10.5 PROCEDURES EXCLUSIVE Pursuant to Section 23B.08.560(2) or any successor provision of the WBCA, the procedures for indemnification and advancement of expenses set forth in this Section are in lieu of the procedures required by Section 23B.08.550 or any successor provision of the WBCA. 10.6 NONEXCLUSIVITY OF RIGHTS The right to indemnification and the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation or Bylaws of the corporation, general or specific action of the Board, contract or otherwise. 10.7 INSURANCE, CONTRACT AND FUNDING The corporation may maintain insurance, at its expense, to protect itself and any Director, officer, partner, trustee, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the WBCA. The corporation may enter into contracts with any Director, officer, partner, trustee, employee or agent of the corporation in furtherance of the provisions of this Section and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Section. 10.8 INDEMNIFICATION OF EMPLOYEE AND AGENT OF THE CORPORATION The corporation may, by action of the Board, grant rights to indemnification and advancement of expenses to employees and agents or any class or group of employees and agents -18- 24 of the corporation (i) with the same scope and effect as the provisions of this Section with respect to the indemnification and advancement of expenses of Directors and officers of the corporation; (ii) pursuant to rights granted pursuant to, or provided by, the WBCA; or (iii) otherwise consistent with law. 10.9 PERSON SERVING OTHER ENTITIES Any person who, while a Director, officer or employee of the corporation, is or was serving (a) as a Director or officer of another foreign or domestic corporation of which a majority of the-shares entitled to vote in the election of its Directors is held by the corporation, or (b) as a partner, trustee or otherwise in an executive or management capacity in a partnership, joint venture, trust or other enterprise of which the corporation or a wholly owned subsidiary of the corporation is a general partner or has a majority ownership shall be deemed to be so serving at the request of the corporation and entitled to indemnification and advancement of expenses under subsections 10.1 and 10.3 of this Section. SECTION 11. AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board, subject to approval by a majority of the Continuing Directors (as defined in the Articles of Incorporation). The shareholders may also alter, amend and repeal these Bylaws or adopt new Bylaws by the affirmative vote of the holders of not less than two-thirds of the outstanding shares. -19- EX-4.2 5 RIGHTS AGREEMENT 1 EXHIBIT 4.2 - -------------------------------------------------------------------------------- RIGHTS AGREEMENT DATED AS OF AUGUST 12, 1996 BETWEEN ADVANCED DIGITAL INFORMATION CORPORATION AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C. AS RIGHTS AGENT --------------------------------------------------------------------- 2 CONTENTS SECTION 1. CERTAIN DEFINITIONS .................................................... 1 SECTION 2. APPOINTMENT OF RIGHTS AGENT ............................................ 7 SECTION 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES ................................. 7 SECTION 4. FORM OF RIGHT CERTIFICATES ............................................. 9 SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION ........................... 9 SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; LOST, STOLEN, DESTROYED OR MUTILATED RIGHT CERTIFICATES; UNCERTIFICATED RIGHTS .................................... 10 SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS .......................... 10 SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES ..................... 12 SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES ....................... 13 SECTION 10. PREFERRED SHARES RECORD DATE ........................................... 13 SECTION 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON; EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS .......................................... 14 SECTION 12. CERTAIN ADJUSTMENTS .................................................... 18 SECTION 13. CERTIFICATE OF ADJUSTMENT .............................................. 19 SECTION 14. ADDITIONAL COVENANTS ................................................... 19 SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES ................................ 20 SECTION 16. RIGHTS OF ACTION ....................................................... 21 SECTION 17. AGREEMENT OF RIGHT HOLDERS ............................................. 21 SECTION 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER ...................... 22
-i- 3 SECTION 19. CONCERNING THE RIGHTS AGENT ............................................ 22 SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT .............. 22 SECTION 21. DUTIES OF RIGHTS AGENT ................................................. 23 SECTION 22. CHANGE OF RIGHTS AGENT ................................................. 25 SECTION 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES ................... 26 SECTION 24. REDEMPTION AND TERMINATION ............................................. 26 SECTION 25. NOTICES ................................................................ 27 SECTION 26. SUPPLEMENTS AND AMENDMENTS ............................................. 27 SECTION 27. SUCCESSORS ............................................................. 28 SECTION 28. BENEFITS OF THIS RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY THE COMPANY'S BOARD OF DIRECTORS ........................................... 28 SECTION 29. SEVERABILITY ........................................................... 28 SECTION 30. GOVERNING LAW .......................................................... 28 SECTION 31. COUNTERPARTS; EFFECTIVENESS ............................................ 29 SECTION 32. DESCRIPTIVE HEADINGS ................................................... 29
Exhibits A DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK B FORM OF RIGHT CERTIFICATE -ii- 4 RIGHTS AGREEMENT RIGHTS AGREEMENT dated as of August 12, 1996, between ADVANCED DIGITAL INFORMATION CORPORATION, a Washington corporation (the "Company"), and CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one Right (as hereinafter defined) for each share of Common Stock, no par value, of the Company (the "Common Stock") outstanding at the Close of Business (as hereinafter defined) on the date of the closing of the Spinoff (as hereinafter defined) (the "Record Date") and has further authorized the issuance of one Right (as such number may hereafter be adjusted pursuant to the provisions of this Rights Agreement) with respect to each share of Common Stock that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date and the Expiration Date in accordance with the provisions of Section 23. Each Right shall initially represent the right to purchase one one-hundredth (1/100th) of a share of Series A Participating Cumulative Preferred Stock, no par value, of the Company (the "Preferred Shares"), having the powers, rights and preferences set forth in the Designation of Rights and Preferences (as hereinafter defined) attached as Exhibit A. Accordingly, in consideration of the premises and the mutual agreements set forth in this Rights Agreement, the Company and the Rights Agent hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS For purposes of this Rights Agreement, the following terms have the meanings indicated: "Acquiring Person" shall mean any Person (as hereinafter defined) which, alone or together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as hereinafter defined) of 15% or more of the Common Stock (as hereinafter defined) then outstanding, but shall not include the Company, any Subsidiary (as hereinafter defined) of the Company, any employee benefit plan of the Company or of any of its Subsidiaries, or any Person holding Common Stock for or pursuant to the terms of any such employee benefit plan. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Stock of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Stock then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the -1- 5 Beneficial Owner of any additional Common Stock, then such Person shall be deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person which would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph, has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph, then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. "Affiliate" and "Associate," when used with reference to any Person, shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act (as hereinafter defined), as in effect on the date of this Rights Agreement. A Person shall be deemed to be the "Beneficial Owner" of, to "beneficially own," and to have "Beneficial Ownership" of, any securities: (a) that such Person or any of such Person's Affiliates or Associates is deemed to "beneficially own" within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Rights Agreement; (b) that such Person or any of such Person's Affiliates or Associates have (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (written or oral), 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 to be the Beneficial Owner of, to beneficially own, or to have Beneficial Ownership of, 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 thereunder or (ii) the right to vote pursuant to any agreement, arrangement or understanding (written or oral); provided, however, that a Person shall not be deemed to be the Beneficial Owner of, to beneficially own, or to have Beneficial Ownership of, any security if (A) the agreement, arrangement or understanding (written or oral) to vote such security 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 under the Exchange Act and (B) the beneficial ownership of such security is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (c) that are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (written or oral) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (b)(ii) of this definition) or disposing of any securities of the Company. -2- 6 Notwithstanding the foregoing, nothing contained in this definition shall cause a Person ordinarily engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired in a bona fide firm commitment underwriting pursuant to an underwriting agreement with the Company. 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. "Book Value," when used with reference to Common Shares (as hereinafter defined) issued by any Person, shall mean the amount of such Person's equity applicable to each Common Share, determined (a) in accordance with generally accepted accounting principles in effect on the date as of which such Book Value is to be determined, (b) using all the consolidated assets and all the consolidated liabilities of such Person on the date as of which such Book Value is to be determined, except that no value shall be included in such assets for goodwill arising from consummation of a business combination, and (c) after giving effect to (i) the exercise of all rights, options and warrants to purchase such Common Shares (other than the Rights), and the conversion of all securities convertible into such Common Shares, at an exercise or conversion price, per Common Share, that is less than such Book Value before giving effect to such exercise or conversion (whether or not exercisability or convertibility is conditioned upon occurrence of a future event), (ii) all dividends and other distributions on the capital stock of such Person declared prior to the date as of which such Book Value is to be determined and to be paid or made after such date, and (iii) any other agreement, arrangement or understanding (written or oral), or transaction or other action prior to the date as of which such Book Value is to be determined that would have the effect of thereafter reducing such Book Value. "Business Combination" shall have the meaning set forth in Section 11(d)(i). "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York, or Seattle, Washington, are authorized or obligated by law or executive order to close. "Close of Business" on any given date shall mean 5 p.m., New York City time, on such date; provided, however, that if such date is not a Business Day, "Close of Business" shall mean 5 p.m., New York City time, on the next succeeding Business Day. "Common Shares," when used with reference to the Company prior to a Business Combination, shall mean the shares of Common Stock of the Company or any other shares of capital stock of the Company into which the Common Stock shall be reclassified or changed. "Common Shares," when used with reference to any Person (other than the Company prior to a Business Combination), shall mean shares of capital stock of such Person (if such Person is a corporation) of any class or series, or units of equity interests in such Person (if such Person is not a corporation) of any class or series, the terms of which do not limit (as a maximum -3- 7 amount and not merely in proportional terms) the amount of dividends or income payable or distributable on such class or series or the amount of assets distributable on such class or series upon any voluntary or involuntary liquidation, dissolution or winding up of such Person and do not provide that such class or series is subject to redemption at the option of such Person, or any shares of capital stock or units of equity interests into which the foregoing shall be reclassified or changed; provided, however, that, if at any time there shall be more than one such class or series of capital stock or equity interests of such Person, "Common Shares" of such Person shall include all such classes and series substantially in the proportion of the total number of shares or other units of each such class or series outstanding at such time. "Common Stock" shall have the meaning set forth in the introductory paragraph of this Rights Agreement. "Company" shall have the meaning set forth in the introductory paragraph of this Rights Agreement; provided, however, that if there is a Business Combination, "Company" shall have the meaning set forth in Section 11(d)(iii). The term "control" with respect to any Person shall mean the power to direct the management and policies of such Person, directly or indirectly, by or through stock ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or understanding (written or oral) with one or more other Persons by or through stock ownership, agency or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "Designation of Rights and Preferences" shall mean the Designation of Rights and Preferences of Series A Participating Cumulative Preferred Stock setting forth the powers, preferences, rights, qualifications, limitations and restrictions of such series of Preferred Stock of the Company, a copy of which is attached to this Rights Agreement as Exhibit A. "Distribution Date" shall have the meaning set forth in Section 3(b). "Exchange Act" shall mean the Securities Exchange Act of 1934, as in effect on the date in question, unless otherwise specifically provided in this Rights Agreement. "Exchange Consideration" shall have the meaning set forth in Section 11(b)(i). "Expiration Date" shall have the meaning set forth in Section 7(a). "Formula Number" shall have the meaning set forth in the Designation of Rights and Preferences. "Major Part," when used with reference to the assets of the Company and its Subsidiaries as of any date, shall mean assets (a) having a fair market value aggregating 50% or more of the total fair market value of all the assets of the Company and its Subsidiaries (taken as a whole) as of the date in question, (b) accounting for 50% or more of the total value (net of depreciation and amortization) of all the assets of the Company and its Subsidiaries (taken as a whole) as would be shown on a consolidated or combined balance -4- 8 sheet of the Company and its Subsidiaries as of the date in question, prepared in accordance with generally accepted accounting principles then in effect, or (c) accounting for 50% or more of the total amount of net income or revenues of the Company and its Subsidiaries (taken as a whole) as would be shown on a consolidated or combined statement of income of the Company and its Subsidiaries for the period of 12 months ending on the last day of the Company's monthly accounting period next preceding the date in question, prepared in accordance with generally accepted accounting principles then in effect. "Market Value," when used with reference to any securities on any date, shall mean the average of the daily closing prices, per share, of such securities for the period that is the shorter of (a) 30 consecutive Trading Days (as hereinafter defined) immediately prior to the date in question and (b) the number of consecutive Trading Days beginning on the Trading Day immediately after the date of the first public announcement of the event requiring a determination of the Market Value and ending on the Trading Day immediately prior to the record date of such event; provided, however, that, in the event that the Market Value of such securities is to be determined in whole or in part during a period following the announcement by the issuer of such securities of any action of the type described in Section 12(a) that would require an adjustment thereunder, then, and in each such case, the Market Value of such securities shall be appropriately adjusted to reflect the effect of such action on the market price of such securities. The closing price for each Trading Day shall be the closing price quoted on the composite tape for securities listed on the New York Stock Exchange, or, if such securities are not quoted on such composite tape or if such securities are not listed on such exchange, on the principal United States securities exchange registered under the Exchange Act (or any recognized foreign stock exchange) on which such securities are listed or, if such securities are not listed on any such exchange, the average of the closing bid and asked quotations with respect to a share of such securities on the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use or, if no such quotations are available, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such securities selected by the Company's Board of Directors. If on any such Trading Day no market maker is making a market in such securities, the closing price of such securities on such Trading Day shall be deemed to be the fair value of such securities as determined in good faith by the Company's Board of Directors (whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent, the holders of Rights and all other Persons); provided, however, that for the purpose of determining the closing price of the Preferred Shares for any Trading Day on which there is no public market for the Preferred Shares or there is no such market maker for the Preferred Shares, the closing price on such Trading Day shall be deemed to be the Formula Number times the closing price of the Common Stock on such Trading Day. "Person" shall mean an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity and shall include any successor (by merger or otherwise) of such entity. "Preferred Shares" shall have the meaning set forth in the introductory paragraph of this Rights Agreement. Any reference in this Rights Agreement to Preferred Shares shall be -5- 9 deemed to include any authorized fraction of a Preferred Share, unless the context otherwise requires. "Principal Party" shall mean the Surviving Person in a Business Combination; provided, however, that if such Surviving Person is a direct or indirect Subsidiary of any other Person, "Principal Party" shall mean the Person which is the ultimate parent of such Surviving Person and which is not itself a Subsidiary of another Person. In the event ultimate control of such Surviving Person is shared by two or more Persons, "Principal Party" shall mean that Person which is immediately controlled by such two or more Persons. "Purchase Price" with respect to each Right shall mean $50, subject to adjustment as provided herein, and shall be payable in lawful money of the United States of America. All references herein to the Purchase Price shall mean the Purchase Price as in effect at the time in question. "Record Date" shall have the meaning set forth in the introductory paragraph of this Rights Agreement. "Redemption Date" shall have the meaning set forth in Section 24(a). "Redemption Price" with respect to each Right shall mean $.01, as such amount may from time to time be adjusted in accordance with Section 12. All references in this Rights Agreement to the Redemption Price shall mean the Redemption Price as in effect at the time in question. "Registered Common Shares" shall mean Common Shares that are, as of the date of consummation of a Business Combination, and have continuously been for the 12 months immediately preceding such date, registered under Section 12 of the Exchange Act. "Right" shall mean the right to purchase Preferred Shares (or other securities) as provided in this Rights Agreement. "Right Certificate" shall mean a certificate evidencing a Right in substantially the form attached to this Rights Agreement as Exhibit B. "Securities Act" shall mean the Securities Act of 1933, as in effect on the date in question, unless otherwise specifically provided in this Rights Agreement. "Shares Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such. "Subsidiary" shall mean a Person, at least a majority of the total outstanding voting power (being the power under ordinary circumstances (and not merely upon the happening of a contingency) to vote in the election of directors of such Person (if such Person is a corporation) or to participate in the management and control of such Person (if such Person is not a corporation)) of which is owned, directly or indirectly, by another Person or by one or -6- 10 more other subsidiaries of such other Person or by such other Person or by one or more other subsidiaries of such other Person. "Spinoff" shall mean the distribution of approximately 8 million shares of the Common Stock to the shareholders of Interpoint Corporation, a Washington corporation. As a result of the Spinoff, the Company will cease to be a subsidiary of Interpoint Corporation and will operate as an independent, publicly-held company. The Spinoff is being made in connection with, and is a condition precedent to, the merger of Interpoint Corporation with a wholly owned subsidiary of Crane Co., a Delaware corporation, pursuant to an Agreement and Plan of Merger dated as of July 1, 1996 among Interpoint Corporation, Crane Co. and the wholly owned subsidiary of Crane Co. "Surviving Person" shall mean (a) the Person which is the continuing or surviving Person in a consolidation or merger specified in Section 11(d)(i)(A) or 11(d)(i)(B) or (b) the Person to which the Major Part of the assets of the Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in a transaction specified in Section 11(d)(i)(C); provided, however, that if the Major Part of the assets of the Company and its subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in one or more related transactions specified in Section 11(d)(i)(C) to more than one Person, the "Surviving Person" in such case shall mean the Person that acquired assets of the Company and/or its Subsidiaries with the greatest fair market value in such transaction or transactions. "Trading Day" shall mean a day on which the principal national securities exchange (or principal recognized foreign stock exchange, as the case may be) on which any securities or Rights, as the case may be, are listed or admitted to trading is open for the transaction of business or, if the securities or Rights in question are not listed or admitted to trading on any national securities exchange (or recognized foreign stock exchange, as the case may be), a Business Day. 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 prior to the Distribution Date shall also be the holders of the Common Stock) in accordance with the terms and conditions of this Rights Agreement, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint one or more co-Rights Agents as it may deem necessary or desirable (the term "Rights Agent" being used in this Rights Agreement to refer, collectively, to the Rights Agent together with any such co-Rights Agents). In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents shall be as the Company shall determine. SECTION 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES (a) One Right shall be associated with each share of Common Stock outstanding on the Record Date, each additional share of Common Stock that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and -7- 11 the Expiration Date and each additional share of Common Stock with which Rights are issued after the Distribution Date but prior to the earlier of the Redemption Date and the Expiration Date as provided in Section 23; provided, however, that if the number of outstanding Rights are combined into a smaller number of outstanding Rights pursuant to Section 12(a), the appropriate fractional Right determined pursuant to such Section shall thereafter be associated with each such share of Common Stock. (b) Until the earlier of (i) the Close of Business on the tenth Business Day after the Shares Acquisition Date and (ii) the Close of Business on such date, if any, as may be designated by the Company's Board of Directors following the commencement of, or first public disclosure of an intent to commence, a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any of its Subsidiaries, or any Person holding Common Stock for or pursuant to the terms of any such employee benefit plan) for outstanding Common Stock, if upon consummation of such tender or exchange offer such Person could be the Beneficial Owner of 15% or more of the outstanding Common Stock (the Close of Business on the earlier of such dates being the "Distribution Date"), (y) the Rights will be evidenced by the certificates for Common Stock registered in the names of the holders thereof and not by separate Right Certificates and (z) the Rights, including the right to receive Right Certificates, will be transferable only in connection with the transfer of Common Stock. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent, if requested, will send), by first-class, postage-prepaid mail, to each record holder of Common Stock as of the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate evidencing one whole Right for each share of Common Stock (or for the number of shares of Common Stock with which one whole Right is then associated if the number of Rights per share of Common Stock held by such record holder has been adjusted in accordance with the proviso in Section 3(a)). If the number of Rights associated with each share of Common Stock has been adjusted in accordance with the proviso in Section 3(a), at the time of distributing the Right Certificates the Company may make any necessary and appropriate rounding adjustments so that Right Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Right in accordance with Section 15(a). As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (c) Certificates representing Common Stock issued after the Record Date (including, without limitation, upon transfer or exchange of outstanding Common Stock), but prior to the earliest of the Distribution Date, the Redemption Date and the Expiration Date, shall have printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain rights as set forth in the Rights Agreement dated as of August 12, 1996, as it may be amended from time to time (the "Rights Agreement"), between Advanced Digital Information Corporation ("ADIC") and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (or between ADIC and any successor Rights Agent under the Rights Agreement), the terms of which are -8- 12 hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of ADIC. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. ADIC will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Rights beneficially owned by Acquiring Persons or their Affiliates or Associates thereof (as such terms are defined in the Rights Agreement) and by any subsequent holder of such Rights are null and void and nontransferable. Notwithstanding the requirements of this paragraph (c), the omission of a legend shall not affect the enforceability of any part of this Rights Agreement or the rights of any holder of Rights. SECTION 4. FORM OF RIGHT CERTIFICATES The Right Certificates (and the form of election to purchase and form of assignment to be printed on the reverse side thereof) shall be in substantially the form set forth as Exhibit B 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 Rights Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 7, 11 and 23, the Right Certificates, whenever issued, shall be dated as of the Distribution Date, and on their face shall entitle the holders thereof to purchase such number of Preferred Shares as shall be set forth therein for the Purchase Price set forth therein. SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION (a) The Right Certificates shall be executed on behalf of the Company by the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer or a Vice President (whether preceded by any additional title) of the Company, either manually or by facsimile signature, shall have affixed thereon the Company's seal or a facsimile thereof, and shall be attested by the Secretary, an Assistant Secretary or a Vice President (whether preceded by any additional title, provided that such Vice President shall not have also executed the Right Certificates) of the Company, either manually or by facsimile signature. The Right Certificates shall be manually 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 signed any of the Right Certificates shall cease to be such an officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates may nevertheless 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 Right Certificates had not ceased to be such an officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of execution of such Right -9- 13 Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of execution of this Rights Agreement any such person was not such an officer of the Company. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office in Seattle, Washington, books for registration and transfer of the Right Certificates issued under this Rights Agreement. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced by each Right Certificate, the certificate number of each Right Certificate and the date of each Right Certificate. SECTION6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; LOST, STOLEN, DESTROYED OR MUTILATED RIGHT CERTIFICATES; UNCERTIFICATED RIGHTS (a) Subject to the provisions of Sections 7(e) and 15, at any time after the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date and the Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 7(e) or that have been exchanged pursuant to Section 11(b), entitling the registered holder to purchase a like number of one one-hundredths (1/100th) of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent; provided, however, that neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any Right Certificate surrendered for transfer until the registered holder shall have completed and signed the certification contained in the form of assignment on the reverse side of such Right 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 the provisions of Sections 7(e) and 15, countersign and deliver to the Person entitled thereto a Right Certificate or Right 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 Right Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a valid Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make a new Right Certificate of like tenor and deliver such new Right Certificate to the Rights Agent for -10- 14 delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. (c) Notwithstanding any other provision of this Rights Agreement, the Company and the Rights Agent may amend this Rights Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by Right Certificates. SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS (a) Subject to Section 7(e) and except as otherwise provided in this Rights Agreement (including Section 11), each Right shall entitle the registered holder thereof, upon exercise thereof as provided in this Rights Agreement, to purchase for the Purchase Price, at any time after the Distribution Date and at or prior to the earlier of (i) the Close of Business on the tenth year anniversary of the Record Date (the Close of Business on such date being the "Expiration Date") and (ii) the Redemption Date, one one-hundredth (1/100th) of a Preferred Share, subject to adjustment from time to time as provided in Sections 11 and l2. (b) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided in this Rights Agreement) in whole or in part at any time after the Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent in Seattle, Washington, together with payment of the Purchase Price for each one one-hundredth (1/100th) of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the Expiration Date, (ii) the Redemption Date, and (iii) the time at which such Rights are exchanged as provided in Section 11(b). (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the Preferred Shares to be purchased together with an amount equal to any applicable transfer tax, by certified check, cashier's check or money order payable to the order of the Company, the Rights Agent shall thereupon (i) either (A) promptly requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent) certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the Preferred Shares with a depositary agent under a depositary arrangement, promptly requisition from the depositary agent depositary receipts representing the number of one one-hundredths (1/100ths) of a Preferred Share to be purchased (in which case certificates for the Preferred Shares to be represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with all such requests, (ii) when appropriate, promptly requisition from the Company the amount of cash to be paid in lieu of the 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 Right 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 Right Certificate. -11- 15 (d) In case the registered holder of any Right Certificate shall exercise fewer than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Right Certificate or to his or her duly authorized assigns, subject to the provisions of Section 15. (e) If the Rights are at any time beneficially owned by an Acquiring Person or an Affiliate or Associate of an Acquiring Person, such Rights shall be null and void and nontransferable and the holder of any such Right (including any purported transferee or subsequent holder) shall not have any right to exercise or transfer any such Right. No Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be canceled. (f) Notwithstanding anything in this Rights Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of any Right Certificates upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. (g) The Company may temporarily suspend, for a period of time not to exceed 90 calendar days after the Distribution Date, the exercisability of the Rights in order to prepare and file a registration statement under the Securities Act, on an appropriate form, with respect to the Preferred Shares purchasable upon exercise of the Rights and permit such registration statement to become effective; provided, however, that no such suspension shall remain effective after, and the Rights shall without any further action by the Company or any other Person become exercisable immediately upon, the effectiveness of such registration statement. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended and shall issue a further public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision in this Rights Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification under the blue sky or securities laws of such jurisdiction shall not have been obtained or the exercise of the Rights shall not be permitted under applicable law. SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES All Right Certificates surrendered or presented for the purpose of exercise, transfer, split-up, combination or exchange shall, and any Right Certificate surrendered or presented for any purpose that represents Rights that have become null and void and nontransferable -12- 16 pursuant to Section 7(e) shall, if surrendered or presented to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered or presented to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by 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 Right Certificate purchased or acquired by the Company. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the Company's written request, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any authorized and issued Preferred Shares held in its treasury, free from preemptive rights or any right of first refusal, a number of Preferred Shares sufficient to permit the exercise in full of all outstanding Rights. (b) In the event that there shall not be sufficient Preferred Shares issued but not outstanding, or authorized but unissued, to permit the exercise or exchange of Rights in accordance with Section 11, the Company covenants and agrees that it will take all such action as may be necessary to authorize additional Preferred Shares for issuance upon the exercise or exchange of Rights pursuant to Section 11. (c) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise or exchange of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. (d) So long as the Preferred Shares issuable upon the exercise or exchange of Rights are to be listed on any national securities exchange, the Company covenants and agrees to use its best efforts to cause, from and after such time as the Rights become exercisable or exchangeable, all Preferred Shares reserved for such issuance to be listed on such securities exchange upon official notice of issuance upon such exercise or exchange. (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges that may be payable in respect of the issuance or delivery of Right Certificates or of any Preferred Shares upon the exercise or exchange of Rights. The Company shall not, however, be required to pay any transfer tax that may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or in respect of the issuance or delivery of certificates representing the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or exchange or to issue or deliver any certificates representing Preferred Shares upon the exercise or exchange of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of -13- 17 surrender) or until it has been established to the Company's satisfaction that no such tax is due. SECTION 10. PREFERRED SHARES RECORD DATE Each Person in whose name any certificate for Preferred Shares is issued upon the exercise or exchange of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date on which the Right Certificate evidencing such Rights was duly surrendered and payment of any Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date on which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such Preferred Shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred 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. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON; EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS (a) Upon a Person becoming an Acquiring Person, each holder of a Right, except as provided in Section 7(e), shall thereafter have a right to receive, upon exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, such number of shares of Common Stock as shall equal the result obtained by multiplying the Purchase Price by a fraction, the numerator of which is the number of one one-hundredths (1/100ths) of a Preferred Share for which a Right is then exercisable and the denominator of which is 50% of the Market Value of the Common Stock on the date on which a Person becomes an Acquiring Person. As soon as practicable after a Person becomes an Acquiring Person (provided the Company shall not have elected to make the exchange permitted by Section 11(b)(i) for all outstanding Rights), the Company covenants and agrees to use its best efforts to: (i) prepare and file a registration statement under the Securities Act, on an appropriate form, with respect to the securities purchasable upon exercise of the Rights; (ii) cause such registration statement to become effective as soon as practicable after such filing; (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; and -14- 18 (iv) qualify or register the securities purchasable upon exercise of the Rights under the blue sky or securities laws of such jurisdictions as may be necessary or appropriate. (b) (i) The Company's Board of Directors may, at its option, at any time after a Person becomes an Acquiring Person, mandatorily exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that shall have become null and void and nontransferable pursuant to the provisions of Section 7(e)) for consideration per Right consisting of one-half of the Common Stock that would be issuable at such time upon the exercise of one Right in accordance with Section 11(a) (the consideration issuable per Right pursuant to this Section 11(b)(i) being the "Exchange Consideration"). If the Company's Board of Directors elects to exchange all the Rights for the Exchange Consideration pursuant to this Section 11(b)(i) prior to the physical distribution of the Right Certificates, the Company may distribute the Exchange Consideration in lieu of distributing Right Certificates, in which case for purposes of this Rights Agreement holders of Rights shall be deemed to have simultaneously received and surrendered for exchange Right Certificates on the date of such distribution. (ii) Any action of the Company's Board of Directors ordering the exchange of any Rights pursuant to Section 11(b)(i) shall be irrevocable and, immediately upon the taking of such action and without any further action and without any notice, the right to exercise any such Right pursuant to Section 11(a) shall terminate and the only right thereafter of a holder of such Right shall be to receive the Exchange Consideration in exchange for each such Right held by such holder or, if the Exchange Consideration shall not have been paid, to exercise any such Right pursuant to Section 11(d)(i). 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 holders of such Rights at their last addresses as they appear on the registry books of the Rights Agent. Any notice that is mailed in the manner provided in this Rights Agreement 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 Rights for the Exchange Consideration will be effected and, in the event of any partial exchange, the number of Rights that will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights that shall have become null and void and nontransferable pursuant to the provisions of Section 7(e)) held by each holder of Rights. (c) In the event that there shall not be sufficient Common Stock issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with Section 11(a) or 11(b), the Company shall take all such action as may be necessary to authorize additional Common Stock for issuance upon exercise of the Rights. In the event the Company shall, after a good-faith effort, be unable to take all such action as may be necessary to authorize such additional Common Stock, the Company shall substitute, for each Common Stock that would otherwise be issuable upon exercise of a Right, that number -15- 19 of Preferred Shares or fraction thereof such that the current Market Value of one Preferred Share multiplied by such number or fraction is equal to the current Market Value of one share of Common Stock as of the date of issuance of such Preferred Shares or fraction thereof. (d) (i) In the event that, following a Distribution Date, any transactions specified in the following clause (A), (B) or (C) of this Section 11(d)(i) (each such transaction being a "Business Combination") shall be consummated, directly or indirectly: (A) the Company shall consolidate with, or merge with and into, any other Person; (B) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation following the merger and, in connection with such merger, all or part of the Common Stock shall be changed into or exchanged for capital stock or other securities of the Company or of any other Person (or the Company) or cash or any other property; or (C) the Company shall sell, lease, exchange or otherwise transfer or dispose of (or one or more of its Subsidiaries shall sell, lease, exchange or otherwise transfer or dispose of), in one or more transactions, the Major Part of the assets of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons other than the Company or one or more of its wholly owned Subsidiaries, then, in each such case, proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, the securities specified below (or, at such holder's option, if any Business Combination is consummated at any time after a Person becomes an Acquiring Person, the securities specified in Section 11(a)): (1) If the Principal Party in such Business Combination has Registered Common Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, such number of Registered Common Shares of such Principal Party, free and clear of all liens, encumbrances or other adverse claims, as shall have an aggregate Market Value equal to the result obtained by multiplying the Purchase Price by two; or (2) If the Principal Party in such Business Combination does not have Registered Common Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, at the election of the holder of such Right at the time of the exercise thereof, any of: -16- 20 (x) such number of Common Shares of the Surviving Person in such Business Combination as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two; (y) such number of Common Shares of the Principal Party in such Business Combination (if the Principal Party is not also the Surviving Person in such Business Combination) as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two; or (z) if the Principal Party in such Business Combination is an Affiliate of one or more Persons which has Registered Common Shares outstanding, such number of Registered Common Shares of whichever of such Affiliates of the Principal Party has Registered Common Shares with the greatest aggregate Market Value on the date of consummation of such Business Combination as shall have an aggregate Market Value on the date of such Business Combination equal to the result obtained by multiplying the Purchase Price by two. (ii) The Company shall not consummate any Business Combination unless each issuer of Common Shares for which Rights may be exercised, as set forth in this Section 11(d), shall have sufficient authorized Common Shares that have not been issued or reserved for issuance (and that shall, when issued upon exercise thereof in accordance with this Rights Agreement, be validly issued, fully paid and nonassessable and free of preemptive rights, rights of first refusal or any other restrictions or limitations on the transfer or ownership thereof) to permit the exercise in full of the Rights in accordance with this Section 11(d) and unless prior thereto: (A) a registration statement under the Securities Act, on an appropriate form, with respect to the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights shall be effective; and (B) the Company and each such issuer shall have: (1) executed and delivered to the Rights Agent a supplemental agreement providing for the assumption by such issuer of the obligations set forth in this Section 11(d) (including the obligation of such issuer to issue Common Shares upon the exercise of Rights in accordance with the terms set forth in Sections 11(d)(i) and 11(d)(iii)) and further providing that such issuer, at its own expense, will use its best efforts to: -17- 21 (x) cause a registration statement under the Securities Act, on an appropriate form, with respect to the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; (y) qualify or register the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights under the blue sky or securities laws of such jurisdictions as may be necessary or appropriate; and (z) list the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights on each national securities exchange on which the Common Stock was listed prior to the consummation of the Business Combination or, if the Common Stock was not listed on a national securities exchange prior to the consummation of the Business Combination, on a national securities exchange; (2) furnished to the Rights Agent a written opinion of independent counsel stating that such supplemental agreement is a valid, binding and enforceable agreement of such issuer; and (3) filed with the Rights Agent a certificate of a nationally recognized firm of independent accountants setting forth the number of Common Shares of such issuer that may be purchased upon the exercise of each Right after the consummation of such Business Combination. (iii) After consummation of any Business Combination and subject to the provisions of Section 11(d)(ii), (A) each issuer of Common Shares for which Rights may be exercised as set forth in this Section 11(d) shall be liable for, and shall assume, by virtue of such Business Combination, all the obligations and duties of the Company pursuant to this Rights Agreement, (B) the term "Company" shall thereafter be deemed to refer to such issuer, (C) each such issuer shall take such steps in connection with such consummation as may be necessary to ensure that the provisions of this Rights Agreement (including the provisions of Sections 11(a) and 11(b)) shall thereafter apply, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights, and (D) the number of Common Shares of each such issuer thereafter 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 of Sections 11(a) and 12(a), and the provisions of Sections 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly as reasonably may be, on like terms to any such Common Shares. -18- 22 SECTION 12. CERTAIN ADJUSTMENTS (a) To preserve the actual or potential economic value of the Rights, if at any time after the date of this Rights Agreement there shall be any change in the Common Stock or the Preferred Shares, whether by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other similar changes in capitalization, any distribution or issuance of cash, assets, evidences of indebtedness or subscription rights, options or warrants to holders of Common Stock or Preferred Shares, as the case may be (other than the Rights or regular quarterly cash dividends), or otherwise, then, in each such event the Company's Board of Directors shall make such appropriate adjustments in the number of Preferred Shares (or the number and kind of other securities) issuable upon exercise of each Right, the Purchase Price and Redemption Price in effect at such time and the number of Rights outstanding at such time (including the number of Rights or fractional Rights associated with each share of Common Stock) such that following such adjustment such event shall not have had the effect of reducing or limiting the benefits the holders of the Rights would have had absent such event. (b) If, as a result of an adjustment made pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, then the number of such securities so receivable upon exercise of any Right thereafter shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions of Sections 11(a) and 12(a), and the provisions of Sections 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly as reasonably may be possible, on like terms to any such other securities. (c) All Rights originally issued by the Company subsequent to any adjustment made to the amount of Preferred Shares or other securities relating to a Right shall evidence the right to purchase, for the Purchase Price, the adjusted number and kind of securities purchasable from time to time under this Rights Agreement upon exercise of the Rights, all subject to further adjustment as provided in this Rights Agreement. (d) Irrespective of any adjustment or change in the Purchase Price or the number of Preferred Shares or number or kind of other securities issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the terms that were expressed in the initial Right Certificates issued under this Rights Agreement. (e) In any case in which action taken pursuant to Section 12(a) requires that an adjustment be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the holder of any Right exercised after such record date the Preferred Shares and/or other securities, if any, issuable upon such exercise over and above the Preferred Shares and/or other securities, if any, issuable before giving effect 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 securities upon the occurrence of the event requiring such adjustment. -19- 23 SECTION 13. CERTIFICATE OF ADJUSTMENT Whenever an adjustment is made as provided in Section 11 or 12, 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 Shares a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Right Certificate (or, prior to the Distribution Date, of Common Stock) in accordance with Section 25. SECTION 14. ADDITIONAL COVENANTS (a) Notwithstanding any other provision of this Rights Agreement, no adjustment to the number of Preferred Shares (or fraction of a share) or other securities for which a Right is exercisable or the number of Rights outstanding or associated with each Common Share or any similar or other adjustment shall be made or be effective if such adjustment would have the effect of reducing or limiting the benefits the holders of the Rights would have had absent such adjustment, including, without limitation, the benefits under Sections 11 and 12, unless the terms of this Rights Agreement are amended so as to preserve such benefits. (b) The Company covenants and agrees that, after the Distribution Date, except as permitted by Section 26, it will not take (or permit any Subsidiary of the Company to take) any action if at the time such action is taken it is reasonably foreseeable that such action will reduce or otherwise limit the benefits the holders of the Rights would have had absent such action, including, without limitation, the benefits under Sections 11 and 12. Any action taken by the Company during any period after any Person becomes an Acquiring Person but prior to the Distribution Date shall be null and void unless such action could be taken under this Section 14(b) from and after the Distribution Date. SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES (a) The Company may, but shall not be required to, issue fractional Rights or distribute Right Certificates that evidence fractional Rights. In lieu of such fractional Rights, the Company may pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 15(a), the current market value of a whole Right shall be the closing price of the Rights (as determined pursuant to the second and third sentences of the definition of Market Value contained in Section 1) for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. (b) The Company may, but shall not be required to, issue fractional Preferred Shares upon exercise of the Rights or distribute certificates that evidence fractional Preferred Shares. In lieu of fractional Preferred Shares, the Company may elect to (i) utilize a depository arrangement as provided by the terms of the Preferred Shares or (ii) in the case of a fractional Preferred Share (other than one one-hundredth (1/100th) of a Preferred Share or any integral multiple thereof), pay to the registered holders of Right Certificates at the time -20- 24 such Rights are exercised as provided in this Rights Agreement an amount in cash equal to the same fraction of the current market value of one Preferred Share, if any are outstanding and publicly traded (or the Formula Number times the current market value of one share of Common Stock if the Preferred Shares are not outstanding and publicly traded). For purposes of this Section 15(b), the current market value of a Preferred Share (or share of Common Stock) shall be the closing price of a Preferred Share (or share of Common Stock) (as determined pursuant to the second and third sentences of the definition of Market Value contained in Section 1) for the Trading Day immediately prior to the date of such exercise. If, as a result of an adjustment made pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, the provisions of this Section 15(b) shall apply, as nearly as reasonably may be, on like terms to such other securities. (c) The Company may, but shall not be required to, issue fractional Common Shares upon exchange of Rights pursuant to Section 11(b), or to distribute certificates that evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company may pay to the registered holders of Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current Market Value of one Common Share as of the date on which a Person became an Acquiring Person. (d) Each holder of Rights by accepting the Rights expressly waives his or her right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as provided in this Section 15. SECTION 16. RIGHTS OF ACTION (a) All rights of action in respect of this Rights Agreement are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock), and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his or her own behalf and for his or her 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 or her right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in the Rights 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 Rights Agreement and shall be entitled to specific performance of the obligations of any Person under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Rights Agreement. (b) Any holder of Rights who prevails in an action to enforce the provisions of this Rights Agreement shall be entitled to recover the reasonable costs and expenses, including attorneys' fees, incurred in such action. -21- 25 SECTION 17. AGREEMENT OF RIGHT HOLDERS Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Stock; (b) after the Distribution Date, the Right Certificates will be transferable, subject to Section 7(e), 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 (c) the Company and the Rights Agent may deem and treat the Person in which name a Right Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. SECTION 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER No holder, as such, of any Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company that may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained in this Rights Agreement or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company, including, without limitation, any right to vote for the election of directors or on 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, or to receive dividends or other distributions or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions of this Rights Agreement. SECTION 19. CONCERNING THE RIGHTS AGENT (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it under this Rights Agreement and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in administering and executing this Rights Agreement and exercising and performing its duties under this Rights Agreement. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Rights Agreement in reliance on any Right Certificate or certificate for the Common Stock or -22- 26 for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged by the proper Person or Persons. SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Rights Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Rights Agreement; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 22. In case at the time such successor Rights Agent shall succeed to the agency created by this Rights Agreement any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement. SECTION 21. DUTIES OF RIGHTS AGENT The Rights Agent undertakes the duties and obligations imposed by this Rights Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates (or, prior to the Distribution Date, of the Common Stock), by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken, suffered or omitted by it in good faith and in accordance with such opinion. -23- 27 (b) Whenever in the performance of its duties under this Rights Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person) be proved or established by the Company prior to taking, refraining from taking or suffering any action under this Rights Agreement, such fact or matter (unless other evidence in respect thereof be specifically prescribed in this Rights Agreement) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, a Vice President (whether preceded by any additional title), the Treasurer or the 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 Rights Agreement in reliance upon such certificate. (c) The Company shall indemnify the Rights Agent for, and hold it harmless against, any loss, liability or expense incurred without gross negligence, bad faith or intentional misconduct on its part arising out of or in connection with its duties under this Rights Agreement, including the costs and expenses of defending itself against any claim or liability in connection with its exercise or performance of any of its duties under this Rights Agreement. In no case will the Rights Agent be liable for special, indirect, incidental or consequential loss or damage of any kind whatsoever, even if the Rights Agent has been advised of the possibility of such loss or damage. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Rights Agreement or in the Right Certificates (except as to its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Rights Agreement or the execution and delivery hereof (except the due execution of this Rights Agreement by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); it shall not be responsible for any breach by the Company of any covenant or condition contained in this Rights Agreement or in any Right Certificate; it shall not be responsible for any adjustment required under the provisions of Section 11 or 12 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 Right Certificates after actual notice of any such adjustment); and it shall not by any act under this Rights Agreement be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or Common Stock to be issued pursuant to this Rights Agreement or any Right Certificate or as to whether any Preferred Shares or Common Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Rights Agreement. -24- 28 (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties under this Rights Agreement from any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, a Vice President (whether preceded by any additional title), the Secretary or the Treasurer of the Company 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 the 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 the Rights Agent under this Rights Agreement. Nothing in this Rights Agreement shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty under this Rights Agreement either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct provided reasonable care was exercised in the selection and continued employment thereof. SECTION 22. CHANGE OF RIGHTS AGENT The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Rights Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock and the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates (or, prior to the Distribution Date, of the Common Stock) 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 the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates (or, prior to the Distribution Date, of the Common Stock) by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Common Stock) (who shall, with such notice, submit his or her Right Certificate or, prior to the Distribution Date, the certificate representing his or her Common Stock, for inspection by the Company), then the registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock) 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 corporation in good standing organized and doing business under the laws of the United States or of the state of Washington (or of any other -25- 29 state of the United States so long as such corporation is authorized to conduct a stock transfer or corporate trust business in the state of Washington) and having a principal office in the state of Washington, which 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. 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; provided, however, that the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it under this Rights Agreement, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates (or, prior to the Distribution Date, of the Common Stock). 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 resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. SECTION 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES Notwithstanding any of the provisions of this Rights Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change made in accordance with the provisions of this Rights Agreement. In addition, in connection with the issuance or sale of Common Stock following the Distribution Date and prior to the earlier of the Redemption Date and the Expiration Date, the Company (a) shall issue, with respect to 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 issue, in any other case, if deemed necessary or appropriate by the Company's Board of Directors, Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Right Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued and (ii) no such 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) The Company's Board of Directors may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, order the redemption of all, but not fewer than all, the then outstanding Rights at the Redemption Price (the date of such redemption being the "Redemption Date"). The redemption of the Rights by the Board of Directors may -26- 30 be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. (b) Immediately upon the action of the Company's Board of Directors ordering the redemption of the Rights, 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 10 Business Days after the action of the Company's Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice 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. Each such notice of redemption will state the method by which payment of the Redemption Price will be made. The notice, if mailed in the manner provided in this Rights Agreement, shall be conclusively presumed to have been duly given, whether or not the holder of Rights receives such notice. In any case, failure to give such notice by mail, or any defect in the notice, to any particular holder of Rights shall not affect the sufficiency of the notice to other holders of Rights. SECTION 25. NOTICES Notices or demands authorized by this Rights Agreement to be given or made by the Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of Common Stock) 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: Advanced Digital Information Corporation 10201 Willows Road Redmond, Washington 98052 Attention: Peter H. van Oppen Subject to the provisions of Section 22, notices or demands authorized by this Rights Agreement to be given or made by the Company or by the holder of a Right Certificate (or, prior to the Distribution Date, of Common Stock) 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: ChaseMellon Shareholder Services, L.L.C. ---------------------------------------- ---------------------------------------- Attention: ------------------------------ Notices or demands authorized by this Rights Agreement to be given or made by the Company or the Rights Agent to any holder of a Right Certificate (or, prior to the Distribution Date, of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at such holder's address as shown on the registry books of -27- 31 the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. SECTION 26. SUPPLEMENTS AND AMENDMENTS At any time prior to the Distribution Date and subject to the last sentence of this Section 26, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Rights Agreement (including, without limitation, the date on which the Distribution Date shall occur, the time during which the Rights may be redeemed pursuant to Section 24 or any provision of the Designation of Rights and Preferences) without the approval of any holder of the Rights. From and after the Distribution Date and subject to applicable law, the Company may, and the Rights Agent shall if the Company so directs, amend this Rights Agreement without the approval of any holder of Right Certificates to (a) cure any ambiguity or correct or supplement any provision contained in this Rights Agreement that may be defective or inconsistent with any other provision of this Rights Agreement or (b) make any other provisions in regard to matters or questions arising under this Rights Agreement that the Company may deem necessary or desirable and that 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). Any supplement or amendment adopted during any period after any Person has become an Acquiring Person but prior to the Distribution Date shall be null and void unless such supplement or amendment could have been adopted under the prior sentence from and after the Distribution Date. Any supplement or amendment to this Rights Agreement duly approved by the Company shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent. SECTION 27. SUCCESSORS All the covenants and provisions of this Rights 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 under this Rights Agreement. SECTION 28. BENEFITS OF THIS RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY THE COMPANY'S BOARD OF DIRECTORS (a) Nothing in this Rights Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the Common Stock) any legal or equitable right, remedy or claim under this Rights Agreement; provided, however, that this Rights Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the Common Stock). (b) Except as explicitly otherwise provided in this Rights Agreement, the Company's Board of Directors shall have the exclusive power and authority to administer this Rights Agreement and to exercise all rights and powers specifically granted to the Company's -28- 32 Board of Directors or to the Company, or as may be necessary or advisable in the administration of this Rights Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Rights Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Rights Agreement (including, without limitation, a determination to redeem or not redeem the Rights or to amend this Rights Agreement and a determination of whether there is an Acquiring Person). SECTION 29. SEVERABILITY If any term, provision, covenant or restriction of this Rights 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 Rights Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. SECTION 30. GOVERNING LAW This Rights Agreement and each Right Certificate issued under this Rights Agreement shall be deemed to be a contract made under the laws of the state of Washington and for all purposes shall be governed by and construed in accordance with the law of Washington applicable to contracts to be made and performed entirely within Washington. SECTION 31. COUNTERPARTS; EFFECTIVENESS This Rights Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original, and all of which shall together constitute but one and the same instrument. This Rights Agreement shall be effective as of the Close of Business on the date of this Rights Agreement first set forth above. SECTION 32. DESCRIPTIVE HEADINGS Descriptive headings of the several Sections of this Rights Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions of this Rights Agreement. -29- 33 IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed as of the day and year first above written. ADVANCED DIGITAL INFORMATION CORPORATION By: /s/ PETER H. VAN OPPEN ------------------------------------------ Name: Peter H. van Oppen Its: Chairman, President and Chief Executive Officer CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent By: /s/ JOYCE DAVIS ------------------------------------------ Name: Joyce Davis Its: AVP -30- 34 EXHIBIT A TO RIGHTS AGREEMENT ADVANCED DIGITAL INFORMATION CORPORATION DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK The Board of Directors of Advanced Digital Information Corporation (the "Corporation") hereby establishes a series of the Corporation's Preferred Stock designated as Series A Participating Cumulative Preferred Stock. The rights, preferences, restrictions and other matters relating to the Series A Participating Cumulative Preferred Stock are set forth below: SECTION 1. DESIGNATION AND NUMBER OF SHARES The shares of such series shall be designated the "Series A Participating Cumulative Preferred Stock" (the "Series A Preferred Stock"), no par value. The number of shares initially constituting the Series A Preferred Stock shall be 100,000 provided, however, that if more than a total of 100,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of August 12, 1996 between the Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agreement"), the Corporation's Board of Directors, pursuant to Section 23B.06.020 of the Washington Business Corporation Act, shall direct by resolution that Articles of Amendment be properly executed and filed in accordance with the provisions thereof, providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to the extent that the Amended and Restated Articles of Incorporation then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. SECTION 2. DIVIDENDS OR DISTRIBUTIONS (a) Subject to the prior and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as, and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, quarterly dividends payable in cash on the last day of each fiscal quarter in each year, or such other dates as the Corporation's Board of Directors shall approve (each such date being referred to in this Designation of Rights and Preferences as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $.01 and (ii) the Formula Number (as hereinafter defined) then in effect times the cash dividends then to be paid on each share of Common Stock. In addition, if the Corporation shall pay any dividend or make any distribution on the A-1 35 Common Stock payable in assets, securities or other forms of noncash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of Series A Preferred Stock a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share of Common Stock. As used in this Designation of Rights and Preferences and in the Rights Agreement, the "Formula Number" shall be 100; provided, however, that if at any time after the date of the closing of the Spinoff (as defined in the Rights Agreement), the Corporation shall (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger number of shares of Common Stock, or (iii) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then in each such event the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are 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 (and rounding the result to the nearest whole number); and provided further, that if at any time after the date of the closing of the Spinoff the Corporation shall issue any shares of its capital stock in a merger, reclassification or change of the outstanding shares of Common Stock, then in each such event the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change. (b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 2(a) immediately prior to or at the same time it declares a dividend or distribution on the Common Stock (other than a dividend or distribution solely in shares of Common Stock); provided, however, that in the event no dividend or distribution (other than a dividend or distribution in shares of Common Stock) 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 $.01 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Corporation's Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock and which shall not be more than 60 days prior to the date fixed for payment thereof. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of Series A Preferred Stock; provided, however, that dividends on such shares that are originally issued after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding the A-2 36 foregoing, dividends on shares of Series A Preferred Stock that are originally issued prior to the record date for the first Quarterly Dividend Payment shall be calculated as if cumulative from and after the last day of the fiscal quarter (or such other Quarterly Dividend Payment Date as the Corporation's Board of Directors shall approve) next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A 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. (d) So long as any shares of Series A Preferred Stock are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock unless, in each case, the dividend required by this Section 2 to be declared on the Series A Preferred Stock shall have been declared. (e) The holders of shares of Series A Preferred Stock shall not be entitled to receive any dividends or other distributions except as provided in this Designation of Rights and Preferences. SECTION 3. VOTING RIGHTS The holders of shares of Series A Preferred Stock shall have the following voting rights: (a) Each holder of Series A Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect for each share of Series A Preferred Stock held of record on each matter on which holders of the Common Stock or shareholders generally are entitled to vote, multiplied by the maximum number of votes per share that any holders of the Common Stock or shareholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied). (b) Except as otherwise provided in this Designation of Rights and Preferences or by applicable law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class for the election of directors of the Corporation and on all other matters submitted to a vote of shareholders of the Corporation. (c) Except as provided in this Designation of Rights and Preferences or by applicable law, holders of Series A 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 in this Designation of Rights and Preferences) for authorizing or taking any corporate action. SECTION 4. CERTAIN RESTRICTIONS (a) Whenever quarterly dividends or other dividends or distributions payable on the Series A 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 A-3 37 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 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 Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock; provided, however, that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior 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 Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Corporation's Board of Directors) to all holders of such shares upon such terms as the Corporation's 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. LIQUIDATION RIGHTS Upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, no distribution shall be made to (a) the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received an amount equal to the greater of (i) $.01 per share and (ii) the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock or (b) the A-4 38 holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 6. 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 then outstanding shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect 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 exchanged or changed. In the event both this Section 6 and Section 2 appear to apply to a transaction, this Section 6 will control. SECTION 7. NO REDEMPTION; NO SINKING FUND (a) The shares of Series A Preferred Stock shall not be subject to redemption by the Corporation or at the option of any holder of Series A Preferred Stock; provided, however, that the Corporation may purchase or otherwise acquire outstanding shares of Series A Preferred Stock in the open market or by offer to any holder or holders of shares of Series A Preferred Stock. (b) The shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund. SECTION 8. RANKING The Series A Preferred Stock shall rank junior to all other series of Preferred Stock of the Corporation, unless the Corporation's Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions thereof. SECTION 9. FRACTIONAL SHARES The Series A Preferred Stock shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fractional share that is one one-hundredth (1/100th) of a share or any integral multiple of such fraction, and shall entitle the holder, in proportion to such holder's fractional shares, to receive dividends, exercise voting rights, participate in distributions and have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fractional share of Series A Preferred Stock, may elect to (a) make a cash payment as provided in the Rights Agreement for a fractional share other than one one-hundredth A-5 39 (1/100th) of a share or any integral multiple thereof or (b) issue depository receipts evidencing such authorized fractional share of Series A Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided, however, that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series A Preferred Stock. SECTION 10. REACQUIRED SHARES Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Corporation's Board of Directors pursuant to the provisions of Article 4 of the Amended and Restated Articles of Incorporation. SECTION 11. AMENDMENT None of the powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock as provided in this Designation of Rights and Preferences or in the Amended and Restated Articles of Incorporation shall be amended in any manner that would alter or change the powers, preferences, rights or privileges of the holders of Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of Series A Preferred Stock, voting as a separate class. A-6 40 EXHIBIT B TO RIGHTS AGREEMENT [FORM OF RIGHT CERTIFICATE] Certificate No. [R] - ___________ Rights NOT EXERCISABLE AFTER [Record Date + 10 years], 2006, OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE. RIGHT CERTIFICATE ADVANCED DIGITAL INFORMATION CORPORATION This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of August 12, 1996 (the "Rights Agreement"), between Advanced Digital Information Corporation, a Washington corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"), unless the Rights evidenced hereby shall have been previously redeemed by the Company, to purchase from the Company at any time after the Distribution Date (as defined in the Rights Agreement) and prior to 5 p.m., New York City time, on [Record Date + 10 years], 2006, at the principal office of the Rights Agent, or its successors as Rights Agent (in Seattle, Washington), one one-hundredth (1/100th) of a fully paid, nonassessable share of Series A Participating Cumulative Preferred Stock, no par value, of the Company (the "Preferred Shares"), at a purchase price per one one-hundredth (1/100th) of a share equal to $50 (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. B-1 41 The Purchase Price and the number and kind of shares that may be purchased upon exercise of each Right evidenced by this Right Certificate, as set forth above, are the Purchase Price and the number and kind of shares that may be so purchased as of [Record Date]. As provided in the Rights Agreement, the Purchase Price and the number and kind of shares that may be purchased upon the exercise of each Right evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. If the Rights evidenced by this Right Certificate are at any time beneficially owned by an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement), such Rights shall be null and void and nontransferable and the holder of any such Right (including any purported transferee or subsequent holder) shall not have any right to exercise or transfer any such Right. This Right Certificate is subject to all the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated in this Right Certificate by reference and made a part hereof and to which reference to the Rights Agreement is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities under this Right Certificate of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available from the Company upon written request. This Right Certificate, with or without other Right Certificates, upon surrender at the principal stock transfer or corporate trust office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number and kind of shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right Certificate may be (i) redeemed by the Company at its option at a redemption price (in cash or shares of Common Stock or other securities of the Company deemed by the Company's Board of Directors to be at least equivalent in value) of $.01 per Right (which amount shall be subject to adjustment as provided in the Rights Agreement) or (ii) exchanged in whole or in part for shares of Common Stock or other securities of the Company. The Company may, but shall not be required to, issue fractions of Preferred Shares or distribute certificates that evidence fractions of Preferred Shares upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing fractional shares, the Company may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-hundredth (1/100th) of a share or any integral multiple thereof or to issue certificates or utilize a depository arrangement as provided in the terms of the Rights Agreement and the Preferred Shares. B-2 42 No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company that may at any time be issuable on the exercise of the Right or Rights evidenced by this Right Certificate, nor shall anything contained in the Rights Agreement or in this Right Certificate be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company, including, without limitation, any right to vote for the election of directors or on any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders except as provided in the Rights Agreement, or to receive dividends or other distributions or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in accordance with the provisions of the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of: --------------------- ADVANCED DIGITAL INFORMATION CORPORATION By: ------------------------------------------ Name: Its: Attest: - ---------------------------------------- Name: Countersigned: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent By: -------------------------------------- Name: Its: B-3 43 Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificate.) FOR VALUE RECEIVED ---------------------------------------------------- hereby sells, assigns and transfers unto --------------------------------------- - -------------------------------------------------------------------------------- (Please print name and address of transferee) - -------------------------------------------------------------------------------- this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ___________________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: --------------------------- -------------------------------- Signature Signature Guaranteed: Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. - ------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). --------------------------------- Signature - -------------------------------------------------------------------------------- B-4 44 Form of Reverse Side of Right Certificate -- continued FORM OF ELECTION TO PURCHASE (To be executed by the registered holder if such holder desires to exercise Rights represented by the Right Certificate.) To: ADVANCED DIGITAL INFORMATION CORPORATION The undersigned hereby irrevocably elects to exercise ___________________ Rights represented by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares be issued in the name of: Please insert social security or other identifying number ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ Dated: _______________________ _______________________________ Signature Signature Guaranteed: Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. B-5 45 Form of Reverse Side of Right Certificate -- continued - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). --------------------------------- Signature - -------------------------------------------------------------------------------- NOTICE The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right 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 Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored. B-6 EX-10.2 6 FORM OF TAX ALLOCATION AGREEMENT 1 TAX ALLOCATION AGREEMENT This TAX ALLOCATION AGREEMENT, dated as of August ___, 1996 (this Agreement") is being entered into by and between INTERPOINT CORPORATION, a Washington corporation (together with its successors and assigns, "Interpoint"), and ADVANCED DIGITAL INFORMATION CORPORATION, a Washington corporation (together with its successors and assigns, "ADIC"). Interpoint and ADIC are entering into this Agreement to provide for the allocation between Interpoint and the Interpoint Subsidiaries, on the one hand, and ADIC and the ADIC Subsidiaries, on the other hand, of all responsibilities, liabilities, and benefits relating to (1) Taxes paid or payable by either of them for all taxable periods or portions thereof ending on or before the Disaffiliation Date (as hereinafter defined) and (2) Tax returns to be filed by either of them for such taxable periods. I. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to the singular and the plural forms of the terms defined). Any terms used but not defined herein shall have the meaning given them in that certain Separation Agreement dated the date hereof between Interpoint and ADIC. "ADIC Affiliated Group" means the affiliated group of corporations (within the meaning of Section 1504(a) of the Code or applicable state or local statute, rule or regulation, as the case may be) of which ADIC is the common parent (or would be the common parent if ADIC were not a member of the Interpoint Affiliated Group). "ADIC Affiliated Group Annual Federal Income Taxes" means, for any taxable period, the sum (which may be positive or negative) of the Separate Annual Federal Income Taxes of each and every ADIC Company. "ADIC Companies" means, for any taxable period, ADIC and the ADIC Subsidiaries that are includable in the ADIC Affiliated Group (or, in the case of Article III hereof, are foreign corporations, including, but not limited to, ADIC Europe). "Alternative Minimum Tax" means the Tax imposed by Section 55 of the Code, or any successor provision thereto. "Annual State or Local Income Taxes" means, with respect to any combined, consolidated or unitary state or local Income Tax Return, the sum of all of the Tax liabilities of the ADIC Companies as reflected on such Tax Return. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto (or, to the extent relevant for any taxable period, the Internal Revenue Code in effect for such period). 2 "Disaffiliation" means ADIC's ceasing to be a member of the Interpoint Affiliated Group. "Disaffiliation Date" means the date upon which ADIC ceases to be a member of the Interpoint Affiliated Group as determined by ADIC in conformity with Treasury Regulations Section 1.1502-76(b). "Final Determination" means the final resolution of liability for any Tax for a taxable period, including without limitation any related interest or penalties, (i) by IRS Form 870-AD (or any successor form thereto), on the date of acceptance by or on behalf of the Commissioner of the IRS, or by a comparable agreement form under the laws of any state, local or foreign government or the rules or regulations of any state, local or foreign taxing authority, except that a Form 870-AD or comparable form that reserves the right of the taxpayer to file a claim for refund and/or the right of the taxing authority to assert a further deficiency shall not constitute a Final Determination with respect to the item or items so reserved; (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or offer in compromise under section 7121 or 7122 of the Code, or comparable agreements under the laws of any state, local or foreign government or the rules or regulations of any state, local or foreign taxing authority; (iv) by any allowance of a refund or credit in respect of an overpayment of Tax, including any related interest or penalties, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing the Tax (including, without limitation, a refund or credit allowed as a result of the filing of an amended return) ; or (v) by any other final disposition by reason of the expiration of the applicable statute of limitations In addition to the foregoing, any event (e.g., the filing of an IRS Form 870 or a partial settlement) which is agreed by the parties in writing to be a Final Determination shall also be treated as a Final Determination. "Income Taxes" means Taxes based on or measured by net income, including franchise or similar Taxes for which a consolidated, unitary or combined Tax Return is required or permitted. "IRS" means the Internal Revenue Service. "Interpoint Affiliated Group" means the affiliated group of corporations (within the meaning of Section 1504(a) of the Code or applicable state or local statute, rule or regulation, as the case may be) of which Interpoint is the common parent. "Interpoint Companies" means, for any taxable period, Interpoint and the Interpoint Subsidiaries that are includable in the Interpoint Affiliated Group (or, in the case of Article III hereof, that are foreign corporations), excluding all ADIC Companies. "Interpoint Consolidated Return" has the meaning specified in Section 2.01. 2 3 "Original Tax Provision" means the amount paid by Interpoint or ADIC, as the case may be thereunder prior to any audit or other adjustment of any Tax Item by any taxing authority. "Post-Disaffiliation Correlative Amounts" means all payments made pursuant to this Agreement that are not in settlement of a tax liability but are correlative thereto (e.g., interest, penalties, additions to tax or costs of contesting a proposed adjustment under Section 9 hereof) and which are neither paid nor accrued on or before the Disaffiliation Date and which are not obligations existing as of the Disaffiliation Date. "Quarterly Federal Income Tax Provision" means the currently payable federal Income Taxes (positive or negative) computed in accordance with the Code and which is intended to be the quarterly estimate of ADIC Affiliated Group Annual Federal Income Taxes. "Quarterly State or Local Income Tax Provision" means the currently payable state or local income tax expense (positive or negative) computed in accordance with applicable state statutes and which is intended to be the quarterly estimate of State and Local Income Taxes. "Separate Annual Federal Income Taxes" means with respect to any member of the Interpoint Affiliated Group, the separate federal Income Tax liability (which may be positive or negative) of such member, calculated as follows: (i) taxable income or loss shall be determined in accordance with Section 1.1552-1(a)(1)(ii) of the Treasury Regulations, except that (A) the portion of the separate net operating loss of such member, if any, that will become part of the consolidated net operating loss attributable to such member under Section 1.1502-79(a)(3) of the Treasury Regulations shall not be taken into account, (B) the portion of any consolidated net capital loss carryback attributable to such member shall be taken into account, but only to the extent absorbed in the taxable year and (C) the last sentence thereof (which does not permit taxable income to be reduced below zero) shall be disregarded, (ii) such taxable income or loss shall be multiplied by the highest marginal rate in effect for the Interpoint Affiliated Group for such period under Section 11(b) of the Code, (iii) all Tax Credits Attributable To Such Member, if any, shall be subtracted from the amount set forth in clause (ii), (iv) all tax credit recapture, if any, attributable to such member shall be added to the amount set forth in clause (ii), (v) all other additions to tax (e.g.. interest on the deferred tax liability with respect to installment obligations under Section 453A of the Code or the Environmental Tax imposed on corporations under Section 59A of the Code), if any, attributable to such member shall be added to the amount set forth in clause (ii), and 3 4 (vi) any Alternative Minimum Tax liability, as provided under Section 2.02 (c) hereof, shall be added to the amount set forth in clause (ii). Notwithstanding anything in the preceding sentence to the contrary, any reference to, or incorporation of, any Sections of the Treasury Regulations shall be modified to the extent necessary to comply with the Code. In addition, except as otherwise directed by Interpoint and to the extent permitted by law, such methods, conventions, elections and principles of taxation shall be used as are consistent with the methods, conventions, elections and principles previously used by the Interpoint Affiliated Group or such ADIC Company in preparing prior federal income tax returns and for the taxable period which ends as the result of the Disaffiliation. To the extent permitted by law, income shall be calculated in accordance with either Section 1.1502-76 (b) (2) (i) (on the basis of income shown on permanent records) of the Treasury Regulations. "Separation Agreement" means that certain Separation Agreement dated the date hereof by and between ADIC and Interpoint. "Tax Benefit" means any item of loss, deduction, or tax credit or any similar item which at any time results in an actual reduction in taxable income or taxes payable on a Tax Return (if a Tax Return is required to reflect such item). "Tax Credit Attributable To Such Member" means, for any taxable period with respect to any tax credit, the sum of: (A) the product of (1) the amount of such credit allowed (after taking into account any relevant limitations but without taking into account any carryovers or carrybacks of such credit) on the Interpoint Consolidated Return and (2) a fraction the numerator of which is the credit earned (or foreign tax paid) by such member and the denominator of which is the sum of all such credits earned (or foreign taxes paid) by all members of the Interpoint Affiliated Group that earned such credits (or paid foreign taxes) and (B) the amount of carrybacks or carryovers of such credit of such member that are absorbed in accordance with Section 1.1502-3(b) (or -4(e)) of the Treasury Regulations. "Tax Detriment" means any item of income, gain, recapture of credits or any similar item which results at any time in an actual increase in taxable income or taxes payable as reflected on a Tax Return (if a Tax Return is required to reflect such item). "Tax Item" means any Tax Benefit or Tax Detriment. "Tax Return" means any return, filing, questionnaire, report, form or other document including amended returns or claims for refund filed or required to be filed for any period with any taxing authority (whether domestic or foreign) in connection with any Taxes (whether or not a payment is required to be made with respect to such filing), including any forms required to obtain an exemption from any Tax. 4 5 "Taxes" means all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, tribal (including without limitation, Indian or other native American), state, federation or other body, and without limiting the generality of the foregoing, shall include income, sales, use, ad valorem, gross receipts, value added, franchise, transfer, recording, withholding, payroll, employment, excise, occupation, premium or property taxes, together with any related interest,' penalties and additions to tax, or additional amounts imposed by any taxing authority (domestic or foreign) upon the ADIC Companies or the Interpoint Companies. II. FEDERAL INCOME TAXES 2.01 FILING OF FEDERAL INCOME TAX RETURNS AND FEDERAL INCOME TAX PAYMENTS For all tax periods or portions thereof ending on or before the Disaffiliation Date, Interpoint shall prepare and file all consolidated federal income Tax Returns ("Interpoint Consolidated Returns") which are required to be filed for the Interpoint Affiliated Group and will pay all Taxes shown as due thereon. Such returns shall include all Tax Items of the ADIC Companies. Subject to review and approval by ADIC (which approval shall not be unreasonably withheld), Interpoint will make all decisions relating to the preparation and filing of such returns. Each ADIC Company whose Tax Items are includable in any such return shall agree to be included in the Interpoint Consolidated Return on any form as may be prescribed for such consent if such consent is requested. 2.02 (a) INFORMATION TO BE PROVIDED BY ADIC COMPANIES So as to enable Interpoint to prepare accurately and completely the Interpoint Consolidated Returns and in order to provide for accurate financial reporting, for tax periods or portions thereof ending on or before the Disaffiliation Date, ADIC shall (i) prepare and submit to Interpoint, no later than 180 days after the end of such tax period or portion thereof, information in the form requested by Interpoint necessary to complete a federal income tax return (complying, including reporting and financial, with all appropriate rules and regulations, policies and practices) reflecting the Tax Items of the ADIC Companies, and (ii) provide such other information with respect to taxes (including, without limitation, forecasts and projections) as Interpoint may reasonably request. ADIC shall bear all costs and expenses of preparation and submission of such information, including, without limitation, accountants' and attorneys' fees. (b) PAYMENTS For taxable periods or portions thereof beginning on or after November 1, 1995 and ending on or before the Disaffiliation Date, ADIC shall pay to Interpoint or Interpoint shall pay to ADIC, as the case may be, an amount equal to the Quarterly Federal Income Tax Provision on the first working day of the second month following the end of each quarter. On the last day of the taxable year, an obligation shall arise requiring ADIC to pay to Interpoint 5 6 or Interpoint to pay to ADIC, as the case may be, an amount equal to the difference (if any) between the ADIC Affiliated Group Annual Federal Income Taxes and the sum of the Quarterly Federal Income Tax Provisions for the taxable year, it being understood that if the ADIC Affiliated Group Annual Federal Income Taxes is determined to be a negative number (e.g., because deductions of ADIC for the year exceed its income) then, whether or not the Interpoint Affiliated Group has any liability for tax on the Interpoint Consolidated Return., Interpoint shall pay to ADIC an amount equal to that negative number. Notwithstanding anything to the contrary contained herein, in the Merger Agreement or the Separation Agreement or in the Code or regulations or rulings thereunder, any deductions arising from the payment to holders of options to acquire Interpoint stock pursuant to Section 2.01(d) of the Merger Agreement shall be allocated to ADIC in determining the ADIC Affiliated Group Annual Federal Income Taxes whether such holders are employees of ADIC or Interpoint , and no payment made by Interpoint to ADIC under this Section 2.01(b) shall reduce the Aggregate Share Distribution Amount otherwise determined under Section 2.01(b) of the Merger Agreement. (c) ALTERNATIVE MINIMUM TAX For the purpose of calculating ADIC Affiliated Group Annual Federal Income Taxes, allocations of the Alternative Minimum Tax will be made in accordance with proposed Treasury Regulation Section 1.1502-55 unless and until those Treasury Regulations are issued in final form, in which case any determinations made under the proposed Treasury Regulations shall be revised to the extent required by the final Treasury Regulations. III. STATE AND LOCAL INCOME TAXES 3.01 FILING OF STATE AND LOCAL INCOME TAX RETURNS For all tax periods or portions thereof ending on or before the Disaffiliation Date, Interpoint shall prepare and file all combined, consolidated or unitary state or local income Tax Returns which are required by law to be filed which include both any Tax Item of any ADIC Company and any Tax Item of any Interpoint Company. Interpoint shall pay all Taxes shown as due on such Tax Returns (including those for which any subsidiary may be liable). Interpoint will advise ADIC in a timely manner of the ADIC Companies which will be included in combined, consolidated or unitary Tax Returns to be filed by Interpoint pursuant to this paragraph, and the states or localities in which such returns will be filed. Subject to review and approval by ADIC (which approval shall not be unreasonably withheld), Interpoint will make all decisions relating to the preparation and filing of such returns. Each ADIC Company whose Tax items are included in any combined, consolidated or unitary state or local income Tax Return shall agree to be included on such return on any form as may be prescribed for such consent if such consent is requested. ADIC shall prepare and file all other state and local income and franchise Tax Returns required to be filed with respect to the ADIC Companies and shall pay all taxes reportable on such returns. 6 7 3.02 (a) INFORMATION TO BE PROVIDED BY ADIC COMPANIES So as to enable Interpoint to accurately and completely prepare all combined, consolidated or unitary state and local income Tax Returns and in order to provide for accurate financial reporting, for tax periods or portions thereof ending on or before the Disaffiliation Date each ADIC Company which will be included in a combined, consolidated or unitary return to be filed by Interpoint pursuant to the preceding paragraph shall (i) prepare and submit to Interpoint, no later than 180 days after the end of such tax period or portion thereof, information in the form requested by Interpoint necessary to complete state and local income and franchise tax returns (complying, including reporting and financial, with all applicable rules and regulations, policies and practices) for each state or locality in which such combined, consolidated or unitary returns will be filed and (ii) such other information with respect to taxes (including, without limitation, forecasts and projections) as Interpoint may reasonably request. ADIC shall bear all costs and expenses of preparation and submission of such information, including, without limitation, accountants' and attorneys' fees. (b) PAYMENTS For taxable periods or portions thereof beginning on or after November 1, 1995 and ending on or before the Disaffiliation Date, ADIC shall pay to Interpoint or Interpoint shall pay to ADIC, as the case may be, an amount equal to the Quarterly State or Local Income Tax Provision on the first working day of the second month following the end of each quarter. On the last day of the taxable year, an obligation shall arise requiring ADIC to pay to Interpoint or Interpoint to pay to ADIC, as the case may be, an amount equal to the difference (if any) between the Annual State or Local Income Taxes and the sum of the Quarterly State or Local Income Tax Provision for the taxable year, it being understood that if ADIC Annual State or Local Income Taxes is determined to be a negative number (e.g., because deductions of ADIC for the year exceed its income) then, whether or not the Interpoint Affiliated Group has any liability for tax on a combined or consolidated state or local tax return, Interpoint shall pay to ADIC an amount equal to that negative number. Notwithstanding anything to the contrary contained herein, in the Merger Agreement or the Separation Agreement or in the laws, regulations or rulings of any state or local taxing authority, any deductions arising from the payment to holders of options to acquire Interpoint stock pursuant to Section 2.01(d) of the Merger Agreement shall be allocated to ADIC in determining ADIC Annual State and Local Income Taxes whether such holders are employees of ADIC or Interpoint , and no payment made by Interpoint to ADIC under this Section 2.01(b) shall reduce the Aggregate Share Distribution Amount otherwise determined under Section 2.01(b) of the Merger Agreement. 7 8 IV. FOREIGN TAXES AND U.S. TAXES OF FOREIGN CORPORATIONS 4.01 FILING OF FOREIGN INCOME TAX RETURNS AND PAYMENT OF TAXES ADIC shall prepare and file all foreign Income Tax Returns required to be filed by any ADIC Company for all Tax periods or portions thereof, and shall pay all taxes shown as due in connection therewith. Interpoint shall prepare and file all other foreign Income Tax Returns required to be filed by any other Interpoint Company and will pay all Taxes due in connection therewith. 4.02 FILING OF U.S. TAX RETURNS AND PAYMENT OF TAXES ADIC shall prepare and file all U.S. Income Tax Returns (if any) required to be filed by any ADIC Company that is a foreign corporation and pay all Taxes due in connection therewith. Interpoint shall prepare and file all U.S. Tax Returns (if any) for all other Interpoint Companies and pay all Taxes due in connection therewith. Any obligations for the payment of Taxes for periods ending on or before the Disaffiliation date shall be treated as an advance made by Interpoint to ADIC or the payment of an intercompany advance by ADIC to Interpoint, as the case may be, and shall be satisfied pursuant to Section 2.03 of the Separation Agreement. V. SUBSEQUENT ADJUSTMENTS OF TAX LIABILITY 5.01 FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAXES - IN GENERAL (a) LIABILITY OF ADIC ADIC shall indemnify and hold harmless the Interpoint Companies from and against any and all federal, state, local or foreign Income Tax liability resulting from any Final Determination which adjusts any Tax Item of any ADIC Company for any Tax period or portion thereof, including, without limitation, any interest, penalties or additions to tax attributable thereto. ADIC shall be entitled to the benefit of all refunds (whether actual or constructive) of federal, state, local and foreign Income Taxes, and all interest attributable thereto, resulting from any Final Determination which adjusts any Tax Item of any ADIC Company for any Tax period or portion thereof. As provided in Article V of the Separation Agreement, Taxes other than Income Taxes may be considered Liabilities subject to indemnification under the Separation Agreement. (b) LIABILITY OF INTERPOINT Interpoint shall indemnify and hold harmless the ADIC Companies from and against any and all federal, state, local or foreign income Tax liability resulting from any Final Determination which adjusts any Tax Item of any member or former member of the Interpoint Affiliated Group (other than an ADIC Company) for any tax period or portion thereof, including, without limitation, any interest, penalties or additions to tax attributable thereto. As 8 9 provided herein, Interpoint shall be entitled to the benefit of all refunds (whether actual or constructive) of federal, state, local or foreign Income Taxes, and all interest attributable thereto, resulting from any Final Determination which adjusts any Tax Item of any Interpoint Company for any tax period or portion thereof. 5.02 DETERMINATION OF INDEMNIFICATION AMOUNTS If any Final Determination results in an adjustment to any Tax Item of any ADIC Company or Interpoint Company for any Tax period or portion thereof ending on or before the Disaffiliation Date, and such adjustment would affect the liability of ADIC to pay to Interpoint or of Interpoint to pay to ADIC, as the case may be, any Original Tax Provision, such Original Tax Provision shall be redetermined to give effect to such adjustment, as if it had been made as part of or reflected in the Tax Return to which such Original Tax Provision relates. ADIC shall pay to Interpoint or Interpoint shall pay to ADIC, as the case may be, (a) any excess of the Original Tax Provision pursuant to such redetermination over the Original Tax Provision as originally computed, plus (b) the amount of any interest, penalties, additions to tax or expenses (as described in Section 5.01) with respect to such amount. Any amount payable by ADIC or Interpoint pursuant to this Section 5.02 shall be reduced to reflect any amount paid directly by an ADIC Company or an Interpoint Company, as the case may be, to any government or taxing authority to satisfy the increased Tax liability taken into account in computing such payment. Vl. CARRYBACKS OF ADIC TAX BENEFITS If a Tax Benefit of an ADIC Company arises in any taxable period ending after the Disaffiliation Date which either (i) is required under applicable law to be carried back to any taxable period ending on or before the Disaffiliation Date or (ii) ADIC properly elects to carryback to such earlier taxable period, then the Original Tax Provision for the taxable period to which such Tax Benefit is carried back shall. be adjusted accordingly, and (whether or not an Original Tax Provision existed for the applicable period) Interpoint shall pay to ADIC the amount of the reduction in Tax liability resulting from the carryback of such Tax Benefit (to the extent that ADIC does not receive such amount directly from the appropriate taxing authority). Such payment shall be made within thirty (30) days of the receipt by any Interpoint Company of the tax benefit of any such reduction. For the purposes of this Article VI, if for any taxable period ending after the Disaffiliation Date, both Interpoint and ADIC have Tax Benefits that they can properly elect to carryback, then such Tax Benefits shall be applied first against any income or tax attributable to Interpoint or ADIC, as the case may be. Interpoint then shall pay ADIC the amount of the additional reduction in Tax liability remaining after that application to the extent of ADIC's pro rata share of the amount of the remaining Tax Benefits that can be carried back. Such pro rata share shall be the total amount of remaining Tax Benefits that can be carried back multiplied by a fraction the numerator of which is the amount of the remaining Tax Benefits of the ADIC Companies and the denominator of which is the sum of the remaining Tax Benefits of both the ADIC and Interpoint Companies that are described in the first sentence of this Article VI. 9 10 VII. TAXES ATTRIBUTABLE TO FORMATION AND DISAFFILIATION OF ADIC 7.01 INTERPOINT LIABILITY. Notwithstanding any provision of this Agreement to the contrary, except as otherwise provided in this Article VII, Interpoint shall pay, and shall indemnify and hold harmless the ADIC Companies from and against, and ADIC shall not be required to make any payment to Interpoint in respect of, any Taxes (including without limitation (i) the inclusion in income of "excess loss accounts," within the meaning of Section 1.1502-19 of the Treasury Regulations or comparable provisions of state or local tax laws or (ii) the restoration of deferred gain on deferred intercompany transactions under Section 1.1502-13 of the Treasury Regulations) attributable to transactions undertaken in contributing to or capitalizing the ADIC Companies or in the Disaffiliation, including, without limitation, the transfer of the stock or the assets of any ADIC Company within the Interpoint Affiliated Group, or the sale, exchange, distribution or other transfer of the stock of ADIC by or to any Interpoint Company or to the shareholders of Interpoint. 7.02 TAX BENEFITS. In the event that, as a result of a Final Determination attributable to one or more transactions described in Section 7.01, there is an adjustment to a federal, state, local or foreign Tax Item of an ADIC Company with respect to a tax period or portion thereof ending on or before the Disaffiliation Date (other than an adjustment with respect to which ADIC has borne all resulting increases in Tax liability pursuant to Section 7.03) and as a result of such adjustment there is allowable a net increase in federal, state, local or foreign Tax Benefits or a net decrease in federal, state, local or foreign Tax Detriments of an ADIC Company in any tax period or portion thereof ending after the Disaffiliation Date, ADIC shall pay to Interpoint the amount of any such reduction together with interest received as a result of such reduction. Such payments shall be made within thirty (30) days of the receipt by the ADIC Companies of the benefit of any such reduction or interest which the ADIC Companies would not have received but for such net increase or net decrease. Interpoint shall notify ADIC of any Final Determination which may give rise to a payment under this paragraph and will provide ADIC with such information as may be reasonably necessary for the ADIC Companies to avail themselves of the benefit of any resulting net increase in Tax Benefits or net decrease in Tax Detriments. ADIC shall promptly take all action as may be reasonably necessary to secure the benefit of any reduction in Income Tax liability, plus interest resulting from such net increase or decrease (including by filing an amended return or claim for refund) and shall diligently pursue such benefit. ADIC shall provide Interpoint with notice as to the date of the closing of the statute of limitations for any taxable year of any material ADIC Company under any state, local or foreign Income Tax law under which there may be a material benefit for which Interpoint may be entitled to a payment under this section at least thirty (30) days prior to such date. Any benefit or interest which is not received by the ADIC Companies as a result of the application of the statute of limitations to a taxable year of an ADIC Company shall be considered to have been received at the time of the receipt by ADIC of the notification from Interpoint required under this paragraph if such notification is promptly given by Interpoint after the occurrence of an adjustment and if it is received-at least ten (10) business days prior to the last day of which procedures are 10 11 available under the relevant statute of limitation to make claims for refunds of Income Taxes for the taxable year of the ADIC Company in question. 7.03 ADIC LIABILITY. Notwithstanding Section 7.01 hereof, ADIC shall be liable for the Taxes described in Article VIII of this Agreement, even if attributable to transactions undertaken in organizing or capitalizing the ADIC Companies or the Disaffiliation, if the incurrence of the Tax in question resulted solely from the failure by ADIC to timely provide information available to the Interpoint Companies, or file any forms or provide any certificates, reasonably requested in writing by Interpoint either to be provided to Interpoint or to be filed by the ADIC Companies. VIII. TAXES OTHER THAN INCOME TAXES ADIC shall pay, and shall indemnify and hold harmless the Interpoint Companies against, all Taxes, other than income taxes, attributable to the ADIC Companies for all periods prior to the Disaffiliation Date, including any expenses incurred by any Interpoint Company (including reasonable accountants' and attorneys' fees) in connection therewith. Interpoint shall pay, and shall indemnify and hold harmless the ADIC Companies against, all Taxes, other than income taxes, attributable to the Interpoint Companies for all periods prior to the Disaffiliation Date, including any expenses incurred by any ADIC Company (including reasonable accountants' and attorneys' fees) in connection therewith. IX. ADMINISTRATIVE PROVISIONS 9.01. CONTESTS In order to be indemnified under this Agreement a party entitled to be indemnified under this Agreement for any liability resulting from an adjustment to Tax Item reportable in any tax period or portion thereof or the imposition of a Tax shall provide the indemnifying party (at the indemnifying party's cost) with written notice of any claim or of the commencement of any audit or proceeding which may result in any such indemnification, together with copies of all correspondence, notices or other documents relating thereto; shall provide the indemnifying party with notice of and an opportunity to attend any meeting with tax authorities regarding such claim, audit or proceeding; and shall not (unless otherwise required by a proper notice of assessment of levy) pay, settle, compromise or concede any portion of such claim or issue relating thereto without the written consent of the indemnifying party and shall, at the indemnifying party's sole cost (including any reasonable out-of-pocket costs incurred by the indemnified party) take such action as the indemnifying party may reasonably request (including the filing of a petition, amended return or claim for refund) in contesting such claim, provided that the indemnifying party shall, if so requested, provide an opinion of independent tax counsel or an independent accounting firm that there exists a reasonable basis for such contest, and shall assign to the indemnifying party any claim for refund for any portion of such claim which shall have been paid. If in the course of a contest a compromise is offered with respect to offsetting or partially offsetting issues, the parties agree 11 12 to negotiate in good faith in an effort to share the benefits of such compromise. Any party receiving a refund (or interest attributable thereto) to which the other party is entitled shall promptly pay such refund and interest to such other party. 9.02 COOPERATION AND EXCHANGE OF INFORMATION Interpoint and ADIC will provide each other with such cooperation and information as either of them may reasonably request of the other in filing any Tax Return, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes, Such cooperation and information shall include, without limitation, providing copies of all relevant Tax Returns, together with accompanying schedules and related workpapers, the computerized tax data base with respect to any Interpoint Company or ADIC Company, documents relating to rulings or other determinations by taxing authorities, and records concerning the ownership and tax basis of property, which either party may possess. Each party shall make its employees available on a mutually convenient basis to provide explanations of any documents or information requested hereunder. Except as otherwise provided in this agreement, the party requesting assistance hereunder shall reimburse the other for any reasonable out-of-pocket costs incurred in providing any Tax Return, document or other written information, upon receipt of reasonable documentation of such costs. Each party will retain all returns, schedules and workpapers, and all material records or other documents relating thereto, until the expiration of the statute of limitations (including extensions) of the taxable years to which such returns and other documents relate and, unless such Tax Returns and other documents are offered to the other party, until the final determination of any payments which may be required in respect of such years under this agreement. Any information obtained under this Section shall be kept confidential, except as may be otherwise necessary in connection with the filing of returns or claims for refund or in conducting any audit or other proceeding. 9.03. STATEMENT OF POSSIBLE CARRYFORWARDS Within thirty (30) days before the filing by the Interpoint Affiliated Group of its consolidated federal income tax return for its taxable year which includes the Disaffiliation Date and the filing by the Interpoint Affiliated Group of any state or local consolidated, combined or unitary tax returns including an ADIC Company for the taxable year which includes the Disaffiliation Date (and, if requested by ADIC, at any additional time prior to such dates) , Interpoint will provide ADIC with its estimate of the amount of carryforwards of losses, credits, or other Tax Items, if any, which may be available to the ADIC Companies following the Disaffiliation Date, Such estimate will be for information only, based on Interpoint's best estimate of the available benefits as of the time such estimate is provided, and no warranty as to the existence or availability of carryforwards shall be given or implied. Interpoint will inform ADIC of any adjustments to such carryforward determined in connection with the filing of the Interpoint Affiliated Group's Tax Returns, promptly after such filing, or which may result from any audit or other proceeding, at the time of a Final Determination with respect thereto. 12 13 9.04 MEANING OF RECEIPT OR REDUCTION Any reference in this Agreement to the receipt by a party of an amount, or a reduction in a tax liability of a party or interest with respect thereto, shall (except where the context indicates to the contrary) include any offset or credit against any other tax liability of such party, and shall be deemed to have been received or refunded at the time such other tax liability (or interest thereon) would otherwise have been due. 9.05 CHARACTER AND EFFECT OF PAYMENTS All amounts paid pursuant to this Agreement by one party to another, other than Post Disaffiliation Correlative Amounts, shall be treated by such parties for all Tax purposes as intercompany settlements of liabilities existing on or before the Disaffiliation Date. If, notwithstanding such treatment by Interpoint and ADIC, as a result of a Final Determination the federal, state, local or foreign income tax liability of either Interpoint or ADIC shall be increased as a result of its receipt of a payment pursuant to this Agreement, or with respect to any payment of a Post Disaffiliation Correlative Amount, such payment shall be appropriately adjusted (but only to the extent that the indemnifying party shall have been given the opportunity to contest such adjustment in accordance with Section 9.01 hereof) so that the amount of such payment, as adjusted, reduced by the amount of all Income Taxes payable with respect to the receipt thereof (but taking into account all correlative tax benefits resulting from the payment of such Income Taxes) , shall equal the amount of the payment which the party receiving such payment would otherwise be entitled to receive pursuant to this Agreement. 9.06 ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENTS This agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes (to the extent not incorporated herein) all other agreements, whether or not written, in respect of any Tax between any of the Interpoint Companies, on the one hand, and any of the ADIC Companies, on the other hand. This Agreement may not be amended except by an agreement in writing, signed by the parties hereto. 9.07 NOTICES All notices, requests, demands and other communications to any party hereunder shall be in writing and shall be duly given if delivered and mailed (registered or certified mail, postage prepaid, return receipt requested) to the address set forth below or such other address as either party shall give written notice to the other: If to Interpoint: 10301 Willows Road Redmond, Washington 98073-9705 13 14 Attention: Chief Executive Officer If to ADIC: 10201 Willows Road Redmond, Washington 981052 Attention: Chief Operating Officer 9.08 RESOLUTION OF DISPUTES Any disputes between the parties concerning the calculation of amounts, allocation or attribution of costs or of any Tax or Tax Item or similar accounting matters shall be resolved by a nationally recognized public accounting firm selected by the parties, whose fees and expenses shall be shared equally by Interpoint and ADIC. 9.09 APPLICATION TO PRESENT AND FUTURE SUBSIDIARIES OR AFFILIATES This agreement is being entered into by Interpoint (on behalf of itself and each of the Interpoint Companies), and ADIC (on behalf of itself and each of the ADIC Companies). This agreement shall constitute a direct obligation of Interpoint and the ADIC Companies, and shall continue as such whether or not they remain affiliated, as the case may be, and shall be deemed to have been readopted and affirmed on behalf of any corporation which becomes an ADIC Company in the future. ADIC shall, upon the written request of Interpoint, cause any of its companies formally to execute this agreement. This agreement shall be binding upon, and shall inure to the benefit of, the successors, assigns and persons controlling any of the corporations bound hereby, including but not limited to, Crane and its Affiliates. 9.10 TERM This agreement shall commence on the date of execution indicated on page one hereof and shall continue in effect until otherwise agreed to in writing by Interpoint and ADIC, or their successors. 9.11 COMPREHENSIVE SETTLEMENT Following the expiration of the statute of limitations for all taxable years ending on or before the Disaffiliation Date, and for the taxable year which includes the Disaffiliation Date, of Interpoint and each ADIC Company, under every federal, state, local or foreign Tax law under which Interpoint or ADIC may have a material liability for such years, Interpoint and ADIC shall each, if requested by the other, agree to negotiate in good faith in an effort to reach an appropriate settlement of all of the then remaining obligations of either party pursuant to this Agreement. 14 15 9.12 GOVERNING LAW This agreement shall be governed by the laws of the State of Washington, without regard to the principles of conflicts of law thereof. 9.13 SEVERABILITY If any term, provision or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and restrictions shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions and restrictions without including any of such which may be hereafter declared invalid, void and unenforceable. 9.14 SOURCE OF INTERPOINT PAYMENTS Interpoint shall satisfy all of its payment obligations under this Agreement with its own funds and shall not directly or indirectly obtain or borrow funds or use as security any funds of Crane Co. to satisfy such payment obligations. 15 16 IN WITNESS WHEREOF, the parties have executed this agreement as of the date first above written. INTERPOINT CORPORATION By_______________________ ADVANCED DIGITAL INFORMATION CORPORATION. By_______________________ Acknowledged and Agreed CRANE CO. By:_______________________ 16 EX-10.3 7 ADIC 1996 STOCK OPTION PLAN 1 Exhibit 10.3 ADVANCED DIGITAL INFORMATION CORPORATION 1996 STOCK OPTION PLAN SECTION 1. PURPOSE The purpose of the Advanced Digital Information Corporation 1996 Stock Option Plan (the "Plan") is to enhance the long-term shareholder value of Advanced Digital Information Corporation, a Washington corporation (the "Company"), by offering opportunities to employees, directors, officers, consultants, agents, advisors and independent contractors of the Company and its Subsidiaries (as defined in Section 2) to participate in the Company's growth and success, and to encourage them to remain in the service of the Company and its Subsidiaries and to acquire and maintain stock ownership in the Company. SECTION 2. DEFINITIONS For purposes of the Plan, the following terms shall be defined as set forth below: 2.1 AWARD "Award" means an award or grant made to a Participant pursuant to the Plan, including awards or grants of Incentive Stock Options and Nonqualified Stock Options or any combination thereof. 2.2 BOARD "Board" means the Board of Directors of the Company. 2.3 CAUSE "Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conviction or confession of a crime punishable by law (except minor violations), in each case as determined by the Plan Administrator, and its determination shall be conclusive and binding. 2.4 CODE "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.5 COMMON STOCK "Common Stock" means the common stock, no par value, of the Company. -1- 2 2.6 CORPORATE TRANSACTION "Corporate Transaction" means any of the following events: (a) Consummation of any merger or consolidation of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Common Stock are converted into cash, securities or other property, if following such merger or consolidation the holders of the Company's outstanding voting securities immediately prior to such merger or consolidation own less than 66-2/3% of the outstanding voting securities of the surviving corporation; (b) Consummation of any sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of the Company's assets other than a transfer of the Company's assets to a majority-owned subsidiary corporation (as the term "subsidiary corporation" is defined in Section 8.3) of the Company; (c) Approval by the holders of the Common Stock of any plan or proposal for the liquidation or dissolution of the Company; or (d) Acquisition by a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date of adoption of the Plan) of the Exchange Act of a majority or more of the Company's outstanding voting securities (whether directly or indirectly, beneficially or of record).Ownership of voting securities shall take into account and shall include ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption of the Plan) pursuant to the Exchange Act. 2.7 DISABILITY "Disability" means "disability" as that term is defined for purposes of Section 22(e)(3) of the Code. 2.8 ELIGIBLE DIRECTOR "Eligible Director" means a member of the Board who is not also an employee of the Company or any "parent corporation" or "subsidiary corporation" (as those terms are defined in Section 8.3) of the Company. 2.9 EXCHANGE ACT "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.10 FAIR MARKET VALUE "Fair Market Value" shall be as established in good faith by the Plan Administrator or (a) if the Common Stock is listed on the Nasdaq National Market, the closing selling price for the Common Stock as reported by the Nasdaq National Market for a single trading day or (b) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, the closing selling price for the Common Stock as such price is officially quoted in the composite tape of transactions on such exchange for a single trading day. If there is no such reported price for the Common Stock for the date in question, then such price on the last preceding date for which such price exists shall be determinative of Fair Market Value. -2- 3 2.11 GOOD REASON "Good Reason" means the occurrence of any of the following events or conditions and the failure of the Successor Corporation to cure such event or condition within 30 days after receipt of written notice by the Holder: (a) a change in the Holder's status, title, position or responsibilities (including reporting responsibilities) that, in the Holder's reasonable judgment, represents a substantial reduction in the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Holder of any duties or responsibilities that, in the Holder's reasonable judgment, are materially inconsistent with such status, title, position or responsibilities; or any removal of the Holder from or failure to reappoint or reelect the Holder to any of such positions, except in connection with the termination of the Holder's employment for Cause, for Disability or as a result of his or her death, or by the Holder other than for Good Reason; (b) a reduction in the Holder's annual base salary; (c) the Successor Corporation's requiring the Holder (without the Holder's consent) to be based at any place outside a 35-mile radius of his or her place of employment prior to a Corporate Transaction, except for reasonably required travel on the Successor Corporation's business that is not materially greater than such travel requirements prior to the Corporate Transaction; (d) the Successor Corporation's failure to (i) continue in effect any material compensation or benefit plan (or the substantial equivalent thereof) in which the Holder was participating at the time of a Corporate Transaction, including, but not limited to, the Plan, or (ii) provide the Holder with compensation and benefits substantially equivalent (in terms of benefit levels and/or reward opportunities) to those provided for under each material employee benefit plan, program and practice as in effect immediately prior to the Corporate Transaction; (e) any material breach by the Successor Corporation of its obligations to the Holder under the Plan or any substantially equivalent plan of the Successor Corporation; or (f) any purported termination of the Holder's employment or service for Cause by the Successor Corporation that does not comply with the terms of the Plan or any substantially equivalent plan of the Successor Corporation. -3- 4 2.12 GRANT DATE "Grant Date" means the date the Plan Administrator adopted the granting resolution or a later date designated in a resolution of the Plan Administrator as the date an Award is to be granted, or the date an Option is automatically granted pursuant to Section 9. 2.13 HOLDER "Holder" means the Participant to whom an Award is granted or, for a Holder who has died, the personal representative of the Holder's estate, the person(s) to whom the Holder's rights under the Award have passed by will or by the applicable laws of descent and distribution or the beneficiary designated pursuant to Section 10. 2.14 INCENTIVE STOCK OPTION "Incentive Stock Option" means an Option to purchase Common Stock granted under Section 7 with the intention that it qualify as an "incentive stock option" as that term is defined in Section 422 of the Code. 2.15 NONQUALIFIED STOCK OPTION "Nonqualified Stock Option" means an Option to purchase Common Stock granted under Section 7 other than an Incentive Stock Option. 2.16 OPTION "Option" means the right to purchase Common Stock granted under Section 7. 2.17 PARTICIPANT "Participant" means an individual who is a Holder of an Award or, as the context may require, any employee, director, officer, consultant, agent, advisor or independent contractor of the Company or a Subsidiary who has been designated by the Plan Administrator as eligible to participate in the Plan. 2.18 PLAN ADMINISTRATOR "Plan Administrator" means the Board or any committee of the Board designated to administer the Plan under Section 3.1. 2.19 SECURITIES ACT "Securities Act" means the Securities Act of 1933, as amended. 2.20 SUBSIDIARY "Subsidiary," except as provided in Section 8.3 in connection with Incentive Stock Options, means any entity that is directly or indirectly controlled by the Company or in which the -4- 5 Company has a significant ownership interest, as determined by the Plan Administrator, and any entity that may become a direct or indirect parent of the Company. 2.21 SUCCESSOR CORPORATION "Successor Corporation" has the meaning set forth under Section 12.2. SECTION 3. ADMINISTRATION 3.1 PLAN ADMINISTRATOR The Plan shall be administered by the Board or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board. If and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in selecting the Plan Administrator and the membership of any committee acting as Plan Administrator of the Plan with respect to any persons subject or likely to become subject to Section 16 under the Exchange Act the provisions regarding (a) "outside directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible Participants to different committees, subject to such limitations as the Board deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. 3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Awards under the Plan, including the selection of individuals to be granted Awards, the type of Awards, the number of shares of Common Stock subject to an Award, all terms, conditions, restrictions and limitations, if any, of an Award and the terms of any instrument that evidences the Award. The Plan Administrator shall also have exclusive authority to interpret the Plan and may from time to time adopt, and change, rules and regulations of general application for the Plan's administration. The Plan Administrator's interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. The Plan Administrator may delegate administrative duties to such of the Company's officers as it so determines. SECTION 4. STOCK SUBJECT TO THE PLAN 4.1 AUTHORIZED NUMBER OF SHARES Subject to adjustment from time to time as provided in Section 12.1, a maximum of 625,000 shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares. -5- 6 4.2 LIMITATIONS Subject to adjustment from time to time as provided in Section 12.1, not more than 100,000 shares of Common Stock may be made subject to Awards under the Plan to any individual Participant in the aggregate in any one fiscal year of the Company, such limitation to be applied in a manner consistent with the requirements of, and only to the extent required for compliance with, the exclusion from the limitation on deductibility of compensation under Section 162(m) of the Code. 4.3 REUSE OF SHARES Any shares of Common Stock that have been made subject to an Award that cease to be subject to the Award (other than by reason of exercise or payment of the Award to the extent it is exercised for in shares), shall again be available for issuance in connection with future grants of Awards under the Plan; provided, however, that any such shares shall be counted in accordance with the requirements of Section 162(m) of the Code. SECTION 5. ELIGIBILITY Awards may be granted under the Plan to those officers, directors and key employees of the Company and its Subsidiaries as the Plan Administrator from time to time selects; provided, however, that Eligible Directors shall be eligible to receive Awards only under Section 9. Awards may also be made to consultants, agents, advisors and independent contractors who provide services to the Company and its Subsidiaries. SECTION 6. AWARDS 6.1 FORM AND GRANT OF AWARDS The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be made under the Plan. Such Awards may consist of Incentive Stock Options and/or Nonqualified Stock Options. Awards may be granted singly or in combination. 6.2 ACQUIRED COMPANY AWARDS Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other acquired entities ("Acquired Entities") (or the parent of the Acquired Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or of stock, reorganization or liquidation (the "Acquisition Transaction"). In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such Awards shall be deemed to be Participants and Holders. -6- 7 SECTION 7. AWARDS OF OPTIONS 7.1 GRANT OF OPTIONS The Plan Administrator is authorized under the Plan, in its sole discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock Options, which shall be appropriately designated. 7.2 OPTION EXERCISE PRICE The exercise price for shares purchased under an Option shall be as determined by the Plan Administrator, but shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date. 7.3 TERM OF OPTIONS The term of each Option shall be as established by the Plan Administrator or, if not so established, shall be five years from the Grant Date. 7.4 EXERCISE OF OPTIONS The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which or the installments in which the Option shall become exercisable, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:
Period of Holder's Continuous Employment or Service With the Company or Its Subsidiaries Percent of Total Option From the Option Grant Date That Is Exercisable -------------------------- ------------------- After 1 year 25% After 2 years 50% After 3 years 75% After 4 years 100%
To the extent that the right to purchase shares has accrued thereunder, an Option may be exercised from time to time by written notice to the Company, in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised and accompanied by payment in full as described in Section 7.5. The Plan Administrator may determine at any time that an Option may not be exercised as to less than 100 shares at any one time (or the lesser number of remaining shares covered by the Option). -7- 8 7.5 PAYMENT OF EXERCISE PRICE The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid in cash or check, or, unless the Plan Administrator at any time determines otherwise, a combination of cash and/or check and one or both of the following alternative forms: (a) tendering (either actually or, if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) Common Stock already owned by the Holder for at least six months (or any shorter period necessary to avoid a charge to the Company's earnings for financial reporting purposes) having a Fair Market Value on the day prior to the exercise date equal to the aggregate Option exercise price; or (b) if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed exercise notice, together with irrevocable instructions, to (i) a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise and (ii) the Company to deliver the certificates for such purchased shares directly to such brokerage firm, all in accordance with the regulations of the Federal Reserve Board. In addition, the exercise price for shares purchased under an Option may be paid either singly or in combination with one or more of the alternative forms of payment authorized by this Section 7.5, by (y) a promissory note delivered pursuant to Section 10 or (z) such other consideration as the Plan Administrator may permit. 7.6 POST-TERMINATION EXERCISES The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option will continue to be exercisable, and the terms and conditions of such exercise, if a Holder ceases to be employed by, or to provide services to, the Company or its Subsidiaries, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time. In case of termination of the Holder's employment or services other than by reason of death or Cause, the Option shall be exercisable, to the extent of the number of shares purchasable by the Holder at the date of such termination, only within three months after the date the Holder ceases to be an employee, director, officer, consultant, agent, advisor or independent contractor of the Company or a Subsidiary if termination of the Holder's employment or services is for any reason other than Disability and only within one year after the date of such termination by reason of Disability, but in no event later than the remaining term of the Option. Any Option exercisable at the time of the Holder's death may be exercised, at any time or from time to time within one year after the date of death, but in no event later than the remaining term of the Option, to the extent of the number of shares purchasable by the Holder at the date of the Holder's death, by the personal representative of the Holder's estate, the person(s) to whom the Holder's rights under the Award have passed by will or the applicable laws of descent and distribution or the beneficiary designated pursuant to Section 11. Any portion of an Option that is not exercisable on the date of termination of the Holder's employment or services shall terminate on such date, unless the Plan -8- 9 Administrator determines otherwise. In case of termination of the Holder's employment or services for Cause, the Option shall automatically terminate upon first notification to the Holder of such termination, unless the Plan Administrator determines otherwise. If a Holder's employment or services with the Company are suspended pending an investigation of whether the Holder shall be terminated for Cause, all the Holder's rights under any Option likewise shall be suspended during the period of investigation. A transfer of employment or services between or among the Company and its Subsidiaries shall not be considered a termination of employment or services. The effect of a Company-approved leave of absence on the terms and conditions of an option shall be determined by the Plan Administrator, in its sole discretion. SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS To the extent required by Section 422 of the Code, Incentive Stock Options shall be subject to the following additional terms and conditions: 8.1 DOLLAR LIMITATION To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted. 8.2 10% SHAREHOLDERS If a Participant owns more than 10% of the total voting power of all classes of the Company's stock, then the exercise price per share of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option term shall not exceed five years. The determination of 10% ownership shall be made in accordance with Section 422 of the Code. 8.3 ELIGIBLE EMPLOYEES Individuals who are not employees of the Company or one of its parent corporations or subsidiary corporations may not be granted Incentive Stock Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code. 8.4 TERM The term of an Incentive Stock Option shall not exceed 10 years. -9- 10 8.5 EXERCISABILITY To qualify for Incentive Stock Option tax treatment, an Option designated as an Incentive Stock Option must be exercised within three months after termination of employment for reasons other than death, except that, in the case of termination of employment due to total disability, such Option must be exercised within one year after such termination. Employment shall not be deemed to continue beyond the first 90 days of a leave of absence unless the Participant's reemployment rights are guaranteed by statute or contract. For purposes of this Section 8.5, "total disability" shall mean a mental or physical impairment of the Participant which is expected to result in death or which has lasted or is expected to last for a continuous period of 12 months or more and which causes the Participant to be unable, in the opinion of the Company and two independent physicians, to perform his or her duties for the Company and to be engaged in any substantial gainful activity. Total disability shall be deemed to have occurred on the first day after the Company and the two independent physicians have furnished their opinion of total disability to the Plan Administrator. 8.6 TAXATION OF INCENTIVE STOCK OPTIONS In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares issued upon the exercise of an Incentive Stock Option for two years after the Grant Date of the Incentive Stock Option and one year from the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Plan Administrator may require a Participant to give the Company prompt notice of any disposition of shares acquired by the exercise of an Incentive Stock Option prior to the expiration of such holding periods. 8.7 PROMISSORY NOTES The amount of any promissory note delivered pursuant to Section 10 in connection with an Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax purposes. SECTION 9. AWARDS OF OPTIONS TO NONEMPLOYEE DIRECTORS Notwithstanding any other provision of the Plan to the contrary, grants to Eligible Directors shall be made only pursuant to the terms and conditions set forth below. -10- 11 9.1 ANNUAL GRANTS Commencing with the Company's 1997 Annual Meeting of Shareholders, each Eligible Director shall automatically receive a grant of an Option to purchase 500 shares of Common Stock immediately following each year's Annual Meeting of Shareholders ("Annual Grants"). Annual Grants shall vest and become exercisable upon the optionee's continued service as a director until the next Annual Meeting of Shareholders after the Grant Date. 9.2 INITIAL GRANTS Each Eligible Director shall automatically receive a grant of an Option to purchase 5,500 shares of Common Stock immediately following his or her initial election or appointment to the Board ("Initial Grants"). Initial Grants shall vest and become exercisable as follows: Options for 1,375 shares shall become exercisable on and after one year after the Grant Date, and Options for an additional 1,375 shares shall become exercisable on and after each of the three succeeding anniversaries of the Grant Date. 9.3 NONQUALIFIED STOCK OPTIONS; TERM OF OPTIONS Options granted to an Eligible Director under the Plan shall constitute Nonqualified Stock Options. The term of each Option granted under this Section 9 shall be five years from the Grant Date. 9.4 OPTION EXERCISE PRICE The exercise price for shares purchased under an Option granted under this Section 9 shall be the Fair Market Value of the Common Stock on the Grant Date. 9.5 POST-TERMINATION EXERCISES In case of termination of the Holder's services other than by reason of death or Cause, the Option shall be exercisable, to the extent of the number of shares purchasable by the Holder at the date of such termination, only within three months after the date the Holder ceases to be a director of the Company if such termination is for reasons other than Disability and only within one year if such termination is by reason of Disability, but in no event later than the remaining term of the Option. Any Option exercisable at the time of the Holder's death may be exercised, to the extent of the number of shares purchasable by the Holder at the date of the Holder's death, by the personal representative of the Holder's estate entitled thereto at any time or from time to time within one year after the date of death, but in no event later than the remaining term of the Option. In case of termination of the Holder's services for Cause, the Option shall automatically terminate upon first notification to the Holder of such termination. If a Holder's services with the Company are suspended pending an investigation of whether the Holder shall be terminated for Cause, all the Holder's rights under any Option likewise shall be suspended during the period of investigation. -11- 12 9.6 CORPORATE TRANSACTION In the event of a Corporate Transaction, each Award that is at the time outstanding shall automatically accelerate so that each such Award shall, immediately prior to the specified effective date for the Corporate Transaction, become 100% vested, except that such acceleration will not occur if, in the opinion of the Company's accountants, it would render unavailable "pooling of interests" accounting for a Corporate Transaction that would otherwise qualify for such accounting treatment. All such Awards not exercised prior to that time shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction. 9.7 AVAILABILITY OF SHARES The Options provided for in this Section 9 are subject to the availability of shares under the Plan. If at the date of any grant under this Section 9 there are insufficient shares of Common Stock available to satisfy the grants in whole, then the shares available shall be divided by the number of Eligible Directors then entitled to a grant and each such Eligible Director shall be granted an Option for that number of shares. 9.8 OTHER TERMS APPLICABLE Except as otherwise provided in this Section 9, Options granted to Eligible Directors shall be subject to the terms and conditions of the Plan applicable to other Participants. SECTION 10. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES To assist a Holder (including a Holder who is an officer or director of the Company) in acquiring shares of Common Stock pursuant to an Award granted under the Plan, the Plan Administrator, in its sole discretion, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Award, (a) the extension of a loan to the Holder by the Company, (b) the payment by the Holder of the purchase price, if any, of the Common Stock in installments, or (c) the guarantee by the Company of a loan obtained by the Holder from a third party. The terms of any loans, installment payments or loan guarantees, including the interest rate and terms of repayment, will be subject to the Plan Administrator's discretion. Loans, installment payments and loan guarantees may be granted with or without security. The maximum credit available is the purchase price, if any, of the Common Stock acquired, plus the maximum federal and state income and employment tax liability that may be incurred in connection with the acquisition. SECTION 11. ASSIGNABILITY No Award granted under the Plan may be pledged, assigned or transferred by the Holder other than by will or by the laws of descent and distribution, and during the Holder's lifetime, such Awards may be exercised only by the Holder. Notwithstanding the foregoing, and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit such assignment, transfer and exercisability and may permit a Holder of such Awards to designate -12- 13 a beneficiary who may exercise the Award or receive compensation under the Award after the Holder's death; provided, however, that any Award so assigned or transferred shall be subject to all the same terms and conditions contained in the instrument evidencing the Award. SECTION 12. ADJUSTMENTS 12.1 ADJUSTMENT OF SHARES In the event that, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of securities of the Company or of any other corporation or (b) new, different or additional securities of the Company or of any other corporation being received by the holders of shares of Common Stock of the Company, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and class of securities subject to the Plan as set forth in Section 4.1, (ii) the number and class of securities that may be made subject to Awards to any individual Participant as set forth in Sections 4.2, 9.1, 9.2 and 9.3 and (iii) the number and class of securities subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding. 12.2 CORPORATE TRANSACTION Except as otherwise provided in the instrument that evidences the Award, in the event of a Corporate Transaction, each Award that is at the time outstanding shall automatically accelerate so that each such Award shall, immediately prior to the specified effective date for the Corporate Transaction, become 100% vested, except that such acceleration will not occur if, in the opinion of the Company's accountants, it would render unavailable "pooling of interests" accounting for a Corporate Transaction that would otherwise qualify for such accounting treatment. Except for Options granted pursuant to Section 9, such Award shall not so accelerate, if and to the extent (a) such Award is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof (the "Successor Corporation") or to be replaced with a comparable award for the purchase of shares of the capital stock of the Successor Corporation or, (b) such Award is to be replaced with a cash incentive program of the Successor Corporation that preserves the spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award. The determination of Award comparability under clause (a) above shall be made by the Plan Administrator, and its determination shall be conclusive and binding. All such Awards shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction, except to the extent such Awards (other than Options granted pursuant to Section 9) are assumed by the Successor Corporation. Any such Awards that are assumed or replaced in the Corporate Transaction and do not otherwise accelerate at that time shall be accelerated in the event the Holder's employment or services should subsequently terminate within two years following such Corporate Transaction, unless such employment or services are -13- 14 terminated by the Successor Corporation for Cause or by the Holder voluntarily without Good Reason. Notwithstanding the foregoing, no Incentive Stock Option shall become exercisable pursuant to this Section 12.2 without the Holder's consent, if the result would be to cause such Option not to be treated as an Incentive Stock Option (whether by reason of the annual dollar limitation described in Section 8.1 or otherwise). 12.3 FURTHER ADJUSTMENT OF AWARDS Subject to the preceding Section 12.2, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Awards (other than Options granted pursuant to Section 9). Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, alternate forms and amounts of payments and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such actions before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation or change in control that is the reason for such action. 12.4 LIMITATIONS The grant of Awards will in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. SECTION 13. WITHHOLDING The Company may require the Holder to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to the grant or exercise of any Award. In such instances, subject to the Plan and applicable law and unless the Plan Administrator determines otherwise, the Holder may satisfy withholding obligations, in whole or in part, by paying cash, by electing to have the Company withhold shares of Common Stock or by transferring shares of Common Stock to the Company, in such amounts as are equivalent to the Fair Market Value of the withholding obligation. The Company shall have the right to withhold from any shares of Common Stock issuable pursuant to an Award or from any cash amounts otherwise due or to become due from the Company to the Participant an amount equal to such taxes. The Company may also deduct from any Award any other amounts due from the Participant to the Company or a Subsidiary. -14- 15 SECTION 14. AMENDMENT AND TERMINATION OF PLAN 14.1 AMENDMENT OF PLAN The Plan may be amended by the shareholders of the Company. The Board may also amend the Plan in such respects as it shall deem advisable; however, to the extent required for compliance with Section 422 of the Code or any applicable law or regulation, shareholder approval will be required for any amendment that will (a) increase the aggregate number of shares as to which Awards may be granted, (b) modify the class of employees eligible to receive Awards, or (c) otherwise require shareholder approval under any applicable law or regulation. 14.2 TERMINATION OF PLAN The Company's shareholders or the Board may suspend or terminate the Plan at any time. The Plan will have no fixed expiration date; provided, however, that no Incentive Stock Options may be granted more than 10 years after the earlier of the Plan's adoption by the Board or approval by the shareholders. 14.3 CONSENT OF HOLDER The amendment or termination of the Plan shall not, without the consent of the Holder of any Award under the Plan, impair or diminish any rights or obligations under any Award theretofore granted under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Holder, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. SECTION 15. GENERAL 15.1 AWARD AGREEMENTS Awards granted under the Plan shall be evidenced by a written agreement which shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and which are not inconsistent with the Plan. 15.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS None of the Plan, participation in the Plan as a Participant or any action of the Plan Administrator taken under the Plan shall be construed as giving any Participant or employee of the Company any right to be retained in the employ of the Company or limit the Company's right to terminate the employment or services of the Participant. 15.3 REGISTRATION; CERTIFICATES FOR SHARES The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under state -15- 16 securities laws, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made. The Company may issue certificates for shares with such legends and subject to such restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary or desirable for compliance by the Company with federal and state securities laws. Inability of the Company to obtain, from any regulatory body having jurisdiction, the authority deemed by the Company's counsel to be necessary for the lawful issuance and sale of any shares hereunder or the unavailability of an exemption from registration for the issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the nonissuance or sale of such shares as to which such requisite authority shall not have been obtained. 15.4 NO RIGHTS AS A SHAREHOLDER No Award shall entitle the Holder to any dividend, voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award, free of all applicable restrictions. 15.5 COMPLIANCE WITH LAWS AND REGULATIONS Notwithstanding anything in the Plan to the contrary, the Board, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code. 15.6 NO TRUST OR FUND The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company. 15.7 SEVERABILITY If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. -16- 17 SECTION 16. EFFECTIVE DATE The Plan's effective date is the date on which it is adopted by the Board, so long as it is approved by the Company's shareholders at any time within 12 months of such adoption. -17- EX-10.4 8 ADIC 1996 TRANSITION PLAN 1 EXHIBIT 10.4 ADVANCED DIGITAL INFORMATION CORPORATION 1996 TRANSITION PLAN 2 SECTION 1. PURPOSE The purpose of the Advanced Digital Information Corporation 1996 Transition Plan (the "Plan") is to provide for (i) the grant of ADIC Adjusted Options as a result of the adjustment of the Interpoint Options in connection with the Distribution, (ii) the grant of options after the Distribution to holders of options issued under the Plan in connection with the adjustment of outstanding options pursuant to Section 7, and (iii) the administration of the ADIC Adjusted Options (and any other options granted in respect thereof in accordance with the Plan). SECTION 2. DEFINITIONS "ADIC" or "Corporation" means Advanced Digital Information Corporation, a Washington corporation. "ADIC Adjusted Option" has the meaning set forth under the definition of "Interpoint Option." "Board" means the Corporation's Board of Directors. "Common Stock" means the common stock, no par value, of ADIC. "Distribution" means the distribution of all the outstanding shares of Common Stock to the shareholders of Interpoint. "Interpoint" means Interpoint Corporation, a Washington corporation. "Interpoint Adjusted Option" has the meaning set forth under the definition of "Interpoint Option." "Interpoint Common Stock" means the common stock, no par value, of Interpoint. "Interpoint Option" means an option to purchase Interpoint Common Stock, which was granted under the Interpoint Corporation 1995 Stock Option and Award Plan, as set forth on Exhibit A (the "1995 Plan"), the Amended 1985 Incentive Stock Option Plan, as set forth on Exhibit B (the "1985 Plan"), the Interpoint Corporation Amended Non-Qualified Stock Option Plan, as set forth on Exhibit C (the "Non-Qualified Plan"), or the Interpoint Corporation Amended 1981 Incentive Stock Option Plan, as set forth on Exhibit D (the "1981 Plan"), which Interpoint Option, in connection with the Distribution, has been surrendered in exchange for and converted into two separately exercisable options, one to purchase Common Stock (an "ADIC Adjusted Option") and one to purchase Interpoint Common Stock (an "Interpoint Adjusted Option"). -2- 3 "Interpoint Plan" means any of the 1995 Plan, the 1985 Plan, the Non-Qualified Plan and the 1981 Plan, each of which is incorporated into the Plan by reference, and all of which are referred to together as the "Interpoint Plans." "Plan Administrator" has the meaning set forth in Section 3.1. SECTION 3. ADMINISTRATION 3.1 PLAN ADMINISTRATOR The Plan shall be administered by the Board, or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board. As long as the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Board shall consider, in selecting the Plan Administrator and the membership of any committee acting as Plan Administrator of the Plan with respect to any persons subject or likely to become subject to Section 16 under the Exchange Act, the provisions regarding (a) "outside directors" as contemplated by Section 162(m) of the Internal Revenue Code of 1986, as amended, and (b) "nonemployee directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible participants to different committees, subject to such limitations as the Board deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. 3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR Subject to the express provisions of the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to grants of options under the Plan, including the selection of individuals to be granted options; the number of shares of Common Stock subject to an option; all terms, conditions, restrictions and limitations, if any, of an option; and the terms of any instrument that evidences the option. The Plan Administrator shall also have exclusive authority to interpret the Plan and may from time to time adopt, and change, rules and regulations of general application for the Plan's administration. The Plan Administrator's interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. The Plan Administrator may delegate administrative duties to such of the Corporation's officers as it so determines. SECTION 4. STOCK SUBJECT TO THE ADJUSTMENT PLAN There are reserved for issuance upon the exercise of options under the Plan that number of shares of Common Stock equal to the number of shares of Interpoint Common Stock issuable upon exercise of the Interpoint Options. Such shares shall be drawn from authorized and unissued shares. -3- 4 SECTION 5. ELIGIBILITY Prior to the Distribution, the Plan Administrator may only grant ADIC Adjusted Options in connection with the Distribution. After the Distribution, the Plan Administrator may grant options to holders of options issued under the Plan, but only in connection with the adjustment of options issued under the Plan pursuant to Section 7. Any person eligible under the Plan may receive one or more grants of options, as the Plan Administrator shall from time to time determine, and such determinations may vary as to different employees and may vary as to different grants. SECTION 6. GRANTS OF OPTIONS The Plan Administrator is authorized under the Plan, in its discretion, to grant options in accordance with the terms and conditions of the Interpoint Plan under which the Interpoint Option corresponding to the ADIC Adjusted Option (or option granted in respect thereof) was granted; provided, however, that the exercise price per share of each ADIC Adjusted Option will be the difference between the exercise price of the Interpoint Option corresponding to the ADIC Adjusted Option and the exercise price of the related Interpoint Adjusted Option. SECTION 7. ADJUSTMENTS In the event of any changes in the outstanding stock of the Corporation by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, split-ups, split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution to shareholders other than cash dividends, the Plan Administrator shall make such adjustments, if any, in light of the change or distribution as permitted or required for a particular ADIC Adjusted Option (or any other option granted in respect thereof in accordance with the Plan) by the Interpoint Plan under which the corresponding Interpoint Option was granted. SECTION 8. AMENDMENT AND TERMINATION OF PLAN The Plan shall have no fixed expiration date; provided, however, that no grants of options in respect of an ADIC Adjusted Option shall be made unless such grant would have been permissible pursuant to the Interpoint Plan under which the Interpoint Option corresponding to such ADIC Adjusted Option was made. The Plan may be terminated, modified or amended by the Board in such respects as it shall deem advisable; provided, however, that shareholder approval will be required for any amendment that would require shareholder approval under any applicable law or regulation. The amendment or termination of the Plan shall not, without the consent of the recipient of any option under the Plan, impair or diminish any rights or obligations under any option theretofore granted under the Plan. -4- 5 SECTION 9. EFFECTIVE DATE The Adjustment Plan shall become effective immediately prior to the Distribution on October __, 1996. The Plan Administrator may in its discretion authorize the granting of options, the issuance or exercise of which shall be expressly subject to the condition that a registration statement under the Securities Act of 1933, as amended, with respect to such shares shall have become effective. -5- 6 EXHIBIT A INTERPOINT CORPORATION 1995 STOCK OPTION AND AWARD PLAN AS AMENDED AND RESTATED ON DECEMBER 6, 1995 SECTION 1. PURPOSE The purpose of the Interpoint Corporation 1995 Stock Option and Award Plan, as amended and restated (the "Plan"), is to enhance the long-term profitability and shareholder value of Interpoint Corporation, a Washington corporation (the "Company"), by offering incentives and rewards to those employees, directors, officers, consultants, agents, advisors and independent contractors of the Company and its Subsidiaries (as defined in Section 2 below) who are key to the Company's growth and success, and to encourage them to remain in the service of the Company and its Subsidiaries and to acquire and maintain stock ownership in the Company. SECTION 2. DEFINITIONS For purposes of the Plan, the following terms shall be defined as set forth below: 2.1 AWARD "Award" means an award or grant made to a Participant pursuant to the Plan. 2.2 BOARD "Board" means the Board of Directors of the Company. 2.3 CAUSE "Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conviction or confession of a crime punishable by law (except minor violations), in each case as determined by the Plan Administrator, and its determination shall be conclusive and binding. 2.4 CODE "Code" means the Internal Revenue Code of 1986, as amended from time to time. 7 2.5 COMMON STOCK "Common Stock" means the common stock, no par value, of the Company. 2.6 CORPORATE TRANSACTION "Corporate Transaction" means any of the following events: (a) Approval by the holders of the Common Stock of any merger or consolidation of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Common Stock are converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger; (b) Approval by the holders of the Common Stock of any sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of the Company's assets other than a transfer of the Company's assets to a majority-owned subsidiary corporation (as the term "subsidiary corporation" is defined in Section 8.3 of the Plan) of the Company; or (c) Approval by the holders of the Common Stock of any plan or proposal for the liquidation or dissolution of the Company. 2.7 DISABILITY "Disability" means "disability" as that term is defined for purposes of Section 22(e)(3) of the Code. 2.8 ELIGIBLE DIRECTOR "Eligible Director" means a member of the Board who is not also an employee of the Company or any "parent corporation" or "subsidiary corporation" (as those terms are defined in Section 8.3 of the Plan) of the Company. 2.9 EXCHANGE ACT "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.10 FAIR MARKET VALUE "Fair Market Value" shall be as established in good faith by the Plan Administrator or (i) if the Common Stock is listed on the Nasdaq National Market, the closing price for the Common Stock as reported by the Nasdaq National Market for a single trading day or (ii) if the Common Stock is listed on the New York Stock Exchange, the mean of the high and low per share trading prices for the Common Stock as reported in The Wall Street Journal for the -2- 8 New York Stock Exchange--Composite Transactions (or similar successor consolidated transactions reports) for a single trading day. 2.11 GOOD REASON "Good Reason" means the occurrence of any of the following events or conditions: (a) a change in the Holder's status, title, position or responsibilities (including reporting responsibilities) that, in the Holder's reasonable judgment, represents a substantial reduction of the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Holder of any duties or responsibilities that, in the Holder's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Holder from or failure to reappoint or reelect the Holder to any of such positions, except in connection with the termination of the Holder's employment for Cause, for Disability or as a result of his or her death, or by the Holder other than for Good Reason; (b) a reduction in the Holder's annual base salary; (c) the Company's requiring the Holder (without the Holder's consent) to be based at any place outside a 35-mile radius of his or her place of employment prior to a Corporate Transaction, except for reasonably required travel on the Company's business that is not materially greater than such travel requirements prior to the Corporate Transaction; (d) the Company's failure to (i) continue in effect any material compensation or benefit plan (or the substantial equivalent thereof) in which the Holder was participating at the time of a Corporate Transaction, including, but not limited to, the Plan, or (ii) provide the Holder with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each employee benefit plan, program and practice as in effect immediately prior to the Corporate Transaction (or as in effect following the Corporate Transaction, if greater); (e) any material breach by the Company of any provision of the Plan; or (f) any purported termination of the Holder's employment or service for Cause by the Company that does not comply with the terms of the Plan. 2.12 GRANT DATE "Grant Date" means (i) the date designated in a resolution of the Plan Administrator as the date an Award is granted, (ii) if the Plan Administrator does not designate the Grant Date in the resolution, the date the Plan Administrator adopted the resolution, or (iii) the date an option is automatically granted pursuant to Section 9 of the Plan. -3- 9 2.13 HOLDER "Holder" means the Participant to whom an Award is granted, or the personal representative of a Holder who has died. 2.14 INCENTIVE STOCK OPTION "Incentive Stock Option" means an option to purchase Common Stock granted under Section 7 of the Plan with the intention that it qualify as an "incentive stock option" as that term is defined in Section 422 of the Code. 2.15 NONQUALIFIED STOCK OPTION "Nonqualified Stock Option" means an option to purchase Common Stock granted under Section 7 of the Plan other than an Incentive Stock Option. 2.16 OPTION "Option" means the right to purchase Common Stock granted under Sections 7 or 9 of the Plan. 2.17 PARTICIPANT "Participant" means an individual who is a Holder of an Award. 2.18 PLAN ADMINISTRATOR "Plan Administrator" means the Board or any committee of the Board designated to administer the Plan under Section 3.1 of the Plan. 2.19 SUBSIDIARY "Subsidiary," except as expressly provided otherwise, means any entity that is directly or indirectly controlled by the Company or in which the Company has a significant ownership interest, as determined by the Plan Administrator, and any entity that may become a direct or indirect parent of the Company. SECTION 3. ADMINISTRATION 3.1 PLAN ADMINISTRATOR The Plan shall be administered by the Board or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board; provided. however, that so long as the Company is subject to Rule 16b-3 promulgated under Section 16(b) of the Exchange Act as in effect prior to May 1, 1991, such committee shall consist of at least three members of the Board. The Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible -4- 10 Participants to different committees or, with respect to grants made to newly hired individuals other than persons subject to Section 16(b) of the Exchange Act, to one or more officers of the Company, subject to such limitations as the Board deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. Notwithstanding the foregoing, the administration of the Plan with respect to officers and directors of the Company who are subject to Section 16 of the Exchange Act with respect to securities of the Company shall comply with the requirements of Rule 16b-3 under the Exchange Act as then applicable to the Company's employee benefit plans. 3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Awards under the Plan, including the selection of individuals to be granted Awards, the type of Awards, the number of shares of Common Stock subject to an Award, all terms, conditions, restrictions and limitations, if ANY, of an Award and the terms of any instrument that evidences the Award. The Plan Administrator shall also have exclusive authority to interpret the Plan and may from time to time adopt, and change, rules and regulations of general application for the Plan's administration. The Plan Administrator's interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. The Plan Administrator may delegate administrative duties to such of the Company's officers as it so determines. SECTION 4. STOCK SUBJECT TO THE PLAN 4.1 AUTHORIZED NUMBER OF SHARES Subject to adjustment from time to time as provided in Section 12.1 of the Plan, a maximum of 100,000 shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares. 4.2 LIMITATIONS Subject to adjustment from time to time as provided in Section 12.1 of the Plan, not more than 50,000 shares of Common Stock may be made subject to Awards under the Plan to any individual Participant in the aggregate in any one fiscal year of the Company, such limitation to be applied in a manner consistent with the requirements of, and only to the extent required for compliance with, the exclusion from the limitation on deductibility of compensation under Section 162(m) of the Code. 4.3 REUSE OF SHARES Any shares of Common Stock that have been made subject to an Award that cease to be subject to the Award (other than by reason of exercise), including, without limitation, in -5- 11 connection with the cancellation of an Award and the grant of a replacement Award, shall again be available for issuance in connection with future grants of Awards under the Plan. SECTION 5. ELIGIBILITY Awards may be granted under the Plan to those officers, directors and key employees of the Company and its Subsidiaries as the Plan Administrator from time to time selects; provided, however, that Eligible Directors shall be eligible to receive Awards only under Section 9 of the Plan. Awards may also be made to consultants, agents, advisors and independent contractors who provide services to the Company and its Subsidiaries. SECTION 6. AWARDS 6.1 FORM AND GRANT OF AWARDS The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be made under the Plan. Such Awards shall consist of Incentive Stock Options and Nonqualified Stock Options. 6.2 ACQUIRED COMPANY AWARDS Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other entities ("Acquired Entities") (or the parent of the Acquired Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or of stock, reorganization or liquidation (the "Acquisition Transaction"). In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such Awards shall be deemed to be Participants and Holders. SECTION 7. AWARDS OF OPTIONS 7.1 GRANT OF OPTIONS The Plan Administrator is authorized under the Plan, in its sole discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock Options, which shall be appropriately designated. -6- 12 7.2 OPTION EXERCISE PRICE The exercise price for shares purchased under an Option shall be as determined by the Plan Administrator, but shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date. 7.3 TERM OF OPTIONS The term of each Option shall be as established by the Plan Administrator or, if not so established, shall be five years from the Grant Date. 7.4 EXERCISE OF OPTIONS The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which or the installments in which the Option shall become exercisable, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:
Period of Holder's Continuous Employment Percent of Total Option or Service with the Company or Its That Is Subsidiaries From the Option Grant Date Exercisable After 1 year 25% After 2 years 50% After 3 years 75% After 4 years 100%
To the extent that the right to purchase shares has accrued thereunder, an Option may be exercised from time to time by written notice to the Company, in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised and accompanied by payment in full as described in Section 7.5 of the Plan. 7.5 PAYMENT OF EXERCISE PRICE The exercise price for shares purchased under an Option SHALL be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid in cash or check and/or one or more of the following alternative forms: (i) Common Stock already owned by the Holder for at least six months (or any shorter period necessary to avoid a charge to the Company's earnings for financial reporting purposes) having a Fair Market Value on the day prior to the exercise date equal to the aggregate Option exercise price or (ii) if the Common Stock is publicly traded, delivery of a properly executed exercise notice, together with irrevocable -7- 13 instructions, to (a) a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise and (b) the Company to deliver the certificates for such purchased shares directly to such brokerage firm, all in accordance with the regulations of the Federal Reserve Board. 7.6 POST-TERMINATION EXERCISES The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option will continue to be exercisable, and the terms and conditions of such exercise, if a Holder ceases to be employed by, or to provide services to, the Company or its Subsidiaries, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time. In case of termination of the Holder's employment or services other than by reason of death or Cause, the Option shall be exercisable, to the extent of the number of shares purchasable by the Holder at the date of such termination, only within three months after the date of such termination for reasons other than Disability and only within one year after the date of such termination by reason of Disability, but in no event later than the remaining term of the Option. Any Option exercisable at the time of the Holder's death may be exercised, to the extent of the number of shares purchasable by the Holder at the date of the Holder's death, by the personal representative of the Holder's estate entitled thereto at any time or from time to time within one year after the date of death, but in no event later than the remaining term of the Option. In case of termination of the Holder's employment or services for Cause, the Option shall automatically terminate upon first notification to the Holder of such termination, unless the Plan Administrator determines otherwise. If a Holder's employment or services with the Company are suspended pending an investigation of whether the Holder shall be terminated for Cause, all the Holder's rights under any Option likewise shall be suspended during the period of investigation. A transfer of employment or services between or among the Company and its Subsidiaries shall not be considered a termination of employment or services. Unless the Plan Administrator determines otherwise, a leave of absence approved in accordance with Company procedures shall not be considered a termination of employment or services, except that with respect to Incentive Stock Options such leave of absence shall be subject to any requirements of Section 422 of the Code. SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS To the extent required by Section 422 of the Code, Incentive Stock Options shall be subject to the following additional terms and conditions: 8.1 DOLLAR LIMITATION To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the -8- 14 Company) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option, unless such annual limitation is modified or eliminated under Code Section 422. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted. 8.2 10% SHAREHOLDERS If a Participant owns 10% or more of the total voting power of all classes of the Company's stock, then the exercise price per share of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date and the OPTION term shall not exceed five years. 8.3 ELIGIBLE EMPLOYEES Individuals who are not employees of the Company or one of its parent corporations or subsidiary corporations may not be granted Incentive Stock Options. For purposes of this Section 8.3 of the Plan, "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code. 8.4 TERM The term of an Incentive Stock Option shall not exceed 10 years. 8.5 EXERCISABILITY An Option designated as an Incentive Stock Option must be exercised within three months after termination of employment for reasons other than death to qualify for Incentive Stock Option tax treatment, except that in the case of termination of employment due to Disability, such Option must be exercised within one year after such termination. 8.6 TAXATION OF INCENTIVE STOCK OPTION In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares issued upon the exercise of an Incentive Stock Option for two years after the date of grant of the Incentive Stock Option and one year from the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Committee may require a Participant to give the Company prompt notice of any disposition of shares acquired by the exercise of an Incentive Stock Option prior to the expiration of such holding periods. SECTION 9. AWARDS OF OPTIONS TO NONEMPLOYEE DIRECTORS Notwithstanding any other provision of the Plan to the contrary, grants to Eligible Directors shall be made only pursuant to the terms and conditions set forth below. All grants -9- 15 made under this Section 9 prior to shareholder approval of the Plan shall be subject to such shareholder approval. 9.1 ORIGINAL GRANTS Each Eligible Director who is in office on the date the Plan is adopted by the Board shall automatically receive a grant of an Option to purchase 500 shares of Common Stock immediately following the Board's adoption of the Plan ("Original Grants"). Original Grants shall vest and become exercisable upon the optionee's continued service as a director until the Company's first Annual Meeting of Shareholders after the Grant Date. 9.2 ANNUAL GRANTS Commencing with the Company's 1996 Annual Meeting of Shareholders, each Eligible Director shall automatically receive a grant of an Option to purchase 500 shares of Common Stock immediately following each year's Annual Meeting of Shareholders ("Annual Grants"). Annual Grants shall vest and become exercisable upon the optionee's continued service as a director until the next Annual Meeting of Shareholders after the Grant Date. 9.3 INITIAL GRANTS Each Eligible Director shall automatically receive a grant of an Option to purchase 5,500 shares of Common Stock immediately following his or her initial election or appointment to the Board ("Initial Grants"). Initial Grants shall vest and become exercisable as follows: Options for 1,375 shares shall become exercisable on and after one year after the Grant Date, and Options for an additional 1,375 shares shall become exercisable on and after each of the three succeeding anniversaries of the Grant Date. 9.4 NONQUALIFIED STOCK OPTIONS; TERM OF OPTIONS Options granted to an Eligible Director under the Plan shall constitute Nonqualified Stock Options. The term of each Option granted under this Section 9 shall be five years from the Grant Date. 9.5 OPTION EXERCISE PRICE The exercise price for shares purchased under an Option granted under this Section 9 shall be the Fair Market Value of the Common Stock on the Grant Date. 9.6 POST-TERMINATION EXERCISES In case of termination of the Holder's services other than by reason of death or Cause, the Option shall be exercisable, to the extent of the number of shares purchasable by the Holder at the date of such termination, only within three months after the date the Holder ceases to be director of the Company if such termination is for reasons other than Disability and only within one year if such termination is by reason of Disability, but in no event later than the remaining term of the Option. Any Option exercisable at the time of the Holder's -10- 16 death may be exercised, to the extent of the number of shares purchasable by the Holder at the date of the Holder's death, by the personal representative of the Holder's estate entitled thereto at any time or from time to time within one year after the date of death, but in no event later than the remaining term of the Option. In case of termination of the Holder's services for Cause, the Option shall automatically terminate upon first notification to the Holder of such termination. If a Holder's services with the Company are suspended pending an investigation of whether the Holder shall be terminated for Cause, all the Holder's rights under any Option likewise shall be suspended during the period of investigation. 9.7 CORPORATE TRANSACTION In the event of any Corporate Transaction, each Option that is at the time outstanding shall automatically accelerate so that each such Option shall, immediately prior to the specified effective date for the Corporate Transaction, become 100% vested, except that such acceleration will not occur if, in the opinion of the Company's accountants, it would render unavailable "pooling of interests" accounting for a Corporate Transaction that would otherwise qualify for such accounting treatment. All such Options not exercised prior to that time shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction. 9.8 AVAILABILITY OF SHARES The Options provided for in this Section 9 are subject to the availability of shares under the Plan. If at the date of any grant under this Section 9 there are insufficient shares of Common Stock available to satisfy the grants in whole, then the shares available shall be divided by the number of Eligible Directors then entitled to a grant and each such Eligible Director shall be granted an Option for that number of shares. 9.9 OTHER TERMS APPLICABLE Except as otherwise provided in this Section 9, Options granted to Eligible Directors shall be subject to the terms and conditions of the Plan applicable to other Participants. SECTION 10. LOANS, LOAN GUARANTEES AND INSTALLMENT PAYMENTS To assist a Holder (including a Holder who is an officer or director of the Company) in acquiring shares of Common Stock pursuant to an Award granted under the Plan other than an Option granted pursuant to Section 9 of the Plan, the Plan Administrator may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Award, (i) the extension of a loan to the Holder by the Company, (ii) the payment by the Holder of the purchase price, if any, of the Common stock in installments, or (iii) the guarantee by the Company of a loan obtained by the grantee from a third party. The terms of any loans, installment payments or guarantees, including the interest rate and terms of repayment, will be subject to the Plan Administrator's discretion. Loans, installment payments and guarantees may be granted with or without security. The maximum credit available is the -11- 17 purchase price, if any, of the Common Stock acquired plus the maximum federal and state income and employment tax liability that may be incurred in connection with the acquisition. SECTION 11. ASSIGNABILITY No Option granted under the Plan may be assigned or transferred by the Holder other than by will or by the laws of descent and distribution, and during the Holder's lifetime, such Awards may be exercised only by the Holder. Notwithstanding the foregoing, with respect to Awards other than Options granted pursuant to Section 9 of the Plan, and to the extent permitted by Rule 16b-3 under the Exchange Act and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit such assignment, transfer and exercisability and may permit a Holder of such Awards to designate a beneficiary who may exercise the Award after the Holder's death. With respect to Options granted pursuant to Section 9 of the Plan, and to the extent permitted by Rule 16b-3 under the Exchange Act as then applicable to the Company's employee benefit plans, such Options may be transferred or assigned by gift or other transfer to either (i) any trust or estate in which the original award recipient or such person's spouse or other immediate family member has a substantial beneficial interest or (ii) a spouse or other immediate family member, provided that such a transfer would continue to require such awards to be disclosed pursuant to Item 403 of Regulation S-K under the Securities Act of 1933, as amended. SECTION 12. ADJUSTMENTS 12.1 ADJUSTMENT OF SHARES In the event that at any time or from time to time a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (i) the outstanding shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of securities of the Company or of any other corporation or (ii) new, different or additional securities of the Company or of any other corporation being received by the holders of shares of Common Stock of the Company, then the Plan Administrator shall make proportional adjustments in (a) the maximum number and class of securities subject to the Plan as set forth in Section 4.1 of the Plan, (b) the number and class of securities that may be made subject to individual Awards as set forth in Section 9 of the Plan, and (c) the number and class of securities subject to any outstanding Award made pursuant to Section 9 of the Plan and the per share price of such securities, without any change in the aggregate price to be paid therefor, and the Plan Administrator, in its sole discretion. shall make such equitable adjustments as it shall deem appropriate in the circumstances in (y) the maximum number and class of securities that may be made subject to Awards to any individual Participant as set forth in Section 4.2 of the Plan and (z) the number and class of securities that are subject to any outstanding Award (other than Options granted pursuant to Section 9 of the Plan) and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding. -12- 18 12.2 CORPORATE TRANSACTION Except as otherwise provided in the instrument that evidences the Award, in the event of any Corporate Transaction, each Option that is at the time outstanding shall automatically accelerate so that each such Award shall, immediately prior to the specified effective date for the Corporate Transaction, become 100% vested, except that such acceleration will not occur if in the opinion of the Company's accountants it would render unavailable "pooling of interest" accounting for a Corporate Transaction that would otherwise qualify for such accounting treatment. Except for Options granted pursuant to Section 9 of the Plan, such Award shall not so accelerate if and to the extent: (i) such Award is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable award for the purchase of shares of the capital stock of the successor corporation or its parent corporation, (ii) such Award is to be replaced with a cash incentive program of the successor corporation that preserves the spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award, or (iii) the acceleration of such Award is subject to other limitations imposed by the instrument evidencing the Award. The determination of Award comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be conclusive and binding. All such Awards shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction, except to the extent such Awards (other than Options granted pursuant to Section 9 of the Plan) are assumed by the successor corporation or its parent corporation. Any such Awards that are assumed or replaced in the Corporate Transaction and do not otherwise accelerate at that time shall be accelerated in the event the Holder's employment or services should subsequently terminate within two years following such Corporate Transaction, unless such employment or services are terminated by the Company for Cause or by the Holder voluntarily without Good Reason. Notwithstanding the foregoing, no Incentive Stock Option shall become exercisable pursuant to this Section 12.2 without the Holder's consent, if the result would be to cause such Option not to be treated as an Incentive Stock Option (whether by reason of the annual limitation described in Section 8.1 of the Plan or otherwise). 12.3 FURTHER ADJUSTMENT OF AWARDS Subject to the preceding Section 12.2 of the Plan, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines necessary or advisable, and fair and equitable to Participants, with respect to Awards (other than Options granted pursuant to Section 9 of the Plan). Such authorized action may include (but shall not be limited to) establishing. amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, alternate forms and amounts of payments and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such actions before or after granting Awards to which the action relates and before or after any public announcement with respect to such -13- 19 sale, merger, consolidation, reorganization, liquidation or change in control that is the reason for such action. 12.4 LIMITATIONS The grant of Awards will in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. SECTION 13. WITHHOLDING OF TAXES The Company may require the Holder to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to the grant or exercise of any Award. SECTION 14. AMENDMENT AND TERMINATION OF PLAN 14.1 AMENDMENT OF PLAN The Plan may be amended by the shareholders of the Company. The Board may also amend the Plan in such respects as it shall deem advisable; however, to the extent required for compliance with Rule 16b-3 under the Exchange Act, Section 422 of the Code or any applicable law or regulation, shareholder approval will be required for any amendment that will (i) increase the total number of shares as to which Awards may be granted under the Plan, (ii) materially modify the class of persons eligible to receive Awards, (iii) materially increase the benefits accruing to Participants under the Plan, or (iv) otherwise require shareholder approval under any applicable law or regulation. Notwithstanding the foregoing, to the extent required for compliance with Rule 16b-3 under the Exchange Act or any applicable law or regulation, no amendment with respect to Section 9 of the Plan shall be made more than once every six months that would change the amount, price, timing or vesting of the Options, other than to comport to the changes in the Code, or the rules and regulations promulgated thereunder. 14.2 TERMINATION OF THE PLAN The Company's shareholders or the Board may suspend or terminate the Plan at any time. The Plan will have no fixed expiration date; provided, however, that no Incentive Stock Options may be granted more than 10 years after the Plan's effective date. 14.3 CONSENT OF HOLDER The amendment or termination of the Plan shall not, without the consent of the Holder of any Award under the Plan, alter or impair any rights or obligations under any Award theretofore granted under the Plan. -14- 20 SECTION 15. GENERAL 15.1 NOTIFICATION The Plan Administrator shall promptly notify a Participant OF an Award, and a written grant shall promptly be executed and delivered by or on behalf of the Company. 15.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS Neither the Plan, participation in the Plan as a Participant nor any action of the Plan Administrator taken under the Plan shall be construed as giving any Participant, including any employee, officer or director of the Company any right to be retained in the employ of the Company or to continue service as an officer or director of the Company, or limit the Company's right to terminate the employment or services of the Participant. 15.3 REGISTRATION; CERTIFICATES FOR SHARES The Company shall be under no obligation to any Participant to register for offering or resale under the Securities Act of 1933, as amended, or register or qualify under state securities laws, any shares of Common Stock issued under the Plan. The Company may issue certificates for shares with such legends and subject to such restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary or desirable for compliance by the Company with federal and state securities laws. 15.4 NO RIGHTS AS A SHAREHOLDER No Award shall entitle the Holder to any dividend, voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Awards, free of all applicable restrictions. 15.5 COMPLIANCE WITH LAWS AND REGULATIONS It is the Company's intention that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not to be in compliance with such Rule, the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code. -15- 21 15.6 SEVERABILITY If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. SECTION 16. EFFECTIVE DATE The Plan's effective date is the date on which it is adopted by the Board, so long as it is approved by the Company's shareholders at any time within 12 months of such adoption or, if earlier, and to the extent required for compliance with Rule 16b-3 under the Exchange Act, at the next annual meeting of the Company's shareholders after adoption of the Plan by the Board. -16- 22 EXHIBIT B INTERPOINT CORPORATION AMENDED 1985 INCENTIVE STOCK OPTION PLAN The following Incentive Stock Option Plan ("Plan") was adopted by INTERPOlNT CORPORATION ("Company") effective December 18, 1985, and was approved by the Shareholders on February 15, 1986. The Plan is intended to qualify under Section 422A of the Internal Revenue Code of 1954 ("IRC") as finally adopted. This Plan was amended by amendments adopted by the Board of Directors on November 4, 1987. In addition, this plan was amended by the Board of Directors effective December 20, 1989 and approved by affirmative vote of the Shareholders on February 26, 1990. The Plan was further amended by the Board of Directors effective December 16, 1992, and approved by affirmative vote of the Shareholders on February 24, 1993. On November 22, 1993, the Board of Directors adopted an amendment to the Plan which was approved by affirmative vote of the Shareholders on February 11, 1994. Finally, the Plan was amended by the Board of Directors effective December 7, 1994 and approved by affirmative vote of the Shareholders on February 22, 1995. 1. PURPOSE. The purpose of the Plan is to provide for the issuance of options to key salaried employees ("Team Members") to purchase shares of the Company's authorized but unissued common stock without par value in order to encourage key salaried Team Members to have a proprietary interest in successful operations of the Company and to expand and improve the Company's profits. 2. SHARES UNDER PLAN. The aggregate number of shares which may be issued under the Plan through amendment is 490,000 shares. 3. ELIGIBILITY. a. To be eligible to receive an option under the Plan, an individual must on the date of granting the option be a salaried Team Member of either the Company, a parent or subsidiary of the Company, or a corporation or a parent or subsidiary corporation of such 23 corporation issuing or assuming a stock option in a transaction to which IRC Section 425(a) applies. b. No individual may receive grant of an option who at the time the option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation unless at the time the option is granted the option price is at least 110 percent of the fair market value of the stock subject to the option and the option by its terms is not exercisable after the expiration of five years from the date that option is granted. 4. ADMINISTRATION. The Plan will be administered by a Committee of the Board of Directors of the Company ("Committee") consisting of outside Directors (those who are not employees of the Company). The Committee is authorized, consistent with the Plan: to select Team Members to whom options are granted, to fix the number of shares and price per share granted to each, to determine whether payable in money or in stock of the Company or otherwise, to fix the date of grant, date of termination and expiration and terms and conditions of each option, to interpret the Plan, to determine rights and obligations of option holders, to grant options and direct the Company to execute option agreements, to perform all other acts necessary or convenient to administer the Plan, and to correct any defect, omission or inconsistency in the Plan necessary to effect its purpose and qualify as an incentive stock option plan under the IRC Section 422A. In addition, the Interpoint President, or others as he or she may assign, may grant options to newly hired Team Members who are not executive officers. 5. TERMS OF OPTIONS. Each option must comply with the following terms: a. Grant. The option must be granted within ten years from the date the Plan is adopted or the date the Plan is approved by the shareholders, whichever is earlier. b. Option Price. The option price must not be less than the fair market value of the stock at the time the option is granted. The fair market value shall be the closing market price on the last business day preceding the date of grant, or, if no trades were made on that day, it shall be the mean between the bid and ask prices quoted by NASDAQ at the close of the market on that day. c. Exercise. Subject to the next two sentences, the option may be exercisable for all or part of the shares subject to the option and at any intervals determined by the Committee. No option may be exercisable after the first to occur of the following events: (1) The expiration of ten years from the date the option is granted or such shorter period as the Committee may determine for that option, and -2- 24 (2) The expiration of three months from the date the option holder ceases to be employed by the employer corporation, or the expiration of one year from the date the option holder ceases to be employed by the employer corporation in the case of a Team Member who dies or is disabled within the meaning of IRC Section 22(c)(3). Each option must be exercised by written notice to the Company signed by the option holder or his or her personal representative stating the number of shares being purchased and accompanied by full payment. d. Sequential Exercise -- Pre-1987 Options. No option which was granted prior to January 1, 1987 may be exercised while there is outstanding (meaning not exercised in full or not expired by reason of lapse of time) any incentive stock option which was granted, before the granting of the pre-1987 option, to the individual to purchase stock in the individual's employer corporation or in a corporation which (at the time of the granting of the option) is a parent or subsidiary corporation of the employer corporation, or in a predecessor corporation of any such corporations. e. Non-transferability. The option may not be transferable by the individual to whom granted otherwise than by will or the laws of descent and distribution, and must be exercisable, during the individual's lifetime, only by the individual. f. Payment. If approved by the Committee, the price for the stock issued upon exercise of the option may be paid in stock of the corporation granting the option. g. Lapse. Upon lapse of any option not exercised in full, the unexercised shares will become available for other option under the Plan. 6. OPTION AGREEMENT. Each option granted under the Plan will be evidenced by a written agreement executed by the Company and the option holder, and will contain terms and conditions as the Committee deems desirable not inconsistent with the Plan. 7. NON-QUALIFIED OPTIONS. Unless the option agreement provides otherwise, options granted under the Plan are intended to be incentive stock options qualifying under IRC Section 422A, as amended. Non-qualified stock options may be granted under this Plan if the option agreement granting the option states that it is intended that the option not qualify as an incentive stock option. Paragraphs 3.b. and 5.d. of this Plan shall not apply to non-qualified options granted hereunder. 8. CHANGE IN CAPITALIZATION. If the Company changes its capitalization, whether by stock dividend, stock split-up, reclassification or recapitalization, merger or consolidation, or otherwise (if the option does -3- 25 not terminate pursuant to paragraph 9), then the number and kind of shares then subject to options and thereafter to become subject to options and the prices to be paid therefor, will be proportionately adjusted by the Committee to whatever extent the Committee determines the change equitably requires an adjustment, without issuance of any fractional option or share. 9. MERGER OR CONSOLIDATION. If the Company dissolves, is reorganized, splits up its stock or merges or consolidates with any other corporation and the Company is not the surviving corporation, then (unless one or more of the surviving corporations assumes the options under the Plan or issues substitute options) each holder of outstanding options will be notified of and have the right to exercise the options prior to the dissolution, reorganization, stock split-up, merger or consolidation. Any option not exercised within thirty (30) days of notification will thereupon terminate, and simultaneously the Plan will terminate. 10. OPTIONS TO OUTSIDE DIRECTORS. Notwithstanding any provision in this Plan to the contrary, options to outside Directors shall be non-qualified options and shall be granted only in accordance with the following provisions: a. Grant. Each outside Director, upon his or her first election or appointment as a director of the Company, shall be granted a non-qualified option for 5,500 shares and shall not be eligible for any other options under this or any other option plan of the Company. b. Vesting. Each option granted under this Section 10 shall vest as follows: options for 1,375 shares shall be exercisable on and after one (1) year from the date of grant, and options for an additional 1,375 shares shall be exercisable on end after each of the three succeeding anniversaries of the date of grant. c. Availability of Shares. The options provided for in this Section 10 are subject to the availability of shares under this Plan. If at the date of any grant there are insufficient shares available to satisfy the grants in whole, then the shares available shall be divided by the number of outside Directors then entitled to a grant and each such outside Director shall be granted an option for that number of shares. d. Term of Option. The term of each option shall be for a period of ten (10) years from the date of grant thereof. e. Option Price. The option price must not be less than the fair market value of the stock at the time the option is granted. The fair market value shall be the closing market price on the last business day preceding the date of grant, or, if no trades were made on that day, it shall be the mean between the bid and ask prices quoted by NASDAQ at the close of the market on that day. -4- 26 f. Other Terms Applicable. Except as otherwise provided in this Section 10, options granted to outside Directors shall be subject to the terms and conditions of this Plan applicable to other option holders. 11. AMENDMENT OF PLAN. The Board of Directors of the Company may amend the Plan and, with the consent of each option holder affected, the terms and conditions of granted options as its deems advisable, but may not without the approval of the holders of not less than a majority of the outstanding capital stock of the Company: a. increase the maximum number of shares subject to the Plan, except pursuant to paragraph 8; b. decrease the option price provided for in paragraph 5; c. extend the term for which options may be granted; d. change the class of employees eligible to receive options; or e. cause any condition or provision of an option or the Plan to be inconsistent with the provisions of IRC Section 422A(b). 12. TERMINATION OF PLAN. The Plan will terminate on December 17, 1995, except that the Board of Directors of the company may terminate the Plan sooner at any time. No termination, other than as provided in paragraph 9, will affect any option then outstanding. 13. SEVERABILITY. If any provision of this Plan or of any option is determined to be inconsistent with the provisions of IRC Section 422A, the inconsistent provision will be deemed omitted and the remaining provisions will remain in effect. -5- 27 EXHIBIT C INTERPOINT CORPORATION AMENDED NON-QUALIFIED STOCK OPTION PLAN The following Non-Qualified Stock Option Plan was adopted by the Board of Directors on December 18, 1985 and approved by the Shareholders on February 15, 1986. It was amended by the Board of Directors on December 16, 1987, and the amendment was approved by the Shareholders on February 20, 1988. 1. PURPOSE. The purposes of this Stock Option Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to officers, directors, employees and others who have a relationship with the Company or any Parent or Subsidiary of the Company, which now exists or hereafter is organized or acquired by or acquires the Company, and to promote the success of the business. 2. DEFINITIONS. As used herein, the following definitions shall apply: a. "Board" shall mean the Board of Directors of the Company. b. "Common Stock" shall mean the common stock, without par value, of the Company. c. "Company" shall mean Interpoint Corporation. d. "Committee" shall mean the existing Stock Option Committee of the Company. e. "Option" shall mean a stock option granted pursuant to the Plan. f. "Optioned Shares" shall mean stock subject to an Option granted pursuant to this Plan. g. "Outside Director" shall mean a member of the Board of Directors of the Company who is not an employee of the Company. 28 h. "Plan" shall mean the Interpoint Corporation Amended Non-Qualified Stock Option Plan. i. "Shares" shall mean the shares of the Common Stock of the Company. 3. STOCK SUBJECT TO THE PLAN. Except as otherwise provided in Section 13, the maximum aggregate number of Shares which may he optioned and sold pursuant to the Plan is 100,000 Shares; provided, however, that such maximum aggregate number of Shares shall be automatically increased in direct proportion to any increase in outstanding Shares. Shares may be authorized, but unissued, or may be Treasury Shares. Except as otherwise provided in Section 15, if an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for other Options under the Plan. 4. ADMINISTRATION OF THE PLAN. a. Appointment of Committee. The Plan shall be administered by the Interpoint Corporation Stock Option Committee. b. Procedure. A majority of the entire Committee shall constitute a quorum and the action of a majority of the members present at any meeting at which a quorum is present shall be deemed the action of the committee. In addition, any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it has been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary to keep minutes of its meetings and may make such rules and regulations for the conduct of its business as it shall deem advisable. c. Powers of the Committee. Except as provided in Section 11, and subject to the provisions of the Plan, the Committee shall have authority: (i) to determine the Option price of the Shares covered by each Option, the Optionees to whom, and the time or times at which Options shall be granted, and the number of Shares to be represented by each Option; (ii) to interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations relating to the Plan; (iv) to determine the terms and provisions of each Option granted under the Plan (which need not be identical) and, with the consent of the holder thereof, modify or amend each Option; (v) to authorize any person to execute on behalf of an Option previously granted by the Committee; and (vi) to make all other determinations deemed necessary or advisable for the administration of the Plan. d. Effect of Committee's Decision. All decisions, determinations and interpretations of the Committee shall be final and binding on all Optionees and any other holders of any Options granted under this Plan. -2- 29 5. ELIGIBILITY. Options may be granted only to persons who, at the time of the grant, are employees, officers, directors, agents, consultants or independent contractors of the Company or any subsidiary of the Company (hereinafter referred to as "Optionee"). An Optionee who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options. 6. TERM OF PLAN. The Plan shall become effective upon its adoption by the Board or its approval or ratification by vote of the holders of a majority of the outstanding Shares entitled to vote on the adoption of the plan, whichever is earlier. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 12 of the Plan. 7. TERMS OF OPTION. Unless otherwise provided in the terms of an Option, the term of each Option granted under the Plan shall be ten (10) years from the date of grant thereof. 8. OPTION PRICE. The Option price for Shares to be issued pursuant to any Option granted under the Plan shall be the fair market value for the Shares at the time the Option is granted. This shall be the mean between the bid and ask prices for Shares of the Common Stock quoted by NASDAQ as of the close of the last business day preceding the date of grant. 9. VESTING AND EXERCISE OF OPTION. Options shall be 100 percent vested immediately upon grant unless the Committee establishes another vesting schedule. Options shall be exercisable at any time after vesting (but no later than ten (10) years after the option is granted), subject, however, to all other terms of the Plan and of the Option granted to an Optionee. An Option may not be exercised for fractional Shares of the Shares of the Company. Notwithstanding the foregoing, in the event the Company or the shareholders of the Company enter into an agreement to dispose of all or substantially all of the assets or shares by means of a sale, a reorganization, a liquidation, or otherwise, Options shall become immediately exercisable with respect to the full number of Shares subject to those Options. All Options not exercised prior to consummation of any such agreement shall terminate. a. Procedure for Exercise. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Until the issuance of the stock certificates (as evidenced by the -3- 30 appropriate entry on the books of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Optioned Shares notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other rights for which the record date is prior to the date of exercise of the Option except as provided in Section 13 of the Plan. b. Time of Exercise, Effect of Termination. Unless otherwise provided in the terms of an Option, it is the intent of this Plan that an Option may be exercised by the Optionee as provided in this Plan only while he or she has a relationship with the Company as described herein, except as set out below. If the Optionee's relationship is terminated, the following rules control: (1) If the Optionee dies, the persons to whom the Optionee's rights have passed by will or the laws of descent and distribution may exercise such rights, to the extent the Optionee could have done so, immediately preceding his death. Any such Option must be exercised within twelve (12) months of the Optionee's death, but in no event later than ten (10) years after its grant. (2) If the Optionee's relationship with the Company is terminated, due to his or her embezzlement or theft of Company funds, defraudation of the Company, violation of Company rules, regulations or policies, or any intentional act which harms the Company, such Option, to the extent not exercised as of the date of termination, shall be terminated as of that date. (3) If the Optionee's relationship with the Company is terminated, for any reason other than those set forth in subparagraphs (1) and (2) above, the Optionee may exercise his Option, to the extent exercisable as of the date of his termination, within sixty (60) days after termination, but in no event later than ten (10) years after its grant. 10. OPTION NOT TRANSFERABLE. Options under the Plan may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, and may be exercised during the Optionee's lifetime only by the Optionee, or his guardian or legal representative. 11. OPTIONS TO OUTSIDE DIRECTORS. Notwithstanding any provision in this Plan to the contrary, Options to Outside Directors shall be granted only in accordance with the following provisions: a. Grant. Each Outside Director shall be granted an Option for 5,500 Shares upon the later of (i) the adoption of this Amended Non- Qualified Stock Option Plan by the Shareholders or (ii) his or her initial election or appointment as a director of the Company, and shall not be eligible for any other Options under this Plan. -4- 31 b. Vesting. Each Option granted under this Section 11 shall vest as follows: options for 1,375 Shares shall be exercisable on and after one (1) year from the date of grant, and options for an additional 1,375 Shares shall be exercisable on and after each of the three succeeding anniversaries of the date of grant. c. Availability of Shares. The Options provided for in this Section 11 are subject to the availability of shares under this Plan. If at the date of any grant there are insufficient Shares available to satisfy the grants in whole, then the Shares available shall be divided by the number of Outside Directors then entitled to a grant and each such Outside Director shall be granted an Option for that number of Shares. d. Term of Option. The term of each Option shall be for a period of ten (10) years from the date of grant thereof. e. Option Price. The Option price shall be the fair market value of the Shares at the time the option is granted. This shall be the mean between the bid and ask prices for Shares of the Common Stock quoted by NASDAQ as of the close of the last business day immediately preceding the date of grant. f. Other Terms Applicable. Except as otherwise provided in this Section 11, Options granted to Outside Directors shall be subject to the terms and conditions of this Plan applicable to other optionees. 12. AMENDMENT OR TERMINATION OF THE PLAN. a. The Board may amend the Plan from time to time in such respects as the Board deems advisable, except that no amendment may, without further stockholder approval or ratification: (1) Increase the total number of Shares which may be purchased under Section 3 of the Plan (subject, however, to Section 13); (2) Change the definition of eligibility in Section 5 of the Plan; (3) Change the term of Option stated in Section 7 of the Plan. b. The Board, without further approval of the stockholders, may at any time terminate the Plan. c. Any Amendment or Termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if the Plan had not been amended or terminated. 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The number and kind of Shares of Company stock subject to Option, in respect thereof, shall be appropriately adjusted along with a corresponding adjustment in the Option -5- 32 price to reflect any stock dividend, stock split, split-up or any combination or exchange of Shares, however accomplished. An appropriate adjustment shall also be made with respect to the aggregate number and kind of Shares remaining available to be optioned and sold under the Plan. 14. AGREEMENT AND REPRESENTATION OF EMPLOYEE. As a condition to the exercise of any portion of an Option, the Company may require the person exercising such Option to represent and warrant at the time of exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute the Shares if, in the opinion of counsel for the Company, such a representation is required under the Securities Act of 1933 or any other applicable law, regulation or rule of any governmental agency. 15. RESERVATIONS OF SHARES OF COMMON STOCK. The Company, during the term of this Plan, will at all times reserve and keep available, and will seek or obtain from any regulatory body having jurisdiction any requisite authority in order to issue and sell, such number of Shares as shall be sufficient to satisfy the requirements of the Plan. Inability of the Company to obtain from any regulatory body having jurisdiction authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder shall relieve the Company of any liability in respect of the non-issuance or sale of Shares as to which such requisite authority shall not have been obtained. -6- 33 EXHIBIT D INTERPOINT CORPORATION AMENDED 1981 INCENTIVE STOCK OPTION PLAN The following Incentive Stock Option Plan ("Plan") is adopted by INTERPOINT CORPORATION ("Company") effective December 1, 1981, if approved by affirmative vote of the holders of a majority of the Company's shares within twelve months after December 1, 1981, the date of adoption by the Board of Directors. The Plan is intended to qualify under Section 422A of the Internal Revenue Code of 1954 ("IRC") as finally adopted. This Plan was amended by amendments adopted by the Board of Directors on November 4, 1987 and October 17, 1990. 1. PURPOSE. The purpose of the Plan is to provide for the issuance of options to key salaried employees to purchase shares of the Company's authorized but unissued common stock without par value in order to encourage key salaried employees to have a proprietary interest in successful operations of the Company and to expand and improve the Company's profits. 2. SHARES UNDER PLAN. The aggregate number of shares which may be issued under the Plan is 25,000 shares. 3. ELIGIBILITY. a. To be eligible to receive an option under the Plan, an individual must on the date of granting the option be a salaried employee of either the Company, a parent or subsidiary of the Company, or a corporation or a parent or subsidiary corporation of such corporation issuing or assuming a stock option in a transaction to which IRC Section 425(a) applies. b. No individual may receive grant of an option who at the time the option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation unless at the time the option is granted the option price is at least 110 percent of 34 the fair market value of the stock subject to the option and the option by its terms is not exercisable after the expiration of five years from the date that option is granted. 4. ADMINISTRATION. The Plan will be administered by a Committee of the board of Directors of the Company ("Committee"). The Committee is authorized, consistent with the Plan: to select employees to whom options are granted, to fix the number of shares and price per share granted to each, to determine whether payable in money or in stock of the Company or otherwise, to fix the date of grant, date of termination and expiration and terms and conditions of each option, to interpret the Plan, to establish, change and rescind rules for the Plan, to determine rights and obligations of option holders, to grant options and direct the Company to execute option agreements, to perform all other acts necessary or convenient to administer the Plan, and to correct any defect, omission or inconsistency in the Plan necessary to effect its purpose and qualify as an incentive stock option plan under the IRC Section 422A. 5. TERMS OF OPTIONS. Each option must comply with the following terms. a. Grant. The option must be granted within ten years from the date the Plan is adopted or the date the Plan is approved by the shareholders, whichever is earlier. b. Option Price. The option price must not be less than the fair market value of the stock at the time the option is granted, which may be the mean between the bid and ask prices quoted in the Seattle Times as of the close of the last business day immediately preceding the date of grant. c. Exercise. Subject to the next two sentences, the option may be exercisable for all or part of the shares subject to the option and at any intervals determined by the Committee. No option may be exercisable after the first to occur of the following events: (1) The expiration of ten years from the date the option is granted or such shorter period as the Committee may determine for that option, and (2) the expiration of three months from the date the option holder ceases to be employed by the employer corporation, or the expiration of one year from the date the option holder ceases to be employed by the employer corporation in the case of an employee who dies or is disabled within the meaning of IRC Section 22(c)(3). Each option must be exercised by written notice to the Company signed by the option holder or his or her personal representative stating the number of shares being purchased and accompanied by full payment. -2- 35 d. Sequential Exercise -- Pre-1987 Options. No option which was granted prior to January 1, 1987 may be exercised while there is outstanding (meaning not exercised in full or not expired by reason of lapse of time) any incentive stock option which was granted, before the granting of the pre-1987 option, to the individual to purchase stock in the individual's employer corporation or in a corporation which (at the time of the granting of the option) is a parent or subsidiary corporation of the employer corporation, or in a predecessor corporation of any of such corporations. e. Nontransferability. The option may not be transferable by the individual to whom granted otherwise than by will or the laws of descent and distribution, and must be exercisable, during the individual's lifetime, only by the individual. f. Payment. If approved by the Committee, the price for the stock issued upon exercise of the option may be paid in stock of the corporation granting the option. g. Lapse. Upon lapse of any option not exercised in full, the unexercised shares will become available for other options under the Plan. 6. OPTION AGREEMENT. Each option granted under the Plan will be evidenced by a written agreement executed by the Company and the option holder, and will contain terms and conditions as the Committee deems desirable not inconsistent with the Plan. 7. NON-QUALIFIED OPTIONS. Unless the option agreement provides otherwise, options granted under this Plan are intended to be incentive stock options qualifying under IRC Section 422A, as amended. Non-qualified stock opTions may be granted under this Plan if the option agreement granting the option states that it is intended that the option not qualify as an incentive stock option. Paragraphs 3.b. and 5.d. of this Plan shall not apply to non-qualified options granted hereunder. 8. CHANGES IN CAPITALIZATION. If the Company changes its capitalization, whether by stock dividend, stock split-up, reclassification or recapitalization, merger or consolidation, or otherwise, (if the option does not terminate pursuant to paragraph 9) then the number and kind of shares then subject to options and thereafter to become subject to options and the prices to be paid therefor, will be proportionately adjusted by the Committee to whatever extent the Committee determines the change equitably requires an adjustment, without issuance of any fractional option or share. -3- 36 9. MERGER OR CONSOLIDATION. If the Company dissolves, is reorganized, splits up its stock or merges or consolidates with any other corporation and the Company is not the surviving corporation, then (unless one or more of the surviving corporations assumes the options under the Plan or issues substitute options) each holder of outstanding options will be notified of and have the right to exercise the options prior to the dissolution, reorganization, stock split-up, merger or consolidation. Any option not exercised within thirty (30) days of notification will thereupon terminate, and simultaneously the Plan will terminate. 10. AMENDMENT OF PLAN. The Board of Directors of the Company may amend the Plan and, with the consent of each option holder affected, the terms and conditions of granted options as it deems advisable, but may not without the approval of the holders of not less than a majority of the outstanding capital stock of the Company: a. increase the maximum number of shares subject to the Plan, except pursuant to paragraph 8; b. decrease the option price provided for in paragraph 5; c. extend the term for which options may be granted; d. change the class of employees eligible to receive options; or e. cause any condition or provision of an option or the Plan to be inconsistent with the provisions of IRC Section 422A(b). 11. TERMINATION OF PLAN. The Plan will terminate on November 30, 1991, except that the Board of Directors of the Company may terminate the Plan sooner at any time. No termination, other than as provided in paragraph 9 will affect any option then outstanding. 12. SEVERABILITY. If any provision of this Plan or of any option is determined to be inconsistent with the provisions of IRC Section 422A, the inconsistent provision will be deemed omitted and the remaining provisions will remain in effect. -4- EX-21.1 9 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT ADIC Europe SARL, a corporation organized under the laws of France ADIC International, Inc., a corporation organized under the laws of Barbados -----END PRIVACY-ENHANCED MESSAGE-----