<SEC-DOCUMENT>0000950132-00-000342-index.html : 20000510

<SEC-HEADER>0000950132-00-000342.hdr.sgml : 20000510

ACCESSION NUMBER:      0000950132-00-000342

CONFORMED SUBMISSION TYPE: 8-K

PUBLIC DOCUMENT COUNT:     6

CONFORMED PERIOD OF REPORT:     20000501

ITEM INFORMATION:     

ITEM INFORMATION:     

FILED AS OF DATE:      20000509

 

FILER:

 

     COMPANY DATA:

         COMPANY CONFORMED NAME:             ARMSTRONG HOLDINGS INC /PA/

         CENTRAL INDEX KEY:              0001109304

         STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089]

         IRS NUMBER:                233033414

         STATE OF INCORPORATION:             PA

         FISCAL YEAR END:           1231

 

     FILING VALUES:

         FORM TYPE:        8-K

         SEC ACT:     

         SEC FILE NUMBER:  333-32530

         FILM NUMBER:      623287

 

     BUSINESS ADDRESS:

         STREET 1:         2500 COLUMBIA AVE

         CITY:             LANCASTER

         STATE:            PA

         ZIP:          17603

         BUSINESS PHONE:        7173970611

 

     MAIL ADDRESS:

         STREET 1:         2500 COLUMBIA AVE

         CITY:             LANCASTER

         STATE:            PA

         ZIP:          17603

</SEC-HEADER>

<DOCUMENT>

<TYPE>8-K

<SEQUENCE>1

<DESCRIPTION>FORM 8-K

<TEXT>

 

<PAGE>

 

                      SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

 

 

 

                                    FORM 8-K

 

 

                                 CURRENT REPORT

                       Pursuant to Section 13 or 15(d) of

                      The Securities Exchange Act of 1934

 

 

 

        Date of Report  (date of earliest event reported):  May 1, 2000

 

 

 

                            ARMSTRONG HOLDINGS, INC.

             (Exact name of registrant as specified in its charter)

 

 

       Pennsylvania                  333-32530              23-3033414

(State or other jurisdiction        (Commission           (IRS Employer

     or incorporation)              File Number)     Identification  Number)

 

 

  2500 Columbia Avenue, Lancaster, PA                         17604

(Address of principal executive offices)                   (ZIP code)

 

 

       Registrant's telephone number including area code: (717) 397-6011

<PAGE>

 

                             Item 5.  Other Events

 

     Effective May 1, 2000, Armstrong Holdings, Inc. ("Holdings"), a

Pennsylvania corporation, became the indirect parent holding company of

Armstrong World Industries, Inc. ("Armstrong").  This restructuring was approved

Armstrong's shareholders at Armstrong's 2000 annual meeting on May 1, 2000.  As

of the effective date, the holders of Armstrong common stock became holders of

Holdings common stock and the present stock certificates representing Armstrong

common stock automatically represent Holdings common stock.  Each share of

Holdings common stock is accompanied by a preferred stock purchase right,

pursuant to the Rights Agreement dated as of March 14, 2000 by and between

Armstrong Holdings, Inc. and American Stock Transfer & Trust, Inc. (the "Rights

Agreement").  The Rights Agreement has terms substantially identical to those of

the shareholder rights plan adopted by Armstrong in 1996.  The terms of the

rights are summarized in Exhibit B of the Rights Agreement, attached hereto as

Exhibit 99.2, and Exhibit B is incorporated herein by reference.  A copy of the

press release dated May 1, 2000 announcing the consummation of the transaction

is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

     Pursuant to Section 12g-3(a) of the General Rules and Regulation under the

Securities Exchange Act of 1934, as amended (the "1934 Act"), Holdings is a

successor issuer to Armstrong and shares of common stock of Holdings and the

accompanying preferred stock purchase rights are deemed registered for the

purposes of Section 12(b) of the 1934 Act. The Holdings common stock and rights

are listed on the New York Stock Exchange and trade under the symbol "ACK".

 

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits

 

     (c)  Exhibits.

 

           2.1     Agreement and Plan of Exchange dated as of March 14, 2000, by

                   and among Armstrong Holdings, Inc. and Armstrong World

                   Industries, Inc.

 

           3.1(i)  Amended and Restated Articles of Incorporation of Armstrong

                   Holdings, Inc.

 

 

          99.1     Press Release issued by Armstrong Holdings, Inc., dated as of

                   May 1, 2000.

 

          99.2     Shareholders Summary of Rights to Purchase Preferred Stock

                   dated March 14, 2000.

 

          99.3     Rights Agreement dated as of March 14, 2000 by and between

                   Armstrong Holdings, Inc. and American Stock Transfer & Trust,

                   Inc.

 

                                      -2-

<PAGE>

 

                                   SIGNATURES

 

     Pursuant to the requirements of the Securities Exchange Act of 1934, the

Registrant has duly caused this report to be signed on its behalf by the

undersigned thereunto duly authorized.

 

                                    ARMSTRONG HOLDINGS, INC.

 

 

Dated:  May 4, 2000            By:  /s/ Deborah K. Owen

                                    Name:  Deborah K. Owen

                                    Title:  Senior Vice President, Secretary

                                            and General Counsel

 

 

 

                                      -3-

<PAGE>

 

                                 EXHIBIT INDEX

 

     Exhibit No.        Description

     -----------        -----------

 

          2.1    Agreement and Plan of Exchange dated as of March 14, 2000, by

                 and among Armstrong Holdings, Inc. and Armstrong World

                 Industries, Inc.

 

          3.1(i) Amended and Restated Articles of Incorporation of Armstrong

                 Holdings, Inc.

 

          99.1   Press Release issued by Armstrong Holdings, Inc., dated as of

                 May 1, 2000.

 

          99.2   Shareholders Summary of Rights to Purchase Preferred Stock

                 dated as of March 14, 2000.

 

          99.3   Rights Agreement dated as of March 14, 2000 by and between

                 Armstrong Holdings, Inc. and American Stock Transfer & Trust,

                 Inc.

 

                                      -4-

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-2.1

<SEQUENCE>2

<DESCRIPTION>AGREEMENT AND PLAN OF EXCHANGE

<TEXT>

 

<PAGE>

 

                                  EXHIBIT 2.1

 

                         AGREEMENT AND PLAN OF EXCHANGE

 

                                    BETWEEN

 

                        ARMSTRONG WORLD INDUSTRIES, INC.

 

                                      AND

 

                            ARMSTRONG HOLDINGS, INC.

 

                                    RECITALS

 

     A.  Armstrong World Industries, Inc. (the "Exchanging Corporation") is a

corporation duly organized, validly existing and in good standing under the laws

of the Commonwealth of Pennsylvania, which is authorized to issue 200,000,000

shares of Common Stock, par value $1.00 per share ("AWI Common Stock"), of which

40,217,225 shares are issued and outstanding as February 18, 2000, and

20,000,000 shares of Class A Preferred Stock, without par value ("AWI Preferred

Stock"), none of which are issued and outstanding as of the date hereof.

 

     B.  Armstrong Holdings, Inc. (the "Acquiring Corporation") is a corporation

duly organized, validly existing and in good standing under the laws of the

Commonwealth of Pennsylvania, which is authorized to issue 200,000,000 shares of

Common Stock, par value $1.00 per share ("Holdings Common Stock"), of which 100

shares are issued and outstanding as of the date hereof and 20,000,000 shares of

Class A Preferred Stock, without par value ("Holdings Preferred Stock").

 

     C.  The Exchanging Corporation and the Acquiring Corporation desire to

effect the exchange of shares immediately contemplated hereby (the "Exchange")

so that after the Exchange, the shareholders of the Exchanging Corporation hold

all of the issued and outstanding shares of the Acquiring Corporation and the

Exchanging Corporation is a wholly-owned subsidiary of the Acquiring

Corporation.

 

     D.  The Board of Directors of the Exchanging Corporation and the Acquiring

Corporation have each adopted resolutions approving this Agreement and Plan of

Exchange (the "Agreement") in accordance with the Pennsylvania Business

Corporation Law of 1988 (the "BCL") and each directing that it be submitted to

the shareholders of the Exchanging Corporation and the Acquiring Corporation,

respectively, for adoption.

<PAGE>

 

                                   ARTICLE I

 

                                    General

 

     1.01  Parties to Exchange.  The Exchanging Corporation and the Acquiring

           -------------------

Corporation shall effect the Exchange in accordance with and subject to the

terms of this Agreement.

<PAGE>

 

     1.02.  Effectiveness.  Subject to the terms of this Agreement, the parties

            -------------

hereto shall file Articles of Exchange, and such other documents and instruments

as are required by, and complying in all respects with, the BCL with appropriate

state officials after the adoption of the Agreement by the shareholders of the

Exchanging Corporation, at such time as the Exchanging Corporation and the

Acquiring Corporation shall mutually agree.  The Exchange shall become effective

upon the filing of the Articles of Exchange in the Department of State of the

Commonwealth of Pennsylvania in accordance with the terms of the Articles of

Exchange (the "Effective Time").

 

     1.03.  Termination.  Notwithstanding shareholder approval of this

            -----------

Agreement, this Agreement may be terminated at any time prior to the Effective

Time by either the Acquiring Corporation by written notice to the Exchanging

Corporation prior to the Effective Time or by the Exchanging Corporation at any

time prior to the Effective Time by resolution approved by its Board of

Directors.

 

     1.04.  Amendment.  This Agreement may be amended by the Board of Directors

            ---------

of both the Exchanging Corporation and the Acquiring Corporation at any time

prior to submission of the Agreement to the shareholders of the Exchanging

Corporation for approval and, to the extent permitted by law, at any time

thereafter prior to the Effective Time.

 

                                   ARTICLE II

 

                                 Capital Stock

 

     2.01.  Exchange.  At the Effective Time each share of AWI Common Stock and

            --------

AWI Preferred Stock issued and outstanding immediately prior to the Effective

Time shall, by virtue of the Exchange and without any action on the part of the

holders thereof, be converted into and exchanged for one share of Holdings

Common Stock and one share of Holdings Preferred Stock, respectively.  The

Acquiring Corporation shall thereupon have acquired and be the holder of each

share of AWI Common Stock and AWI Preferred Stock converted and exchanged in the

Exchange.  No shares of AWI Common Stock or AWI Preferred Stock shall cease to

exist by reason of such conversion and exchange.

 

     2.02.  Stock Certificates.  Following the Effective Time, each holder of an

            ------------------

outstanding certificate or certificates theretofore representing shares of AWI

Common Stock or AWI Preferred Stock may, but shall not be required to, surrender

the same to the Acquiring Corporation for new certificates representing shares

of Holdings Common Stock or Holdings Preferred Stock, as the case may be, and

each such holder or transferee will be entitled to receive a certificate or

certificates representing the same number of shares of the Acquiring

Corporation.  Without any further action on the part of the Exchanging

Corporation or the Acquiring Corporation, each outstanding certificate which,

immediately prior to the Effective Time, represented AWI Common Stock or AWI

Preferred Stock, shall from and after the Effective Time be deemed and treated

for all corporate purposes to represent the ownership of the same number of

shares of Holdings Common Stock or Holdings Preferred Stock, as the case maybe,

as though a surrender or transfer and exchange had taken place.

<PAGE>

 

     2.03.  Cancellation of Holdings Common and Holdings Preferred Stock held by

            --------------------------------------------------------------------

the Exchanging Corporation.  Immediately prior to the Effective Time, each share

--------------------------

of Holdings Common and Preferred Stock issued and outstanding immediately before

the Effective Time shall be cancelled and thereupon shall constitute an

authorized but unissued share, and all rights in respect thereof shall cease.

 

                                  ARTICLE III

 

     3.01  Articles of Incorporation of the Exchanging Corporation.  The

           -------------------------------------------------------

Articles of Incorporation of the Acquiring Corporation in effect prior to the

Effective Time and attached hereto as Attachment A shall continue to be the

Articles of Incorporation of the Acquiring Corporation after the Effective Time,

unaffected by the Exchange until amended, modified or repealed.

 

     3.02  Bylaws.  The Bylaws of the Acquiring Corporation in effect prior to

           -------

the Effective Time and attached hereto as Attachment B shall continue to be the

Bylaws of the Acquiring Corporation after the Effective Time, unaffected by the

Exchange, until amended, modified or repealed.

 

     3.03  Directors.  The directors of the Exchanging Corporation immediately

           ----------

prior to the Effective Time shall be the directors of the Acquiring Corporation

from and after the Effective Time until their successors are duly elected and

qualified or until their earlier death, resignation or removal.

 

     3.04  Stock Plans.  The Acquiring Corporation shall assume the obligations

           ------------

of the Exchanging Corporation pursuant to the existing stock plans of the

Exchanging Corporation.

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement and

Plan of Exchange as of March 14, 2000.

 

 

                              ARMSTRONG WORLD INDUSTRIES, INC.

 

                              By:    /s/ George A. Lorch

                                     ------------------------------

                              Name:  George A. Lorch

                              Title: Chairman and Chief Executive

                                     Officer

 

                              ARMSTRONG HOLDINGS, INC.

 

                              By:    /s/ George A. Lorch

                                     ------------------------------

                              Name:  George A. Lorch

                              Title: Chairman and Chief Executive

                                     Officer

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-3.1

<SEQUENCE>3

<DESCRIPTION>AMENDED AND RESTATED ARTICLES OF INCORPORATION

<TEXT>

 

<PAGE>

 

                                 EXHIBIT 3.1(i)

 

                            ARMSTRONG HOLDINGS, INC.

 

                           ARTICLES OF INCORPORATION

 

1ST.  The name of the Corporation is Armstrong Holdings, Inc.

 

2ND.  The location and post office address of its registered office in this

Commonwealth is 2500 Columbia Avenue, Lancaster, Lancaster County, Pennsylvania.

 

3RD.  The purpose or purposes for which the Corporation is incorporated under

the Business Corporation Law of the Commonwealth of Pennsylvania are to engage

in, and do any lawful act concerning, any or all lawful business for which

corporations may be incorporated under the Business Corporation Law, including,

but not limited to, manufacturing, purchasing and selling a variety of interior

furnishings, interior finish materials and related services for residential,

commercial and institutional interiors, including resilient floors and

carpeting, ceiling materials and ceiling systems, furniture and related

accessory items; as well as insulation materials and industrial specialties;

engaging in research and development, furnishing services, and acquiring,

owning, using, and disposing of real property of any nature whatsoever.

 

4TH.  The term of its existence is perpetual.

 

5TH.  The authorized capital stock of the Corporation shall be 20,000,000 shares

of Class A Preferred Stock (without par value) and 200,000,000 shares of Common

Stock of the par value of $1.00 per share.  A description of each class of

shares and a statement of the preferences, voting powers, qualifications,

limitations, restrictions and the special or relative rights granted to or

imposed upon the shares of each class and of the authority vested in the Board

of Directors of the Corporation to establish series of Class A Preferred Stock

and to fix and determine the variations in the relative rights and preferences

as between the series of each class are as follows:

 

     (i).   The holders of Common Stock shall be entitled to receive dividends,

            when and as declared by the Board of Directors, out of surplus

            legally available therefor.

 

     (ii).  The holders of Common Stock shall have one vote per share.

 

     (iii). The Corporation may issue shares of stock, option rights or

            securities having conversion or option rights, without first

            offering them to the holders of Class A Preferred Stock or Common

            Stock.

 

     (iv).  The Board of Directors may in its discretion, at any time or from

            time to time, issue or cause to be issued all or any part of the

            authorized and unissued shares of Common Stock for consideration of

            such character and value as the Board shall from time to time fix or

            determine.

 

     (v).   The Board of Directors is hereby expressly authorized, at any time

            or from time to time, to divide any or all of the shares of Class A

            Preferred Stock into one or more series, and in the resolution or

            resolutions establishing a particular series, before

<PAGE>

 

            issuance of any of the shares thereof, to fix and determine the

            number of shares and the designation of such series, so as to

            distinguish it from the shares of all other series and classes, and

            to fix and determine the preferences, voting rights, qualifications,

            privileges, limitations, options, conversion rights, restrictions

            and other special or relative rights of the Class A Preferred Stock

            or of such series, to the fullest extent now or hereafter permitted

            by the laws of the Commonwealth of Pennsylvania, including, but not

            limited to, the variations between different series in the following

            respects:

 

             (a)  the distinctive designation of such series and the number of

                  shares which shall constitute such series, which number may be

                  increased or decreased (but not below the number of shares

                  thereof then outstanding) from time to time by the Board of

                  Directors;

 

             (b)  the annual dividend rate for such series, and the date or

                  dates from which dividends shall commence to accrue;

 

             (c)  the price or prices at which, and the terms and conditions on

                  which, the shares of such series may be made redeemable;

 

             (d)  the purchase or sinking fund provisions, if any, for the

                  purchase or redemption of shares of such series;

 

             (e)  the preferential amount or amounts payable upon shares of such

                  series in the event of liquidation, dissolution, or winding up

                  of the Corporation;

 

             (f)  the voting rights, if any, of shares of such series;

 

             (g)  the terms and conditions, if any, upon which shares of such

                  series may be converted and the class or classes or series of

                  shares of the corporation or other securities into which such

                  shares may be converted;

 

             (h)  the relative seniority, priority or junior rank of such series

                  as to dividends or assets with respect to any other classes or

                  series of stock then or thereafter to be issued; and

 

             (i)  such other terms, qualifications, privileges, limitations,

                  options, restrictions, and special or relative rights and

                  preferences, if any, of shares of such series as the Board of

                  Directors may, at the time of such resolution or resolutions,

                  lawfully fix or determine under the laws of the Commonwealth

                  of Pennsylvania.

 

        Unless otherwise provided by law, the Articles of Incorporation, the

        bylaws of the Corporation or in a resolution or resolutions establishing

        any particular series of Class A Preferred Stock, the aggregate number

        of authorized shares of Class A Preferred Stock may be increased by an

        amendment of the Articles of Incorporation approved solely by a majority

        vote of the outstanding shares of Common Stock.

 

        All shares within each series of Class A Preferred Stock shall be alike

        in every particular, except with respect to the dates from which

        dividends shall commence to accrue.

<PAGE>

 

        The Board of Directors may in its discretion, at any time or from time

        to time, issue or cause to be issued all or any part of the authorized

        and unissued shares of Class A Preferred Stock for consideration of such

        character and value as the Board of Directors shall from time to time

        fix or determine.

 

  (vi). Series One Preferred Stock (A Series Of Class A Preferred Stock).

        There is established a series of the Class A Preferred Stock of the

        Corporation to consist initially of 500,000 shares with the

        designation and relative rights and preferences thereof to be as

        follows:

 

          Section 1.  Designation.  The shares of such series shall be

          designated as "Series One Preferred Stock."  Shares of this series

          shall be issued pursuant to the exercise of rights to purchase Series

          One Preferred Stock distributed to the holders of Common Stock, par

          value $1.00 per share, of the Corporation (the "Common Stock").

 

          Section 2.  Dividends and Distributions.  Subject to the rights and

          preferences of the holders of any shares of any series of Class A

          Preferred Stock ranking senior as to dividends to this Series One

          Preferred Stock, the holders of shares of Series One Preferred Stock,

          in preference to the holders of Common Stock and shares of stock

          ranking junior as to dividends to the Series One Preferred Stock,

          shall be entitled to receive, when and if declared by the Board of

          Directors out of funds legally available for the purpose, quarterly

          dividends payable in cash on the 15th day of March, June, September

          and December in each year (each such date being referred to herein as

          a "Quarterly Dividend Payment Date"), commencing on the first

          Quarterly Dividend Payment Date after the first issuance of a share or

          fraction of a share of Series One Preferred Stock, in an amount per

          share (rounded to the nearest cent) equal to the greater of (a) $36.00

          or (b) subject to the provision for adjustment hereinafter set forth,

          100 times the aggregate per share amount of all cash dividends plus

          100 times the aggregate per share amount (payable in kind) of all non-

          cash dividends or other distributions, other than a dividend payable

          in shares of Common Stock, or a subdivision of the outstanding shares

          of Common Stock (by reclassification or otherwise), paid on the Common

          Stock at any time during the quarter year immediately preceding the

          quarter year ending on the day immediately preceding such Quarterly

          Dividend Payment Date. In the event the Corporation shall at any time

          after May1, 2000 (the "Rights Distribution Date") during any quarter

          year immediately preceding the quarter year ending on the day

          immediately preceding a Quarterly Dividend Payment Date (i) declare

          any dividend on Common Stock payable in shares of Common Stock, or

          (ii) subdivide the outstanding Common Stock or combine the outstanding

          Common Stock into a greater or lesser number of shares of Common

          Stock, then in each such case the amounts to which holders of shares

          of Series One Preferred Stock were entitled immediately prior to such

          event under clause (b) of the preceding sentence shall be adjusted by

          multiplying each such amount by a fraction, the numerator of which is

          the number of shares of Common Stock outstanding immediately after

          such event and the denominator of which is

<PAGE>

 

          the number of shares of Common Stock that were outstanding immediately

          prior to such event.

 

                  Dividends shall begin to accrue and be cumulative on

          outstanding shares of Series One Preferred Stock from the Quarterly

          Dividend Payment Date next preceding the date of issue of such shares

          of Series One Preferred Stock, unless the date of issue is a Quarterly

          Dividend Payment Date or is a date after the record date for the

          determination of holders of shares of Series One Preferred Stock

          entitled to receive a quarterly dividend and before such Quarterly

          Dividend Payment Date, in either of which events such dividends shall

          begin to accrue and be cumulative from such Quarterly Dividend Payment

          Date.  Accrued but unpaid dividends shall not bear interest.

          Dividends paid on the shares of Series One Preferred Stock in an

          amount less than the total amount of such dividends at the time

          accrued and payable on such shares shall be allocated pro rata on a

          share-by-share basis among all such shares at the time outstanding.

          The Board of Directors may fix a record date for the determination of

          holders of shares of Series One Preferred Stock entitled to receive

          payment of a dividend or distribution declared thereon, which record

          date shall be no more than 30 days prior to the date fixed for the

          payment thereof.

 

          Section 3.  Voting Rights.  Except as otherwise provided by law,

          holders of shares of Series One Preferred Stock shall have no voting

          rights.

 

          Section 4.  Certain Restrictions.

 

      1.  Whenever quarterly dividends or other dividends or distributions

          payable on the Series One 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 One

          Preferred Stock outstanding shall have been paid in full, the

          Corporation shall not:

 

             a.  declare or pay dividends on, make any distributions on, or

                 redeem or purchase or otherwise acquire for consideration any

                 shares of stock ranking junior (either as to dividends or as to

                 assets) to the Series One Preferred Stock;

 

             b.  declare or pay dividends on or make any other distributions on

                 any shares of stock ranking on a parity (either as to dividends

                 or as to assets) with the Series One Preferred Stock, except

                 dividends paid ratably on the Series One 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;

 

             c.  redeem or purchase or otherwise acquire for consideration

                 shares of any stock ranking junior (either as to dividends or

                 as to assets) to the Series One Preferred Stock, provided 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

<PAGE>

 

                 Corporation ranking junior (either as to dividends or as to

                 assets) to the Series One Preferred Stock; or

 

             d.  purchase or otherwise acquire for consideration any shares of

                 Series One Preferred Stock, or any shares of stock ranking on a

                 parity (either as to dividends or upon liquidation, dissolution

                 or winding up) with the Series One Preferred Stock, except in

                 accordance with a purchase offer made in writing or by

                 publication (as determined by the Board of Directors) to all

                 holders of such shares upon such terms as the Board of

                 Directors, after consideration of the respective annual

                 dividend rates and other relative rights and preferences of the

                 respective series and classes, shall determine in good faith

                 will result in fair and equitable treatment among the

                 respective series of classes.

 

 

      2.  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.  Reacquired Shares.  Any shares of Series One Preferred

          Stock purchased or otherwise acquired by the Corporation in any manner

          whatsoever shall be retired and cancelled promptly after the

          acquisition thereof.  All such shares shall upon their cancellation

          become authorized but unissued shares of Class A Preferred Stock and

          may be reissued as part of a new series of Class A Preferred Stock to

          be created by resolution or resolutions of the Board of Directors,

          subject to the conditions and restrictions on issuance set forth

          herein.

 

          Section 6.  Liquidation, Dissolution or Winding Up.  Subject to the

          rights and preferences of the holders of any shares of any series of

          Class A Preferred Stock ranking senior as to assets to this Series One

          Preferred Stock:

 

                1. Upon any involuntary or voluntary liquidation, dissolution or

          winding up of the Corporation, no distribution shall be made to the

          holders of shares of stock ranking junior (either as to dividends or

          as to assets) to the Series One Preferred Stock unless, prior thereto,

          the holders of shares of Series One Preferred Stock shall have

          received an amount per share equal to the Per Share Series One

          Liquidation Preference. The Per Share Series One Liquidation

          Preference shall be equal to the sum of (x) $100.00 plus an amount

          equal to accrued and unpaid dividends and distributions thereon,

          whether or not declared, to the date of such payment, plus (y) the

          Participation Preference. The "Participation Preference" is an amount

          per each share of Series One Preferred Stock outstanding, equal to the

          product of (A) the Excess Distribution Amount, as hereinafter defined,

          times (B) a fraction whose numerator is 100 and whose denominator is

          the sum of (i) the product of 100 times the number of outstanding

          shares of Series One Preferred Stock, plus (ii) the product of 100

          times a fraction whose numerator is the number of outstanding shares

          of Common Stock and whose denominator is the Adjustment Number;

          provided, however, if the foregoing computation results in a negative

          number, then the Participation

<PAGE>

 

          Preference shall be 0. Following the payment of the full amount of the

          Series One Liquidation Preference, holders of shares of Common Stock

          shall receive the remaining assets to be distributed.

 

                  The "Excess Distribution Amount" is an amount equal to the

          amount available for distribution to shareholders of the Corporation

          after payment of all debts and liabilities less the sum of (i) the

          liquidation preferences in respect of all shares of preferred stock of

          the Corporation other than the Series One Preferred Stock, (ii) the

          product of 100 times the number of outstanding shares of Series One

          Preferred Stock, and (iii) the product of the number of outstanding

          shares of Common Stock times a fraction whose numerator is 100 and

          whose denominator is the Adjustment Number.

 

                2. The Adjustment Number shall initially be 100 and shall be

          subject to adjustment as provided in this subsection (B). In the event

          the Corporation shall at any time after the Rights Declaration Date

          (i) declare any dividend on Common Stock payable in shares of Common

          Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine

          the outstanding Common Stock into a smaller number of shares, then in

          each such case the Adjustment Number in effect immediately prior to

          such event shall be adjusted by multiplying such Adjustment Number by

          a fraction, the numerator of which is the number of shares of Common

          Stock outstanding immediately after such event and the denominator of

          which is the number of shares of Common Stock that were outstanding

          immediately prior to such event.

 

          Section 7.  Consolidation, Merger, etc.  In case the Corporation shall

          enter into any consolidation, merger, combination or other transaction

          in which the shares of Common Stock are exchanged for or changed into

          other stock or securities, cash and/or any other property, then in any

          such case the shares of Series One Preferred Stock shall at the same

          time be similarly exchanged or changed in an amount per share (subject

          to the provision for adjustment hereinafter set forth) equal to 100

          times the aggregate amount of stock, securities, cash and/or any other

          property (payable in kind), as the case may be, into which or for

          which each share of Common Stock is changed or exchanged.  In the

          event the Corporation shall at any time (i) declare any dividend on

          Common Stock payable in shares of Common Stock, or (ii) subdivide the

          outstanding Common Stock or combine the outstanding Common Stock into

          a greater or lesser number of shares of Common Stock, then in each

          such case the amount set forth in the preceding sentence with respect

          to the exchange or change of shares of Series One Preferred Stock

          shall be adjusted by multiplying such amount by a fraction the

          numerator of which is the number of shares of Common Stock outstanding

          immediately after such event and the denominator of which is the

          number of shares of Common Stock that were outstanding immediately

          prior to such event.

 

          Section 8.  Redemption.  The outstanding shares of Series One

          Preferred Stock may be redeemed at the option of the Board of

          Directors as a whole, but not in part, at any time, or from time to

          time, at a cash price per share equal to (i) the

<PAGE>

 

          product of the Adjustment Number times the Average Market Value, as

          such term is hereinafter defined, of the Common Stock, plus (ii) all

          dividends which on the redemption date have accrued on the shares to

          be redeemed and have not been paid or declared and a sum sufficient

          for the payment thereof set apart, without interest; provided,

          however, that if and whenever any quarter-yearly dividend shall have

          accrued on the Series One Preferred Stock which has not been paid or

          declared and a sum sufficient for the payment thereof set apart, the

          Corporation may not purchase or otherwise acquire any shares of Series

          One Preferred Stock unless all shares of such stock at the time

          outstanding are so purchased or otherwise acquired. The "Average

          Market Value" is the average of the closing sale prices of the Common

          Stock during the 30-day period immediately preceding the date before

          the redemption date on the Composite Tape for New York Stock Exchange-

          Listed Stocks, or, if such stock is not quoted on the Composite Tape,

          on the New York Stock Exchange, or, if such stock is not listed on

          such Exchange, on the principal United States securities exchange

          registered under the Securities Exchange Act of 1934, as amended, on

          which such stock is listed, or, if such stock is not listed on any

          such exchange, the average of the closing bid quotations with respect

          to a share of Common Stock during such 30-day period on the National

          Association of Securities Dealers, Inc. Automated Quotations System or

          any system then in use, or if no such quotations are available, the

          fair market value of the Common Stock as determined by the Board of

          Directors in good faith.

 

          Section 9.  Fractional Shares.  Series One Preferred Stock may be

          issued in fractions of a share which shall entitle the holder, in

          proportion to such holder's fractional shares, to exercise voting

          rights, if applicable, receive dividends, participate in distributions

          and to have the benefit of all other rights of holders of Series One

          Preferred Stock.

 

6TH.  A.  In addition to the right of the Board of Directors under law to remove

a director for cause, and subject to the rights of the holders of any series of

preferred stock then outstanding, any director, any class of directors, or the

entire Board of Directors may be removed from office by a vote of the

shareholders at any time, with or without assigning any cause, but only if

shareholders entitled to cast at least eighty percent (80% ) of the votes which

all shareholders would be entitled to cast at an annual election of directors or

of such class shall vote in favor of such removal; provided, however, that no

individual director shall be removed (unless the entire Board of Directors or

any class of directors shall be removed) if the votes cast against such removal

would be sufficient, if voted cumulatively for such director, to elect him or

her to the class of directors of which he or she is a member.

 

     B.  Notwithstanding any other provision of law, the Articles of

Incorporation or the bylaws of the Corporation, the affirmative vote of

shareholders entitled to cast at least eighty percent (80%) of the votes which

all shareholders would be entitled to cast at an annual election of directors,

voting together as a single class, shall be required to amend, alter, or repeal,

or to adopt any provision inconsistent with, this Article 6th or any provision

of the bylaws of the Corporation relating to the number of directors, the

classification of directors, and/or the filling of vacancies on the Board of

Directors; provided, however, that this Paragraph B shall not apply

<PAGE>

 

to and such eighty percent (80%) vote shall not be required for any such

amendment, repeal, or adoption unanimously approved by all of the Directors of

the Corporation.

 

7TH.  A.  In addition to any affirmative vote required by law, the Articles of

Incorporation or the bylaws of the Corporation.  Business Combinations with an

Interested Shareholder shall require the affirmative vote of the shareholders

entitled to cast at least a majority of the votes which all shareholders other

than the Interested Shareholder would be entitled to cast in an annual election

of directors, without counting the vote of the Interested Shareholder, voting

together as a single class; provided, however, that such affirmative vote shall

not be required and such Business Combination shall require only the affirmative

vote required by law, the Articles of Incorporation or the bylaws of the

Corporation if:

 

     (1)  The Business Combination shall have been approved by a majority of

          Disinterested Directors; or

 

     (2)  All of the following six conditions shall have been met:

 

            (a) The transaction constituting the Business Combination shall

                provide for a consideration to be received by holders of Common

                Stock in exchange for their stock, and the aggregate amount of

                the cash consideration and the Fair Market Value as of the date

                of the consummation of the Business Combination of consideration

                other than cash to be received per share by holders of Common

                Stock in such Business Combination shall be at least equal to

                the highest of the following:

 

                    (i)  (if applicable) the highest per share price (including

                         any brokerage commissions, transfer taxes, and

                         soliciting dealers' fees) paid by the Interested

                         Shareholder in order to acquire any shares of Common

                         Stock beneficially owned by the Interested Shareholder

                         which were acquired (I) within the two-year period

                         immediately prior to the first public announcement of

                         the proposed Business Combination (the "Announcement

                         Date") or (II) in the transaction in which the

                         Interested Shareholder became an Interested

                         Shareholder, whichever is higher;

 

                   (ii)  the Fair Market Value per share of Common Stock on the

                         Announcement Date or on the date on which the

                         Interested Shareholder became an Interested Shareholder

                         (the "Determination Date"), whichever is higher;

 

                  (iii)  the highest Fair Market Value per share of Common Stock

                         for the two years immediately preceding the

                         Announcement Date, where the closing sale price is

                         determined for each trading day without reference to

                         the 30-day period; and

 

                  (iv)   (if applicable) the price per share equal to the Fair

                         Market Value per share of Common Stock determined

                         pursuant to clause (ii) preceding, multiplied by the

                         ratio of (I) the highest per share price (including any

                         brokerage commissions, transfer taxes, and soliciting

                         dealers' fees) paid in order to acquire any shares of

                         Common Stock beneficially owned by the Interested

                         Shareholder which were

<PAGE>

 

                         acquired within the two-year period immediately prior

                         to the Announcement Date to (II) the Fair Market Value

                         per share of Common Stock on the first day in such two-

                         year period on which the Interested Shareholder

                         beneficially owned any shares of Common Stock.

 

    All per share prices shall be adjusted to reflect any intervening stock

splits, stock dividends, and reverse stock splits.

 

       (b)  If the transaction constituting the Business Combination shall

            provide for a consideration to be received by holders of any class

            of outstanding Voting Stock other than Common Stock, the aggregate

            amount of the cash and the Fair Market Value as of the date of the

            consummation of the Business Combination of consideration other than

            cash to be received per share by holders of shares of such Voting

            Stock shall be at least equal to the highest of the following (it

            being intended that the requirements of this clause (2)(b) shall be

            required to be met with respect to every such class of outstanding

            Voting Stock whether or not the Interested Shareholder beneficially

            owns any shares of a particular class of such Voting Stock):

 

             (i) (if applicable) the highest per share price (including any

                 brokerage commissions, transfer taxes, and soliciting dealers'

                 fees) paid by the Interested Shareholder in order to acquire

                 any shares of such class of Voting Stock beneficially owned by

                 the Interested Shareholder which were acquired (I) within the

                 two-year period immediately prior to the Announcement Date or

                 (II) in the transaction in which the Interested Shareholder

                 became an Interested Shareholder, whichever is higher;

 

            (ii) (if applicable) the highest preferential amount per share to

                 which the holders of shares of such class of Voting Stock are

                 entitled in the event of any liquidation, dissolution, or

                 winding up of the Corporation;

 

           (iii) the highest Fair Market Value per share of such class of Voting

                 Stock for the two years immediately preceding the Announcement

                 Date, where the closing sale price is determined for each

                 trading day without reference to the 30-day period;

 

            (iv) the Fair Market Value per share of such class of Voting Stock

                 on the Announcement Date or on the Determination Date,

                 whichever is higher; and

 

            (v)  (if applicable) the price per share equal to the Fair Market

                 Value per share of such class of Voting Stock determined

                 pursuant to clause (iv) immediately preceding, multiplied by

                 the ratio of (I) the highest per share price (including any

                 brokerage

<PAGE>

 

                 commissions, transfer taxes, and soliciting dealers'

                 fees) paid in order to acquire any shares of such class of

                 Voting Stock beneficially owned by the Interested Shareholder

                 which were acquired within the two-year period immediately

                 prior to the Announcement Date to (II) the Fair Market Value

                 per share of such class of Voting Stock on the first day in

                 such two-year period on which the Interested Shareholder

                 beneficially owned any share of such class of Voting Stock.

 

     All per share prices shall be adjusted to reflect any intervening stock

splits, stock dividends, and reverse stock splits.

 

                (c) The consideration to be received by holders of a particular

     class of outstanding Voting Stock (including Common Stock) shall be in cash

     or in the same form as was previously paid in order to acquire shares of

     such class of Voting Stock which are beneficially owned by the Interested

     Shareholder. If the Interested Shareholder beneficially owns shares of any

     class of Voting Stock which were acquired with varying forms of

     consideration, the form of consideration to be received by holders of such

     class of Voting Stock shall be either cash or the form used to acquire the

     largest number of shares of such class of Voting Stock beneficially owned

     by the Interested Shareholder.

 

                (d) After such Interested Shareholder has become an Interested

     Shareholder and prior to the consummation of such Business Combination:

 

                (i)  except as approved by a majority of Disinterested

                     Directors, there shall have been no failure to declare and

                     pay at the regular date therefor any full quarterly

                     dividends (whether or not cumulative) on any outstanding

                     preferred stock;

 

                (ii) there shall have been (I) no reduction in the annual rate

                     of dividends paid on the Common Stock (except as necessary

                     to reflect any subdivision of the Common Stock), except as

                     approved by a majority of the Disinterested Directors, and

                     (II) an increase in such annual rate of dividends (as

                     necessary to prevent any such reduction) in the event of

                     any reclassification (including any reverse stock split),

                     recapitalization, reorganization, or any similar

                     transaction which has the effect of reducing the number of

                     outstanding shares of the Common Stock, unless the failure

                     so to increase such annual rate is approved by a majority

                     of the Disinterested Directors; and

 

               (iii) such Interested Shareholder shall not have become the

                     beneficial owner of any additional shares of Voting Stock

<PAGE>

 

                     except as part of the transaction in which such Interested

                     Shareholder became an Interested Shareholder .

 

                (e) After such Interested Shareholder has become an Interested

     Shareholder, such Interested Shareholder shall not have received the

     benefit, directly or indirectly (except proportionately as a shareholder),

     of any loans, advances, guarantees, pledges, or other financial assistance

     or any tax credits or other tax advantages provided by the Corporation,

     whether in anticipation of or in connection with a Business Combination or

     otherwise.

 

                (f) A proxy or information statement describing the proposed

     Business Combination and complying with the requirements of the Securities

     Exchange Act of 1934, as amended, and the rules and regulations thereunder

     (or any subsequent provisions replacing such Act, rules, or regulations)

     shall be mailed to public shareholders of the Corporation at least 30 days

     prior to the consummation of such Business Combination (whether or not such

     proxy or information statement is required to be mailed pursuant to such

     Act or subsequent provisions).

 

     B.  For the purposes of this Article 7th:

 

         (1)        The term "Business Combination" shall mean:

 

               (a)  any merger or consolidation of the Corporation or any

                    Subsidiary with (i) any Interested Shareholder or with (ii)

                    any other corporation (whether or not itself an Interested

                    Shareholder) which is, or after such merger or consolidation

                    would be, an Affiliate or Associate of an Interested

                    Shareholder;

 

               (b)  any sale, lease, exchange, mortgage, pledge, transfer, or

                    other disposition (in one transaction or a series of

                    transactions) to or with any Interested Shareholder and/or

                    any Affiliate or Associate of any Interested Shareholder of

                    all or a Substantial Part of the assets of the corporation

                    or any Subsidiary thereof;

 

               (c)  the issuance, exchange, sale, or transfer by the Corporation

                    or any Subsidiary (in one transaction or a series of

                    transactions) of any securities of the Corporation or any

                    Subsidiary to any Interested Shareholder and/or any

                    Affiliate or Associate of any Interested Shareholder in

                    exchange for cash, securities, or other consideration (or a

                    combination thereof) having an aggregate Fair Market Value

                    of, equal to or in excess of a Substantial Part of the

                    assets of the Corporation;

 

               (d)  the adoption of any plan or proposal for the liquidation or

                    dissolution of the Corporation proposed by or on behalf of

                    any Interested Shareholder or any Affiliate or Associate of

                    any Interested Shareholder; or

<PAGE>

 

               (e)  any reclassification of securities (including any reverse

                    stock split), or recapitalization of the Corporation, or any

                    merger or consolidation of the Corporation with any of its

                    Subsidiaries or any other transaction (whether or not with

                    or into or otherwise involving an Interested Shareholder)

                    which has the effect, directly or indirectly, of increasing

                    the proportionate share of the outstanding shares of any

                    class of equity securities or securities convertible into

                    equity securities of the Corporation or any Subsidiary which

                    is directly or indirectly owned by an Interested Shareholder

                    or any Affiliate or Associate of any Interested Shareholder.

 

     (2)  The term "person" shall mean any individual, firm, corporation, or

          other entity and shall include any group comprised of any person and

          any other person with whom such person or any Affiliate or Associate

          of such person has any agreement, arrangement, or understanding,

          directly or indirectly, for the purpose of acquiring, holding, voting,

          or disposing of Voting Stock of the Corporation.

 

     (3)  The term "Interested Shareholder" at any particular time shall mean

          any person (other than the Corporation or any Subsidiary and other

          than any profit sharing, employee stock ownership, or other employee

          benefit plan of the Corporation or any Subsidiary or any trustee of or

          fiduciary with respect to any such plan when acting in such capacity)

          who or which:

 

               (a)  is at such time the beneficial owner, directly or

                    indirectly, of more than ten percent (10%) of the voting

                    power of the outstanding Voting Stock;

 

               (b)  was at any time within the two-year period immediately prior

                    to such time the beneficial owner, directly or indirectly,

                    of more than ten percent (10%) of the voting power of the

                    then outstanding Voting Stock; or

 

               (c)  is at such time an assignee of or has otherwise succeeded to

                    the beneficial ownership of any shares of Voting Stock which

                    were at any time within the two-year period immediately

                    prior to such time beneficially owned by any Interested

                    Shareholder, if such assignment or succession shall have

                    occurred in the course of a transaction or series of

                    transactions not involving a public offering within the

                    meaning of the Securities Act of 1933, as amended.

 

     (4) A person shall be a "beneficial owner" of any shares of Voting Stock:

 

               (a)  which such person or any of its Affiliates or Associates

                    beneficially owns, directly or indirectly;

 

               (b)  which such person or any of its Affiliates or Associates has

                    (i) the right to acquire (whether or not such right is

                    exercisable

<PAGE>

 

                    immediately) pursuant to any agreement, arrangement, or

                    understanding or upon the exercise of conversion rights,

                    exchange rights, warrants or options, or otherwise, or (ii)

                    the right to vote pursuant to any agreement, arrangement, or

                    understanding; or

 

               (c)  which are beneficially owned, directly or indirectly, by any

                    other person with which such person or any of its Affiliates

                    or Associates has any agreement, arrangement, or

                    understanding for the purpose of acquiring, holding, voting,

                    or disposing of any shares of Voting Stock.

 

     (5)  For the purposes of determining whether a person is an Interested

          Shareholder pursuant to Section (B)(3) of this Article 7th the number

          of shares of Voting Stock deemed to be outstanding shall include

          shares deemed owned by an Interested Shareholder through application

          of Section (B)(4) immediately preceding but shall not include any

          other shares of Voting Stock which may be issuable pursuant to any

          agreement, arrangement, or understanding, or upon the exercise of

          conversion rights, exchange rights, warrants or options, or otherwise.

 

     (6)  "Affiliate" or "Associate" shall have the respective meanings ascribed

          to such terms in Rule 12b-2 of the General Rules and Regulations under

          the Securities Exchange Act of 1934, as amended, as in effect on

          January 1, 1985 (the term "registrant" in said Rule 12b-2 meaning in

          this case the Corporation).

 

     (7)  "Subsidiary" means any corporation of which a majority of any class of

          equity security is owned, directly or indirectly, by the Corporation;

          provided, however, that for the purposes of the definition of

          Interested Shareholder set forth in Section (B)(3) of this Article 7th

          the term "Subsidiary" shall mean only a corporation of which a

          majority of each class of equity security is owned, directly or

          indirectly, by the Corporation.

 

     (8)  "Disinterested Director" means any member of the Board of Directors of

          the Corporation who is unaffiliated with, and not a representative of,

          an Interested Shareholder and who was a member of the Board of

          Directors prior to the time that the Interested Shareholder became an

          Interested Shareholder or became a member subsequently to fill a

          vacancy created by an increase in the size of the Board of Directors

          and did receive the favorable vote of a majority of the Disinterested

          Directors in connection with being nominated for election by the

          shareholders to fill such vacancy or in being elected by the Board of

          Directors to fill such vacancy, and any successor of a Disinterested

          Director who is unaffiliated with, and not a representative of, the

          Interested Shareholder and is recommended or elected to succeed a

          Disinterested Director by a majority of the disinterested directors

          then on the Board of Directors.

 

     (9)  "Fair Market Value" means: (1) in the case of stock, the highest

          closing sale price during the 30-day period immediately preceding the

          date in question of a share of such stock on the Composite Tape for

          New York Stock Exchange-Listed Stocks,

<PAGE>

 

          or, if such stock is not quoted on the Composite Tape, on the New York

          Stock Exchange, or, if such stock is not listed on such exchange, on

          the principal United States securities exchange registered under the

          Securities Exchange Act of 1934, as amended, on which such stock is

          listed, or, if such stock is not listed on any such exchange, the

          highest closing bid quotation with respect to a share of such stock

          during the 30-day period preceding the date in question on the

          National Association of Securities Dealers, Inc., Automated Quotations

          System or any system then in use, or if no such quotations are

          available, the fair market value on the date in question of a share of

          such stock as determined by the Board of Directors in good faith with

          the approval of at least a majority of the Disinterested Directors in

          the determination made; and (2) in the case of property other than

          cash or stock, the fair market value of such property on the date in

          question as determined by the Board of Directors in good faith with

          the approval of at least a majority of the Disinterested Directors in

          the determination made.

 

     (10) In the event of any Business Combination in which the Corporation

          survives, the phrase "consideration other than cash to be received" as

          used in Section (A)(2) of this Article 7th shall include the shares of

          Common Stock and/or the shares of any class of outstanding Voting

          Stock retained by the holders of such shares.

 

     (11) "Substantial Part" of the Corporation shall mean more than ten percent

          (10%) of the fair market value of the total assets of the Corporation

          as of the end of its most recent fiscal quarter ending prior to the

          time the determination is made.

 

     (12) The term "Voting Stock" shall mean all outstanding shares of capital

          stock of the Corporation entitled to vote in an annual election of

          directors.

 

     (13) The term "beneficial owner" shall have the meaning ascribed to such

          term in Rule 13d-3 of the General Rules and Regulations under the

          Securities Exchange Act of 1934, as amended, as in effect on January

          1, 1985.

 

     C.  A majority of the Disinterested Directors shall have the power and duty

to determine for the purposes of this Article 7th, on the basis of information

known to them after reasonable inquiry, all facts necessary to determine

compliance with this Article 7th, including without limitation (1) whether a

person is an Interested Shareholder, (2) the number of shares of Voting Stock

beneficially owned by any person, (3) whether a person is an Affiliate or

Associate of another, (4) whether the applicable conditions set forth in Section

(A)(2) of this Article 7th have been met with respect to any Business

Combination, and (5) whether the assets which are the subject of any Business

Combination equal or exceed, or whether the consideration to be received from

the issuance or transfer of securities by the Corporation or any Subsidiary in

any Business Combination equals or exceeds, a Substantial Part of the assets of

the Corporation.  Any such determination made in good faith shall be binding and

conclusive on all parties.

 

     D.  Nothing contained in this Article 7th shall be construed to relieve any

Interested Shareholder from any fiduciary obligation imposed by law.

<PAGE>

 

     E.  Unless otherwise clear from the context, all terms used in this Article

7th shall have the meanings given to them in this Article 7th.  The masculine

gender shall include the feminine and neuter genders, and vice versa; and the

singular shall include the plural, and vice versa.

 

     F.  Notwithstanding any other provisions of law, the Articles of

Incorporation or the bylaws of the Corporation, and notwithstanding the fact

that a lesser percentage may be specified by law, the affirmative vote of

shareholders entitled to cast at least eighty percent (80%) of the votes which

all shareholders would be entitled to cast at an annual election of directors,

voting together as a single class, shall be required to amend, alter, or repeal,

or to adopt any provision inconsistent with, this Article 7th.

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-99.1

<SEQUENCE>4

<DESCRIPTION>PRESS RELEASE, MAY 1, 2000

<TEXT>

 

<PAGE>

 

                                 EXHIBIT 99.1

 

FOR IMMEDIATE RELEASE                           Contact:  Stan Steinreich

                                                --------

May 1, 2000                                     V.P. of Corporate Relations

                                                (717) 396-2169

 

                                                Tom Waters

                                                Director of Investor Relations

                                                (717) 396-2216

 

ARMSTRONG SHAREHOLDERS APPROVE CREATION

---------------------------------------

OF HOLDING COMPANY

------------------

 

NEW CORPORATE STRUCTURE WILL ENABLE GREATER FLEXIBILITY IN FINANCING AND

------------------------------------------------------------------------

DEVELOPING NEW BUSINESSES

-------------------------

 

     LANCASTER, PA  -  Shareholders of Armstrong World Industries (NYSE: ACK)

today approved a plan to establish a holding company that will give the building

materials manufacturer greater financial and organizational flexibility to more

effectively compete in its global markets.

 

     The creation of a holding company was one of three key issues shareholders

approved at today's annual meeting. The other topics included changes to the

terms of the Management Achievement Plan and the re-election of three directors.

 

     The new entity will be called Armstrong Holdings, Inc. and will become the

parent company for Armstrong World Industries, which continues to have the same

operations, employees and assets as before. All current Armstrong common stock

will be exchanged for Holdings common stock on a share-for-share basis. The

corporate governance and dividend policy of the holding company are the same as

that of Armstrong World Industries.

 

     A holding company is a parent company that conducts no business operations

itself. It owns stock of operating subsidiaries and may own various investments.

Its sources of revenue are cash from its subsidiaries and earnings on any

investments it holds.

 

     A number of companies in the building materials industry are already

organized as holdings companies, including USG Corp. and American Standard

Companies Inc.

 

     "Holding companies are increasingly becoming the appropriate structure

through which global companies such Armstrong grow. The new structure will

better position us to compete more effectively in today's business environment,"

said Chairman and CEO George A. Lorch.

<PAGE>

 

     Shareholders also voted on several changes to the company's Management

Achievement Plan covering performance criteria, eligibility to receive awards

under the Plan and the award maximum under the Plan. The major change in the

program will be a shift from using an Economic Value Added (EVA(R)) model as the

sole basis for determining awards under the Achievement Plan, to now also

include other performance criteria such as: cash flow, earnings, operating

income, return on shareholder's equity and sales. Management proposed the change

in order to supplement EVA(R) with other financial criteria that are also

directly aligned with investor evaluations of Armstrong's financial performance.

 

     In other action, shareholders re-elected three directors for terms expiring

in 2003: Van C. Campbell, 61, former vice chairman of Corning Inc.; John A.

Krol, 63, former chairman of E.I. duPont Nemours and Co.; and David W. Raisbeck,

50, vice chairman of Cargill, Inc.

 

     This news release contains forward looking statements related to future

sales growth and earnings.  Actual results could differ materially as a result

of known and unknown risks and uncertainties and other factors, including the

outcome of asbestos-related and other litigation, future sales growth resulting

from our investment in research and development, our success in the introduction

of new products, interest, foreign exchange and effective tax rates, impacts to

international operations caused by changes to intellectual property protections

or trade regulations, potential business combinations among our competitors or

suppliers, variations in raw material and energy costs, the strength of domestic

and foreign end-use markets,  product and price competition caused by factors

such as worldwide excess industry capacity, the political climate in emerging

markets,  and the successful integration of our 1998 acquisitions.  Additional

information on matters which could affect the company's financial results is

included in its 1999 annual report and form 10-K

 

     Armstrong World Industries is a global leader in the design, innovation and

manufacture of interior finishing solutions, most notably floors and ceilings.

Based in Lancaster, PA, Armstrong has approximately 18,000 employees worldwide.

In 1999, Armstrong's net sales totaled more than $3.4 billion. Additional

information about the company can be found on the Internet at www.armstrong.com.

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-99.2

<SEQUENCE>5

<DESCRIPTION>SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK

<TEXT>

 

<PAGE>

 

                 SUMMARY OF RIGHTS TO PURCHASE  PREFERRED STOCK

 

        The Board of Directors of Armstrong Holdings, Inc. (the "Company")

declared a distribution of one Right for each share of Common Stock of the

Company distributed to shareholders in connection with the Share Exchange under

the Agreement and Plan of Exchange (whereby all Armstrong World Industries, inc.

common stock was exchanged for the Company's Common Stock) and with respect to

each share of Common Stock that may be issued by the Company thereafter and

prior to the "Distribution Date" (or the earlier redemption or expiration of the

Rights) described below.   The Rights are effective as of their distribution to

shareholders.

 

     Upon the occurrence of certain events described below, each Right would

entitle the registered holder to purchase from the Company a unit consisting of

one-hundredth of a share (a "unit") of Series One Class A Preferred Stock,

without par value (the "Preferred Stock"), at a purchase price of $300 per unit,

subject to adjustment (the "Purchase Price").  The Purchase Price must be paid

in cash or, if the Company shall in its sole discretion so consent, shares of

Common Stock having a value at the time of exercise equal to the Purchase Price.

The description and terms of the Rights are set forth in a Rights Agreement (the

"Rights Agreement") between the Company and the Rights Agent.

 

        Unless otherwise delayed by an action of the Board of Directors, the

Rights will separate from the Common Stock upon the earlier to occur of (i) ten

(10) days following a public announcement that a person or group of affiliated

or associated persons (an "Acquiring Person") has acquired, or obtained the

right to acquire, beneficial ownership of shares of the Company's capital stock

representing twenty percent (20%) or more of the voting power of all outstanding

shares of capital stock of the Company (the date of such announcement being

referred to as the "Stock Acquisition Date") or such later date as specified by

the majority of the Disinterested Directors, or (ii) ten (10) business days

following the commencement of a tender offer or exchange offer that would result

in a person or group beneficially owning outstanding shares of the Company's

capital stock representing twenty-eight percent (28%) or more of the voting

<PAGE>

 

power of all outstanding shares of capital stock of the Company, or such later

date as specified by the majority of  the Disinterested Directors.

 

        The term "Disinterested Directors" means any member of the Board of

Directors of the Company who was a member of the Board prior to the time that

the Acquiring Person became an Acquiring Person, any person who is subsequently

elected to the Board to fill a vacancy created by an increase in the size of the

Board if such person is recommended or approved by a majority of the

Disinterested Directors, and any successor of a Disinterested Director if such

person is recommended or approved by a majority of the Disinterested Directors,

but shall not include an Acquiring Person, or an affiliate or associate of an

Acquiring Person, or any representative of the foregoing entities.

 

        Until the Distribution Date, (i) the Rights will be evidenced by the

Common Stock certificates and will be transferred only with such Common Stock

certificates, (ii) new Common Stock certificates issued will contain a notation

incorporating the Rights Agreement by reference, and (iii) the surrender for

transfer of any certificates for Common Stock will also constitute the transfer

of the Rights associated with the Common Stock represented by such certificate.

The Rights will be attached to all Common Stock certificates representing shares

then outstanding until the occurrence of a Distribution Date or the earlier

redemption or expiration of the Rights. No separate Rights Certificates will be

                                        ---------------------------------------

distributed unless and until a Distribution Date occurs. The Rights will expire

-------------------------------------------------------

at the close of business on March 21, 2006, unless extended or earlier redeemed

by the Board as described below.

 

        As soon as practicable after a Distribution Date (except as otherwise

provided above), Rights Certificates will be mailed to holders of record of the

Common Stock as of the close of business on a Distribution Date and, thereafter,

such separate Rights Certificates alone will represent the Rights.

 

        In the event that, at any time following the Distribution Date, (i) the

Company is the surviving corporation in a merger with an Acquiring Person and

its Common Stock is not changed or exchanged, or (ii) a Person becomes the

beneficial owner of shares of the Company's

<PAGE>

 

capital stock representing twenty-eight percent (28%) or more of the voting

power of all outstanding shares of capital stock of the Company, each holder of

a Right will thereafter have the right to receive, upon exercise, Common Stock

(or, in certain circumstances, cash, property or other securities of the

Company) having a value equal to two times the exercise price of the Right. The

exercise price per Right is $300. Notwithstanding any of the foregoing,

following the occurrence of any of the events described in item (i) or (ii) in

this paragraph, all Rights that are, or (under certain circumstances specified

in the Rights Agreement) were, beneficially owned by any Acquiring Person will

be null and void. However, the Rights are not exercisable following the

occurrence of either of the events set forth in this paragraph until such time

as the Rights are no longer redeemable by the Company as set forth below.

 

        For example, at an exercise price of $300 per Right, each Right not

owned by an Acquiring Person (or by certain related parties) following an event

set forth in the preceding paragraph would entitle its holder to purchase $600

worth of Common Stock (or other consideration, as noted above) for $300.

 

        In the event that, at any time following the Stock Acquisition Date, (i)

the Company is acquired in certain merger or other business combination

transactions (other than a merger described in the second preceding paragraph)

or (ii) fifty percent (50%) or more of the Company's assets or earning power is

sold or transferred, each holder of a Right (except Rights which previously have

been voided as set forth above) shall thereafter have the right to receive, upon

exercise, common stock of the acquiring company having a value equal to two

times the exercise price of the Right.

 

        The right to purchase Common Stock of the Company or common stock of an

Acquiring Person at a discount in the circumstances described in the preceding

paragraphs would not be exercisable if the Right holder has previously exercised

the right to purchase Preferred Stock.

 

        The Purchase Price payable, and the number of Units of Preferred Stock

or other securities or property issuable, upon exercise of the Rights are

subject to adjustment from time to

<PAGE>

 

time to prevent dilution (i) in the event of a stock dividend on, or a

subdivision, combination or reclassification of, the Preferred Stock, (ii) if

holders of the Preferred Stock are granted certain rights or warrants to

subscribe for Preferred Stock or convertible securities at less than the current

market price of the Preferred Stock, or (iii) upon the distribution to holders

of the Preferred Stock of evidences of indebtedness or assets (excluding regular

quarterly cash dividends) or of subscription rights or warrants (other than

those referred to above).

 

     With certain exceptions, no adjustment in the Purchase Price will be

required until cumulative adjustments amount to at least one percent (1%) of the

Purchase Price.  No fractional Units will be issued and, in lieu thereof, an

adjustment in cash will be made based on the market price of the Preferred Stock

on the last trading date prior to the date of exercise.

 

     At any time until ten days after the Stock Acquisition Date, the Board

of Directors may redeem the Rights in whole, but not in part, at a price of $.05

per Right.  The redemption period may be extended by the Company's Board of

Directors at any time prior to the expiration of such period.  Under certain

circumstances set forth in the Rights Agreement, the decision to redeem shall

require the concurrence of a majority of the Disinterested Directors.  After the

redemption period has expired, the Company's right of redemption may be

reinstated if an Acquiring Person reduces his beneficial ownership to shares of

capital stock of the Company representing ten percent (10%) or less of the

voting power of all outstanding shares of capital stock of the Company in a

transaction or series of transactions not involving the Company.  Immediately

upon the action of the Board of Directors ordering redemption of the Rights,

with, where required, the concurrence of a majority of the Disinterested

Directors, the Rights will terminate and the only right of the holders of Rights

will be to receive the $.05 redemption price.

 

     Until a Right is exercised, the holder thereof, as such, will have no

rights as a shareholder of the Company arising from the Right itself, including,

without limitation, the right to vote or to receive dividends.  While the

initial declaration and distribution of the Rights will not be taxable to the

shareholders or the Company, shareholders may, depending upon the circumstances,

recognize taxable income in the event that the Rights become exercisable for

Common Stock (or

<PAGE>

 

other consideration) of the Company or for common stock of an acquiring company

as set forth above.

 

     Under the Rights Plan, the Board has broad amendatory powers.  Other than

those provisions relating to the principal economic terms of the Rights, any of

the provisions of the Rights Agreement may be amended by the Board prior to the

Distribution Date.  After the Distribution Date, amendments may not adversely

affect Right holders' interests but any amendment suspending the provisions of

the Rights Plan by excluding any acquirer from its benefits shall not be deemed

to adversely affect Rights' holders interests.  Under certain circumstances, an

amendment would require the concurrence of the Disinterested Directors.

 

     A copy of the Rights Agreement has been filed with the Securities and

Exchange Commission.  A copy is also available free of charge from the Company.

This summary description does not purport to be complete and is qualified in its

entirety by reference to the Rights Agreement, which is incorporated herein by

reference.

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-99.3

<SEQUENCE>6

<DESCRIPTION>RIGHTS AGREEMENT

<TEXT>

 

<PAGE>

 

                                 EXHIBIT 99.3

 

 

 

 

 

 

                            ARMSTRONG HOLDINGS, INC.

 

                                Rights Agreement

 

                             Dated: March 14, 2000

<PAGE>

 

<TABLE>

<CAPTION>

Section                                                                                                        Page

-------                                                                                                      --------

<S>                                                                                                         <C>

 1.  Certain Definitions

 2.  Appointment of Rights Agent

 3.  Issue of Rights Certificates

 4.  Form of Rights Certificates

 5.  Countersignature and Registration

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

     or Stolen Rights Certificates

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

 8.  Cancellation and Destruction of Rights Certificates

 9.  Reservation and Availability of Capital Stock

10.  Preferred Stock Record Date

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

12.  Certificate of Adjusted Purchase Price or Number of Shares

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

14.  Fractional Rights and Fractional Shares

15.  Rights of Action

16.  Agreement of Rights Holders

17.  Rights Certificate Holder Not Deemed a Stockholder

18.  Concerning the Rights Agent

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

20.  Duties of Rights Agent

21.  Change of Rights Agent

22.  Issuance of New Rights Certificates

23.  Redemption and Termination

24.  Notice of Certain Events

25.  Notices

26.  Supplements and Amendments

27.  Successors

28.  Determinations and Actions by the Board of Directors, etc.

29.  Benefits of this Agreement

30.  Severability

31.  Governing Law

32.  Counterparts

33.  Descriptive Headings

Exhibit A -- Form of Rights Certificate

Exhibit B -- Summary of Rights to Purchase Preferred Stock

</TABLE>

<PAGE>

 

                            ARMSTRONG HOLDINGS, INC.

 

                                Rights Agreement

 

     THIS RIGHTS AGREEMENT (the "Agreement") is effective as of March 14, 2000,

between Armstrong Holdings, Inc., a Pennsylvania corporation (the "Company"),

and American Stock Transfer and Trust Company (the "Rights Agent").  This

Agreement is made in connection with an Agreement and Plan of Exchange dated

March 14, 2000 between the Company and Armstrong World Industries, Inc. ("AWI")

which contemplates a one-for-one exchange of shares of common stock of the

Company in return for all outstanding common stock of AWI.  In connection with

that Agreement and Plan of Exchange, the Company establishes this present

Agreement, which has the same substantive terms as the current AWI rights

agreement.  This will provide that when AWI's shareholders exchange their AWI

shares for Company shares, those shareholders will have the continued benefit of

the protection provided hereby.

 

     Accordingly on this March 14, 2000 date (the "Rights Declaration Date"),

the Board of Directors of the Company authorized and declared a distribution of

one Right for each share of common stock, par value $1.00 per share, of the

Company (the "Common Stock") to be issued by the Company at the "Effective Time"

as defined in said Agreement and Plan of Exchange, and has authorized the

issuance at said Effective Time of one Right (as such number may hereinafter be

adjusted pursuant to the provisions of Section 11(p) hereof) for each share of

Common Stock of the Company issued at that time or thereafter (whether

originally issued or delivered from the Company's treasury) and prior to the

Expiration Date.  The date during which the Effective Time occurs is referred to

here as the "Record Date."  Each "Right" initially represents the right to

purchase one one-hundredth of a share of Series One of Class A Preferred Stock

of the Company, having the rights, powers and preferences as set forth in the

Articles of Incorporation of the Company, upon the terms and subject to the

conditions hereinafter set forth.

 

     In consideration of the premises and the mutual agreements herein set forth

and intending to be legally bound hereby, the parties agree as set forth herein.

<PAGE>

 

     1.  Certain Definitions.

         -------------------

     For purposes of this Agreement, the following terms have the meanings

indicated:

 

     (a) "Acquiring Person" means any Person who or which, together with all

Affiliates and Associates of such Person, shall be the Beneficial Owner of

outstanding shares of Voting Stock representing 20% or more of the Voting Power,

but shall not include the current sole shareholder of the Company prior to the

Effective Time, the Company, any Subsidiary of the Company, any employee benefit

plan of the Company or of any Subsidiary of the Company, or any Person or entity

organized, appointed or established by the Company for or pursuant to the terms

of any such plan.

 

     (b) "Adjustment Shares" has the meaning ascribed in Section 11(a)(ii).

 

     (c) "Affiliate" and "Associate" have the respective meanings ascribed to

such words in Rule 12b-2 of the General Rules and Regulations under the

Securities Exchange Act of 1934, as amended and in effect on the date of this

Agreement (the "Exchange Act").

 

     (d) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed

to "beneficially own," any securities:

 

          (i) which such Person or any of such Person's Affiliates or

     Associates, directly or indirectly, has the right to acquire (whether such

     right is exercisable immediately or only after the passage of time)

     pursuant to any agreement, arrangement or understanding (whether or not in

     writing) or upon the exercise of conversion rights, exchange rights,

     rights, warrants or options, or otherwise; provided, however, that a Person

                                                --------

     shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"

     (A) securities tendered pursuant to a tender or exchange offer made by such

     Person or any of such Person's Affiliates or Associates until such tendered

     securities are accepted for purchase or exchange, or (B) securities

     issuable upon exercise of the Rights at any time prior to the occurrence of

     a Triggering Event, or (C) securities issuable upon exercise of Rights from

     and after the occurrence of a Triggering Event which Rights were acquired

     by such Person or any of such Person's Affiliates or Associates prior to

     the Distribution Date or

<PAGE>

 

     pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or

     pursuant to Section 11(i) in connection with an adjustment made with

     respect to any Original Rights;

 

          (ii) which such Person or any of such Person's Affiliates or

     Associates, directly or indirectly, has the right to vote or dispose of or

     has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the

     General Rules and Regulations under the Exchange Act), including pursuant

     to any agreement, arrangement or understanding, whether or not in writing;

     provided, however, that a Person shall not be deemed the "Beneficial Owner"

     of, or to "beneficially own," any security under this subparagraph (ii) as

     a result of an agreement, arrangement or understanding to vote such

     security if such agreement, arrangement or understanding:  (A) arises

     solely from a revocable proxy given in response to a public proxy or

     consent solicitation made pursuant to, and in accordance with, the

     applicable provisions of the General Rules and Regulations under the

     Exchange Act, and (B) is not also then reportable by such Person on

     Schedule 13D under the Exchange Act (or any comparable or successor

     report); or

 

          (iii) which are beneficially owned, directly or indirectly, by any

     other Person (or any Affiliate or Associate thereof) with which such Person

     (or any of such Person's Affiliates or Associates) has any agreement,

     arrangement or understanding (whether or not in writing) for the purpose of

     acquiring, holding, voting (except pursuant to a revocable proxy as

     described in the proviso to subparagraph (ii) of this paragraph (c)) or

     disposing of any voting securities of the Company.

 

     (e) "Business Day" means any day other than a Saturday, Sunday or a day on

which banking institutions in the State of New York are authorized or obligated

by law or executive order to close.

 

     (f) "Close of business" on any given date means 5:00 P.M., New York City

time, on such date; provided, however, that if such date is not a Business Day,

                    --------

it shall mean 5:00 P.M., New York City time, on the next succeeding Business

Day.

<PAGE>

 

     (g) "Common Stock" means the common stock, par value $1.00 per share, of

the Company, except that "Common Stock" when used with reference to any Person

other than the Company means the capital stock of such Person with the greatest

aggregate voting power, or the equity securities or other equity interest having

power to control or direct the management, of such Person.

 

     (h) "common stock equivalents" has the meaning ascribed in Section

11(a)(iii).

 

     (i) "current market price" has the meaning ascribed in Section 11(d)(i) and

(ii).

 

     (j) "Current Value" has the meaning ascribed in Section 11(a)(iii).

 

     (k) "Disinterested Director" means (i) any member of the Board of Directors

of the Company, while such Person is a member of the Board, who is not an

Acquiring Person or an Affiliate or Associate of an Acquiring Person, or a

representative of an Acquiring Person or of any such Affiliate or Associate, and

was a member of the Board prior to the time that the Acquiring Person became an

Acquiring Person, or (ii) any Person who subsequently becomes a member of the

Board to fill a vacancy created by an increase in the size of the Board, while

such Person is a member of the Board, who is not an Acquiring Person or an

Affiliate or Associate of an Acquiring Person, or a representative of an

Acquiring Person or of any such Affiliate or Associate, if such Person's

nomination for election by the shareholders or election to the Board is

recommended or approved by a majority of the Disinterested Directors, or (iii)

any successor of a Disinterested Director who is not an Acquiring Person or an

Affiliate or Associate of an Acquiring Person, or a representative of an

Acquiring Person or of any such Affiliate or Associate, if such Person's

nomination for election by the shareholders or election to the Board is

recommended or approved by a majority of the Disinterested Directors.

 

     (l) "Distribution Date" has the meaning ascribed in Section 3(a) hereof.

 

     (m) "Expiration Date", has the meaning ascribed in Section 7(a) hereof.

<PAGE>

 

     (n) "Final Expiration Date" means March 21, 2006 as prescribed in Section

7(a) hereof.

 

     (o) "Person" means any individual, firm, corporation, partnership or other

entity.

 

     (p) "Preferred Stock" means shares of Series One of Class A Preferred

Stock, no par value, of the Company.

 

     (q) "Principal Party" has the meaning ascribed in Section 13(b) herein.

 

     (r) "Purchase Price" has the meaning ascribed in Section 4(a) hereof and is

equal to the amount specified in Section 7(b) hereof.

 

     (s) "Record Date" has the meaning ascribed in the beginning of this

Agreement.

 

     (t) "Right" has the meaning ascribed in the beginning of this Agreement.

 

     (u) "Rights Agent" has the meaning ascribed in the beginning of this

Agreement.

 

     (v) "Rights Certificates" has the meaning ascribed in Section 3(a) hereof.

 

     (w) "Rights Declaration Date" has the meaning ascribed in the beginning of

this Agreement.

 

     (x) "Section 11(a)(ii) Event" means any event described in Section

11(a)(ii)(A) or (B) hereof.

 

     (y) "Section 11(a)(ii) Trigger Date" has the meaning ascribed in Section

11(a)(iii).

 

     (z) "Section 13 Event" means any event described in clauses (x), (y) or (z)

of Section 13(a) hereof.

<PAGE>

 

     (aa) "Spread" has the meaning ascribed in Section 11(a)(iii)

 

     (bb) "Stock Acquisition Date" means the first date of public announcement

(which, for purposes of this definition, shall include, without limitation, a

report filed pursuant to Section 13(d) under the Exchange Act) by the Company or

an Acquiring Person that an Acquiring Person has become such.

 

     (cc) "Subsidiary" means, with reference to any Person, any corporation of

which an amount of voting securities sufficient to elect at least a majority of

the directors of such corporation is beneficially owned, directly or indirectly,

by such Person, or otherwise controlled by such Person.

 

     (dd) "Substitution Period" has the meaning ascribed in Section 11(a)(iii).

 

     (ee) "Trading Day" has the meaning ascribed in Section 11(d)(i).

 

     (ff) "Triggering Event" means any Section 11(a)(ii) Event or Section 13(a)

Event.

 

     (gg) "Voting Power" means, at any particular point in time, the total

number of votes that all holders of the then outstanding shares of capital stock

of the Company would be entitled to cast in an annual election of the directors

of the Company, voting together as a single class.

 

     (hh) "Voting Stock" means Common Stock of the Company and all other equity

securities of the Company that would entitle the holders thereof to cast votes

in an election of directors of the Company.

 

     2.  Appointment of Rights Agent.

         ---------------------------

 

     The Company appoints the Rights Agent to act as agent for the Company and

the holders of the Rights (who, in accordance with Section 3 hereof, shall prior

to the Distribution Date also be the holders of the Common Stock) in accordance

with the terms and conditions hereof, and

<PAGE>

 

the Rights Agent accepts such appointment. The Company may from time to time

appoint such Co-Rights Agents as it may deem necessary or desirable.

 

     3.  Issue of Rights Certificates

         ----------------------------

     (a) Until the earlier of:

 

     (i)   the close of business on the tenth day (or such later date as

           specified by the majority of the Disinterested Directors) after the

           Stock Acquisition Date, or

 

     (ii)  the close of business on the tenth business day (or such later date

           as specified by the majority of the Disinterested Directors) after

           the date that a tender or exchange offer by any Person (other than

           the Company, any Subsidiary of the Company, any employee benefit plan

           of the Company or of any Subsidiary of the Company, or any Person or

           entity organized, appointed or established by the Company for or

           pursuant to the terms of any such plan) is first published or sent or

           given within the meaning of Rule 14e-2(a) of the General Rules and

           Regulations under the Exchange Act, if upon consummation thereof,

           such Person would be the Beneficial Owner of shares of Voting Stock

           representing 28% or more of the Voting Power,

 

(the earlier of (i) and (ii) being herein referred to as the "Distribution

Date"), (x) the Rights will be  evidenced (subject to the provisions of

paragraph (b) of this Section 3) by the certificates for the Common Stock

registered in the names of the holders of the Common Stock (which certificates

for Common Stock shall be deemed also to be certificates for rights) and not by

separate certificates, and (y) the Rights will be transferable only in

connection with the transfer of the underlying shares of Common Stock (including

a transfer to the Company).  Unless otherwise delayed by an action of the Board

of Directors, as soon as practicable after the Distribution Date, the Rights

Agent will send, by first-class, insured, postage-prepaid mail, to each record

holder of the Common Stock as of the close of business on the Distribution Date,

at the address of such holder shown on the records of the Company, one or more

rights certificates, in substantially the form of Exhibit A hereto (the "Rights

Certificates"), evidencing one Right for each share of Common Stock so held,

subject to adjustment as provided herein.  In the event that an adjustment in

the number of Rights per share of Common Stock has been made pursuant to

<PAGE>

 

Section 11(p) hereof, at the time of distribution of the Rights Certificates,

the Company shall make the necessary and appropriate rounding adjustments (in

accordance with Section 14(a) hereof) so that Rights Certificates representing

only whole numbers of Rights are distributed and cash is paid in lieu of any

fractional Rights. As of and after the Distribution Date, the Rights will be

evidenced solely by such Rights Certificates.

 

     (b) AWI previously provided a Summary of Rights, containing the substance

of Exhibit B (the "Summary of Rights") to its shareholders.  As it deems

advisable, the Company may also provide such a Summary of Rights to its

shareholders.  Until the Distribution Date, the Rights will be evidenced by

certificates for the Common Stock, and the registered holders of the Common

Stock shall also be the registered holders of the associated Rights.  Until the

earlier of the Distribution Date or the Expiration Date (as such term is defined

in Section 7 hereof), the transfer of any certificates representing shares of

Common Stock in respect of which Rights have been issued shall also constitute

the transfer of the Rights associated with such shares of Common Stock.

 

     (c) Rights shall be issued in respect of all shares of Common Stock which

are issued on and after the Record Date but prior to the earlier of the

Distribution Date or the Expiration Date.  Certificates representing such shares

of Common Stock shall also be deemed to be certificates for Rights, and shall

bear the following legend:

 

               "This certificate also evidences and entitles the holder hereof

          to certain Rights as set forth in the Rights Agreement between

          Armstrong Holdings, Inc. (the "Company") and the Rights Agent under

          that Agreement effective as of March 14, 2000 (the "Rights Agreement")

          the terms of which are hereby incorporated herein by reference and a

          copy of which is on file at the principal offices of the Company.

          Under certain circumstances, as set forth in the Rights Agreement,

          such Rights will be evidenced by separate certificates and will no

          longer be evidenced by this certificate.  The Company will mail or

          cause to be mailed to the holder of this certificate a copy of the

          Rights Agreement, as in effect on the date of mailing, without charge

          promptly after receipt of a written request therefor.  Under certain

          circumstances set forth in the Rights Agreement, Rights issued to, or

          held by, any Person who is, was or becomes an Acquiring Person or any

          Affiliates or Associates thereof (as such terms are defined in the

          Rights Agreement), whether currently held by or on behalf of such

          Person or by any subsequent holder, may become null and void.  Rights

          will expire March 21, 2006

<PAGE>

 

          unless earlier redeemed or otherwise extended as described in the

          Rights Agreement."

 

     With respect to such certificates containing the foregoing legend, until

the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights

associated with the Common Stock represented by such certificates shall be

evidenced by such certificates alone and registered holders of Common Stock

shall also be the registered holders of the associated Rights, and the transfer

of any of such certificates shall also constitute the transfer of the Rights

associated with the Common Stock represented by such certificates.

 

     4.  Form of Rights Certificates.

         ---------------------------

 

     (a) The Rights Certificates (and the forms of election to purchase and of

assignment to be printed on the reverse thereof) shall each be substantially in

the form set forth in Exhibit A hereto and may have such marks of identification

or designation and such legends, summaries or endorsements printed thereon as

the Company may deem appropriate and as are not inconsistent with the provisions

of this Agreement, or as may be required to comply with any applicable law or

with any rule or regulation made pursuant thereto or with any rule or regulation

of any stock exchange on which the Rights may from time to time be listed, or to

conform to usage.  Subject to the provisions of Section 11 and Section 22

hereof, the Rights Certificates, whenever distributed, shall be dated as of the

Record Date and on their face shall entitle the holders thereof to purchase such

number of one one-hundredths of a share of Preferred Stock as shall be set forth

therein at the price set forth therein (such exercise price per one one-

hundredth of a share being hereinafter called the "Purchase Price"), but the

amount and type of securities purchasable upon the exercise of each Right and

the Purchase Price thereof shall be subject to adjustment as provided herein.

 

     (b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22

hereof that represents Rights beneficially owned by:  (i) an Acquiring Person or

any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an

Acquiring Person (or of any such Associate or Affiliate) who becomes a

transferee after the Acquiring Person becomes such, or (iii) a transferee of an

Acquiring Person (or of any such Associate or Affiliate) who becomes a

transferee prior to or concurrently with the Acquiring Person becoming such and

receives such Rights pursuant to

<PAGE>

 

either (A) a transfer (whether or not for consideration) from the Acquiring

Person to holders of equity interests in such Acquiring Person or to any Person

with whom such Acquiring Person has any continuing agreement, arrangement or

understanding regarding the transferred Rights or (B) a transfer which the Board

of Directors of the Company has determined is part of a plan, arrangement or

understanding which has as a primary purpose or effect avoidance of Section 7(e)

hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11

hereof upon transfer, exchange, replacement or adjustment of any other Rights

Certificate referred to in this sentence, shall contain (to the extent feasible)

the following legend:

 

          "The Rights represented by this Rights Certificate are or were

     beneficially owned by a Person who was or became an Acquiring Person or an

     Affiliate or Associate of an Acquiring Person (as such terms are defined in

     the Rights Agreement). Accordingly, this Rights Certificate and the Rights

     represented hereby may become null and void in the circumstances specified

     in Section 7(e) of  such Agreement."

 

     5.  Countersignature and Registration.

         ---------------------------------

 

     (a) The Rights Certificates shall be executed on behalf of the Company by

its Chairman of the Board, its President, any Vice President or its Treasurer,

either manually or by facsimile signature, and shall be attested by the

Secretary or an Assistant Secretary of the Company, either manually or by

facsimile signature.  The Rights 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 Rights

Certificates shall cease to be such officer of the Company before

countersignature by the Rights Agent and issuance and delivery by the Company,

such Rights Certificates, nevertheless, may be countersigned by the Rights Agent

and issued and delivered by the Company with the same force and effect as though

the person who signed such Rights Certificates had not ceased to be such officer

of the Company; and any Rights Certificate may be signed on behalf of the

Company by any person who, at the actual date of the execution of such Rights

Certificate, shall be a proper officer of the Company to sign such Rights

Certificate, although at the date of the execution of this Rights Agreement any

such person was not such an officer.

 

     (b) Following the Distribution Date, the Rights Agent will keep or cause to

be kept, at its principal office or offices designated as the appropriate place

for surrender of Rights Certificates

<PAGE>

 

upon exercise or transfer, books for registration and transfer of the Rights

Certificates issued hereunder. Such books shall show the names and addresses of

the respective holders of the Rights Certificates, the number of Rights

evidenced on its face by each of the Rights Certificates, the Certificate Number

and the date of each of the Rights Certificates.

 

     6.  Transfer, Split Up, Combination and Exchange of Rights Certificates;

         --------------------------------------------------------------------

Mutilated, Destroyed, Lost or Stolen Rights Certificates.

--------------------------------------------------------

 

     (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14

hereof, at any time after the close of business on the Distribution Date, and at

or prior to the close of business on the Expiration Date, any Rights Certificate

or Certificates may be transferred, split up, combined or exchanged for another

Rights Certificate or Certificates entitling the registered holder to purchase a

like number of one-hundredths of a share of Preferred Stock (or, following a

Triggering Event, Common Stock, other securities, cash or other assets, as the

case may be) as the Rights Certificate or Certificates surrendered then entitled

such holder (or former holder in the case of a transfer) to purchase.  Any

registered holder desiring to transfer, split up, combine or exchange any Rights

Certificate or Certificates shall make such request in writing delivered to the

Rights Agent, and shall surrender the Rights Certificate or Certificates to be

transferred, split up, combined or exchanged at the principal office or offices

of the Rights Agent designated for such purpose.  Neither the Rights Agent nor

the Company shall be obligated to take any action whatsoever with respect to the

transfer of any such surrendered Rights Certificate until the registered holder

shall have completed and signed the certificate contained in the form of

assignment on the reverse side of such Rights Certificate and shall have

provided such additional evidence of the identity of the Beneficial Owner (or

former Beneficial Owner) or Affiliates or Associates thereof as the Company

shall reasonably request.  Thereupon the Rights Agent shall, subject to Section

4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person

entitled thereto a Rights Certificate or Rights Certificates, as the case may

be, as so requested.  The Company may require payment of a sum sufficient to

cover any tax or governmental charge that may be imposed in connection with any

transfer, split up, combination or exchange of Rights Certificates.

<PAGE>

 

     (b) Upon receipt by the Company and the Rights Agent of evidence reasonably

satisfactory to them of the loss, theft, destruction or mutilation of a Rights

Certificate, and, in case of loss, theft or destruction, of indemnity or

security reasonably satisfactory to them, and reimbursement to the Company and

the Rights Agent of all reasonable expenses incidental thereto, and upon

surrender to the Rights Agent and cancellation of the Rights Certificate if

mutilated, the Company will execute and deliver a new Rights Certificate of like

tenor to the Rights Agent for countersignature and delivery to the registered

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

 

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

         -------------------------------------------------------------

 

     (a) Subject to Section 7(e) hereof, the registered holder of any Rights

Certificate may exercise the Rights evidenced thereby (except as otherwise

provided herein, including, without limitation, the restrictions on

exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)

hereof) in whole or in part at any time after the Distribution Date upon

surrender of the Rights Certificate, with the form of election to purchase and

the certificate on the back thereof duly executed, to the Rights Agent at the

principal office or offices of the Rights Agent designated for such purpose,

together with payment of the aggregate Purchase Price with respect to the total

number of one one-hundredths of a share of Preferred Stock (or other securities,

cash or other assets, as the case may be) as to which such surrendered Rights

are then exercisable, at or prior to the earlier of (i) the close of business on

March 21, 2006 unless otherwise extended (the "Final Expiration Date") or (ii)

the time at which the Rights are redeemed as provided in Section 23 hereof (the

earlier of (i) and (ii) being herein referred to as the "Expiration Date").

 

     (b) The Purchase Price for each one one-hundredth of a share of Preferred

Stock pursuant to the exercise of a Right shall initially be $300, and shall be

subject to adjustment from time to time as provided in Sections 11 and 13(a)

hereof and shall be payable in accordance with paragraph (c) below (the

"Purchase Price").

 

     (c) Upon receipt of a Rights Certificate representing exercisable Rights,

with the form of election to purchase and the certificate duly executed,

accompanied by payment, with respect to each Right so exercised, of the Purchase

Price per one one-hundredth of a share of Preferred

<PAGE>

 

Stock (or other shares, securities, cash or other assets, as the case may be) to

be purchased as set forth below and an amount equal to any applicable transfer

tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly

 

 

 

           (i) (A)  requisition from any transfer agent of the shares of

                    Preferred Stock

 

           or

 

                    make available, if the Rights Agent is the transfer agent

                    for such shares, certificates for the total number of one

                    one-hundredths of a share of Preferred Stock to be

                    purchased, and the Company hereby irrevocably authorizes its

                    transfer agent to comply with all such requests, or

 

               (B)  if the Company shall have elected to deposit the total

                    number of shares of Preferred Stock issuable upon exercise

                    of the Rights hereunder with a depositary agent, requisition

                    from the depositary agent depositary receipts representing

                    such number of one one-hundredths of a share of Preferred

                    Stock as are to be purchased (in which case certificates for

                    the shares of Preferred Stock represented by such receipts

                    shall be deposited by the transfer agent with the depositary

                    agent), and the Company will direct the depositary agent to

                    comply with such request,

 

           (ii) requisition from the Company the amount of cash, if any, to be

     paid in lieu of fractional shares in accordance with Section 14 hereof,

 

           (iii) after receipt of such certificates or depositary receipts,

     cause the same to be delivered to or upon the order of the registered

     holder of such Rights Certificate, registered in such name or names as may

     be designated by such holder, and

<PAGE>

 

           (iv) after receipt thereof, deliver such cash, if any, to or upon the

     order of the registered holder of such Rights Certificate.

 

The payment of the Purchase Price (as such amount may be reduced pursuant to

Section 11(a)(iii) hereof) may be made (x) in cash or by certified bank check or

money order payable to the order of the Company, or (y) if the Company shall in

its sole discretion so consent, by delivery of a certificate or certificates

(with appropriate stock powers executed in blank attached thereto) evidencing a

number of shares of Common Stock equal to the then Purchase Price divided by the

closing price (as determined pursuant to Section 11(d) hereof) per share of

Common Stock on the Trading Date immediately preceding the date of such

exercise. In the event that the Company is obligated to issue other securities

(including Common Stock) of the Company, pay cash and/or distribute other

property pursuant to Section 11(a) hereof, the Company will make all

arrangements necessary so that such other securities, cash and/or other property

are available for distribution by the Rights Agent, if and when appropriate.

 

     (d) In case the registered holder of any Rights Certificate shall exercise

less than all the Rights evidenced thereby, a new Rights Certificate evidencing

Rights equivalent to the Rights remaining unexercised shall be issued by the

Rights Agent and delivered to, or upon the order of, the registered holder of

such Rights Certificate, registered in such name or names as may be designated

by such holder, subject to the provisions of Section 14 hereof.

 

     (e) Notwithstanding anything in this Agreement to the contrary, from and

after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially

owned by:

 

           (i) an Acquiring Person or an Associate or Affiliate of an Acquiring

     Person,

 

           (ii) a transferee of an Acquiring Person (or of any such Associate or

     Affiliate) who becomes a transferee after the Acquiring Person becomes

     such, or

<PAGE>

 

           (iii) a transferee of an Acquiring Person (or of any such Associate

     or Affiliate) who becomes a transferee prior to or concurrently with the

     Acquiring Person becoming such and receives such Rights pursuant to either:

 

               (A)  a transfer (whether or not for consideration) from the

                    Acquiring

 

                    Person to holders of equity interests in such Acquiring

                    Person or to any Person with whom the Acquiring Person has

                    any continuing agreement, arrangement or understanding

                    regarding the transferred Rights or

 

               (B)  a transfer which the Board of Directors of the Company has

                    determined is part of a plan, arrangement or understanding

                    which has as a primary purpose or effect the avoidance of

                    this Section 7(e),

 

shall become null and void without any further action, and no holder of such

Rights shall have any rights whatsoever with respect to such Rights, whether

under any provision of this Agreement or otherwise. The Company shall use all

reasonable efforts to ensure that the provisions of this Section 7(e) and

Section 4(b) hereof are complied with, but shall have no liability to any holder

of Rights Certificates or other Person as a result of its failure to make any

determinations with respect to an Acquiring Person or its Affiliates, Associates

or transferees hereunder.

 

     (f) Notwithstanding anything in this Agreement to the contrary, neither the

Rights Agent nor the Company shall be obligated to undertake any action with

respect to a registered holder upon the occurrence of any purported exercise as

set forth in this Section 7 unless such registered holder shall have:

 

           (i) completed and signed the certificate contained in the form of

     election to purchase set forth on the reverse side of the Rights

     Certificate surrendered for such exercise, and

<PAGE>

 

           (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.

 

     8.  Cancellation and Destruction of Rights Certificates.

         ---------------------------------------------------

 

     All Rights Certificates surrendered for the purpose of exercise, transfer,

split up, combination or exchange shall, if surrendered to the Company or any of

its agents, be delivered to the Rights Agent for cancellation or in cancelled

form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no

Rights Certificates shall be issued in lieu thereof except as expressly

permitted by any of the provisions of this Agreement.  The Company shall deliver

to the Rights Agent for cancellation and retirement, and the Rights Agent shall

so cancel and retire, any other Rights Certificate purchased or acquired by the

Company otherwise than upon the exercise thereof.  The Rights Agent shall

deliver all cancelled Rights Certificates to the Company, or  shall, at the

written request of the Company, destroy such cancelled Rights Certificates, and

in such case shall deliver a certificate of destruction thereof to the Company.

 

     9.  Reservation and Availability of Capital Stock.

         ---------------------------------------------

 

     (a) The Company covenants and agrees that it will cause to be reserved and

kept available out of its authorized and unissued shares of Preferred Stock

(and, following the occurrence of a Triggering Event, out of its authorized and

unissued shares of Common Stock and/or other securities or out of its authorized

and issued shares held in its treasury) the number of shares of Preferred Stock

(and, following the occurrence of a Triggering Event, Common Stock and/or other

securities) that, as provided in this Agreement, including Section 11(a)(iii)

hereof, will be sufficient to permit the exercise in full of all outstanding

Rights.

 

     (b) So long as the shares of Preferred Stock (and, following the occurrence

of a Triggering Event, Common Stock and/or other securities) issuable and

deliverable upon the exercise of the Rights may be listed on any national

securities exchange, the Company shall use its best efforts to cause, from and

after such time as the Rights become exercisable, all shares reserved for such

issuance to be listed on such exchange upon official notice of issuance upon

such exercise.

<PAGE>

 

     (c) The Company shall use its best efforts to (i) file, as soon as

practicable following the earliest date after the first occurrence of a Section

11(a)(ii) Event on which the consideration to be delivered by the Company upon

exercise of the Rights has been determined in accordance with Section 11(a)(iii)

hereof, or as soon as is required by law following the Distribution Date, as the

case may be, a registration statement under the Securities Act of 1933 (the

"Act") with respect to the securities purchasable upon exercise of the Rights on

an appropriate form, (ii) cause such registration statement to become effective

as soon as practicable after such filing, and (iii) cause such registration

statement to remain effective (with a prospectus at all times meeting the

requirements of the Act) until the earlier of (A) the date as of which the

Rights are no longer exercisable for such securities or (B) the date of the

expiration of the Rights.  The Company will also take such action as may be

appropriate under, or to ensure compliance with, the securities or "blue sky"

laws of the various states in connection with the exercisability of the Rights.

The Company may temporarily suspend, for a period of time not to exceed ninety

(90) days after the date set forth in clause (i) of the first sentence of this

Section 9(c), the exercisability of the Rights in order to prepare and file such

registration statement and permit it to become effective.  Upon any such

suspension, the Company shall issue a public announcement stating that the

exercisability of the Rights has been temporarily suspended, as well as a public

announcement at such time as the suspension is no longer in effect.

Notwithstanding any provision of this Agreement to the contrary, the Rights

shall not be exercisable in any jurisdiction unless the requisite qualification

in such jurisdiction shall have been obtained.

 

     (d) The Company covenants and agrees that it will take all such action as

may be necessary to ensure that all one one-hundredths of a share of Preferred

Stock (and, following the occurrence of a Triggering Event, Common Stock and/or

other securities) delivered upon exercise of Rights shall, at the time of

delivery of the certificates for such shares (subject to payment of the Purchase

Price), be duly and validly authorized and issued and fully paid and non-

assessable.

 

          (e) The Company further covenants and agrees that it will pay when due

and payable any and all federal and state transfer taxes and charges which may

be payable in respect

<PAGE>

 

of the issuance or delivery of the Rights Certificates and of any certificates

for a number of one one-hundredths of a share of Preferred Stock (or Common

Stock and/or other securities, as the case may be) upon the exercise of Rights.

The Company shall not, however, be required to pay any transfer tax which may be

payable in respect of any transfer or delivery of Rights Certificates to a

Person other than, or the issuance or delivery of a number of one one-hundredths

of a share of Preferred Stock (or Common Stock and/or other securities, as the

case may be) in respect of a name other than that of, the registered holder of

the Rights Certificates evidencing Rights surrendered for exercise, or to issue

or deliver any certificates for a number of one one-hundredths of a share of

Preferred Stock (or Common Stock and/or other securities, as the case may be) in

a name other than that of the registered holder upon the exercise of any Rights

until such tax shall have been paid (any such tax being payable by the holder of

such Rights Certificate at the time of surrender) or until it has been

established to the Company's satisfaction that no such tax is due.

 

 

 

     10. Preferred Stock Record Date.

         ---------------------------

 

     Each person in whose name any certificate for a number of one one-

hundredths of a share of Preferred Stock (or Common Stock and/or other

securities, as the case may be) is issued upon the exercise of Rights shall for

all purposes be deemed to have become the holder of record of such fractional

shares of Preferred Stock (or Common Stock and/or other securities, as the case

may be) represented thereby on, and such certificate shall be dated, the date

upon which the Rights Certificate evidencing such Rights was duly surrendered

and payment of the Purchase Price (and all applicable transfer taxes) was made;

 

provided, however, that if the date of such surrender and payment is a date upon

--------

which the Preferred Stock (or Common Stock and/or other securities, as the case

may be) transfer books of the Company are closed, such Person shall be deemed to

have become the record holder of such shares (fractional or otherwise) on, and

such certificate shall be dated, the next succeeding Business Day on which the

Preferred Stock (or Common Stock and/or other securities, as the case may be)

transfer books of the Company are open.  Prior to the exercise of the Rights

evidenced thereby, the holder of a Rights Certificate shall not be entitled to

any rights of a stockholder of the Company with respect to shares for

<PAGE>

 

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.

 

     11. Adjustment of Purchase Price, Number and Kind of Shares or Number of

         --------------------------------------------------------------------

Rights.

------

 

     The Purchase Price, the number and kind of shares covered by each Right and

the number of Rights outstanding are subject to adjustment from time to time as

provided in this Section 11.

 

     (a) (i)   In the event the Company shall at any time after the date of this

     Agreement (A) declare a dividend on the Preferred Stock payable in shares

     of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)

     combine the outstanding Preferred Stock into a smaller number of shares, or

     (D) issue any shares of its capital stock in a reclassification of the

     Preferred Stock (including any such reclassification in connection with a

     consolidation or merger in which the Company is the continuing or surviving

     corporation), except as otherwise provided in this Section 11(a) and

     Section 7(e) hereof, the Purchase Price in effect at the time of the record

     date for such dividend or of the effective date of such subdivision,

     combination or reclassification, and the number and kind of shares of

     Preferred Stock or capital stock, as the case may be, issuable on such

     date, shall be proportionately adjusted so that the holder of any Right

     exercised after such time shall be entitled to receive, upon payment of the

     Purchase Price then in effect, the aggregate number and kind of shares of

     Preferred Stock or capital stock, as the case may be, which, if such Right

     had been exercised immediately prior to such date and at a time when the

     Preferred Stock transfer books of the Company were open, he would have

     owned upon such exercise and been entitled to receive by virtue of such

     dividend, subdivision, combination or reclassification. If an event occurs

     which would require an adjustment under both this Section 11(a)(i) and

     Section 11(a)(ii) hereof, the adjustment provided for in this Section

     11(a)(i) shall be in addition to, and shall be made prior to, any

     adjustment required pursuant to Section 11(a)(ii) hereof.

 

          (ii)  In the event:

<PAGE>

 

               (A)  any Acquiring Person or any Associate or Affiliate of any

                    Acquiring Person, at any time after the date of this

                    Agreement, directly or indirectly, shall merge into the

                    Company or otherwise combine with the Company and the

                    Company shall be the continuing or surviving corporation of

                    such merger or combination and the Common Stock of the

                    Company shall remain outstanding and unchanged, or

 

               (B)  any Person (other than the Company, any Subsidiary of the

                    Company, any employee benefit plan of the Company or of any

                    Subsidiary of the Company, or any Person or entity appointed

                    or established by the Company for or pursuant to the terms

                    of any such plan), alone or together with its Affiliates and

                    Associates, shall, at any time after the Rights Declaration

                    Date, become the Beneficial Owner of shares of Voting Stock

                    representing 28% or more of the Voting Power, other than

                    pursuant to any transaction set forth in Section 13(a)

                    hereof,

 

          then, promptly following five (5) days after the date of the

          occurrence of an event described in Section 11(a)(ii)(B) hereof and

          promptly following the occurrence of an event described in Section

          11(a)(ii)(A) hereof, proper provision shall be made so that each

          holder of a Right (except as provided below and in Section 7(e)

          hereof) shall thereafter have the right to receive, upon exercise

          thereof at the then current Purchase Price in accordance with the

          terms of this Agreement, in lieu of a number of one one-hundredths of

          a share of Preferred Stock, such number of shares of Common Stock of

          the Company as shall equal the result obtained by (x) multiplying the

          then current Purchase Price by the then number of one one-hundredths

          of a share of Preferred Stock for which a Right was exercisable

          immediately prior to the first occurrence of a Section 11(a)(ii)

          Event, and (y) dividing that product (which, following such first

          occurrence, shall thereafter be referred to as the "Purchase Price"

          for each Right and for all purposes of this

<PAGE>

 

          Agreement) by 50% of the current market price (determined pursuant to

          Section 11(d) hereof) per share of Common Stock on the date of such

          first occurrence (such number of shares hereinafter referred to as the

          "Adjustment Shares").

 

          (iii) If the number of shares of Common Stock which are authorized by

     the Company's Articles of Incorporation but not outstanding or reserved for

     issuance for purposes other than upon exercise of the Rights is not

     sufficient to permit the exercise in full of the Rights in accordance with

     the foregoing subparagraph (ii) of this Section 11(a), the Company shall:

     (A) determine the excess of (1) the value of the Adjustment Shares issuable

     upon the exercise of a Right (the "Current Value") over (2) the Purchase

     Price (such excess, the "Spread"), and (B) with respect to each Right, make

     adequate  provision to substitute for the Adjustment Shares, upon payment

     of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase

     Price, (3) Common Stock or other equity securities of the Company

     (including, without limitation, shares, or units of shares, of preferred

     stock which the Board of Directors of the Company has deemed to have the

     same value as shares of Common Stock (such shares of preferred stock,

     "common stock equivalents")), (4) debt securities of the Company, (5) other

     assets, or (6) any combination of the foregoing having an aggregate value

     equal to the Current Value, where such aggregate value has been determined

     by the Board of Directors of the Company based upon the advice of a

     nationally recognized investment banking firm selected by the Board of

     Directors of the Company; provided, however, if the Company shall not have

                                         -------

     made adequate provision to deliver value pursuant to clause (B) above

     within thirty (30) days following the later of (x) the first occurrence of

     a Section 11(a)(ii) Event and (y) the date on which the Company's right of

     redemption pursuant to Section 23(a) expires (the later of (x) and (y)

     being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the

     Company shall be obligated to deliver, upon the surrender for exercise of a

     Right and without requiring payment of the Purchase Price, shares of Common

     Stock (to the extent available) and then, if necessary, cash, which shares

     and/or cash have an aggregate value equal to the Spread. If the Board of

     Directors of the Company shall determine in good faith that it is likely

     that sufficient additional shares of Common Stock could be authorized for

     issuance upon exercise in full of the Rights, the

<PAGE>

 

     thirty (30) day period set forth above may be extended to the extent

     necessary, but not more than ninety (90) days after the Section 11(a)(ii)

     Trigger Date, in order that the Company may seek shareholder approval for

     the authorization of such additional shares (such period, as it may be

     extended, the "Substitution Period"). To the extent that the Company

     determines that some action need be taken pursuant to the first and/or

     second sentences of this Section 11(a)(iii), the Company (x) shall provide,

     subject to Section 7(e) hereof, that such action shall apply uniformly to

     all outstanding Rights, and (y) may suspend the exercisability of the

     Rights until the expiration of the Substitution Period in order to seek any

     authorization of additional shares and/or to decide the appropriate form of

     distribution to be made pursuant to such first sentence. In the event of

     any such suspension, the Company shall issue a public announcement stating

     that the exercisability of the Rights has been temporarily suspended, as

     well as a public announcement at such time as the suspension is no longer

     in effect. For purposes of this Section 11(a)(iii), the value of the Common

     Stock shall be the current market price (as determined pursuant to Section

     11(d) hereof) per share of the Common Stock on the Section 11(a)(ii)

     Trigger Date and the value of any "common stock equivalent" shall be deemed

     to have the same value as the Common Stock on such date.

 

     (b) If the Company shall set a record date for the issuance of rights,

options or warrants to all holders of Preferred Stock entitling them to

subscribe for or purchase (for a period expiring within forty-five (45) calendar

days after such record date) Preferred Stock (or shares having the same rights,

privileges and preferences as the shares of Preferred Stock ("equivalent

preferred stock")) or securities convertible into Preferred Stock or equivalent

preferred stock at a price per share of Preferred Stock or per share of

equivalent preferred stock (or having a conversion price per share, if a

security convertible into Preferred Stock or equivalent preferred stock) less

than the current market price (as determined pursuant to Section 11(d) hereof)

per share of Preferred Stock on such record date, the Purchase Price to be in

effect after such record date shall be determined by multiplying the Purchase

Price in effect immediately prior to such record date by a fraction, the

numerator of which shall be the number of shares of Preferred Stock outstanding

on such record date, plus the number of shares of Preferred Stock which the

aggregate offering price of the total number of shares of Preferred Stock and/or

equivalent preferred stock so to be

<PAGE>

 

offered (and/or the aggregate initial conversion price of the convertible

securities so to be offered) would purchase at such current market price, and

the denominator of which shall be the number of shares of Preferred Stock

outstanding on such record date, plus the number of additional shares of

Preferred Stock and/or equivalent preferred stock to be offered for subscription

or purchase (or into which the convertible securities so to be offered are

initially convertible). In case such subscription price may be paid by delivery

of consideration part or all of which may be in a form other than cash, the

value of such consideration shall be as determined in good faith by the Board of

Directors of the Company, whose determination shall be described in a statement

filed with the Rights Agent and shall be binding on the Rights Agent and the

holders of the Rights. Shares of Preferred Stock owned by or held for the

account of the Company shall not be deemed outstanding for the purpose of any

such computation. Such adjustment shall be made successively whenever such a

record date is fixed, and in the event that such rights or warrants are not so

issued, the Purchase Price shall be adjusted to be the Purchase Price which

would then be in effect if such record date had not been fixed.

 

     (c) If the Company shall set a record date for a distribution to all

holders of Preferred Stock (including any such distribution made in connection

with a consolidation or merger in which the Company is the continuing

corporation) of evidences of indebtedness, cash (other than a regular quarterly

cash dividend out of the earnings or retained earnings of the Company), assets

(other than a dividend payable in Preferred Stock, but including any dividend

payable in stock other than Preferred Stock) or subscription rights or warrants

(excluding those referred to in Section 11(b) hereof), the Purchase Price to be

in effect after such record date shall be determined by multiplying the Purchase

Price in effect immediately prior to such record date by a fraction, the

numerator of which shall be the current market price (as determined pursuant to

Section 11(d) hereof) per share of Preferred Stock on such record date, less the

fair market value (as determined in good faith by the Board of Directors of the

Company, whose determination shall be described in a statement filed with the

Rights Agent) of the portion of the cash, assets or evidences of indebtedness so

to be distributed or of such subscription rights or warrants applicable to a

share of Preferred Stock, and the denominator of which shall be such current

market price (as determined pursuant to Section 11(d) hereof) per share of

Preferred Stock.  Such adjustments shall be made successively whenever such a

record date is fixed, and in the event

<PAGE>

 

that such distribution is not so made, the Purchase Price shall be adjusted to

be the Purchase Price which would have been in effect if such record date had

not been fixed.

 

     (d)   For the purpose of any computation hereunder:

 

          (i) other than computations made pursuant to Section 11(a)(iii)

     hereof, the "current market price" per share of Common Stock on any date

     shall be deemed to be the average of the daily closing prices per share of

     such Common Stock for the thirty (30) consecutive Trading Days (as such

     term is hereinafter defined) immediately prior to such date; and for

     purposes of computations made pursuant to Section 11(a)(iii) hereof, the

     "current market price" per share of Common Stock on any date shall be

     deemed to be the average of the daily closing prices per share of such

     Common Stock for the ten (10) consecutive Trading Days immediately

     following such date; provided, however, that in the event that the current

                          --------

     market price per share of the Common Stock is determined during a period

     following the announcement by the issuer of such Common Stock of (A) a

     dividend or distribution on such Common Stock payable in shares of such

     Common Stock or securities convertible into shares of such Common Stock

     (other than the Rights), or (B) any subdivision, combination or

     reclassification of such Common Stock, and prior to the expiration of the

     requisite thirty (30) Trading Day or ten (10) Trading Day period, as set

     forth above, after the ex-dividend date for such dividend or distribution,

     or the record date for such subdivision, combination or reclassification,

     then, and in each such case, the "current market price" shall be properly

     adjusted to take into account ex-dividend trading.  The closing price for

     each day shall be the last sale price, regular way, or, in case no such

     sale takes place on such day, the average of the closing bid and asked

     prices, regular way, in either case as reported in the principal

     consolidated transaction reporting system with respect to securities listed

     or admitted to trading on the New York Stock Exchange or, if the shares of

     Common Stock are not listed or admitted to trading on the New York Stock

     Exchange, as reported in the principal consolidated transaction reporting

     system with respect to securities listed on the principal national

     securities exchange on which the shares of Common Stock are listed or

     admitted to trading or, if the shares of Common Stock are not listed or

     admitted to trading on any national securities exchange, the last quoted

     price or, if not so quoted, the average of the high bid

<PAGE>

 

     and low asked prices in the over-the-counter market, as reported by the

     National Association of Securities Dealers, Inc. Automated Quotation System

     ("NASDAQ") or such other system then in use, or, if on any such date the

     shares of Common Stock are not quoted by any such organization, the average

     of the closing bid and asked prices as furnished by a professional market

     maker making a market in the Common Stock selected by the Board of

     Directors of the Company. If on any such date no market maker is making a

     market in the Common Stock, the fair value of such shares on such date as

     determined in good faith by the Board of Directors of the Company shall be

     used. The term "Trading Day" shall mean a day on which the principal

     national securities exchange on which the shares of Common Stock are listed

     or admitted to trading is open for the transaction of business or, if the

     shares of Common Stock are not listed or admitted to trading on any

     national securities exchange, a Business Day. If the Common Stock is not

     publicly held or not so listed or traded, "current market price" per share

     shall mean the fair value per share as determined in good faith by the

     Board of Directors of the Company, whose determination shall be described

     in a statement filed with the Rights Agent and shall be conclusive for all

     purposes.

 

          (ii)  For the purpose of any computation hereunder, the "current

     market price" per share of Preferred Stock shall be determined in the same

     manner as set forth above for the Common Stock in clause (i) of this

     Section 11(d) (other than the last sentence thereof).  If the current

     market price per share of Preferred Stock cannot be determined in the

     manner provided above or if the Preferred Stock is not publicly held or

     listed or traded in a manner described in clause (i) of this Section 11(d),

     the "current market price" per share of Preferred Stock shall be

     conclusively deemed to be an amount equal to 100 (as such number may be

     appropriately adjusted for such events as stock splits, stock dividends and

     recapitalizations with respect to the Common Stock occurring after the date

     of this Agreement) multiplied by the current market price per share of the

     Common Stock.  If neither the Common Stock nor the Preferred Stock is

     publicly held or so listed or traded, "current market price" per share of

     the Preferred Stock shall mean the fair value per share as determined in

     good faith by the Board of Directors of the Company, whose determination

     shall be described in a statement filed with the Rights Agent and shall be

<PAGE>

 

     conclusive for all purposes.  For purposes of this Agreement, the "current

     market price" of one one-hundredth of a share of Preferred Stock shall be

     equal to the "current market price" of one share of Preferred Stock divided

     by 100.

 

     (e) Anything herein to the contrary notwithstanding, no adjustment in the

Purchase Price shall be required unless such adjustment would require an

increase or decrease of at least one percent (1%) in the Purchase Price;

provided, however, that any adjustments which by reason of this Section 11(e)

--------

are not required to be made shall be carried forward and taken into account in

any subsequent adjustment.  All calculations under this Section 11 shall be made

to the nearest cent or to the nearest ten-thousandth of a share of Common Stock

or other share or one-millionth of a share of Preferred Stock, as the case may

be.  Notwithstanding the first sentence of this Section 11(e), any adjustment

required by this Section 11 shall be made no later than the earlier of (i) three

(3) years from the date of the transaction which mandates such adjustment or

(ii) the Expiration Date.

 

     (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or

Section 13(a) hereof, the holder of any Right thereafter exercised shall become

entitled to receive any shares of capital stock other than Preferred Stock,

thereafter the number of such other shares so receivable upon exercise of any

Right and the Purchase Price thereof shall be subject to adjustment from time to

time in a manner and on terms as nearly equivalent as practicable to the

provisions with respect to the Preferred Stock contained in Sections 11(a), (b),

(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,

10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like

terms to any such other shares.

 

     (g) All Rights originally issued by the Company subsequent to any

adjustment made to the Purchase Price hereunder shall evidence the right to

purchase, at the adjusted Purchase Price, the number of one one-hundredths of a

share of Preferred Stock purchasable from time to time hereunder upon exercise

of the Rights, all subject to further adjustment as provided herein.

 

     (h) Unless the Company shall have exercised its election as provided in

Section 11(i), upon each adjustment of the Purchase Price as a result of the

calculations made in Sections 11(b)

<PAGE>

 

and (c), each Right outstanding immediately prior to the making of such

adjustment shall thereafter evidence the right to purchase, at the adjusted

Purchase Price, that number of one one-hundredths of a share of Preferred Stock

(calculated to the nearest one-millionth) obtained by (i) multiplying (x) the

number of one one-hundredths of a share covered by a Right immediately prior to

this adjustment by (y) the Purchase Price in effect immediately prior to such

adjustment of the Purchase Price, and (ii) dividing the product so obtained by

the Purchase Price in effect immediately after such adjustment of the Purchase

Price.

 

     (i) The Company may elect on or after the date of any adjustment of the

Purchase Price to adjust the number of Rights in lieu of any adjustment in the

number of one one-hundredths of a share of Preferred Stock purchasable upon the

exercise of a Right.  Each of the Rights outstanding after the adjustment in the

number of Rights shall be exercisable for the number of one one-hundredths of a

share of Preferred Stock for which a Right was exercisable immediately prior to

such adjustment.  Each Right held of record prior to such adjustment of the

number of Rights shall become that number of Rights (calculated to the nearest

one ten-thousandth) obtained by dividing the Purchase Price in effect

immediately prior to adjustment of the Purchase Price by the Purchase Price in

effect immediately after adjustment of the Purchase Price.  The Company shall

make a public announcement of its election to adjust the number of Rights,

indicating the record date for the adjustment and, if known at the time, the

amount of the adjustment to be made.  This record date may be the date on which

the Purchase Price is adjusted or any day thereafter, but, if the Rights

Certificates have been issued, shall be at least ten (10) days later than the

date of the public announcement.  If Rights Certificates have been issued, upon

each adjustment of the number of Rights pursuant to this Section 11(i), the

Company shall, as promptly as practicable, cause to be distributed to holders of

record of Rights Certificates on such record date Rights Certificates

evidencing, subject to Section 14 hereof, the additional Rights to which such

holders shall be entitled as a result of such adjustment, or, at the option of

the Company, shall cause to be distributed to such holders of record in

substitution and replacement for the Rights Certificates held by such holders

prior to the date of adjustment, and upon surrender thereof if required by the

Company, new Rights Certificates evidencing all the Rights to which such holders

shall be entitled after such adjustment.  Rights Certificates so to be

distributed shall be issued, executed and countersigned in the manner provided

for herein (and

<PAGE>

 

may bear, at the option of the Company, the adjusted Purchase Price) and shall

be registered in the names of the holders of record of Rights Certificates on

the record date specified in the public announcement.

 

     (j) Irrespective of any adjustment or change in the Purchase Price or the

number of one one-hundredths of a share of Preferred Stock issuable upon the

exercise of the Rights, the Rights Certificates theretofore and thereafter

issued may continue to express the Purchase Price per one one-hundredth of a

share and the number of one one-hundredths of a share which were expressed in

the initial Rights Certificates issued hereunder.

 

     (k) Before taking any action that would cause an adjustment reducing the

Purchase Price below the then stated value if any, of the number of one one-

hundredths of a share of Preferred Stock issuable upon exercise of the Rights,

the Company shall take any corporate action which may, in the opinion of its

counsel, be necessary in order that the Company may validly and legally issue

fully paid and nonassessable such number of one one-hundredths of a share of

Preferred Stock at such adjusted Purchase Price.

 

     (l) In any case in which this Section 11 shall require that an adjustment

in the Purchase Price be made effective as of a record date for a specified

event, the Company may elect to defer until the occurrence of such event the

issuance to the holder of any Right exercised after such record date the number

of one one-hundredths of a share of Preferred Stock and other capital stock or

securities of the Company, if any, issuable upon such exercise over and above

the number of one one-hundredths of a share of Preferred Stock and other capital

stock or securities of the Company, if any, issuable upon such exercise on the

basis of the Purchase Price in effect prior to such adjustment; provided,

                                                                --------

however, that the Company shall deliver to such holder a due bill or other

appropriate instrument evidencing such holder's right to receive such additional

shares (fractional or otherwise) or securities upon the occurrence of the event

requiring such adjustment.

 

     (m) Anything in this Section 11 to the contrary notwithstanding, the

Company shall be entitled to make such reductions in the Purchase Price, in

addition to those adjustments expressly

<PAGE>

 

required by this Section 11, as and to the extent that in their good faith

judgment the Board of Directors of the Company shall determine to be advisable

in order that any

 

           (i)  consolidation or subdivision of the Preferred Stock,

 

           (ii) issuance wholly for cash of any shares of Preferred Stock at

     less than the current market price,

 

           (iii) issuance wholly for cash of shares of Preferred Stock or

     securities which by their terms are convertible into or exchangeable for

     shares of Preferred Stock,

 

           (iv)  stock dividends, or

 

           (v) issuance of rights, options or warrants referred to in this

     Section 11 hereafter made by the Company to holders of its Preferred Stock

     shall not be taxable to such shareholders.

 

     (n) The Company covenants and agrees that it shall not, at any time after

the Distribution Date

 

           (i) consolidate with any other Person (other than a Subsidiary of the

     Company in a transaction which complies with Section 11(o) hereof),

 

           (ii) merge with or into any other Person (other than a Subsidiary of

     the Company in a transaction which complies with Section 11(o) hereof), or

 

           (iii) sell or transfer (or permit any Subsidiary to sell or

     transfer), in one transaction or a series of related transactions, assets

     or earning power aggregating more than 50% of the assets or earning power

     of the Company and its Subsidiaries (taken as a whole) to any other Person

     or Persons (other than the Company and/or any of its Subsidiaries in one or

     more transactions each of which complies with Section 11(o) hereof),

 

if (x) at the time of or immediately after such consolidation, merger or sale

there are any rights, warrants or other instruments or securities outstanding or

agreements in effect which would substantially diminish or otherwise eliminate

the benefits intended to be afforded by the Rights, or (y) prior to,

simultaneously with or immediately after such consolidation, merger or sale, the

shareholders of the Person who constitutes the "Principal Party" for purposes of

Section 13(a) hereof shall have received a distribution of Rights previously

owned by such Person or any of its Affiliates and Associates.

<PAGE>

 

     (o) The Company covenants and agrees that, after the Distribution Date, it

will not, except as permitted by Section 23 or Section 26 hereof, take (or

permit any Subsidiary to take) any action if at the time such action is taken it

is reasonably foreseeable that such action will diminish substantially or

otherwise eliminate the benefits intended to be afforded by the Rights.

 

     (p) Anything in this Agreement to the contrary notwithstanding, in the

event that the Company shall at any time after the Rights Declaration Date and

prior to the Distribution Date

 

           (i) declare a dividend on the outstanding shares of Common Stock

     payable in shares of Common Stock,

 

           (ii) subdivide the outstanding shares of Common Stock, or

 

           (iii) combine the outstanding shares of Common Stock into a smaller

     number of shares,

 

the number of Rights associated with each share of Common Stock then

outstanding, or issued or delivered thereafter but prior to the Distribution

Date, shall be proportionately adjusted so that the number of Rights thereafter

associated with each share of Common Stock following any such event shall equal

the result obtained by multiplying the number of Rights associated with each

share of Common Stock immediately prior to such event by a fraction, the

numerator of which shall be the total number of shares of Common Stock

outstanding immediately prior to the occurrence of the event and the denominator

of which shall be the total number of shares of Common Stock outstanding

immediately following the occurrence of such event.

 

     12. Certificate of Adjusted Purchase Price or Number of Shares.

         ----------------------------------------------------------

 

     Whenever an adjustment is made as provided in Section 11 or Section 13

hereof, the Company shall (a) promptly prepare a certificate setting forth such

adjustment and a brief statement of the facts accounting for such adjustment,

(b) promptly file with the Rights Agent, and with each transfer agent for the

Preferred Stock and the Common Stock, a copy of such certificate, and (c)

provide a brief summary thereof to each holder of a Rights Certificate (or, if

prior to the Distribution Date, to each holder of a certificate representing

shares of Common Stock) in accordance with Section 25 hereof.  The Rights Agent

shall be fully protected in relying on any such certificate and on any

adjustment therein contained.

<PAGE>

 

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

         --------------------------------------------------------------------

 

     (a) In the event that, following the Stock Acquisition Date, directly or

indirectly, (x) the Company shall consolidate with, or merge with and into, any

other Person (other than a Subsidiary of the Company in a transaction which

complies with Section 11(o) hereof), and the Company shall not be the continuing

or surviving corporation of such consolidation or merger, (y) any Person (other

than a Subsidiary of the Company in a transaction which complies with Section

11(o) hereof) shall consolidate with, or merge with or into, the Company, and

the Company shall be the continuing or surviving corporation of such

consolidation or merger and, in connection with such consolidation or merger,

all or part of the outstanding shares of Common Stock shall be changed into or

exchanged for stock or other securities of any other Person or cash or any other

property, or (z) the Company shall sell or otherwise transfer (or one or more of

its Subsidiaries shall sell or otherwise transfer), in one transaction or a

series of related transactions, assets or earning power aggregating more than

50% of the assets or earning power of the Company and its Subsidiaries (taken as

a whole) to any Person or Persons (other than the Company or any Subsidiary of

the Company in one or more transactions each of which complies with Section

11(o) hereof), then, and in each such case, proper provision shall be made so

that: (i) each holder of a Right, except as provided in Section 7(e) hereof,

shall thereafter have the right to receive, upon the exercise thereof at the

then current Purchase Price in accordance with the terms of this Agreement, such

number of validly authorized and issued, fully paid, non-assessable and freely

tradable shares of Common Stock of the Principal Party (as such term is

hereinafter defined), not subject to any liens, encumbrances, rights of first

refusal or other adverse claims, as shall be equal to the result obtained by (1)

multiplying the then current Purchase Price by the number of one one-hundredths

of a share of Preferred Stock for which a Right is exercisable immediately prior

to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event

has occurred prior to the first occurrence of a Section 13 Event, multiplying

the number of such one one-hundredths of a share for which a Right was

exercisable immediately prior to the first occurrence of a Section 11(a)(ii)

Event by the Purchase Price in effect immediately prior to such first

occurrence), and (2) dividing that product (which, following the first

occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"

for each Right and for all purposes of this Agreement) by 50% of the current

market price

<PAGE>

 

(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock

of such Principal Party on the date of consummation of such Section 13 Event;

(ii) such Principal Party shall thereafter be liable for, and shall assume, by

virtue of such Section 13 Event, all the obligations and duties of the Company

pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed

to refer to such Principal Party, it being specifically intended that the

provisions of Section 11 hereof shall apply only to such Principal Party

following the first occurrence of a Section 13 Event; (iv) such Principal Party

shall take such steps (including, but not limited to, the reservation of a

sufficient number of shares of its Common Stock) in connection with the

consummation of any such transaction as may be necessary to assure that the

provisions hereof shall thereafter be applicable, as nearly as reasonably may

be, in relation to its shares of Common Stock thereafter deliverable upon the

exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall

be of no effect following the first occurrence of any Section 13 Event.

 

     (b)  "Principal Party" shall mean:

 

          (i) in the case of any transaction described in clause (x) or (y) of

     the first sentence of Section 13(a), the Person that is the issuer of any

     securities into which shares of Common Stock of the Company are converted

     in such merger or consolidation, and if no securities are so issued, the

     Person that is the other party to such merger or consolidation; and

 

          (ii) in the case of any transaction described in clause (z) of the

     first sentence of Section 13(a), the Person that is the party receiving the

     greatest portion of the assets or earning power transferred pursuant to

     such transaction or transactions; provided, however, that in any such case,

                                       --------

     (1) if the Common Stock of such Person is not at such time and has not been

     continuously over the preceding twelve (12) month period registered under

     Section 12 of the Exchange Act, and such Person is a direct or indirect

     Subsidiary of another Person the Common Stock of which is and has been so

     registered, "Principal Party" shall refer to such other Person, and (2) in

     case such Person is a Subsidiary, directly or indirectly, of more than one

     Person the Common Stocks of two or more of which are and have been so

     registered, "Principal Party" shall refer to whichever

<PAGE>

 

     of such Persons is the issuer of the Common Stock having the greatest

     aggregate market value.

 

     (c) The Company shall not consummate any such consolidation, merger, sale

or transfer unless the Principal Party shall have a sufficient number of

authorized shares of its Common Stock which have not been issued or reserved for

issuance to permit the exercise in full of the Rights in accordance with this

Section 13 and unless prior thereto the Company and such Principal Party shall

have executed and delivered to the Rights Agent a supplemental agreement

providing for the terms set forth in paragraphs (a) and (b) of this Section 13

and further providing that, as soon as practicable after the date of any

consolidation, merger or sale of assets mentioned in paragraph (a) of this

Section 13, the Principal Party will:

 

          (i)  prepare and file a registration statement under the Act with

     respect to the Rights and the securities purchasable upon exercise of the

     Rights on an appropriate form, and will use its best efforts to cause such

     registration statement to (A) become effective as soon as practicable after

     such filing and (B) remain effective (with a prospectus at all times

     meeting the requirements of the Act) until the Expiration Date; and

 

          (ii)  deliver to holders of the Rights historical financial statements

     for the Principal Party and each of its Affiliates which comply in all

     respects with the requirements for registration on Form 10 under the

     Exchange Act.

 

     The provisions of this Section 13 shall similarly apply to successive

mergers or consolidations or sales or other transfers.  In the event that a

Section 13 Event shall occur at any time after the occurrence of a Section

11(a)(ii) Event, the Rights which have not theretofore been exercised shall

thereafter become exercisable in the manner described in Section 13(a).

 

     14. Fractional Rights and Fractional Shares

         ---------------------------------------

 

     (a) The Company shall not be required to issue fractions of Rights, except

prior to the Distribution Date as provided in Section 11(p) hereof, or to

distribute Rights Certificates which evidence fractional Rights.  In lieu of

such fractional Rights, there shall be paid to the registered

<PAGE>

 

holders of the Rights Certificates with regard to which such fractional Rights

would otherwise be issuable an amount in cash equal to the same fraction of the

current market value of a whole Right. For purposes of this Section 14(a), the

current market value of a whole Right shall be the closing price of the Rights

for the Trading Day immediately prior to the date on which such fractional

Rights would have been otherwise issuable. The closing price of the Rights for

any day shall be the last sale price, regular way, or, in case no such sale

takes place on such day, the average of the closing bid and asked prices,

regular way, in either case as reported in the principal consolidated

transaction reporting system with respect to securities listed or admitted to

trading on the New York Stock Exchange or, if the Rights are not listed or

admitted to trading on the New York Stock Exchange, as reported in the principal

consolidated transaction reporting system with respect to securities listed on

the principal national securities exchange on which the Rights are listed or

admitted to trading or, if the Rights are not listed or admitted to trading on

any national securities exchange, the last quoted price or, if not so quoted,

the average of the high bid and low asked prices in the over-the-counter market,

as reported by NASDAQ or such other system then in use, or, if on any such date

the Rights are not quoted by any such organization, the average of the closing

bid and asked prices as furnished by a professional market maker making a market

in the Rights selected by the Board of Directors of the Company. If on any such

date no such market maker is making a market in the Rights, the fair value of

the Rights on such date as determined in good faith by the Board of Directors of

the Company shall be used.

 

     (b) The Company shall not be required to issue fractions of shares of

Preferred Stock (other than fractions which are integral multiples of one one-

hundredth of a share of Preferred Stock) upon exercise of the Rights or to

distribute certificates which evidence fractional shares of Preferred Stock

(other than fractions which are integral multiples of one one-hundredth of a

share of Preferred Stock).  In lieu of fractional shares of Preferred Stock that

are not integral multiples of one one-hundredth of a share of Preferred Stock,

the Company may pay to the registered holders of Rights Certificates at the time

such Rights are exercised as herein provided an amount in cash equal to the same

fraction of the current market value of one one-hundredth of a share of

Preferred Stock.  For purposes of this Section 14(b), the current market value

of one one-hundredth of a share of Preferred Stock shall be one one-hundredth of

the closing price of a

<PAGE>

 

share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof)

for the Trading Day immediately prior to the date of such exercise.

 

     (c) Following the occurrence of a Triggering Event, the Company shall not

be required to issue fractions of shares of Common Stock upon exercise of the

Rights or to distribute certificates which evidence fractional shares of Common

Stock.  In lieu of fractional shares of Common Stock, the Company may pay to the

registered holders of Rights Certificates at the time such Rights are exercised

as herein provided an amount in cash equal to the same fraction of the current

market value of one (1) share of Common Stock.  For purposes of this Section

14(c), the current market value of one share of Common Stock shall be the

closing price of one share of Common Stock (as determined pursuant to Section

11(d)(i) hereof) for the Trading Day immediately prior to the date of such

exercise.

 

     (d) The holder of a Right by the acceptance of the Rights expressly waives

his right to receive any fractional Rights or any fractional shares upon

exercise of a Right, except as permitted by this Section 14.

 

     15. Rights of Action.

         ----------------

 

     All rights of action in respect of this Agreement are vested in the

respective registered holders of the Rights Certificates (and, prior to the

Distribution Date, the registered holders of the Common Stock); and any

registered holder of any Rights Certificate (or, prior to the Distribution Date,

of the Common Stock), without the consent of the Rights Agent or of the holder

of any other Rights Certificate (or, prior to the Distribution Date, of the

Common Stock), may, in his own behalf and for his own benefit, enforce, and may

institute and maintain any suit, action or proceeding against the Company to

enforce, or otherwise act in respect of, his right to exercise the Rights

evidenced by such Rights Certificate in the manner provided in such Rights

Certificate and in this Agreement.  Without limiting the foregoing or any

remedies available to the holders of Rights, it is specifically acknowledged

that the holders of Rights would not have an adequate remedy at law for any

breach of this Agreement and shall be entitled to specific performance of the

obligations hereunder and injunctive relief against actual or threatened

violations of the obligations hereunder of any Person subject to this Agreement.

<PAGE>

 

     16. Agreement of Rights Holders.

         ---------------------------

 

     Every holder of a Right by accepting the same consents and agrees with the

Company and the Rights Agent and with every other holder of a Right that:

 

     (a) prior to the earlier of the Distribution Date and the Expiration Date,

the Rights will be transferable only in connection with the transfer of Common

Stock;

 

     (b) after the Distribution Date, the Rights Certificates are transferable

only on the registry books of the Rights Agent if surrendered at the principal

office or offices of the Rights Agent designated for such purposes, duly

endorsed or accompanied by a proper instrument of transfer and with the

appropriate forms and certificates fully executed;

 

     (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the

Rights Agent may deem and treat the Person in whose name a Rights Certificate

(or, prior to the Distribution Date, the associated Common Stock certificate) is

registered as the absolute owner thereof and of the Rights evidenced thereby

(notwithstanding any notations of ownership or writing on the Rights

Certificates or the associated Common Stock certificate made by anyone other

than the Company or the Rights Agent) for all purposes whatsoever, and neither

the Company nor the Rights Agent, subject to the last sentence of Section 7(e)

hereof, shall be required to be affected by any notice to the contrary; and

 

     (d) notwithstanding anything in this Agreement to the contrary, neither the

Company nor the Rights Agent shall have any liability to any holder of a Right

or other Person as a result of its inability to perform any of its obligations

under this Agreement by reason of any preliminary or permanent injunction or

other order, decree or ruling issued by a court of competent jurisdiction or by

a governmental, regulatory or administrative agency or commission, or any

statute, rule, regulation or executive order promulgated or enacted by any

governmental authority, prohibiting or otherwise restraining performance of such

obligation; provided, however, the Company must use its best efforts to have any

such order, decree or ruling lifted or otherwise overturned as soon as possible.

<PAGE>

 

     17. Rights Certificate Holder Not Deemed a Stockholder.

         --------------------------------------------------

 

     No holder, as such, of any Rights Certificate shall be entitled to vote,

receive dividends or be deemed for any purpose the holder of the number of one

one-hundredths of a share of Preferred Stock or any other securities of the

Company which may at any time be issuable on the exercise of the Rights

represented thereby, nor shall anything contained herein or in any Rights

Certificate be construed to confer upon the holder of any Rights Certificate, as

such, any of the rights of a stockholder of the Company or any right to vote for

the election of directors or upon any matter submitted to stockholders at any

meeting thereof, or to give or withhold consent to any corporate action, or to

receive notice of meetings or other actions affecting stockholders (except as

provided in Section 24 hereof), or to receive dividends or subscription rights,

or otherwise, until the Right or Rights evidenced by such Rights Certificate

shall have been exercised in accordance with the provisions hereof.

 

     18. Concerning the Rights Agent.

         ---------------------------

 

     (a) The Company agrees to pay to the Rights Agent reasonable compensation

for all services rendered by it hereunder and, from time to time, on demand of

the Rights Agent, its reasonable expenses and counsel fees and disbursements and

other disbursements incurred in the administration and execution of this

Agreement and the exercise and performance of its duties hereunder.  The Company

also agrees to indemnify the Rights Agent for, and to hold it harmless against,

any loss, liability or expense incurred without negligence, bad faith or willful

misconduct on the part of the Rights Agent for anything done or omitted by the

Rights Agent in connection with the acceptance and administration of this

Agreement, including the costs and expenses of defending against any claim of

liability in the premises.

 

     (b) The Rights Agent shall be protected and shall incur no liability for or

in respect of any action taken, suffered or omitted by it in connection with its

administration of this Agreement in reliance upon any Rights Certificate or

certificate for Preferred Stock or for other securities of the Company,

instrument of assignment or transfer, power of attorney,  endorsement,

affidavit, letter, notice, direction, consent, certificate, statement or other

paper or document believed by it

<PAGE>

 

to be genuine and to be signed, executed and, where necessary, verified or

acknowledged, by the proper Person or Persons.

 

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

         ---------------------------------------------------------

 

     (a) Any corporation into which the Rights Agent or any successor Rights

Agent may be merged or with which it may be consolidated, or any corporation

resulting from any merger or consolidation to which the Rights Agent or any

successor Rights Agent shall be a party, or any corporation succeeding to the

corporate trust business or stock transfer business of the Rights Agent or any

successor Rights Agent, shall be the successor to the Rights Agent under this

Agreement without the execution or filing of any paper or any further act on the

part of any of the parties hereto; provided, however, that such corporation

                                   --------

would be eligible for appointment as a successor Rights Agent under the

provisions of Section 21 hereof.  In case at the time such successor Rights

Agent shall succeed to the agency created by this Agreement any of the Rights

Certificates shall have been countersigned but not delivered, any such successor

Rights Agent may adopt the countersignature of a predecessor Rights Agent and

deliver such Rights Certificates so countersigned; and in case at that time any

of the Rights Certificates shall not have been countersigned, any successor

Rights Agent may countersign such Rights Certificates either in the name of the

predecessor or in the name of the successor Rights Agent; and in all such cases

such Rights Certificates shall have the full force provided in the Rights

Certificates and in this Agreement.

 

     (b) In case at any time the name of the Rights Agent shall be changed and

at such time any of the Rights Certificates shall have been countersigned but

not delivered, the Rights Agent may adopt the countersignature under its prior

name and deliver Rights Certificates so countersigned; and in case at that time

any of the Rights Certificates shall not have been countersigned, the Rights

Agent may countersign such Rights Certificates either in its prior name or in

its changed name; and in all such cases such Rights Certificates shall have the

full force provided in the Rights Certificates and in this Agreement.

<PAGE>

 

     20. Duties of Rights Agent.

         ----------------------

 

     The Rights Agent undertakes the duties and obligations imposed by this

Agreement upon the following terms and conditions, by all of which the Company

and the holders of Rights Certificates, by their acceptance thereof, shall be

bound:

 

     (a) The Rights Agent may consult with legal counsel (who may be legal

counsel for the Company), and the opinion of such counsel shall be full and

complete authorization and protection to the Rights Agent as to any action taken

or omitted by it in good faith and in accordance with such opinion.

 

     (b) Whenever in the performance of its duties under this Agreement the

Rights Agent shall deem it necessary or desirable that any fact or matter

(including, without limitation, the identity of any Acquiring Person and the

determination of "current market price") be proved or established by the Company

prior to taking or suffering any action hereunder, such fact or matter (unless

other evidence in respect thereof be herein specifically prescribed) may be

deemed to be conclusively proved and established by a certificate signed by the

Chairman of the Board, the President, any Vice President, the Treasurer, the

Secretary or any Assistant Secretary of the Company and delivered to the Rights

Agent, and such certificate shall be full authorization to the Rights Agent for

any action taken or suffered in good faith by it under the provisions of this

Agreement in reliance upon such certificate.

 

     (c) The Rights Agent shall be liable hereunder only for its own negligence,

bad faith or willful misconduct.

 

     (d) The Rights Agent shall not be liable for or by reason of any of the

statements of fact or recitals contained in this Agreement or in the Rights

Certificates or be required to verify the same (except as to its

countersignature on such Rights Certificates), but all such statements and

recitals are and shall be deemed to have been made by the Company only.

 

     (e) The Rights Agent shall not be under any  responsibility in respect of

the validity of this Agreement or the execution and delivery hereof (except the

due execution hereof by the Rights Agent) or in respect of the validity or

execution of any Rights Certificate (except its

<PAGE>

 

countersignature thereof); nor shall it be responsible for any breach by the

Company of any covenant or condition contained in this Agreement or in any

Rights Certificate; nor shall it be responsible for any adjustment required

under the provisions of Section 11 or Section 13 hereof or responsible for the

manner, method or amount of any such adjustment or the ascertaining of the

existence of facts that would require any such adjustment (except with respect

to the exercise of Rights evidenced by Rights Certificates after actual notice

of any such adjustment); nor shall it by any act hereunder be deemed to make any

representation or warranty as to the authorization or reservation of any shares

of Common Stock or Preferred Stock to be issued pursuant to this Agreement or

any Rights Certificate or as to whether any shares of Common Stock or Preferred

Stock will, when so issued, be validly authorized and issued, fully paid and

non-assessable.

 

     (f) The Company agrees that it will perform, execute, acknowledge and

deliver, or cause to be performed, executed, acknowledged and delivered, all

such further and other acts, instruments and assurances as may reasonably be

required by the Rights Agent for the carrying out or performing by the Rights

Agent of the provisions of this Agreement.

 

     (g) The Rights Agent is hereby authorized and directed to accept

instructions with respect to the performance of its duties hereunder from the

Chairman of the Board, the President, any Vice President, the Secretary, any

Assistant Secretary or the Treasurer of the Company, and to apply to such

officers for advice or instructions in connection with its duties, and it shall

not be liable for any action taken or suffered to be taken by it in good faith

in accordance with instructions of any such officer.

 

     (h) The Rights Agent and any stockholder, director, officer or employee of

the Rights Agent may buy, sell or deal in any of the Rights or other securities

of the Company or become pecuniarily interested in any transaction in which the

Company may be interested, or contract with or lend money to the Company, or

otherwise act as fully and freely as though it were not Rights Agent under this

Agreement. Nothing herein shall preclude the Rights Agent from acting in any

other capacity for the Company or for any other legal entity.

<PAGE>

 

     (i) The Rights Agent may execute and exercise any of the rights or powers

hereby vested in it or perform any duty hereunder either itself or by or through

its attorneys or agents, and the Rights Agent shall not be answerable or

accountable for any act, default, neglect or misconduct of any such attorneys or

agents or for any loss to the Company resulting from any such act, default,

neglect or misconduct; provided, however, reasonable care was exercised in the

                       --------

selection and continued employment thereof.

 

     (j) No provision of this Agreement shall require the Rights Agent to expend

or risk its own funds or otherwise incur any financial liability in the

performance of any of its duties hereunder or in the exercise of its rights if

there shall be reasonable grounds for believing that repayment of such funds or

adequate indemnification against such risk or liability is not reasonably

assured to it.

 

     (k) If, with respect to any Right Certificate surrendered to the Rights

Agent for exercise or transfer, the certificate attached to the form of

assignment or form of election to purchase, as the case may be, has either not

been completed or indicates an affirmative response to clause 1 and/or 2

thereof, the Rights Agent shall not take any further action with respect to such

requested exercise of transfer without first consulting with the Company.

 

     21. Change of Rights Agent.

         ----------------------

 

     The Rights Agent or any successor Rights Agent may resign and be discharged

from its duties under this Agreement upon thirty (30) days' notice in writing

mailed to the Company, and to each transfer agent of the Common Stock and

Preferred Stock, by registered or certified mail, and to the holders of the

Rights Certificates by first-class mail.  The Company may remove the Rights

Agent or any successor Rights Agent upon thirty (30) days' notice in writing,

mailed to the Rights Agent or successor Rights Agent, as the case may be, and to

each transfer agent of the Common Stock and Preferred Stock, by registered or

certified mail, and to the holders of the Rights Certificates by first-class

mail.  If the Rights Agent shall resign or be removed or shall otherwise become

incapable of acting, the Company shall appoint a successor to the Rights Agent.

If the Company shall fail to make such appointment within a period of thirty

(30) days after giving notice of such removal or after it has been notified in

writing of such resignation or

<PAGE>

 

incapacity by the resigning or incapacitated Rights Agent or by the holder of a

Rights Certificate (who shall, with such notice, submit his Rights Certificate

for inspection by the Company), then any registered holder of any Rights

Certificate may apply to any court of competent jurisdiction for the appointment

of a new Rights Agent. Any successor Rights Agent, whether appointed by the

Company or by such a court, shall be (a) a corporation organized and doing

business under the laws of the United States or of the State of New York (or of

any other state of the United States so long as such corporation is authorized

to do business as a banking institution in the State of New York), in good

standing, having a principal office in the State of New York, which is

authorized under such laws to exercise corporate trust or stock transfer 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 $10,000,000 or (b) an Affiliate controlled by a corporation

described in clause (a). After appointment, the successor Rights Agent shall be

vested with the same powers, rights, duties and responsibilities as if it had

been originally named as Rights Agent without further act or deed; but the

predecessor Rights Agent shall deliver and transfer to the successor Rights

Agent any property at the time held by it hereunder, and execute and deliver any

further assurance, conveyance, act or deed necessary for the purpose. Not later

than the effective date of any such appointment, the Company shall file notice

thereof in writing with the predecessor Rights Agent and each transfer agent of

the Common Stock and the Preferred Stock, and mail a notice thereof in writing

to the registered holders of the Rights Certificates. Failure to give any notice

provided for in this Section 21, however, or any defect therein, shall not

affect the legality or validity of the resignation or removal of the Rights

Agent or the appointment of the successor Rights Agent, as the case may be.

 

     22. Issuance of New Rights Certificates.

         -----------------------------------

 

     Notwithstanding any of the provisions of this Agreement or of the Rights to

the contrary, the Company may, at its option, issue new Rights Certificates

evidencing Rights in such form as may be approved by its Board of Directors to

reflect any adjustment or change in the Purchase Price and the number or kind or

class of shares or other securities or property purchasable under the Rights

Certificates made in accordance with the provisions of this Agreement.  In

addition, in connection with the issuance or sale of shares of Common Stock

following the Distribution Date

<PAGE>

 

and prior to the redemption or expiration of the Rights, the Company (a) shall,

with respect to shares of Common Stock so issued or sold pursuant to the

exercise of stock options or under any employee plan or arrangement, or upon the

exercise, conversion or exchange of securities hereinafter issued by the

Company, and (b) may, in any other case, if deemed necessary or appropriate by

the Board of Directors of the Company, issue Rights Certificates representing

the appropriate number of Rights Certificates representing the appropriate

number of Rights in connection with such issuance or sale; provided, however,

                                                           --------

that (i) no such Rights Certificate shall be issued if, and to the extent that,

the Company shall be advised by counsel that such issuance would create a

significant risk of material adverse tax consequences to the Company or the

person to whom such Rights Certificate would be issued, and (ii) no such Rights

Certificate shall be issued if, and to the extent that, appropriate adjustment

shall otherwise have been made in lieu of the issuance thereof.

 

     23. Redemption and Termination.

         --------------------------

 

     (a) The Board of Directors of the Company may, at its option, at any time

prior to 5:00 P.M., New York City time, on the earlier of (i) the close of

business on the tenth day following the Stock Acquisition Date or (ii) the Final

Expiration Date, redeem all but not less than all of the then outstanding Rights

at a redemption price of $.05 per Right, as such amount may be appropriately

adjusted to reflect any stock split, stock dividend or similar transaction

occurring after the date hereof (such redemption price being hereinafter

referred to as the "Redemption Price"); provided, however, if the Board of

                                        --------

Directors of the Company authorizes redemption of the Rights in either of the

circumstances set forth in clauses (i) and (ii) below, then there must be

Disinterested Directors then in office and such authorization shall require the

concurrence of a majority of such Disinterested Directors: (i) such

authorization occurs on or after the time a Person becomes an Acquiring Person,

or (ii) such authorization occurs on or after the date of a change (resulting

from a proxy or consent solicitation) in a majority of the directors in office

at the commencement of such solicitation if any Person who is a participant in

such solicitation has stated (or, if upon the commencement of such solicitation,

a majority of the Board of Directors of the Company has determined in good

faith) that such Person or any of its Affiliates or Associates intends to take,

or may consider taking, any action which would result in such Person becoming an

Acquiring Person or which would cause the occurrence of a Triggering Event,

unless,

<PAGE>

 

concurrent with such solicitation, such Person or one or more of its

Affiliates or Associates is making a cash tender offer pursuant to a Schedule

14D-1 (or any successor form) filed with the Securities and Exchange Commission

for all outstanding shares of Common Stock not beneficially owned by such Person

or by its Affiliates or Associates; provided further, however, that if,

                                    ----------------

following the occurrence of a Stock Acquisition Date and following the

expiration of the right of redemption hereunder but prior to any Triggering

Event, (i) a Person who is an Acquiring Person shall have transferred or

otherwise disposed of a number of shares of Common Stock in one transaction, or

series of transactions, not directly or indirectly involving the Company or any

of its Subsidiaries, which did not result in the occurrence of a Triggering

Event such that such Person is not thereafter a Beneficial Owner of shares of

Voting Stock representing more than 10% of the Voting Power, and (ii) there are

no other Persons, immediately following the occurrence of the event described in

clause (i), who are Acquiring Persons, then the right of redemption shall be

reinstated and thereafter be subject to the provisions of this Section 23.

Notwithstanding anything contained in this Agreement to the contrary, the Rights

shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event

until such time as the Company's right of redemption hereunder has expired.

 

     (b) Immediately upon the action of the Board of Directors of the Company

ordering the redemption of the Rights, evidence of which shall have been filed

with the Rights Agent and without any further action and without any notice, the

right to exercise the Rights will terminate and the only right thereafter of the

holders of Rights shall be to receive the Redemption Price for each Right so

held.  Promptly after the action of the Board of Directors ordering the

redemption of the Rights, the Company shall give notice of such redemption to

the Rights Agent and the holders of the then outstanding Rights by mailing such

notice to all such holders at each holder's last address as it appears upon the

registry books of the Rights Agent or, prior to the Distribution Date, on the

registry books of the Transfer Agent for the Common Stock.  Any notice which is

mailed in the manner herein provided shall be deemed given, whether or not the

holder receives the notice.  Each such notice of redemption will state the

method by which the payment of the Redemption Price will be made.

<PAGE>

 

     24. Notice of Certain Events.

         ------------------------

 

     (a) In case the Company shall propose, at any time after the Distribution

Date, (i) to pay any dividend payable in stock of any class to the holders of

Preferred Stock or to make any other distribution to the holders of Preferred

Stock (other than a regular quarterly cash dividend out of earnings or retained

earnings of the Company), or (ii) to offer to the holders of Preferred Stock

rights or warrants to subscribe for or to purchase any additional shares of

Preferred Stock or shares of stock of any class or any other securities, rights

or options, or (iii) to effect any reclassification of its Preferred Stock

(other than a reclassification involving only the subdivision of outstanding

shares of Preferred Stock), or (iv) to effect any consolidation or merger into

or with any other Person (other than a Subsidiary of the Company in a

transaction which complies with Section 11(o) hereof), or to effect any sale or

other transfer (or to permit one or more of its Subsidiaries to effect any sale

or other transfer), in one transaction or a series of related transactions, of

more than 50% of the assets or earning power of the Company and its Subsidiaries

(taken as a whole) to any other Person or Persons (other than the Company and/or

any of its Subsidiaries in one or more transactions each of which complies with

Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding

up of the Company, then, in each such case, the Company shall give to each

holder of a Rights Certificate, to the extent feasible and in accordance with

Section 25 hereof, a notice of such proposed action, which shall specify the

record date for the purposes of such stock dividend, distribution of rights or

warrants, or the date on which such reclassification, consolidation, merger,

sale, transfer, liquidation, dissolution or winding up is to take place and the

date of participation therein by the holders of the shares of Preferred Stock,

if any such date is to be fixed, and such notice shall be so given in the case

of any action covered by clause (i) or (ii) above at least twenty (20) days

prior to the record date for determining holders of the shares of Preferred

Stock for purposes of such action and, in the case of any such other action, at

least twenty (20) days prior to the date of the taking of such proposed action

or the date of participation therein by the holders of the shares of Preferred

Stock, whichever shall be the earlier.

 

     (b) In case any Section 11(a)(ii) or Section 13 Event shall occur, then, in

any such case, (i) the Company shall as soon as practicable thereafter give to

each holder of a Rights Certificate, to the extent feasible and in accordance

with Section 25 hereof, a notice of the occurrence of such event, which shall

specify the event and the consequences of the event to holders of Rights

<PAGE>

 

under Section 11(a)(ii) or Section 13 hereof, and (ii) all references in the

preceding paragraph to Preferred Stock shall be deemed thereafter to refer to

Common Stock and/or, if appropriate, other securities.

 

     25. Notices.

         -------

 

     Notices or demands authorized by this Agreement to be given or made by the

Rights Agent or by the holder of any Rights Certificate to or on the Company

shall be sufficiently given or made if sent by first-class mail, postage

prepaid, addressed (until another address is filed in writing with the Rights

Agent) as follows:

 

               Armstrong Holdings, Inc.

               P. O. Box 3001

               Lancaster, PA  17604

               Attention:  Corporate Secretary

 

     Subject to the provisions of Section 21, any notice or demand authorized by

this Agreement to be given or made by the Company or by the holder of any Rights

Certificate to or on the Rights Agent shall be sufficiently given or made if

sent by first-class mail, postage prepaid, addressed (until another address is

filed in writing with the Company) as follows:

 

               American Stock Transfer & Trust Co.

               40 Wall Street

               New York, NY  10005

 

     Notices or demands authorized by this Agreement to be given or made by the

Company or the Rights Agent to the holder of any Rights Certificate (or, if

prior to the Distribution Date, to the holder of certificates representing

shares of Common Stock) shall be sufficiently given or made if sent by first-

class mail, postage prepaid, addressed to such holder at the address of such

holder as shown on the registry books of the Company, or by any other means

which the Secretary of the Company determines to be reasonable and appropriate

under the circumstances.

 

     26. Supplements and Amendments.

         --------------------------

 

     Prior to the Distribution Date and subject to the penultimate 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 Agreement without the

approval of any holders of certificates representing

<PAGE>

 

shares of Common Stock. From and after the Distribution Date, and subject to the

penultimate sentence of this Section 26, the Company may, and the Rights Agent

shall if the Company so directs, supplement or amend this Agreement without the

approval of any holders of Rights Certificates in order (i) to cure any

ambiguity, (ii) to correct or supplement any provision contained herein which

may be defective or inconsistent with any other provisions herein, (iii) to

change or supplement the provisions hereunder in any manner which the Company

may deem necessary or desirable and which shall not adversely affect the

interests of the holders of Rights Certificates (other than an Acquiring Person

or an Affiliate or Associate of an Acquiring Person), (iv) to suspend the

effectiveness of Section 7(e) hereof (which suspension, following the first

occurrence of an event set forth in clauses (i) and (ii) of the first proviso to

Section 23(a) hereof, shall be effective only if there are Disinterested

Directors and shall require the concurrence of a majority of such Disinterested

Directors), or (v) to shorten or lengthen any time period hereunder (which

lengthening or shortening, following the first occurrence of an event set forth

in clauses (i) and (ii) of the first proviso to Section 23(a) hereof, shall be

effective only if there are Disinterested Directors and shall require the

concurrence of a majority of such Disinterested Directors); provided, this

                                                            --------

Agreement may not be supplemented or amended to lengthen, pursuant to clause (v)

of this sentence, (A) a time period relating to when the Rights may be redeemed

at such time as the Rights are not then redeemable or (B) any other time period

unless such lengthening is for the purpose of protecting, enhancing or

clarifying the rights of, and/or the benefits to, the holders of Rights. Upon

the delivery of a certificate from an appropriate officer of the Company which

states that the proposed supplement or amendment is in compliance with the terms

of this Section 26, the Rights Agent shall execute such supplement or amendment.

Notwithstanding anything contained in this Agreement to the contrary, no

supplement or amendment shall be made which (i) changes the Redemption Price,

the Purchase Price or the number of one one-hundredths of a share of Preferred

Stock for which a Right is exercisable or (ii) shortens the Final Expiration

Date. Prior to the Distribution Date, the interests of the holders of Rights

shall be deemed coincident with the interests of the holders of Common Stock.

<PAGE>

 

     27. Successors.

         ----------

 

     All the covenants and provisions of this Agreement by or for the benefit of

the Company or the Rights Agent shall bind and inure to the benefit of their

respective successors and assigns hereunder.

 

     28. Determinations and Actions by the Board of Directors, Etc.

         ----------------------------------------------------------

 

     For all purposes of this Agreement, any calculation of the number of shares

of Common Stock or of any other class of capital stock outstanding at any

particular time, including for purposes of determining the particular percentage

of outstanding shares of Common Stock or of Voting Power of which any Person is

the Beneficial Owner, shall be made in accordance with the last sentence of Rule

13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.  The

Board of Directors of the Company (with, where specifically provided for herein,

the concurrence of the Disinterested Directors) shall have the exclusive power

and authority to administer this Agreement and to exercise all rights and powers

specifically granted to the Board (with, where specifically provided for herein,

the concurrence of the Disinterested Directors) or to the Company, or as may be

necessary or advisable in the administration of this Agreement, including,

without limitation, the right and power to (i) interpret the provisions of this

Agreement, and (ii) make all determinations deemed necessary or advisable for

the administration of this Agreement (including a determination to redeem or not

redeem the Rights or to amend the Agreement).  All such actions, calculations,

interpretations and determinations (including, for purposes of clause (y) below,

all omissions with respect to the foregoing) which are done or made by the Board

(with, where specifically provided for herein, the concurrence of the

Disinterested Directors) in good faith, shall (x) be final, conclusive and

binding on the Company, the Rights Agent, the holders of the Rights and all

other parties, and (y) not subject the Board or the Disinterested Directors to

any liability to the holders of the Rights.

 

     29. Benefits of this Agreement.

         --------------------------

 

     Nothing in this Agreement shall be construed to give to any Person other

than the Company, the Rights Agent and the registered holders of the Rights

Certificates (and, prior to the Distribution Date, the registered holders of the

Common Stock) any legal or equitable right, remedy or claim under this

Agreement, but this Agreement shall be for the sole and exclusive

<PAGE>

 

benefit of the Company, the Rights Agent and the registered holders of the

Rights Certificates (and, prior to the Distribution Date, registered holders of

the Common Stock).

 

     30. Severability.

         ------------

 

     If any term, provision, covenant or restriction of this Agreement is held

by a court of competent jurisdiction or other authority to be invalid, void or

unenforceable, the remainder of the terms, provisions, covenants and

restrictions of this Agreement shall remain in full force and effect and shall

in no way be affected, impaired or invalidated; provided, however, that

                                                --------

notwithstanding anything in this Agreement to the contrary, if any such term,

provision, covenant or restriction is held by such court or authority to be

invalid, void or unenforceable and the Board of Directors of the Company

determines in its good faith judgment that severing the invalid language from

this Agreement would adversely affect the purpose or effect of this Agreement,

the right of redemption set forth in Section 23 hereof shall be reinstated and

shall not expire until the close of business on the tenth day following the date

of such determination by the Board of Directors.

 

     31. Governing Law.

         -------------

 

     This Agreement, each Right and each Rights Certificate issued hereunder

shall be deemed to be a contract made under the laws of the Commonwealth of

Pennsylvania and for all purposes shall be governed by and construed in

accordance with the laws of such Commonwealth applicable to contracts made and

to be performed entirely within such Commonwealth except for Sections 18, 19, 20

and 21 hereof, which for all purposes shall be governed by and construed in

accordance with the laws of the State of New York.

 

     32. Counterparts.

         ------------

 

     This Agreement may be executed in any number of counterparts and each shall

be deemed an original, and all together constitute one and the same instrument.

 

     33. Descriptive Headings.

         --------------------

 

     Descriptive headings of the Sections of this Agreement are inserted for

convenience only and shall not control or affect the meaning or construction of

the provisions hereof.

 

 

 

<PAGE>

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be

duly executed as of the day and year first above written.

 

Attest:                                   ARMSTRONG HOLDINGS, INC.

 

By    /s/ Walter T. Gangl                 By    /s/ Deborah K. Owen

     ---------------------                    ----------------------------

     Name:  Walter T. Gangl                   Name:  Deborah K. Owen

     Title: Attorney                          Title: Senior Vice President,

                                              Secretary and General Counsel

 

Attest:                                   American Stock Transfer & Trust Co.

 

 

By /s/                                    By /s/

   ------------------------                  -----------------------------

<PAGE>

 

                                                                       EXHIBIT A

 

                          [Form of Rights Certificate]

                          ----------------------------

     Certificate No. R-Rights

     ------------------------

 

     NOT EXERCISABLE AFTER MARCH 21, 2006 (UNLESS OTHERWISE EXTENDED) OR EARLIER

IF REDEEMED BY THE COMPANY.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION

OF THE COMPANY, AT $.05 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS

AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN

ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY

SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.  [THE RIGHTS

REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A

PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN

ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).

ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY

BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH

AGREEMENT.]/*/

 

 

 

                               Rights Certificate

                            ARMSTRONG HOLDINGS, INC.

 

     This certifies that                                       , or registered

assigns, is the registered owner of the number of Rights set forth above, each

of which entitles the owner thereof, subject to the terms, provisions and

conditions of the Rights Agreement, effective as of March 14, 2000 (the "Rights

Agreement"), between Armstrong Holdings, Inc., a Pennsylvania corporation (the

"Company"), and American Stock Transfer & Trust Company, (the "Rights Agent"),

to purchase from the Company at any time prior to 5:00 PM (New York City time)

on March 21, 2006 (unless otherwise extended) at the office or offices of the

Rights Agent designated for such purpose, or its successors as Rights Agent, one

one-hundredth of a fully paid, non-assessable share of Series One of Class A

Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of

$300 per one one-hundredth of a share (the "Purchase Price"), upon presentation

and surrender of this Rights Certificate with the Form of Election to Purchase

and related Certificate duly executed.  The Purchase Price shall be paid in cash

or, if the Company shall in its sole discretion so consent, in shares of Common

Stock of the Company having an equivalent value. The number of Rights evidenced

by this Rights Certificate (and the number of shares which may be purchased upon

exercise thereof) set forth above, and the Purchase Price

 

 

----------------

* The portion of the legend in brackets shall be inserted only if applicable and

  shall replace the preceding sentence.

<PAGE>

 

per share set forth above, are the number and Purchase Price as of the date of

the Share Exchange by the Company under an Agreement and Plan of Exchange dated

March 14, 2000, based on the Preferred Stock as constituted at such date.

 

     Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined

in the Rights Agreement), if the Rights evidenced by this Rights Certificate are

beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of

any such Acquiring Person (as such terms are defined in the Rights Agreement),

(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)

under certain circumstances specified in the Rights Agreement, a transferee of a

person who, after such transfer, became an Acquiring Person or an Affiliate or

Associate of an Acquiring Person, such Rights shall become null and void, and no

holder hereof shall have any right with respect to such Rights from and after

the occurrence of such Section 11(a)(ii) Event.

 

     As provided in the Rights Agreement, the Purchase Price and the number and

kind of shares of Preferred Stock or other securities which may be purchased

upon the exercise of the Rights evidenced by this Rights Certificate are subject

to modification and adjustment upon the happening of certain events, including

Triggering Events.

 

     This Rights Certificate is subject to all of the terms, provisions and

conditions of the Rights Agreement, which terms, provisions and conditions are

hereby incorporated herein by reference and made a part hereof and to which

Rights Agreement reference is hereby made for a full description of the rights,

limitations of rights, obligations, duties and immunities hereunder of the

Rights Agent, the Company and the holders of the Rights Certificates, which

limitations of rights include the temporary suspension of the exercisability of

such Rights under the specific circumstances set forth in the Rights Agreement.

Copies of the Rights Agreement are on file at the office of the Company and are

also available upon written request to the Company.

 

     This Rights Certificate, with or without other Rights Certificates, upon

surrender at the principal office or offices of the Rights Agent designated for

such purpose, may be exchanged for another Rights Certificate or Rights

Certificates of like tenor and date evidencing Rights entitling the holder to

purchase a like aggregate number of one one-hundredths of a share of Preferred

Stock as the Rights evidenced by the Rights Certificate or Rights Certificates

surrendered shall have entitled such holder to purchase.  If this Rights

Certificate shall be exercised in part, the holder shall be entitled to receive

upon surrender hereof another Rights Certificate or Rights Certificates for the

number of whole Rights not exercised.

 

     Subject to the provisions of the Rights Agreement, the Rights evidenced by

this Certificate may be redeemed by the Company at its option at a redemption

price of $.05 per Right at any time prior to the earlier of the close of

business on (i) the tenth day following the Stock Acquisition Date (as such

number of days may be extended), and (ii) the Final Expiration Date.  Under

certain circumstances set forth in the Rights Agreement, the decision to redeem

shall require the concurrence of a majority of the Disinterested Directors.

Thereafter, the Company's right of redemption may be reinstated if an Acquiring

Person reduces his beneficial ownership to shares of Voting Stock representing

10% or less of the Voting Power in a transaction or series of transactions not

involving the Company.

<PAGE>

 

     No fractional shares of Preferred Stock will be issued upon the exercise of

any Right or Rights evidenced hereby (other than fractions which are integral

multiples of one one-hundredth of a share of Preferred Stock, which may, at the

election of the Company, be evidenced by depositary receipts), but in lieu

thereof a cash payment will be made, as provided in the Rights Agreement.

 

     No holder of this Rights Certificate shall be entitled to vote or receive

dividends or be deemed for any purpose the holder of shares of Preferred Stock

or of any other securities of the Company which may at any time be issuable on

the exercise hereof, nor shall anything contained in the Rights Agreement or

herein be construed to confer upon the holder hereof, as such, any of the rights

of a stockholder of the Company or any right to vote for the election of

directors or upon any matter submitted to stockholders at any meeting thereof,

or to give or withhold consent to any corporate action, or to receive notice of

meetings or other actions affecting stockholders (except as provided in the

Rights Agreement), or to receive dividends or subscription rights, or otherwise,

until the Right or Rights evidenced by this Rights Certificate shall have been

exercised as provided in the Rights Agreement.

 

     This Rights Certificate shall not be valid or obligatory for any purpose

until it shall have been countersigned by the Rights Agent.

 

     WITNESS the facsimile signature of the proper officers of the Company and

its corporate seal.

 

     Dated as of     ,

 

ATTEST:                                     Armstrong Holdings, Inc.

 

 

                                            By

--------------------------------               ----------------------------

Title:                                          Title:

Countersigned:

 

                                            American Stock Transfer &

                                            Trust Company

 

 

                                            By

                                               ----------------------------

                                               Authorized Signature

<PAGE>

 

                         FORM OF ELECTION TO PURCHASE

 

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

Rights Certificate.)

 

     To:  ARMSTRONG HOLDINGS, INC.

 

     The undersigned hereby irrevocably elects to exercise

                                                           --------------------

Rights represented by this Rights Certificate to purchase the shares of Series

One of Class A Preferred Stock issuable upon the exercise of the Rights (or such

other securities of the Company or of any other person which may be issuable

upon the exercise of the Rights) and requests that certificates for such shares

be issued in the name of and delivered to:

 

     Please insert social security or other identifying number

 

--------------------------------------------------------------------------------

                        (Please print name and address)

 

--------------------------------------------------------------------------------

 

     If such number of Rights shall not be all the Rights evidenced by this

Rights Certificate, a new Rights Certificate for the balance of such Rights

shall be registered in the name of and delivered to:

 

     Please insert social security or other identifying number

 

--------------------------------------------------------------------------------

                        (Please print name and address)

 

--------------------------------------------------------------------------------

 

 

 

     Dated:  ___________________      __________________________

                                      Signature

 

 

     Signature Guaranteed:

<PAGE>

 

                                  Certificate

                                  -----------

 

     The undersigned hereby certifies by checking the appropriate boxes that:

 

     (1) the Rights evidenced by this Rights Certificate [   ] are  [  ] are not

being exercised by or on behalf of a Person who is or was an Acquiring Person or

an Affiliate or Associate of any such Acquiring Person (as such terms are

defined pursuant to the Rights Agreement);

 

     (2) after due inquiry and to the best knowledge of the undersigned, it [  ]

did [  ] did not acquire the Rights evidenced by this Rights Certificate from

any Person who is, was or became an Acquiring Person or an Affiliate or

Associate of an Acquiring Person.

 

     Dated: _______________

                                             ---------------------------

                                             Signature

     Signature Guaranteed:

 

                                     NOTICE

                                     ------

 

     The signature to the foregoing Election to Purchase and Certificate must

correspond to the name as written upon the face of this Rights Certificate in

every particular, without alteration or enlargement or any change whatsoever.

<PAGE>

 

                                                    [Back of Rights Certificate]

 

                               FORM OF ASSIGNMENT

                               ------------------

 

     (To be executed by the registered holder if such holder desires to transfer

the Rights Certificate.)

 

     FOR VALUE RECEIVED ______________________________________________

     hereby sells, assigns and transfers unto

 

--------------------------------------------------------------------------------

                 (Please print name and address of transferee)

 

--------------------------------------------------------------------------------

 

this Rights Certificate, together with all right, title and interest therein,

and does hereby irrevocably constitute and appoint ____________________

Attorney, to transfer the within

 

Rights Certificate on the books of the within-named Company, with full power of

substitution.

 

     Dated:  _________________      ________________________________

                                    Signature

 

     Signature Guaranteed:

<PAGE>

 

                                  Certificate

                                  -----------

 

     The undersigned hereby certifies by checking the appropriate boxes that:

 

     (1) This Rights Certificate [  ] is [  ] is not being sold, assigned and

transferred by or on behalf of a Person who is or was an Acquiring Person or an

Affiliate or Associate of any such Acquiring Person (as such terms are defined

pursuant to the Rights Agreement);

 

     (2) after due inquiry and to the best knowledge of the undersigned, it [ ]

did [ ] did not acquire the Rights evidenced by this Rights Certificate from any

Person who is, was or subsequently became an Acquiring Person or an Affiliate or

Associate of an Acquiring Person.

 

     Dated:  _________________       __________________________________

                                     Signature

 

     Signature Guaranteed:

 

                                     NOTICE

                                     ------

 

     The signature to the foregoing Assignment and Certificate must correspond

to the name as written upon face of this Rights Certificate in every particular,

without alteration or enlargement or any change whatsoever.

</TEXT>

</DOCUMENT>

</SEC-DOCUMENT>