Document:

exv4w5

VANDA PHARMACEUTICALS INC.

and

American Stock Transfer & Trust Company, LLC, as Rights Agent

RIGHTS AGREEMENT

Dated as of September 25, 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	Section 1. Certain Definitions
	 	 	1	 
	Section 2. Appointment of Rights Agent
	 	 	6	 
	Section 3. Issue of Right Certificates
	 	 	6	 
	Section 4. Form of Right Certificates
	 	 	8	 
	Section 5. Countersignature and Registration
	 	 	8	 
	Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates
	 	 	9	 
	Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights
	 	 	10	 
	Section 8. Cancellation and Destruction of Right Certificates
	 	 	11	 
	Section 9. Availability of Shares of Preferred Stock
	 	 	11	 
	Section 10. Preferred Stock Record Date
	 	 	12	 
	Section 11. Adjustment of Purchase Price, Number of Shares and Number
of Rights
	 	 	13	 
	Section 12. Certificate of Adjusted Purchase Price or Number of Shares
	 	 	21	 
	Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power
	 	 	22	 
	Section 14. Fractional Rights and Fractional Shares
	 	 	26	 
	Section 15. Rights of Action
	 	 	27	 
	Section 16. Agreement of Right Holders
	 	 	28	 
	Section 17. Right Certificate Holder Not Deemed a Stockholder
	 	 	28	 
	Section 18. Concerning the Rights Agent
	 	 	29	 
	Section 19. Merger or Consolidation or Change of Name of Rights Agent
	 	 	29	 
	Section 20. Duties of Rights Agent
	 	 	30	 

 

 

	 	 	 	 	 
	 	 	Page
	Section 21. Change of Rights Agent
	 	 	32	 
	Section 22. Issuance of New Right Certificates
	 	 	33	 
	Section 23. Redemption
	 	 	33	 
	Section 24. Exchange
	 	 	34	 
	Section 25. Notice of Certain Events
	 	 	35	 
	Section 26. Notices
	 	 	35	 
	Section 27. Supplements and Amendments
	 	 	36	 
	Section 28. Successors
	 	 	37	 
	Section 29. Benefits of this Agreement
	 	 	37	 
	Section 30. Determinations and Actions by the Board of Directors
	 	 	37	 
	Section 31. Severability
	 	 	37	 
	Section 32. Governing Law
	 	 	37	 
	Section 33. Counterparts
	 	 	37	 
	Section 34. Descriptive Headings
	 	 	38	 

 

 

RIGHTS AGREEMENT

     Rights Agreement, dated as of September 25, 2008 (“Agreement”), between Vanda Pharmaceuticals
Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as
Rights Agent (the “Rights Agent”).

     The Board of Directors of the Company has authorized and declared a dividend of one preferred
share purchase right (a “Right”) for each share of Common Stock (as hereinafter defined) of the
Company outstanding as of the Close of Business (as defined below) on October 6, 2008 (the “Record
Date”), each Right representing the right to purchase one one-thousandth (subject to adjustment) of
a share of Preferred Stock (as hereinafter defined), upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one Right (subject to
adjustment as provided herein) with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earlier of the Distribution Date and the Expiration
Date (as such terms are hereinafter defined); provided, however, that Rights may be issued
with respect to shares of Common Stock that shall become outstanding after the Distribution Date
and prior to the Expiration Date in accordance with Section 22.

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

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

     (a) “Acquiring Person” shall mean any Person (as such term is hereinafter defined) who or
which shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the
shares of Common Stock then outstanding, but shall not include an Exempt Person (as such term is
hereinafter defined); provided, however, that (i) if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an “Acquiring Person” became
the Beneficial Owner of a number of shares of Common Stock such that the Person would otherwise
qualify as an “Acquiring Person” inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of Common Stock that would otherwise
cause such Person to be an “Acquiring Person” or (B) such Person was aware of the extent of its
Beneficial Ownership of Common Stock but had no actual knowledge of the consequences of such
Beneficial Ownership under this Agreement) and without any intention of changing or influencing
control of the Company, then such Person shall not be deemed to be or to have become an “Acquiring
Person” for any purposes of this Agreement unless and until such Person shall have failed to divest
itself, as soon as practicable (as determined, in good faith, by the Board of Directors of the
Company), of Beneficial Ownership of a sufficient number of shares of Common Stock so that such
Person would no longer otherwise qualify as an “Acquiring Person”; (ii) if, as of the date hereof
or prior

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to the first public announcement of the adoption of this Agreement, any Person is or
becomes the Beneficial Owner of 15% or more of the shares of Common Stock outstanding, such
Person shall not be deemed to be or to become an “Acquiring Person” unless and until such time as
such Person shall, after the first public announcement of the adoption of this Agreement, become
the Beneficial Owner of additional shares of Common Stock (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common Stock or pursuant to a split or
subdivision of the outstanding Common Stock), unless, upon becoming the Beneficial Owner of such
additional shares of Common Stock, such Person is not then the Beneficial Owner of 15% or more of
the shares of Common Stock then outstanding; and (iii) no Person shall become an “Acquiring Person”
as the result of an acquisition of shares of Common Stock by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares of Common Stock
beneficially owned by such Person to 15% or more of the shares of Common Stock then outstanding,
provided, however, that if a Person shall become the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding by reason of such share acquisitions by the
Company and shall thereafter become the Beneficial Owner of any additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or made by the Company on the outstanding
Common Stock or pursuant to a split or subdivision of the outstanding Common Stock), then such
Person shall be deemed to be an “Acquiring Person” unless upon becoming the Beneficial Owner of
such additional shares of Common Stock such Person does not beneficially own 15% or more of the
shares of Common Stock then outstanding. For all purposes of this Agreement, any calculation of
the number of shares of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock 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 Securities Exchange Act of 1934, as
amended (the “Exchange Act”), as in effect on the date hereof.

     (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date
hereof.

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

          (i) which such Person or any of such Person’s Affiliates or Associates is deemed to
beneficially own, directly or indirectly, within the meaning of Rule l3d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date hereof;

          (ii) which such Person or any of such Person’s Affiliates or Associates has (A) the right to
acquire (whether such right is exercisable immediately or

2

 

only after the passage of time) pursuant
to any agreement, arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public offering of securities), 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,
(x) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person
or any of such Person’s Affiliates or Associates until such tendered securities are accepted for
purchase, (y) securities which such Person has a right to acquire upon the exercise of Rights at
any time prior to the time that any Person becomes an Acquiring Person or (z) securities issuable
upon the exercise of Rights from and after the time that any Person becomes an Acquiring Person if
such Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (“Original Rights”) or
pursuant to Section 11(i) or Section 11(n) with respect to an adjustment to Original Rights; or
(B) the right to vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any security by reason of such agreement, arrangement or understanding if the agreement,
arrangement or understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act
and (2) is not also then reportable 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 and with
respect to which such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B)) or disposing of such securities of the Company;

provided, however, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such Person’s status or authority as such, to be
the “Beneficial Owner” of, to have “Beneficial Ownership” of or to “beneficially own” any
securities that are “beneficially owned” (as defined in this Section l(c)), including, without
limitation, in a fiduciary capacity, by an Exempt Person or by any other such officer, director or
employee of an Exempt Person.

     (d) “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in the State of New York or the city in which the principal office of the
Rights Agent is located are authorized or obligated by law or executive order to close.

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

     (f) “Common Stock” when used with reference to the Company shall mean the Common Stock,
presently par value $.001 per share, of the Company. “Common Stock” when used with reference to
any Person other than the Company shall mean the common stock (or, in the case of an unincorporated
entity, the equivalent equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary
(as such term is hereinafter defined) of another Person, the Person or Persons which
ultimately control such first-mentioned Person.

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

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

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

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

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

     (l) “Exempt Person” shall mean the Company or any Subsidiary of the Company, in each case
including, without limitation, in its fiduciary capacity, or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity or trustee holding Common Stock for or
pursuant to the terms of any such plan or for the purpose of funding any such plan or funding other
employee benefits for employees of the Company or of any Subsidiary of the Company.

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

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

     (o) “Flip-In Event” shall have the meaning set forth in Section 11(a)(ii) hereof.

     (p) “NASDAQ” shall mean The Nasdaq Stock Market.

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     (q) “New York Stock Exchange” shall mean the New York Stock Exchange, Inc.

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

     (s) “Preferred Stock” shall mean the Series A Junior Participating Preferred Stock, par value
$.001 per share, of the Company having the rights and preferences set forth in the Form of
Certificate of Designation attached to this Agreement as Exhibit A.

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

     (u) “Purchase Price” shall have the meaning set forth in Section 7(b)
hereof.

     (v) “Redemption Date” shall have the meaning set forth in Section 7 hereof.

     (w) “Redemption Price” shall have the meaning set forth in Section 23 hereof.

     (x) “Right Certificate” shall have the meaning set forth in Section 3 hereof.

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

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

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

     (bb) “Stock Acquisition Date” shall mean the first date of public announcement (which, for
purposes of this definition, shall include, without limitation, a report filed pursuant to Section
13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such, or such earlier date as a majority of the Board of Directors of the Company shall
become aware of the existence of an Acquiring Person.

     (cc) “Subsidiary” of any Person shall mean any corporation or other entity of which securities
or other ownership interests having ordinary voting power sufficient to elect a majority of the
board of directors or other persons performing similar functions are

5

 

beneficially owned, directly
or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by
such Person.

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

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

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

     Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent
to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date be the holders of Common Stock) in accordance with the
terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable.

     Section 3. Issue of Right Certificates.

     (a) Until the Close of Business on the earlier of (i) the tenth day after the Stock
Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action
of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement by any Person (other than an Exempt Person) of, or of
the first public announcement of the intention of such Person (other than an Exempt Person) to
commence, a tender or exchange offer the consummation of which would result in any Person (other
than an Exempt Person) becoming the Beneficial Owner of shares of Common Stock aggregating 15% or
more of the Common Stock then outstanding (the earlier of such dates being herein referred to as
the “Distribution Date”, provided, however, that if either of such dates occurs
after the date of this Agreement and on or prior to the Record Date, then the Distribution Date
shall be the Record Date), (x) the Rights will be evidenced (subject to the provisions of Section
3(b) hereof) by the certificates for Common Stock registered in the names of the holders thereof
and not by separate Right Certificates, and (y) the Rights will be transferable only in connection
with the transfer of Common Stock. As soon as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign and the Company will send or cause to
be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid
mail, to each record holder of Common Stock as of the close of business on the Distribution Date
(other than any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the
address of such holder shown on the records of the Company, a Right Certificate, in substantially
the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right (subject to

6

 

adjustment
as provided herein) for each share of Common Stock so held. As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.

     (b) On the Record Date, or as soon as practicable thereafter, the Company will send a copy of
a Summary of Rights to Purchase Shares of Preferred Stock, in substantially the form of Exhibit C
hereto (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record holder of
Common Stock as of the Close of Business on the Record Date (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records
of the Company. With respect to certificates for Common Stock outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such certificates registered in the
names of the holders thereof together with the Summary of Rights. Until the Distribution Date (or,
if earlier, the Expiration Date), the surrender for transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Stock represented thereby.

     (c) Rights shall be issued in respect of all shares of Common Stock issued or disposed of
(including, without limitation, upon disposition of Common Stock out of treasury stock or issuance
or reissuance of Common Stock out of authorized but unissued
            shares) after the Record Date but prior to the earlier of the Distribution Date and the
Expiration Date, or in certain circumstances provided in Section 22 hereof, after the Distribution
Date. Certificates issued for Common Stock (including, without limitation, upon transfer of
outstanding Common Stock, disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares) after the Record Date but prior
to the earlier of the Distribution Date and the Expiration Date shall have impressed on, printed
on, written on or otherwise affixed to them the following legend:

This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Vanda
Pharmaceuticals Inc. (the “Company”) and American Stock Transfer & Trust
Company, LLC, as Rights Agent, dated as of September 25, 2008 and as
amended from time to time (the “Rights Agreement”), the terms of which
are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt
of a written request therefor. Under certain circumstances, as set
forth in the Rights Agreement, Rights owned by or transferred to any
Person who is or becomes an Acquiring Person (as defined in the

7

 

Rights
Agreement) and certain transferees thereof will become null and void and
will no longer be transferable.

With respect to such certificates containing the foregoing legend, until the Distribution Date, the
Rights associated with the Common Stock represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificate, except as otherwise
provided herein, shall also constitute the transfer of the Rights associated with the Common Stock
represented thereby. In the event that the Company purchases or otherwise acquires any Common
Stock after the Record Date but prior to the Distribution Date, any Rights associated with such
Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Stock which are no longer outstanding.

     Notwithstanding this paragraph (c), the omission of a legend shall not affect the
enforceability of any part of this Agreement or the rights of any holder of the Rights.

     Section 4. Form of Right Certificates. The Right Certificates (and the forms of
election to purchase shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or
interdealer quotation system on which the Rights may from time to time be listed or quoted, or
to conform to usage. Subject to the provisions of this Agreement, the Right Certificates shall
entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred
Stock as shall be set forth therein at the Purchase Price, but the number of such one
one-thousandths of a share of Preferred Stock and the Purchase Price shall be subject to adjustment
as provided herein.

     Section 5. Countersignature and Registration.

     (a) The Right Certificates shall be executed on behalf of the Company by the President of the
Company, either manually or by facsimile signature, shall have affixed thereto the Company’s seal
or a facsimile thereof and shall be attested by the Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent
and shall not be valid for any purpose unless countersigned. In case any officer of the Company
who shall have signed any of the Right Certificates shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by the Company, such Right
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 Right Certificates
had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf
of the Company by any Person who, at the actual date of the

8

 

execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate, although at the date of
the execution of this 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 an
office or agency designated for such purpose, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of the respective
holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.

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

     (a) Subject to the provisions of this Agreement, at any time after the Distribution Date and
prior to the Expiration Date, any Right Certificate or Right Certificates may be transferred, split
up, combined or exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock as
the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right Certificate or
Right Certificates shall make such request in writing delivered to the Rights Agent, and shall
surrender the Right Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office or agency of the Rights Agent designated for such purpose. Thereupon the
Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company
may require payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of Right Certificates.

     (b) Subject to the provisions of this Agreement, at any time after the Distribution Date and
prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.

9

 

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

     (a) Except as otherwise provided herein, the Rights shall become exercisable on the
Distribution Date, and thereafter the registered holder of any Right Certificate may, subject to
Section 11(a)(ii) hereof and except as otherwise provided herein, exercise the Rights evidenced
thereby in whole or in part upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the office or agency of
the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price
with respect to the total number of one one-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which the Rights are exercised, at any
time which is both after the Distribution Date and prior to the time (the “Expiration Date”) that
is the earliest of (i) the Close of Business on September 25, 2018 (the “Final Expiration Date”),
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption
Date”) or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof.

     (b) The Purchase Price shall be initially $6.00 for each one one-thousandth of a share of
Preferred Stock purchasable upon the exercise of a Right. The Purchase Price and the number of one
one-thousandths of a share of Preferred Stock or other securities or property to be acquired upon
exercise of a Right shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the United States of America in accordance with
paragraph (c) of this Section 7.

     (c) Except as otherwise provided herein, upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of
the aggregate Purchase Price for the shares of Preferred Stock to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof, in cash or by certified check, cashier’s check or money order
payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition
from any transfer agent of the Preferred Stock, or make available if the Rights Agent is the
transfer agent for the
Preferred Stock, certificates for the number of shares of Preferred Stock to be purchased,
and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests,
or (B) requisition from a depositary agent appointed by the Company depositary receipts
representing interests in such number of one one-thousandths of a share of Preferred Stock as are
to be purchased (in which case certificates for the Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent), and the Company hereby directs
any such depositary agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder and (iv) when appropriate,
after receipt,

10

 

promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate.

     (d) Except as otherwise provided herein, in case the registered holder of any Right
Certificate shall exercise less than all of the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the exercisable Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.

     (e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to undertake any action with respect to a registered holder of
Rights upon the occurrence of any purported transfer or exercise of Rights pursuant to Section 6
hereof or this Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of assignment or form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such transfer or exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
thereof as the Company shall reasonably request.

     Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange
shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no Right 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 Right Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent
shall deliver all canceled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate
of destruction thereof to the Company.

     Section 9. Availability of Shares of Preferred 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, or any shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that will be sufficient to permit the
exercise in full of all outstanding Rights.

     (b) So long as the shares of Preferred Stock issuable upon the exercise of Rights may be
listed or admitted to trading on any national securities exchange, or quoted on NASDAQ, 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 or

11

 

admitted to trading on such exchange, or quoted
on NASDAQ, upon official notice of issuance upon such exercise.

     (c) From and after such time as the Rights become exercisable, the Company shall use its best
efforts, if then necessary to permit the issuance of shares of Preferred Stock upon the exercise of
Rights, to register and qualify such shares of Preferred Stock under the Securities Act and any
applicable state securities or “Blue Sky” laws (to the extent exemptions therefrom are not
available), cause such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications effective (with a
prospectus at all times meeting the requirements of the Securities Act) until the earlier of the
date as of which the Rights are no longer exercisable for such securities and the Expiration Date.
The Company may temporarily suspend, for a period of time not to exceed 90 days, the exercisability
of the Rights in order to prepare and file a registration statement under the Securities Act 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 and
until a registration statement under the Securities Act shall have been declared effective, unless
an exemption therefrom is available.

     (d) The Company covenants and agrees that it will take all such action as may be necessary to
ensure that all shares of Preferred Stock delivered upon exercise of Rights shall, at the time of
delivery of the certificates therefor (subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and nonassessable shares.

     (e) The Company further covenants and agrees that it will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any shares of Preferred Stock 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 Right Certificates to a Person other than, or the issuance
or delivery of certificates or depositary receipts for the Preferred Stock in a name other than
that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise
or to issue or deliver any certificates or depositary receipts for Preferred Stock upon the
exercise of any Rights until any such tax shall have been paid (any such tax being payable by that
holder of such Right
Certificate at the time of surrender) or until it has been established to the Company’s
reasonable satisfaction that no such tax is due.

     Section 10. Preferred Stock Record Date. Each Person in whose name any certificate
for Preferred Stock is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Preferred Stock represented

12

 

thereby on, and such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable
transfer taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate shall not be entitled to any rights of a holder of Preferred Stock for which the Rights
shall be exercisable, including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

     Section 11. Adjustment of Purchase Price, Number and Kind of Shares and Number of
Rights. The Purchase Price, the number of shares of Preferred Stock or other securities or
property purchasable upon exercise of 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 and pay 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 of Preferred Stock 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), the number and kind of shares of capital stock issuable
upon exercise of a Right as of the record date for such dividend or the effective date of such
subdivision, combination or reclassification shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive the aggregate number and kind
of shares of capital stock which, if such Right had been exercised immediately prior to such date
and at a time when the Preferred Stock transfer books of the Company were open, the holder would
have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification.

     (ii) Subject to Section 24 of this Agreement, in the event any Person becomes an Acquiring
Person (the first occurrence of such event being referred to hereinafter as the “Flip-In Event”),
then (A) the Purchase Price shall be adjusted to be the Purchase Price in effect immediately prior
to the Flip-In Event multiplied by the number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to such Flip-In Event, whether or not such
Right was then exercisable, and (B) each holder of a Right, except as otherwise provided in this
Section 11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the right to receive, upon
exercise thereof at a price equal to the Purchase Price (as so adjusted), in accordance with the
terms of this Agreement and in lieu of shares of Preferred Stock, such number of shares of Common

13

 

Stock as shall equal the result obtained by dividing the Purchase Price (as so adjusted) by
50% of the current per share market price of the Common Stock (determined pursuant to Section 11(d)
hereof) on the date of such Flip-In Event; provided, however, that the Purchase
Price (as so adjusted) and the number of shares of Common Stock so receivable upon exercise of a
Right shall, following the Flip-In Event, be subject to further adjustment as appropriate in
accordance with Section 11(f) hereof. Notwithstanding anything in this Agreement to the contrary,
however, from and after the Flip-In Event, any Rights that are beneficially owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Flip-In
Event or (z) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a
transferee prior to or concurrently with the Flip-In Event pursuant to either (I) a transfer from
the Acquiring Person to holders of its equity securities or to any Person with whom it has any
continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a
transfer which the Board of Directors of the Company has determined is part of a plan, arrangement
or understanding which has the purpose or effect of avoiding the provisions of this paragraph, and
subsequent transferees of such Persons, shall be void without any further action and any holder of
such Rights shall thereafter have no rights whatsoever with respect to such Rights under any
provision of this Agreement. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder
of Right 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. From and
after the Flip-In Event, no Right Certificate shall be issued pursuant to Section 3 or Section 6
hereof that represents Rights that are or have become void pursuant to the provisions of this
paragraph, and any Right Certificate delivered to the Rights Agent that represents Rights that are
or have become void pursuant to the provisions of this paragraph shall be canceled. From and after
the occurrence of an event specified in Section 13(a) hereof, any Rights that theretofore have not
been exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only in
accordance with Section 13 and not pursuant to this Section 11(a)(ii).

     (iii) The Company may at its option substitute for a share of Common Stock issuable upon the
exercise of Rights in accordance with the foregoing subparagraph (ii) a number of shares of
Preferred Stock or fraction thereof such that the current per share market price of one share of
Preferred Stock multiplied by such number or fraction is equal to the current per share market
price of one share of Common Stock. In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit the exercise in full
of the Rights in accordance with the foregoing subparagraph (ii), the Board of Directors of the
Company shall, with respect to such deficiency, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party, (A) determine the excess (such
excess, the “Spread”) of (1) the value of the shares of Common Stock issuable upon the exercise of
a Right in accordance with the foregoing subparagraph (ii) (the “Current Value”) over (2) the
Purchase Price (as adjusted in accordance with the foregoing subparagraph (ii)), and

14

 

(B) with
respect to each Right (other than Rights which have become void pursuant to the
foregoing subparagraph (ii)), make adequate provision to substitute for the shares of Common
Stock issuable in accordance with the foregoing subparagraph (ii) upon exercise of the Right and
payment of the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a reduction in
such Purchase Price, (3) shares of Preferred Stock or other equity securities of the Company
(including, without limitation, shares or fractions of shares of preferred stock which, by virtue
of having dividend, voting and liquidation rights substantially comparable to those of the shares
of Common Stock, are deemed in good faith by the Board of Directors of the Company to have
substantially the same value as the shares of Common Stock (such shares of Preferred Stock and
shares or fractions of shares of preferred stock are hereinafter referred to as “Common Stock
Equivalents”)), (4) debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having a value which, when added to the value of the shares of Common Stock issued upon
exercise of such Right, shall have an aggregate value equal to the Current Value (less the amount
of any reduction in such Purchase Price), where such aggregate value has been determined by the
Board of Directors of the Company upon the advice of a nationally recognized investment banking
firm selected in good faith by the Board of Directors of the Company; provided,
however, that if the Company shall not make adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the Flip-In Event (the date of the Flip-In Event
being the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the
extent permitted by applicable law and any material agreements then in effect to which the Company
is a party, upon the surrender for exercise of a Right and without requiring payment of such
Purchase Price, shares of Common Stock (to the extent available), and then, if necessary, such
number or fractions of shares of Preferred Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread. If, upon the
occurrence of the Flip-In Event, 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, then, if the Board of Directors of the Company so
elects, the thirty (30) day period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may
seek stockholder approval for the authorization of such additional shares (such thirty (30) day
period, as it may be extended, is herein called the “Substitution Period”). To the extent that the
Company determines that some action need be taken pursuant to the second and/or third sentence of
this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the
last sentence of this Section 11(a)(iii) 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 second sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the shares of Common Stock

15

 

shall be the current per share market price (as
determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or
fractional value of any “Common
Stock Equivalent” shall be deemed to equal the current per share market price of the Common
Stock. The Board of Directors of the Company may, but shall not be required to, establish
procedures to allocate the right to receive shares of Common Stock upon the exercise of the Rights
among holders of Rights pursuant to this Section 11(a)(iii).

     (b) In case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them (for a period expiring within 45 calendar
days after such record date) to subscribe for or purchase Preferred Stock (or shares having the
same rights, privileges and preferences as the Preferred Stock (“Equivalent Preferred Shares”)) or
securities convertible into Preferred Stock or Equivalent Preferred Shares at a price per share of
Preferred Stock or Equivalent Preferred Shares (or having a conversion price per share, if a
security convertible into shares of Preferred Stock or Equivalent Preferred Shares) less than the
then current per share market price of the Preferred Stock (determined pursuant to Section 11(d)
hereof) 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 and Equivalent
Preferred Shares outstanding on such record date plus the number of shares of Preferred Stock and
Equivalent Preferred Shares which the aggregate offering price of the total number of shares of
Preferred Stock and/or Equivalent Preferred Shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of shares of Preferred Stock and
Equivalent Preferred Shares outstanding on such record date plus the number of additional shares of
Preferred Stock and/or Equivalent Preferred Shares to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially convertible);
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value of such
consideration shall be 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. Shares of Preferred
Stock and Equivalent Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such rights, options or
warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

     (c) In case the Company shall fix a record date for the making of a distribution to all
holders of the Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular

16

 

quarterly cash dividend or a dividend
payable in 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 then
current per share market price of the Preferred Stock (determined pursuant to Section 11(d) hereof)
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 assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one share of Preferred Stock, and the
denominator of which shall be such current per share market price (determined pursuant to Section
11(d) hereof) of the Preferred Stock; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments
shall be made successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.

     (d)(i) Except as otherwise provided herein, for the purpose of any computation hereunder, the
“current per share market price” of any security (a “Security” for the purpose of this Section
11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of
such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that in the event that the current per share
market price of the Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security, and prior to the expiration of 30 Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per share market price
shall be appropriately adjusted to reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked prices, regular way, in
either case as reported by the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Security is listed or admitted to trading or, if the
Security is not listed or admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices on NASDAQ or in the
over-the-counter market, as reported by NASDAQ or such other system then in use, or, if on any such
date the Security is not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Security selected by the

17

 

Board of Directors of the Company. The term “Trading Day” shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading on any national
securities exchange, a Business Day.

     (ii) For the purpose of any computation hereunder, if the Preferred Stock is publicly traded,
the “current per share market price” of the Preferred Stock shall be determined in accordance with
the method set forth in Section 11(d)(i). If the Preferred Stock is not publicly traded but the
Common Stock is publicly traded, the “current per share market price” of the Preferred Stock shall
be conclusively deemed to be the current per share market price of the Common Stock as determined
pursuant to Section 11(d)(i) multiplied by the then applicable Adjustment Number (as defined in and
determined in accordance with the Certificate of Designation for the Preferred Stock). If neither
the Common Stock nor the Preferred Stock is publicly traded, “current per share market price” 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.

     (e) No adjustment in the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one hundred-thousandth of a share of
Preferred Stock or one-hundredth of a share of Common Stock or other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the Expiration Date.

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

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

18

 

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

     (i) The Company may elect on or after the date of any adjustment of the Purchase Price
pursuant to Sections 11(b) or 11(c) hereof to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights
shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which
a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to
such adjustment of the number of Rights shall become that number of Rights (calculated to the
nearest one-hundredth) 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. Such record date may be the date on which the Purchase Price
is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at
least 10 days later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company
may, as promptly as practicable, cause to be distributed to holders of record of Right Certificates
on such record date Right 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 Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates evidencing all the
Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided for herein and shall
be registered in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.

     (j) Irrespective of any adjustment or change in the Purchase Price or the number of one
one-thousandths of a share of Preferred Stock issuable upon the exercise of a Right, the Right
Certificates theretofore and thereafter issued may continue to express the

19

 

Purchase Price and the
number of one one-thousandths of a share of Preferred Stock which were expressed in the initial
Right Certificates issued hereunder.

     (k) Before taking any action that would cause an adjustment reducing the Purchase Price below
the then par value, if any, of the fraction of Preferred Stock or other shares of capital stock
issuable upon exercise of a Right, 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 shares of Preferred Stock
or other such shares 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 issuing to the holder of any Right exercised after such record
date the Preferred Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the 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 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 adjustments in the Purchase Price, in addition to those adjustments expressly required
by this Section 11, as and to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Preferred Stock, issuance wholly
for cash of any shares of Preferred Stock at less than the current market price, issuance wholly
for cash of Preferred Stock or securities which by their terms are convertible into or exchangeable
for Preferred Stock, dividends on Preferred Stock payable in shares of Preferred Stock or issuance
of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the
Company to holders of its Preferred Stock shall not be taxable to such holders.

     (n) Anything in this Agreement to the contrary notwithstanding, in the event that at any time
after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare
and pay any dividend on the Common Stock payable in Common Stock or (ii) effect a subdivision,
combination or consolidation of the Common Stock (by reclassification or otherwise than by payment
of a dividend payable in Common Stock) into a greater or lesser number of shares of Common Stock,
then, in each such case, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter, 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

20

 

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.

     (o) The Company agrees that, after the earlier of the Distribution Date or the Stock
Acquisition Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit
any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or eliminate the benefits intended to be afforded by
the Rights.

     Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a
certificate setting forth such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Stock and
the Preferred Stock a copy of such certificate and (c) mail a brief summary thereof to each holder
of a Right Certificate in accordance with Section 25 hereof (if so required under Section 25
hereof). The Rights Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.

21

 

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

22

 

     (a) In the event, directly or indirectly, at any time after the Flip-In Event (i) the Company
shall consolidate with or shall merge into any other Person, (ii) any Person shall merge with and
into the Company and the Company shall be the continuing or surviving corporation of such merger
and, in connection with such merger, all or part of the Common Stock shall be changed into or
exchanged for stock or other securities of any other Person (or of the Company) or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning
power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person (other than the Company or one or more wholly-owned
Subsidiaries of the Company), then upon the first occurrence of such event, proper provision shall
be made so that: (A) each holder of a Right (other than Rights which have become void pursuant to
Section 11(a)(ii) hereof) shall thereafter have the right to receive, upon the exercise thereof at
the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof), in
accordance with the terms of this Agreement and in lieu of shares of Preferred Stock or Common
Stock of the Company, such number of validly authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims,
as shall equal the result obtained by dividing the Purchase Price (as theretofore adjusted in
accordance with Section 11(a)(ii) hereof) by 50% of the current per share market price of the
Common Stock of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; provided, however,
that the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) and
the number of shares of Common Stock of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section 11(f) hereof to
reflect any events occurring in respect of the Common Stock of such Principal Party after the
occurrence of such consolidation, merger, sale or transfer; (B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this Agreement; (C) the term
“Company” shall thereafter be deemed to refer to such Principal Party; and (D) such Principal Party
shall take such steps (including, but not limited to, the reservation of a sufficient number of its
shares of Common Stock in accordance with Section 9 hereof) in connection with such 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 the shares of its Common Stock
thereafter deliverable upon the exercise of the Rights; provided that, upon the subsequent
occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled
to receive, upon exercise of a Right and payment of the Purchase Price as provided in this Section
13(a), such cash, shares, rights, warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such transaction, owned the Common Stock of the
Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a), and such
Principal Party shall take such steps (including, but not limited to, reservation of shares of

23

 

stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with
the terms hereof for such cash, shares, rights, warrants and other property.

     (b) “Principal Party” shall mean:

          (i) in the case of any transaction described in (i) or (ii) of the first sentence of Section
13(a) hereof: (A) the Person that is the issuer of the securities into which the shares of Common
Stock are converted in such merger or consolidation, or, if there is more than one such issuer, the
issuer the shares of Common Stock of which have the greatest aggregate market value of shares
outstanding, or (B) if no securities are so issued, (x) the Person that is the other party to the
merger, if such Person survives said merger, or, if there is more than one such Person, the Person
the shares of Common Stock of which have the greatest aggregate market value of shares outstanding
or (y) if the Person that is the other party to the merger does not survive the merger, the Person
that does survive the merger (including the Company if it survives) or (z) the Person resulting
from the consolidation; and

          (ii) in the case of any transaction described in (iii) of the first sentence of Section 13(a)
hereof, the Person that is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each Person that is a party to
such transaction or transactions receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of the assets or earning power cannot
be determined, whichever of such Persons is the issuer of Common Stock having the greatest
aggregate market value of shares outstanding;

provided, however, that in any such case described in the foregoing clause (b)(i) or (b)(ii), if
the Common Stock of such Person is not at such time or has not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, then (1) if such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which is and has been so
registered, the term “Principal Party” shall refer to such other Person, or (2) if such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Stock of all of which is
and has been so registered, the term “Principal Party” shall refer to whichever of such Persons is
the issuer of Common Stock having the greatest aggregate market value of shares outstanding, or (3)
if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set forth in clauses (1)
and (2) above shall apply to each of the owners having an interest in the venture as if the Person
owned by the joint venture was a Subsidiary of both or all of such joint venturers, and the
Principal Party in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.

     (c) The Company shall not consummate any consolidation, merger, sale or transfer referred to
in Section 13(a) hereof unless prior thereto the Company and the Principal Party involved therein
shall have executed and delivered to the Rights Agent an

24

 

agreement confirming that the requirements
of Sections 13(a) and (b) hereof shall promptly
be performed in accordance with their terms and that such consolidation, merger, sale or
transfer of assets shall not result in a default by the Principal Party under this Agreement as the
same shall have been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof and
providing that, as soon as practicable after executing such agreement pursuant to this Section 13,
the Principal Party will:

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

          (ii) use its best efforts, if the Common Stock of the Principal Party shall be listed or
admitted to trading on the New York Stock Exchange or on another national securities exchange, to
list or admit to trading (or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on the New York Stock Exchange or such securities exchange, or, if the
Common Stock of the Principal Party shall not be listed or admitted to trading on the New York
Stock Exchange or a national securities exchange, to cause the Rights and the securities receivable
upon exercise of the Rights to be authorized for quotation on NASDAQ or on such other system then
in use;

          (iii) deliver to holders of the Rights historical financial statements for the Principal Party
which comply in all respects with the requirements for registration on Form 10 (or any successor
form) under the Exchange Act; and

          (iv) obtain waivers of any rights of first refusal or preemptive rights in respect of the
Common Stock of the Principal Party subject to purchase upon exercise of outstanding Rights.

     (d) In case the Principal Party has a provision in any of its authorized securities or in its
certificate of incorporation or by-laws or any other instrument governing its affairs, which
provision would have the effect of (i) causing such Principal Party to issue (other than to holders
of Rights pursuant to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of Common Stock or Common
Stock Equivalents of such Principal Party at less than the then current market price per share
thereof (determined pursuant to Section 11(d) hereof) or securities exercisable for, or convertible
into, Common Stock or Common Stock Equivalents of such Principal Party at less than such then
current market price, or (ii) providing for any special payment, tax or similar provision in
connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions
of Section 13, then, in such event, the Company hereby agrees with each holder of Rights that it
shall not

25

 

consummate any such transaction unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have been canceled,
waived or amended, or that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with, or as a consequence of, the consummation of the
proposed transaction.

     (e) The Company covenants and agrees that it shall not, at any time after the Flip-In Event,
enter into any transaction of the type described in clauses (i) through (iii) of Section 13(a)
hereof if (i) at the time of or immediately after such consolidation, merger, sale, transfer or
other transaction 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, (ii) prior to, simultaneously with or immediately after such
consolidation, merger, sale, transfer or other transaction, the stockholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of Section 13(b) hereof shall
have received a distribution of Rights previously owned by such Person or any of its Affiliates or
Associates or (iii) the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.

     Section 14. Fractional Rights and Fractional Shares.

     (a) The Company shall not be required to issue fractions of Rights (except prior to the
Distribution Date in accordance with Section 11(n) hereof) or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the current market value of
a whole Right. For the 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 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 on NASDAQ or 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

26

 

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 Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) or to
distribute certificates which evidence fractional shares of Preferred Stock (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred Stock) upon the exercise
or exchange of Rights. Interests in fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided that such agreement shall provide that the holders of such
depositary receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such depositary receipts. In
lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth
of a share of Preferred Stock, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised or exchanged as herein provided an amount in
cash equal to the same fraction of the current market value of a whole share of Preferred Stock (as
determined in accordance with Section 14(a) hereof) for the Trading Day immediately prior to the
date of such exercise or exchange.

     (c) The Company shall not be required to issue fractions of shares of Common Stock or to
distribute certificates which evidence fractional shares of Common Stock upon the exercise or
exchange of Rights. In lieu of such fractional shares of Common Stock, the Company shall pay to
the registered holders of the Right Certificates with regard to which such fractional shares of
Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock (as determined in accordance with Section
14(a) hereof) for the Trading Day immediately prior to the date of such exercise or exchange.

     (d) The holder of a Right by the acceptance of the Right expressly waives his right to receive
any fractional Rights or any fractional shares upon exercise or exchange of a Right (except as
provided above).

     Section 15. Rights of Action. All rights of action in respect of this Agreement,
excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the
respective registered holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of
the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common
Stock), on his own behalf and for his own benefit, may 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 Right Certificate (or, prior to the Distribution
Date, such Common

27

 

Stock) in the manner provided therein 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 will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of any Person
subject to this Agreement.

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

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

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

     (c) the Company and the Rights Agent may deem and treat the Person in whose name the Right
Certificate (or, prior to the Distribution Date, the Common Stock certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the 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 Section 7(e) hereof, shall be affected by any notice to the contrary.

     Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such,
of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose
the holder of the Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise or exchange of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the holder of any Right
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 this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Right Certificate shall have
been exercised or exchanged in accordance with the provisions hereof.

28

 

     Section 18. Concerning the Rights Agent.

     (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and 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
arising therefrom, directly or indirectly.

     (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 Right Certificate or certificate for the Preferred Stock or Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper
or document believed by it to be genuine and to be signed, executed and, where necessary, verified
or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.

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

     (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties hereto;
provided that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Right Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Right Certificates shall have the full force provided in the Right Certificates and in
this Agreement.

29

 

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

     Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Right 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 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 President and the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such
certificate.

     (c) The Rights Agent shall be liable hereunder to the Company and any other Person 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 Right Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.

     (e) The Rights Agent shall not be under any responsibility in respect of the validity of this
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 Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the Rights becoming void
pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights provided for in
Sections 3, 11, 13, 23 and 24, or the ascertaining of the existence of facts that would require any
such change or adjustment

30

 

(except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate furnished pursuant to Section 12, describing such
change or 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 Preferred Stock or other securities to be
issued pursuant to this Agreement or any Right Certificate or as to whether any shares of Preferred
Stock or other securities will, when issued, be validly authorized and issued, fully paid and
nonassessable.

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

     (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to
the performance of its duties hereunder from any person reasonably believed by the Rights Agent to
be one of the President or the Secretary 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 by it in good faith in accordance with instructions of any such officer or for any delay
in acting while waiting for those instructions. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on
and/or after which such action shall be taken or such omission shall be effective. The Rights
Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance
with a proposal included in any such application on or after the date specified in such application
(which date shall not be less than five Business Days after the date any officer of the Company
actually receives such application unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.

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

     (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company

31

 

resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection and continued
employment thereof.

     (j) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate contained in the form of assignment or the form of election to purchase
set forth on the reverse thereof, as the case may be, has not been completed to certify the holder
is not an Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof, the
Rights Agent shall not take any further action with respect to such requested exercise or transfer
without first consulting with the Company.

     Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent
may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing
mailed to the Company and to each transfer agent of the Common Stock or Preferred Stock by
registered or certified mail, and, following the Distribution Date, to the holders of the Right
Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and, following the Distribution Date, to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company
shall fail to make such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice,
submit his Right Certificate for inspection by the Company), then the registered holder of any
Right 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 corporation organized and doing business under the laws of the United States or the laws
of any state of the United States or the District of Columbia, in good standing, having an office
in the State of Maryland or 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 $50 million. 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 or Preferred Stock,
and, following the Distribution Date, mail a notice thereof in writing to the registered holders of
the Right Certificates. Failure to give any notice provided for in this Section 21, however, or
any defect therein,

32

 

shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may be.

     Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may, at its option,
issue new Right Certificates evidencing Rights in such forms 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 Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Stock following the Distribution Date and prior to the Expiration Date, the Company
may with respect to shares of Common Stock so issued or sold pursuant to (i) the exercise of stock
options, (ii) under any employee plan or arrangement, (iii) upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Company or (iv) a contractual obligation
of the Company, in each case existing prior to the Distribution Date, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance or sale.

     Section 23. Redemption.

     (a) The Board of Directors of the Company may, at any time prior to the Flip-In Event, redeem
all but not less than all the then outstanding Rights at a redemption price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring
in respect of the Common Stock after the date hereof (the redemption price being hereinafter
referred to as the “Redemption Price”). The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board of Directors of the Company in its sole
discretion may establish. The Redemption Price shall be payable, at the option of the Company, in
cash, shares of Common Stock, or such other form of consideration as the Board of Directors of the
Company shall determine.

     (b) Immediately upon the action of the Board of Directors of the Company ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at such later time as the
Board of Directors of the Company may establish for the effectiveness of such redemption), 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.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption. Within 10 days after such action of the Board of Directors of the
Company ordering the redemption of the Rights (or such later time as the Board of Directors of the
Company may establish for the effectiveness of such redemption), the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock. Any notice which is mailed in the manner

33

 

herein
provided shall be deemed given, whether or not the holder receives the notice. Each such notice of
redemption shall state the method by which the payment of the Redemption Price will be made.

     Section 24. Exchange.

     (a) The Board of Directors of the Company may, at its option, at any time after the Flip-In
Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring in respect of the Common
Stock after the date hereof (such amount per Right being hereinafter referred to as the “Exchange
Ratio”). Notwithstanding the foregoing, the Board of Directors of the Company shall not be
empowered to effect such exchange at any time after an Acquiring Person shall have become the
Beneficial Owner of shares of Common Stock aggregating 50% or more of the shares of Common Stock
then outstanding. From and after the occurrence of an event specified in Section 13(a) hereof, any
Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall thereafter be
exercisable only in accordance with Section 13 and may not be exchanged pursuant to this Section
24(a). The exchange of the Rights by the Board of Directors of the Company may be made effective
at such time, on such basis and with such conditions as the Board of Directors of the Company in
its sole discretion may establish.

     (b) Immediately upon the effectiveness of the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any
further action and without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that number of shares of
Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of
the holders of the Rights so exchanged at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other than Rights which
have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of
Rights.

     (c) The Company may at its option substitute, and, in the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit
an exchange of Rights for Common Stock as contemplated in

34

 

accordance with this Section 24, the
Company shall substitute to the extent of such insufficiency, for each share of Common Stock that
would otherwise be issuable upon exchange of a Right, a number of shares of Preferred Stock or
fraction thereof (or Equivalent Preferred Shares, as such term is defined in Section 11(b)) such
that the current per share market price (determined pursuant to Section 11(d) hereof) of one share
of Preferred Stock (or Equivalent Preferred Share) multiplied by such number or fraction is equal
to the current per share market price of one share of Common Stock (determined pursuant to Section
11(d) hereof) as of the date of such exchange.

     Section 25. Notice of Certain Events.

     (a) In case the Company shall at any time after the earlier of the Distribution Date or the
Stock Acquisition Date propose (i) to pay any dividend payable in stock of any class to the holders
of its Preferred Stock or to make any other distribution to the holders of its Preferred Stock
(other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving only the
subdivision or combination of outstanding Preferred Stock), (iv) to effect the liquidation,
dissolution or winding up of the Company, or (v) to pay any dividend on the Common Stock payable in
Common Stock or to effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock), then, in each such
case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date for the purposes of
such dividend or distribution or offering of rights or warrants, or the date on which such
liquidation, dissolution, winding up, reclassification, subdivision, combination or consolidation
is to take place and the date of participation therein by the holders of the Common Stock and/or
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 10 days prior to the record date for
determining holders of the Preferred Stock for purposes of such action, and in the case of any such
other action, at least 10 days prior to the date of the taking of such proposed action or the date
of participation therein by the holders of the Common Stock and/or Preferred Stock, whichever shall
be the earlier.

     (b) In case any event described in Section 11(a)(ii) or Section 13 shall occur then the
Company shall as soon as practicable thereafter give to each holder of a Right Certificate (or if
occurring prior to the Distribution Date, the holders of the Common Stock) in accordance with
Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11(a)(ii) and Section 13
hereof.

     Section 26. Notices. Notices or demands authorized by this Agreement to be given or
made by the Rights Agent or by the holder of any Right Certificate to or on the

35

 

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:

Vanda Pharmaceuticals Inc.

9605 Medical Center Drive, Suite 300

Rockville, MD 20850

Attention: Mihael H. Polymeropoulos

Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement
to be given or made by the Company or by the holder of any Right 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 Company, LLC

59 Maiden Lane

Plaza Level

New York, NY 10038

Attention: Geraldine Zarbo

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.

     Section 27. Supplements and Amendments. Except as provided in the penultimate
sentence of this Section 27, for so long as the Rights are then redeemable, the Company may in its
sole and absolute discretion, and the Rights Agent shall if the Company so directs, supplement or
amend any provision of this Agreement in any respect without the approval of any holders of the
Rights. At any time when the Rights are no longer redeemable, except as provided in the
penultimate sentence of this Section 27, 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, provided that no such supplement or amendment may (a) adversely affect the
interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person), (b) cause this Agreement again to become amendable other than in
accordance with this sentence or (c) cause the Rights again to become redeemable. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price. Upon the delivery of a certificate from an appropriate officer
of the Company which states that the supplement or amendment is in compliance with the terms of
this Section 27, the Rights Agent shall execute such supplement or amendment, provided that
any supplement or amendment that does not amend Sections 18, 19, 20 or 21 hereof or this Section 27
in a manner adverse to the

36

 

Rights Agent shall become effective immediately upon execution by the
Company, whether or not also executed by the Rights Agent.

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

     Section 29. 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
Right Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Stock).

     Section 30. Determinations and Actions by the Board of Directors. The Board of
Directors of the Company shall have the exclusive power and authority to administer this Agreement
and to exercise the rights and powers specifically granted to the Board of Directors of the Company
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, without limitation, a determination to redeem or not redeem the Rights
or to amend or not amend this Agreement). All such actions, calculations, interpretations and
determinations that are done or made by the Board of Directors of the Company in good faith shall
be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights, as
such, and all other parties.

     Section 31. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

     Section 32. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.

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

37

 

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

38

 

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

	 	 	 	 	 	 	 
	 	 	VANDA PHARMACEUTICALS INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mihael Polymeropoulus, M.D.	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mihael Polymeropoulus, M.D.	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	AMERICAN STOCK TRANSFER & TRUST 
COMPANY, LLC

as Rights Agent
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Herbert J. Lemmer	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Herbert J. Lemmer	 	 
	 

	 	Title:
	 	Vice President	 	 

39

 

Exhibit A

FORM OF

CERTIFICATE OF DESIGNATION

of

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

VANDA PHARMACEUTICALS INC.

Pursuant to Section 151 of the General Corporation Law

of the State of Delaware

          Vanda Pharmaceuticals Inc., a corporation organized and existing under the General Corporation
Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Section 103
thereof, DOES HEREBY CERTIFY:

          That pursuant to the authority vested in the Board of Directors of the Corporation (the “Board
of Directors”) in accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on September 25, 2008 adopted the following resolution
creating a series of 30,000 shares of Preferred Stock designated as “Series A Junior Participating
Preferred Stock”:

RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value
$.001 per share, of the Corporation be and hereby is created, and that
the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications, limitations
and restrictions thereof are as follows:

Series A Junior Participating Preferred Stock

          1. Designation and Amount. There shall be a series of Preferred Stock that shall be
designated as “Series A Junior Participating Preferred Stock,” and the number of shares
constituting such series shall be 30,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, however, that no decrease shall reduce the number
of shares of Series A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable

A-1 

 

upon exercise of outstanding rights,
options or warrants or upon conversion of outstanding securities issued by the Corporation.

          2. Dividends and Distribution.

               (A) Subject to the prior and superior rights of the holders of any shares of any class or
series of stock of the Corporation ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior
Participating Preferred Stock outstanding at the close of business on the business day immediately
preceding each Quarterly Dividend Payment Date (as defined below) (or on such other record date as
the Board of Directors may specify), in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series A Junior Participating Preferred Stock in
respect thereof, shall be entitled to receive, when, as and if declared (except as provided in
paragraph (B) below) by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the 30th day of March, June, September and December, in each
year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing
on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Junior Participating Preferred Stock (the “First Issuance Date”), in an amount
per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) the sum of (x)
the Adjustment Number (as defined below) times the aggregate per share amount of all cash
dividends, and (y) the Adjustment Number times the fair value (as determined by the Board of
Directors) of the aggregate per share amount of all non-cash dividends or other distributions
payable in kind as provided herein, other than a dividend payable in shares of Common Stock, par
value $.001 per share, of the Corporation (the “Common Stock”) or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), in the case of clauses (x) and (y)
declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or
with respect to the first Quarterly Dividend Payment Date following the First Issuance Date, from
(but not including) the Quarterly Dividend Payment Date immediately preceding the First Issuance
Date; provided, that to the extend the holders of shares of Series A Junior Participating
Preferred Stock are entitled to payment of such dividend pursuant to clause (b) of this sentence in
whole or in part as a result of a non-cash dividend or distribution referred to in clause (b)(y)
above, such holders will receive per share of Series A Junior Participating Preferred Stock, in
lieu of the cash value of such non-cash dividend or distribution, an amount of the securities or
other property equal to the Adjustment Number times the amount of such securities or other property
distributed per share of Common Stock. The “Adjustment Number” shall initially be 1000. In the
event the Corporation shall at any time after September 25, 2008 (i) declare and pay 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

A-2 

 

outstanding immediately after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.

               (B) The Board of Directors shall declare a dividend or distribution on the Series A Junior
Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in shares of Common
Stock); provided, that no such dividend will be required to be declared until the aggregate
amount of cash dividends and the fair value of all non-cash dividends and distributions on the
Common Stock, in each case multiplied by the Adjustment Number, during the period following the
last Quarterly Dividend Payment Date (or, if applicable, the Quarterly Dividend Payment Date
preceding the First Issuance Date), exceeds the amount set forth in clause (a) of paragraph (A)
above.

               (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior
Participating Preferred Stock from (but not including) the Quarterly Dividend Payment Date next
preceding the First Issuance Date, unless such First Issuance Date is a Quarterly Dividend Payment
Date or is after the record date for such Quarterly Dividend Payment Date and prior to such
Quarterly Dividend Payment Date, in which event such dividends shall begin to accrue and be
cumulative from (but not including) such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares
at the time outstanding.

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

               (A) Each share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of
the stockholders of the Corporation.

               (B) Except as required by law, by Section 3(C) and by Section 10 hereof, holders of Series A
Junior Participating Preferred Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.

               (C) If, at the time of any annual meeting of stockholders for the election of directors, the
equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares
of Series A Junior Participating Preferred Stock are in default, the number of directors
constituting the Board of Directors of the Corporation shall be increased by two. In addition to
voting together with the holders of Common Stock for the election of other directors of the
Corporation, the holders of record of the Series A Junior Participating Preferred Stock, voting
separately as a class to the exclusion

A-3 

 

of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all
dividends in arrears on the Series A Junior Participating Preferred Stock have been paid or
declared and set apart for payment prior thereto, to vote for the election of two directors of the
Corporation, the
holders of any Series A Junior Participating Preferred Stock being entitled to cast a number
of votes per share of Series A Junior Participating Preferred Stock as is specified in paragraph
(A) of this Section 3. Until the default in payments of all dividends which permitted the election
of said directors shall cease to exist, any director who shall have been so elected pursuant to the
provisions of this Section 3(C) may be removed at any time, without cause, only by the affirmative
vote of the holders of the shares of Series A Junior Participating Preferred Stock at the time
entitled to cast a majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy thereby created may
be filled by the vote of such holders. If and when such default shall cease to exist, the holders
of the Series A Junior Participating Preferred Stock shall be divested of the foregoing special
voting rights, subject to revesting in the event of each and every subsequent like default in
payments of dividends. Upon the termination of the foregoing special voting rights, the terms of
office of all persons who may have been elected directors pursuant to said special voting rights
shall forthwith terminate, and the number of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this Section 3(C) shall be in addition to any other
voting rights granted to the holders of the Series A Junior Participating Preferred Stock in this
Section 3.

          4. Certain Restrictions.

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

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

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

A-4 

 

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

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

          5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after
the acquisition thereof. All such shares shall upon their retirement become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to any conditions and
restrictions on issuance set forth herein.

          6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation, dissolution or winding up
of the Corporation, voluntary or otherwise, no distribution shall be made to the holders of shares
of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to
the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of
Series A Junior Participating Preferred Stock shall have received an amount per share (the “Series
A Liquidation Preference”) equal to the greater of (i) $1.00 plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date of such payment,
or (ii) the Adjustment Number times the per share amount of all cash and other property to be
distributed in respect of the Common Stock upon such liquidation, dissolution or winding up of the
Corporation.

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

A-5 

 

               (C) Neither the merger or consolidation of the Corporation into or with another entity nor the
merger or consolidation of any other entity into or with the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.

          7. Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the outstanding 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 each share of Series A Junior Participating
Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share
equal to the Adjustment Number 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.

          8. No Redemption. Shares of Series A Junior Participating Preferred Stock shall not be
subject to redemption by the Corporation.

          9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other
series of the Preferred Stock as to the payment of dividends and as to the distribution of assets
upon liquidation, dissolution or winding up, unless the terms of any such series shall provide
otherwise, and shall rank senior to the Common Stock as to such matters.

          10. Amendment. At any time that any shares of Series A Junior Participating Preferred Stock
are outstanding, the Certificate of Incorporation of the Corporation shall not be amended, by
merger, consolidation or otherwise, which would materially alter or change the powers, preferences
or special rights of the Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.

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

          IN WITNESS WHEREOF, the undersigned has executed this Certificate this 25th day of September,
2008.

	 	 	 	 	 
	 	VANDA PHARMACEUTICALS INC. 

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

A-6 

 

Exhibit B

Form of Right Certificate

Certificate No. R-                    

NOT EXERCISABLE AFTER SEPTEMBER 25, 2008 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT
AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES
THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

RIGHT CERTIFICATE

VANDA PHARMACEUTICALS INC.

          This certifies that                                         
or registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Rights Agreement, dated as of September 25, 2008, as
the same may be amended from time to time (the “Rights Agreement”), between Vanda Pharmaceuticals
Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as
Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time,
on September 25, 2018 at the office or agency of the Rights Agent designated for such purpose, or
of its successor as Rights Agent, one one-thousandth of a fully paid non-assessable share of Series
A Junior Participating Preferred Stock, par value $.001 per share (the “Preferred Stock”), of the
Company at a purchase price of $6.00 per one one-thousandth of a share of Preferred Stock (the
“Purchase Price”), upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed. The number of Rights evidenced by this Rights Certificate (and
the number of one one-thousandths

B-7

 

of a share of Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of September 25, 2008, based on the Preferred Stock as constituted at such date.
As provided in the Rights Agreement, the Purchase Price, the number of one one-thousandths of a
share of Preferred Stock (or other securities or property) which may be purchased
upon the exercise of the Rights and the number of Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.

          This Right Certificate is subject to all of the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and
made a part hereof and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights
Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are
on file at the principal executive offices of the Company and the above-mentioned office or agency
of the Rights Agent. The Company will mail to the holder of this Right Certificate a copy of the
Rights Agreement without charge after receipt of a written request therefor.

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

          Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
(i) may be redeemed by the Company at a redemption price of $.01 per Right or (ii) may be exchanged
in whole or in part for shares of the Company’s Common Stock, par value $.001 per share, or shares
of Preferred Stock.

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

          No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of the Preferred Stock or of any other securities of the
Company which may at any time be issuable on the exercise or exchange 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,

B-8

 

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 Right Certificate shall have been exercised or exchanged
as provided in the Rights Agreement.

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

          WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.
Dated as of September 25, 2008.

	 	 	 	 	 	 	 
	 	 	VANDA PHARMACEUTICALS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

ATTEST:

	 	 	 	 	 
	 	 	 
	Name:
	 	 	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Countersigned:	 	 
	 
	 	 	 	 
	AMERICAN STOCK TRANSFER & TRUST

COMPANY, LLC, as Rights Agent	 	 
	 
	 	 	 	 
	By

	 	 

	 	 
	 

	 	 

	 	 
	Name:

	 	 

	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 

B-9

 

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Right Certificate)

     FOR VALUE RECEIVED                                         hereby sells, assigns and transfers unto
                                                                      

 

(Please print name and address of transferee)

                     Rights represented by this Right Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint

                                        

Attorney, to transfer said Rights on the books of the within-named Company, with full power of
substitution.

Dated:                                         

	 	 	 	 	 	 	 
	 	 	 	 	 
	                    
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Signature	 	 

Signature Guaranteed:

          Signatures must be guaranteed by a bank, trust company, broker, dealer or other eligible
institution participating in a recognized signature guarantee medallion program.

	 	 	 	 	 
	 	 	 
	(To be completed)	 	 

          The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by, were not acquired by the undersigned from, and are not being assigned to an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

	 	 	 	 	 	 	 
	 
	 	 	 	 	 
	                    
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Signature	 	 

B-10

 

Form of Reverse Side of Right Certificate — continued

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise

Rights represented by the Rights Certificate)

To Vanda Pharmaceuticals Inc.:

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

 

(Please print name and address)

 

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

Please insert social security

or other identifying number

 

(Please print name and address)

 

Dated:                    

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	          Signature

(Signature must conform to holder specified on Right Certificate)

Signature Guaranteed:

B-11

 

          Signature must be guaranteed by a bank, trust company, broker, dealer or other eligible
institution participating in a recognized signature guarantee medallion program.

B-12 

 

Form of Reverse Side of Right Certificate — continued

 

(To be completed)

          The undersigned certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by, and were not acquired by the undersigned from, an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	          Signature

 

NOTICE

          The signature in the Form of Assignment or Form of Election to Purchase, as the case may be,
must conform to the name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.

          In the event the certification set forth above in the Form of Assignment or the Form of
Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase
will not be honored.

B-13 

 

Exhibit C

UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES
THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

SUMMARY OF RIGHTS TO PURCHASE

SHARES OF PREFERRED STOCK OF

VANDA PHARMACEUTICALS INC.

          On September 25, 2008, the Board of Directors of Vanda Pharmaceuticals Inc. (the “Company”)
declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of
common stock, par value $.001 per share, of the Company (the “Common Stock”). The dividend is
payable on October 25, 2008 to the stockholders of record on October 6, 2008 (the “Record Date”).
Each Right entitles the registered holder to purchase from the Company one one-thousandth of a
share of Series A Junior Participating Preferred Stock, par value $.001 per share, of the Company
(the “Preferred Stock”) at a price of $6.00 per one one-thousandth of a share of Preferred Stock
(the “Purchase Price”), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement dated as of September 25, 2008, as the same may be amended from time to
time (the “Rights Agreement”), between the Company and American Stock Transfer & Trust Company,
LLC, as Rights Agent (the “Rights Agent”).

          Until the earlier to occur of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (with certain exceptions, an “Acquiring Person”) has
acquired beneficial ownership of 15% or more of the outstanding shares of Common Stock or (ii) 10
business days (or such later date as may be determined by action of the Board of Directors of the
Company prior to such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the outstanding shares of Common Stock (the earlier of such dates being
called the “Distribution Date”), the Rights will be evidenced, with respect to any of the Common
Stock certificates outstanding as of the Record Date, by such Common Stock certificate together
with this Summary of Rights.

          The Rights Agreement provides that, until the Distribution Date (or earlier expiration of the
Rights), the Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier expiration of the Rights), new Common Stock certificates issued after
the Record Date upon transfer or new issuances of Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier
expiration of the Rights), the surrender for transfer of any certificates for shares of Common
Stock outstanding as of the Record Date, even without such notation or a copy of this Summary of
Rights, will also constitute the transfer of the Rights associated with the shares of Common

C-1 

 

Stock represented by such certificate. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders
of record of the Common Stock as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.

          The Rights are not exercisable until the Distribution Date. The Rights will expire on
September 25, 2018 (the “Final Expiration Date”), unless the Final Expiration Date is advanced or
extended or unless the Rights are earlier redeemed or exchanged by the Company, in each case as
described below.

          The Purchase Price payable, and the number of shares of Preferred Stock or other securities or
property issuable, upon exercise of the Rights is subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred Stock at a price, or securities
convertible into Preferred Stock with a conversion price, less than the then-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 periodic cash dividends or dividends payable
in Preferred Stock) or of subscription rights or warrants (other than those referred to above).

          The number of outstanding Rights is subject to adjustment in the event of a stock dividend on
the Common Stock payable in shares of Common Stock or subdivisions, consolidations or combinations
of the Common Stock occurring, in any such case, prior to the Distribution Date.

          Shares of Preferred Stock purchasable upon exercise of the Rights will not be redeemable.
Each share of Preferred Stock will be entitled, when, as and if declared, to a minimum preferential
quarterly dividend payment of the greater of (a) $10.00 per share, and (b) an amount equal to 1000
times the dividend declared per share of Common Stock. In the event of liquidation, dissolution or
winding up of the Company, the holders of the Preferred Stock will be entitled to a minimum
preferential payment of the greater of (a) $10.00 per share (plus any accrued but unpaid
dividends), and (b) an amount equal to 1000 times the payment made per share of Common Stock. Each
share of Preferred Stock will have 1000 votes, voting together with the Common Stock. Finally, in
the event of any merger, consolidation or other transaction in which outstanding shares of Common
Stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1000
times the amount received per share of Common Stock. These rights are protected by customary
antidilution provisions.

          Because of the nature of the Preferred Stock’s dividend, liquidation and voting rights, the
value of the one one-thousandth interest in a share of Preferred Stock purchasable upon exercise of
each Right should approximate the value of one share of Common Stock.

          In the event that any person or group of affiliated or associated persons becomes an Acquiring
Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which
will thereupon become void), will thereafter have the right to receive

C-2 

 

upon exercise of a Right that number of shares of Common Stock having a market value of two
times the exercise price of the Right.

          In the event that, after a person or group has become an Acquiring Person, the Company is
acquired in a merger or other business combination transaction or 50% or more of its consolidated
assets or earning power are sold, proper provisions will be made so that each holder of a Right
(other than Rights beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive upon the exercise of a Right that number of shares of common
stock of the person with whom the Company has engaged in the foregoing transaction (or its parent)
that at the time of such transaction have a market value of two times the exercise price of the
Right.

          At any time after any person or group becomes an Acquiring Person and prior to the earlier of
one of the events described in the previous paragraph or the acquisition by such Acquiring Person
of 50% or more of the outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such Acquiring Person which will have become void),
in whole or in part, for shares of Common Stock or Preferred Stock (or a series of the Company’s
preferred stock having equivalent rights, preferences and privileges), at an exchange ratio of one
share of Common Stock, or a fractional share of Preferred Stock (or other preferred stock)
equivalent in value thereto, per Right.

          With certain exceptions, no adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares of
Preferred Stock or Common Stock will be issued (other than fractions of Preferred Stock which are
integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election
of the Company, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the current market price of the Preferred Stock or the Common Stock.

          At any time prior to the time an Acquiring Person becomes such, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the
“Redemption Price”) payable, at the option of the Company, in cash, shares of Common Stock or such
other form of consideration as the Board of Directors of the Company shall determine. The
redemption of the Rights may be made effective at such time, on such basis and with such conditions
as the Board of Directors of the Company in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.

          For so long as the Rights are then redeemable, the Company may, except with respect to the
Redemption Price, amend the Rights Agreement in any manner. After the Rights are no longer
redeemable, the Company may, except with respect to the Redemption Price, amend the Rights
Agreement in any manner that does not adversely affect the interests of holders of the Rights.

C-3 

 

          Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or to receive
dividends.

          A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as
an Exhibit to a Registration Statement on Form 8-A dated September 25, 2008. A copy of the Rights
Agreement is available free of charge from the Company. This summary description of the Rights
does not purport to be complete and is qualified in its entirety by reference to the Rights
Agreement, as the same may be amended from time to time, which is hereby incorporated herein by
reference.

C-4exv10w1

Exhibit 10.1

SYMANTEC CORPORATION

2004 EQUITY INCENTIVE PLAN

As Adopted by the Board on July 20, 2004

and as amended thereafter

     1. Purpose. The purpose of this Plan is to provide incentives to attract, retain and motivate
eligible persons whose present and potential contributions are important to the success of the
Company, its Parent, Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company’s future performance through awards of Options, Stock Appreciation Rights, Restricted
Stock Units, and Restricted Stock Awards. Capitalized terms not defined in the text are defined in
Section 25.

     2. Shares Subject to the Plan.

     2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the total number of Shares
reserved and available for grant and issuance pursuant to this Plan will be one hundred eight
million (108,000,000) Shares plus up to fifty-five million four hundred thousand (55,400,000)
shares subject to awards granted under the Company’s 1996 Equity Incentive Plan that cancel,
forfeit (e.g., upon the Participant’s Termination) or otherwise expire by their terms on or
following the adoption of this Plan.

          Any award other than an Option or a SAR shall reduce the number of Shares available for
issuance under this Plan by two Shares for every Share issued. Subject to Sections 2.2 and 18,
Shares that: (a) are subject to issuance upon exercise of an Option but cease to be subject to such
Option for any reason other than exercise of such Option; (b) are subject to an Award granted
hereunder but are forfeited or are repurchased by the Company at the original issue price; or (c)
are subject to an Award that otherwise terminates without Shares being issued will again be
available for grant and issuance in connection with future Awards under this Plan. The following
Shares may not again be made available for future grant and issuance as Awards under the Plan: (i)
Shares that are withheld to pay the exercise or purchase price of an Award or to satisfy any tax
withholding obligations in connection with an Award, (ii) Shares not issued or delivered as a
result of the net settlement of an outstanding Option or SAR or (iii) shares of the Company’s
Common Stock repurchased on the open market with the proceeds of an Option exercise price. At all
times the Company shall reserve and keep available a sufficient number of Shares as shall be
required to satisfy the requirements of all outstanding Awards granted under this Plan.

     2.2 Adjustment of Shares. In the event that the number of outstanding Shares is changed by a
stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company without consideration or
there is a change in the corporate structure (including, without limitation, a spin-off), then (a)
the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number
of Shares subject to outstanding Options, (c) the number of Shares that may be granted pursuant to
Section 3 below, and (d) the Purchase Price and number of Shares subject to other outstanding
Awards, including Restricted Stock Awards, will be proportionately adjusted, subject to any
required action by the Board or the stockholders of the Company and compliance with applicable
securities laws; provided, however, that fractions of a Share will not be issued but will be
rounded down to the nearest whole Share, and may be replaced by a cash payment equal to the Fair
Market Value of such fraction of a Share, as determined by the Committee.

     3. Eligibility. ISOs (as defined in Section 5 below) may be granted only to employees
(including officers and directors who are also employees) of the Company or of a Parent or
Subsidiary of the Company. All other Awards may be granted to employees, officers, directors,
consultants, independent contractors and advisors of the Company or any Parent, Subsidiary or
Affiliate of the Company; provided such consultants, contractors and advisors render bona fide
services not in connection with the offer and sale of securities in a capital-raising transaction;
and provided further, that unless otherwise determined by the Board, non-employee directors shall
receive Restricted Stock Units only pursuant to the formula award provisions set forth in Section
6. No person will be eligible to receive more than 2,000,000 Shares in any calendar year under this
Plan, pursuant to the grant of Awards hereunder, of which no more than 400,000 Shares shall be
covered by Awards of Restricted Stock and Restricted Stock Units, other than new employees of the
Company or of a Parent or Subsidiary of the Company (including new employees who are also officers
and directors of the Company or any Parent or Subsidiary of the Company), who are eligible to
receive up to a maximum of 3,000,000 Shares in the calendar year in which they commence their
employment, of

 

 

which no more than 600,000 Shares shall be covered by Awards of Restricted Stock and Restricted
Stock Units. For purposes of these limits only, each Restricted Stock Unit settled in Shares (but
not those settled in cash), shall be deemed to cover one Share. A person may be granted more than
one Award under this Plan.

     4. Administration.

     4.1 Committee Authority. This Plan will be administered by the Committee or by the Board
acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to
the direction of the Board, except as provided in Section 6, the Committee will have full power to
implement and carry out this Plan. Without limitation, the Committee will have the authority to:

     (a) construe and interpret this Plan, any Award Agreement and any other agreement or document
executed pursuant to this Plan;

     (b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

     (c) select persons to receive Awards;

     (d) determine the form and terms of Awards;

     (e) determine the number of Shares or other consideration subject to Awards;

     (f) determine whether Awards will be granted singly, in combination with, in tandem with, in
replacement of, or as alternatives to, other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent, Subsidiary or Affiliate of the Company;

     (g) grant waivers of Plan or Award conditions;

     (h) determine the vesting, exercisability and payment of Awards;

     (i) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any
Award or any Award Agreement;

     (j) amend any Award Agreements executed in connection with this Plan;

     (k) determine whether an Award has been earned; and

     (l) make all other determinations necessary or advisable for the administration of this Plan.

     4.2 Committee Discretion. Any determination made by the Committee with respect to any Award
will be made in its sole discretion at the time of grant of the Award or, unless in contravention
of any express term of this Plan or Award, at any later time, and such determination will be final
and binding on the Company and on all persons having an interest in any Award under this Plan. To
the extent permitted by applicable laws, the Committee may delegate to one or more officers of the
Company the authority to grant an Award under this Plan to Participants who are not Insiders of the
Company.

     4.3 Section 162(m), Rule 16b-3 and Stock Exchange Requirements. If two or more members of the
Board are Outside Directors, the Committee will be comprised of at least two (2) members of the
Board, at least two (2) of whom are Outside Directors. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3 promulgated under the Exchange Act (“Rule
16b-3”), Awards to officers and directors shall be made by the entire Board or a Committee of two
or more “non-employee directors” within the meaning of Rule 16b-3. In addition, the Plan will be
administered in a manner that complies with any applicable Nasdaq Global Select Market or stock
exchange listing requirements.

     5. Options. The Committee may grant Options to eligible persons and will determine whether
such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or
Nonqualified Stock Options (“NQSOs”),

2

 

the number of Shares subject to the Option, the Exercise Price of the Option (subject to Section
5.4 below), the circumstances upon and the period during which the Option may be exercised, and all
other terms and conditions of the Option, subject to the following:

     5.1 Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award
Agreement which will expressly identify the Option as an ISO or an NQSO (“Stock Option Agreement”),
and will be in such form and contain such provisions (which need not be the same for each
Participant) as the Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan. To the extent that any Option designated as an
ISO in the Award Agreement fails to qualify as such under applicable law, it shall be treated
instead as a NQSO.

     5.2 Date of Grant. The date of grant of an Option will be the date on which the Committee
makes the determination to grant such Option, unless a later date is otherwise specified by the
Committee at the time it acts to approve the grant. The Stock Option Agreement and a copy of this
Plan will be delivered to the Participant within a reasonable time after the granting of the
Option.

     5.3 Exercise Period. Options will be exercisable within the times or upon the events
determined by the Committee as set forth in the Stock Option Agreement governing such Option;
provided, however, that no Option will be exercisable after the expiration of ten (10) years from
the date the Option is granted; and provided further that no ISO granted to a person who directly
or by attribution owns more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent
Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for the exercise of Options to become exercisable at one
time or from time to time, periodically or otherwise (including, without limitation, the attainment
during a Performance Period of performance goals based on Performance Factors), in such number of
Shares or percentage of Shares as the Committee determines.

     5.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when
the Option is granted and may not be less than 100% of the Fair Market Value of the Shares on the
date of grant; provided that the Exercise Price of any ISO granted to a Ten Percent Stockholder
will not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for
the Shares purchased may be made in accordance with Section 10 of this Plan.

     5.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written
or electronic notice or agreement of stock option exercise (the “Exercise Agreement”) in a form
approved by the Committee (which need not be the same for each Participant), stating the number of
Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise
Agreement, if any, and such representations and agreements regarding Participant’s investment
intent and access to information and other matters, if any, as may be required or desirable by the
Company to comply with applicable securities laws, together with payment in full of the Exercise
Price for the number of Shares being purchased and all applicable withholding taxes.

     5.6 Termination. Notwithstanding the exercise periods set forth in the Stock Option Agreement,
exercise of an Option will always be subject to the following:

     (a) If the Participant is Terminated for any reason except death or Disability, then the
Participant may exercise such Participant’s Options only to the extent that such Options are vested
and exercisable upon the Termination Date no later than three (3) months after the Termination Date
(or such shorter or longer time period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an
NQSO), but in any event, no later than the expiration date of the Options.

     (b) If the Participant is Terminated because of Participant’s death or Disability (or the
Participant dies within three (3) months after a Termination other than because of Participant’s
death or disability), then Participant’s Options may be exercised only to the extent that such
Options are vested and exercisable by Participant on the Termination Date and must be exercised by
Participant (or Participant’s legal representative or authorized assignee) no later than twelve
(12) months after the Termination Date (or such shorter or longer time period not exceeding five
(5) years as may be determined by the Committee, with any such exercise beyond (a) three (3) months
after the

3

 

Termination Date when the Termination is for any reason other than the Participant’s death or
Disability, or (b) twelve (12) months after the Termination Date when the Termination is for
Participant’s death or Disability, deemed to be an NQSO), but in any event no later than the
expiration date of the Options.

     5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares
that may be purchased on any exercise of an Option, provided that such minimum number will not
prevent Participant from exercising the Option for the full number of Shares for which it is then
exercisable.

     5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as of the date of grant)
of Shares with respect to which ISOs are exercisable for the first time by a Participant during any
calendar year (under this Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value
of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a
Participant during any calendar year exceeds $100,000, then the Options for the first $100,000
worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the
amount in excess of $100,000 that become exercisable in that calendar year will be NQSOs. In the
event that the Code or the regulations promulgated thereunder are amended after the Effective Date
of this Plan to provide for a different limit on the Fair Market Value of Shares permitted to be
subject to ISOs, such different limit will be automatically incorporated herein and will apply to
any Options granted after the effective date of such amendment.

     5.9 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding
Options and authorize the grant of new Options in substitution therefor, provided that (a) any such
action may not, without the written consent of a Participant, impair any of such Participant’s
rights under any Option previously granted; (b) any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code; and (c)
notwithstanding anything to the contrary elsewhere in the Plan, the Company is subject to Section
21.2 below with respect to any proposal to reprice outstanding Options.

     5.10 No Disqualification. Notwithstanding any other provision in this Plan, no term of this
Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority
granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code
or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the
Code.

     6. Non-Employee Director Equity Awards. Each continuing non-employee director shall receive an
annual grant of RSUs having a Fair Market Value on the date of grant equal to $180,000, and such
RSUs shall be granted on the first business day following the Company’s first regular Board meeting
of the Company’s fiscal year. RSUs granted pursuant to this Section 6 on an annual basis vest on
the first anniversary following the date of grant, provided the non-employee director serves on the
Board on such vesting date, and shall be settled within 30 days of vesting by distribution of
Shares to the non-employee director. New non-employee directors shall be granted initial RSUs
having a Fair Market Value on the date of grant equal to $180,000 on the first business day
following such new non-employee director’s election to the Board, with such amount prorated based
on the number of days from such non-employee director’s election to the Board to, and including,
the Company’s first regular Board meeting of the following fiscal year. RSUs granted to new
non-employee directors pursuant to the preceding sentence vest on the first anniversary of the
grant date, provided the non-employee director serves on the Board on such date, and shall be
settled within 30 days of vesting by distribution of Shares to the non-employee director.

     7. Restricted Stock Awards. A Restricted Stock Award is an offer by the Company to issue to an
eligible person Shares that are subject to restrictions. The Committee will determine to whom an
offer will be made, the number of Shares the person may be issued or purchase, the Purchase Price
(if any), the restrictions to which the Shares will be subject, and all other terms and conditions
of the Restricted Stock Award, subject to the following:

     7.1 Restricted Stock Agreement. All purchases under a Restricted Stock Award will be evidenced
by a written agreement (the “Restricted Stock Agreement”), which will be in substantially a form
(which need not be the same for each Participant) that the Committee shall from time to time
approve, and will comply with and be subject to the terms and conditions of the Plan. A
Participant can accept a Restricted Stock Award only by signing and delivering to the Company the
Restricted Stock Agreement, and full payment of the Purchase Price (if any) and all applicable
withholding taxes, at such time and on such terms as required by the Committee. If the Participant
does not accept

4

 

the Restricted Stock Award at such time and on such terms as required by the Committee, then the
offer of the Restricted Stock Award will terminate, unless the Committee determines otherwise.

     7.2 Purchase Price. The Purchase Price (if any) for a Restricted Stock Award will be
determined by the Committee, and may be less than Fair Market Value on the date the Restricted
Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 10
of this Plan and as permitted in the Restricted Stock Agreement, and in accordance with any
procedures established by the Company.

     7.3 Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to all
restrictions, if any, that the Committee may impose. These restrictions may be based on completion
of a specified period of service with the Company and/or upon completion of the performance goals
as set out in advance in the Restricted Stock Agreement, which shall be in such form and contain
such provisions (which need not be the same for each Participant) as the Committee shall from time
to time approve, and which will comply with and be subject to the terms and conditions of this
Plan. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the
nature, length and starting date of any Performance Period for the Restricted Stock Award; (b)
select performance criteria, including if the Award is intended to qualify as “performance-based
compensation” under Code Section 162(m) from among the Performance Factors, to be used to measure
performance goals, if any; and (c) determine the number of Shares that may be awarded to the
Participant. For Restricted Stock Awards intended to comply with the requirements of Section
162(m) of the Code, the performance goals will be determined at a time when the achievement of the
performance goals remains substantially uncertain and shall otherwise be administered in a manner
that complies with the requirements under that statute. Performance Periods may overlap and a
Participant may participate simultaneously with respect to Restricted Stock Awards that are subject
to different Performance Periods and having different performance goals and other criteria.

     7.4 Termination During Vesting or Performance Period. Restricted Stock Awards shall cease to
vest immediately if a Participant is Terminated during the vesting period or Performance Period
applicable to the Award for any reason, unless the Committee determines otherwise, and any unvested
Shares subject to such Restricted Stock Awards shall be subject to the Company’s right to
repurchase such Shares or otherwise to any forfeiture condition applicable to the Award, as
described in Section 14 of this Plan, if and as set forth in the applicable Restricted Stock
Agreement.

     8. Restricted Stock Units. A Restricted Stock Unit (or RSU) is an award covering a number of
Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted
Stock). A RSU may be awarded for past services already rendered to the Company, or any Affiliate,
Parent or Subsidiary of the Company pursuant to an Award Agreement (the “RSU Agreement”) that will
be in such form (which need not be the same for each Participant) as the Committee will from time
to time approve, and will comply with and be subject to the following:

     8.1 Terms of RSUs. RSUs may vary from Participant to Participant and between groups of
Participants, and may be based upon the achievement of the Company, Affiliate, Parent or Subsidiary
and/or individual performance factors or upon such other criteria as the Committee may determine.
The Committee will determine all terms of each RSU including, without limitation: the number of
Shares subject to each RSU, the time or times during which each RSU shall vest and the RSU be
settled, the consideration to be distributed on such settlement, and the effect on each RSU of its
holder’s Termination. A RSU may be awarded upon satisfaction of such performance goals as are set
out in advance in the Participant’s individual Award Agreement (the “Performance RSU Agreement”)
that will be in such form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and conditions of this
Plan. If the RSU is being earned upon the satisfaction of performance goals pursuant to a
Performance RSU Agreement, then the Committee will: (a) determine the nature, length and starting
date of any Performance Period for each RSU; (b) select performance criteria, including if the
Award is intended to qualify as “performance-based compensation” under Code Section 162(m) from
among the Performance Factors, to be used to measure performance goals, if any; and (c) determine
the number of Shares deemed subject to the RSU. For RSUs intended to comply with the requirements
of Section 162(m) of the Code, the performance goals will be determined at a time when the
achievement of the performance goals remains substantially uncertain and shall otherwise be
administered in a manner that complies with the requirements under that statute. Prior to
settlement of any RSU earned upon the satisfaction of performance goals pursuant to a Performance
RSU Agreement, the Committee shall determine the extent to which such RSU has been earned.
Performance Periods may overlap and Participants may participate simultaneously with respect to
RSUs that

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are subject to different Performance Periods and different performance goals and other criteria.
The number of Shares may be fixed or may vary in accordance with such performance goals and
criteria as may be determined by the Committee. The Committee may adjust the performance goals
applicable to the RSUs to take into account changes in law and accounting or tax rules and to make
such adjustments as the Committee deems necessary or appropriate to reflect the impact of
extraordinary or unusual items, events or circumstances to avoid windfalls or hardships.

     8.2 Form and Timing of Exercise. The portion of a RSU being settled may be paid currently or
on a deferred basis with such interest or dividend equivalent, if any, as the Committee may
determine. Payment may be made in the form of cash or whole Shares or a combination thereof, either
in a lump sum payment or in installments, all as the Committee will determine.

     9. Stock Appreciation Rights. A Stock Appreciation Right (or SAR) is an award that may be
exercised for cash or Shares (which may consist of Restricted Stock), having a value equal to the
value determined by multiplying the difference between the Fair Market Value on the date of
settlement over the Exercise Price and the number of Shares with respect to which the SAR is being
settled. A SAR may be awarded for past services already rendered to the Company, or any Parent or
Subsidiary of the Company pursuant to an Award Agreement (the “SAR Agreement”) that will be in such
form (which need not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the following:

     9.1 Terms of SARs. SARs may vary from Participant to Participant and between groups of
Participants, and may be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may determine. The
Committee will determine all terms of each SAR including, without limitation: the number of Shares
deemed subject to each SAR, the time or times during which each SAR may be settled, the
consideration to be distributed on settlement, and the effect on each SAR of its holder’s
Termination. The Exercise Price of a SAR will be determined by the Committee when the SAR is
granted and may not be less than 100% of the Fair Market Value of the Shares on the date of grant.
A SAR may be awarded upon satisfaction of such performance goals as are set out in advance in the
Participant’s individual Award Agreement (the “Performance SAR Agreement”) that will be in such
form (which need not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this Plan. If the SAR
is being earned upon the satisfaction of performance goals pursuant to a Performance SAR Agreement,
then the Committee will: (a) determine the nature, length and starting date of any Performance
Period for each SAR; (b) select performance criteria, including if the Award is intended to qualify
as “performance-based compensation” under Code Section 162(m) from among the Performance Factors,
to be used to measure performance goals, if any; and (c) determine the number of Shares deemed
subject to the SAR. Prior to exercise of any SAR earned upon the satisfaction of performance goals
pursuant to a Performance SAR Agreement, the Committee shall determine the extent to which such SAR
has been earned. Performance Periods may overlap and Participants may participate simultaneously
with respect to SARs that are subject to different Performance Periods and different performance
goals and other criteria. The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The Committee may adjust the
performance goals applicable to the SARs to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships.
Notwithstanding anything to the contrary elsewhere in the Plan, the Company is subject to Section
21.2 below with respect to any proposal to reprice outstanding SARs. The term of a SAR shall be
ten (10) years from the date the SAR is awarded or such shorter term as may be provided in the
Award Agreement.

     9.2 Form and Timing of Settlement. The portion of a SAR being settled may be paid currently or
on a deferred basis with such interest or dividend equivalent, if any, as the Committee may
determine. Payment may be made in the form of cash or whole Shares or a combination thereof, either
in a lump sum payment or in installments, all as the Committee will determine.

     10. Payment for Share Purchases. Payment for Shares purchased pursuant to this Plan may be
made in cash, by check or by wire transfer or, where expressly approved for the Participant by the
Committee and where permitted by law:

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     (a) by cancellation of indebtedness of the Company to the Participant;

     (b) by surrender of shares that either: (1) have been owned by Participant for more than six
(6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note has been fully paid with respect
to such shares); or (2) were obtained by Participant in the public market;

     (c) cashless “net exercise” arrangement pursuant to which the Company will reduce the number
of Shares issued upon exercise by the largest whole number of Shares having an aggregate Fair
Market Value that does not exceed the aggregate exercise price; provided that the Company shall
accept a cash or other payment from the Participant to the extent of any remaining balance of the
exercise price not satisfied by such reduction in the number of whole Shares to be issued;

     (d) by waiver of compensation due or accrued to the Participant for services rendered;

     (e) with respect only to purchases upon exercise of an Option, and provided that a public
market for the Company’s stock exists, through a “same day sale” commitment from the Participant
and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD
Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of
the Shares so purchased to pay for the Exercise Price and any applicable withholding obligations,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise
Price directly to the Company;

     (f) by such other consideration and method of payment as permitted by the Committee and
applicable law; or

     (g) by any combination of the foregoing.

     11. Withholding Taxes.

     11.1 Withholding Generally. It shall be a condition to the grant of an Award under this Plan
that the Participant satisfy any tax withholding or similar obligations applicable to the Award
that may be legally imposed upon the Participant. Whenever Awards are to be granted or Shares are
to be issued in satisfaction of Awards granted under this Plan, the Participant shall make such
arrangements as the Company may require to remit to the Company an amount sufficient to satisfy
federal, state, local, or foreign withholding tax requirements prior to the delivery of any Award
Agreement or certificate or certificates for Award Shares. Whenever, under this Plan, payments in
satisfaction of Awards are to be made in cash, such payment will be net of an amount sufficient to
satisfy federal, state, and local withholding tax requirements.

     11.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in
connection with the grant, exercise or vesting of any Award that is subject to tax withholding and
the Participant is obligated to pay the Company the amount required to be withheld, the Committee
may allow the Participant to satisfy the minimum withholding tax obligation by electing to have the
Company withhold from the Shares to be issued that number of Shares having a Fair Market Value
equal to the minimum amount required to be withheld, determined on the date that the amount of tax
to be withheld is to be determined (the “Tax Date”). All elections by a Participant to have Shares
withheld for this purpose will be made in writing in a form and during a period acceptable to the
Committee.

     12. Privileges of Stock Ownership; Voting and Dividends. Except to the extent that the
Committee grants an RSU that entitles the Participant to credit for dividends paid on Award Shares
prior to the date such Shares are issued to the Participant (as reflected in the RSU Agreement), no
Participant will have any of the rights of a stockholder with respect to any Shares until the
Shares are issued to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to such Shares,
including the right to vote and receive all dividends or other distributions made or paid with
respect to such Shares; provided, that if such Shares are restricted stock, then any new,
additional or different securities the Participant may become entitled to receive with respect to
such Shares by virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the restricted stock;
provided, further, that the Participant will have no right to retain such stock dividends or stock
distributions with

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respect to Shares that are repurchased at the Participant’s original Purchase Price or otherwise
forfeited to the Company.

     13. Transferability. Awards granted under this Plan, and any interest therein, will not be
transferable or assignable by Participant, and may not be made subject to execution, attachment or
similar process, otherwise than by will or by the laws of descent and distribution or as consistent
with the specific Plan and Award Agreement provisions relating thereto. All Awards shall be
exercisable: (i) during the Participant’s lifetime, only by (A) the Participant, or (B) the
Participant’s guardian or legal representative; and (ii) after Participant’s death, by the legal
representative of the Participant’s heirs or legatees.

     14. Restrictions on Shares. At the discretion of the Committee, the Company may reserve to
itself and/or its assignee(s) in the Award Agreement a right to repurchase a portion of or all
Shares that are not vested held by a Participant following such Participant’s Termination at any
time specified after the Participant’s Termination Date, for cash and/or cancellation of purchase
money indebtedness, at the Participant’s original Exercise Price or Purchase Price, as the case may
be. Alternatively, at the discretion of the Committee, Award Shares issued to the Participant for
which the Participant did not pay any Exercise or Purchase Price may be forfeited to the Company on
such terms and conditions as may be specified in the Award Agreement. All certificates for Shares
or other securities delivered under this Plan will be subject to such stock transfer orders,
legends and other restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or any rules,
regulations and other requirements of the SEC or any stock exchange or automated quotation system
upon which the Shares may be listed or quoted.

     15. Escrow; Pledge of Shares. To enforce any restrictions on a Participant’s Shares, the
Committee may require the Participant to deposit all certificates representing Shares, together
with stock powers or other instruments of transfer approved by the Committee, appropriately
endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until
such restrictions have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates.

     16. Exchange and Buyout of Awards. The Committee may, at any time or from time to time,
authorize the Company, with the consent of the respective Participants, to issue new Awards in
exchange for the surrender and cancellation of any or all outstanding Awards. This Section shall
not be construed to defeat the requirements of Section 21.2 with respect to any proposed repricing
of Options or SARs.

     17. Securities Law and Other Regulatory Compliance. An Award will not be effective unless such
Award is in compliance with all applicable federal and state securities laws, rules and regulations
of any governmental body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of
the Award and also on the date of exercise or other issuance. Notwithstanding any other provision
in this Plan, the Company will have no obligation, and no liability for failure, to issue Shares or
deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from
governmental agencies that the Company determines are necessary or advisable; and/or (b) completion
of any registration or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or advisable. The Company will
be under no obligation to register the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any inability or failure to
do so.

     18. Corporate Transactions.

     18.1 Assumption or Replacement of Awards by Successor. In the event of (a) a dissolution or
liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation
of the Company in a different jurisdiction, or other transaction in which there is no substantial
change in the stockholders of the Company or their relative stock holdings and the Awards granted
under this Plan are assumed, converted or replaced by the successor corporation, which assumption
will be binding on all Participants), (c) a merger in which the Company is the surviving
corporation but after which the stockholders of the Company (other than any stockholder which
merges (or which owns or controls another corporation which merges) with the Company in such
merger) cease to own their shares or

8

 

other equity interests in the Company, (d) the sale of substantially all of the assets of the
Company, or (e) any other transaction which qualifies as a “corporate transaction” under Section
424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in
the Company (except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company from or by the stockholders of the Company), any or all
outstanding Awards may be assumed, converted or replaced by the successor corporation (if any),
which assumption, conversion or replacement will be binding on all Participants, or the successor
corporation may substitute equivalent awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account the existing provisions of
the Awards); provided that all formula Restricted Stock Unit grants, pursuant to Section 6 shall
accelerate and be fully vested upon such merger, consolidation or corporate transaction. In the event such successor corporation (if any) fails to assume or
substitute Awards pursuant to a transaction described in this Subsection 18.1, all such Awards will
expire on such transaction at such time and on such conditions as the Board shall determine.

     18.2 Other Treatment of Awards. Subject to any greater rights granted to Participants under
the foregoing provisions of this Section 18, in the event of the occurrence of any transaction
described in Section 18.1, any outstanding Awards will be treated as provided in the applicable
agreement or plan of merger, consolidation, dissolution, liquidation, sale of assets or other
“corporate transaction.”

     18.3 Assumption of Awards by the Company. The Company, from time to time, also may substitute
or assume outstanding awards granted by another company, whether in connection with an acquisition
of such other company or otherwise, by either; (a) granting an Award under this Plan in
substitution of such other company’s award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award granted under this
Plan. Such substitution or assumption will be permissible if the holder of the substituted or
assumed award would have been eligible to be granted an Award under this Plan if the other company
had applied the rules of this Plan to such grant. In the event the Company assumes an award granted
by another company, the terms and conditions of such award will remain unchanged (except that the
exercise price and the number and nature of Shares issuable upon exercise of any such option will
be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects
to grant a new Option rather than assuming an existing option, such new Option may be granted with
a similarly adjusted Exercise Price.

     19. No Obligation to Employ; Accelerated Expiration of Award for Harmful Act. Nothing in this
Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any
right to continue in the employ of, or to continue any other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate Participant’s employment or other
relationship at any time, with or without cause. Notwithstanding anything to the contrary herein,
if a Participant is Terminated because of such Participant’s actual or alleged commitment of a
criminal act or an intentional tort and the Company (or an employee of the Company) is the victim
or object of such criminal act or intentional tort or such criminal act or intentional tort
results, in the reasonable opinion of the Company, in liability, loss, damage or injury to the
Company, then, at the Company’s election, Participant’s Awards shall not be exercisable or
settleable and shall terminate and expire upon the Participant’s Termination Date. Termination by
the Company based on a Participant’s alleged commitment of a criminal act or an intentional tort
shall be based on a reasonable investigation of the facts and a determination by the Company that a
preponderance of the evidence discovered in such investigation indicates that such Participant is
guilty of such criminal act or intentional tort.

     20. Compliance with Section 409A. Notwithstanding anything to the contrary contained herein,
to the extent that the Committee determines that any Award granted under the Plan is subject to
Code Section 409A and unless otherwise specified in the applicable Award Agreement, the Award
Agreement evidencing such Award shall incorporate the terms and conditions necessary for such Award
to avoid the consequences described in Code Section 409A(a)(1), and to the maximum extent permitted
under applicable law (and unless otherwise stated in the applicable Award Agreement), the Plan and
the Award Agreements shall be interpreted in a manner that results in their conforming to the
requirements of Code Section 409A(a)(2), (3) and (4) and any Department of Treasury or Internal
Revenue Service regulations or other interpretive guidance issued under Section 409A (whenever
issued, the “Guidance”). Notwithstanding anything to the contrary in this Plan (and unless the
Award Agreement provides otherwise, with specific reference to this sentence), to the extent that a
Participant holding an Award that constitutes “deferred compensation” under Section 409A and the
Guidance is a “specified employee” at the time of his or her

9

 

“separation from service” (as each is defined under Section 409A and applicable Guidance), no
distribution or payment of any amount shall be made before a date that is six (6) months following
the date of such Participant’s separation from service or, if earlier, the date of the
Participant’s death within such six (6) month period.

     21. Certain Stockholder Approval Matters.

          21.1 Plan Effectiveness; Increasing Plan Shares. This Plan became effective on July 20, 2004
(the “Effective Date”) and the amendment and restatement of this Plan became effective on September
22, 2008. Any amendment to this Plan increasing the number of Shares available for issuance
hereunder shall be approved by the stockholders of the Company, consistent with applicable laws,
within twelve (12) months before or after the effective date of such amendment (“Amendment
Effective Date”). Upon the Amendment Effective Date, the Board may grant Awards covering such
additional Shares pursuant to this Plan; provided, however, that: (a) no Option granted pursuant to
such increase in the number of Shares subject to this Plan approved by the Board may be exercised
prior to the time such increase has been approved by the stockholders of the Company; and (b) in
the event that stockholder approval of any such amendment increasing the number of Shares subject
to this Plan is not obtained, all Awards covering such additional Shares granted hereunder will be
canceled, any Shares issued pursuant to any Award will be canceled, and any purchase of Shares
hereunder will be rescinded.

          21.2 Repricing Matters. Except in connection with a corporate transaction involving the
Company (including without limitation any stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification, reorganization, merger, consolidation,
split-up, spin-off or exchange of shares), the terms of outstanding Awards may not without
stockholder approval be amended to reduce the exercise price of outstanding Options or SARs, or to
cancel outstanding Options or SARs in exchange either for (a) cash, or (b) new Options, SARS or
other Awards with an exercise price that is less than the exercise price of the original
(cancelled) Options or SARs.

     22. Term of Plan. Unless earlier terminated as provided herein, this Plan will terminate on
July 20, 2014.

     23. Amendment or Termination of Plan. The Board may at any time terminate or amend this Plan
in any respect, including without limitation amendment of Section 6 of this Plan; provided,
however, that the Board will not, without the approval of the stockholders of the Company, amend
this Plan to increase the number of shares that may be issued under this Plan, change the
designation of employees or class of employees eligible for participation in this Plan, take any
action in conflict with Section 21.2 above, or otherwise materially modify a provision of the Plan
if such modification requires stockholder approval under Nasdaq rules.

     24. Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board, the submission
of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will
be construed as creating any limitations on the power of the Board to adopt such additional
compensation arrangements as it may deem desirable, including, without limitation, the granting of
stock options and bonuses otherwise than under this Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.

     25. Definitions. As used in this Plan, the following terms will have the following meanings:

     “Affiliate” means any corporation that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with, another corporation,
where “control” (including the terms “controlled by” and “under common control with”) means the
possession, direct or indirect, of the power to cause the direction of the management and policies
of the corporation, whether through the ownership of voting securities, by contract or otherwise.

     “Award” means any award under this Plan, including any Option, Stock Appreciation Right,
Restricted Stock Unit, or Restricted Stock Award.

     “Award Agreement” means, with respect to each Award, the signed written agreement between the
Company and the Participant setting forth the terms and conditions of the Award.

     “Board” means the Board of Directors of the Company.

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     “Code” means the Internal Revenue Code of 1986, as amended.

     “Committee” means the committee appointed by the Board to administer this Plan, or if no such
committee is appointed, the Board.

     “Company” means Symantec Corporation, a corporation organized under the laws of the State of
Delaware, or any successor corporation.

     “Disability” means a disability, whether temporary or permanent, partial or total, within the
meaning of Section 22(e)(3) of the Code, as determined by the Committee.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Exercise Price” means the price at which a holder of an Option may purchase the Shares
issuable upon exercise of the Option, and in the case of a Stock Appreciation Right the value
specified on the date of grant that is subtracted from the Fair Market Value when such Stock
Appreciation Right is settled.

     “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock
determined as follows:

          (a) if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global
Market or the Nasdaq Capital Market (collectively, the “Nasdaq Market”), its closing price on the
Nasdaq Market on the date of determination as reported in The Wall Street Journal;

          (b) if such Common Stock is publicly traded and is then listed on a national securities
exchange, its closing price on the date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street
Journal;

          (c) if such Common Stock is publicly traded but is not quoted on the Nasdaq Market nor listed
or admitted to trading on a national securities exchange, the average of the closing bid and asked
prices on the date of determination as reported in The Wall Street Journal; or

          (d) if none of the foregoing is applicable, by the Committee in good faith.

     “Insider” means an officer or director of the Company or any other person whose transactions
in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

     “Outside Director” shall mean a person who satisfies the requirements of an “outside director”
as set forth in regulations promulgated under Section 162(m) of the Code.

     “Option” means an award of an option to purchase Shares pursuant to Section 5.

     “Parent” means any corporation (other than the Company) in an unbroken chain of corporations
ending with the Company, if at the time of the granting of an Award under this Plan, each of such
corporations other than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     “Participant” means a person who receives an Award under this Plan.

     “Performance Factors” means the factors selected by the Committee from among the following
measures to determine whether the performance goals established by the Committee and applicable to
Awards have been satisfied:

          (1) Net revenue and/or net revenue growth;

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          (2) Earnings before income taxes and amortization and/or earnings before income taxes and
amortization growth;

          (3) Operating income and/or operating income growth;

          (4) Net income and/or net income growth;

          (5) Earnings per share and/or earnings per share growth;

          (6) Total stockholder return and/or total stockholder return growth;

          (7) Return on equity;

          (8) Operating cash flow return on income;

          (9) Adjusted operating cash flow return on income;

          (10) Economic value added; and

          (11) Individual business goals or criteria that can be objectively specified in a manner that
complies with Section 162(m).

     “Performance Period” means the period of service determined by the Committee, not to exceed
five years, during which years of service or performance is to be measured for Restricted Stock
Awards.

     “Plan” means this Symantec Corporation 2004 Equity Incentive Plan, as amended from time to
time.

     “Purchase Price” means the price to be paid for Shares acquired under this Plan pursuant to an
Award other than an Option.

     “Restricted Stock Award” means an award of Shares pursuant to Section 7.

     “Restricted Stock Unit” or “RSU” means an award of Shares pursuant to Section 8.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Shares” means shares of the Company’s Common Stock reserved for issuance under this Plan, as
adjusted pursuant to Sections 2 and 18, and any successor security.

     “Stock Appreciation Right” or “SAR” means an Award, granted pursuant to Section 9.

     “Subsidiary” means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of granting of the Award, each of the
corporations other than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the other corporations in
such chain.

     “Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant,
that the Participant has for any reason ceased to provide services as an employee, director,
consultant, independent contractor or advisor to the Company or a Parent, Subsidiary or Affiliate
of the Company, except in the case of sick leave, military leave, or any other leave of absence
approved by the Committee, provided that such leave is for a period of not more than ninety (90)
days, or reinstatement upon the expiration of such leave is guaranteed by contract or statute. The
Committee will have sole discretion to determine whether a Participant has ceased to provide
services and the effective date on which the Participant ceased to provide services (the
“Termination Date”).

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]