Document:

exv4w1

Exhibit 4.1

      

Leap Wireless International, Inc.

and

Mellon Investor Services LLC

as Rights Agent

Tax Benefit Preservation Plan

Dated as of September 13, 2010

      

 

 

TAX BENEFIT PRESERVATION PLAN

          Tax Benefit Preservation Plan, dated as of September 13, 2010 (this “Plan”), between Leap
Wireless International, Inc., a Delaware corporation (the “Company”), and Mellon Investor Services
LLC, a New Jersey limited liability company, as Rights Agent (the “Rights Agent”).

RECITALS

          WHEREAS, on September 13, 2010, the Board of Directors (the “Board”) of the Company adopted
this Plan, and has authorized and declared a dividend of one preferred stock purchase right (a
“Right”) for each share of Common Stock (as defined in Section 1.6) of the Company
outstanding at the close of business on September 24, 2010 (the “Record Date”) and has 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 earliest
of the Distribution Date and the Expiration Date (as such terms are defined in Sections 3.1 and
7.1, respectively), each Right initially representing the right to purchase one one-thousandth
(subject to adjustment) of a share of Series A Junior Participating Preferred Stock, par value
$.0001 per share (the “Preferred Stock”), of the Company having the rights, powers and preferences
set forth in the form of Certificate of Designations of Series A Junior Participating Preferred
Stock attached hereto as Exhibit A (as amended from time to time), upon the terms and
subject to the conditions hereinafter set forth, 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;

          WHEREAS, if the Company experiences an “ownership change,” as defined in Section 382 of the
Internal Revenue Code of 1986, as amended (the “Code”), its ability to use net operating losses and
certain other tax attributes (collectively, “NOLs”) for income tax purposes could be substantially
limited or lost altogether; and

          WHEREAS, the Company views its NOLs as a valuable asset of the Company, which is likely to
inure to the benefit of the Company and its shareholders, and the Company believes that it is in
the best interests of the Company and its shareholders that the Company provide for the protection
of the Company’s NOLs on the terms and conditions set forth herein.

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

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

          1.1. “Acquiring Person” shall mean any Person who or which, from and after the date of this
Plan, shall be the Beneficial Owner of 4.99% or more of the Common Stock then outstanding, but
shall not include (i) an Exempt Person or (ii) any Existing Holder, unless and until such time as
such Existing Holder shall become the Beneficial Owner of one or more additional shares of Common
Stock (other than pursuant to a dividend or distribution paid or
made by the Company on the outstanding Common Stock in Common Stock or pursuant to a

 

 

split or
subdivision of the outstanding Common Stock), unless upon acquiring such Beneficial Ownership, such
Existing Holder does not Beneficially Own 4.99% or more of the Common Stock then outstanding.
Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the result of (x) an
acquisition of Common Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares Beneficially Owned by such Person to 4.99% or more of
the Common Stock then outstanding, provided, however, that if a Person shall become the Beneficial
Owner of 4.99% or more of the Common Stock then outstanding solely by reason of share purchases by
the Company and shall, after such share purchases by the Company, become the Beneficial Owner of
one or more additional shares of Common Stock (other than pursuant to a dividend or distribution
paid or made by the Company on the outstanding Common Stock in 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 Common Stock, such
Person does not Beneficially Own 4.99% or more of the Common Stock then outstanding, or (y) the
acquisition of Common Stock upon the exercise of any options, warrants or other rights, or upon the
initial grant or vesting of restricted stock, in each case, granted by the Company to its directors
or officers. Notwithstanding the foregoing, if the Board determines in good faith that a Person
who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of
this Section 1.1, has become such 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 Plan), and such Person divests as promptly as practicable a
sufficient number of shares of Common Stock so that such Person would no longer be an Acquiring
Person, as defined pursuant to the foregoing provisions of this Section 1.1, then such
Person shall not be deemed to be or have become an “Acquiring Person” at any time for any purposes
of this Plan. For all purposes of this Plan, any calculation of the number of shares of Common
Stock outstanding at any particular time, for purposes of determining the particular percentage of
such outstanding Common Stock of which any Person is the Beneficial Owner, shall be made pursuant
to and in accordance with Section 382 of the Code and the Treasury Regulations promulgated
thereunder.

          1.2. “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), as in effect on the date of this Plan.

          1.3. A Person shall be deemed the “Beneficial Owner” of and shall be deemed to “Beneficially
Own” or have “Beneficial Ownership” of any securities:

          1.3.1. which such Person, directly or indirectly, has the Right to Acquire; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to “Beneficially
Own” (w) securities (including rights, options or warrants) which are convertible or exchangeable
into or exercisable for Common Stock until such time as such securities are converted or exchanged
into or exercised for Common Stock except to the extent the acquisition or transfer of securities
(including rights, options or warrants) would be treated as exercised on
the date of its acquisition or transfer under Section 1.382-4(d) of the Treasury Regulations
promulgated under Section 382 of the Code; (x) securities tendered pursuant to a tender or

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exchange
offer made by such Person until such tendered securities are accepted for purchase or exchange; (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 prior to the Distribution Date or pursuant to
Section 3.1 or Section 22 (“Original Rights”) or pursuant to Section 11.9
or Section 11.15 with respect to an adjustment to Original Rights;

          1.3.2. which such Person, directly or indirectly, has or shares the right to vote or dispose
of, or otherwise has “beneficial ownership” of (as defined under Rule 13d-3 of the General Rules
and Regulations under the Exchange Act), provided, however, that Beneficial
Ownership arising solely as a result of any such Person’s participation in a “group” (within the
meaning of Rule 13d-5(b) of the General Rules and Regulations under the Exchange Act) shall be
determined under Section 1.3.3 of this Agreement and not under this Section 1.3.2;
or

          1.3.3. of which any other Person is the Beneficial Owner, if such Person has any agreement,
arrangement or understanding (whether or not in writing) with such other Person with respect to
acquiring, holding, voting or disposing of such securities of the Company, but only if the effect
of such agreement, arrangement or understanding is to treat such Persons as an “entity” under
Section 1.382-3(a)(1) of the Treasury Regulations; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to Beneficially Own, any security (A) if such
Person has the right to vote such security pursuant to an agreement, arrangement or understanding
(whether or not in writing) which (1) arises solely from a revocable proxy 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 of the Exchange Act and (2) is not also then reportable on
Schedule 13D or Schedule 13G under the Exchange Act (or any comparable or successor report), or
(B) if such beneficial ownership arises solely as a result of such Person’s status as a “clearing
agency,” as defined in Section 3(a)(23) of the Exchange Act; provided, further,
that nothing in this Section 1.3.3 shall cause a Person engaged in business as an
underwriter of securities or member of a selling group to be the Beneficial Owner of, or to
Beneficially Own, any securities acquired through such Person’s participation in good faith in an
underwriting syndicate until the expiration of 40 calendar days after the date of such acquisition,
or such later date as the Board of the Company may determine in any specific case.

          Notwithstanding anything herein to the contrary, to the extent not within the foregoing
provisions of this Section 1.3, a Person shall be deemed the Beneficial Owner of, and shall
be deemed to Beneficially Own, securities held by any other Person that such Person would be deemed
to constructively own or that otherwise would be aggregated with shares owned by such Person
pursuant to Section 382 of the Code, or any successor provision or replacement provision and the
Treasury Regulations thereunder.

          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 1.3), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director or employee of
an Exempt Person.

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          1.4. “Business Day” shall mean any day other than a Saturday, Sunday, or a day on which
banking institutions in the State of New York or the State of New Jersey are authorized or
obligated by law or executive order to close.

          1.5. “close of business” on any given date shall mean 5:00 p.m., New York time, on such date;
provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., New York time,
on the next succeeding Business Day.

          1.6. “Common Stock” when used with reference to the Company shall mean the Common Stock, par
value $.0001 per share, of the Company. “Common Stock” when used with reference to any Person
other than the Company shall mean the capital stock with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the management, of such other
Person or, if such Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person, and which has issued and outstanding such capital stock,
equity securities or equity interest.

          1.7. “Exempt Person” shall mean (i) the Company, any Subsidiary of the Company, in each case
including, without limitation, the officers and members of the boards of directors thereof acting
in their fiduciary capacities, or any employee benefit plan of the Company or of any Subsidiary of
the Company or any entity or trustee holding shares of capital stock of the Company for or pursuant
to the terms of any such plan, or for the purpose of funding other employee benefits for employees
of the Company or any Subsidiary of the Company, and (ii) any Person deemed to be an “Exempt
Person” in accordance with Section 28.

          1.8. “Existing Holder” shall mean any Person who, immediately prior to the first public
announcement of the adoption of this Plan, is the Beneficial Owner of 4.99% or more of the Common
Stock then outstanding.

          1.9. “Person” shall mean any individual, partnership, joint venture, limited liability
company, firm, corporation, unincorporated association or organization, trust or other entity, and
shall include any successor (by merger or otherwise) of any such entity.

          1.10. “Right to Acquire” shall mean a legal, equitable or contractual right to acquire
(whether directly or indirectly and whether exercisable immediately, or only after the passage of
time, compliance with regulatory requirements, fulfillment of a condition or otherwise), pursuant
to any agreement, arrangement or understanding, whether or not in writing (excluding customary
agreements entered into in good faith with and between an underwriter and selling group members in
connection with a firm commitment underwriting registered under the Securities Act of 1933, as
amended (the “Securities Act”), or upon the exercise of any option, warrant or right, through
conversion of a security, pursuant to the power to revoke a trust, discretionary account or similar
arrangement, pursuant to the power to terminate a repurchase or similar so-called “stock borrowing”
agreement or arrangement, or pursuant to the automatic termination of a trust, discretionary
account or similar arrangement.

          1.11. “Stock Acquisition Date” shall mean the first date of public announcement (which, for
purposes of this definition, shall include, without limitation, the filing of a report pursuant to
Section 13(d) of the Exchange Act or pursuant to a comparable successor statute) by

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the Company or
an Acquiring Person that an Acquiring Person has become such or that discloses information which
reveals the existence of an Acquiring Person or such earlier date as a majority of the Board shall
become aware of the existence of an Acquiring Person.

          1.12. “Subsidiary” of any Person shall mean any partnership, joint venture, limited liability
company, firm, corporation, unincorporated association, trust or other entity of which a majority
of the voting power of the voting equity securities or equity interests is owned, of record or
beneficially, directly or indirectly, by such Person.

          1.13. A “Trigger Event” shall be deemed to have occurred upon any Person becoming an Acquiring
Person.

          1.14. The following terms shall have the meanings defined for such terms in the Sections set
forth below:

	 	 	 
	Term	 	Section
	Adjustment Shares
	 	11.1.2
	Board
	 	Recitals
	Book Entry Shares
	 	3.1
	Code
	 	Recitals
	common stock equivalent
	 	11.1.3
	Company
	 	Preamble
	current per share market price
	 	11.4.1
	Current Value
	 	11.1.3
	Distribution Date
	 	3.1
	equivalent preferred stock
	 	11.2
	Exchange Act
	 	1.2
	Exchange Consideration
	 	27.1
	Exemption Request
	 	28
	Expiration Date
	 	7.1
	Final Expiration Date
	 	7.1
	NASDAQ
	 	9
	NOLs
	 	Recitals
	Original Rights
	 	1.3.2
	Plan
	 	Preamble
	Preferred Stock
	 	Recitals
	Principal Party
	 	13.2
	Purchase Price
	 	4
	Record Date
	 	Recitals
	Redemption Date
	 	7.1
	Redemption Price
	 	23.1
	Requesting Person
	 	28
	Right
	 	Recitals
	Right Certificate
	 	3.1
	Rights Agent
	 	Preamble

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	Term	 	Section
	Securities Act
	 	1.10
	Security
	 	11.4.1
	Spread
	 	11.1.3
	Substitution Period
	 	11.1.3
	Summary of Rights
	 	3.2
	Trading Day
	 	11.4.1
	Trust
	 	27.1
	Trust Agreement
	 	27.1

          Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the express terms and conditions set forth
herein (and no implied terms or conditions), and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-rights agents as it may deem necessary or
desirable, upon 10 days’ prior written notice to the Rights Agent. In the event the Company
appoints one or more co-rights agents, the respective duties of the Rights Agent and any co-rights
agent shall be as the Company shall determine; provided, however, that the Rights
Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions
of any such co-rights agent.

          Section 3. Issuance of Right Certificates.

          3.1. Rights Evidenced by Stock Certificates. Until the earlier of (i) the close of
business on the tenth (10th) Business Day after the Stock Acquisition Date or (ii) the
close of business on the tenth (10th) Business Day after the date of the commencement
of, or first public announcement of the intent of any 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 Common Stock aggregating 4.99% or more of
the then outstanding Common Stock (the earlier of (i) and (ii) being herein referred to as the
“Distribution Date”), (x) the Rights (unless earlier expired, redeemed or terminated) will be
evidenced (subject to the provisions of Section 3.2) by the certificates representing the
Common Stock registered in the names of the holders thereof or, in the case of uncertificated
shares of Common Stock registered in book entry form (“Book Entry Shares”), by notation in book
entry (which certificates for Common Stock and Book Entry Shares shall also be deemed to be Right
Certificates) and not by separate certificates, and (y) the Rights (and the right to receive
certificates therefor) will be transferable only in connection with the transfer of the underlying
Common Stock. The preceding sentence notwithstanding, (A) prior to the occurrence of a
Distribution Date specified as a result of an event described in clauses (i) or (ii) (or such later
Distribution Date as the Board may select pursuant to this sentence), the Board may postpone, one
or more times, the Distribution Date in order to make a determination pursuant to
Section 7.1(v) or (B) prior to the occurrence of a Distribution Date specified as a result
of an event described in clause (ii) (or such later Distribution Date as the Board may select
pursuant to this sentence), the Board may postpone, one or more times, the Distribution Date which
would occur as a result of an event described in clause (ii) beyond the date set forth in such
clause (ii).
Nothing herein shall permit such a postponement of a Distribution Date after a Person becomes
an Acquiring Person, except as a result of the operation of the third sentence of Section
1.1. As soon as practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign and the Company (or, if requested and provided with all necessary

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information and documents, the Rights Agent) will send, by first-class, 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), at the address of such holder shown on the records of the Company or the
transfer agent or registrar for the Common Stock, one or more certificates for Rights, in
substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right
(subject to adjustment as provided herein) for each share of Common Stock so held. As of and after
the Distribution Date, the Rights will be evidenced solely by such Right Certificates. The Company
shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and,
if such notification is given orally, the Company shall confirm same in writing on or prior to the
Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent
may presume conclusively for all purposes that the Distribution Date has not occurred.

          3.2. Summary of Rights. On the Record Date or as soon as practicable thereafter, the
Company will send or cause to be sent a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit C (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) at the address of such holder shown
on the records of the Company or the transfer agent or registrar for the Common Stock. Any failure
to send a copy of the Summary of Rights shall not invalidate the Rights or affect their transfer
with the Common Stock. With respect to certificates representing Common Stock and Book Entry
Shares outstanding as of the close of business on the Record Date, until the Distribution Date (or
the earlier Expiration Date), the Rights will be evidenced by such certificates for Common Stock
registered in the names of the holders thereof or Book Entry Shares, as applicable, together with a
copy of the Summary of Rights and the registered holders of the Common Stock shall also be
registered holders of the associated Rights. Until the Distribution Date (or the earlier
Expiration Date), the surrender for transfer of any certificate for Common Stock or Book Entry
Shares outstanding at the close of business 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 and the Book Entry Shares, as applicable.

          3.3. New Certificates and Uncertificated Shares After Record Date. Certificates for
Common Stock that become outstanding (whether upon issuance out of authorized but unissued Common
Stock, disposition out of treasury or transfer or exchange of outstanding Common Stock) after the
Record Date but prior to the earliest of the Distribution Date or the Expiration Date, shall have
impressed, printed, stamped, written or otherwise affixed onto them a legend in substantially the
following form:

This certificate also evidences and entitles the holder hereof to certain rights as
set forth in a Tax Benefit Preservation Plan between Leap Wireless International,
Inc. (the “Company”) and Mellon Investor Services LLC, as Rights Agent, dated as of
September 13, 2010, as the same may be amended from time to time (the “Plan”), 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 Plan, such Rights (as defined in the Plan) 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

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Plan without charge after receipt of a written request therefor. As described in
the Plan, Rights which are owned by, transferred to or have been owned by Acquiring
Persons (as defined in the Plan) shall become null and void and will no longer be
transferable.

With respect to any Book Entry Shares, such legend shall be included in a notice to the record
holder of such shares in accordance with applicable law. Until the Distribution Date (or the
earlier Expiration Date), the Rights associated with the Common Stock represented by such
certificates and such Book Entry Shares shall be evidenced solely by such certificates or the Book
Entry Shares alone, and the surrender for transfer of any such certificates or Book Entry Shares,
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 that are no longer
outstanding.

          Notwithstanding this Section 3.3, neither the omission of the legend required hereby,
nor the failure to provide the notice thereof, shall affect the enforceability of any part of this
Plan 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 assignment, including the certifications therein, to be printed on
the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto
and may have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate (but which do not affect the
rights, duties, liabilities or responsibilities of the Rights Agent) and as are not inconsistent
with the provisions of this Plan, 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 trading system on which the Rights may from time to time be listed or quoted, or to conform to
usage. Subject to the terms and conditions hereof, the Right Certificates, whenever issued, shall
be dated as of the Record Date, and shall show the date of countersignature by the Rights Agent,
and on their face shall entitle the holders thereof to purchase such number of one one-thousandths
of a share of Preferred Stock as shall be set forth therein at the price per one one-thousandth of
a share of Preferred Stock set forth therein (the “Purchase Price”), but the 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. The Right Certificates shall be
executed on behalf of the Company by the Chairman of the Board, or the President, the Chief
Operating Officer, any Executive Vice President or any Senior Vice President of the Company, either
manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a
facsimile thereof, which shall be attested by the Secretary or any Assistant Secretary or the
Treasurer or any Assistant Treasurer of the Company or by such officers as the Board may
designate, either manually or by facsimile signature. The Right Certificates shall be
countersigned, either manually or by facsimile signature, by an authorized signatory of the Rights
Agent, but it shall not be necessary for the same signatory to countersign all of the Right

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Certificates hereunder. No Right Certificate shall be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such 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 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 Plan any such
person was not such an officer.

          Following the Distribution Date, receipt by the Rights Agent of written notice to that effect
and all other necessary information and documents referred to in Section 3.2, the Rights
Agent will keep or cause to be kept, at an office 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, the certificate number of 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. Subject to the provisions of this Plan,
including but not limited to Section 11.1.2 and Section 14, at any time after the
close of business on the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become null and void pursuant to Section 11.1.2 or that have
been exchanged pursuant to Section 27) may be transferred, split up or 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, together with any required form of assignment and certificate duly executed and properly
completed, the Right Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose. The Right Certificates
are transferable only on the registry books of the Rights Agent. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate or Right Certificates until the registered holder shall have (i)
properly completed and duly executed the certificate contained in the form of assignment on the
reverse side of such Right Certificate or Right Certificates, (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights
represented by such Right Certificate as the Company or the Rights Agent shall reasonably request,
and (iii) paid a sum sufficient to cover any tax or charge that may be imposed in connection with
any transfer, split up, combination or exchange of Right Certificates as required by Section
9 hereof. Thereupon, the Rights Agent,
subject to the provisions of this Plan, shall countersign and deliver to the Person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Rights
Agent shall forward any such sum collected by it to the Company or to such Persons as the Company
shall specify by written notice. The Rights Agent shall have no duty or obligation under any

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Section of this Plan that requires the payment of taxes or charges unless and until it is satisfied
that all such taxes and/or charges have been paid.

          Subject to the provisions of Section 11.1.2, at any time after the Distribution Date
and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence
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 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 countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.

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

          7.1. Exercise of Rights. Subject to Section 11.1.2 and except as otherwise
provided herein, the registered holder of any Right Certificate may exercise the Rights evidenced
thereby in whole or in part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase and certification on the reverse side thereof
properly completed and duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase Price for 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 and an amount equal to any tax or
charge required to be paid under Section 9 hereof, at any time prior to the time (the
“Expiration Date”) that is the earliest of (i) the close of business on September 30, 2020 (the
“Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section
23 (the “Redemption Date”), (iii) the closing of any merger or other acquisition transaction
involving the Company pursuant to an agreement of the type described in Section 13.3 at
which time the Rights are deemed terminated, (iv) the time at which the Rights are exchanged as
provided in Section 27, or (v) the time at which the Board determines that the NOLs are
utilized in all material respects or no longer available in any material respect under Section 382
of the Code or that an ownership change under Section 382 of the Code would not adversely impact in
any material respect the time period in which the Company could use the NOLs, or materially impair
the amount of the NOLs that could be used by the Company in any particular time period, for
applicable tax purposes. The Company shall promptly notify the Rights Agent in writing upon the
occurrence of the Expiration Date and, if such notification is given orally, the Company shall
confirm same in writing on or prior to the Business Day next following. Until such notice is
received by the Rights Agent, the Rights Agent may presume conclusively for all purposes, prior to
the Final Expiration Date, that the Expiration Date has not occurred.

          7.2. Purchase. The Purchase Price for each one one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right shall be initially $60.00, shall be subject to
adjustment from time to time as provided in Sections 11, 13 and 26 and shall
be payable in lawful money of the United States of America in accordance with Section 7.3.

          7.3. Payment Procedures. Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to purchase and

10

 

certification properly completed and duly executed, accompanied (subject to the following sentence)
by payment of the aggregate Purchase Price for the total number of one one-thousandths of a share
of Preferred Stock to be purchased and an amount equal to any applicable tax or charge required to
be paid by the holder of such Right Certificate in accordance with Section 9 hereof, in
cash or by certified or 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) certificates for the number of
shares of Preferred Stock to be purchased and the Company hereby irrevocably authorizes each such
transfer agent to comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depository agent, requisition from such depositary agent 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 all such requests, (ii) when necessary to comply with this
Plan, requisition from the Company the amount of cash to be paid in lieu of the issuance of
fractional shares in accordance with Section 14 hereof or otherwise in accordance with
Section 11.1.3 hereof; (iii) after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such holder and (iv) when
necessary to comply with this Plan, after receipt of the cash requisitioned from the Company,
deliver such cash to or upon the order of the registered holder of such Right Certificate. In the
event that the Company is obligated to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11.1.3 hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when necessary to comply with this Plan.

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

          7.5. Full Information Concerning Ownership. Notwithstanding anything in this Plan 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 or other securities upon the occurrence of any
purported transfer or exercise of Rights pursuant to Section 6 hereof or as set forth in
this Section 7 unless such registered holder shall have (i) properly completed and duly
executed the certification contained in the form of election to purchase set forth on the reverse
side of the Right Certificate surrendered for such transfer or exercise, (ii) not indicated an
affirmative response to clause 1 or 2 thereof, and (iii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) as the Company or the Rights
Agent 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 

11

 

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 respect or lieu thereof except as expressly permitted
by any of the provisions of this Plan. 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. Subject
to applicable law, regulation and the Rights Agent’s internal policies, the Rights Agent shall
maintain in a retrievable database electronic records of all cancelled or destroyed Rights
Certificates which have been cancelled or destroyed by the Rights Agent. The Rights Agent shall
maintain such electronic records or physical records for the time period required by applicable
law, regulation and the Rights Agent’s internal policies. Subject to applicable law, regulation
and the Rights Agent’s internal policies, upon written request of the Company (and at the expense
of the Company), the Rights Agent shall (i) destroy or cause to be destroyed such cancelled Rights
Certificates, and/or (ii) provide to the Company or its designee copies of any such electronic
records or physical records relating to Rights Certificates cancelled or destroyed by the Rights
Agent.

          Section 9. Reservation and Availability of Capital Stock. The Company covenants and
agrees that, from and after the Distribution Date, it will cause to be reserved and kept available
out of its authorized and unissued Preferred Stock (and, following the occurrence of a Trigger
Event, out of its authorized and unissued Common Stock or other securities or out of its shares
held in its treasury) the number of shares of Preferred Stock (and, following the occurrence of a
Trigger Event, Common Stock and/or other securities) that will be sufficient to permit the exercise
in full of all outstanding Rights.

          So long as the Preferred Stock (and, following the occurrence of a Trigger Event, Common Stock
and/or other securities) issuable upon the exercise of Rights may be listed on The NASDAQ Global
Select Market (“NASDAQ”) or any other national securities exchange or traded in the
over-the-counter market, 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 admitted to
trading on the NASDAQ or such other exchange or market upon official notice of issuance upon such
exercise.

          The Company covenants and agrees that it will take all such action as may be necessary to
ensure that all Preferred Stock (and, following the occurrence of a Trigger Event, Common Stock
and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.

          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 Preferred Stock upon the exercise of Rights,
to register and qualify such 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 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, from time to time for a period of time not
to 

12

 

exceed one hundred twenty (120) days in any particular instance, the exercisability of the
Rights in order to prepare and file a registration statement under the Securities Act and permit it
to become effective or in order to prepare and file any supplement or amendment to such
registration statement that the Board determines to be necessary and appropriate under applicable
law. 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. The Company shall notify the Rights Agent
whenever it makes a public announcement pursuant to this Section and give the Rights Agent a copy
of such announcement. Notwithstanding any provision of this Plan to the contrary, the Rights shall
not be exercisable in any jurisdiction unless the requisite qualification or exemption in such
jurisdiction shall have been obtained and until a registration statement under the Securities Act
(if required) shall have been declared effective.

          The Company further covenants and agrees that it will pay when due and payable any and all
taxes and charges which may be payable in respect of the issuance or delivery of the Right
Certificates or of any Preferred Stock (or Common Stock and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to pay any tax or
charge 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 for the Preferred Stock (or Common
Stock and/or other securities, as the case may be) 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 for Preferred Stock (or Common Stock and/or other securities, as the case may be)
in a name other than that of the registered holder upon the exercise of any Rights until any such
tax or charge shall have been paid (any such tax or charge being payable by the registered holder
of such Right Certificate at the time of surrender) or until it has been established to the
Company’s or the Rights Agent’s satisfaction that no such tax or charge is due.

          Section 10. Preferred Stock Record Date. Each Person in whose name any certificate
for Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon
the exercise of Rights shall for all purposes be deemed to have become the holder of record of the
Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges)
was made; provided, however, that if the date of such surrender and payment is a date upon which
the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of
the Company are closed, such Person shall be deemed to have become the record holder of such shares
(fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer
books of the Company are open. Prior to the exercise of the Rights evidenced thereby (or an
exchange pursuant to Section 27), the holder of a Right Certificate shall not be entitled
to any rights of a holder of Preferred Stock (or Common Stock or other securities, as the case may
be) 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.

13

 

          Section 11. Adjustment of Purchase Price, Number of Shares or 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.

          11.1. Post-Execution Events.

          11.1.1. Corporate Dividends, Reclassifications, Etc. In the event the Company shall,
at any time after the date of this Plan, (A) declare and pay a dividend on the Preferred Stock
payable in 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 11.1.1,
the Purchase Price in effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the number and kind of shares of
capital stock issuable on such date, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive the aggregate number and kind of
shares of capital stock which, if such Right had been exercised immediately prior to such date and
at a time when the Preferred Stock transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the shares of capital
stock of the Company issuable upon exercise of one Right. If an event occurs which would require
an adjustment under both Section 11.1.1 and Section 11.1.2, the adjustment provided
for in this Section 11.1.1 shall be in addition to, and shall be made prior to, the
adjustment required pursuant to Section 11.1.2.

          11.1.2. Acquiring Person Events; Triggering Events. Subject to Section 27, in
the event that a Trigger Event occurs, then, from and after the first occurrence of such event,
each holder of a Right, except as provided below, shall thereafter have a right to receive, upon
exercise thereof at a price per Right equal to the then current Purchase Price multiplied by the
number of one one-thousandths of a share of Preferred Stock for which a Right is then exercisable
(without giving effect to this Section 11.1.2), in accordance with the terms of this Plan
and in lieu of Preferred Stock, such number of shares of Common Stock as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the number of one one-thousandths of
a share of Preferred Stock for which a Right is then exercisable (without giving effect to this
Section 11.1.2) and (y) dividing that product by 50% of the then current per share market
price of the Common Stock (determined pursuant to Section 11.4) on the first of the date of
the occurrence of, or the date of the first public announcement of, a Trigger Event (the
“Adjustment Shares”); provided that the Purchase Price and the number of Adjustment Shares shall
thereafter be subject to further adjustment as appropriate in accordance with Section 11.6.
Notwithstanding the foregoing, upon the occurrence of a Trigger Event, any Rights that are or
were acquired or Beneficially Owned by (1) any Acquiring Person, (2) a transferee of any
Acquiring Person who becomes a transferee after the Acquiring Person becomes such, or (3) a
transferee of any Acquiring Person who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer

14

 

(whether
or not for consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of this Section 11.1.2, and subsequent transferees, shall become null and void
without any further action, and any holder (whether or not such holder is an Acquiring Person) of
such Rights shall thereafter have no right to exercise such Rights under any provision of this Plan
or otherwise. From and after the Trigger Event, no Right Certificate shall be issued pursuant to
Section 3 or Section 6 that represents Rights that are or have become null and 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 null and void pursuant to the provisions of
this paragraph shall be canceled.

          The Company shall use all reasonable efforts to ensure that the provisions of this Section
11.1.2 are complied with, but shall have no liability to any holder of Right Certificates or
any other Person as a result of its failure to make any determinations with respect to any
Acquiring Person or transferees hereunder.

          From and after the occurrence of an event specified in Section 13.1, any Rights that
theretofore have not been exercised pursuant to this Section 11.1.2 shall thereafter be
exercisable only in accordance with Section 13 and not pursuant to this Section
11.1.2.

          11.1.3. Insufficient Shares. The Company may at its option substitute for Common
Stock issuable upon the exercise of Rights in accordance with the foregoing Section 11.1.2
a number of shares of Preferred Stock or fraction thereof such that the then current per share
market price of one share of Preferred Stock multiplied by such number or fraction is equal to the
then current per share market price of one share of Common Stock. In the event that upon the
occurrence of a Trigger Event there shall not be sufficient Common Stock authorized but unissued,
or held by the Company as treasury shares, to permit the exercise in full of the Rights in
accordance with the foregoing Section 11.1.2, the Company shall take all such action as may
be necessary to authorize additional Common Stock for issuance upon exercise of the Rights,
provided, however, that if the Company determines that it is unable to cause the authorization of a
sufficient number of additional shares of Common Stock, then, in the event the Rights become
exercisable, the Company, with respect to each Right and to the extent necessary and permitted by
applicable law and any agreements or instruments in effect on the date hereof to which it is a
party, shall: (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the “Current Value”), over (2) the Purchase Price (such excess, the “Spread”)
and (B) with respect to each Right (other than Rights which have become null and void pursuant to
Section 11.1.2), make adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Preferred Stock, (4) 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 Common Stock,
the Board has deemed in good faith to have substantially the same value as the Common Stock)
(each such share of preferred stock or fractions of shares of preferred stock constituting a
“common stock equivalent”)), (5) debt securities of the Company, (6) other assets or (7) any
combination of the foregoing having an aggregate value equal to the Current Value, where such

15

 

aggregate value has been determined by the Board based upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board; provided, however, that if the Company
shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty
(30) days following the occurrence of a Trigger Event, then the Company shall be obligated to
deliver, to the extent necessary and permitted by applicable law and any agreements or instruments
in effect on the date hereof to which it is a party, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Common Stock (to the extent available) and then,
if necessary, such number or fractions 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 the
Board shall determine in good faith that it is unlikely that sufficient additional Common Stock
would be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period
set forth above may be extended and re-extended to the extent necessary, but not more than one
hundred twenty (120) days following the occurrence of a Trigger Event, in order that the Company
may seek shareholder approval for the authorization of such additional shares (such period as may
be extended, the “Substitution Period”). To the extent that the Company determines that some
actions need be taken pursuant to the second and/or third sentences of this Section 11.1.3,
the Company (x) shall provide that such action shall apply uniformly to all outstanding Rights, and
(y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence 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 11.1.3,
the value of a share of Common Stock shall be the then current per share market price (as
determined pursuant to Section 11.4) on the date of the occurrence of a Trigger Event and
the value of any “common stock equivalent” shall be deemed to have the same value as the Common
Stock on such date. The Board may, but shall not be required to, establish procedures to allocate
the right to receive Common Stock upon the exercise of the Rights among holders of Rights pursuant
to this Section 11.1.3.

          11.2. Dilutive Rights Offering. 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 forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Stock (or securities having the same rights, privileges and preferences as the
Preferred Stock (“equivalent preferred stock”)) or securities convertible into Preferred Stock or
equivalent preferred stock at a price per share of Preferred Stock or per share of equivalent
preferred stock (or having a conversion or exercise price per share, if a security convertible into
or exercisable for Preferred Stock or equivalent preferred stock) less than the then current per
share market price of the Preferred Stock (as determined pursuant to Section 11.4) 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 shares of equivalent
preferred stock outstanding on such record date plus the number of shares of Preferred Stock and
shares of equivalent preferred stock which the aggregate offering price of the total number of
shares of Preferred Stock and/or shares of equivalent preferred stock to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be offered) would purchase
at such current per share market price and the denominator of which shall be the number of 

16

 

shares
of Preferred Stock and shares of equivalent preferred stock outstanding on such record date plus
the number of additional Preferred Stock and/or shares of equivalent preferred stock to be offered
for subscription or purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the consideration to be paid upon
the exercise of one Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon 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, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and
the holders of the Rights. Preferred Stock and shares of equivalent preferred stock owned by or
held for the account of the Company or any Subsidiary of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

          11.3. Distributions. 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, cash, securities or assets (other than a regular
periodic cash dividend at a rate not in excess of 125% of the rate of the last regular periodic
cash dividend theretofore paid or, in case regular periodic cash dividends have not theretofore
been paid, at a rate not in excess of 50% of the average net income per share of the Company for
the four quarters ended immediately prior to the payment of such dividend, or a dividend payable in
Preferred Stock (which dividend, for purposes of this Plan, shall be subject to the provisions of
Section 11.1.1(A))) or convertible securities, or subscription rights or warrants
(excluding those referred to in Section 11.2), 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 (as determined pursuant to Section 11.4) on such record
date, less the fair market value (as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be binding on the Rights
Agent) of the portion of the cash, assets, securities 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 of the Preferred Stock
(as determined pursuant to Section 11.4); 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
that would then be in effect if such record date had not been fixed.

          11.4. Current Per Share Market Value.

          11.4.1. General. For the purpose of any computation hereunder, the “current per share
market price” of any security (a “Security” for the purpose of this Section 11.4.1) on any
date shall be deemed to be the average of the daily closing prices per share of such Security for

17

 

the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior
to, but not including, such date; provided, however, that in the event that the then current per
share market price of the Security is determined during any period following, but not including,
the announcement by the issuer of such Security of (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares or (ii) any
subdivision, combination or reclassification of such Security, and prior to the expiration of
thirty (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 then 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 in the principal consolidated
transaction reporting system with respect to securities listed or admitted to trading on the NASDAQ
or, if the Security is not listed or admitted to trading on the NASDAQ, 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 on such date the Security is not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported thereby 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 Board. If the Security is not publicly held or not so listed or traded,
or if on any such date the Security is not so quoted and no such market maker is making a market in
the Security, “current per share market price” shall mean the fair value per share as determined in
good faith by the Board or, if at the time of such determination there is an Acquiring Person, by a
nationally recognized investment banking firm selected by the Board, which shall have the duty to
make such determination in a reasonable and objective manner, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for all purposes. 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.

          11.4.2. Preferred Stock. Notwithstanding Section 11.4.1, for the purpose of
any computation hereunder, the “current per share market price” of the Preferred Stock shall be
determined in the same manner as set forth above in Section 11.4.1 (other than the last
sentence thereof). If the current per share market price of the Preferred Stock cannot be
determined in the manner described in Section 11.4.1, the “current per share market price”
of the Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number
may be appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of this Plan)
multiplied by the current per share market price of the Common Stock (as determined pursuant to
Section 11.4.1). If neither
the Common Stock nor the Preferred Stock are publicly held or so listed or traded, or if on
any such date neither the Common Stock nor the Preferred Stock are so quoted and no such market
maker is making a market in either the Common Stock or the Preferred Stock, “current per share
market price” of the Preferred Stock shall mean the fair value per share as determined in good
faith by the Board, or, if at the time of such determination there is an Acquiring Person, by a

18

 

nationally recognized investment banking firm selected by the Board, which shall have the duty to
make such determination in a reasonable and objective manner, which determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For
purposes of this Plan, the “current per share market price” of one one-thousandth of a share of
Preferred Stock shall be equal to the “current per share market price” of one share of Preferred
Stock divided by 1,000.

          11.5. Insignificant Changes. 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.
Any adjustments which by reason of this Section 11.5 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 the nearest one-hundred thousandth of a share of Common Stock or other
share or security, as the case may be.

          11.6. Shares Other Than Preferred Stock. If as a result of an adjustment made
pursuant to Section 11.1, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any Right shall be
subject to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in Sections 11.1,
11.2, 11.3, 11.5, 11.8, 11.9 and 11.13, and the provisions of Sections 7, 9, 10,
13 and 14 with respect to the Preferred Stock shall apply on like terms to any such
other shares.

          11.7. Rights Issued Subsequent to Adjustment. 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 and shares of other capital stock or other securities, assets or cash of the
Company, if any, purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.

          11.8. Effect of Adjustments on Existing Rights. Unless the Company shall have
exercised its election as provided in Section 11.9, upon each adjustment of the Purchase
Price as a result of the calculations made in Section 11.2 and Section 11.3, 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 of Preferred Stock
covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

          11.9. Adjustment in Number of Rights. The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a share of Preferred Stock issuable 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 

19

 

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 ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement (with prompt written notice
thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record
date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Right Certificates have been issued, shall be at least ten (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 11.9, 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, 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 may bear, at the option of the Company,
the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.

          11.10. Right Certificates Unchanged. 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 the Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price per share and the number of one one-thousandths of a share of Preferred
Stock which were expressed in the initial Right Certificates issued hereunder.

          11.11. Par Value Limitations. Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then par value, if any, of the
Preferred Stock or other shares of capital stock issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable Preferred Stock or
other such shares at such adjusted Purchase Price.

          11.12. Deferred Issuance. 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 (with prompt written notice thereof to the Rights Agent)
until the occurrence of such event the issuance to the holder of any Right exercised after such
record date of that number of shares of Preferred Stock and shares of other capital stock or
securities of the Company, if any, issuable upon such exercise over and above the Preferred Stock
and shares
of other capital stock or other securities, assets or cash 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.

20

 

          11.13. Reduction in Purchase Price. Anything in this Section 11 to the
contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase
Price, in addition to those adjustments expressly required by this Section 11, as and to
the extent that 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 of the
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 Preferred Stock or issuance of rights, options or warrants
referred to hereinabove in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such shareholders.

          11.14. Company Not to Diminish Benefits of Rights. The Company covenants and agrees
that after the earlier of the Stock Acquisition Date or Distribution Date it will not, except as
permitted by Section 23, Section 26 or Section 27, 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 substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.

          11.15. Adjustment of Rights Associated with Common Stock. Notwithstanding anything
contained in this Plan to the contrary, in the event that the Company shall at any time after the
date hereof and prior to the Distribution Date (i) declare or pay any dividend on the outstanding
Common Stock payable in shares of Common Stock, (ii) effect a subdivision or consolidation of the
outstanding Common Stock (by reclassification or otherwise than by the payment of dividends payable
in shares of Common Stock) or (iii) combine the outstanding Common Stock into a greater or lesser
number of shares of Common Stock, then in any such case, the number of Rights associated with each
share of Common Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date or in accordance with Section 22 shall be proportionately adjusted so
that the number of Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding immediately prior to the occurrence of
the event and the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event. The adjustments provided for in
this Section 11.15 shall be made successively whenever such a dividend is declared or paid
or such a subdivision, combination or consolidation is effected.

          Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Section 11 or Section 13, the Company shall (a)
promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer
agent for the Common Stock or the Preferred Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate (or if before the Distribution Date, to
each holder of a certificate representing shares of Common Stock or Book Entry Shares in respect
thereof) in accordance with Section 25. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment or statement therein contained and shall have
no duty

21

 

or liability with respect to, and shall not be deemed to have knowledge of any such
adjustment or any such event unless and until it shall have received such certificate.

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

          13.1. Certain Transactions. In the event that, from and after the first occurrence of
a Trigger Event, directly or indirectly, (A) the Company shall consolidate with, or merge with and
into, any other Person and the Company shall not be the continuing or surviving corporation, (B)
any Person shall consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation 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 the Company or any other Person or cash or any other property or (C) the Company
shall sell, exchange, mortgage or otherwise transfer (or one or more of its Subsidiaries shall
sell, exchange, mortgage 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 or Persons (other than the Company or one or more
wholly-owned Subsidiaries of the Company in one or more transactions each of which complies with
Section 11.14), then, and in each such case, proper provision shall be made so that (i)
each holder of a Right (other than Rights which have become null and void pursuant to Section
11.1.2) shall thereafter have the right to receive, upon the exercise thereof at a price per
Right equal to the then current Purchase Price multiplied by the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Trigger Event (as subsequently adjusted pursuant to Sections 11.1.1, 11.2,
11.3, 11.8, 11.9 and 11.12), in accordance with the terms of this Plan and in lieu of
Preferred Stock or Common Stock, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable Common Stock of the Principal Party (as such term is hereinafter
defined) not subject to any liens, encumbrances, rights of first refusal or other adverse claims,
as shall be equal to the result obtained by (x) multiplying the then current Purchase Price by the
number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as subsequently adjusted pursuant to
Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12) and (y) dividing that product by
50% of the then current per share market price of the Common Stock of such Principal Party
(determined pursuant to Section 11.4) on the date of consummation of such consolidation,
merger, sale or transfer; provided that the price per Right so payable and the number of shares of
Common Stock of such Principal Party so receivable upon exercise of a Right shall thereafter be
subject to further adjustment as appropriate in accordance with Section 11.6 to reflect any
events covered thereby occurring in respect of the Common Stock of such Principal Party after the
occurrence of such consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all of the obligations and duties of the Company pursuant to this Plan; (iii) the term
“Company” shall thereafter be deemed to refer to such Principal Party and (iv) such Principal Party
shall take such steps
(including, but not limited to, the reservation of a sufficient number of shares of its Common
Stock in accordance with Section 9) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to 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 

22

 

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 13.1, 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 13.1, and such Principal Party shall take such
steps (including, but not limited to, reservation of shares of 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. The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement confirming (i) that the
requirements of this Section 13.1 and Section 13.2 shall promptly be performed in
accordance with their terms, (ii) that the Principal Party has assumed all the duties,
responsibilities and obligations that the Company owes to the Rights Agent under this Plan, and
(iii) that such consolidation, merger, sale or transfer of assets shall not result in a default by
the Principal Party under this Plan as the same shall have been assumed by the Principal Party
pursuant to this Section 13.1 and Section 13.2 and providing that, as soon as
practicable after executing such agreement pursuant to this Section 13, the Principal
Party, at its own expense, shall:

          (1) 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;

          (2) use its best efforts, if the Common Stock of the Principal Party shall be listed or
admitted to trading on the NASDAQ 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 NASDAQ or such securities exchange;

          (3) 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

          (4) 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.

          In case the Principal Party has provision in any of its authorized securities or in its
articles or certificate of incorporation or by-laws or other instrument governing its corporate
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,
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 11.4) or securities exercisable
for, or convertible into,

23

 

Common Stock or common stock equivalents of such Principal Party at less
than such then current market price (other than to holders of Rights pursuant to this Section
13), or (ii) providing for any special payment, taxes, charges or similar provision in
connection with the issuance of the Common Stock of such Principal Party pursuant to the provision
of Section 13, then, in such event, the Company hereby agrees with each holder of Rights
that it shall not 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.

          The Company covenants and agrees that it shall not, at any time after the Trigger Event, enter
into any transaction of the type described in clauses (A) through (C) of this Section 13.1
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 shareholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of Section 13.2 shall
have received a distribution of Rights previously owned by such Person or (iii) the form or nature
of organization of the Principal Party would preclude or limit the exercisability of the Rights.
The provisions of this Section 13 shall similarly apply to successive transactions of the
type described in clauses (A) through (C) of this Section 13.1.

          13.2. Principal Party. “Principal Party” shall mean:

               (i) in the case of any transaction described in clauses (A) or (B) of the first sentence of
Section 13.1: (i) the Person that is the issuer of the securities into which the Common
Stock is converted in such merger or consolidation, or, if there is more than one such issuer, the
issuer the Common Stock of which has the greatest aggregate market value of shares outstanding, or
(ii) 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 Common Stock
of which has 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 clause (C) of the first sentence in
Section 13.1, 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 (i) or (ii) of this Section 13.2, if the shares of Common
Stock of such Person are not at such time or have not been continuously over the preceding twelve
(12) month period registered under Section 12 of the Exchange Act, then (1) if such Person
is a direct

24

 

or indirect Subsidiary of another Person the shares of Common Stock of which are and
have 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 shares of Common
Stock of all of which are and have 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.

          13.3. Approved Acquisitions. Notwithstanding anything contained herein to the
contrary, upon the consummation of any merger or other acquisition transaction of the type
described in clause (A), (B) or (C) of Section 13.1 involving the Company pursuant to a
merger or other acquisition agreement between the Company and any Person which agreement has been
approved by the Board prior to any Person becoming an Acquiring Person, this Plan and the rights of
holders of Rights hereunder shall be terminated in accordance with Section 7.1.

          Section 14. Fractional Rights and Fractional Shares.

          14.1. Cash in Lieu of Fractional Rights. The Company shall not be required to issue
fractions of Rights or to distribute Right Certificates which evidence fractional Rights (except
prior to the Distribution Date in accordance with Section 11.15). 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 14.1, 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 NASDAQ or, if the Rights are not
listed or admitted to trading on the NASDAQ, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national securities exchange on
which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as reported by the
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. If on any such date no such
market maker is making a market in the Rights, the current market value of the
Rights on such date shall be the fair value of the Rights as determined in good faith by the
Board, or, if at the time of such determination there is an Acquiring Person, by a nationally
recognized investment banking firm selected by the Board, which shall have the duty to make such
determination in a reasonable and objective manner, which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.

25

 

          14.2. Cash in Lieu of Fractional Shares of Preferred Stock. The Company shall not be
required to issue fractions of shares of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock) upon exercise or exchange of the
Rights 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).
Interests in fractions of shares of Preferred Stock in integral multiples of one one-thousandth of
a share of Preferred Stock may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of such depositary receipts shall have
all the rights, privileges and preferences to which they are entitled as Beneficial Owners of the
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 per share market price of one share of Preferred Stock (as determined in accordance with
Section 14.1) for the Trading Day immediately prior to the date of such exercise or
exchange.

          14.3. Cash in Lieu of Fractional Shares of Common Stock. 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 14.1) for the Trading Day
immediately prior to the date of such exercise or exchange.

          14.4. Waiver of Right to Receive Fractional Rights or Shares. The holder of a Right
by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise or exchange of a Right, except as permitted by this
Section 14.

          14.5. Notice and Payment to the Rights Agent. Whenever a payment for fractional
Rights or fractional shares of Common Stock or Preferred Stock is to be made by the Rights Agent,
the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth
in reasonable detail the facts related to such payments and the prices and/or formulas utilized in
calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of
fully collected funds to make such payments. The Rights Agent shall be fully protected in relying
upon such a certificate and shall have no duty with respect to, and shall not be deemed to have
knowledge of any payment for fractional Rights or fractional shares or Common Stock or Preferred
Stock under any Section of this Plan relating to the
payment of fractional Rights or fractional shares of Common Stock or Preferred Stock unless
and until the Rights Agent shall have received such a certificate and sufficient monies.

          Section 15. Rights of Action. All rights of action in respect of this Plan, except
the rights of action given to the Rights Agent under Section 18 and Section 20, are
vested in the respective registered holders of the Right Certificates (and, prior to the
Distribution Date,

26

 

the registered holders of the Common Stock); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution
Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce this Plan, and
may institute and maintain any suit, action or proceeding against the Company to enforce this Plan,
or otherwise enforce or act in respect of his right to exercise the Rights evidenced by such Right
Certificate (or, prior to the Distribution Date, such Common Stock) in the manner provided in such
Right Certificate and in this Plan. 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 Plan and shall be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened violations of, the
obligations of any Person (including, without limitation, the Company) subject to this Plan.

          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 not be evidenced by a Right
Certificate and will be transferable only in connection with the transfer of the Common
Stock;

          (b) as of and after the Distribution Date, the Right Certificates are transferable only
on the registry books of the Rights Agent if surrendered at the office of the Rights Agent
designated for such purpose, duly endorsed or accompanied by a proper instrument of
transfer, and such additional evidence of the identity of the Beneficial Owner and/or former
Beneficial Owner as the Company or the Rights Agent shall reasonably request;

          (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 associated Common Stock
certificate or Book Entry Shares) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right
Certificates or the associated Common Stock certificate (or notices provided to holders of
Book Entry Shares) made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any
notice to the contrary; and

          (d) notwithstanding anything in this Plan to the contrary, neither the Company nor the
Rights Agent shall have any liability to any holder of a Right or other Person as a result
of its inability to perform any of its obligations under this Plan by
reason of any preliminary or permanent injunction or other order, judgment, decree or
ruling (whether interlocutory or final) issued by a court or by a governmental, regulatory,
self-regulatory or administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation.

27

 

          Section 17. Right Certificate Holder Not Deemed a Shareholder. 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 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 shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.

          Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder in accordance with a fee
schedule to be mutually agreed upon and, from time to time, on demand of the Rights Agent, its
reasonable expenses, including but not limited to the reasonable fees and expenses of its counsel,
and other disbursements incurred in connection with the preparation, negotiation, delivery,
amendment, administration and execution of this Plan 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, damage, judgment, fine, penalty, claim, demand, settlement, cost or
expense (including, without limitation, the reasonable fees and expenses of legal counsel),
incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent
(each as determined by a final, non-appealable judgment of a court of competent jurisdiction), for
any action taken, suffered or omitted to be taken by the Rights Agent in connection with the
acceptance and administration of this Plan, or the exercise or performance of its duties hereunder,
including without limitation, the costs and expenses of defending against any claim of liability
hereunder, directly or indirectly. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company to the extent that the Rights Agent is successful, in
whole or in part, with respect to such enforcement proceeding. The provisions of this Section
18 and Section 20 below shall survive the termination of this Plan, the exercise or
expiration of the Rights and the resignation, replacement or removal of the Rights Agent hereunder,
including, without limitation, the reasonable costs and expenses of defending against a claim of
liability hereunder.

          The Rights Agent shall be authorized and protected and shall incur no liability for or in
respect of any action taken, suffered or omitted to be taken by it in connection with its
acceptance and administration of this Plan and the exercise and performance of its duties hereunder
in reliance upon any Right Certificate or certificate for the Preferred Stock or the Common Stock
or for any other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, 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. The Rights Agent
shall not be deemed to have knowledge of any event of which it was supposed to receive notice
thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for
failing to take any action in connection therewith unless and until it has received such notice.

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          Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any Person
into which the Rights Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or
any successor Rights Agent shall be a party, or any Person succeeding to the shareowner services
business or corporate trust or stock transfer business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Plan without the execution or filing
of any paper or any further act on the part of any of the parties hereto, provided that such Person
would be eligible for appointment as a successor Rights Agent under the provisions of Section
21. In case at the time such successor Rights Agent shall succeed to the agency created by
this Plan, 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 Plan.

          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 Plan.

          Section 20. Duties of Rights Agent. The Rights Agent undertakes to perform only the
duties and obligations expressly imposed by this Plan (and no implied duties or obligations) 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:

          20.1. Legal Counsel. The Rights Agent may consult with outside or internal legal
counsel selected by it (who may be legal counsel for the Company and/or the Board), and the advice
or opinion of such counsel shall be full and complete authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered
or omitted to be taken by it in accordance with such advice or opinion.

          20.2. Certificates as to Facts or Matters. Whenever in the performance of its duties
under this Plan the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the determination of the
current per share market price of any security) be proved or established by the Company prior to
taking or suffering or omitting to take 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 any one of the President, the Chief
Operating Officer, any Executive Vice President, any Senior Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company and delivered to the
Rights Agent; and such certificate shall be full and complete authorization and protection to the
Rights Agent and the Rights Agent shall incur no liability for or in respect of any action

29

 

taken,
suffered or omitted to be taken by it under the provisions of this Plan in reliance upon such
certificate.

          20.3. Standard of Care. The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful misconduct (each as
determined by a final, non-appealable judgment of a court of competent jurisdiction). Anything to
the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect,
consequential, incidental or punitive loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss
or damage. Any liability of the Rights Agent under this Agreement shall be limited to four times
the amount of annual fees paid by the Company to the Rights Agent.

          20.4. Reliance on Plan and Right Certificates. The Rights Agent shall not be liable
for or by reason of any of the statements of fact or recitals contained in this Plan or in the
Right Certificates (except as to its countersignature on such Right Certificates) or be required to
verify the same, but all such statements and recitals are and shall be deemed to have been made by
the Company only.

          20.5. No Responsibility as to Certain Matters. The Rights Agent shall not have any
liability for or be under any responsibility in respect of the validity of this Plan 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 failure by the Company to
satisfy conditions contained in this Plan or in any Right Certificate; nor shall it be responsible
for any change in the exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 11.1.2 hereof) or any change or adjustment in the terms of the Rights,
including any adjustment required under the provisions of Sections 3, 11, 13, 23 or
27 hereof or responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished
pursuant to Section 12 hereof, describing any such change or adjustment, upon which the
Rights Agent may rely); nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Stock or other securities to be
issued pursuant to this Plan or any Right Certificate or as to whether any Preferred Stock or other
securities will, when so issued, be validly authorized and issued, fully paid and nonassessable.

          20.6. Further Assurance by Company. 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 its duties under this Plan.

          20.7. Authorized Company Officers. The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties hereunder from any one of the
President, the Chief Operating Officer, any Executive Vice President, any Senior Vice President,
the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its

30

 

duties, and such
instructions shall be full authorization and protection to the Rights Agent and the Rights Agent
shall not be liable for or in respect of any action taken, suffered or omitted to be taken by it in
accordance with instructions of any such officer or for any delay in acting while waiting for such
instructions. The Rights Agent shall be fully authorized and protected in relying upon the most
recent instructions received by any such officer. 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, suffered or omitted to be taken by the Rights Agent with respect to
its duties or obligations under this Plan and the date on and/or after which such action shall be
taken, suffered or such omission shall be effective. The Rights Agent shall not be liable to the
Company or any other Person for any action taken or suffered by, or omission of, the Rights Agent
in accordance with a proposal included in any such application on or after the date specified
therein (which date shall not be less than three (3) Business Days after the date any such officer
actually receives such application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking of any such action (or the effective date in the case of
omission), the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.

          20.8. Freedom to Trade in Company Securities. The Rights Agent and any shareholder,
affiliate, director, officer, agent 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 Plan. Nothing herein shall
preclude the Rights Agent or any shareholder, affiliate, director, officer, agent or employee from
acting in any other capacity for the Company or for any other Person.

          20.9. Reliance on Attorneys and Agents. The Rights Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder either itself (through
its directors, officers and employees) or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company or any other Person resulting from
any such act, omission, default, neglect or misconduct, absent gross negligence, bad faith or
willful misconduct (each as determined by a final, non-appealable judgment of a court of competent
jurisdiction) in the selection and continued employment thereof.

          20.10. Incomplete Certificate. If, with respect to any Right 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
either not been completed to certify the holder is not an Acquiring Person or a transferee thereof,
or is not signed or indicates an affirmative response to clause 1 and/or 2, the Rights Agent shall
not take any further action with respect to such requested exercise or transfer without first
consulting with the Company.

          20.11. Repayment of Funds. No provision of this Plan shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in the performance of
any of its duties or in the exercise of its rights hereunder if the Rights Agent believes that
repayment of such funds or adequate indemnification against such risk or liability is not assured
to it.

31

 

          20.12. Rights Holders List. At any time and from time to time after the Distribution
Date, upon the request of the Company, the Rights Agent shall promptly deliver to the Company a
list, as of the most recent practicable date (or as of such earlier date as may be specified by the
Company), of the holders of record of Rights.

          Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent
may resign and be discharged from its duties under this Plan upon thirty (30) days’ notice in
writing mailed to the Company and to each transfer agent of the Common Stock and/or Preferred Stock
known to the Rights Agent, as applicable, by registered or certified mail. Following the
Distribution Date, the Company shall promptly notify the holders of the Right Certificates by
first-class mail of any such resignation. In the event the transfer agency relationship in effect
between the Company and the Rights Agent terminates, the Rights Agent will be deemed to have
resigned automatically and be discharged from its duties under this Plan as of the effective date
of such termination. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock and/or Preferred Stock, as applicable,
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 resigning, removed, or incapacitated Rights Agent shall
remit to the Company, or to any successor Rights Agent designated by the Company, all books,
records, funds, certificates or other documents or instruments of any kind then in its possession
which were acquired by such resigning, removed or incapacitated Rights Agent in connection with its
services as Rights Agent hereunder (except for such items that it is required to retain pursuant to
applicable law, regulation, order or the Rights Agent’s internal policies), and shall thereafter be
discharged from all duties and obligations hereunder. Following notice of such removal,
resignation or incapacity, the Company shall appoint a successor to such Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days after giving notice
of such removal or after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a 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) a Person organized and doing business under the laws of the United
States or any state thereof, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal or state authority
and which has at the time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million or (B) an Affiliate of a Person described in clause (A) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any
property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary
for the purpose. Not later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common
Stock and/or Preferred Stock, as applicable, 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, shall not affect the
legality

32

 

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 Plan 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 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 Plan. In addition, in connection with the issuance or sale of Common Stock
following the Distribution Date and prior to the Expiration Date, the Company shall, with respect
to Common Stock so issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, granted or awarded, or upon exercise, conversion or exchange of securities
hereinafter issued by the Company, in each case existing prior to the Distribution Date, issue
Right Certificates representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Right Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would create a significant
risk of material adverse tax consequences to the Company or the Person to whom such Right
Certificate would be issued and (ii) no such Right Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

          Section 23. Redemption.

          23.1. Right to Redeem. The Board may, at its option, at any time prior to a Trigger
Event, redeem all but not less than all of the then outstanding Rights at a redemption price of
$.01 per Right, appropriately adjusted to reflect any stock split, stock dividend, recapitalization
or similar transaction occurring after the date hereof (such redemption price being hereinafter
referred to as the “Redemption Price”), and the Company may, at its option, pay the Redemption
Price in Common Stock (based on the “current per share market price,” determined pursuant to
Section 11.4, of the Common Stock at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board. The redemption of the Rights by the Board may be
made effective at such time, on such basis and subject to such conditions as the Board in its sole
discretion may establish.

          23.2. Redemption Procedures. Immediately upon the action of the Board ordering the
redemption of the Rights (or at such later time as the Board 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 for each Right so held. The Company shall promptly give public notice of any
such redemption (with prompt written notice thereof to the Rights Agent); provided, however, that
the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. The Company shall promptly give, or (by giving
written notice and all necessary information and documents to the Rights Agent) cause the Rights
Agent to give, notice of such redemption to the holders of the then outstanding Rights by mailing
such notice to all such holders at their last addresses as they appear upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed

33

 

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. The failure to give notice
required by this Section 23.2 or any defect therein shall not affect the validity of the
action taken by the Company. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 27, and other than in
connection with the purchase, acquisition or redemption of Common Stock prior to the Distribution
Date.

          Section 24. Notice of Certain Events. In case the Company shall propose at any time
after the earlier of the Stock Acquisition Date and the Distribution Date (a) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any other distribution
to the holders of Preferred Stock (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last regular periodic cash dividend theretofore paid or, in case
regular periodic cash dividends have not theretofore been paid, at a rate not in excess of 50% of
the average net income per share of the Company for the four quarters ended immediately prior to
the payment of such dividends, or a stock dividend on, or a subdivision, combination or
reclassification of the Common Stock), or (b) to offer to the holders of Preferred Stock rights or
warrants to subscribe for or to purchase any additional Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (c) to effect any reclassification of its
Preferred Stock (other than a reclassification involving only the subdivision of outstanding
Preferred Stock), or (d) to effect any consolidation or merger into or with, or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person (other than pursuant to a
merger or other acquisition agreement of the type excluded from the definition of “Beneficial
Ownership” in Section 1.3), or (e) to effect the liquidation, dissolution or winding up of
the Company, or (f) to declare or 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 the Rights Agent and to each holder of a Right Certificate, in accordance with Section
25, a notice of such proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is
to take place and the date of participation therein by the holders of the Preferred Stock and/or
Common 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 (a) or (b) above at least ten (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 ten (10) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Preferred Stock and/or Common Stock, whichever
shall be the earlier.

          In case any event set forth in Section 11.1.2 or Section 13 shall occur, then,
in any such case, (i) the Company shall as soon as practicable thereafter give to the Rights Agent
and to each holder of a Right Certificate, in accordance with Section 25, a notice of the
occurrence of such event, which notice shall describe the event and the consequences of the event
to holders of Rights under Section 11.1.2 and Section 13, and (ii) all references
in this Section 24 to
Preferred

34

 

Stock shall be deemed thereafter to refer to Common Stock
and/or, if appropriate, other securities.

          Section 25. Notices. Subject to the provisions of this Plan, notices or demands
authorized by this Plan to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by overnight delivery
service or first-class mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:

Leap Wireless International, Inc.

5887 Copley Drive

San Diego, CA 92111

Attention: General Counsel

Subject to the provisions of this Plan, including but not limited to Section 21 and
Section 24, any notice or demand authorized by this Plan 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 overnight delivery service or first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:

Mellon Investor Services LLC

480 Washington Boulevard — 29th Floor

Jersey City, NJ 07310

Attention: Tiffany Skiles

with a copy to:

Mellon Investor Services LLC

480 Washington Boulevard — 29th Floor

Jersey City, NJ 07310

Attention: Legal Department

Notices or demands authorized by this Plan to be given or made by the Company or the Rights Agent
to the holder of any Right Certificate (or, prior to the Distribution Date, to the holder of any
certificate representing Common Stock) shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company or the transfer agent or registrar for the Common Stock; provided
that prior to the Distribution Date a filing by the Company with the Securities and Exchange
Commission shall constitute sufficient notice to the holders of securities of the Company,
including the Rights, for purposes of this Plan and no other notice need be given.

          Section 26. Supplements and Amendments. Except as otherwise provided in this
Section 26, 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 Plan in any respect without the approval of any holders of Rights or Common
Stock. From and after the time that the Rights are no longer redeemable, the Company

35

 

may, and the
Rights Agent shall, if the Company so directs, from time to time supplement or amend this Plan
without the approval of any holders of Rights (i) to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any other provisions
herein or (ii) to make any other changes or provisions in regard to matters or questions arising
hereunder which the Company may deem necessary or desirable, including but not limited to extending
the Final Expiration Date; provided, however, that no such supplement or amendment shall adversely
affect the interests of the holders of Rights as such (other than an Acquiring Person), and no such
supplement or amendment may cause the Rights again to become redeemable or cause this Plan again to
become amendable as to an Acquiring Person other than in accordance with this sentence; provided
further, that the right of the Board to extend the Distribution Date or make any other
determination under this Plan that does not affect the rights, duties, obligations or liabilities
of the Rights Agent shall not require any amendment or supplement hereunder. Upon the delivery of
a certificate from an appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section 26, the Rights Agent shall
execute such supplement or amendment. Notwithstanding anything contained in this Plan to the
contrary, the Rights Agent may, but shall not be obligated to, enter into any supplement or
amendment that affects the Rights Agent’s own rights, duties, immunities or obligations under this
Plan.

          Section 27. Exchange.

          27.1. Exchange of Common Stock for Rights. The Board may, at its option, at any time
after the occurrence of a Trigger Event, exchange Common Stock for all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have become null and void
pursuant to the provisions of Section 11.1.2) by exchanging at an exchange ratio of one
share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such amount per Right being hereinafter
referred to as the “Exchange Consideration”). Notwithstanding the foregoing, the Board shall not
be empowered to effect such exchange at any time after any Acquiring Person shall have become the
Beneficial Owner of 50% or more of the Common Stock then outstanding. From and after the
occurrence of an event specified in Section 13.1, any Rights that theretofore have not been
exchanged pursuant to this Section 27.1 shall thereafter be exercisable only in accordance
with Section 13 and may not be exchanged pursuant to this Section 27.1. The
exchange of the Rights by the Board may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. Without limiting the foregoing,
prior to effecting an exchange pursuant to this Section 27, the Board may direct the
Company to enter into a Trust Agreement in such form and with such terms as the Board shall then
approve (the “Trust Agreement”). If the Board so directs, the Company shall enter into the Trust
Agreement and shall issue to the trust created by such agreement (the “Trust”) all of the Common
Stock issuable pursuant to the exchange (or any portion thereof that have not theretofore been
issued in connection with the exchange). From and after the time at which such shares are issued
to the Trust, all shareholders then entitled to receive shares pursuant to the
exchange shall be entitled to receive such shares (and any dividends or distributions made
thereon after the date on which such shares are deposited in the Trust) only from the Trust and
solely upon compliance with the relevant terms and provisions of the Trust Agreement. Any Common
Stock issued at the direction of the Board in connection herewith shall be validly issued, fully
paid and nonassessable Common Stock or Preferred Stock (as the case may be), and

36

 

the Company shall
be deemed to have received as consideration for such issuance a benefit having a value that is at
least equal to the aggregate par value of the shares so issued.

          27.2. Exchange Procedures. Immediately upon the effectiveness of the action of the
Board ordering the exchange for any Rights pursuant to Section 27.1 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 the Exchange Consideration. The Company
shall promptly give public notice of any such exchange (with prompt written notice thereof to the
Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice of exchange shall
state the method by which the exchange of the Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than the Rights that have become
null and void pursuant to the provisions of Section 11.1.2) held by each holder of Rights.

          27.3. Insufficient Shares. The Company may at its option substitute, and, in the
event that there shall not be sufficient Common Stock issued but not outstanding or authorized but
unissued to permit an exchange of Rights for Common Stock as contemplated in accordance with this
Section 27, 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 stock, as such term is defined in
Section 11.2) such that the current per share market price (determined pursuant to
Section 11.4) of one share of Preferred Stock (or equivalent preferred stock) 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 11.4) as of the date of such exchange.

          Section 28. Process to Seek Exemption. Any Person who desires to effect any
acquisition of Common Stock that would, if consummated, result in such Person beneficially owning
4.99% or more of the then outstanding Common Stock (or, in the case of an Existing Holder,
additional shares of Common Stock) (a “Requesting Person”) may, prior to the Stock Acquisition Date
and in accordance with this Section 28, request that the Board grant an exemption with
respect to such acquisition under this Plan so that such Person would be deemed to be an “Exempt
Person” under subsection (ii) of Section 1.7 hereof for purposes of this Plan (an
“Exemption Request”). An Exemption Request shall be in proper form and shall be delivered by
registered mail, return receipt requested, to the Secretary of the Company at the principal
executive office of the Company. The Exemption Request shall be deemed made upon receipt by the
Secretary of the Company. To be in proper form, an Exemption Request shall set forth (i) the name
and address of the Requesting Person, (ii) the number and percentage of shares of
Common Stock then Beneficially Owned by the Requesting Person, together with all Affiliates
and Associates of the Requesting Person, and (iii) a reasonably detailed description of the
transaction or transactions by which the Requesting
Person would propose to acquire Beneficial
Ownership of Common Stock aggregating 4.99% or more of the then outstanding Common Stock and the
maximum number and percentage of shares of Common Stock that the Requesting

37

 

Person proposes to
acquire. The Board shall make a determination whether to grant an exemption in response to an
Exemption Request as promptly as practicable (and, in any event, within ten (10) Business Days)
after receipt thereof; provided, that the failure of the Board to make a determination within such
period shall be deemed to constitute the denial by the Board of the Exemption Request. The
Requesting Person shall respond promptly to reasonable and appropriate requests for additional
information from the Board and its advisors to assist the Board in making its determination. The
Board shall only grant an exemption in response to an Exemption Request if the Board determines in
its sole discretion that the acquisition of Beneficial Ownership of Common Stock by the Requesting
Person will not limit or impair the availability to the Company of the NOLs. Any exemption granted
hereunder may be granted in whole or in part, and may be subject to limitations or conditions
(including a requirement that the Requesting Person agree that it will not acquire Beneficial
Ownership of shares of Common Stock in excess of the maximum number and percentage of shares
approved by the Board), in each case as and to the extent the Board shall determine necessary or
desirable to provide for the protection of the Company’s NOLs. Any Exemption Request may be
submitted on a confidential basis and, except to the extent required by applicable law, the Company
shall maintain the confidentiality of such Exemption Request and the Board’s determination with
respect thereto, unless the information contained in the Exemption Request or the Board’s
determination with respect thereto otherwise becomes publicly available. The Exemption Request
shall be considered and evaluated by directors serving on the Board, or a duly constituted
committee thereof, who are independent of the Company and the Requesting Person and disinterested
with respect to the Exemption Request, and the action of a majority of such independent and
disinterested directors shall be deemed to be the determination of the Board for purposes of such
Exemption Request.

          Section 29. Successors. All the covenants and provisions of this Plan 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 30. Benefits of this Plan. Nothing in this Plan 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 Plan; but this Plan 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 31. Determination and Actions by the Board. The Board, or any duly authorized
committee thereof, shall have the exclusive power and authority to administer this Plan and to
exercise the rights and powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Plan, including, without limitation, the right
and power to (i) interpret the provisions of this Plan and (ii) make all determinations deemed
necessary or advisable for the administration of this Plan (including,
without limitation, a determination to redeem or not redeem the Rights or amend this Plan).
In administering this Plan and exercising the rights and powers specifically granted to the Board
and to the Company hereunder, and in interpreting this Plan and making any determination hereunder,
the Board, or any duly authorized committee thereof, may consider any and all facts, circumstances
or information it deems to be necessary, useful or appropriate. All such actions,

38

 

calculations,
interpretations and determinations that are done or made by the Board, or any duly authorized
committee thereof, 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 to the fullest extent permitted by
applicable law. The Rights Agent is entitled always to presume that the Board, or any duly
authorized committee thereof, acted in good faith and shall be fully protected and incur no
liability in reliance thereon.

          Section 32. Severability. If any term, provision, covenant or restriction of this
Plan or applicable to this Plan is held by a court of competent jurisdiction or other authority to
be invalid, null and void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Plan shall remain in full force and effect and shall in no way be affected,
impaired or invalidated; provided, further, that if any such excluded term, provision, covenant or
restriction shall adversely affect the rights, immunities, duties or obligations of the Rights
Agent, the Rights Agent shall be entitled to resign immediately.

          Section 33. Governing Law. This Plan and each Right Certificate issued hereunder
shall be deemed to be a contract made under the internal 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 34. Counterparts. This Plan 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. A signature to this Plan
transmitted electronically shall have the same authority, effect and enforceability as an original
signature.

          Section 35. Descriptive Heading. Descriptive headings of the several Sections of this
Plan are inserted for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.

          Section 36. Force Majeure. Notwithstanding anything to the contrary contained herein,
the Rights Agent shall not incur any liability for not performing, or a delay in the performance
of, any act, duty, obligation or responsibility by reason of any occurrence beyond the reasonable
control of the Rights Agent (including without limitation any act or provision of any present or
future law or regulation or governmental authority, any act of God, war, civil or military
disobedience or disorder, riot, rebellion, terrorism, insurrection, fire, earthquake, storm, flood,
strike, work stoppage, labor dispute, accident or failure or malfunction of any utilities, means of
communication or computer (software or hardware) services or similar occurrence).

          Section 37. Each Person that is a party hereto acknowledges that the Rights Agent is subject
to the customer identification program (“Customer Identification Program”)
requirements under the USA PATRIOT Act and its implementing regulations, and that the Rights
Agent must obtain, verify and record information that allows the Rights Agent to identify each such
person or entity. Accordingly, prior to accepting an appointment hereunder, the Rights Agent may
request information from any such person or entity that will help the Rights Agent to identify such
person or entity, including without limitation, as applicable, such person 

39

 

or entity’s physical
address, tax identification number, organizational documents, certificate of good standing, license
to do business, or any other information that the Rights Agent deems necessary. Each person or
entity that is a party hereto acknowledges that the Rights Agent cannot accept an appointment
hereunder unless and until the Rights Agent verifies each such person or entity’s identity in
accordance with the Customer Identification Program requirements.

          Section 38. The Bank of New York Mellon Corporation (“BNYM”) has adopted an incentive
compensation program designed (i) to facilitate clients gaining access to and being provided with
explanations about the full range of products and services offered by BNYM and its subsidiaries and
(ii) to expand and develop client relationships. This program may lead to the payment of referral
fees and/or bonuses to employees of BNYM or its subsidiaries who may have been involved in a
referral that resulted in the execution of this Plan, obtaining products or services covered by
this Plan or products or services that may be ancillary or supplemental to such products or
services. Any such referral fees or bonuses are funded by BNYM solely out of fees and commissions
paid under this Plan or with respect to such ancillary or supplemental products or services.

[Signature Page Follows]

40

 

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

	 	 	 	 	 
	 	LEAP WIRELESS INTERNATIONAL, INC.

 	 
	 	By  	/s/
Robert J. Irving, Jr. 	 
	 	 	Name:  	Robert J. Irving, Jr. 	 
	 	 	Title:  	Senior Vice President and General Counsel 	 
	 
	 	MELLON INVESTOR SERVICES LLC

 	 
	 	By  	/s/
Lucinda B. Bray 	 
	 	 	Name:  	Lucinda B. Bray 	 
	 	 	Title:  	Relationship Manager 	 
	 

 

EXHIBIT A

FORM OF

CERTIFICATE OF DESIGNATIONS

of

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

LEAP WIRELESS INTERNATIONAL, INC.

(Pursuant to Section 151 of the

General Corporation Law of the State of Delaware)

 

          Leap Wireless International, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the “Corporation”), hereby certifies
that the following resolution was adopted by the Board of Directors of the Corporation as required
by Section 151 of the General Corporation Law at a meeting duly called and held on September 13,
2010:

               RESOLVED, that pursuant to the authority expressly granted to and vested in the
Board in accordance with the provisions of the Amended and Restated Certificate of
Incorporation of this Corporation, the Board hereby creates a series of Preferred
Stock, par value $.0001 per share (the “Preferred Stock”), of the Corporation and
hereby states the designation and number of shares, and fixes the relative rights,
powers and preferences, and qualifications, limitations and restrictions thereof as
follows:

          Section 1. Designation and Amount. The shares of such series shall be designated as
“Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of
shares constituting the Series A Preferred Stock shall be 160,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.

          Section 2. Dividends and Distributions.

     (A) Subject to the prior and superior rights of the holders of any shares of any class
or series of stock of this Corporation ranking prior and superior to the Series A Preferred
Stock with respect to dividends, the holders of shares of Series A Preferred

A-1

 

Stock, in preference to the holders of Common Stock, par value $.0001 per share (the
“Common Stock”), of the Corporation, and of any other stock ranking junior to the Series A
Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends payable in
cash on the first day of 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 Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such event.

     (B) The Corporation shall declare a dividend or distribution on the Series A Preferred
Stock as provided in paragraph (A) of this Section 2 immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in shares of
Common Stock); provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on
the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.

     (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of
such shares, unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total

A-2

 

amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than sixty (60) days prior to the date fixed
for the payment thereof.

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

     (A) Subject to the provision for adjustment hereinafter set forth, each share of Series
A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted
to a vote of the shareholders of the Corporation. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in each such case the number
of votes per share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

     (B) Except as otherwise provided herein, in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock, or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of the shareholders of the Corporation.

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

     (D) If, at the time of any annual meeting of shareholders for the election of
directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on
any share or shares of Series A Preferred Stock are in default, the number of directors
constituting the Board of Directors 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 Preferred Stock, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at such meeting of
shareholders (and at each subsequent annual meeting of shareholders), unless all dividends
in arrears on the Series A 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 Preferred Stock being entitled to cast a number

A-3

 

of votes per share of Series A Preferred Stock as is specified in paragraph (A) of this
Section 3. Each such additional director shall serve until the next annual meeting
of shareholders for the election of directors, or until his successor shall be elected and
shall qualify, or until his right to hold such office terminates pursuant to the provisions
of this Section 3(D). 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(D) may be removed at
any time, without cause, only by the affirmative vote of the holders of the shares of Series
A 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 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(D) shall be in addition to any other voting rights
granted to the holders of the Series A Preferred Stock in this Section 3.

          Section 4. Certain Restrictions.

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

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

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

     (iii) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock, provided that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding up) to the Series A Preferred
Stock (provided, however, that the Corporation shall be permitted to redeem,
purchase or otherwise acquire the Common Stock of the Corporation held

A-4

 

by any current or former employee, consultant or director of the Corporation or
its subsidiaries pursuant to the terms of any equity subscription agreement, stock
option agreement or similar agreement entered into in the ordinary course of
business); or

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

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

          Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled
promptly after the acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the
Amended and Restated Certificate of Incorporation or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise required by law.

          Section 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 (i) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of Series A Preferred Stock shall have received an amount per share (the
“Series A Liquidation Preference”) equal to $1,000 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of Common Stock, or (ii) to
the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on
the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a

A-5

 

greater or lesser number of shares of Common Stock, then in each such case the aggregate
amount to which holders of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (i) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of shares of Common Stock
that are outstanding immediately prior to such event.

     (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 Preferred Stock in respect thereof, then the assets available for such
distribution shall be distributed ratably to the holders of the Series A Preferred Stock and
the holders of such parity shares in proportion to their respective liquidation preferences.

     (C) Neither the merger or consolidation of the Corporation into or with another
corporation nor the merger or consolidation of any other corporation 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.

          Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other property, then in
any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged
or changed into an amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

          Section 8. No Redemption. The Series A Preferred Stock shall not be redeemable by the
Corporation.

          Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment
of dividends and the distribution of assets upon liquidation, dissolution or winding up, junior to
all series of any other class of the Corporation’s Preferred Stock, except to the extent that any
such other series specifically provides that it shall rank on a parity with or junior to the Series
A Preferred Stock.

A-6

 

          Section 10. Amendment. At any time any shares of Series A Preferred Stock are
outstanding, the Amended and Restated Certificate of Incorporation of the Corporation shall not be
further amended in any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting separately as a single class.

          Section 11. Fractional Shares. Series A 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 Preferred Stock.

*     *     *

[Remainder of page intentionally left blank]

A-7

 

     IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation
by the undersigned authorized officer this thirteenth day of September 2010.

	 	 	 	 	 
	 	LEAP WIRELESS INTERNATIONAL, INC.

 	 
	 	By:  	 	 	 
	 	Name:	Robert J. Irving, Jr. 	 
	 	Title:	Senior Vice President and General Counsel 	 

A-8

 

	 	 	 	 	 

EXHIBIT B

[Form of Right Certificate]

			
	 	 	 
	Certificate No. R-
	 	                     Rights

NOT EXERCISABLE AFTER SEPTEMBER 30, 2020 OR EARLIER IF NOTICE OF REDEMPTION OR
EXCHANGE IS GIVEN, IF THE COMPANY IS MERGED OR ACQUIRED PURSUANT TO AN AGREEMENT OF
THE TYPE DESCRIBED IN SECTION 13.3 OF THE TAX BENEFIT PRESERVATION PLAN (THE
“PLAN”), OR IF THE BOARD OF DIRECTORS DETERMINES THAT THE NOLS ARE UTILIZED IN ALL
MATERIAL RESPECTS OR NO LONGER AVAILABLE IN ANY MATERIAL RESPECT UNDER SECTION 382
OF THE CODE (AS DEFINED IN THE PLAN) OR THAT AN OWNERSHIP CHANGE UNDER SECTION 382
OF THE CODE WOULD NOT ADVERSELY IMPACT IN ANY MATERIAL RESPECT THE TIME PERIOD IN
WHICH THE COMPANY COULD USE THE NOLS, OR MATERIALLY IMPAIR THE AMOUNT OF THE NOLS
THAT COULD BE USED BY THE COMPANY IN ANY PARTICULAR TIME PERIOD, FOR APPLICABLE TAX
PURPOSES. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 11.1.2 OF THE
PLAN), RIGHTS BENEFICIALLY OWNED BY OR TRANSFERRED TO AN ACQUIRING PERSON (AS
DEFINED IN THE PLAN), OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS, WILL BECOME NULL AND
VOID AND WILL NO LONGER BE TRANSFERABLE.

Right Certificate

LEAP WIRELESS INTERNATIONAL, 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 Tax Benefit Preservation Plan, dated as of September 13, 2010, as
the same may be amended from time to time (the “Plan”), between Leap Wireless International, Inc.,
a Delaware corporation (the “Company”), and Mellon Investor Services LLC, a New Jersey limited
liability company, as Rights Agent (the “Rights Agent”), to purchase from the Company at any time
after the Distribution Date and prior to 5:00 P.M. (New York time) on September 30, 2020, at the
offices of the Rights Agent, or its successors as Rights Agent, designated for such purpose, one
one-thousandth of a fully paid, nonassessable share of Series A Junior Participating Preferred
Stock, par value $.0001 per share (the “Preferred Stock”), of the Company, at a purchase price of
$60.00 per one one-thousandth of a share of Preferred Stock, subject to adjustment (the “Purchase
Price”), upon presentation and surrender of this Right Certificate with the Form of Election to
Purchase and certification duly executed. The number of Rights evidenced by this Right Certificate
(and the number of one one-thousandths of a share of Preferred Stock which may be purchased upon
exercise thereof) set forth above, and

B-1

 

the
Purchase Price set forth above, are the number and Purchase Price as of                                         ,
20___ based on the Preferred Stock as constituted at such date. Capitalized terms used in this
Right Certificate without definition shall have the meanings ascribed to them in the Plan. As
provided in the Plan, the Purchase Price and the number of shares of Preferred Stock which may be
purchased upon the exercise of the 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 Plan,
which terms, provisions and conditions are hereby incorporated herein by reference and made a part
hereof and to which the Plan 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 Plan are on file at the principal
office of the Company and an office of the Rights Agent designed for such purpose.

          This Right Certificate, with or without other Right Certificates, upon surrender at the
offices 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 one one-thousandths of a share 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 Plan, the Board may, at its option, (i) redeem the Rights
evidenced by this Right Certificate at a redemption price of $.01 per Right or (ii) exchange Common
Stock for the Rights evidenced by this Certificate, in whole or in part.

          No fractional Preferred Stock will be issued upon the exercise 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 Plan.

          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 hereof, nor shall anything contained in
the Plan or herein be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions affecting shareholders (except as
provided in the Plan), or to receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the
Plan.

          If any term, provision, covenant or restriction of the Plan is held by a court of competent
jurisdiction or other authority to be invalid, null and void or unenforceable, the

B-2

 

remainder of the terms, provisions, covenants and restrictions of the Plan shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

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

B-3

 

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

Dated as
of                                         , 20 __.

	 	 	 	 	 	 	 	 	 	 	 

	Attest:	 	 	 	LEAP WIRELESS INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 
 

	 	 
	 	By
	 	 
 

	 	 
	 

	 	Title:
	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Countersigned:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	MELLON INVESTOR SERVICES LLC,	 	 	 	 	 	 	 	 
	as Rights Agent	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Authorized Signature	 	 	 	 	 	 	 	 

B-4

 

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

Dated:                     

	 	 	 	 	 
	 	 	 
	 	 
 	 
	 	Signature 	 
	 	 	 
	 

Signature Guaranteed:

                                                            

     Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a
guarantee level acceptable to the Company’s Rights Agent.

B-5

 

The undersigned hereby certifies that:

          (1) the Rights evidenced by this Right Certificate are not Beneficially Owned by and are not
being assigned to an Acquiring Person; and

          (2) after due inquiry and to the best knowledge of the undersigned, the undersigned did not
acquire the Rights evidenced by this Right Certificate from any person who is, was or subsequently
became an Acquiring Person.

Dated:                     

	 	 	 	 	 
	 	 	 
	 	 
 	 
	 	Signature 	 
	 	 	 

B-6

 

	 	 	 	 	 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to

exercise the Right Certificate.)

To: Leap Wireless International, Inc.

          The undersigned hereby irrevocably elects to exercise                      Rights represented by
this Right Certificate to purchase the Preferred Stock issuable upon the exercise of such Rights
(or such other securities or property of the Company or of any other Person which may be issuable
upon the exercise of the Rights) and requests that certificates for such stock 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 Guaranteed:

                                                            

          Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a
guarantee level acceptable to the Company’s Rights Agent.

B-7

 

The undersigned hereby certifies that:

          (1) the Rights evidenced by this Right Certificate are not Beneficially Owned by and are not
being assigned to an Acquiring Person; and

          (2) after due inquiry and to the best knowledge of the undersigned, the undersigned did not
acquire the Rights evidenced by this Right Certificate from any person who is, was or subsequently
became an Acquiring Person.

Dated:                     

	 	 	 	 	 
	 	 	 
	 	 

 	 
	 	Signature 	 

NOTICE

          The signature in the foregoing Form of Assignment and Form of Election to Purchase 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 Form of Election
to Purchase is not completed, the Company will deem the Beneficial Owner of the Rights evidenced by
this Right Certificate to be an Acquiring Person and such Assignment or Election to Purchase will
not be honored.

B-8

 

EXHIBIT C

As described in the Tax Benefit Preservation Plan, Rights which are

held by or have been held by an Acquiring Person (as defined in the

Tax Benefit Preservation Plan) and certain transferees thereof shall

become null and void and will no longer be transferable.

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED SHARES

          On September 13, 2010 the Board of Directors of Leap Wireless International, Inc. (the
“Company”) declared a dividend of one preferred stock purchase right (individually, a “Right” and
collectively, the “Rights”) for each share of common stock, par value $.0001 per share (the “Common
Stock”), of the Company outstanding at the close of business on September 24, 2010 (the “Record
Date”). As long as the Rights are attached to the Common Stock, the Company will issue one Right
(subject to adjustment) with each new share of Common Stock so that all such shares will have
attached Rights. When exercisable, each Right will entitle the registered holder to purchase from
the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $.0001 per share (the “Preferred Stock”), of the Company at a price of $60.00 per one
one-thousandth of a share of Preferred Stock, subject to certain anti-dilution adjustments (the
“Purchase Price”). The description and terms of the Rights are set forth in a Tax Benefit
Preservation Plan, dated as of September 13, 2010, as the same may be amended from time to time
(the “Plan”), between the Company and Mellon Investor Services LLC, as rights agent.

          By adopting the Plan, the Board of Directors is seeking to protect the Company’s ability to
carry forward its net operating losses (collectively, “NOLs”). The Company has experienced
substantial operating losses, and for federal and state income tax purposes, the Company may “carry
forward” net operating losses in certain circumstances to offset current and future taxable income,
which will reduce federal and state income tax liability, subject to certain requirements and
restrictions. These federal and state NOLs can be a valuable asset of the Company, which may inure
to the benefit of the Company and its shareholders. However, if the Company experiences an
“ownership change,” as defined in Section 382 of the Internal Revenue Code (the “Code”), its
ability to use the NOLs could be substantially limited, and the timing of the usage of the NOLs
could be substantially delayed, which could significantly impair the value of the Company’s NOL
asset. Generally, an “ownership change” occurs if the percentage of the Company’s stock owned by
one or more “five percent shareholders” increases by more than fifty percentage points over the
lowest percentage of stock owned by such shareholders at any time during the prior three-year
period or, if sooner, since the last “ownership change” experienced by the Company. The Plan is
intended to act as a deterrent to any person acquiring 4.99% or more of the outstanding shares of
Common Stock without the approval of the Board of Directors. This would protect the Company’s NOL
asset because changes in ownership by a person owning less than 4.99% of the Common Stock are not
included in the calculation of “ownership change” for purposes of Section 382 of the Code.

          Until the earlier to occur of (i) the close of business on the tenth business day following a
public announcement that a person or group has acquired, or obtained the right to

C-1

 

acquire, beneficial ownership of 4.99% or more of the Common Stock (an “Acquiring Person”) or
(ii) the close of business on the tenth business day following the commencement 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 4.99% or more of the Common Stock (the earlier of (i)
and (ii) 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
certificates, or, with respect to any uncertificated Common Stock registered in book entry form, by
notation in book entry, in either case together with a copy of this Summary of Rights. The Board
can postpone the Distribution Date in certain circumstances. Shares held by persons participating
in a group are deemed to be beneficially owned by all persons treated as the same entity for
purposes of Section 382 of the Code. The Plan provides that any person who beneficially owned
4.99% or more of the Common Stock immediately prior to the first public announcement of the
adoption of the Plan (each an “Existing Holder”), shall not be deemed to be an “Acquiring Person”
for purposes of the Plan unless an Existing Holder becomes the beneficial owner of one or more
additional shares of Common Stock (other than pursuant to a dividend or distribution paid or made
by the Company on the outstanding Common Stock, pursuant to a split or subdivision of the
outstanding Common Stock or pursuant to the acquisition of Common Stock upon the exercise of any
option, warrants or other rights, or upon the initial grant or vesting of restricted stock, granted
by the Company to its directors and officers). However, if upon acquiring beneficial ownership of
one or more additional shares of Common Stock, the Existing Holder does not beneficially own 4.99%
or more of the Common Stock then outstanding, the Existing Holder will not be treated as an
“Acquiring Person” for purposes of the Plan.

          Any person who desires to effect an acquisition of Common Stock that would, if consummated,
result in such person beneficially owning 4.99% or more of the then outstanding Common Stock or any
Existing Holder who desires to effect an acquisition of additional Common Stock may, prior to
acquiring the Common Stock, request that the Board of Directors grant an exemption covering the
proposed acquisition. The Plan provides that the Board of Directors (or a committee thereof) may
only grant an exemption if the Board of Directors (or a committee thereof) determines that the
acquisition of beneficial ownership of Common Stock will not limit or impair the availability to
the Company of the NOLs. Any exemption granted by the Board of Directors (or a committee thereof)
may be granted in whole or in part, and may be subject to limitations or conditions the Board of
Directors (or a committee thereof) determines necessary or desirable to provide for the protection
of the Company’s NOL asset. The exemption request must include (i) the name and address of the
requesting person, (ii) the number and percentage of shares of Common Stock beneficially owned by
the requesting person and (iii) a reasonably detailed description of the transaction by which the
requesting person would propose to acquire beneficial ownership of Common Stock above the 4.99%
ownership threshold and the percentage of shares that the requesting person proposes to acquire.
The Board of Directors (or a committee thereof) must make a determination whether to grant the
exemption within ten business days after receipt of the request. The requesting person is required
to respond promptly to reasonable and appropriate requests for additional information from the
Board or its advisors to assist the Board in making its determination. Failure of the Board of
Directors (or a committee thereof) to make a determination within ten business days of receipt of
the exemption request is deemed to constitute a denial by the Board of Directors of the exemption
request. Each exemption request will be considered and evaluated by directors

C-2

 

serving on the Board of Directors (or a committee thereof) who are independent of the Company
and the party requesting the exemption and disinterested with respect to that specific exemption
request. The decision of a majority of the independent and disinterested directors (or a committee
of the Board of Directors) is deemed to be the determination of the Board of Directors with respect
to any request for exemption from the Plan.

          The Plan provides that until the Distribution Date (or earlier redemption, exchange,
termination or expiration of the Rights), the Rights will be transferred only with the Common
Stock. Until the Distribution Date (or earlier redemption, exchange, termination or expiration of
the Rights), new Common Stock certificates issued after the close of business on the Record Date
upon transfer or new issuance of the Common Stock will contain a notation incorporating the Plan by
reference, and the Company will deliver a notice to that effect upon the transfer or new issuance
of book entry shares. Until the Distribution Date (or earlier redemption, exchange, termination or
expiration of the Rights), the surrender for transfer of any certificates for Common Stock or any
book entry shares, with or without such notation, notice or a copy of this Summary of Rights, will
also constitute the transfer of the Rights associated with the Common Stock represented by such
certificate or the book entry shares. 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 30, 2020, subject to the Company’s right to extend such date (the “Final Expiration
Date”), or earlier if redeemed or exchanged by the Company, if the Company is merged or acquired
pursuant to a transaction approved by the Board of Directors prior to the time at which the person
has become an Acquiring Person, or if the Board of Directors determines that the NOLs are utilized
in all material respects or no longer available in any material respect under Section 382 of the
Code or that an ownership change under Section 382 of the Code would not adversely impact in any
material respect the time period in which the Company could use the NOLs, or materially impair the
amount of the NOLs that could be used by the Company in any particular time period, for applicable
tax purposes.

          Each share of Preferred Stock purchasable upon exercise of the Rights will be entitled, when,
as and if declared, to a minimum preferential quarterly dividend payment equal to the greater of
(i) $1.00 or (ii) 1,000 times the dividend, if any, 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 liquidation payment of $1,000 per share (plus any
accrued but unpaid dividends), provided that such holders of the Preferred Stock will be entitled
to an aggregate payment of 1,000 times the payment made per share of Common Stock. Each share of
Preferred Stock will have 1,000 votes and will vote together with the Common Stock. Finally, in
the event of any merger, consolidation or other transaction in which shares of the Common Stock are
exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount
received per share of Common Stock. The Preferred Stock will not be redeemable. The Rights are
protected by customary anti-dilution provisions. Because of the nature of the Preferred Stock’s
dividend, liquidation and voting rights, the value of one one-thousandth of a share of Preferred
Stock purchasable upon exercise of each Right should approximate the value of one share of Common
Stock.

C-3

 

          The Purchase Price payable, and the number of one one-thousandth of a share of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Stock, (ii) upon the grant to holders of the
Preferred Stock of certain rights or warrants to subscribe for or purchase Preferred Stock or
convertible securities at less than the current market price of the Preferred Stock or (iii) upon
the distribution to holders of the Preferred Stock of evidences of indebtedness, cash, securities
or assets (excluding regular periodic cash dividends at a rate not in excess of 125% of the rate of
the last regular periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the average net income
per share of the Company for the four quarters ended immediately prior to the payment of such
dividend, or dividends payable in shares of Preferred Stock (which dividends will be subject to the
adjustment described in clause (i) above)) or of subscription rights or warrants (other than those
referred to above).

          In the event that a person becomes an Acquiring Person or if the Company were the surviving
corporation in a merger with an Acquiring Person and the Common Stock were not changed or
exchanged, each holder of a Right, other than Rights that are or were acquired or beneficially
owned by the Acquiring Person (which Rights will thereafter be null and void), will thereafter have
the right to receive upon exercise that number of shares of Common Stock having a market value of
two times the then current Purchase Price of the Right. In the event that, after a person has
become an Acquiring Person, the Company were acquired in a merger or other business combination
transaction or more than 50% of its assets or earning power were sold, proper provision shall be
made so that each holder of a Right shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market value of two times
the then current Purchase Price of the Right.

          At any time after a person becomes an Acquiring Person and prior to the earlier of one of the
events described in the last sentence of the previous paragraph or the acquisition by such
Acquiring Person of 50% or more of the then outstanding Common Stock, the Board of Directors may
cause the Company to exchange the Rights (other than Rights owned by an Acquiring Person which will
have become null and void), in whole or in part, for shares of Common Stock at an exchange rate of
one share of Common Stock per Right (subject to adjustment).

          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 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 depository receipts), and in lieu thereof, a payment in cash will be made based on the
market price of the Preferred Stock or Common Stock on the last trading date prior to the date of
exercise.

          The Rights may be redeemed in whole, but not in part, at a price of $.01 per Right (the
“Redemption Price”) by the Board of Directors at any time prior to the time that an Acquiring
Person has become such. The redemption of the Rights may be made effective at such

C-4

 

time, on such basis and with such conditions as the Board of Directors 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.

          Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder
of the Company beyond those as an existing shareholder, including, without limitation, the right to
vote or to receive dividends.

          Any of the provisions of the Plan may be amended by the Board of Directors for so long as the
Rights are then redeemable, and after the Rights are no longer redeemable, the Company may amend or
supplement the Plan in any manner that does not adversely affect the interests of the holders of
the Rights (other than an Acquiring Person).

          A copy of the Plan has been filed with the Securities and Exchange Commission as an Exhibit to
a Current Report on Form 8-K. A copy of the Plan 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 Plan, which is incorporated herein by reference.

C-5Exhibit 4.1

Exhibit 4.1

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT, dated as of September 8, 2010 (this “Agreement”),
is entered into by and between USG CORPORATION, a Delaware corporation (the “Company”), and
EVERCORE TRUST COMPANY, N.A., solely in its capacity as duly appointed and acting investment
manager (the “Manager”) of a segregated account held in the USG Corporation Retirement Plan
Trust (the “Trust”) created under the USG Corporation Retirement Plan (the “Plan”).

RECITALS

WHEREAS, the Company has agreed to contribute an aggregate of 3,271,405 shares of its common
stock, par value $0.10 per share (“Common Stock”), to the Trust (the
“Contribution”), to be held in a single segregated account (the “Segregated
Account”) in the Trust (such contributed shares, the “Registrable Shares”);

WHEREAS, pursuant to the Investment Management Agreement, dated the date hereof, among the
Manager, the Company and the Pension and Investment Committee of the Company (the
“Committee”) (the “Investment Management Agreement”), the Manager has been
appointed as a “fiduciary” of the Trust, as defined in Section 3(21) of the Employee Retirement
Income Security Act of 1974, as amended, but only to the extent of the assets in the Segregated
Account, with the authority to act on behalf of the Trust with respect to all assets held in the
Segregated Account;

WHEREAS, the Company has agreed to grant certain registration rights with respect to the
Registrable Shares held in the Segregated Account, on the terms and subject to the conditions set
forth in this Agreement; and

WHEREAS, pursuant to the Investment Management Agreement, the Manager has full power and
authority to execute and deliver this Agreement for the benefit of the Trust and to take any
actions required or permitted to be taken in connection with this Agreement.

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

(1) Registration; Compliance with the Securities Act. The Company hereby agrees that,
to the extent not prohibited by any applicable law or applicable interpretations of the staff of
the Securities and Exchange Commission (the “SEC”), it shall:

(a) prepare and file with the SEC, as soon as reasonably practicable after the Contribution,
but in no event more than 30 days after the Contribution, a registration statement on Form S-3 for
the purpose of registering for sale under the Securities Act of 1933, as amended (the
“Securities Act”), all of the Registrable Shares by the Trust, as the selling stockholder
thereunder (such registration statement (including any replacement or substitute registration
statement), including all amendments (including any post-effective amendments) or supplements
thereto, the prospectus contained therein or deemed to be a part thereof and any documents
incorporated by reference therein, the “Registration Statement”), to enable the Manager to
direct the Trust to offer and sell any or all of the Registrable Shares on a delayed or continuous
basis
pursuant to Rule 415 under the Securities Act and in the manner contemplated by the plan of
distribution set forth in the Registration Statement;

 

 

 

(b) use its commercially reasonable efforts to cause the Registration Statement, if not
effective on the date of the Contribution, to become effective as promptly as reasonably possible
after filing and to remain continuously effective until the earliest of (i) the date on which all
Registrable Shares have been sold, (ii) the date on which all Registrable Shares may be sold by the
Trust to the public in accordance with Rule 144 under the Securities Act or any successor rule
thereto (as such rule may be amended from time to time, “Rule 144”) and when no conditions
of Rule 144 are then applicable to the Trust (other than the holding period requirement in
paragraph (d) of Rule 144, so long as such holding period requirement is satisfied at such time of
determination) and (iii) the date that is 90 days after the date on which the number of Registrable
Shares held by the Trust is less than one percent of the shares of Common Stock then outstanding
(the period from the date of effectiveness until such earliest date, the “Registration
Period”); provided that the Company shall not be required to file the Registration
Statement or cause the Registration Statement to become effective during any suspension period
pursuant to Section 2(c) or (d) below;

(c) prepare and file with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus relating thereto filed with the SEC
pursuant to Rule 424(b) under the Securities Act or, if no such filing is required, as included in
the Registration Statement (the “Prospectus”), as may be necessary to keep the Registration
Statement effective at all times until the end of the Registration Period; provided that
the Company shall not be required to file any such amendment or supplement during any suspension
period pursuant to Section 2(c) or (d) below;

(d) furnish the Manager with such reasonable number of copies of the Prospectus, in conformity
with the requirements of the Securities Act, and such other documents as the Manager may reasonably
request, in order to facilitate the public sale or other disposition of all or any of the
Registrable Shares by the Trust;

(e) use its commercially reasonable efforts to file any documents necessary to register or
qualify the Registrable Shares under the securities or blue sky laws of such jurisdictions as the
Manager shall reasonably designate in writing; provided that the Company shall not be
required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in
any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general
consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any
such jurisdiction if it is not otherwise so subject;

(f) use its commercially reasonable efforts to cause the Registrable Shares to be listed on
the New York Stock Exchange (the “NYSE”) as soon as reasonably practicable after the date
of the Contribution; and

(g) bear all expenses in connection with the actions contemplated by paragraphs (a) through
(f) of this Section 1 and the registration for sale of the Registrable Shares pursuant to the
Registration Statement, including reasonable fees and expenses of legal counsel to the Manager
incurred in connection with the registration and sale of the Registrable Shares, but excluding
underwriting discounts, brokerage fees, commissions and transfer taxes incurred by the
Manager, the Trust or the Plan, if any.

 

2

 

It shall be a condition precedent to the obligations of the Company to take any action pursuant to
this Section 1 that the Manager shall provide such reasonable assistance to the Company and
furnish, or cause to be furnished, to the Company in writing such information regarding the
Manager, the Registrable Shares to be sold and the intended method or methods of disposition of the
Registrable Shares as shall be necessary to effect the registration of the Registrable Shares and
as may be required from time to time under the Securities Act and the rules and regulations
thereunder.

(2) Transfer of Registrable Shares after Registration; Suspension.

(a) The Manager agrees that (i) it will not (x) offer to sell or make any sale, assignment,
pledge, hypothecation or other transfer with respect to the Registrable Shares that would
constitute a sale within the meaning of the Securities Act or (y) direct the Trust to offer to sell
or make any sale, assignment, pledge, hypothecation or other transfer with respect to the
Registrable Shares that would constitute a sale within the meaning of the Securities Act, except,
in the case of each of clauses (x) and (y), pursuant to either the Registration Statement or
Rule 144, and (ii) it will promptly notify the Company of any changes in the information set forth
in the Registration Statement regarding the Manager or the intended plan of distribution of the
Registrable Shares.

(b) The Manager and the Company agree that the Registrable Shares may be sold in one or more
privately-negotiated block trades; provided that no such block trade may exceed
500,000 shares and that no more than one privately-negotiated block trade may be made to a single
purchaser or affiliates of such purchaser within a twelve-month period.

(c) In addition to any suspension rights under Section 2(d) below, the Company may, upon the
happening of any event or the existence of any state of facts that, in the judgment of an executive
officer of the Company or the Company’s legal counsel, renders advisable the suspension of the
disposition of Registrable Shares covered by the Registration Statement or the use of the
Prospectus or any supplement thereto due to pending transactions or other corporate developments,
public filings with the SEC or similar events, suspend the disposition of Registrable Shares
covered by the Registration Statement and the use of such Prospectus or any supplement thereto for
a period of not more than 90 days upon written notice (a “Suspension Event Notice”) to the
Manager (which Suspension Event Notice will not disclose the content of any material non-public
information and will indicate the dates of the beginning and the end of the intended suspension, if
known), in which case the Manager, upon receipt of such Suspension Event Notice, shall discontinue,
and shall cause the Trust to discontinue, disposition of Registrable Shares covered by the
Registration Statement and the use of any applicable Prospectus or any supplement thereto (an
“Event Suspension”) until copies of a supplemented or amended Prospectus are distributed to
the Manager or until the Manager is advised in writing by the Company that the disposition of
Registrable Shares covered by the Registration Statement or the use of the Prospectus or supplement
thereto may be resumed; provided that such right to suspend the disposition of Registrable
Shares covered by the Registration Statement or the use of the Prospectus or supplement thereto
shall not be exercised by the Company for more than
120 days in any 12-month period. Any Event Suspension and Suspension Event Notice described
in this Section 2(c) shall be held in confidence and not disclosed by the Manager, except as
required by law.

 

3

 

(d) Subject to Section 2(g) below, in the event of: (i) any request by the SEC or any other
federal or state governmental authority for amendments or supplements to the Registration Statement
or related Prospectus or for additional information; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose, including the receipt
by the Company of any notice of objection of the SEC to the use of the Registration Statement or
any post-effective amendment thereto pursuant to Rule 401(g)(2) under the Securities Act; (iii) the
receipt by the Company of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Shares for sale in any jurisdiction or the
initiation of any proceedings for such purpose; or (iv) any event or circumstance that necessitates
the making of any changes in the Registration Statement or the Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein not
misleading, and that, in the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading, in each case, during the Registration Period, then the Company shall deliver a
certificate in writing to the Manager (a “Suspension Notice”) to the effect of the
foregoing (which Suspension Notice will not disclose the content of any material non-public
information and will indicate the dates of the beginning and the end of the intended suspension, if
known) and, upon receipt of such Suspension Notice, the Manager shall refrain, and shall cause the
Trust to refrain, from selling any Registrable Shares pursuant to the Registration Statement or
using the Prospectus or any supplement thereto (a “Suspension”) until the Manager has
received copies of a supplemented or amended Prospectus prepared and filed by the Company, or until
the Manager is advised in writing by the Company that the current Prospectus or supplement thereto
may be used. In the event of any Suspension, the Company will use its commercially reasonable
efforts to cause the availability for use of the Registration Statement and the Prospectus to be
resumed as soon as reasonably possible after delivery of a Suspension Notice to the Manager. Any
Suspension and Suspension Notice described in this Section 2(d) shall be held in confidence and not
disclosed by the Manager, except as required by law.

(e) In order to enforce the covenants of the Manager set forth in Sections 2(c) and (d) above,
the Company may impose stop transfer instructions with respect to the sale of Registrable Shares by
the Trust until the end of the applicable suspension period.

(f) If so directed by the Company, the Manager shall deliver to the Company all physical
copies of the Prospectus and any supplements thereto in its possession at the time of receipt by
the Manager of any Suspension Event Notice or Suspension Notice.

(g) The Manager may sell Registrable Shares under the Registration Statement; provided
that (i) neither a Suspension nor an Event Suspension is then in effect, (ii) the Manager sells in
accordance with the plan of distribution in the Prospectus and (iii) the Manager arranges
for delivery of a current Prospectus (as supplemented) to any transferee receiving such
Registrable Shares in compliance with the prospectus delivery requirements of the Securities Act.

 

4

 

(3) Indemnification. For the purpose of this Section 3, the term “Registration
Statement” shall include any preliminary or final Prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement defined in Section 1(a).

(a) Indemnification by the Company. The Company agrees to (i) indemnify and hold
harmless the Manager (including, for purposes of this Section 3, the officers, directors, employees
and agents of the Manager), and each person, if any, who controls the Manager within the meaning of
either Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
or Section 15 of the Securities Act (the “Manager Indemnitees”), from and against any and all
losses, claims, damages, liabilities or expenses, joint or several (each, a “Loss” and,
collectively, “Losses”), to which any Manager Indemnitee may become subject under the
Securities Act, the Exchange Act or any other federal or state law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is effected with the
written consent of the Company, which consent shall not be unreasonably withheld or delayed), only
to the extent such Losses (or actions in respect thereof as contemplated below) arise out of or are
based upon (A) any failure on the part of the Company to comply with the covenants and agreements
contained in this Agreement or (B) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of the Prospectus or any
supplement thereto, in light of the circumstances under which they were made) not misleading, and
(ii) reimburse each Manager Indemnitee for any reasonable legal fees and other reasonable
out-of-pocket expenses as such expenses are incurred by such Manager Indemnitee in connection with
investigating, defending, settling, compromising or paying any such Loss or action;
provided that the Company will not be liable in any such case to the extent that any such
Loss arises out of or is based upon (1) an untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with information furnished in writing to the
Company by the Manager, (2) any untrue statement or omission of a material fact required to make
such statement not misleading in the Prospectus that is corrected in an amended or supplemented
Prospectus that was delivered to the Manager before the pertinent sale or sales by the Manager or
(3) any untrue statement or alleged untrue statement or omission or alleged omission in the
Registration Statement, the Prospectus or any amendment or supplement thereto, when used or
distributed by the Manager during a period in which an Event Suspension or Suspension is properly
in effect under Section 2(c) or (d). The Manager hereby agrees that if the Manager or any of its
controlling persons is not entitled to indemnification for any Loss pursuant to this Section 3(a)
as a result of clause (1), (2) or (3) above, then none of the Manager Indemnitees shall be entitled
to indemnification for such Loss pursuant to the terms of the indemnification provisions set forth
in the Investment Management Agreement or that certain engagement letter effective August 31, 2010,
among the Company, the Manager and the Committee.

 

5

 

(b) Indemnification by the Manager. To the extent permitted by applicable law, the
Manager will (i) indemnify and hold harmless the Company, the Committee, each director of the
Company, each member of the Committee, each of the Company’s officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act (the “Company Indemnitees”), from
and against any and all Losses to which any Company Indemnitee may become subject under the
Securities Act, the Exchange Act or any other federal or state law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is effected with the
written consent of the Manager, which consent shall not be unreasonably withheld or delayed), only
to the extent such Losses (or actions in respect thereof as contemplated below) arise out of or are
based upon (i) any failure on the part of the Manager to comply with the covenants and agreements
contained in this Agreement with respect to the sale of the Registrable Shares or (ii) any untrue
statement or alleged untrue statement of any material fact contained in the Registration Statement,
the Prospectus or any amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein
(in the case of the Prospectus or any supplement thereto, in light of the circumstances under which
they were made) not misleading; provided that the Manager will be liable in any such case
only to the extent that any such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of the Manager, and (ii) reimburse such Company Indemnitee for any
reasonable legal fees and other reasonable out-of-pocket expenses as such expenses are incurred by
such Company Indemnitee in connection with investigating, defending, settling, compromising or
paying any such Loss or action. In no event shall the liability of the Manager under this
Section 3 be greater than the aggregate fees received by the Manager pursuant to the Investment
Management Agreement.

(c) Indemnification Procedure. (i) Promptly after receipt by an indemnified party
under this Section 3 of written notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 3, promptly notify the indemnifying party in writing of the claim;
provided that the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party under the
indemnity agreement contained in this Section 3 or otherwise, to the extent that the indemnifying
party is not prejudiced as a result of such failure.

(i) In case any such action is brought against any indemnified party and such
indemnified party notifies an indemnifying party thereof and seeks or intends to seek
indemnity from such indemnifying party, such indemnifying party will be entitled to
participate in, and to the extent that it may determine, jointly with all other indemnifying
parties similarly notified, to assume, the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided that, if the defendants in any such
action include both such indemnified party and such indemnifying party and such indemnified
party shall have reasonably concluded that there may be a conflict between its position and
the position of such indemnifying party with respect to the conduct of the defense of any
such action or that there may be legal defenses available to it that are

 

6

 

different
from or additional to those available to such indemnifying party, in each case, such
indemnified party shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of such
indemnified party. Upon receipt of notice from such indemnifying party of its election so
to assume the defense of such action and approval by such indemnified party of such
indemnifying party’s counsel, such indemnifying party will not be liable to such indemnified
party under this Section 3 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense of such action; provided that the
reasonable fees and expenses of counsel of such indemnified party shall be at the expense of
such indemnifying party if (A) such indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso to the
preceding sentence (it being understood that such indemnifying party shall not be liable for
the expenses of more than one separate counsel (in addition to any local counsel) for all
indemnified parties who are parties to such action) or (B) such indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the action.

(d) Contribution. (i) If the indemnification provided for in this Section 3 is held
by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any
Loss referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such indemnified party as a
result of such Loss in such proportion as is appropriate to reflect the relative fault of such
indemnifying party on the one hand and of such indemnified party on the other hand in connection
with the statements or omissions that resulted in such Loss, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and of such indemnified
party shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified party and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the Losses referred to
above shall be deemed to include, subject to the limitations set forth in Section 3(c) hereof, any
legal or other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.

(ii) The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 3(d) were determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the provisions of this
Section 3(d), in no event shall the Manager be required to contribute any amount in excess
of the aggregate fees received by the Manager pursuant to the Investment Management
Agreement. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.

 

7

 

(e) Non-Exclusive Remedies. The remedies provided for in this Section 3 are not
exclusive and shall not limit any rights or remedies that may otherwise be available to any
indemnified person at law or in equity.

(f) Surviving Obligations. The obligations of the Company and the Manager under this
Section 3 shall survive the termination of this Agreement and the completion of the disposition of
the Registrable Shares.

(4) Rule 144 Information. For such period as the Trust or the Plan holds any
Registrable Shares received pursuant to the Contribution, the Company shall use its reasonable best
efforts to file all reports required to be filed by it under the Exchange Act and the rules and
regulations thereunder and shall use its reasonable best efforts to take such reasonable further
action to the extent required to enable the Manager to sell the Registrable Shares pursuant to
Rule 144.

(5) Rights of the Trust. All of the rights and benefits conferred on the Manager
pursuant to this Agreement (other than the right to indemnification provided in Section 3) are
intended to inure to the benefit of the Trust.

(6) Miscellaneous.

(a) Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York, irrespective of the choice of
laws principles of the State of New York, as to all matters, including matters of validity,
construction, effect, enforceability, performance and remedies.

(b) Force Majeure. Neither party will have any liability for damages or delay due to
fire, explosion, lightning, pest damage, power failure or surges, strikes or labor disputes, water
or flood, acts of God, the elements, war, civil disturbances, acts of civil or military authorities
or the public enemy, acts or omissions of communications or other carriers or any other cause
beyond a party’s reasonable control (other than that which arises from the gross negligence or
willful misconduct of such party), whether or not similar to the foregoing, that prevent such party
from materially performing its obligations hereunder.

(c) Entire Agreement; Modification; Waivers. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to the matters discussed herein. This
Agreement may not be altered, modified or amended except by a written instrument signed by both
parties. The failure of any party to require the performance or satisfaction of any term or
obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.

(d) Severability. The provisions of this Agreement are severable and, in the event
that any provision is deemed illegal or unenforceable, the remaining provisions shall remain in
full force and effect, unless the deletion of any such illegal or unenforceable provision shall
cause this Agreement to become materially adverse to either party, in which event the parties
shall use commercially reasonable efforts to arrive at an accommodation that best preserves
for the parties the benefits and obligations of the offending provision.

 

8

 

(e) Notices. Except as otherwise expressly provided, any notice, request, demand or
other communication permitted or required to be given under this Agreement shall be in writing,
shall be sent by one of the following means to the Company or the Manager at the addresses set
forth below (or to such other address as shall be designated hereunder by notice to the other
parties and persons receiving copies, effective upon actual receipt), and shall be deemed
conclusively to have been given (i) on the first business day following the day timely deposited
with Federal Express (or other equivalent national overnight courier) or United States Express
Mail, with the cost of delivery prepaid or for the account of the sender, (ii) on the fifth
business day following the day duly sent by certified or registered United States mail, postage
prepaid and return receipt requested, or (iii) when otherwise actually received by the addressee on
a business day (or on the next business day if received after the close of normal business hours or
on any non-business day).

If to the Manager:

Evercore Trust Company, N.A.

55 East 52nd Street

New York, NY 10055

Attention: Norman P. Goldberg, Managing Director

If to the Company:

USG Corporation

550 West Adams Street

Chicago, Illinois 60661-3676

Attention: Ellis A. Regenbogen

with a copy to:

Jones Day

77 West Wacker Drive

Chicago, Illinois 60601-1692

Attention: Timothy J. Melton

(f) Title and Headings. Titles and headings to sections herein are inserted for
convenience of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.

(g) Execution in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

(h) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Company and the Manager and their respective successors and permitted assigns.
None of the rights or obligations under this Agreement shall be assigned by the Manager
without the prior written consent of the Company and the Trust in their sole discretion. Any
purported assignment in violation of the foregoing sentence shall be null and void.

(Signatures follow.)

 

9

 

IN WITNESS WHEREOF, each of the Company and the Manager has caused this Agreement to be duly
executed on its behalf by its duly authorized officer as of the date first written above.

	 	 	 	 	 
	 	USG CORPORATION

 	 
	 	By:  	/s/ Richard H. Fleming
 	 
	 	 	Name:  	Richard H. Fleming 	 
	 	 	Title:  	Executive Vice President and Chief Financial Officer 	 
	 
	 	EVERCORE TRUST COMPANY, N.A.,

As Investment Manager of a Segregated Account in the USG Corporation
Retirement Plan Trust

 	 
	 	By:  	/s/ Norman P. Goldberg
 	 
	 	 	Name:  	Norman P. Goldberg 	 
	 	 	Title:  	Managing Director 	 

 

10

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