UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-20045

WATSON PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Nevada		95-3872914
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

311 Bonnie Circle Corona, CA 92880-2882
(Address of principal executive offices, including zip code)

(909) 493-5300
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

The number of shares outstanding of the Registrant’s only class of common stock as of May 9, 2003 was approximately 107,056,517.

WATSON PHARMACEUTICALS, INC.

TABLE OF CONTENTS

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements:

	Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002

	Consolidated Statements of Income for the Three Months Ended March 31, 2003 and 2002

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002

	Notes to Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Item 4. Controls and Procedures

PART II. OTHER INFORMATION AND SIGNATURES

Item 1. Legal Proceedings

Item 6. Exhibits and Reports on Form 8-K

Signatures

Certifications

WATSON PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands, except share amounts)

	March 31, 2003		December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	415,676	$	230,155
Marketable securities	34,659		42,649
Accounts receivable, net	157,075		178,563
Inventories	364,740		348,773
Prepaid expenses and other current assets	27,787		35,895
Deferred tax assets	81,959		77,416
Total current assets	1,081,896		913,451
Property and equipment, net	317,880		304,667
Investments and other assets	83,462		75,435
Deferred tax assets	33,919		34,596
Product rights and other intangibles, net	1,048,830		889,027
Goodwill	446,288		446,288
Total assets	$	3,012,275	$	2,663,464

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	200,457	$	177,812
Income taxes payable	83,421		111,565
Current portion of long-term debt	—		83,360
Other current liabilities	1,719		2,728
Total current liabilities	285,597		375,465

Long-term debt	722,426		331,877
Other long-term liabilities	7,881		5,948
Deferred tax liabilities	142,252		151,890
Total liabilities	1,158,156		865,180

Commitments and contingencies

Stockholders’ equity:
Preferred stock; no par value per share; 2,500,000 shares authorized; none issued	—		—
Common stock; $0.0033 par value per share; 500,000,000 shares authorized; 106,964,800 and 106,878,900 shares outstanding	353		353
Additional paid-in capital	799,067		797,097
Retained earnings	1,046,679		998,850
Accumulated other comprehensive income	8,020		1,984
Total stockholders’ equity	1,854,119		1,798,284
Total liabilities and stockholders’ equity	$	3,012,275	$	2,663,464

See accompanying Notes to Consolidated Financial Statements.

WATSON PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; in thousands, except per share amounts)

	Three Months Ended March 31,
	2003			2002

Net revenues	$	336,922		$	285,690
Cost of sales	149,601			135,687
Gross profit	187,321			150,003

Operating expenses:
Research and development	22,484			18,519
Selling, general and administrative	67,659			62,263
Amortization	18,435			13,294
Total operating expenses	108,578			94,076
Operating income	78,743			55,927

Other income (expense):
Equity in earnings (losses) of joint ventures	117			(1,059		)
Impairment of securities	(13,042		)	—
Gain on sale of securities	1,089			—
Gain on sale of subsidiary	15,676			—
Loss on early extinguishment of debt	(2,807		)	—
Interest income	1,242			1,599
Interest expense	(5,341		)	(5,160		)
Other income (expense)	(594		)	29
Total other income (expense), net	(3,660		)	(4,591		)

Income before income taxes	75,083			51,336
Provision for income taxes	27,254			19,251
Net income	$	47,829		$	32,085

Earnings per share:
Basic	$	0.45		$	0.30
Diluted	$	0.44		$	0.30

Weighted average shares outstanding:
Basic	106,942			106,467
Diluted	107,622			107,423

See accompanying Notes to Consolidated Financial Statements.

WATSON PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

	Three Months Ended March 31,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	47,829		$	32,085
Reconciliation to net cash provided by operating activites:
Depreciation	6,926			6,026
Amortization	18,435			13,294
Deferred income tax benefit	(9,019		)	(1,272		)
Equity in (earnings) losses of joint ventures	(117		)	1,101
Gain on sale of securities	(1,089		)	—
Gain on sale of subsidiary	(15,676		)	—
Loss on early extinguishment of debt	2,807			—
Charge for impairment of securities	13,042			—
Tax benefits related to exercises of stock options	50			140
Other	(1,005		)	317
Changes in assets and liabilities:
Accounts receivable	19,292			(1,335		)
Inventories	(16,941		)	3,276
Prepaid expenses and other current assets	8,071			(850		)
Accounts payable and accrued expenses	24,629			(6,774		)
Income taxes payable	(28,172		)	43,160
Other assets	(778		)	2,703
Total adjustments	20,455			59,786
Net cash provided by operating activities	68,284			91,871
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment	(21,580		)	(14,750		)
Acquisitions of product rights	(178,238		)	(70,204		)
Proceeds from sales of securities	3,829			—
Proceeds from sale of subsidiary	16,368			—
Other investing activities, net	1,212			1,060
Net cash used in investing activities	(178,409		)	(83,894		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt, net of issuance costs	560,625			—
Proceeds from borrowings under revolving credit facility	60,000			—
Principal payments on credit facility	(325,940		)	(31,604		)
Principal payments on acquisition liabilities	(1,009		)	—
Proceeds from stock plans	1,970			387
Net cash provided by (used in) financing activities	295,646			(31,217		)
Net increase (decrease) in cash and cash equivalents	185,521			(23,240		)
Cash and cash equivalents at beginning of period	230,155			193,731
Cash and cash equivalents at end of period	$	415,676		$	170,491

See accompanying Notes to Consolidated Financial Statements.

WATSON PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – GENERAL

Watson Pharmaceuticals, Inc. (Watson or the Company) is primarily engaged in the development, manufacture, marketing, sale and distribution of branded and off-patent (generic) pharmaceutical products. Watson was incorporated in 1985 and began operations as a manufacturer and marketer of generic pharmaceuticals. The Company also develops advanced drug delivery systems designed to enhance the therapeutic benefits of existing drug forms. Watson operates manufacturing, distribution, research and development and administrative facilities primarily in the United States of America (U.S.).

The accompanying consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying consolidated financial statements. The accompanying interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, necessary to present fairly Watson’s consolidated financial position, results of operations and cash flows for the periods presented. Unless otherwise noted, all such adjustments are of a normal, recurring nature. Certain reclassifications, none of which affected net income or retained earnings, have been made to prior period amounts to conform to current period presentation. The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods or for the full year.

Comprehensive income

Comprehensive income includes all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. Other comprehensive income refers to revenues, expenses, gains and losses that, under generally accepted accounting principles, are included in comprehensive income, but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. Watson’s other comprehensive income (loss) is comprised of unrealized gains (losses) on its holdings of publicly traded equity securities, net of realized gains included in net income. The components of comprehensive income and related income taxes consisted of the following (in thousands):

	Three Months Ended March 31,
	2003			2002

Net income	$	47,829		$	32,085

Other comprehensive income (loss):
Unrealized holding gain (loss) on securities	(2,632		)	(46,617		)
Less related income taxes	1,053			18,647
Total unrealized gain (loss) on securities, net	(1,579		)	(27,970		)

Reclassification for losses included in net income	11,953			—
Less related income taxes	(4,338		)	—
Total reclassification, net	7,615			—
Total other comprehensive income (loss)	6,036			(27,970		)
Total comprehensive income	$	53,865		$	4,115

Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average common shares outstanding during a period. Diluted earnings per share is based on the treasury stock method and is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding during the periods presented assuming the exercise of all in-the-money stock options. Common share equivalents have been excluded where their inclusion would be anti-dilutive. A reconciliation of the numerators and denominators of basic and diluted earnings per share consisted of the following (in thousands, except per share amounts):

	Three Months Ended March 31,
	2003		2002

Numerator:
Net income	$	47,829	$	32,085
Denominator:
Basic weighted average common shares outstanding	106,942		106,467
Effect of dilutive stock options	680		956
Diluted weighted average common shares outstanding	107,622		107,423

Basic earnings per share	$	0.45	$	0.30

Diluted earnings per share	$	0.44	$	0.30

Excluded from the computation of diluted earnings per share are outstanding common stock options with an exercise price greater than the average market price of the common shares for the period reported. For the three month periods ended March 31, 2003 and 2002, excluded from the computation were stock options to purchase 9.9 million and 9.7 million common shares, respectively.

If all of the convertible contingent debentures (as described in Note H) were converted as of March 31, 2003, an additional 14,357,054 shares of Watson’s common stock would be outstanding.

Stock-based compensation

The Company accounts for its stock-based employee compensation plans using the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. No stock-based employee compensation expense has been recognized for the options in the accompanying consolidated statements of income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

Had the Company determined compensation expense for all prior periods using the fair value method prescribed by Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation”, the Company’s net income and earnings per share would have been as follows (in thousands, except EPS amounts):

	Three Months Ended March 31,
	2003			2002

Net income	$	47,829		$	32,085
Total stock-based employee compensation expense determined under fair value based method for all awards	8,338			13,931
Tax effect of compensation expense	(3,027		)	(5,224		)
Pro forma net income	$	42,518		$	23,378

Basic EPS - as reported	$	0.45		$	0.30
Basic EPS - pro forma	$	0.40		$	0.22

Diluted EPS - as reported	$	0.44		$	0.30
Diluted EPS - pro forma	$	0.40		$	0.22

Weighted average shares outstanding:
Basic	106,942			106,467
Diluted	107,622			107,423

The weighted average fair value of the options has been estimated on the date of grant using the Black-Scholes option-pricing model. Weighted averages are used because of varying assumed exercise dates. The following weighted average assumptions were used for options granted during the respective periods:

	Three Months Ended March 31,
	2003	2002

Dividend yield	None	None
Expected volatility	44%	38%
Risk-free interest rate	3.48%	4.21%
Expected term	5.2 years	5.1 years

Recent accounting pronouncements

In July 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred, as opposed to when the entity commits to an exit plan under previous guidance. This statement is effective for exit or disposal activities initiated after December 31, 2002. The Company adopted SFAS No. 146 on January 1, 2003, which had no material impact on the Company’s results of operations or financial position.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted SFAS No. 148 on January 1, 2003, which had no material impact on the Company’s results of operations or financial position.

In January 2003, the FASB issued Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities.” FIN 46 requires reporting entities to perform an evaluation in order to determine whether the reporting entity has a controlling financial interest in a variable interest entity, and if that interest requires consolidation and/or disclosure by the reporting entity. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company does not believe that the adoption of FIN 46 will have a material impact on its results of operations or financial position.

NOTE B – ACQUISITIONS OF PRODUCT RIGHTS

In February 2003, Watson acquired the U.S. rights to the Fioricetâ and Fiorinalâ product lines from Novartis Pharmaceuticals Corporation (Novartis). These products are indicated for the treatment of tension headaches. The Company paid approximately $178 million in cash for the rights to these products.

NOTE C – MARKETABLE SECURITIES

Marketable securities include Watson’s investment in the common stock of Andrx Corporation — Andrx Group (Andrx) and Dr. Reddy’s Laboratories, Limited (Dr. Reddy). The Company accounts for these investments at fair market value as available-for-sale securities.

Andrx is primarily engaged in the formulation and commercialization of controlled-release pharmaceutical products using proprietary drug delivery technologies. Andrx common stock trades on the Nasdaq National Market System under the symbol ADRX. As of March 31, 2003, Watson owned approximately 1.5 million shares of Andrx common stock (approximately 2% of the total Andrx common stock then outstanding) with a market value of $18.1 million. The unrealized gain on the Company’s investment in Andrx was $8.4 million and $11.0 million (net of income taxes of $5.6 million and $7.4 million) at March 31, 2003 and December 31, 2002, respectively. Watson sold no shares of Andrx common stock during the three months ended March 31, 2003 and 2002.

Dr. Reddy is a developer and manufacturer of active pharmaceutical ingredients and pharmaceutical products. Dr. Reddy’s shares trade on the Bombay Stock Exchange and on the New York Stock Exchange in the form of American Depositary Shares. As of March 31, 2003, Watson owned approximately 850,000 shares of Dr. Reddy common stock (approximately 1% of the total Dr. Reddy common shares then outstanding) with a market value of $16.5 million. The unrealized gain on the Company’s investment in Dr. Reddy was $2.6 million and $3.0 million (net of income taxes of $1.7 million and $2.0 million), at March 31, 2003 and December 31, 2002, respectively.

During the three months ended March 31, 2003, Watson sold 190,000 shares of Dr. Reddy common stock and recorded a pre-tax gain of $1.1 million. The Company did not sell any of its shares of Dr. Reddy common stock during the three months ended March 31, 2002.

NOTE D – OPERATING SEGMENTS

Watson has two reportable operating segments: branded and generic pharmaceutical products. The branded products segment includes the Company’s lines of Women’s Health, Urology/General Products and Nephrology products. Watson has aggregated its branded product lines in a single segment because of similarities in regulatory environment, manufacturing processes, methods of distribution and types of customer. This segment includes patent-protected products and trademarked generic products that Watson promotes directly to healthcare professionals as branded pharmaceutical products. The generic products segment includes off-patent pharmaceutical products that are therapeutically equivalent to proprietary products. The Company sells its branded and generic products primarily to pharmaceutical wholesalers, drug distributors and chain drug stores.

The accounting policies of the segments are the same as those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Watson primarily evaluates the performance of its segments based on net revenues and gross profit. The “other” classification consists primarily of contingent payments received from the settlement of a legal dispute and revenues from research, development and licensing fees. The Company does not report depreciation expense, total assets, and capital expenditures by segment as such information is not used by management, nor accounted for at the segment level. Net revenues and gross profit information for the Company’s segments consisted of the following (in thousands):

	Three Months Ended March 31,
	2003		2002

Net revenues:
Branded pharmaceutical products	$	183,761	$	161,527
Generic pharmaceutical products	143,199		116,083
Other	9,962		8,080
Total net revenues	$	336,922	$	285,690
Gross profit:
Branded pharmaceutical products	$	140,697	$	120,581
Generic pharmaceutical products	36,662		21,342
Other	9,962		8,080
Total gross profit	$	187,321	$	150,003

NOTE E – INVENTORIES

Inventories consist of finished goods held for distribution, raw materials and work in process. Additionally, at March 31, 2003, the Company held approximately $29 million in inventory relating to products that are pending approval by the FDA or have not been launched due to contractual restrictions. Inventories are stated at the lower of cost (first-in, first-out method) or market (net realizable value) and consisted of the following (in thousands):

	March 31, 2003		December 31, 2002

Raw materials	$	119,227	$	116,806
Work-in-process	86,981		80,062
Finished goods	158,532		151,905
Total inventories	$	364,740	$	348,773

NOTE F – ASSETS HELD FOR DISPOSITION

In connection with the acquisition of Schein Pharmaceutical, Inc. (Schein), Watson acquired two injectable pharmaceutical manufacturing facilities, Steris Laboratories, Inc. (Steris), located in Phoenix, Arizona and Marsam Pharmaceuticals, Inc. (Marsam), located in Cherry Hill, New Jersey. Upon acquisition, Watson’s intent was to dispose of these facilities, and therefore these assets were reported as assets held for disposition in the Company’s Consolidated Balance Sheets. Watson recorded these assets held for disposition at estimated fair value. The operating expenses associated with the facilities were recorded separately in the Company’s Consolidated Statements of Income as loss on assets held for disposition.

At December 31, 2002, the Company had approximately $6 million of property related to Marsam and approximately $22 million of inventories and approximately $1 million of fixed assets related to Steris.

On January 1, 2003 Watson reclassified its assets held for disposition as held and used. This reclassification was made as a result of the absence of a completed sale transaction or binding offer for each of the facilities, in accordance with SFAS No. 144. The related assets were reclassified as inventories and property and equipment, as appropriate, in the Company’s Consolidated Balance Sheets. The operating expenses of the Steris facility for the first quarter of 2003 were recorded in the Company’s Consolidated Statements of Income as cost of sales, research and development expenses and selling, general and administrative expenses, as appropriate.

The following table illustrates the changes made to the consolidated balance sheet as of December 31, 2002 and the consolidated statement of income for the three months ended March 31, 2002, included in this Quarterly Report, as a result of the reclassification (in thousands):

	As Previously Reported		As Currently Reported
Consolidated Balance Sheet:

Assets held for disposition	$	29,362	$	—
Inventories	$	326,741	$	348,773
Property and equipment, net	$	297,337	$	304,667

Consolidated Statement of Income:

Loss on assets held for disposition	$	6,986	$	—
Cost of sales	$	129,535	$	135,687
Gross profit	$	156,155	$	150,003
Research and development expenses	$	18,382	$	18,519
Selling, general and administrative expenses	$	61,566	$	62,263

Although the assets were reclassified as held and used, the Company continues its efforts to dispose of the remaining Marsam property and the Steris facility through sale or otherwise.

NOTE G – GOODWILL AND OTHER INTANGIBLE ASSETS

Watson tests its goodwill and intangible assets with indefinite lives by comparing the fair value of each of the Company’s reporting units to the respective carrying value of the reporting units. The Company performs this impairment testing annually during the second quarter. The Company’s reporting units have been identified by Watson as branded and generic pharmaceutical products. The carrying value of each reporting unit is

determined by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. Goodwill is considered impaired if the carrying amount exceeds the fair value of the asset.

There was no impairment of or additions to goodwill recorded during the three months ended March 31, 2003. At March 31, 2003, goodwill for the Company’s reporting units consisted of the following (in thousands):

Branded pharmaceutical products	$	358,798
Generic pharmaceutical products	87,490
Total goodwill	$	446,288

Other intangible assets consist primarily of product rights. The original cost and accumulated amortization of these intangible assets is as follows (in thousands):

	March 31, 2003			December 31, 2002

Product rights and related intangibles	$	1,285,438		$	1,107,200
Less accumulated amortization	(236,608		)	(218,173		)
Total product rights and related intangibles, net	$	1,048,830		$	889,027

Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the assets, annual amortization expense on product rights and related intangibles is estimated to be approximately $71.7 million in 2003, $71.4 million in 2004 and $71.7 million in each of 2005, 2006 and 2007. The Company’s current product rights and related intangibles have a weighted average useful life of approximately nineteen years.

NOTE H – LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

	March 31, 2003			December 31, 2002

Senior unsecured notes, 7.125%, face amount of $150 million, due 2008	$	149,062		$	149,023
Term loan facility, due 2005	—			265,928
Convertible contingent debentures, face amount of $575 million due 2023	575,000			—
Less: Unamortized discount on debentures	(1,910		)	—
Convertible contingent debentures, face amount of $575 million due 2023, net	573,090			—
Other notes payable	274			286
Total debt	$	722,426		$	415,237
Less current portion	—			(83,360		)
Total long-term debt	$	722,426		$	331,877

In May 1998, Watson issued $150 million of senior unsecured notes (1998 Senior Notes). These notes are due in May 2008, with interest only payments due semi-annually in May and November at an effective rate of 7.2%, but may be redeemed earlier under certain circumstances.

The 1998 Senior Notes were issued pursuant to a shelf registration statement authorizing up to $300 million in debt securities, preferred stock or common stock. On April 2, 2003, the Company determined that it did not intend to offer any additional debt securities, preferred stock or common stock under the registration statement, and filed an amendment with the Securities and Exchange Commission deregistering the remaining unsold $150 million aggregate amount of debt securities, preferred stock and common stock covered by the registration statement.

In March 2003, the Company issued $575 million of convertible contingent senior debentures (CODES). These CODES, which are convertible into shares of Watson’s common stock upon the occurrence of certain events, are due in March 2023, with interest payments due semi-annually in March and September at an effective annual interest rate of 2.1%.

The CODES are convertible into Watson’s common stock at a conversion price of approximately $40.05 per share (subject to certain adjustments). These CODES may be converted, at the option of the holders, prior to maturity under any of the following circumstances:

• during any quarterly conversion period (period from and including the thirtieth trading day in a fiscal quarter to, but not including, the thirtieth trading day in the immediately following fiscal quarter) if the closing sale price per share of Watson’s common stock for a period of at least 20 consecutive trading days during the 30 consecutive trading-day period ending on the first day of such conversion period is more than 125% of the conversion price in effect on that thirtieth day;

• on or before March 15, 2018, during the five business-day period following any 10 consecutive trading-day period in which the daily average trading price for the CODES for such ten-day period was less than 105% of the average conversion value for the debentures during that period. This conversion feature represents an embedded derivative. However, based on the de minimis value associated with this feature, no value has been assigned at issuance and at March 31, 2003;

• during any period, following the earlier of (a) the date the CODES are rated by both Standard & Poor’s Rating Services and Moody’s Investor Services, Inc., and (b) April 21, 2003, when the long-term credit rating assigned to the CODES by either Standard & Poor’s or Moody’s (or any successors to these entities) is lower than “BB” or “Ba3”, respectively, or when either of these rating agencies does not have a rating then assigned to the CODES for any reason, including any withdrawal or suspension of a rating assigned to the CODES. This conversion feature represents an embedded derivative. However, based on the de minimis value associated with this feature, no value has been assigned at issuance and at March 31, 2003;

• if the CODES have been called for redemption; or

• upon the occurrence of specified corporate transactions.

The Company may redeem some or all of the CODES for cash, on or after March 20, 2008 for a price equal to 100% of the principal amount of the CODES plus accrued and unpaid interest (including contingent interest) to, but excluding, the redemption date.

The CODES contain put options which may require the Company to repurchase for cash all or a portion of the CODES on March 15 of 2010, 2015 and 2018 at a repurchase price equal to 100% of the principal amount of the CODES plus any accrued and unpaid interest (including contingent interest) to, but excluding, the date of repurchase.

In addition, the holders have the right to receive contingent interest payments during any six-month period from March 15 to September 14 and from September 15 to March 14, commencing on September 15, 2003, if the average trading price of the CODES for the five trading days ending on the second trading day immediately preceding the relevant six-month period equals 120% or more of the principal amount of the CODES. The interest rate used to calculate the contingent interest is the greater of 5% of the Company’s then-current estimated per annum borrowing rate for senior non-convertible fixed-rate debt with a maturity date and other terms comparable to that of the CODES or 0.33% per annum. This contingent interest payment feature is an embedded derivative and has been bifurcated and recorded separately in the Consolidated Balance Sheets in other long-term liabilities. The initial fair value assigned to the embedded derivative was $1.9 million, which is recorded as a discount to the CODES.

The Company used a portion of the proceeds from the issuance of the CODES to retire the outstanding balance of the Company’s term loan and revolving credit facility it entered into in July 2000 (2000 Facility). The total outstanding balance of the 2000 Facility consisted of a $246 million term loan balance and a $60 million revolving credit balance. The Company terminated the 2000 Facility in March 2003 upon repayment of the outstanding balance. As a result of the early retirement of the 2000 Facility, the Company incurred a charge in the amount of $2.8 million for the unamortized bank fees associated with this debt. This charge is reported separately in the Consolidated Statements of Income.

NOTE I – FINANCIAL INSTRUMENTS

Fair value of financial instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts and other receivables, investments, trade accounts payable, senior subordinated notes, CODES and embedded derivatives related to the issuance of the CODES. The carrying amounts of cash and cash equivalents, marketable securities, accounts and other receivables and trade accounts payable are representative of their respective fair values due to their relatively short maturities. The fair values of investments in companies that are publicly traded are based on quoted market prices. The fair value of investments in privately held companies, or cost-method investments, are based on historical cost, adjusted for any write-down related to impairment. The Company estimates the fair value of its fixed rate long-term obligations based on quoted market rates of interest and maturity schedules for similar issues. The carrying value of these obligations approximates their fair value. The fair value of the embedded derivatives related to the CODES is based on a present value technique using discounted expected future cash flows.

Derivative financial instruments

The Company’s derivative financial instruments consist of embedded derivatives related to its CODES. These embedded derivatives include certain conversion features and a contingent interest feature. See Note H for a more detailed description of these features of the CODES. Although the conversion features represent embedded derivative financial instruments, based on the de minimis value of these features at the time of issuance and at March 31, 2003, no value has been assigned to these instruments. The contingent interest feature provides unique tax treatment under the Internal Revenue Service’s Contingent Debt Regulations. In essence, interest accrues, for tax purposes, on the basis of the instrument’s comparable yield (the yield at which the issuer would issue a fixed rate instrument with similar terms). This embedded derivative is reported on the Company’s consolidated balance sheets at fair value and the changes in the fair value of the embedded derivative are reported as gains or losses in the Company’s Consolidated Statements of Income.

At March 31, 2003 and 2002, the carrying amounts and estimated fair values of the Company’s derivative financial instruments were as follows (in thousands):

	March 31,
	2003				2002
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Embedded derivative	$	1,993	$	1,993	$	—	$	—

NOTE J – IMPAIRMENT OF SECURITIES

At March 31, 2003, investments and other assets included an investment in 3 million shares of the common stock of Genelabs Technologies, Inc. (Genelabs), a publicly traded company, with an adjusted cost basis of $3.9 million. This investment has been classified as available-for-sale, pursuant to SFAS No. 115, “Accounting for certain Investments in Debt and Equity Securities.” Available-for-sale securities are carried at fair value, based on quoted market prices, with unrealized gains and losses reported as a separate component of stockholders’ equity. During the first quarter of 2003, in accordance with SFAS No. 115, management determined that an other than temporary decline in the fair value of Genelabs common stock existed and, as a result, wrote down the initial cost basis of the investment to its fair value at March 31, 2003 of $3.9 million. In connection with this write-down, an asset impairment charge of $13.0 million was recorded and recognized in earnings.

NOTE K – SALE OF SUBSIDIARY

During the first quarter of 2003, the Company completed the sale of its subsidiary located in the United Kingdom (UK). The Company received proceeds from this sale of approximately $16.4 million and recorded a pre-tax gain of approximately $15.7 million. During 2002, the subsidiary had net revenues, gross profit and net income of $10.8 million, $6.3 million and $3.2 million, respectively.

In connection with the sale, the Company has provided certain warranties and indemnifications to the buyer including an indemnification relating to web-site content. The buyer must give written notice to the Company within 18 months of the completion of the sale transaction of any claim arising out of these indemnifications. The Company does not expect any liability arising out of a claim, if any, to have a material adverse impact on its results of operations, financial position or cash flows. No liability has been recorded in relation to these indemnifications at March 31, 2003.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and the results of our operations should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, those identified under “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2002.

Results of Operations

Net Revenues

	Three Months Ended March 31,
							Change
($ in thousands):	2003			2002			$		%

Net Revenues by Segment:
Branded pharmaceutical products	$	183,761		$	161,527		$	22,234	13.8	%
% of total product net revenues	56.2		%	58.2		%
Generic pharmaceutical products	143,199			116,083			27,116		23.4	%
% of total product net revenues	43.8		%	41.8		%
Other	9,962			8,080			1,882		23.3	%
Total net revenues	$	336,922		$	285,690		$	51,232	17.9	%

Total net revenues for the three months ended March 31, 2003 increased compared to the corresponding 2002 period due to increases in both our branded and generic segments. Other net revenues also increased due to timing of research and development activities resulting in increased recognition of previously deferred revenue.

Branded Pharmaceutical Products

The increase in net revenues from our branded pharmaceutical products is primarily attributable to product sales within our Women’s Health and Urology/General Products divisions. The increase in net revenues from our Women’s Health division was due to the introduction of new oral contraceptive products and higher sales of our existing oral contraceptive products. Our Necon® 7/7/7 and Mononessa® oral contraceptive products accounted for the majority of the increase.

The increase in net revenues from our Urology/General Products division was primarily due to higher unit sales of our Androderm® testosterone patch as a result of focused product promotions and prescription growth. Our Fioricet® and Fiorinal® product lines, which we acquired during the first quarter of 2003, also contributed to the increase.

The overall increase in net revenues from our branded segment was impacted by a decrease in net revenues within our Nephrology division as a result of unit sales declines and increased competition. We expect net revenues for our branded segment to increase as a result of new products introduced in 2003, including our Oxytrolä product.

Generic Pharmaceutical Products

The increase in net revenues for our generic segment is primarily related to new products launched and products reintroduced during, or subsequent to, the first quarter of 2002 and price increases on certain products. Additionally, during the first quarter of 2002 we granted significant price concessions to customers in connection with the launch of metformin, which resulted in lower net revenues for the first quarter of 2002.

Net Revenue Mix

The change in product net revenue mix is primarily related to the price concessions granted to customers during the first quarter of 2002, discussed above. In addition, the launch of certain generic products during 2002 led to increased generic product net revenues in the current period.

Gross Profit Margin on Product Net Revenues (Gross Margin)

	Three Months Ended March 31,
	2003		2002		Change

Gross Margin by Segment:
Branded pharmaceutical products	76.6	%	74.7	%	1.9	%
Generic pharmaceutical products	25.6	%	18.4	%	7.2	%
Gross margin on product net revenues	54.2	%	51.1	%	3.1	%

The increase in our overall gross margin on product net revenues is primarily attributable to our generic segment. The increase in generic gross margin in the first quarter of 2003 is a result of lower gross margins in the first quarter of 2002 due to price concessions granted to customers. Gross margins from our branded segment remained relatively unchanged. We expect our gross margins to remain consistent with the current quarter.

Research and Development (R&D) Expenses

	Three Months Ended March 31,
							Change
($ in thousands):	2003			2002			$		%

R&D expenses	$	22,484		$	18,519		$	3,965	21.4	%
as % of net revenues	6.7		%	6.5		%

Research and development expenses increased as a result of increased spending on clinical studies for both branded and generic products and increased headcount within our research and development department. We expect research and development expenses to continue to increase slightly as a result of our efforts in both the branded and generic product development.

Selling, General and Administrative (SG&A) Expenses

	Three Months Ended March 31,
							Change
($ in thousands):	2003			2002			$		%

SG&A expenses	$	67,659		$	62,263		$	5,396	8.7	%
as % of net revenues	20.1		%	21.8		%

The increase in selling, general and administrative expenses for the three month period was primarily due to increased corporate insurance premiums on policy renewals, expenses associated with the implementation of our Enterprise Resource Planning (ERP) system and costs associated with the future launch of Oxytrolä. We expect these expenses to continue to increase, primarily as a result of the Oxytrolä product launch.

Amortization Expense

	Three Months Ended March 31,
					Change
($ in thousands):	2003		2002		$		%

Amortization expense	$	18,435	$	13,294	$	5,141	38.7	%

The increase in amortization expense was due primarily to amortization associated with the nifedipine ER product rights acquired in August 2002 and the Fiorinalâ and Fioricetâ product lines acquired in February 2003. See Note B in the accompanying Notes to Consolidated Financial Statements in this Quarterly Report.

Equity in Earnings (Losses) of Joint Ventures

	Three Months Ended March 31,
						Change
($ in thousands):	2003		2002			$		%

Equity in earnings (losses) of joint ventures	$	117	$	(1,059	)	$	1,176	-111.0	%

Our earnings from joint ventures for the three months ended March 31, 2003 is primarily the result of income from our interest in ANCIRC Pharmaceuticals (ANCIRC), a joint venture with Andrx Corporation. The income from ANCIRC was substantially offset by losses from our interest in Somerset Pharmaceuticals, Inc. (Somerset), a joint venture with Mylan Laboratories, Inc. Our loss on joint ventures for the 2002 period was primarily related to losses from our interest in Somerset. We expect our ANCIRC earnings to continue to partially offset Somerset losses.

Impairment of Securities

	Three Months Ended March 31,
						Change
($ in thousands):	2003			2002		$			%

Impairment of securities	$	(13,042	)	$	—	$	(13,042	)	n/a

During the first quarter of 2003, we recorded a $13.0 million asset impairment charge related to our investment in Genelabs. See Note J in the accompanying Notes to Consolidated Financial Statements in this Quarterly Report.

Gain on Sale of Securities

	Three Months Ended March 31,
					Change
($ in thousands):	2003		2002		$		%

Gain on sale of securities	$	1,089	$	—	$	1,089	n/a

During the first quarter of 2003, we sold approximately 190,000 shares of Dr. Reddy common stock and recorded a pre-tax gain of $1.1 million.

Gain on Sale of Subsidiary

	Three Months Ended March 31,
					Change
($ in thousands):	2003		2002		$		%

Gain on sale of subsidiary	$	15,676	$	—	$	15,676	n/a

During the first quarter of 2003, we sold our subsidiary located in the United Kingdom. As a result of the sale, we recorded a pre-tax gain of $15.7 million. During 2002, the subsidiary had net revenues, gross profit and net income of $10.8 million, $6.3 million and $3.2 million, respectively. See Note K in the accompanying Notes to Consolidated Financial Statements in this Quarterly Report.

Loss on Early Extinguishment of Debt

	Three Months Ended March 31,
						Change
($ in thousands):	2003			2002		$			%

Loss on early extinguishment of debt	$	(2,807	)	$	—	$	(2,807	)	n/a

During the first quarter of 2003, as a result of the retirement of our previous credit facility, we incurred a charge for the unamortized bank fees associated with the facility. See Note H in the accompanying Notes to Consolidated Financial Statements in this Quarterly Report.

Liquidity and Capital Resources

We assess liquidity by our ability to generate cash to fund our operations. Significant factors that affect the management of our liquidity include: current balances of cash, cash equivalents and value of marketable securities; expected cash flows provided by operations; current levels of our accounts receivable, inventory and accounts payable balances; our expected investment in capital; access to financing sources, including credit and equity arrangements; and the financial flexibility to attract long-term capital on satisfactory terms.

We generated cash in excess of our working capital requirements for the three months ended March 31, 2003. Our cash flows provided by operations were $68.3 million, a decrease of approximately $23.6 million from the previous year’s period. The decrease in cash flow from operations was primarily due to the change, year over year, in balances of inventories and income tax payable. The change in inventories resulted from the build-up of inventories in support of expected new product launches and marketing initiatives. These decreases were partially offset by the change, year over year, in net income and balances of accounts receivable and accounts payable and accrued expenses.

In addition to the increase in inventories ($16.9 million), other significant uses of cash included the acquisition of product rights ($178.2 million), additions to property and equipment ($21.6 million) and principal payments on our credit facility ($325.9 million, of which $306.1 million was paid from proceeds of the issuance of debentures as discussed below). We currently expect to spend between $125 million to $135 million for property and equipment additions in 2003, of which we expect approximately $25 million to be related to the installation and implementation of our new ERP system.

In May 1998, we issued $150 million of senior unsecured notes due May 2008 (1998 Senior Notes), with interest payable semi-annually in May and November at an effective rate of 7.2%, pursuant to a shelf registration statement authorizing up to $300 million in debt securities, preferred stock or common stock. On April 2, 2003, we determined that we did not intend to offer any additional debt securities, preferred stock or common stock under the registration statement, and filed an amendment with the Securities and Exchange Commission deregistering the remaining unsold $150 million aggregate amount of debt securities, preferred stock and common stock covered by the registration statement. In March 2003, we issued $575 million of convertible contingent senior debentures (CODES) due in 2023. As of March 31, 2003, the entire amount of the CODES remained outstanding at an effective annual interest rate of approximately 2.1%.

We used a portion of the proceeds from the issuance of the CODES to pay the $306.1 million balance on our term loan and revolving credit facility we entered into in July 2000 (2000 Facility). We terminated the 2000 Facility in March 2003 upon our repayment of this balance.

We are currently in negotiations with a consortium of prospective lenders to enter into a new five year, $300 million revolving credit facility which we would use for working capital and other general corporate purposes. If we enter into a new revolving credit facility, its terms may require each of our subsidiaries, other than minor subsidiaries, to provide a full and unconditional guarantee on a joint and several basis. In order to provide subsidiary guarantees in connection with a new credit facility, we will be required to issue similar guarantees to the 1998 Senior Note holders.

Our cash and marketable securities totaled $450.3 million at March 31, 2003. The fair value of our marketable securities may fluctuate significantly due to volatility of the stock market and changes in general economic conditions. See Item 3. in this Quarterly Report on Form 10-Q. We believe that our cash and marketable securities balance and our expected cash flows from operations will be sufficient to meet our normal operating requirements during the next twelve months. However, we continue to review opportunities to acquire or invest in companies, technologies, product rights and other investments that are compatible with our existing business. We could use cash and financing sources discussed herein, or financing sources that subsequently become available, to fund additional acquisitions or investments. In addition, we may consider issuing additional debt or equity securities in the future to fund potential acquisitions or investment, to refinance existing debt, or for general corporate purposes. If a material acquisition or investment is completed, our operating results and financial condition could change materially in future periods. However, no assurance can be given that additional funds will be available on satisfactory terms, or at all, to fund such activities.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Any statements made in this report that are not statements of historical fact or that refer to estimated or anticipated future events are forward-looking statements. Such forward-looking statements reflect our current perspective of existing trends and information as of the date of this filing. These include, but are not limited to, prospects related to our strategic initiatives and business strategies, express or implied assumptions about government regulatory action or inaction, anticipated product approvals and launches, business initiatives and product development activities, assessments related to clinical trial results, product performance and competitive environment, and anticipated financial performance. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” or “pursue,” or the negative other variations thereof or comparable terminology are intended to identify forward-looking statements.

We caution the reader that certain important factors may affect our actual operating results and could cause such results to differ materially from those expressed or implied by forward-looking statements. We believe the following important risks, uncertainties and other factors, among others, may affect our actual results:

• the success of our product development activities and uncertainties related to the timing or outcome of such activities;

• the timing and unpredictability of regulatory authorizations and product rollout, which is particularly sensitive in our generic business;

• the outcome of our litigation (including, without limitation, patent, trademark and copyright litigation), and the costs, expenses and possible diversion of management’s time and attention arising from such litigation;

• our ability to retain key personnel;

• our ability to adequately protect our technology and enforce our intellectual property rights;

• our ability to obtain and maintain a sufficient supply of products to meet market demand in a timely manner;

• our dependence on sole source suppliers and the risks associated with a production interruption or supply delays at such third party suppliers or at our own manufacturing facilities;

• the scope, outcome and timeliness of any governmental, court or other regulatory action that may involve us (including, without limitation, the scope, outcome or timeliness of any inspection or other action of the FDA);

• our success in divesting assets or facilities we intend to dispose of;

• the increasing costs of insurance, and limitations on obtaining insurance coverage;

• the scope, outcome and effect of investigations, actions or legislation related to our product pricing and reimbursement practices;

• the availability to us, on commercially reasonable terms, of raw materials and other third party sourced products;

• our exposure to product liability and other lawsuits and contingencies;

• our mix of product sales between branded products, which typically have higher margins, and generic products;

• our dependence on revenues from significant products, in particular, Ferrlecit®, for which first quarter 2003 net revenues are approximately 10% of our total net revenues;

• our dependence on revenue from significant customers;

• the ability of third parties to assert patents or other intellectual property rights against us which, among other things, could cause a delay or disruption in the manufacture, marketing or sale of our products;

• our ability to license patents or other intellectual property rights from third parties on commercially reasonable terms;

• the expiration of patent and regulatory exclusivity on certain of our products that will result in competitive and pricing pressures;

• difficulties and delays inherent in product development, manufacturing and sale, such as:

• products that may appear promising in the development stage may fail to reach market for numerous reasons, including efficacy or safety concerns;

• the inability to obtain necessary regulatory approvals and the difficulty or excessive cost to manufacture;

• seizure or recall of products;

• the failure to obtain, the imposition of limitations on the use of, or loss of patent and other intellectual property rights;

• manufacturing or distribution problems;

• our successful compliance with extensive, costly, complex and evolving governmental regulations and restrictions;

• market acceptance of and continued demand for our products and the impact of competitive products and pricing;

• our ability to successfully compete in both the branded and generic pharmaceutical product sectors;

• our timely and successful implementation of strategic initiatives, including integrating companies and products we acquire and new enterprise resource planning systems; and

• other risks and uncertainties detailed herein and from time to time in our Securities and Exchange Commission filings.

We disclaim any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. We also may make additional disclosures in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we may file from time to time with the Securities and Exchange Commission (SEC). Please also note that we provided a cautionary discussion of risks and uncertainties under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2002. The factors identified above and those set forth in our SEC filings are the factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could also adversely affect us. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risk for changes in the market values of our investments (Investment Risk) and the impact of interest rate changes (Interest Rate Risk). We have not used derivative financial instruments in our investment portfolio. The quantitative and qualitative disclosures about market risk are set forth below.

Investment Risk

As of March 31, 2003, our total investment in equity securities of other companies was $85.5 million. Of this amount, we had equity-method investments of $37.5 million and publicly traded equity securities (available-for-sale securities) at fair value totaling $48.0 million ($34.7 million that was included in “Marketable securities” and $13.3 million that was included in “Investments and other long-term assets”). The fair values of these investments are subject to significant fluctuations due to volatility of the stock market and changes in general economic conditions. Based on the fair value of the publicly traded equity securities we held at March 31, 2003, an assumed 25%, 40% and 50% adverse change in the market prices of these securities would result in a corresponding decline in total fair value of approximately $12 million, $19 million and $24 million, respectively.

As discussed in Note C in the accompanying Notes to Consolidated Financial Statements in this Quarterly Report, our investment in Andrx consisted of approximately 1.5 million shares of Andrx common stock with a fair market value of $18.1 million at March 31, 2003. Because Andrx is a publicly traded equity security, our holdings of Andrx have exposure to investment risk. The market price of Andrx common shares has been, and may continue to be, volatile. For example, on March 31, 2003, the final trading day of the quarter, the closing price of Andrx was $11.80. On May 8, 2003, before completing this Form 10-Q, the closing price of Andrx common stock was $16.20. The following table sets forth the Andrx high and low market price per share information, based on published financial sources, for 2003 and 2002:

	High		Low
2003, by quarter
First	$	16.83	$	7.68

2002, by quarter
First	$	71.27	$	31.13
Second	$	48.20	$	25.80
Third	$	27.89	$	16.61
Fourth	$	23.19	$	10.75

In addition, our marketable securities include shares of common stock of Dr. Reddy’s Laboratories, Limited (Dr. Reddy). As of March 31, 2003, Watson owned 850,000 common shares of Dr. Reddy with a market value of approximately $16.5 million. Dr. Reddy’s shares trade on the Bombay Stock Exchange (BSE) and on the New York Stock Exchange in the form of American depositary shares. However, the shares of Dr. Reddy common stock that we hold are currently tradable only on the BSE, since our shares are not presently in the form of American depositary shares. The liquidity of our Dr. Reddy investment may be limited due to the current Dr. Reddy daily trading volume on the BSE, among other factors.

The following table sets forth the Dr. Reddy high and low market price per share information, based on published financial sources, for 2003 and 2002:

	High		Low
2003, by quarter
First	$	21.00	$	18.03

2002, by quarter
First	$	23.76	$	18.91
Second	$	24.00	$	18.40
Third	$	21.64	$	16.00
Fourth	$	19.47	$	14.26

We regularly review the carrying value of our investments and identify and recognize losses, for income statement purposes, when events and circumstances indicate that any declines in the fair values of such investments, below our accounting basis, are other than temporary. During the first quarter 2003, we made such a determination with respect to our investment in Genelabs resulting in an impairment charge of $13.0 million (see Note J in the accompanying Notes to Consolidated Financial Statements in this Quarterly Report).

Interest Rate Risk

Our exposure to interest rate risk relates primarily to our non-equity investment portfolio. Our cash is invested in A-rated money market mutual funds and short-term securities. Consequently, our interest rate and principal risk are minimal.

Based on quoted market rates of interest and maturity schedules for similar debt issues, we estimate that the fair values of our CODES and our fixed-rate senior unsecured notes approximated their carrying values March 31, 2003. While changes in market interest rates may affect the fair value of our fixed-rate debt, we believe the effect, if any, of reasonably possible near-term changes in the fair value of such debt on our financial condition, results of operations or cash flows will not be material.

At this time, we are not party to any interest rate or derivative hedging contracts and have no material foreign exchange or commodity price risks.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Company has investments in certain unconsolidated entities. As the Company does not control or manage these entities, its disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those it maintains with respect to its consolidated subsidiaries.

Within 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure

controls and procedures. Based on the foregoing, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.

PART II. OTHER INFORMATION AND SIGNATURES

ITEM 1. LEGAL PROCEEDINGS

The Company is party to certain lawsuits and legal proceedings, which are described in “Part I, Item 3. Legal Proceedings,” of our Annual Report on Form 10-K for the year ended December 31, 2002. There were no material changes in these legal proceedings during the first quarter of 2003.

The Company and its affiliates are involved in various disputes, governmental and/or regulatory inspections, investigations and proceedings, and litigation matters that arise from time to time in the ordinary course of business. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that the resolution of these matters will adversely affect the Company, its results of operations, financial position and/or cash flows.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Reference is hereby made to the Exhibit Index on page 28.

(b) Reports on Form 8-K filed during the quarter ended March 31, 2003:

On March 5, 2003, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission reporting, under Item 5, its plans to offer convertible senior debentures due 2023 in a private placement transaction.

On March 6, 2003, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission reporting, under Item 5, that it increased the size of its offering of convertible senior debentures due 2023 and announced the pricing of the private placement.

On March 12, 2003, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission reporting, under Item 5, it closed its offering of convertible contingent senior debentures due 2023.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		WATSON PHARMACEUTICALS, INC.
		(Registrant)


	By:	/s/ CHARLES SLACIK
		Charles Slacik
		Executive Vice President – Chief Financial Officer
		(Principal Financial Officer)


	By:	/s/ R. TODD JOYCE
		R. Todd Joyce
		Vice President – Corporate Controller and Treasurer
		(Principal Accounting Officer)

Dated: May 14, 2003

CERTIFICATIONS

I, Allen Chao, Chairman and Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Watson Pharmaceuticals, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

	/s/ ALLEN CHAO, Ph.D.
	Allen Chao, Ph.D.
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

I, Charles Slacik, Executive Vice President – Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Watson Pharmaceuticals, Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: May 14, 2003

	/s/ CHARLES SLACIK
	Charles Slacik
	Executive Vice President – Chief Financial Officer
	(Principal Financial Officer)

WATSON PHARMACEUTICALS, INC.

EXHIBIT INDEX TO FORM 10-Q

For the Quarterly Period Ended March 31, 2003

Exhibit No.		Description
4.2		Indenture dated March 7, 2003 between the Company and Wells Fargo Bank, National Association as Trustee for the issuance of the Company’s 1.75% Convertible Contingent Senior Debentures.

10.16		Resale Registration Rights Agreement dated as of March 7, 2003 among the Company and Lehman Brothers Inc., Morgan Stanley & Co., Incorporated, CIBC World Markets Corp., Wachovia Securities, Inc., Banc of America Securities LLC, Comerica Securities, Inc. and Wells Fargo Securities, LLC.

Exhibit 4.2

EXECUTION COPY

INDENTURE

Between

WATSON PHARMACEUTICALS, INC.

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee

1.75% CONVERTIBLE CONTINGENT SENIOR DEBENTURES
DUE MARCH 15, 2023

Dated as of March 7, 2003

CROSS-REFERENCE TABLE*

Trust Indenture Act Section			Indenture Section

310(a)(1)			5.11
(a)(2)			5.11
(a)(3)			n/a
(a)(4)			n/a
(a)(5)			5.11
(b)			5.3; 5.11
(c)			n/a
311(a)			5.12
(b)			5.12
(c)			n/a
312(a)			2.9
(b)			14.3
(c)			14.3
313(a)			5.7
(b)(1)			n/a
(b)(2)			5.7
(c)			5.7; 14.2
(d)			5.7
314(a)(1), (2), (3)			9.4; 14.2
(a)(4)			9.5; 14.6
(b)			n/a
(c)(1)			14.5
(c)(2)			14.5
(c)(3)			n/a
(d)			n/a
(e)			14.6
(f)			n/a
315(a)			5.1(a)
(b)			5.6; 14.2
(c)			5.1(b)
(d)			5.1(c)
(e)			4.14
316(a)(last sentence)			7.2
(a)(1)(A)			4.5
(a)(1)(B)			4.4
(a)(2)			n/a
(b)			4.7
(c)			7.4
317(a)(1)			4.8
(a)(2)			4.9
(b)			2.6
318(a)			14.1
(b)			n/a
(c)			14.1

“n/a” means not applicable.

*This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1.	Definitions

Section 1.2.	Incorporation by Reference of Trust Indenture Act

Section 1.3.	Rules of Construction

ARTICLE 2 THE SECURITIES

Section 2.1.	Title and Terms

Section 2.2.	Form of Securities

Section 2.3.	Legends

Section 2.4.	Execution, Authentication, Delivery and Dating of the Securities

Section 2.5.	Registrar and Paying Agent

Section 2.6.	Paying Agent to Hold Assets in Trust

Section 2.7.	General Provisions Relating to Registration, Transfer and Exchange

Section 2.8.	Book-Entry Provisions for the Global Securities

Section 2.9.	Holder Lists

Section 2.10.	Persons Deemed Owners

Section 2.11.	Mutilated, Destroyed, Lost or Stolen Securities

Section 2.12.	Treasury Securities

Section 2.13.	Temporary Securities

Section 2.14.	Cancellation

Section 2.15.	CUSIP Numbers

Section 2.16.	Defaulted Interest

Section 2.17.	Transfer Provisions

ARTICLE 3 DISCHARGE OF INDENTURE

Section 3.1.	Discharge of Liability on Securities

Section 3.2.	Repayment to the Company

ARTICLE 4 DEFAULTS AND REMEDIES

Section 4.1.	Events of Default

Section 4.2.	Acceleration of Maturity; Rescission and Annulment

Section 4.3.	Other Remedies

Section 4.4.	Waiver of Past Defaults

Section 4.5.	Control by Majority

Section 4.6.	Limitation on Suit

Section 4.7.	Unconditional Rights of Holders to Receive Payment and to Convert

Section 4.8.	Collection of Indebtedness and Suits for Enforcement by the Trustee

Section 4.9.	Trustee May File Proofs of Claim

Section 4.10.	Restoration of Rights and Remedies

Section 4.11.	Rights and Remedies Cumulative

Section 4.12.	Delay or Omission Not Waiver

Section 4.13.	Priorities

Section 4.14.	Undertaking for Costs

Section 4.15.	Waiver of Stay or Extension Laws

ARTICLE 5 THE TRUSTEE

Section 5.1.	Certain Duties and Responsibilities

Section 5.2.	Certain Rights of Trustee

Section 5.3.	Individual Rights of Trustee

Section 5.4.	Money Held in Trust

Section 5.5.	Trustee’s Disclaimer

Section 5.6.	Notice of Defaults

Section 5.7.	Reports by Trustee to Holders

Section 5.8.	Compensation and Indemnification

Section 5.9.	Replacement of Trustee

Section 5.10.	Successor Trustee by Merger, Etc.

Section 5.11.	Corporate Trustee Required; Eligibility

Section 5.12.	Collection of Claims Against the Company

ARTICLE 6 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER, SALE, LEASE OR OTHER DISPOSITION


Section 6.1.	Company May Consolidate, Etc., Only on Certain Terms

Section 6.2.	Successor Corporation Substituted

ARTICLE 7 AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 7.1.	Without Consent of Holders of Securities

Section 7.2.	With Consent of Holders of Securities

iii

Section 7.3.	Compliance with Trust Indenture Act

Section 7.4.	Revocation of Consents and Effect of Consents or Votes

Section 7.5.	Notation on or Exchange of Securities

Section 7.6.	Trustee to Sign Amendment, Etc.

Section 7.7.	Effect of Amendment

ARTICLE 8 [INTENTIONALLY OMITTED]

ARTICLE 9 COVENANTS

Section 9.1.	Payment of Principal, Redemption Price, Repurchase Price and Interest

Section 9.2.	Maintenance of Offices or Agencies

Section 9.3.	Corporate Existence

Section 9.4.	Reports

Section 9.5.	Compliance Certificate

Section 9.6.	Resale of Certain Securities

ARTICLE 10 REDEMPTION OF SECURITIES

Section 10.1.	Optional Redemption

Section 10.2.	Notice to Trustee

Section 10.3.	Selection of Securities to Be Redeemed

Section 10.4.	Notice of Redemption

Section 10.5.	Effect of Notice of Redemption

Section 10.6.	Deposit and Payment of Redemption Price

Section 10.7.	Securities Redeemed in Part

ARTICLE 11 PURCHASE AT THE OPTION OF A HOLDER UPON SPECIFIC REPURCHASE DATES OR CHANGE OF CONTROL

Section 11.1.	Purchase Right

Section 11.2.	Repurchase Event Notice

Section 11.3.	Delivery of Repurchase Event Purchase Notice; Form of Repurchase Event Purchase Notice; Withdrawal of Repurchase Event Purchase Notice

Section 11.4.	Exercise of Purchase Rights

Section 11.5.	Deposit and Payment of the Purchase Price

Section 11.6.	Effect of Delivery of Repurchase Event Purchase Notice and Purchase

Section 11.7.	Physical Securities Purchased in Part

Section 11.8.	Covenant to Comply With Securities Laws Upon Purchase of Securities

Section 11.9.	Repayment to the Company

ARTICLE 12 CONVERSION OF SECURITIES

Section 12.1.	Conversion Right; Expiration of Conversion Right; Conversion Price

Section 12.2.	Exercise of Conversion Right

Section 12.3.	Fractions of Shares

Section 12.4.	Adjustment of Conversion Price

Section 12.5.	Consolidation or Merger of the Company

Section 12.6.	Notice of Adjustments of Conversion Price

Section 12.7.	Notice Prior to Certain Actions

Section 12.8.	Company to Reserve Common Stock

Section 12.9.	Common Stock to be Fully Paid and Nonassessable

Section 12.10.	Taxes on Conversions

Section 12.11.	Cancellation of Converted Securities

Section 12.12.	Responsibility of Trustee for Conversion Provisions

ARTICLE 13 [INTENTIONALLY OMITTED]

ARTICLE 14 OTHER PROVISIONS OF GENERAL APPLICATION

Section 14.1.	Trust Indenture Act Controls

Section 14.2.	Notices

Section 14.3.	Communication by Holders with Other Holders

Section 14.4.	Acts of Holders of Securities

Section 14.5.	Certificate and Opinion as to Conditions Precedent

Section 14.6.	Statements Required in Certificate or Opinion

Section 14.7.	Effect of Headings and Table of Contents

Section 14.8.	Successors and Assigns

Section 14.9.	Separability Clause

Section 14.10.	Benefits of Indenture

Section 14.11.	Governing Law

Section 14.12.	Counterparts

Section 14.13.	Legal Holidays

Section 14.14.	Recourse Against Others

EXHIBITS

EXHIBIT A	Form of Security
EXHIBIT B	Form of Repurchase Event Purchase Notice
EXHIBIT C	Form of Conversion Notice

INDENTURE, dated as of March 7, 2003 (this “Indenture”), between Watson Pharmaceuticals, Inc., a corporation duly organized and existing under the laws of the State of Nevada, having its principal office at 311 Bonnie Circle, Corona, California 92880 (the “Company”) and Wells Fargo Bank, National Association, a federally chartered banking organization, as Trustee (the “Trustee”), having its principal corporate trust office at 707 Wilshire Boulevard, 17^th Floor, Los Angeles, California 90017.

RECITALS OF THE COMPANY

WHEREAS, the Company has duly authorized the creation of an issue of its 1.75% Convertible Contingent Senior Debentures due March 15, 2023 (the “Securities”) of substantially the terms, tenor, amount and other provisions hereinafter set forth, and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture; and

WHEREAS, all things necessary to make the Securities, when the Securities are duly executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company, in accordance with their and its terms, have been done.

NOW, THEREFORE, for and in consideration of the premises and the purchase of the Securities by the Holders (as defined below) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, as follows:

ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1. Definitions.

For all purposes of this Indenture and the Securities, the following terms are defined as follows:

“Act”, when used with respect to any Holder, has the meaning specified in Section 14.4(a).

“Additional Amounts” means all amounts, if any, payable pursuant to Section 3 of the Registration Rights Agreement.

“Adjusted Interest Rate” means, with respect to any Reset Transaction, the rate per annum that is the arithmetic average of the rates quoted by two Reference Dealers selected by the Company or its successor as the rate at which interest on the Securities should accrue so that the Fair Market Value, expressed in dollars, of a Security immediately after the later of:

(i) the public announcement of such Reset Transaction; or

(ii) the public announcement of a change in dividend policy in connection with such Reset Transaction,

will equal most closely the average Trading Price of a Security for the 20 Trading Days preceding the date of such public announcement; provided that the Adjusted Interest Rate shall not be less than 1.75% per annum.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agent Member” has the meaning specified in Section 2.8.

“Bankruptcy Law” means Title 11 of the U.S. Code or any similar federal or state law for the relief of debtors.

“Board of Directors” means either the board of directors of the Company or any committee of that board empowered to act for it with respect to this Indenture.

“Board Resolution” means a resolution duly adopted by the Board of Directors, a copy of which, certified by the Secretary or an Assistant Secretary of the Company to be in full force and effect on the date of such certification, shall have been delivered to the Trustee.

“Business Day” means, with respect to any Security, a day that in the City of New York is not a day on which banking institutions are authorized by law or regulation to close.

“Calculation Agent” means any Person authorized by the Company to obtain market bid quotations on the Securities for purposes of calculating the Trading Price of the Securities. Initially, the Calculation Agent shall be Wells Fargo Bank, National Association.

“Capital Stock” means, with respect to any Person, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests (however designated) in equity of such Person, whether now outstanding or issued after the date of this Indenture, including, without limitation, all common stock and preferred stock.

“Change of Control” means the occurrence of any of the following after the original issuance of the Securities when any of the following has occurred:

(i) the acquisition by any “person” or “group” (within the meaning of Sections 13(d)(3) and 14(d)(2), respectively, of the Exchange Act) deemed to be a “beneficial owner” (as defined in Rule 13d-3 and Rule 13d-5 of the Exchange Act), directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Company’s Capital Stock entitling such person to exercise 50% or more of the total voting power of all shares of the Company’s Capital Stock entitled to vote generally in elections of directors, other than any acquisition by the Company, any of its Subsidiaries or any of its employee benefit plans (except that such person shall be deemed to have beneficial ownership of all securities

that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition);

(ii) the first day on which a majority of members of the Board of Directors are not Continuing Directors;

(iii) any consolidation or merger of the Company with or into any other person (which for purposes of this definition has the meaning set forth in Section 13(d)(3) of the Exchange Act), or any merger of another person into the Company, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the properties and assets of the Company to another person, other than (a) any transaction (i) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Capital Stock of the Company and (ii) pursuant to which holders of Capital Stock of the Company immediately prior to such transaction have the right to exercise, directly or indirectly, 50% or more of the total voting power of all shares of Capital Stock of the Company entitled to vote generally in the election of directors of the continuing or surviving person immediately after such transaction or (b) any such merger solely for the purpose of changing the jurisdiction of incorporation of the Company and resulting in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of the common stock of the surviving entity;

provided, however, that a Change of Control shall not be deemed to have occurred if (A) the Market Price per share of Common Stock for any five Trading Days within the period of 10 consecutive Trading Days ending immediately after the later of the Change of Control or the public announcement of the Change of Control, in the case of a Change of Control under clause (i) above, or the period of 10 consecutive Trading Days ending immediately before the Change of Control, in the case of a Change of Control under clause (ii) or (iii) above, equals or exceeds 110% of the Conversion Price of the Securities in effect on each such Trading Day or (B) at least 90% of the consideration in the transaction or transactions constituting a Change of Control consists of shares of Common Stock traded or to be traded immediately following such Change of Control on a national securities exchange or the Nasdaq National Market and, as a result of the transaction or transactions, the Securities become convertible solely into such Common Stock (and any rights attached thereto).

“Change of Control Purchase Date” has the meaning specified in Section 11.1 hereof.

“Closing Date” means March 7, 2003 or such later date on which the Securities may be delivered pursuant to the Purchase Agreement.

“Commission” means the Securities and Exchange Commission or any successor agency.

“Common Stock” means any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or

involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of Section 12.10 hereof, shares issuable on conversion of the Securities shall include only shares of the class designated as Common Stock, par value $.0033 per share, of the Company at the date of execution of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

“Company” means the corporation named as the “Company” in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor Person.

“Company Order” means a written order signed in the name of the Company by any Officer.

“Contingent Interest” has the meaning specified in Section 2.1(d).

“Continuing Director” means, as of any date of determination, any member of the Board of Directors who (i) was a member of the Board of Directors on the date hereof, (ii) was nominated for election or elected to the Board of Directors with the approval of a majority of the Continuing Directors who were members of the Board of Directors at the time of such new director’s nomination or election.

“Conversion Agent” means any Person authorized by the Company to convert Securities in accordance with Article 12. Initially, the Conversion Agent shall be Wells Fargo Bank, National Association.

“Conversion Date” means, with respect to any Holder, the date on which such Holder has satisfied all the requirements to convert its Securities pursuant to Section 12.2.

“Conversion Price” has the meaning specified in Section 12.1(c).

“Conversion Rate” has the meaning specified in Section 12.1(b).

“Conversion Record Date” has the meaning specified in Section 12.4(g).

“Corporate Trust Office” means for purposes of presentation or surrender of Securities for payment, registration, transfer, exchange or conversion or for service of notices or demands upon the Company or for any other purpose of this Indenture, the office of the Trustee located in the Borough of Manhattan, The City of New York, at which at any particular time its corporate trust business shall be administered, which at the date of this Indenture is located at 45 Broadway, 12^th Floor, New York, New York 10006.

“corporation” means any corporation, association, limited liability company, company and business trust.

“Current Market Price” has the meaning specified in Section 12.4(g).

“Custodian” means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

“Default” means an event which is, or after notice or lapse of time or both would constitute, an Event of Default.

“Defaulted Payment” has the meaning specified in Section 4.1(b).

“Defaulted Interest” has the meaning specified in Section 2.16

“Depositary” means The Depository Trust Company, its nominees and their respective successors.

“Dividend Yield” on any security for any period means the dividends paid or proposed to be paid pursuant to an announced dividend policy on such security for such period divided by, if with respect to dividends paid on such security, the average Market Price of such security during such period and, if with respect to dividends proposed to be paid on such security, the Market Price of such security on the effective date of the related Reset Transaction.

“Dollar” or “$” means a U.S. dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts.

“Event of Default” has the meaning specified in Section 4.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder.

“Expiration Time” has the meaning specified in Section 12.4(f).

“Fair Market Value” has the meaning set forth in Section 12.4(g).

“GAAP” has the meaning specified in Section 1.3.

“Global Security” has the meaning specified in Section 2.2(b)

“guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise)

or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “guarantee” used as a verb has a corresponding meaning.

“Holder”, when used with respect to any Security, including any Global Security, means the Person in whose name the Security is registered in the Register.

“Indebtedness” means, with respect to any Person, at any date of determination (without duplication):

(1) all indebtedness, obligations and other liabilities (contingent or otherwise) of that Person for borrowed money (including obligations in respect of overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements, and any loans or advances from banks, whether or not evidenced by notes or similar instruments) or evidenced by bonds, notes or other instruments for the payment of money, or incurred in connection with the acquisition of any property, services or assets (whether or not the recourse of the lender is to the whole of the assets of such Person or to only a portion thereof), other than any account payable or other accrued current liability or obligation to trade creditors incurred in the ordinary course of business in connection with the obtaining of materials or services;

(2) all reimbursement obligations and other liabilities (contingent or otherwise) of that Person with respect to letters of credit, bank guarantees, bankers’ acceptances, surety bonds, performance bonds or other guaranty of contractual performance;

(3) all obligations and liabilities (contingent or otherwise) in respect of (A) all obligations as lessee which are capitalized in accordance with GAAP, and (B) any lease or related documents (including a purchase agreement) in connection with the lease of real property or improvements thereon which provides that such Person is contractually obligated to purchase or cause a third party to purchase the leased property or pay an agreed residual value of the leased property to the lessor and the obligations of such Person under such lease or related document to purchase or to cause a third party to purchase the leased property whether or not such lease is characterized as an operating lease or a capital lease in accordance with GAAP, including, without limitation, synthetic lease obligations;

(4) all obligations of such Person (contingent or otherwise) with respect to an interest rate or other swap, cap or collar agreement or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement;

(5) all direct or indirect guarantees or similar agreements by that Person in respect of, and obligations or liabilities (contingent or otherwise) of that Person to purchase

or otherwise acquire or otherwise assure a creditor against loss in respect of, indebtedness, obligations or liabilities of another Person of the kind described in clauses (1) through (4) of this definition;

(6) any indebtedness or other obligations described in clauses (1) through (4) of this definition secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by such Person, regardless of whether the Indebtedness or other obligation secured thereby shall have been assumed by such Person; and

(7) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kind described in clauses (1) through (6) of this definition.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that (i) the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP and (ii) Indebtedness shall not include any liability for federal, state, local or other taxes.

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.

“Initial Purchasers” mean Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, CIBC World Markets Corp., Wachovia Securities, Inc., Banc of America Securities LLC, Comerica Securities, Inc. and Wells Fargo Securities, LLC, as initial purchasers under the Purchase Agreement.

“Interest” means, with respect to any Security, the interest payable on such Security based upon the applicable Interest Rate and, if applicable, any Defaulted Interest.

“Interest Payment Date” means each of March 15 and September 15, provided, however, that, if any such date is not a Business Day, the Interest Payment Date shall be the next succeeding Business Day.

“Interest Rate” has the meaning specified in Section 2.1(c).

“Issue Price” of any Security means, in connection with the original issuance of such Security, the initial issue price at which the Security is sold as set forth on the face of the Security.

“Market Price” of a security on any date of determination means:

(1) the closing sale price (or, if no closing sale price is reported, the last reported sale price) of such security (regular way) on the New York Stock Exchange on such date;

(2) if such security is not listed for trading on the New York Stock Exchange on any such date, the closing sale price as reported in the composite transactions for the principal U.S. securities exchange on which such security is listed;

(3) if such security is not so listed on a U.S. national or regional securities exchange, the closing sales price as reported by the Nasdaq National Market;

(4) if such security is not so reported, the last price quoted by Interactive Data Corporation for such security on such date or, if Interactive Data Corporation is not quoting such price, a similar quotation service selected by the Company;

(5) if such security is not so quoted, the average of the mid-point of the last bid and ask prices for such security on such date from at least two dealers recognized as market-makers for such security selected by the Company for this purpose; or

(6) if such security is not so quoted, the average of the last bid and ask prices for such security on such date from a dealer engaged in the trading of convertible securities selected by the Company for this purpose.

“Maturity” means the date on which the Principal with respect to any Outstanding Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by acceleration, conversion, call for redemption, exercise of a purchase right or otherwise.

“Moody’s” means Moody’s Investors Service, Inc. or any successor Person to such entity.

“Nasdaq National Market” means the National Association of Securities Dealers Automated Quotation National Market or any successor national securities exchange or automated over-the-counter trading market in the United States.

“Non-Electing Share” has the meaning specified in Section 12.5.

“Officer” of the Company means the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, any Vice President, the Secretary or any Assistant Secretary of the Company.

“Officers’ Certificate” means, with respect to the Company, a certificate signed by both (1) the Chairman of the Board, the Chief Executive Officer, the President or a Vice President and (2) so long as not the same as the officer signing pursuant to clause (1), the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Trustee.

“Opinion of Counsel” means a written opinion of counsel, who may be counsel to the Company (and may include directors or employees of the Company) and in form and substance acceptable to the Trustee, which acceptance shall not be unreasonably withheld.

“Outstanding”, when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except Securities:

(i) previously canceled by the Trustee or delivered to the Trustee for cancellation;

(ii) for the payment or redemption of which money in the necessary amount has been previously deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, however, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture; and

(iii) which have been paid in exchange for or in lieu of other Securities which have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, Securities held for the account of the Company or of any of its Affiliates shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in making such a determination or relying upon any such consent or vote, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded.

“Paying Agent” has the meaning specified in Section 2.5.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof.

“Physical Securities” means Securities issued in definitive, fully registered form without interest coupons, substantially in the form of Exhibit A hereto, with the applicable legends as provided in Section 2.3.

“Place of Conversion” means any city in which any Conversion Agent is located.

“Place of Payment” means any city in which any Paying Agent is located.

“Predecessor Security” of any particular Security, means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular

Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.11 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

“Principal” means, with respect to any Outstanding Security, the principal amount of that Security, including the Redemption Price, if applicable, and the Repurchase Price, if applicable, payable with respect to that Security.

“Purchase Agreement” means the Purchase Agreement, dated March 4, 2003, among the Company and the Initial Purchasers relating to the offering and sale of the Securities.

“Purchase Right” has the meaning specified in Section 11.1.

“Purchased Shares” has the meaning specified in Section 12.4(f).

“QIB” means a “qualified institutional buyer” as defined under Rule 144A.

“Redemption Date”, when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.

“Redemption Price”, when used with respect to any Security to be redeemed, means the price per Security at which such Security may be redeemed pursuant to Section 10.1.

“Reference Dealer” means a dealer engaged in the trading of convertible securities selected by the Company or its successor for the purpose for which such dealers are quoted or otherwise to which they are referred herein.

“Reference Period” has the meaning specified in Section 12.4(d).

“Register” has the meaning specified in Section 2.5.

“Registrar” has the meaning specified in Section 2.5.

“Registration Rights Agreement” means the Resale Registration Rights Agreement, dated as of the date hereof, among the Company and the Initial Purchasers.

“Regular Record Date” for the Interest payable on the Securities means the March 1 and the September 1 (whether or not a Business Day), as applicable, next preceding the corresponding Interest Payment Date.

“Repurchase Date” has the meaning specified in Section 11.1 hereof.

“Repurchase Event Notice” has the meaning specified in Section 11.2.

“Repurchase Event Purchase Notice” has the meaning specified in Section 11.2 hereof.

“Repurchase Events” has the meaning specified in Section 11.1.

“Repurchase Price” has the meaning specified in Section 11.1 hereof.

“Reset Transaction” means any of (1) a merger, consolidation or statutory share exchange to which the entity that is the issuer of the shares of the common stock into which the Securities are then convertible is a party, (2) a sale of all or substantially all the assets of that entity, (3) a recapitalization of those shares of common stock or (4) a distribution contemplated by Section 12.4(d), in any case, after the effective date of which transaction or distribution the Securities would be convertible into either:

(a) shares of an entity, the common stock of which had a Dividend Yield for the four fiscal quarters of such entity immediately preceding the public announcement of such transaction or distribution that was more than 2.5% higher than the Dividend Yield on the Common Stock (or other common stock then issuable upon a conversion of the Securities) for the four fiscal quarters preceding the public announcement of such transaction or distribution; or

(b) shares of an entity that announces a dividend policy prior to the effective date of such transaction or distribution which policy, if implemented, would result in a Dividend Yield on such entity’s common stock for the next four fiscal quarters that would result in such a 2.5% increase.

“Responsible Officer”, when used with respect to the Trustee, means any officer of the Trustee, including any vice president, assistant vice president, any treasurer, any assistant treasurer, any trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

“Restricted Securities” means the Securities defined as such in Section 2.3.

“Restricted Securities Legend” has the meaning specified in Section 2.3(a).

“Rule 144” means Rule 144 as promulgated under the Securities Act (including any successor rule thereof), as the same may be amended from time to time.

“Rule 144A” means Rule 144A as promulgated under the Securities Act (including any successor rule thereof), as the same may be amended from time to time.

“Securities” has the meaning ascribed to it in the first paragraph under the caption “Recitals of the Company”.

“Securities Act” means the Securities Act of 1933, as amended and the rules and regulations of the Commission thereunder.

“Significant Subsidiary” has the meaning assigned to it under Rule 405 of the Securities Act.

“Specific Repurchase Date” has the meaning specified in Section 11.1.

“Standard & Poor’s” means Standard & Poor’s Rating Services or any successor Person to such entity.

“Stated Maturity” has the meaning assigned to it in Section 2.1.

“Subsidiary” means a Person, more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries.

“TIA” means the Trust Indenture Act of 1939, as amended (15 U.S. Code Section 77aaa-77bbbb), as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, “TIA” means, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended, or any successor statute.

“Trading Day” means:

(1) if the applicable security is listed or admitted for trading on the New York Stock Exchange, a day on which the New York Stock Exchange is open for business;

(2) if that security is not listed on the New York Stock Exchange, a day on which trades may be made on the Nasdaq National Market;

(3) if that security is not so listed on the New York Stock Exchange and not quoted on the Nasdaq National Market, a day on which the principal U.S. securities exchange on which the securities are listed is open for business; or

(4) if the applicable security is not so listed, admitted for trading or quoted, any day other than a Saturday or a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

“Trading Price” of the Securities on any date of determination means the average of the secondary market bid quotations per Security obtained by the Company or the Calculation Agent for $10,000,000 principal amount of the Securities at approximately 4:00 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers selected by the Company, provided that, if at least three such bids cannot reasonably be obtained by the Company or the Calculation Agent, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Company or the Calculation Agent, the one bid shall be used. If either the Company or the Calculation Agent cannot reasonably obtain at least one bid for $10,000,000 principal amount of the Securities from a nationally recognized securities dealer or, in the reasonable judgment of the Company, the bid quotations are not indicative of the secondary market value of the Securities, then the Trading Price of the Securities will equal (a) the then-applicable Conversion Rate of the Securities multiplied by (b) the Market Price of the Common Stock on such determination date.

“Trigger Event” has the meaning specified in Section 12.4(d).

“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean such successor Trustee.

“Vice President”, when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title “vice president”.

“Voting Stock” means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

Section 1.2. Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Securities;

“indenture security holder” means a Holder;

“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee; and

“obligor” on the Securities means the Company and any other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meanings assigned to them by such definitions.

Section 1.3. Rules of Construction.

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

(b) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States prevailing at the time of any relevant computation hereunder (“GAAP”);

(c) the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

(d) all references to section and article numbers in this Indenture shall refer to sections and articles hereof, unless otherwise specified.

ARTICLE 2 THE SECURITIES

Section 2.1. Title and Terms.

(a) The Securities shall be designated as the “1.75% Convertible Contingent Senior Debentures due March 15, 2023” of the Company. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $500.0 million (or $575.0 million if the Initial Purchasers’ option to purchase additional Securities as set forth in Section 2 of the Purchase Agreement is exercised in full), except for Securities authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of other Securities pursuant to Sections 2.7, 2.8, 2.12, 7.5, 10.7, 11.1 or 12.2 hereof. The Securities shall be issuable in denominations of $1,000 or integral multiples thereof.

(b) The Securities shall mature on March 15, 2023 (the “Stated Maturity”).

(c) The Securities shall bear Interest from the date of their original issuance until the principal amount thereof is paid or made available for payment, or until such date on which the Securities are converted, redeemed or purchased as provided herein, (i) prior to the occurrence of a Reset Transaction, at a rate of 1.75% per annum, and (ii) following the occurrence of a Reset Transaction, at the Adjusted Interest Rate related to such Reset Transaction to, but not including, the effective date of any succeeding Reset Transaction (as adjusted, if at all, the “Interest Rate”). Interest shall be payable semi-annually in arrears on each Interest Payment Date.

(d) In addition, interest (the “Contingent Interest”) will accrue on each Security during any six-month period from March 15 to September 14 and from September 15 to March 14, as appropriate, commencing with the six-month period beginning September 15, 2003, if the average Trading Price of a Security for the five Trading Days ending on the second Trading Day immediately preceding the beginning of the relevant six-month period equals 120% or more of the Principal of such Security. The rate of Contingent Interest payable in respect of any six-month period will equal the greater of (i) a per annum rate equal to 5.00% of the Company’s then-current estimated per annum borrowing rate for senior non-convertible fixed-rate Indebtedness with a Maturity and other terms comparable to the Securities and (ii) 0.33% per annum, in each case based on the Outstanding principal amount of the Securities. Contingent Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Upon determination that Holders will be entitled to receive Contingent Interest during any relevant six-month period, on or prior to the start of the relevant six-month period, the Company shall issue a press release and publish information with respect to any Contingent Interest on its web site. The Company shall pay Contingent Interest, if any, in the same manner as it shall pay Interest pursuant to Section 2.1(c) hereof and the obligations of Holders in respect of the

payment of Contingent Interest in connection with the conversion of any Securities will also be the same as described in Section 2.1(f) hereof.

(e) Interest on the Securities shall be computed (i) for any full semi-annual period for which a particular Interest Rate is applicable, on the basis of a 360-day year comprised of twelve 30-day months and (ii) for any period for which a particular Interest Rate is applicable for less than a full semi-annual period for which interest is calculated, on the basis of a 30-day month and, for such periods of less than a month, the actual number of days elapsed over a 30-day month. For purposes of determining the Interest Rate, the Trustee may assume that a Reset Transaction has not occurred unless the Trustee has received an Officers’ Certificate stating that a Reset Transaction has occurred and specifying the Adjusted Interest Rate then in effect.

(f) Interest (including Contingent Interest) shall be due and payable on a Security as follows:

(i) A registered Holder as of the close of business on a Regular Record Date shall be entitled to receive and shall receive (except as otherwise indicated in this Section 2.1(f)), accrued and unpaid Interest (including Contingent Interest) on such Security from the preceding Interest Payment Date (or such earlier date on which Interest was last paid) to the Interest Payment Date next succeeding such Regular Record Date, other than any Security whose Stated Maturity is prior to such Interest Payment Date.

(ii) In the event that a Security becomes subject to redemption pursuant to Article 10 and the Redemption Date occurs after a Regular Record Date but on or prior to the next succeeding Interest Payment Date, the Person whose Security becomes subject to redemption (and only such Person rather than the Holder as of such Regular Record Date) shall be entitled to receive and shall receive accrued and unpaid Interest (including Contingent Interest) from the preceding Interest Payment Date (or such earlier date on which Interest was last paid) to, but excluding, the Redemption Date of such Security, even if such Person is not the Holder of such Security.

(iii) In the event that a Security becomes subject to purchase pursuant to Article 11, a Holder who exercises a Purchase Right with respect to such Security shall be entitled to receive and shall receive accrued and unpaid Interest (including Contingent Interest) on such Security from the preceding Interest Payment Date (or such earlier date on which Interest was last paid) to, but excluding the applicable Repurchase Date for such Security, which amount shall be included in the applicable Repurchase Price thereof pursuant to Article 11.

(iv) In the event that a Security is converted pursuant to Article 12, the Holder who converts such Security on any date other than an Interest Payment Date shall not be entitled to receive unpaid Interest (including Contingent Interest) on such Security from the preceding Interest Payment Date until the Conversion Date, such amounts being deemed to have been paid by receipt of shares of Common Stock in full rather than canceled, extinguished or forfeited. As a result, a Holder which converts a Security after a Regular Record Date but prior to the next succeeding Interest Payment Date will receive accrued and unpaid Interest (including Contingent Interest) on such Security for

such period on such Interest Payment Date but will be required to remit to the Company an amount equal to that Interest (including Contingent Interest) at the time such Holder surrenders the Security for conversion, pursuant to Article 12; provided, however, that such Holder will not be required to remit such Interest (including Contingent Interest) if, prior to conversion or the delivery of a notice of conversion pursuant to Article 12, the Company has either delivered a notice of redemption as contemplated by Article 10 on or prior to the third Business Day after such Interest Payment Date or redeemed such Security pursuant to Article 10 and the Holder converts such Security after a Regular Record Date but prior to the next succeeding Interest Payment Date pursuant to Article 12.

(g) In addition to the amounts set forth in Section 2.1(d) and (f), Holders shall be entitled to receive Additional Amounts, if any, on such Security pursuant and subject to the Registration Rights Agreement, but in no event shall a Holder be required to repay any amounts of Additional Amounts such Holder receives following the remittance of Interest as specified in Section 2.1(f)(iv). Any amounts related to Additional Amounts shall be received or paid on dates corresponding to the payment date of Interest on such Security pursuant to the Registration Rights Agreement.

(h) Payment of any Principal or Interest (to the extent paid in cash), Contingent Interest or Additional Amounts, if any, on Global Securities shall be payable by the Company to the Depositary in immediately available funds.

(i) Payment of any Principal on Physical Securities shall be made at the office or agency of the Company maintained for such purpose, initially the Corporate Trust Office of the Trustee. Interest, Contingent Interest and Additional Amounts, if any, on Physical Securities will be payable by (i) a U.S. Dollar check drawn on a bank in The City of New York mailed to the address of the Person entitled thereto as such address shall appear in the Register, or (ii) upon application to the Registrar not later than the relevant Regular Record Date by a Holder of an aggregate Principal amount of Securities in excess of $5,000,000, wire transfer in immediately available funds, which application shall remain in effect until the Holder notifies, in writing, the Registrar to the contrary.

(j) The Securities may be redeemable at the option of the Company as provided in and subject to Article 10.

(k) The Securities shall be purchased by the Company at the option of Holders as provided in and subject to Article 11.

(l) The Securities shall be convertible at the option of the Holders as provided in and subject to Article 12.

Section 2.2. Form of Securities.

(a) Except as otherwise provided pursuant to this Section 2.2, the Securities are issuable in fully registered, without coupons, in denominations of $1,000 and integral multiples of $1,000 above that amount with applicable legends as are provided for in Section 2.3 and in the form of one or more permanent global securities, except as provided herein (each a

“Global Security” and, collectively, the “Global Securities”), the form of which is contained in Exhibit A hereto. The Securities shall not be issuable in bearer form. The terms and provisions contained in the form of Security shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company, and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

(b) The Securities are being offered and sold by the Company pursuant to the Purchase Agreement. Securities offered and sold to QIBs in accordance with Rule 144A, as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent global Securities in fully registered form without interest coupons, substantially in the form of Exhibit A hereto, with the applicable legends as provided in Section 2.3 (each a “Global Security” and collectively the “Global Securities”). Each Global Security shall be duly executed by the Company and authenticated and delivered by the Trustee, and shall be registered in the name of the Depositary or its nominee and retained by the Trustee, as Custodian, at its Corporate Trust Office. The aggregate Principal Amount at Maturity of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee, as Custodian, and of the Depositary or its nominee, as hereinafter provided.

(c) Physical Securities acquired by QIBs in accordance with Rule 144A may be exchanged for interests in Global Securities pursuant to Sections 2.8(e) and 2.17(a) only. Physical Securities shall be duly executed by the Company and authenticated and delivered by the Trustee.

Section 2.3. Legends.

(a) Restricted Securities Legends.

Each Security issued hereunder shall, upon issuance, bear the legend set forth in Section 2.3(a)(i), and each share of Common Stock issued upon conversion of any Security issued hereunder, shall, upon issuance, bear the legend set forth in Section 2.3(a)(ii) (each such legend, a “Restricted Securities Legend”), and such legend shall not be removed except as provided in Section 2.3(a)(iii). Each Security that bears or is required to bear the Restricted Securities Legend set forth in Section 2.3(a)(i) (together with each share of Common Stock issued upon conversion of such Security that bears or is required to bear the Restricted Securities Legend set forth in Section 2.3(a)(ii), collectively, the “Restricted Securities”) shall be subject to the restrictions on transfer set forth in this Section 2.3(a) (including the Restricted Securities Legend set forth below), and the Holder of each such Restricted Security, by such Holder’s acceptance thereof, shall be deemed to have agreed to be bound by the restrictions on transfer set forth herein.

As used in Section 2.3(a), the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security.

(i) Restricted Securities Legend for Securities.

Except as provided in Section 2.3(a)(iii), until two years after the original issuance date of any Security, any certificate evidencing such Security (and all Securities issued in exchange therefor or substitution thereof, other than share of Common Stock, if any, issued

upon conversion thereof which shall bear the legend set forth in Section 2.3(a)(ii), if applicable) shall bear a Restricted Securities Legend in substantially the following form:

THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER:

(1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT;

(2) REPRESENTS THAT IT IS PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF ONE OR MORE QUALIFIED INSTITUTIONAL BUYERS IN ACCORDANCE WITH RULE 144A.

(3) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; AND

(4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 3(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH SECURITY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 3(D) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE

(OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE 3(B) OR 3(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 3(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY.

(ii) Restricted Securities Legend for Common Stock Issued Upon Conversion of the Securities.

Until two years after the original issuance date of any Security, any stock certificate representing Common Stock issued upon conversion of such Security shall bear a Restricted Securities Legend in substantially the following form:

THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED:

(1) IT WILL NOT OFFER, SELL, ASSIGN, TRANSFER, PLEDGE, ENCUMBER OR OTHERWISE DISPOSE OF THE SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER;

(2) PRIOR TO ANY SUCH TRANSFER OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE, IT WILL FURNISH TO

SUCH TRANSFER AGENT, (OR ANY SUCCESSOR TRANSFER AGENT, AS APPLICABLE) SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRANSFER AGENT OR THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND

(3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED. AS USED HEREIN, THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

(iii) Removal of the Restricted Securities Legends.

Each Security or share of Common Stock issued upon conversion of any Security (other than shares of Common Stock issued upon conversion of a Security that previously were sold pursuant to a registration statement that has been declared effective under the Securities Act and which continues to be effective at the time of such sale) shall bear the applicable Restricted Securities Legend set forth in Section 2.3(a)(i) or 2.3(a)(ii), as applicable, until the earlier of:

(A) the date which is two years after the original issuance date of such Security; and

(B) the date such Security has, or such shares of Common Stock have been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such sale).

The Holder must give notice thereof to the Trustee, as applicable.

In the event Rule 144(k) as promulgated under the Securities Act is amended to shorten the two-year period under Rule 144(k), then, the references in the restrictive legends set forth above to “TWO YEARS”, and in the corresponding transfer restrictions described above, the Securities and the shares of Common Stock will be deemed to refer to such shorter period, from and after receipt by the Trustee of an Officers’ Certificate and an Opinion of Counsel to

that effect. As soon as reasonably practicable after the Company knows of the effectiveness of any such amendment to shorten the two-year period under Rule 144(k), unless such changes would otherwise be prohibited by, or would cause a violation of, the federal securities laws applicable at the time, the Company will provide to the Trustee an Officers’ Certificate and an Opinion of Counsel as to the effectiveness of such amendment and the effectiveness of such change to the restrictive legends and transfer restrictions.

Notwithstanding the foregoing, the Restricted Securities Legend may be removed if there is delivered to the Company such satisfactory evidence, which may include an opinion of independent counsel, as may be reasonably required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure that transfers of such Securities or Common Stock will not violate the registration requirements of the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the written direction of the Company, shall authenticate and deliver in exchange for such Securities another Security or Securities having an equal aggregate Principal Amount at Maturity, Issue Price and Stated Maturity that does not bear such legend. If the Restricted Securities Legend has been removed from a Securities as provided above, no other Security issued in exchange for all or any part of such Security shall bear such legend, unless the Company has reasonable cause to believe that such other Security is a “restricted security” within the meaning of Rule 144 and instructs the Trustee in writing to cause a Restricted Securities Legend to appear thereon.

Any Security (or security issued in exchange or substitution thereof) as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the Restricted Securities Legend set forth in Section 2.3(a)(i) as set forth therein have been satisfied may, upon surrender of such Security for exchange to the Registrar in accordance with the provisions of Section 2.7 hereof, be exchanged for a new Security or Securities, of like tenor and aggregate Principal Amount at Maturity, Issue Price and Stated Maturity which shall not bear the Restricted Securities Legend required by Section 2.3(a)(i).

Any such Common Stock as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the Restricted Securities Legend set forth in Section 2.3(a)(ii) as set forth therein have been satisfied may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the Transfer Agent, be exchanged for a new certificate or certificates for a like aggregate number of shares of Common Stock, which shall not bear the Restricted Securities Legend required by Section 2.3(a)(ii).

(b) Global Security Legend.

Each Global Security shall also bear the following legend on the face thereof:

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF

CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

(c) Legend for Physical Securities.

Physical Securities, in addition to the legend set forth in Section 2.3(a)(i), will also bear a legend substantially in the following form:

THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT AND IS SUBJECT TO THE RULES FOR DEBT INSTRUMENTS WITH CONTINGENT PAYMENTS UNDER TREASURY REGULATION § 1.1275-4(b). FOR INFORMATION REGARDING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, THE YIELD TO MATURITY, THE COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY, YOU SHOULD SUBMIT A WRITTEN REQUEST FOR IT TO THE COMPANY AT THE COMPANY’S ADDRESS SPECIFIED IN SECTION 14 OF THE INDENTURE.

Section 2.4. Execution, Authentication, Delivery and Dating of the Securities.

(a) Two Officers shall execute the Securities on behalf of the Company by manual or facsimile signature. Securities bearing the manual or facsimile signatures of individuals who were at the time of the execution of the Securities the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of authentication of such Securities.

(b) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. No Security shall be

entitled to any benefit under this Indenture, or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by or on behalf of the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee may appoint an authenticating agent or agents reasonably acceptable to the Company with respect to the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.

(c) Each Security shall be dated the date of its authentication. The Trustee shall authenticate and deliver Securities for original issue in an aggregate principal amount of up to $500.0 million (or $575.0 million if the Initial Purchases’ option to purchase additional Securities as forth in Section 2 of the Purchase Agreement is exercised in full) upon one or more Company Orders without any further action by the Company. The aggregate principal amount of Securities Outstanding at any time may not exceed the amount set forth in the foregoing sentence.

Section 2.5. Registrar and Paying Agent.

The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the “Registrar”) and an office or agency where Securities may be presented for payment (the “Paying Agent”). The Registrar shall keep a register of the Securities (the “Register”) and of their transfer and exchange. The Company may appoint one or more co-Registrars and one or more additional Paying Agents for the Securities. The term “Paying Agent” includes any additional paying agent and the term “Registrar” includes any additional registrar. The Company may change any Paying Agent or Registrar without prior notice to any Holder.

The Company will cause each Paying Agent (other than Wells Fargo Bank, National Association) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:

(a) hold all sums of money or Common Stock held by it for the payment of any amounts due and payable in respect of the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as provided in this Indenture;

(b) give the Trustee notice of any Default by the Company in the making of any such payment; and

(c) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

The Company shall give prompt written notice to the Trustee of the name and address of any Paying Agent who is not a party to this Indenture. If the Company fails to appoint

or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any Affiliate of the Company may act as Paying Agent or Registrar; provided, however, that none of the Company, its Subsidiaries or the Affiliates of the foregoing shall act:

(i) as Paying Agent in connection with redemptions, offers to purchase and discharges, except as otherwise specified in this Indenture, and

(ii) as Paying Agent or Registrar if a Default or Event of Default has occurred and is continuing.

The Company hereby initially appoints Wells Fargo Bank, National Association, as Registrar and Paying Agent for the Securities.

Section 2.6. Paying Agent to Hold Assets in Trust.

Not later than 11:00 a.m. (New York City time) on or prior to each due date of payments in respect of any Security, the Company shall deposit with one or more Paying Agents a sum of money in immediately available funds or Common Stock sufficient to make such payments when so becoming due. The Company at any time may require a Paying Agent to pay all money or Common Stock held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company) shall have no further liability for the money or Common Stock so paid over to the Trustee.

The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money and Common Stock held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any Default by the Company in making any such payment. At any time during the continuance of any such Default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and Common Stock so held in trust.

If the Company shall act as a Paying Agent, it shall, prior to or on each such due date, segregate and hold in trust for the benefit of the Holders a sum sufficient with monies held by all other Paying Agents, to pay such amounts so becoming due until such sums shall be paid to such Persons or otherwise disposed of as provided in this Indenture, and shall promptly notify the Trustee of its action or failure to act.

Section 2.7. General Provisions Relating to Registration, Transfer and Exchange.

The Securities are issuable only in registered form. A Holder may transfer a Security only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Furthermore, any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security (or its agent) and that ownership of a beneficial interest in the Global Security shall be required to be reflected in a book-entry. Notwithstanding the

foregoing, in the case of a Restricted Security, a beneficial interest in a Global Security that is transferred in reliance on an exemption from the registration requirements of the Securities Act other than in accordance with Rule 144 or Rule 144A may only be transferred for a Physical Security.

When Securities are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if the requirements hereunder for such transactions are met (including that such Securities are duly endorsed or accompanied by a written instrument of transfer duly executed by the Holder thereof or by an attorney who is authorized in writing to act on behalf of the Holder). Subject to Section 2.4, to permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar’s request. No service charge shall be made for any registration of transfer or exchange or redemption of the Securities, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charge payable upon exchanges pursuant to Sections 2.14, 7.5 or 10.7).

Neither the Company nor the Registrar shall be required to exchange or register a transfer of any Securities:

(a) for a period of 15 days prior to the day of any selection of Securities for redemption under Article 10 hereof;

(b) so selected for redemption or, if a portion of any Security is selected for redemption, such portion thereof selected for redemption; or

(c) surrendered for conversion or, if a portion of any Security is surrendered for conversion, such portion thereof surrendered for conversion.

The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Agent Members or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.8. Book-Entry Provisions for the Global Securities.

(a) The Global Securities initially shall:

(i) be registered in the name of the Depositary;

(ii) be delivered to the Trustee as custodian for such Depositary, for credit to the accounts of the members of, participants in, the Depositary (the “Agent Members”) holding the Securities evidenced thereby; and

(iii) bear the Restricted Securities Legend set forth in Section 2.3(a)(i) until such time as such Restricted Securities Legend may be removed in accordance with Section 2.3.

(b) Agent Members shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary, or the Trustee as its custodian, or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing contained herein shall prevent the Company, the Trustee or any agent of the Company or Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and the Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security.

(c) The registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

(d) A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary, and no such transfer to any such other Person may be registered. Beneficial interests in a Global Security may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.17 hereof.

(e) If at any time:

(i) the Depositary notifies the Company in writing that it is no longer willing or able to continue to act as Depositary for the Global Securities, or the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor depositary for the Global Securities is not appointed by the Company within 90 days of such notice or cessation;

(ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Physical Securities under this Indenture in exchange for all or any part of the Securities represented by a Global Security or Global Securities; or

(iii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary for the issuance of Physical Securities in exchange for such Global Security or Global Securities,

then the Depositary shall surrender such Global Security or Global Securities to the Trustee for cancellation and the Company shall execute, and the Trustee, upon receipt of an Officers’ Certificate and Company Order for the authentication and delivery of Securities, shall authenticate and deliver in exchange for such Global Security or Global Securities, Physical Securities in an aggregate principal amount equal to the aggregate principal amount of such Global Security or Global Securities. Such Physical Securities shall be registered in such names

as the Depositary shall identify in writing as the beneficial owners of the Securities represented by such Global Security or Global Securities (or any nominee thereof).

(f) Notwithstanding the foregoing, in connection with any transfer of beneficial interests in a Global Security to the beneficial owners thereof pursuant to Section 2.8(d) hereof, the Registrar shall reflect on its books and records the date and a decrease in the aggregate principal amount of such Global Security in an amount equal to the aggregate principal amount of the beneficial interest in such Global Security to be transferred.

Section 2.9. Holder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with Section 312(a) of the TIA. If the Trustee is not the Registrar, the Company shall furnish to the Trustee prior to or on each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders relating to such Interest Payment Date or request, as applicable.

Section 2.10. Persons Deemed Owners.

Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of the Security or the payment of any Redemption Price or Repurchase Price in respect thereof and Interest (including Contingent Interest) thereon, if any, or Additional Amounts, if any for any purpose under this Indenture, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

Section 2.11. Mutilated, Destroyed, Lost or Stolen Securities.

If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and aggregate principal amount and bearing a number not contemporaneously outstanding.

If there is delivered to the Company and the Trustee

(a) evidence to their satisfaction of the destruction, loss or theft of any Security, and

(b) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and, upon request, the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, and bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion, but subject to any conversion rights, may, instead of issuing a new Security, pay such Security, upon satisfaction of the condition set forth in the preceding paragraph.

Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Every new Security issued pursuant to this Section 2.11 in lieu of any destroyed, lost or stolen Security shall constitute an original contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and such new Security shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

The provisions of this Section 2.11 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 2.12. Treasury Securities.

In determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only such Securities of which the Trustee has received written notice and are so owned shall be so disregarded.

Section 2.13. Temporary Securities.

Pending the preparation of Securities in definitive form, the Company may execute and the Trustee shall, upon written request of the Company, authenticate and deliver temporary Securities (printed or lithographed). Temporary Securities shall be issuable in any authorized denomination, and substantially in the form of the Securities in definitive form but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Company. Every such temporary Security shall be executed by the Company and authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the Securities in definitive form. Without unreasonable delay, the Company will execute and deliver to the Trustee Securities in definitive form (other than in the case of Securities in global form) and thereupon any or all temporary Securities (other than any such Securities in global form) may be surrendered in exchange therefor, at each office or agency maintained by the Company pursuant to Section 9.2 and the Trustee shall authenticate and deliver in exchange for such temporary Securities an equal principal amount of Securities in definitive form. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged, the temporary

Securities shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as Securities in definitive form authenticated and delivered hereunder.

Section 2.14. Cancellation.

All Securities surrendered for payment, redemption, purchase, conversion, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Securities so delivered shall be canceled promptly by the Trustee, and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. Upon written instructions of the Company, the Trustee shall dispose of canceled Securities in accordance with its procedures for the disposition of cancelled securities in effect as of the date of such disposition. If the Company shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless the same are delivered to the Trustee for cancellation.

Section 2.15. CUSIP Numbers.

The Company in issuing the Securities may use “CUSIP” numbers (if then generally in use), and the Trustee shall use CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any such notice and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP numbers.

Section 2.16. Defaulted Interest.

If the Company fails to make a payment of Principal of or Interest, Contingent Interest and Additional Amounts, if any, on any Security when due and payable, it shall pay such Interest on such amounts (to the extent lawful), which shall be calculated using the applicable Interest Rate (such amounts, the “Defaulted Interest”). It may elect to pay such Defaulted Interest, plus any other Interest (including Contingent Interest) payable on it, to the Persons who are Holders on which the Interest (including Contingent Interest) is due on a subsequent special record date. The Company shall notify the Trustee in writing of the amount of Defaulted Interest the Company proposes to pay on each such Security. The Company shall fix any such special record date and payment date for such payment. At least 15 days before any such special record date, the Company shall mail to Holders affected thereby a notice that states the special record date, the Interest Payment Date and amount to be paid.

Section 2.17. Transfer Provisions.

Unless a Security is (i) transferred after the time period referred to in Rule 144(k) under the Securities Act or (ii) sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such sale), the following provisions shall apply to any sale, pledge or other transfer of Securities:

(a) Transfer of Securities.

The following provisions shall apply with respect to the registration of any proposed transfer of Securities to a QIB:

(i) If the Securities to be transferred consist of a beneficial interest in the Global Securities, the transfer of such interest may be effected only through the book-entry systems maintained by the Depositary.

(ii) If the Securities to be transferred consist of Physical Securities, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Security stating (or has otherwise advised the Company and the Registrar in writing) that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Security stating or has otherwise advised the Company and the Registrar in writing that:

(A) it is purchasing the Securities for its own account or an account with respect to which it exercises sole investment discretion, in each case for investment and not with a view to distribution;

(B) it and any such account is a QIB within the meaning of Rule 144A;

(C) it is aware that the sale to it is being made in reliance on Rule 144A;

(D) it acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information; and

(E) it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A.

In addition, the Registrar shall reflect on its books and records the date and an increase in the Principal Amount at Maturity of the Global Securities in an amount equal to the aggregate Principal Amount at Maturity of the Physical Securities to be transferred, and the Trustee shall cancel the Physical Securities so transferred.

(b) Other Exchanges.

In the event that Global Securities are exchanged for Securities in definitive registered form pursuant to Section 2.7 prior to the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with the provisions of clauses (a) and (b) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A) and such other procedures as may from time to time be adopted by the Company.

(c) General.

By its acceptance of any Security or shares of Common Stock issuable upon conversion of the Securities bearing the Restricted Securities Legend, each Holder of such

Security or shares of Common Stock acknowledges the restrictions on transfer of such Security or shares of Common Stock set forth in this Indenture and agrees that it will transfer such Security and such Common Stock only as provided in this Indenture. The Registrar shall not register a transfer of any Security unless such transfer complies with the restrictions on transfer of such Security set forth in this Indenture. The Registrar shall be entitled to receive and conclusively rely on written instructions from the Company verifying that such transfer complies with such restrictions on transfer. In connection with any transfer of Securities, each Holder agrees by its acceptance of the Securities to furnish the Registrar or the Company such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may conclusively rely on a determination made by the Company with respect to) the sufficiency of any such certifications, legal opinions or other information.

The Registrar shall retain copies of all certifications, letters, notices and other written communications received pursuant to Section 2.8 hereof or this Section 2.17 in accordance with its customary procedures for the retention of records relating to the transfer of securities. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

ARTICLE 3 DISCHARGE OF INDENTURE

Section 3.1. Discharge of Liability on Securities. When (a) the Company delivers to the Trustee all Outstanding Securities (other than Securities replaced pursuant to Section 2.11) for cancellation, (b) all Outstanding Securities have become due and payable at their scheduled maturity within one year or all Outstanding Securities are scheduled for redemption within one year and the Company deposits with the Trustee cash or, in the event of a conversion pursuant to Article 12, Common Stock, sufficient to pay all amounts due and owing on all Outstanding Securities on the date of their scheduled maturity or the scheduled date of redemption (other than Securities replaced pursuant to Section 2.11) or (c) when no Securities are Outstanding, and if in any such case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 5.8, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers’ Certificate and Opinion of Counsel and at the cost and expense of the Company.

Section 3.2. Repayment to the Company. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person and the Trustee and the Paying Agent shall have no further liability to the Holders with respect to such money or securities for that period commencing after the return thereof.

ARTICLE 4 DEFAULTS AND REMEDIES

Section 4.1. Events of Default. An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) the Company fails to convert Securities into shares of its Common Stock in accordance with the provisions of Article 12;

(b) the Company defaults in the payment of the Principal amount (a “Defaulted Payment”) on any Outstanding Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon exercise of a Purchase Right, upon declaration when due for purchase by the Company or otherwise;

(c) the Company defaults in the payment of Interest (including Contingent Interest) and Additional Amounts, if any, on any Security when it becomes due and payable and such default continues for a period of 30 days;

(d) the Company fails to perform or observe any other term, covenant or agreement contained in the Securities or this Indenture and the default continues for a period of 60 days after written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities;

(e) the Company defaults under any Indebtedness for money borrowed by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, the aggregate outstanding principal amount of which is in an amount in excess of $25 million, for a period of 30 days after written notice to the Company by the Trustee or to the Company and the Trustee by Holders of at least 25% in aggregate principal amount of the Outstanding Securities, which default (i) is caused by the Company’s or any such Significant Subsidiary’s failure to pay when due principal or premium of or interest on such Indebtedness by the end of the applicable grace period, if any, unless such Indebtedness is discharged or (ii) results in the acceleration of such Indebtedness because of a default with respect to such Indebtedness without such Indebtedness having been discharged or such non-payment or acceleration having been cured, waived, rescinded or annulled;

(f) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization,

arrangement, adjustment or composition of or in respect of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, under any applicable U.S. federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs; or

(g) the commencement by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, of a voluntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, to the entry of a decree or order for relief in respect of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, of a petition or answer or consent seeking reorganization or relief under any applicable U.S. federal or state law in the context of a bankruptcy, insolvency or reorganization proceeding, or the consent by the Company to the filing of such petition or to the appointment of or the taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, of an assignment for the benefit of creditors, or the admission by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of two or more Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, expressly in furtherance of any such action.

A Default under clause (d) or (e) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% of the principal amount of the Securities at the time Outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (d) or (e) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default”.

The Trustee shall, within 90 days of the occurrence of a Default, give to the Holders notice of all uncured Defaults known to it and written notice of any event which with the giving of notice or the lapse of time, or both, would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto; provided, however, the Trustee shall be protected in withholding such notice if it, in good faith, determines that the withholding of such notice is in the best interest of such Holders, except in the case of a Default

in the payment of the Principal of or Interest (including Contingent Interest) on any of the Securities when due or in the payment of any redemption or Purchase Right.

Section 4.2. Acceleration of Maturity; Rescission and Annulment.

If an Event of Default with respect to Outstanding Securities (other than an Event of Default specified in Section 4.1(f) or 4.1(g) hereof) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Outstanding Securities, by written notice to the Company, may declare due and payable 100% of the principal amount of all Outstanding Securities, plus any accrued and unpaid Interest (including Contingent Interest) or Additional Amounts, if any, to the date of payment. Upon a declaration of acceleration, such Principal amount and accrued and unpaid Interest (including Contingent Interest) or Additional Amounts, if any, to the date of payment shall be immediately due and payable.

If an Event of Default specified in Section 4.1(f) and 4.1(g) occurs, the Principal and accrued and unpaid Interest (including Contingent Interest) or Additional Amounts, if any, on the Outstanding Securities shall become and be immediately due and payable, without any declaration or other act on the part of the Trustee or any Holder.

The Holders of not less than a majority of the principal amount of the Outstanding Securities, may, through notice to the Trustee on behalf of the Holders of all of the Securities, rescind and annul an acceleration and its consequences (including waiver of any defaults) if:

(a) all existing Events of Default, other than the nonpayment of a Defaulted Payment on the Securities which have become due solely because of the acceleration, have been remedied, cured or waived, and

(b) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction;

provided, however, that in the event such declaration of acceleration has been made based on the existence of an Event of Default under Section 4.1(d) and the default with respect to Indebtedness for money borrowed which gave rise to such Event of Default has been remedied, cured or waived, then, without any further action by the Holders, such declaration of acceleration shall be rescinded automatically and the consequences of such declaration shall be annulled. No such rescission or annulment shall affect any subsequent Default or impair any right consequent thereon.

Section 4.3. Other Remedies.

If an Event of Default with respect to Outstanding Securities occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the Defaulted Payment or Interest (including Contingent Interest) due and payable on the Securities or to enforce the performance of any provision of the Securities.

The Trustee may maintain a proceeding in which it may prosecute and enforce all rights of action and claims under this Indenture or the Securities, even if it does not possess any of the Securities or does not produce any of them in the proceeding.

Section 4.4. Waiver of Past Defaults.

The Holders, through the written consent of not less than a majority of the principal amount of the Outstanding Securities, may, on behalf of the Holders of all of the Securities, waive an existing Default or Event of Default, except a Default or Event of Default:

(a) set forth in Sections 4.1(b) and (c), provided, however, that subject to Section 4.7, the Holders of a majority of the principal amount of the Outstanding Securities may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration); or

(b) in respect of a covenant or provision hereof which, under Section 7.2 hereof, cannot be modified or amended without the consent of the Holders of each Outstanding Security affected.

Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; provided, however, that no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 4.5. Control by Majority.

The Holders of a majority of the principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that:

(a) conflicts with any law or with this Indenture;

(b) the Trustee determines may be unduly prejudicial to the rights of the Holders not joining therein; or

(c) may expose the Trustee to personal liability.

The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

Section 4.6. Limitation on Suit.

No Holder shall have any right to pursue any remedy with respect to this Indenture or the Securities (including, instituting any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver or trustee) unless:

(a) such Holder has previously given written notice to the Trustee of an Event of Default that is continuing;

(b) the Holders of at least 25% of the principal amount of the Outstanding Securities shall have made written request to the Trustee to pursue the remedy;

(c) such Holder or Holders have offered to the Trustee indemnity satisfactory to it against any costs, expenses and liabilities incurred in complying with such request;

(d) the Trustee has failed to comply with the request for 60 days after its receipt of such notice, request and offer of indemnity; and

(e) during such 60-day period, no direction inconsistent with such written request has been given to the Trustee by the Holders of a majority of the principal amount of the Outstanding Securities;

provided, however, that no one or more of such Holders may use this Indenture to prejudice the rights of another Holder or to obtain preference or priority over another Holder.

Section 4.7. Unconditional Rights of Holders to Receive Payment and to Convert.

Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the Principal on and Interest (including Contingent Interest) and Additional Amounts, if any, in respect of the Securities held by such Holder, on or after the respective due dates, to convert the Securities in accordance with Article 12 or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, and such rights shall not be impaired or affected adversely without the consent of such Holder.

Section 4.8. Collection of Indebtedness and Suits for Enforcement by the Trustee.

The Company covenants that if:

(a) a Default or Event of Default is made in the payment of Interest (including Contingent Interest) and Additional Amounts, if any, on any Security when such Interest (including Contingent Interest) and Additional Amounts, if any, becomes due and payable and such Default or Event of Default continues for a period of 30 days; or

(b) a Default or Event of Default is made in the payment of the Principal on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration when due for purchase by the Company or otherwise,

then the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the entire Principal then due and payable (as expressed therein or as a result of any acceleration effected pursuant to Section 4.2 hereof) on such Securities for any such amounts and, to the extent legally enforceable, Interest (including Contingent Interest) or Additional Amounts, if any, on such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the monies adjudged or

decreed to be payable in the manner provided by law out of the property of the Company, wherever situated.

If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

Section 4.9. Trustee May File Proofs of Claim.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or the property of the Company or its creditors, the Trustee (irrespective of whether the Principal, Interest (including Contingent Interest) and Additional Amounts, if any, shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the Principal or Interest (including Contingent Interest) and Additional Amounts, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding and

(b) to collect and receive any monies, Common Stock or other property payable or deliverable on any such claim and to distribute the same,

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee under Section 5.8.

Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept, or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 4.10. Restoration of Rights and Remedies.

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all

rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

Section 4.11. Rights and Remedies Cumulative.

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 2.11, no right or remedy conferred in this Indenture upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 4.12. Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as applicable.

Section 4.13. Priorities.

Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee:

FIRST: to the payment of all amounts due to the Trustee under Section 5.8;

SECOND: to Holders for amounts due and unpaid on the Securities for the Principal or Interest (including Contingent Interest) or Additional Amounts, if any, as applicable, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and

THIRD: any remaining amounts shall be repaid to the Company.

The Trustee may fix a special record date and payment date for any payment to Holders pursuant to this Section 4.13. At least 15 days before such special record date, the Trustee shall mail to each Holder and the Company a notice that states the special record date, the payment date and the amount to be paid.

Section 4.14. Undertaking for Costs.

All parties to this Indenture agree, and each Holder of any Security by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may

in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% of the principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of (i) payments pursuant to Section 4.7, (ii) Purchase Rights in accordance with Article 11 or (iii) conversion rights in accordance with Article 12. This Section 4.14 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 4.15. Waiver of Stay or Extension Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim to take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE 5 THE TRUSTEE

Section 5.1. Certain Duties and Responsibilities.

(a) Except during the continuance of an Event of Default,

(i) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture or the TIA, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, however, that in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates or opinions to determine whether or not, on their face, they conform to the requirements to this Indenture (but need not investigate or confirm the accuracy of any facts stated therein).

(b) In case an Event of Default actually known to a Responsible Officer of the Trustee has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) This paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section 5.1;

(ii) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

(iii) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with a direction received by it of the Holders of a majority of the principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

(d) Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 5.1.

(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity reasonably satisfactory to it against any loss, liability, cost or expense (including, without limitation, reasonable fees and expenses of counsel).

(f) The Trustee shall not be obligated to pay interest on any money or other assets received by it unless otherwise agreed in writing with the Company. Assets held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of Indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(h) The Trustee shall not be deemed to have notice or actual knowledge of any Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact a Default is received by the Trustee pursuant to Section 14.2 hereof, and such notice references the Securities and this Indenture.

(i) The rights, privileges, protections, immunities and benefits given to the Trustee hereunder, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each Paying Agent, authenticating agent, Conversion Agent or Registrar acting hereunder.

(j) The Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

Section 5.2. Certain Rights of Trustee.

Subject to the provisions of Section 5.1 hereof and subject to Section 315(a) through (d) of the TIA:

(a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

(c) The Trustee may act through attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care.

(d) The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith which it believed to be authorized or within the discretion or rights or powers conferred upon it by this Indenture, unless the Trustee’s conduct constitutes negligence.

(e) The Trustee may consult with counsel of its selection and the advice of such counsel as to matters of law or legal interpretation shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

(g) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein.

Section 5.3. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee

acquires any conflicting interest (as such term is defined in Section 310(b) of the TIA), it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee (to the extent permitted under Section 310(b) of the TIA) or resign. Any agent may do the same with like rights and duties. The Trustee is also subject to Sections 5.11 and 5.12 hereof.

Section 5.4. Money Held in Trust.

Money held by the Trustee in trust hereunder shall not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise expressly agreed with the Company.

Section 5.5. Trustee’s Disclaimer.

The recitals contained herein and in the Securities (except for those in the certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity, sufficiency or priority of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof.

Section 5.6. Notice of Defaults.

Within 90 days after the occurrence of any Default or Event of Default hereunder of which a Responsible Officer of the Trustee has received written notice, the Trustee shall give notice to Holders, unless such Default or Event of Default shall have been cured or waived; provided, however, that, except in the case of a Default or Event of Default described in Sections 4.1(b) or (c), the Trustee shall be protected in withholding such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. The second sentence of this Section 5.6 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee shall not be deemed to have knowledge of a Default unless a Responsible Officer of the Trustee has received written notice of such Default.

Section 5.7. Reports by Trustee to Holders.

The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required by Section 313 of the TIA at the times and in the manner provided by the TIA.

A copy of each report at the time of its mailing to Holders shall be filed with the SEC, if required, and each stock exchange, if any, on which the Securities and the Common Stock are listed. The Company shall promptly notify the Trustee when the Securities or the Common Stock become listed on any stock exchange.

Section 5.8. Compensation and Indemnification.

The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as agreed to in writing by the Trustee and the Company (which shall not be limited by any provision of law in regard to the compensation of a

trustee of an express trust) and the Company covenants and agrees to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ), except to the extent that any such expense, disbursement or advance is due to its negligence or bad faith. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 4.1, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any bankruptcy law. The Company also covenants to indemnify the Trustee and its officers, directors, employees and agents for, and to hold such Persons harmless against, any loss, liability or expense incurred by them, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder or the performance of their duties hereunder, including the costs and expenses of defending themselves against or investigating any claim of liability in the premises, except to the extent that any such loss, liability or expense was due to the negligence or willful misconduct of such Persons. The obligations of the Company under this Section 5.8 to compensate and indemnify the Trustee and its officers, directors, employees and agents and to pay or reimburse such Persons for expenses, disbursements and advances shall constitute additional Indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee. Such additional Indebtedness shall be a lien prior to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities, and the Securities are hereby subordinated to such senior claim. “Trustee” for purposes of this Section 5.8 shall include any predecessor Trustee, in its capacity as Trustee, but the negligence or willful misconduct of any Trustee shall not affect the indemnification of any other Trustee.

Section 5.9. Replacement of Trustee.

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 5.9.

The Trustee may resign and be discharged from the trust hereby created by so notifying the Company in writing. The Holders of at least a majority of the principal amount of Outstanding Securities may remove the Trustee by so notifying the Trustee and the Company in writing. The Company must remove the Trustee if:

(a) the Trustee fails to comply with Section 5.10 hereof or Section 310 of the TIA;

(b) the Trustee becomes incapable of acting;

(c) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; or

(d) a Custodian or public officer takes charge of the Trustee or its property.

If the Trustee resigns or is removed or if a vacancy exists in the office of the Trustee for any reason, the Company shall promptly appoint a successor Trustee. The Trustee shall be entitled to payment of its fees and reimbursement of its expenses while acting as Trustee. Within one year after the successor Trustee takes office, the Holders of at least a majority of the principal amount of Outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

Any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee if the Trustee fails to comply with Section 5.10.

If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation or removal, the resigning or removed Trustee, as applicable, may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The Company shall issue a notice of the successor Trustee’s succession to the Holders. Upon payment of its charges, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject nevertheless to its lien, if any, provided for in Section 5.8 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 5.9 hereof, the Company’s obligations under Section 5.8 hereof shall continue for the benefit of the retiring Trustee with respect to expenses, losses and liabilities incurred by it prior to such replacement.

Section 5.10. Successor Trustee by Merger, Etc.

Subject to Section 5.11 hereof, if the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the successor entity without any further act shall be the successor Trustee as to the Securities.

Section 5.11. Corporate Trustee Required; Eligibility.

The Trustee shall at all times satisfy the requirements of Section 310(a)(1), (2) and (5) of the TIA. The Trustee shall at all times have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall at all times have), a combined capital and surplus of at least $50 million as set forth in its (or its related bank holding company’s) most recent published annual report of condition. The Trustee is subject to Section 310(b) of the TIA.

Section 5.12. Collection of Claims Against the Company.

The Trustee is subject to Section 311(a) of the TIA, excluding any creditor relationship listed in Section 311(b) of the TIA. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the TIA to the extent indicated therein.

ARTICLE 6 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER, SALE, LEASE OR OTHER DISPOSITION

Section 6.1. Company May Consolidate, Etc., Only on Certain Terms.

The Company shall not consolidate with or merge into any other Person or convey, transfer, sell, lease or otherwise dispose of all or substantially all of its properties and assets to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer, sell, lease or otherwise dispose of all or substantially all of its properties and assets to the Company, unless:

(a) in the event that the Company shall consolidate with or merge into another Person or convey, transfer, sell, lease or otherwise dispose of all or substantially all of its properties or assets to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by such conveyance, transfer, sale, lease or disposition all or substantially all of the properties and assets of the Company shall be a Person organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia;

(b) in the event that the Company shall consolidate with or merge into another Person or convey, transfer, sell, lease or otherwise dispose of all or substantially all of its properties or assets to any Person, and the entity surviving such transaction or transferee entity is not the Company, then such surviving or transferee entity shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of all and any amounts when due on all the Securities and the performance of every covenant of this Indenture, the Securities and the Registration Rights Agreement (to the extent any obligations of the Company thereunder remain outstanding) on the part of the Company to be performed or observed and shall have provided for conversion rights provided in Article 12;

(c) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and

(d) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, sale, lease or disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.

Section 6.2. Successor Corporation Substituted.

Upon any consolidation or merger by the Company with or into any other Person or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the

properties and assets of the Company to any Person, in accordance with Section 6.1 hereof, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer, sale, lease or disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. In the event of any such conveyance, transfer, sale or disposition to the Company (which term shall for this purpose mean the Person named as the “Company” in the first paragraph of this Indenture or any successor Person which shall theretofore become such in the manner described in Section 6.1 hereof), except in the case of a lease to another Person, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities and may be dissolved and liquidated.

ARTICLE 7 AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 7.1. Without Consent of Holders of Securities.

Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may amend this Indenture and the Securities to:

(a) add to the covenants of the Company for the benefit of the Holders;

(b) surrender any right or power herein conferred upon the Company;

(c) provide for conversion rights of Holders if any reclassification or change of the Company’s Common Stock or any consolidation, merger or sale of all or substantially all of the Company’s assets occurs;

(d) provide for the assumption of the Company’s obligations to the Holders in the case of a merger, consolidation or conveyance, sale, transfer or lease pursuant to Article 6 hereof;

(e) reduce the Conversion Price; provided, however, that such reduction in the Conversion Price shall not adversely affect the interest of the Holders (after taking into account tax and other consequences of such reduction);

(f) comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA;

(g) make any changes or modifications to this Indenture necessary in connection with the registration of any Securities under the Securities Act as contemplated in the Registration Rights Agreement; provided, however, that such change or modification pursuant to this clause (g) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution) and the Trustee, adversely affect the interests of the Holders in any material respect;

(h) cure any ambiguity or correct or supplement any provision herein which may be inconsistent with any other provision herein or which is otherwise defective, or

make any other provisions with respect to matters or questions arising under this Indenture which the Company may deem necessary or desirable and which shall not be inconsistent with the provisions of this Indenture; provided, however, that such action pursuant to this clause (h) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution) and the Trustee, adversely affect the interests of the Holders in any material respect;

(i) add guarantees with respect to the Securities; or

(j) add or modify any other provisions herein with respect to matters or questions arising hereunder which the Company and the Trustee may deem necessary or desirable and which will not adversely affect the interests of the Holders.

Section 7.2. With Consent of Holders of Securities.

Except as provided below in this Section 7.2, this Indenture or the Securities may be amended, modified or supplemented, and noncompliance in any particular instance with any provision of this Indenture or the Securities may be waived, (i) with the written consent of the Holders of at least a majority of the principal amount of the Outstanding Securities or (ii) by the adoption of a resolution at a meeting of holders by at least a majority in aggregate principal amount of the Securities represented at such meeting.

Without the written consent or the affirmative vote of each Holder of Securities affected thereby, an amendment or waiver under this Section 7.2 may not:

(a) change the Stated Maturity of the Principal of or the date any installment of Interest, Contingent Interest or Additional Amounts, if any, is due on any Security;

(b) reduce the Principal or any premium, Repurchase Price or Redemption Price of or Interest (including Contingent Interest) or Additional Amounts, if any, on any Security;

(c) change the currency of any amount owed or owing under the Security or any Interest (including Contingent Interest) or Additional Amounts thereon from U.S. Dollars;

(d) impair the right of any Holder to institute suit for the enforcement of any payment in or with respect to any Security;

(e) modify the obligation of the Company to maintain an office or agency in The City of New York pursuant to Section 9.2;

(f) except as otherwise permitted or contemplated by the Indenture, adversely affect the Purchase Right of the Holders as provided in Article 11 or the right of the Holders to convert any Security as provided in Article 12;

(g) modify the provisions of Article 10 in a manner adverse to the Holders;

(h) modify any of the provisions of this Section, or reduce the percentage of voting interests required to waive a default, except to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby;

(i) reduce the percentage of the principal amount of the Outstanding Securities the consent of whose Holders is required for any supplemental indenture or the consent of whose Holders is required for any waiver provided for in this Indenture; or

(j) alter the manner of calculation or rate of accrual of Interest, Contingent Interest or Additional Amounts, if any, on any Security or extend the payment of any such amount.

It shall not be necessary for any Act of Holders under this Section 7.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Section 7.3. Compliance with Trust Indenture Act.

Every amendment to this Indenture or the Securities shall be set forth in a supplemental indenture that complies with the TIA as then in effect.

Section 7.4. Revocation of Consents and Effect of Consents or Votes.

Until an amendment, supplement or waiver becomes effective, a written consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent is not made on any Security; provided, however, that unless a record date shall have been established, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of a Security if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective.

An amendment, supplement or waiver becomes effective on receipt by the Trustee of written consents from or affirmative votes by, as applicable, the Holders of the requisite percentage of the principal amount of the Outstanding Securities, and thereafter shall bind every Holder; provided, however, if the amendment, supplement or waiver makes a change described in any of the clauses (a) through (j) of Section 7.2, the amendment, supplement or waiver shall bind only each Holder which has consented to it or voted for it, as applicable, and every subsequent Holder of a Security or portion of a Security that evidences the same Indebtedness as the Security of the consenting or affirmatively voting Holder, as applicable.

Section 7.5. Notation on or Exchange of Securities.

If an amendment, supplement or waiver changes the terms of a Security:

(a) the Trustee may require the Holder of a Security to deliver such Securities to the Trustee, the Trustee may place an appropriate notation on the Security about the changed

terms and return it to the Holder and the Trustee may place an appropriate notation on any Security thereafter authenticated; or

(b) if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms.

Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver.

Section 7.6. Trustee to Sign Amendment, Etc.

The Trustee shall sign any amendment authorized pursuant to this Article 7 if the Trustee reasonably determines the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If the Trustee reasonably determines the amendment does adversely affect the rights, duties, liabilities or immunities of the Trustee, the Trustee may but need not sign it. In signing or refusing to sign any amendment hereunder, the Trustee shall be entitled to receive and shall be fully protected in relying upon an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that such amendment is authorized or permitted by this Indenture and that all conditions precedent relating thereto have been complied with.

Section 7.7. Effect of Amendment .

Upon the execution of any supplemental amendment under this Article, this Indenture shall be modified in accordance therewith, and such amendment shall form a part of this Indenture for all purposes; and every Holder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

ARTICLE 8 [INTENTIONALLY OMITTED]

ARTICLE 9 COVENANTS

Section 9.1. Payment of Principal, Redemption Price, Repurchase Price and Interest.

The Company will duly and punctually pay the Principal of, Interest, Contingent Interest and Additional Amounts, if any, on the Securities when and if at any time any such foregoing amounts are due and payable in accordance with the terms of the Securities and this Indenture. The Company will deposit or cause to be deposited with the Trustee as directed by the Trustee, no later than the day of the Stated Maturity of any Security, the date of any installment of Interest, Contingent Interest or Additional Amounts, if any, or any other date such payment is otherwise due. If Additional Amounts are payable by the Company pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to such effect stating (i) the amount of Additional Amounts so payable and (ii) the date on which such Additional Amounts are payable. Unless and until a Responsible Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no Additional Amounts are payable.

Section 9.2. Maintenance of Offices or Agencies.

The Company hereby appoints the Trustee’s Corporate Trust Office as its office in the Borough of Manhattan, The City of New York, where Securities may be:

(a) presented or surrendered for payment;

(b) surrendered for registration of transfer or exchange;

(c) surrendered for conversion;

and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served.

The Company will maintain in The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee, and notice to the Holders in accordance with Section 14.2 hereof, of the appointment or termination of any such agents and of the location and any change in the location of any such office or agency.

If at any time the Company shall fail to maintain any such required office or agency in The City of New York, or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at, and notices and demands may be served on, the Corporate Trust Office of the Trustee.

Section 9.3. Corporate Existence.

Subject to Article 6 hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises of the Company and each Subsidiary; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders.

Section 9.4. Reports.

(a) The Company, shall deliver to the Trustee within 15 days after it files them with the Commission copies of Forms 10-K and 10-Q which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; provided, however, the Company shall not be required to deliver to the Trustee any materials for which the Company has sought and received confidential treatment by the SEC. The Company also shall comply with the other provisions of Section 314(a) of the TIA.

(b) If at any time the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder, the Company, will promptly furnish or cause to be furnished to such Holder or to a prospective purchaser of such Security designated by such

Holder, as applicable, the information, if any, required to be delivered by it pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with the resale of such Security; provided, however, that the Company shall not be required to furnish such information in connection with any request made on or after the date which is two years from the later of the date such security was last acquired from the Company or an “affiliate” (as defined under Rule 144 under the Securities Act) of the Company.

Section 9.5. Compliance Certificate.

The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, an Officer’s Certificate signed by two Officers of the Company stating that, in the course of the performance by the signers of their duties as Officers of the Company, they would normally have knowledge of any failure by the Company to comply with all conditions, or Default by the Company with respect to any covenants, under this Indenture, and further stating whether or not they have knowledge of any such failure or Default and, if so, specifying each such failure or Default and the nature thereof. In the event an Officer of the Company comes to have actual knowledge of a Default, regardless of the date, the Company shall deliver an Officers’ Certificate to the Trustee within five Business Days of obtaining such actual knowledge specifying such Default and the nature and status thereof.

When any Registration Default (as defined in the Registration Rights Agreement) occurs, the Company shall promptly deliver to the Trustee by registered or certified mail or by telegram, telex or facsimile transmission an Officer’s Certificate specifying the nature of such Registration Default. In addition, the Company shall deliver to the Trustee on each Interest Payment Date during the continuance of a Registration Default and on the first Interest Payment Date following the cure of a Registration Default (to the extent that Additional Amounts are then due and payable on such Interest Payment Date), an Officer’s Certificate specifying the amount of Additional Amounts which have accrued and which are then owing under the Registration Rights Agreement.

Section 9.6. Resale of Certain Securities.

During the period of two years after the last date of original issuance of any Securities, the Company shall not, and shall not register for transfer any sales by any of its “affiliates” (as defined under Rule 144 under the Securities Act) of any Securities, or shares of Common Stock issuable upon conversion of the Securities, which constitute “restricted securities” under Rule 144, except pursuant to an effective registration statement under the Securities Act; provided, however, that the Company may register for transfer sales of Securities, or shares of Common Stock issuable upon conversion of the Securities, which constitute “restricted securities” under Rule 144, if the transferee thereof acknowledges that such Securities are Transfer Restricted Securities (as defined in the Registration Rights Agreement). The Trustee shall have no responsibility or liability in respect of the Company’s performance of its agreement in the preceding sentence.

ARTICLE 10 REDEMPTION OF SECURITIES

Section 10.1. Optional Redemption.

At any time on or after March 20, 2008, except for Securities that it is required to purchase pursuant to Section 11.1 or required to convert pursuant to Section 12.1, the Company may, at its option, redeem the Securities in whole at any time or in part from time to time, on any date prior to the Stated Maturity of such Securities, upon notice as set forth in Section 10.4, at the Redemption Price equal to 100.00% of the principal amount of the Securities. In addition, the Company will pay Interest (including Contingent Interest) on the Securities being redeemed, including those Securities which are converted into Common Stock after the date the notice of the redemption is mailed and prior to the Redemption Date. This Interest will include Interest accrued and unpaid to, but excluding, the Redemption Date. If the Redemption Date is an Interest Payment Date, the Company will pay the Interest to the Holder of record on the corresponding Regular Record Date, which may or may not be the same Person to whom the Company will pay the Redemption Price.

If the Company exercises its option to redeem the Securities pursuant to this Section 10.1, a Holder may nevertheless exercise its right to have its Securities purchased pursuant to Section 11.1, if applicable, or to convert such Securities pursuant to Article 12 even if such Securities are not otherwise convertible at such time, in each case, until the close of business on the day that is one Business Day immediately preceding the Redemption Date.

The Company shall pay Interest, Contingent Interest or Additional Amounts, if any, to the Holder of the Securities called for redemption pursuant to Section 10.1 (including those Securities which are converted into Common Stock after the date the notice of the redemption is mailed and prior to the Redemption Date) accrued but not paid to, but excluding, the Redemption Date pursuant to Section 2.1(f)(ii); provided, however, that if the Redemption Date is an Interest Payment Date, the Company shall pay the Interest (including Contingent Interest) to the Holder of the Security at the close of business on such Interest Payment Date.

Section 10.2. Notice to Trustee.

If the Company elects to redeem Securities pursuant to the provisions of Section 10.1 hereof (such election to be ordered by a Board Resolution), it shall notify the Trustee at least 20 days prior to the intended Redemption Date (unless a shorter notice shall be satisfactory to the Trustee) of (i) such intended Redemption Date, (ii) the principal amount of Securities to be redeemed and (iii) the CUSIP numbers of the Securities to be redeemed.

Section 10.3. Selection of Securities to Be Redeemed.

If fewer than all the Securities are to be redeemed, the Trustee shall select the particular Securities to be redeemed from the Outstanding Securities by a method that complies with the requirements of any exchange on which the Securities are listed, or, if the Securities are not listed on an exchange, on a pro rata basis or by lot or in accordance with any other method the Trustee considers fair and appropriate. The Trustee may select for redemption portions of the principal amount of Securities that have denominations larger than $1,000.

Securities and portions thereof that the Trustee selects shall be in principal amounts in integral multiples of $1,000. Provisions of this Indenture that apply to Securities

called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed.

The Trustee shall promptly notify the Company and the Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.

If any Security selected for partial redemption is converted or elected to be purchased in part before termination of the conversion right or Purchase Right with respect to the portion of the Security so selected, the converted or purchased portion of such Security shall be deemed to be the portion selected for redemption; provided, however, that the Holder of such Security so converted or purchased and deemed redeemed shall not be entitled to any additional interest payment as a result of such deemed redemption than such Holder would have otherwise been entitled to receive upon conversion or purchase of such Security subject to Section 2.1(f). Securities which have been converted or purchased during a selection of Securities to be redeemed may be treated by the Trustee as Outstanding for the purpose of such selection.

For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.

Section 10.4. Notice of Redemption.

Notice of redemption shall be given in the manner provided in Section 14.2 to the Holders of Securities to be redeemed. Such notice shall be given no less than 20 and no more than 60 days prior to the intended Redemption Date.

All notices of redemption shall state:

(a) such intended Redemption Date;

(b) the Redemption Price and Interest, Contingent Interest or Additional Amounts, if any, accrued and unpaid to, but excluding, the Redemption Date, if any;

(c) if fewer than all the Outstanding Securities are to be redeemed, the principal amount of Securities to be redeemed and the principal amount of Securities which will be Outstanding after such partial redemption;

(d) that on the Redemption Date the Redemption Price and Interest, Contingent Interest or Additional Amounts, if any, accrued and unpaid to, but excluding, the Redemption Date, if any, will become due and payable upon each such Security to be redeemed;

(e) the Conversion Price, the date on which the right to convert the principal of the Securities to be redeemed will terminate and the places where such Securities may be surrendered for conversion;

(f) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued and unpaid Interest, Contingent Interest or Additional Amounts, if any; and

(g) the CUSIP number of the Securities.

The notice given shall specify the last date on which exchanges or transfers of Securities may be made pursuant to Section 2.7, and shall specify the serial numbers of Securities and the portions thereof called for redemption.

Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company’s written request delivered at least 20 days prior to the date of the mailing of such Notice (unless a shorter period shall be acceptable to the Trustee), by the Trustee in the name of and at the expense of the Company.

Section 10.5. Effect of Notice of Redemption.

Notice of redemption having been given as provided in Section 10.4 hereof, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued and unpaid Interest (including Contingent Interest)) such Securities shall cease to bear Interest (including Contingent Interest). Upon surrender of any such Security for redemption in accordance with such notice, such Security shall be paid by the Company at the Redemption Price; provided, however, the installments of Interest (including Contingent Interest) on Securities whose Stated Maturity is prior to or on the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Date.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium, if any, shall, until paid, bear Interest (including Contingent Interest) from the Redemption Date at the Interest Rate.

Section 10.6. Deposit and Payment of Redemption Price.

Prior to or on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.6) an amount of money in immediately available funds sufficient to pay the Redemption Price, and accrued and unpaid Interest, Contingent Interest or Additional Amounts, if any, in respect of all the Securities to be redeemed on that Redemption Date from the last Interest Payment Date to but not including the Redemption Date, other than any Securities called for redemption on that date which have been converted prior to the date of such deposit, and accrued and unpaid Interest (including Contingent Interest) on such Securities. The Trustee and Paying Agent shall then cause such funds to be paid to the Holders of the Securities being redeemed in accordance with this Article.

If any Security delivered for redemption shall not be so redeemed by payment to the Holders thereof on the Redemption Date, the principal amount of such Security shall, until it

is redeemed, bear Interest (including Contingent Interest) on the Redemption Date to but not including the actual date of redemption at the applicable Interest Rate, and each such Security shall remain convertible into shares of Common Stock pursuant to Article 12 until such Security shall have been so redeemed.

If any Security called for redemption is converted, any money deposited with the Trustee or with a Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive Interest (including Contingent Interest) as provided in Section 2.1(f)) be paid to the Company upon request by the Company or, if then held by the Company, shall be discharged from such trust.

Section 10.7. Securities Redeemed in Part.

Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 9.2 hereof (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or the Holder’s attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of any authorized denomination as requested by such Holder in principal amount equal to and in exchange for the unredeemed portion of the Security so surrendered, provided that no single Security may be purchased in part unless the portion of the principal amount of such Security to be Outstanding after such purchase is equal to $1,000 or an integral multiple thereof.

ARTICLE 11 PURCHASE AT THE OPTION OF A HOLDER UPON SPECIFIC REPURCHASE DATES OR CHANGE OF CONTROL

Section 11.1. Purchase Right.

(a) On March 15 of 2010, 2015 and 2018, (each, a “Specific Repurchase Date”) each Holder shall have the right (the “Purchase Right”), at the Holder’s option, to require the Company to repurchase for cash, and upon the exercise of such right the Company shall purchase, all of such Holder’s Securities not theretofore called for redemption, or any portion of the principal amount thereof that is equal to $1,000 or an integral multiple thereof (provided that no single Security may be purchased in part unless the portion of the principal amount of such Security to be Outstanding after such purchase is equal to $1,000 or an integral multiple thereof), at a purchase price equal to 100% of the principal amount of the Securities to be purchased (the “Repurchase Price”), plus accrued and unpaid Interest (including Contingent Interest) on those Securities to, but excluding the Specific Repurchase Date. Holders may submit their Securities for repurchase to the Paying Agent at any time from the opening of business on the date that is 20 Business Days prior to the applicable Specific Repurchase Date until the close of business on the Specific Repurchase Date.

(b) In the event that a Change of Control (together with the Specific Repurchase Dates, “Repurchase Events”) shall occur, each Holder shall have the Purchase Right, at the Holder’s option, but subject to the provisions of Section 11.2 hereof, to require the Company to purchase for cash, and upon the exercise of such right the Company shall purchase, all of such Holder’s Securities not theretofore called for redemption, or any portion of the principal amount thereof that is equal to $1,000 or an integral multiple thereof as directed by such Holder pursuant to Section 11.3 (provided that no single Security may be purchased in part unless the portion of the principal amount of such Security to be Outstanding after such purchase is equal to $1,000 or an integral multiple thereof), on the date (the Change of Control Purchase Date”; together with the Specific Repurchase Date, the “Repurchase Date”) that is a Business Day no earlier than 20 Business Days and no later than 60 days after the date of the Repurchase Event Notice at the Repurchase Price plus accrued and unpaid Interest (including Contingent Interest) or Additional Amounts, if any, to, but excluding, the Change of Control Purchase Date; provided, however, that installments of Interest (including Contingent Interest) on Securities whose Stated Maturity is prior to or on the Change of Control Purchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Date according to their terms and the provisions of Section 2.1 hereof. If the Holders have a Repurchase Right pursuant to this Section 11.2(b), the Company shall issue a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing the relevant information and make such information available on the Company’s web site or through another public medium as the Company may use at such time.

Section 11.2. Repurchase Event Notice.

No later than 20 Business Days after the occurrence of a Repurchase Event, the Company shall mail a written notice of the Repurchase Event (the “Repurchase Event Notice”) by first- class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law) pursuant to Section 14.2. The Repurchase Event Notice shall include a form of notice (the “Repurchase Event Purchase Notice”) to be completed by the Holder and delivered to the Paying Agent pursuant to Section 11.3, and shall state the following:

(a) that it is a Repurchase Event Notice pursuant to this Section;

(b) the events causing a Repurchase Event and the date of such Repurchase Event;

(c) the procedures with which such Holder must comply to exercise its right to have its Securities purchased pursuant to Section 11.1, including the date by which the completed Repurchase Event Purchase Notice pursuant to Section 11.3 and the Securities the Holder elects to have purchased pursuant to Section 11.1 must be delivered to the Paying Agent in order to have such Securities purchased by the Company pursuant to Section 11.1, the name and address of the Paying Agent and that the Securities as to which a Repurchase Event Purchase Notice has been given may be converted, if they are otherwise convertible pursuant to Article 12, only if the completed and delivered Repurchase Event Purchase Notice has been withdrawn in accordance with the terms of the Indenture, the Holder’s conversion rights pursuant to Article 12 and the Conversion Rate then in effect and any adjustments thereto;

(d) the Repurchase Date and the Repurchase Price, if applicable;

(e) that, unless the Company defaults in making payment of such Repurchase Price, Interest, Contingent Interest or Additional Amounts, if any, on the Securities surrendered for purchase by the Company will cease to accrue on and after the Repurchase Date, if applicable;

(f) the CUSIP number of the Securities; and

No failure by the Company to give the foregoing Repurchase Event Notice shall limit any Holder’s right to exercise its rights pursuant to Section 11.1 or affect the validity of the proceedings for the purchase of its Securities hereunder.

Section 11.3. Delivery of Repurchase Event Purchase Notice; Form of Repurchase Event Purchase Notice; Withdrawal of Repurchase Event Purchase Notice.

(a) The Company shall deliver, or cause the Trustee or Paying Agent, to deliver, to all Holders (and beneficial holders of the Securities) a form of Repurchase Event Purchase Notice, which with respect to Holders’ Purchase Rights set forth in Section 11.1, shall be delivered to such Holders at least 20 Business Days prior to the Repurchase Event Purchase Date and, as set forth in Section 11.2, shall be included in the Repurchase Event Notice; provided that the delivery of such form of Repurchase Event Purchase Notice to the Holders shall be made in the Company’s name and at the Company’s expense and the text of such form of Repurchase Event Purchase Notice shall be prepared by the Company pursuant to clause (b) of this Section.

(b) The form of Repurchase Event Purchase Notice shall provide instructions regarding procedures with which Holders must comply to exercise their rights pursuant to Section 11.1 and the completion of the Repurchase Event Purchase Notice and also shall state:

(i) that it is the Repurchase Event Purchase Notice pursuant to Sections 11.2 and 11.3 of the Indenture and must be completed by the Holder and delivered to the Paying Agent (and any beneficial holder of securities), together with the delivery of the Holder’s Securities for which the Holder will exercise its Purchase Rights pursuant to Section 11.1, for such Holder to receive the Repurchase Price;

(ii) the name and address of the Paying Agent to, and the date by, which the completed Repurchase Event Purchase Notice and Securities must be delivered in order for the Holder to receive the applicable purchase price;

(iii) the portion of the principal amount of the Security which the Holder will deliver to be purchased, which portion must be in Principal Amounts at Maturity of $1,000 or an integral multiple thereof;

(iv) any other procedures then applicable that the Holder must follow to exercise rights under Article 11 and a brief description of those rights;

(v) the Repurchase Date and the Repurchase Price;

(vi) the procedures with which such Holder must comply to exercise its right to have its Securities purchased pursuant to Section 11.1, including the date by which the completed Repurchase Event Purchase Notice pursuant to Section 11.3 and the Securities the Holder elects to have purchased pursuant to Section 11.1 must be delivered to Paying Agent in order to have such Securities purchased by the Company pursuant to Section 11.1, the name and address of the Paying Agent and that the Securities as to which a Repurchase Event Purchase Notice has been given may be converted, if they are otherwise convertible pursuant to Article 12, only if the completed and delivered Repurchase Event Purchase Notice has been withdrawn in accordance with the terms of the Indenture, the Holder’s conversion rights pursuant to Article 12, the Conversion Rate then in effect and any adjustments thereto;

(vii) the Holder’s right to withdraw a completed and delivered Repurchase Event Purchase Notice, the procedures for withdrawing a Repurchase Event Purchase Notice, pursuant to clause (c) below and that Securities as to which a completed and delivered Repurchase Event Purchase Notice may be converted, if they are convertible only in accordance with Article 12, if the applicable completed and delivered Repurchase Event Purchase Notice has been withdrawn;

(viii) that, unless the Company defaults in making payment on Securities for which a Repurchase Event Purchase Notice has been submitted, Interest, Contingent Interest or Additional Amounts, if any, on such Securities will cease to accrue on the Repurchase Event Purchase Date; and

(ix) the CUSIP number of the Securities.

(c) Notwithstanding anything herein to the contrary, any Holder which has delivered a completed Repurchase Event Purchase Notice to the Paying Agent shall have the right to withdraw such Repurchase Event Purchase Notice by delivery of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Repurchase Event Purchase Notice at any time prior to the close of business on the Repurchase Date specifying:

(i) the certificate number, if any, of the Security in respect of which such notice of withdrawal is being submitted;

(ii) the principal amount of the Security with respect to which such notice of withdrawal is being submitted; and

(iii) the principal amount, if any, of such Security which remains subject to the original Repurchase Event Purchase Notice and which has been or will be delivered for purchase by the Company.

The Paying Agent shall promptly notify the Company of the receipt by it of any Repurchase Event Purchase Notice or written notice of withdrawal thereof.

Section 11.4. Exercise of Purchase Rights.

To exercise a Purchase Right pursuant to Section 11.1, a Holder must deliver to the Trustee at its offices on or prior to the Repurchase Date the following:

(a) a completed Repurchase Event Purchase Notice, the form of which is provided in Exhibit B hereto; and

(b) the Securities or cause such Securities to be delivered through the facilities of the Depositary, as applicable, with respect to which the Purchase Right is being exercised, with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer, in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing.

Section 11.5. Deposit and Payment of the Purchase Price

(a) If a Holder has exercised its rights pursuant to Section 11.1 and has satisfied the conditions for the exercise of such rights in accordance with Section 11.4, then the Company shall, prior to 10:00 a.m. (New York City time) on the Business Day following the Repurchase Date, deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.4) an amount of money in immediately available funds, if deposited on such Business Day, sufficient to pay the aggregate Repurchase Price of all the Securities or portions thereof which are to be purchased on such purchase date. The Trustee or Paying Agent, as applicable, shall pay the Holder the applicable Repurchase Price multiplied by the principal amount of Securities for which such rights were exercised on the Change of Control Purchase Date.

(b) There shall be no purchase of any Securities pursuant to Section 11.1 if there has occurred (prior to, on or after, as applicable, the giving, by the Holders of such Securities, of the required Repurchase Event Purchase Notice) and is continuing an Event of Default (other than a default in the payment of the Repurchase Event Price with respect to such Securities). The Paying Agent will promptly return to the respective Holders thereof any Securities (i) with respect to which a Repurchase Event Purchase Notice has been withdrawn in compliance with this Indenture, or (ii) held by it during the continuance of an Event of Default (other than a default in the payment of the Repurchase Price with respect to such Securities) in which case, upon such return, the Repurchase Event Purchase Notice with respect thereto shall be deemed to have been withdrawn.

(c) If any Security delivered for purchase pursuant to Section 11.1 shall not be so paid on the Repurchase Date, the principal amount of such Security shall, until it is paid, bear Interest (including Contingent Interest) from the purchase date to but not including the date of actual payment hereunder at the applicable Interest Rate, and each such Security shall remain convertible into shares of Common Stock pursuant to Article 12 until such Security shall have been paid.

Section 11.6. Effect of Delivery of Repurchase Event Purchase Notice and Purchase.

(a) Upon receipt by the Paying Agent of a Repurchase Event Purchase Notice, the Holder of the Security in respect of which such Repurchase Event Purchase Notice was delivered shall (unless such Repurchase Event Purchase Notice is withdrawn pursuant to Section 11.3(c)) thereafter be entitled to receive solely the Repurchase Price with respect to such Security, and, if applicable, any accrued and unpaid Interest (including Contingent Interest) pursuant to Section 2.1(f). Securities in respect of which a Repurchase Event Purchase Notice has been delivered by the Holder thereof may not be converted pursuant to Article 12 on or after the date of the delivery of such Repurchase Event Purchase Notice unless such Repurchase Event Purchase Notice which has been completed and delivered to the Paying Agent has first been validly withdrawn pursuant to Section 11.3(c).

(b) All Securities delivered for purchase shall be canceled by the Trustee or Paying Agent, as applicable.

Section 11.7. Physical Securities Purchased in Part.

Any Physical Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered which is not purchased.

Section 11.8. Covenant to Comply With Securities Laws Upon Purchase of Securities.

When complying with the provisions of this Article 11 (provided that such offer or purchase constitutes an “issuer tender offer” for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall (a) comply with Rule 13e- 4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable, (b) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act and (c) otherwise comply with all federal and state securities laws so as to permit the rights and obligations under this Article 11 to be exercised in the time and in the manner specified in this Article 11.

Section 11.9. Repayment to the Company. The Trustee and the Paying Agent shall return to the Company any cash that remains unclaimed, together with interest or dividends, if any, thereon (subject to the provisions of Section 5.4), held by them for the payment of the Repurchase Price; provided, however, that to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 11.5 exceeds the aggregate Repurchase Price of the Securities or portions thereof which the Company is obligated to purchase on the purchase date then, unless otherwise agreed in writing with the Company, promptly after the Business Day following such purchase date, the Trustee or Paying Agent, as applicable, shall return any such excess to the Company together with interest or dividends, if any, thereon, subject to the provisions of Section 5.4.

ARTICLE 12 CONVERSION OF SECURITIES

Section 12.1. Conversion Right; Expiration of Conversion Right; Conversion Price.

(a) Subject to and upon compliance with the provisions of this Article, at the option of the Holder at any time and from time to time, any Security or any portion of the principal amount thereof which is an integral multiple of $1,000 may be converted at the principal amount thereof, or of such portion thereof, into duly authorized, fully paid and nonassessable shares of Common Stock, at the Conversion Price, determined as hereinafter provided, in effect at the time of conversion:

(i) during any Conversion Period, if the Market Price of the Common Stock for at least 20 Trading Days in the 30 consecutive Trading Day period ending on the first day of such Conversion Period was more than 125% of the Conversion Price in effect on such 30th Trading Day (in the event that the Conversion Price on such thirtieth Trading Day is not the same as the Conversion Price in effect for each of such thirty Trading Days, the Conversion Agent shall make such adjustments as it, in its discretion, deems appropriate in determining whether the foregoing condition has been met);

(ii) on or before March 15, 2018, during the five Business Day period following any 10 consecutive Trading Day period in which the average Trading Price of the Securities for such 10 Trading Day period was less than 105% of the average Conversion Value of the Securities during the same period;

(iii) at any time prior to the close of business on the day that is one Business Day immediately preceding the Redemption Date, if such Security has been called for redemption pursuant to Article 10 hereof;

(iv) during any period, following the earlier of (a) the date the Securities are rated by both Standard & Poor’s and Moody’s and (b) April 21, 2003, when the long-term credit rating assigned to the Securities by either Standard & Poor’s or Moody’s is lower than “BB” or “Ba3”, respectively, or either of these rating agencies does not have a rating then assigned to the Securities for any reason, including any withdrawal or suspension of a rating assigned to the Securities; or

(v) as provided in Section 12.1(b).

The Conversion Agent shall, on behalf of the Company, determine on a daily basis whether the Securities shall be convertible as a result of the occurrence of an event specified in clause (i) or clause (ii) above and, if the Securities shall be so convertible, the Conversion Agent shall promptly deliver to the Company and the Trustee written notice thereof. Whenever the Securities shall become convertible pursuant to Section 12.1, the Company or, at the Company’s request, the Trustee in the name and at the expense of the Company, shall notify the Holders of the event triggering such convertibility in the manner provided in Section 14.2, and the Company shall also publicly announce such information and publish it on the Company’s web site. Any notice so given shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice.

(b) In addition, in the event that:

(i) (A) the Company distributes to all holders of shares of Common Stock rights or warrants entitling them (for a period expiring within 60 days of the record date for such distribution) to subscribe for or purchase shares of Common Stock, at a price per share less than the Market Price of the Common Stock at the time of the announcement of such distribution, (B) the Company distributes to all holders of shares of Common Stock cash or other assets, debt securities or rights or warrants to purchase the Company’s securities, where the Fair Market Value (as determined by the Board of Directors) of such distribution per share of Common Stock exceeds 5% of the Market Price of a share of Common Stock on the Business Day immediately preceding the date of declaration of such distribution or (C) a Change of Control occurs but the Holders do not have the right to require the Company to purchase their Securities as a result of such Change of Control, because of the provisions set forth in Section 11, then, in each case, the Securities may be surrendered for conversion at any time on and after the date that the Company gives notice to the Holders of such right, which shall be not less than 20 days prior to the Ex-Dividend Time for such distribution, in the case of clause (A) or (B), or within 20 Business Days after the occurrence of the Change of Control, in the case of clause (C), until (1) the earlier of the close of business on the Business Day immediately preceding the Ex-Dividend Time or the date the Company announces that such distribution will not take place, in the case of clause (A) or (B), or (2) the earlier of 20 Business Days after the Company’s delivery of the Repurchase Event Notice or the date the Company announces that the Change of Control will not take place, in the case of clause (C).

(ii) the Company consolidates with or merges into another Person, or is a party to a binding share exchange pursuant to which the shares of Common Stock would be converted into cash, securities or other property as set forth in Section 12.5 hereof, then the Securities may be surrendered for conversion at any time from and after the date which is 15 days prior to the date announced by the Company as the anticipated effective time of such transaction until 15 days after the actual date of such transaction, provided, however, that at the effective time of a transaction described in the immediately preceding clause, the right to convert a Security into Common Stock will be changed into a right to convert a Security into the kind and amount of cash, securities or other property which a Holder would have received if such Holder had converted such Security immediately prior to such transaction.

“Conversion Period” means the period from and including the thirtieth Trading Day in a fiscal quarter to, but not including, the thirtieth Trading Day in the immediately following fiscal quarter.

“Conversion Value”, on any day, means the product of the Market Price for the Common Stock multiplied by the then-current Conversion Rate.

“Ex-Dividend Time” means, with respect to any issuance or distribution on shares of Common Stock, the first date on which the shares of Common Stock trade regular way on the principal securities market on which the shares of Common Stock are then traded without the right to receive such issuance or distribution.

The “Conversion Rate”, at any time, shall equal (A) $1,000 divided by the Conversion Price at such time, rounded to three decimal places (rounded up if the fourth decimal place thereof is 5 or more and otherwise rounded down).

(c) The price at which shares of Common Stock shall be delivered upon conversion (the “Conversion Price”) shall be initially equal to approximately $40.05 per share of Common Stock, subject to adjustment, in certain instances, as provided in Section 12.4.

(d) No payment or adjustment will be made for dividends on, or other distributions with respect to, any Common Stock except as provided in this Article 12.

(e) A Security in respect of which a Holder has delivered a Repurchase Event Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with Section 11.3(c).

Section 12.2. Exercise of Conversion Right

(a) To exercise the conversion right with respect to a Physical Security, a Holder must (1) deliver a completed conversion notice, the form of which is provided in Exhibit C, to the Depositary stating that the Holder elects to convert such Physical Security or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted, (2) deliver duly signed completed conversion notice and the Physical Security duly endorsed or assigned to the Company or in blank, at the office of any Conversion Agent, (3) pay all Interest (including Contingent Interest) to which the Holder is not entitled, if any, pursuant to Section 2.1(f) and (4) pay any transfer taxes or other applicable taxes or duties, if required.

(b) To convert interests in a Global Security issued pursuant to Rule 144A, a Holder must deliver to DTC the appropriate instruction form for conversion pursuant to DTC’s conversion program.

(c) To the extent provided in Section 2.1(f), Securities surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the next succeeding Interest Payment Date (except in the case of any Security whose Stated Maturity is prior to such Interest Payment Date) shall be accompanied by payment by such Holder in immediately available funds to the Company of an amount equal to the Interest (including Contingent Interest) to be received on such Interest Payment Date on principal amount of Securities being surrendered for conversion. To the extent provided in Section 2.1, Securities which have been called for redemption by the Company in a notice of redemption pursuant to Section 10.4, and are converted prior to redemption on a Redemption Date that is on or prior to the third Business Day after such Interest Payment Date, shall not require such concurrent payment to the Company upon surrender for conversion, and, if such Securities are converted during the time period set forth in the preceding sentence, the Holders of such converted Securities shall be entitled to receive (and retain) any accrued interest on the principal amount of such surrendered Securities, if any.

(d) Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with

the foregoing provisions, and at such time the rights of the Holders of such Securities as Holders shall cease, and the Person or Persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock at such time.

(e) In the case of any Security which is converted in part only, or a Holder converts less than the principal amount it owns at such time, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations in principal amount equal to the unconverted portion of the principal amount of such Securities.

(f) As promptly as practicable on or after the Conversion Date, the Company shall cause to be issued and delivered to such Conversion Agent a certificate or certificates for the number of full shares of Common Stock issuable upon conversion of such Securities, together with payment in lieu of any fraction of a share as provided in Section 12.3 hereof. The Company hereby initially appoints Wells Fargo Bank, National Association as the Conversion Agent.

(g) A Security in respect of which a Holder has delivered a Repurchase Event Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with Section 11.3(c).

(h) If shares of Common Stock to be issued upon conversion of a Restricted Security, or Securities to be issued upon conversion of a Restricted Security in part only, are to be registered in a name other than that of the Holder of such Restricted Security, such Holder must deliver to the Conversion Agent a certificate in substantially the form set forth in Exhibit C annexed hereto, dated the date of surrender of such Restricted Security and signed by such Holder, as to compliance with the restrictions on transfer applicable to such Restricted Security. None of the Trustee, any Conversion Agent, Registrar or Transfer Agent shall be required to register in a name other than that of the Holder of shares of Common Stock or Securities issued upon conversion of any such Restricted Security not so accompanied by a properly completed certificate.

Section 12.3. Fractions of Shares.

No fractional shares of Common Stock shall be issued upon conversion of any Security or Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares of Common Stock which shall be issued upon conversion thereof shall be computed on the basis of the principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issued upon conversion of any Security or Securities (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the Trading Price of the shares of Common Stock as of the Trading Day preceding the Conversion Date.

Section 12.4. Adjustment of Conversion Price.

The Conversion Price shall be subject to adjustment, calculated in good faith by the Company, from time to time as follows:

(a) In case the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction:

(i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Conversion Record Date fixed for such determination; and

(ii) the denominator of which shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution.

Such reduction shall become effective immediately after the opening of business on the day following the Conversion Record Date. If any dividend or distribution of the type described in this Section 12.4(a) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared.

(b) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as applicable, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

(c) In case the Company shall issue rights or warrants (other than any rights or warrants issued pursuant to a rights plan (commonly referred to as a “poison pill” plan) referred to in Section 12.4(d)) to all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into shares of Common Stock) at a price per share (or having a conversion price per share) less than the Current Market Price on the Conversion Record Date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect at the opening of business on the date after such Conversion Record Date by a fraction:

(i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Conversion Record Date, plus the number of shares which the aggregate offering price of the total number of shares so offered for

subscription or purchase (or the aggregate conversion price of the convertible securities so offered) would purchase at such Current Market Price; and

(ii) the denominator of which shall be the number of shares of Common Stock outstanding on the close of business on the Conversion Record Date, plus the total number of additional shares of Common Stock so offered for subscription or purchase (or into which the convertible securities so offered are convertible).

Such adjustment shall become effective immediately after the opening of business on the day following the Conversion Record Date fixed for determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock (or securities convertible into Common Stock) are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock (or securities convertible into Common Stock) actually delivered. In the event that such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the Holders to subscribe for or purchase Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, the value of such consideration if other than cash, to be determined by the Board of Directors.

(d) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of Capital Stock of the Company (other than any dividends or distributions to which Section 12.4(a) applies) or evidences of its Indebtedness, cash or other assets, including securities, but excluding (1) any rights or warrants referred to in Section 12.4(c), (2) dividends or distributions of stock, securities or other property or assets (including cash) in connection with a reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which Section 12.5 applies, (3) dividends and distributions paid exclusively in cash and (4) distributions of Common Stock referred to in Section 12.4(a) (such Capital Stock, evidence of its Indebtedness, cash, other assets or securities being distributed hereinafter in this Section 12.4(d) called the “distributed assets”), then, in each such case, subject to clause (ii) of this Section 12.4(d), the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Conversion Record Date with respect to such distribution by a fraction:

(i) the numerator of which shall be the Current Market Price on such date, less the Fair Market Value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) on such date of the portion of the distributed assets so distributed applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Conversion Record Date); and

(ii) the denominator of which shall be such Current Market Price on such Conversion Record Date.

Such reduction shall become effective immediately prior to the opening of business on the day following the Conversion Record Date. However, in the event that the then Fair Market Value (as so determined) of the portion of the distributed assets so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Conversion Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Security (or any portion thereof) the amount of distributed assets such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such Conversion Record Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared.

If the Board of Directors determines the Fair Market Value of any distribution for purposes of this Section 12.4(d) by reference to the actual or when issued trading market for any distributed assets comprising all or part of such distribution, it must in doing so consider the prices in such market over the same period (the “Reference Period”) used in computing the Current Market Price to the extent possible, unless the Board of Directors in a Board Resolution determines in good faith that determining the Fair Market Value during the Reference Period would not be in the best interest of the Holders.

Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company’s Capital Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events specified in such rights or warrants or related instruments or agreements governing the same (a “Trigger Event”):

(A) are deemed to be transferred with such shares of Common Stock;

(B) are not exercisable; and

shall be deemed not to have been distributed for purposes of this Section 12.4(d) (and no adjustment to the Conversion Price under this Section 12.4(d) will be required) until the occurrence of the earliest Trigger Event. If such right or warrant is subject to subsequent events, upon the occurrence of which such right or warrant shall become exercisable to purchase different distributed assets, evidences of Indebtedness or other assets or entitle the Holder to purchase a different number or amount of the foregoing or to purchase any of the foregoing at a different purchase price, then the occurrence of each such event shall be deemed to be the date of issuance and the Conversion Record Date with respect to a new right or warrant (and a termination or expiration of the existing right or warrant without exercise by the Holder thereof); In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto, that resulted in an adjustment to the Conversion Price under this Section 12.4(d):

(1) in the case of any such rights or warrants which shall all have been redeemed or purchased without exercise by any Holders thereof, the Conversion Price shall be readjusted upon such final redemption or purchase to give effect to such distribution or Trigger Event, as applicable, as though it were a cash distribution, equal to the per share redemption or purchase price received by a holder of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or purchase; and

(2) in the case of such rights or warrants which shall have expired or been terminated without exercise, the Conversion Price shall be readjusted as if such rights and warrants had never been issued.

For purposes of this Section 12.4(d) and Sections 12.4(a), 12.4(b) and 12.4(c), any dividend or distribution to which this Section 12.4(d) is applicable that also includes shares of Common Stock, a subdivision or combination of Common Stock to which Section 12.4(b) applies, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 12.4(c) applies (or any combination thereof), shall be deemed instead to be:

(1) a dividend or distribution of the evidences of Indebtedness, assets, shares of Capital Stock, rights or warrants, other than such shares of Common Stock, such subdivision or combination or such rights or warrants to which Sections 12.4(a), 12.4(b) and 12.4(c) apply, respectively (and any Conversion Price reduction required by this Section 12.4(d) with respect to such dividend or distribution shall then be made), immediately followed by

(2) a dividend or distribution of such shares of Common Stock, such subdivision or combination or such rights or warrants (and any further Conversion Price reduction required by Sections 12.4(a), 12.4(b) and 12.4(c) with respect to such dividend or distribution shall then be made), except:

(A) the Conversion Record Date of such dividend or distribution shall be substituted as (x) “the date fixed for the determination of stockholders entitled to receive such dividend or other distribution”, “Conversion Record Date fixed for such determinations” and “Conversion Record Date” within the meaning of Section 12.4(a), (y) “the day upon which such subdivision becomes effective” and “the day upon which such combination becomes effective” within the meaning of Section 12.4(b), and (z) as “the date fixed for the determination of stockholders entitled to receive such rights or warrants”, “the Conversion Record Date fixed for the determination of the stockholders entitled to receive such rights or warrants” and such “Conversion Record Date” within the meaning of Section 12.4(c); and

(B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding at the close of business on the date fixed

for such determination” within the meaning of Section 12.4(a) and any reduction or increase in the number of shares of Common Stock resulting from such subdivision or combination shall be disregarded in connection with such dividend or distribution.

In the event of any distribution referred to in Section 12.4(c) or 12.4(d), where, in the case of a distribution described in Section 12.4(d), the Fair Market Value of such distribution per share of Common Stock (as determined by the Board of Directors) exceeds 5% of the Current Market Price on the Business Day immediately preceding the declaration date for such distribution, then, if such distribution would also trigger a conversion right under Section 12.1(b) or the Securities are otherwise convertible pursuant to this Article 12, the Company will be required to give notice to the Holders at least 20 days prior to the Ex-Dividend Time for the distribution and, upon giving of notice, the Securities may be surrendered for conversion at any time on and after the date that the Company gives notice to the Holders of such conversion right, until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such distribution will not take place. No adjustment to the Conversion Price or the ability of a Holder to convert will be made if the Holder will otherwise participate in such distribution without conversion.

(e) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed upon a reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which Section 12.5 applies or as part of a distribution referred to in Section 12.4(d)), in an aggregate amount that, combined together with:

(i) the aggregate amount of any other such distributions to all holders of Common Stock made exclusively in cash within the 12 months preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this Section 12.4(e) has been made; and

(ii) the aggregate of any cash plus the Fair Market Value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) of consideration payable in respect of any tender or exchange offer by the Company or any of its Subsidiaries for all or any portion of the Common Stock concluded within the 12 months preceding the date of such distribution and in respect of which no adjustment pursuant to Section 12.4(f) has been made;

exceeds 5% of the product of the Current Market Price on the Conversion Record Date with respect to such distribution multiplied by the number of shares of Common Stock outstanding on such Conversion Record Date or the date of payment for such distribution, then and in each such case, immediately after the close of business on such date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such Conversion Record Date by a fraction:

(A) the numerator of which shall be equal to the Current Market Price on the Conversion Record Date less an amount equal to the quotient of (x)

the excess of such combined amount over such 5% and (y) the number of shares of Common Stock outstanding on the Conversion Record Date, and

(B) the denominator of which shall be equal to the Current Market Price on such Conversion Record Date.

However, in the event that the then Fair Market Value (as so determined) of the portion of the securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Conversion Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Security (or any portion thereof) the amount of cash such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such Conversion Record Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared.

(f) In case a tender offer made by the Company or any of its Subsidiaries for all or any portion of the Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares) of an aggregate consideration having a Fair Market Value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) that combined together with:

(i) the aggregate of the cash plus the Fair Market Value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution), as of the expiration of such tender offer, of any other consideration payable in respect of any other tender or exchange offers by the Company or any of its Subsidiaries for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this Section 12.4(f) has been made; and

(ii) the aggregate amount of any distributions to all holders of the Company’s Common Stock made exclusively in cash within 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to Section 12.4(e) has been made,

exceeds 5% of the product of the Current Market Price as of the last time (the “Expiration Time”) tenders could have been made pursuant to such tender offer (as it may be amended) multiplied by the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to close of business on the date of the Expiration Time by a fraction:

(A) the numerator of which shall be the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time

multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time; and

(B) the denominator shall be the sum of (x) the Fair Market Value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the “Purchased Shares”) and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time.

Such reduction (if any) shall become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender offer had not been made. If the application of this Section 12.4(f) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 12.4(f).

(g) For purposes of this Section 12.4, the following terms shall have the meanings indicated:

(i) “Current Market Price” shall mean the average of the daily Trading Prices per share of Common Stock (or such other security as specified herein) for the ten consecutive Trading Days immediately prior to the date in question; provided, however, that if:

(A) the “ex” date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f) occurs during such ten consecutive Trading Days, the Trading Price for each Trading Day prior to the “ex” date for such other event shall be adjusted by multiplying such Trading Price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event;

(B) the “ex” date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f) occurs on or after the “ex” date for the issuance or distribution requiring such computation and prior to the day in question, the Trading Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Trading Price by the reciprocal of the fraction by which

the Conversion Price is so required to be adjusted as a result of such other event; and

(C) the “ex” date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (i) or (ii) of this proviso, the Trading Price for each Trading Day on or after such “ex” date shall be adjusted by adding thereto the amount of any cash and the Fair Market Value (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of Section 12.4(d) or (f), whose determination shall be conclusive and set forth in a Board Resolution) of the evidences of Indebtedness, shares of Capital Stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such “ex” date.

For purposes of any computation under Section 12.4(f), the Current Market Price of the Common Stock on any date shall be deemed to be the average of the daily Trading Prices per share of Common Stock for such day and the next two succeeding Trading Days; provided, however, that if the “ex” date for any event (other than the tender offer requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.4(a), (b), (c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or exchange offer requiring such computation and prior to the day in question, the Trading Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Trading Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term “ex” date, when used:

(1) with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Trading Price was obtained without the right to receive such issuance or distribution;

(2) with respect to any subdivision or combination of shares of Common Stock, means the first date on which the shares of Common Stock trade regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective; and

(3) with respect to any tender or exchange offer, means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer.

Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called for pursuant to this Section 12.4, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 12.4 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors.

(ii) “Fair Market Value” shall mean, if there is a current market for the asset, debt or transaction in question, the amount that a willing buyer would pay a willing seller in an arm’s length transaction or, in the absence of a current market for such asset, debt or transaction, the amount determined in good faith by the Board of Directors that represents its determination of the fair market value of the asset.

(iii) “Conversion Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).

The Company may make such reductions in the Conversion Price, in addition to those required by Sections 12.4(a), (b), (c), (d), (e) or (f), as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any even treated as such for income tax purposes or otherwise.

(h) No adjustment need be made for (i) a transaction referred to in Sections 12.4 or 12.5 if Holders participate in the transaction without conversion on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of shares of Common Stock participate in the transaction; (ii) the issuance and distribution of rights to purchase shares of Common Stock pursuant to (A) a Company plan for reinvestment of dividends or interest, (B) a change in the par value or no par value of the shares of Common Stock or (C) to the extent the Securities become convertible pursuant to this Article 12 in whole or in part into cash, with respect to such cash after such cash is distributed to the Holders in satisfaction of such conversion right.

(i) To the extent permitted by applicable law, the Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and the reduction is irrevocable during the period and the Board of Directors determines in good faith that such reduction would be in the best interests of the Holders, which determination shall be conclusive and set forth in a Board Resolution. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to the Trustee and the Conversion Agent a notice of the reduction at least 15 days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period during which it will be in effect.

(j) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 12.4(j) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 12 shall be made by the Company in good faith and shall be made to the nearest cent or to the nearest one hundredth of a share, as applicable. No adjustment need be made for a change in the par value or no par value of the Common Stock.

(k) No adjustment in Conversion Price shall be required if the Fair Market Value of any assets, debt securities or rights, warrants or options to purchase the securities of the Company, including but not limited to Common Stock, in each case applicable to each share of Common Stock are distributed to the Company’s stockholders and such Fair Market Value either equals or exceeds the Current Market Price or such Current Market Price exceeds the such Fair Market Price Value by an amount not exceeding $1.00; provided, however, that any adjustments which by reason of this Section 12.4(k) are not required to be made shall be distributed upon conversion of any Security in an amount of assets, securities or rights, warrants or options comprising the distribution that a Holder would have received if such Holder had converted such Security immediately prior to the Conversion Record Date.

(l) In any case in which this Section 12.4 provides that an adjustment shall become effective immediately after a Conversion Record Date for an event, the Company may defer until the occurrence of such event (i) issuing to the Holder of any security converted after such Conversion Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such Holder any amount in cash in lieu of any fraction pursuant to Section 12.3.

(m) For purposes of this Section 12.4, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.

(n) If the distribution date for the rights provided in the Company’s rights agreement, if any, occurs prior to the date a Security is converted, the Holder of the Security who converts such Security after the distribution date is not entitled to receive the rights that would otherwise be attached (but for the date of conversion) to the shares of Common Stock received upon such conversion; provided, however, that an adjustment shall be made to the Conversion Price pursuant to clause 12.4(b) as if the rights were being distributed to the common stockholders of the Company immediately prior to such conversion. If such an adjustment is made and the rights are later redeemed, invalidated or terminated, then a corresponding reversing adjustment shall be made to the Conversion Price, on an equitable basis, to take account of such event.

(o) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of Capital Stock of a Subsidiary, then the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Conversion Record Date with respect to such distribution by a fraction:

(i) the numerator of which shall be the Current Market Price of the shares of Capital Stock of such Subsidiary (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution), measured from the date of such distribution; and

(ii) the denominator of which shall be the Current Market Price of the Company’s common stock, measured from the date of such distribution.

(p) If the Company adjusts the Conversion Price pursuant to this Section 12.4, the Company shall issue a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing the relevant information and make such information available on the Company’s web site or through another public medium as the Company may use at such time.

Section 12.5. Consolidation or Merger of the Company.

If any of the following events occurs, namely:

(a) any reclassification or change of the outstanding Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) as a result of which holders of Common Stock shall be entitled to receive Capital Stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock;

(b) any merger, consolidation, statutory share exchange or combination of the Company with another Person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash or any combination thereof) with respect to or in exchange for such Common Stock; or

(c) any sale or conveyance of all or substantially all of the properties and assets of the Company to any other Person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash or any combination thereof) with respect to or in exchange for such Common Stock;

the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture, if such supplemental indenture is then required to so comply) providing that such Securities shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including cash) which such Holder would have been entitled to receive upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance had such Securities been converted into Common Stock immediately prior to such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance assuming such holder of Common Stock did not exercise its rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance (provided that if the kind or amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised (“Non-Electing Share”), then for the purposes of this Section 12.5, the kind and amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance for each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). Such supplemental indenture shall provide for adjustments which shall be as

nearly equivalent as may be practicable to the adjustments provided for in this Article 12. If, in the case of any such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, the stock or other securities and assets receivable thereupon by a holder of Common Stock includes shares of stock or other securities and assets of a Person other than the successor or purchasing Person, as the case may be, in such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other Person and shall contain such additional provisions to protect the interests of the Holders as the Board of Directors shall reasonably consider necessary by reason of the foregoing, including to the extent practicable the provisions providing for the Purchase Rights set forth in Article 11 hereof.

The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Holder, at the address of such Holder as it appears on the register of the Securities maintained by the Registrar, within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

The above provisions of this Section 12.5 shall similarly apply to successive reclassifications, mergers, consolidations, statutory share exchanges, combinations, sales and conveyances.

If this Section 12.5 applies to any event or occurrence, Section 12.4 shall not apply.

Section 12.6. Notice of Adjustments of Conversion Price.

Whenever the Conversion Price is adjusted as herein provided (other than in the case of an adjustment pursuant to the second paragraph of Section 12.4(i) for which the notice required by such paragraph has been provided), the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers’ Certificate setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based. Promptly after delivery of such Officers’ Certificate, the Company shall prepare a notice or press release stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective, shall issue such notice or press release through Dow Jones & Company Inc. or Bloomberg Business News and shall make the information available on the Company’s website or through another public medium as the Company may use at such time. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

Section 12.7. Notice Prior to Certain Actions.

In case at any time after the date hereof:

(a) the Company shall become party to a consolidation or merger for which approval of any stockholders of the Company is required, or enters into the sale or conveyance to another Person or entity or group of Persons or entities acting in concert as a partnership, limited partnership, syndicate or other group (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of all or substantially all of the property and assets of the Company;

(b) the Company shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its capital surplus or its consolidated retained earnings;

(c) the Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of Capital Stock of any class (or of securities convertible into shares of Capital Stock of any class) or of any other rights;

(d) there shall occur any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, a change in par value, a change from par value to no par value or a change from no par value to par value), or any merger, consolidation, statutory share exchange or combination to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale, transfer or conveyance of all or substantially all of the assets of the Company; or

(e) there shall occur the voluntary or involuntary dissolution, liquidation or winding up of the Company;

the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of securities pursuant to Section 9.2, and shall cause to be provided to the Trustee and all Holders in accordance with Section 14.2, at least 20 days (or 10 days in any case specified in clause (a) or (b) above) prior to the applicable record or effective date hereinafter specified, a notice stating:

(i) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined; or

(ii) the date on which such reclassification, merger, consolidation, statutory share exchange, combination, sale, transfer, conveyance, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, merger, consolidation, statutory share exchange, sale, transfer, dissolution, liquidation or winding up.

Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings or actions described in clauses (a) through (e) of this Section 12.6.

Section 12.8. Company to Reserve Common Stock.

The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the

conversion of the Securities, the full number of shares of fully paid and nonassessable Common Stock then issuable upon the conversion of all Outstanding Securities.

Section 12.9. Common Stock to be Fully Paid and Nonassessable.

The Company covenants that all Common Stock which may be issued upon conversion of Securities will upon issue be fully paid and nonassessable and, except as provided in Section 12.10, the Company will pay all taxes, liens and charges with respect to the issue thereof.

Section 12.10. Taxes on Conversions.

Except as provided in the next sentence, the Company will pay any and all taxes (other than taxes on income) and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant to Article 12. A Holder delivering a Security for conversion shall be liable for and will be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless the Person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid.

Section 12.11. Cancellation of Converted Securities.

All Securities delivered for conversion shall be delivered to the Trustee to be canceled by or at the direction of the Trustee.

Section 12.12. Responsibility of Trustee for Conversion Provisions.

The Trustee, subject to the provisions of Section 5.1, and any Conversion Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or intent of any such adjustments when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent shall be accountable with respect to the validity or value (of the kind or amount) of any Common Stock or of any other securities or property, which may at any time be issued or delivered upon the conversion of any Security; and it or they do not make any representation with respect thereto. Neither the Trustee, subject to the provisions of Section 5.1, nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of stock or share certificates or other securities or property upon the surrender of any Security for the purpose of conversion; and the Trustee, subject to the provisions of Section 5.1, and any Conversion Agent shall not be responsible or liable for any failure of the Company to comply with any of the covenants of the Company contained in this Article.

ARTICLE 13 [INTENTIONALLY OMITTED]

ARTICLE 14 OTHER PROVISIONS OF GENERAL APPLICATION

Section 14.1. Trust Indenture Act Controls.

This Indenture is subject to the provisions of the TIA which are required to be part of this Indenture, and shall, to the extent applicable, be governed by such provisions.

Section 14.2. Notices.

Any notice or communication to the Company or the Trustee is duly given if in writing (which may be by facsimile with the original to follow) and delivered in person or mailed by first-class mail to the address set forth below:

(a) if to the Company:

Watson Pharmaceuticals, Inc.

311 Bonnie Circle

Corona, California 92880

Attention: General Counsel

Fax: (909) 270-1096

Telephone: (909) 493-5300

With a copy to:

Latham & Watkins LLP

650 Town Centre Drive, 20th Floor

Costa Mesa, California 92626-1925

Attention: Charles K. Ruck, Esq.

Fax: (714) 755-8290

Telephone: (714) 755-8245

(b) if to the Trustee:

Wells Fargo Bank, National Association

707 Wilshire Boulevard, 17th Floor

Los Angeles, California 90017

Attn: Jeanie Mar, Vice President

Fax:(213) 614-3355

Telephone: (213) 614-3349

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

Any notice or communication to a Holder shall be mailed by first class mail to his address shown on the Register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in such notice or communication shall not affect its sufficiency with

respect to other Holders. If the company mails a notice or communication to Holders, it shall mail a copy to the Trustee at the same time

If a notice or communication is mailed or sent in the manner provided above within the time prescribed it is duly given as of the date it is mailed, whether or not the addressee receives it, except that notice to the Trustee shall only be effective upon receipt thereof by the Trustee.

Section 14.3. Communication by Holders with Other Holders.

Holders may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their rights under the Securities or this Indenture. The Company, the Trustee, the Registrar and anyone else shall have the protection of Section 312(c) of the TIA.

Section 14.4. Acts of Holders of Securities.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent or proxy duly appointed in writing.

Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 5.1) conclusive in favor of the Trustee and the Company if made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such instrument or writing may be provided in any manner which the Trustee reasonably deems sufficient.

(c) The principal amount and serial numbers of Securities held by any Person, and the date of such Person holding the same, shall be proved by the Register.

(d) Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of the Holders of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, the Company in reliance thereon, whether or not notation of such action is made upon such Security.

Section 14.5. Certificate and Opinion as to Conditions Precedent.

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or

covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an Officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the Opinion of Counsel with respect to the matters upon which such certificate or opinion is based is erroneous. Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or representations by, an Officer or Officers of the Company stating that the information with respect to such factual matters is in the possession of the Company unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such Counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished; provided, however, that, at any time that an Opinion of Counsel is required to be delivered hereunder, the opining counsel may, with the consent of the Trustee, deliver to the Trustee the Opinion of Counsel in question addressed to a party other than the Trustee with text to the effect that the Trustee may rely on such opinion rather than by delivering a separate Opinion of Counsel to the Trustee directly.

Section 14.6. Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(a) a statement that each individual signing such certificate or opinion on behalf of the Company, has read such covenant or condition and the definitions herein relating thereto;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

Section 14.7. Effect of Headings and Table of Contents.

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 14.8. Successors and Assigns.

All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

Section 14.9. Separability Clause.

In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 14.10. Benefits of Indenture.

Nothing contained in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or legal or equitable right, remedy or claim under this Indenture.

Section 14.11. Governing Law.

This Indenture and the Securities shall be governed by, and construed in accordance with, the Laws of the State of New York.

Section 14.12. Counterparts.

This instrument may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original but all such counterparts shall together constitute but one and the same instrument.

Section 14.13. Legal Holidays.

In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity of any Security or the last day on which a Holder has a right to convert such Security shall not be a Business Day at any Place of Payment or Place of Conversion, then (notwithstanding any other provision of this Indenture or of the Securities) payment of Principal on or Interest (including Contingent Interest) on or conversion of the Securities, need not be made at such Place of Payment or Place of Conversion on such day, but may be made on the next succeeding Business Day at such Place of Payment or Place of Conversion with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repurchase Date or at the Stated Maturity or on such last day for conversion; provided, however, that in the case that payment is made on such succeeding Business Day, no Interest shall accrue on the amount so

payable for the period from and after such Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity, as applicable.

Section 14.14. Recourse Against Others.

No recourse for the payment of the Principal of or Interest (including Contingent Interest) on any Securities, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director or manager, as such, past, present or future, of the Company of any successor entity to either the Company, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance thereof and as part of the consideration for the issue thereof, expressly waived and released.

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

	WATSON PHARMACEUTICALS, INC.


	By:	/S/ Allen Chao
		Name: Allen Chao, Ph.D.
		Title: Chairman and Chief Executive Officer

	WELLS FARGO BANK, NATIONAL
	ASSOCIATION, AS TRUSTEE AND NOT IN ITS
	INDIVIDUAL CAPACITY

	By:	/S/ Jeanie Mar
		Name: Jeanie Mar
		Title: Vice President

EXHIBIT A

FORM OF SECURITY

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR.

A-1

WATSON PHARMACEUTICALS, INC.

1.75% Convertible Contingent Senior Debentures due March 15, 2023

CUSIP NO. 942683202AB9

No.

Principal Amount

Watson Pharmaceuticals, Inc., a Nevada corporation (including any successor corporation under the Indenture hereinafter referred to, the “Company”), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of U.S. Dollars ($ ) on March 15, 2023.

Interest Payment Dates: March 15 and September 15, commencing September 15, 2003.

Regular Record Dates: March 1 and September 1.

Reference is hereby made to the further provisions of this Security set forth below, which further provisions shall for all purposes have the same effect as if set forth at this place.

IN WITNESS WHEREOF, the Company has caused this Security to be duly executed manually or by facsimile by its duly authorized officers.

WATSON PHARMACEUTICALS, INC.

By:
	Name:
	Title:

By:
	Name:
	Title:

Dated:		, 20

Trustee’s Certificate of Authentication

This is one of the 1.75% Convertible Contingent Senior Debentures due March 15, 2023 described in the within-named Indenture.

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

By:
Authorized Signatory

Dated:		, 20

A-2

WATSON PHARMACEUTICALS, INC.

1.75% Convertible Contingent Senior Debentures due March 15, 2023

SECTION 1 Indenture; Securities.

This Security is one of a duly authorized series of the 1.75% Convertible Contingent Senior Debentures due March 15, 2023 (the “Securities”) of Watson Pharmaceuticals, Inc., a Nevada corporation (including any successor Person under the Indenture hereinafter referred to, the “Company”), issued under an Indenture, dated as of March 7, 2003 (the “Indenture”), between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”). The terms of the Security include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (“TIA”). This Security is subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency or difference between the terms of this Security and the terms of the Indenture, the terms of the Indenture shall control. Capitalized terms used but not defined herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

SECTION 2 Principal and Interest.

The Company promises to pay Interest on the principal amount of the Securities at the Interest Rate from the date of issuance until repayment in full at Stated Maturity, redemption or purchase. The Company will pay Interest (including Contingent Interest) on this Security semi-annually in arrears on March 15 and September 15 of each year (each, an “Interest Payment Date”), commencing September 15, 2003.

The Securities shall bear Interest from March 7, 2003 until the Principal thereof is paid or made available for payment, or until such date on which the Securities are converted, redeemed or purchased as provided herein, (i) prior to the occurrence of a Reset Transaction, at a rate of 1.75% per annum, and (ii) following the occurrence of a Reset Transaction, at the Adjusted Interest Rate related to such Reset Transaction to, but not including, the effective date of any succeeding Reset Transaction. Interest shall be payable semi-annually in arrears on each Interest Payment Date.

In addition, Contingent Interest will accrue on this Security during any six-month period from March 15 to September 14 and from September 15 to March 14, commencing with the six-month period beginning September 15, 2003, under the conditions specified in the Indenture at a rate equal to the greater of (i) a per annum rate equal to 5.00% of the Company’s then-current estimated per annum borrowing rate for senior non-convertible fixed-rate Indebtedness with a Maturity and other terms comparable to this Security and (ii) 0.33% per annum.

Interest (including Contingent Interest) on the Securities shall be computed (i) for any full semi-annual period for which a particular Interest Rate is applicable, on the basis of a 360-day year comprised of twelve 30-day months and (ii) for any period for which a particular

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Interest Rate is applicable for less than a full semiannual period for which Interest is calculated, on the basis of a 30-day month and, for such periods of less than a month, the actual number of days elapsed over a 30-day month. For purposes of determining the Interest Rate, the Trustee may assume that a Reset Transaction has not occurred unless the Trustee has received an Officers’ Certificate stating that a Reset Transaction has occurred and specifying the Adjusted Interest Rate then in effect.

Further reference is made to Sections 2.1(c) through Section 2.1(f) of the Indenture for other provisions of the Securities relating to the payment of Interest and Contingent Interest.

If the Company fails to make a payment of Principal of or Interest (including Contingent Interest) on any Security when due and payable, it shall pay such Interest on such amounts (to the extent lawful), which shall be calculated using the applicable Interest Rate (such amounts, the “Defaulted Interest”). It may elect to pay such Defaulted Interest, plus any other Interest (including Contingent Interest) payable on it, to the Persons who are Holders on which the Interest (including Contingent Interest) is due on a subsequent special record date. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security. The Company shall fix any such special record date and payment date for such payment. At least 15 days before any such special record date, the Company shall mail to Holders affected thereby a notice that states the special record date, the Interest Payment Date and amount to be paid.

SECTION 3 Method of Payment.

Interest (including Contingent Interest) on this Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such Interest. Principal of and Interest (including Contingent Interest) on Global Securities will be payable, for the benefit of the Holders of this Security, to the Depositary in immediately available funds.

Principal on Physical Securities will be payable at the office or agency of the Company maintained for such purpose, initially the Corporate Trust Office of the Trustee. Interest (including Contingent Interest) on Physical Securities will be payable by (i) a U.S. Dollar check drawn on a bank in The City of New York mailed to the address of the Person entitled thereto as such address shall appear in the Register, or (ii) upon application to the Registrar not later than the relevant Regular Record Date by a Holder of an aggregate Principal amount of Securities in excess of $5,000,000, wire transfer in immediately available funds.

SECTION 4 Paying Agent and Registrar.

Initially, Wells Fargo Bank, National Association will act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without notice to any Holder.

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SECTION 5 Optional Redemption

Reference is made to Article 10 of the Indenture regarding the Company’s right to optionally redeem the Securities, which is incorporated into this Security by reference as if stated herein in its entirety.

SECTION 6 Purchase Right Upon a Specific Date or Repurchase Event.

Reference is made to Article 11 of the Indenture regarding the Company’s obligations to the Holders upon a Repurchase Event and the Holders’ rights to require the Company to repurchase their Securities upon a Repurchase Event, which is incorporated into this Security by reference as if stated herein in its entirety.

SECTION 7 Conversion Right.

Reference is made to Article 12 of the Indenture regarding the Holders’ right to convert their Securities and related matters, which is incorporated into this Security by reference as if stated herein in its entirety.

SECTION 8 No Sinking Fund.

The Securities are not subject to a sinking fund.

SECTION 9 Absolute Obligation.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company under the Indenture and this Security which is absolute and unconditional, to pay the Principal of or Interest (including Contingent Interest) on this Security at the place and time and in the coin or currency herein prescribed.

SECTION 10 Denominations; Transfer; Exchange.

The Securities are issuable in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000 in excess thereof. A Holder may transfer and register the transfer or exchange of Securities in accordance with the Indenture.

Pursuant to the Indenture, when this Security (or any portion thereof in integral multiples of $1,000 in principle amount) is presented to the Registrar with a request to register the transfer or to exchange it for an equal principal amount other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if the requirements hereunder for such transactions are met (including that such portions thereof are duly endorsed or accompanied by a written instrument of transfer duly executed by the Holder thereof or by an attorney who is authorized in writing to act on behalf of the Holder). Subject to Section 2.4 of the Indenture, to permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar’s request. No service charge shall be made for any registration of transfer or exchange or redemption of the Securities, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other

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similar governmental charge payable upon exchanges pursuant to Sections 2.14, 7.5 or 10.7 of the Indenture).

Pursuant to the Indenture, neither the Company nor the Registrar shall be required to exchange or register a transfer of this Security (or any portion thereof):

(a) for a period of 15 days prior to the day of any selection of any portion of this Security for redemption under Article 10 hereof;

(b) so selected for redemption or, if a portion of this Security is selected for redemption, such portion thereof selected for redemption; or

(c) surrendered for conversion or, if a portion of this Security is surrendered for conversion, such portion thereof surrendered for conversion.

In the event of redemption, conversion or purchase of the Securities in part only, a new Security or Securities for the unredeemed, unconverted or unpurchased portion thereof will be issued in the name of the Holder hereof.

SECTION 11 Persons Deemed Owners.

The registered Holder of this Security shall be treated as its owner for all purposes.

SECTION 12 Discharge Prior to Redemption or Stated Maturity.

Subject to certain conditions contained in the Indenture, the Company may discharge its obligations under the Securities and the Indenture if (1)(A) all of the Outstanding Securities shall become due and payable at their scheduled Stated Maturity within one year or (B) all of the Outstanding Securities are scheduled for redemption within one year or have all been converted, and (2) the Company shall have deposited with the Trustee cash or, in the event of a conversion pursuant to the terms of the Indenture, Common Stock, sufficient to pay all amounts due and owing on all Outstanding Securities on the date of their scheduled maturity or the scheduled date of redemption, as the case may be.

SECTION 13 Amendment; Supplement; Waiver.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority of the aggregate principal amount of the Outstanding Securities. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences and to make any changes or modifications necessary in connection with the registration of the Securities under the Securities Act as contemplated in the Registration Rights Agreement. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such

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Holder and upon all future Holders of this Security and of any Security issued upon registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security or such other Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the Principal of and Interest (including Contingent Interest) on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security (or pay cash in lieu of conversion) as provided in the Indenture.

SECTION 14 Defaults and Remedies.

Reference is made to the Indenture for the Events of Default, remedies and related provisions with respect to the Securities, which is incorporated into this security by reference as if stated herein in its entirety.

SECTION 15 Authentication.

This Security shall not be valid until the Trustee executes the certificate of authentication in the space provided therefore on the Security.

SECTION 16 Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

SECTION 17 CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused one or more CUSIP numbers, as appropriate, to be printed on this Security and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on this Security or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

SECTION 18 Governing Law.

The Indenture and this Security shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 19 Successor Corporation.

In the event a successor Person assumes all the obligations of the Company under this Security, pursuant to the terms hereof and of the Indenture, the Company will be released from all such obligations.

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SECTION 20 Registration Rights.

The Holders of the Securities are entitled to the benefits of a Resale Registration Rights Agreement, dated as of March 7, 2003, among the Company, Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, CIBC World Markets Corp., Wachovia Securities, Inc., Banc of America Securities LLC, Comerica Securities, Inc. and Wells Fargo Securities, LLC, including the receipt of additional amounts upon a registration default (as defined in such agreement).

SECTION 21 Tax Treatment.

The Company agrees, and by acceptance of a beneficial ownership interest in the Securities each beneficial holder of the Securities will be deemed to have agreed, for United States federal income tax purposes (1) to treat the Securities as indebtedness that is subject to Treas. Reg. Sec. 1.1275-4 (the “Contingent Payment Regulations”) and, for purposes of the Contingent Payment Regulations, to treat the fair market value of any stock beneficially received by a beneficial holder upon any conversion of the Securities as a contingent payment and (2) to be bound by the Company’s determination that the “comparable yield” and “projected payment schedule,” within the meaning of the Contingent Payment Regulations, with respect to the Securities. A Holder of the Securities may obtain the amount of original issue discount, issue date, yield to maturity, comparable yield and projected payment schedule by submitting a written request for it to the Company at the Company’s address specified in Section 14.2 of the Indenture.

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ASSIGNMENT FORM

To assign this Security, fill in the form below and have your signature guaranteed: (I) or (we) assign and transfer this Security to:

____________________________________________________

(Insert assignee’s social security or tax I.D. number)

____________________________________________________

(Print or type assignee’s name, address and zip code)

and irrevocably appoint _____________ to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Your Name:____________________________________________________________________

(Print your name exactly as it appears on the face of this Security)

In connection with any transfer of this Security occurring prior to the date which is the end of the period referred to in Rule 144(k) under the Securities Act (other than a transfer pursuant to an effective registration statement under the Securities Act), the undersigned confirms that without utilizing any general solicitation or general advertising that:

[Check One]

o (a) this Security is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder.

o (b) this Security is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Security and the Indenture.

If none of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Security in the name of any Person other than the Holder hereof unless the conditions to any such transfer of registration set forth herein and in Sections 2.7, 2.8 and 2.17 of the Indenture shall have been satisfied.

	Dated:

	Your Signature:
			(Sign exactly as your name appears on the face of this Security)

	Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion, in each case for investment and not with a view to distribution, and that it and any such account is a “Qualified Institutional Buyer” within the meaning of Rule 144A under the Securities Act of 1933 and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated: ________________________

NOTICE: To be executed by an executive officer.

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SCHEDULE OF EXCHANGES FOR PHYSICAL SECURITIES

The following exchanges of a part of this Global Security for Physical Securities have been made:

Date of Exchange

Amount of decrease in
Principal Amount of
this Global Security

Amount of increase in
Principal Amount of
this Global Security

Principal Amount of this
Global Security
following such decrease
(or increase)

Signature of
authorized officer of
Trustee

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EXHIBIT B

FORM OF REPURCHASE EVENT PURCHASE NOTICE

TO: Watson Pharmaceuticals, Inc.

311 Bonnie Circle

Corona, California 92880

The undersigned registered owner of this Security hereby irrevocably acknowledges receipt of a notice from Watson Pharmaceuticals, Inc. (the “Company”) as to the occurrence of a Repurchase Event with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Security, or the portion thereof (which is $1,000 principal amount or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security, together with Interest (including Contingent Interest), if any, accrued and unpaid to, but excluding, such date, to the registered Holder hereof.

Your Name: ____________________________________________________________________

(Print your name exactly as it appears on the face of this Security)

Dated: _____________________________________________________________________________

	Your Signature:
		(Sign exactly as your name appears on the face of this Security)

	Signature Guarantee*:

Social Security or other Taxpayer Identification Number:______________________________

Principal amount to be converted (if less than all): $ __________________________________

Certificate number (if applicable:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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EXHIBIT C

FORM OF CONVERSION NOTICE

TO: Watson Pharmaceuticals, Inc.

311 Bonnie Circle

Corona, California 92880

The undersigned registered owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion hereof (which is $1,000 principal amount or an integral multiple thereof) below designated, into shares of Common Stock in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If shares or any portion of this Security not converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. To the extent provided in the Indenture, any amount required to be paid to the undersigned on account of Interest (including Contingent Interest), if any, accompanies this Security.

Your Name: _____________________________________________________________________

(Print your name exactly as it appears on the face of this Security)

Dated: ___________________________________________________________________________

Your Signature: ___________________________________________________________________

(Sign exactly as your name appears on the face of this Security)

Signature Guarantee*: ______________________________________________________________

Social Security or other Taxpayer Identification Number: ___________________________________

Principal amount to be converted (if less than all): $________________________________________

Fill in for registration of shares (if to be issued) and Securities (if to be delivered) other than to and in the name of the registered Holder

________________________________________________________________________

(Name)

________________________________________________________________________

(Street Address)

________________________________________________________________________

(City, State and Zip Code)

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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	WATSON PHARMACEUTICALS, INC.


	By:	/s/ Allen Chao
		Name: Allen Chao, Ph.D.
		Title: Chairman and Chief Executive Officer

	LEHMAN BROTHERS INC.
	MORGAN STANLEY & CO. INCORPORATED
	CIBC WORLD MARKETS CORP.
	WACHOVIA SECURITIES, INC.
	BANC OF AMERICA SECURITIES, LLC
	COMERICA SECURITIES, INC.
	WELLS FARGO SECURITIES, LLC

	By:	LEHMAN BROTHERS INC.


		/s/ Timothy B. Gould
		Name: Timothy B. Gould
		Title: Managing Director

	By:	MORGAN STANLEY & CO. INCORPORATED


		/s/ William R. Salisbury
		Name: William R. Salisbury
		Title: Managing Director

		Very truly yours,

		[name]

		By:
		(Authorized Signature)

Dated:

1.	Definitions
2.	Shelf Registration
3.	Additional Amounts
4.	Registration Procedures
5.	Registration Expenses
6.	Indemnification and Contribution
7.	Rule 144A
8.	Participation in Underwritten Registrations
9.	Miscellaneous