-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AKwDnGfnLR0Ro1y+y9aSvLSQas+BSPlLWRn/Z/m8PGh97lf/0BwciFiSTaDC16xK BGVgd5014tB/oX8EvNI2CQ== 0000950129-03-001657.txt : 20030328 0000950129-03-001657.hdr.sgml : 20030328 20030328162445 ACCESSION NUMBER: 0000950129-03-001657 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030325 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCC INSURANCE HOLDINGS INC/DE/ CENTRAL INDEX KEY: 0000888919 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 760336636 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13790 FILM NUMBER: 03625586 BUSINESS ADDRESS: STREET 1: 13403 NORTHWEST FRWY CITY: HOUSTON STATE: TX ZIP: 77040-6094 BUSINESS PHONE: 7136907300 8-K 1 h04438e8vk.txt HCC INSURANCE HOLDINGS, INC. - 3/25/2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 March 25, 2003 Date of Report (Date of earliest event reported) HCC INSURANCE HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 0-20766 76-0336636 (State or Other Jurisdiction (Commission File Number) (I.R.S. Employer of Incorporation) Identification No.) 13403 Northwest Freeway Houston, Texas 77040-6094 (Address of Principal Executive Offices, Including Zip Code) (713) 690-7300 (Registrant's Telephone Number, Including Area Code) ITEM 5. OTHER EVENTS. On January 22, 2002, the Securities and Exchange Commission ("SEC") declared effective the Registration Statement previously filed by HCC Insurance Holdings, Inc. (the "Company") on Form S-3, File No. 333-76122 (the prospectus of which, pursuant to Rule 429 of the Securities Act of 1933, as amended, also relates to $427,500,000 of unsold securities under the Company's registration Statement on Form S-3, File No. 333-58350) (the "Registration Statement"). The Registration Statement offered, pursuant to Rule 415 under the Securities Act of 1933, as amended, up to an aggregate of $750,000,000 in securities of the Company. The Registration Statement and the definitive prospectus contained therein are collectively referred to herein as the "Prospectus." On March 27, 2003, the Company filed with the SEC a prospectus supplement (the "Prospectus Supplement"). The Prospectus Supplement relates to the issuance and sale in an underwritten public offering of $125,000,000 aggregate principal amount of the Company's 1.30% Convertible Notes due 2023 ("Notes") and up to an additional $18,750,000 of Notes if the underwriters exercise their over-allotment option in full. In connection with the filing of the Prospectus Supplement with the SEC, the Company is filing certain exhibits as part of this Form 8-K. See "Item 7. Financial Statements and Exhibits." On March 25 and March 26, 2003, the Company issued press releases relating to the offering of the Notes. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) EXHIBITS. EXHIBIT NUMBER TITLE OF DOCUMENT ------ ----------------- 1.1 Underwriting Agreement, dated March 25, 2003 by and between the Company and Salomon Smith Barney Inc., Raymond James & Associates, Inc., Wells Fargo Securities, LLC, William Blair & Company, L.L.C. and Advest, Inc. as representatives of the several underwriters on Schedule I thereto, with respect to the issuance and sale of $125,000,000 aggregate principal amount of the Company's 1.30% Convertible Notes due 2023 ("Notes") and up to an additional $18,750,000 of Notes if the underwriters exercise their over-allotment option in full. 4.1 Indenture dated August 23, 2001 relating to the Notes, incorporated herein by reference to the Form 8-K filed August 23, 2001. EXHIBIT NUMBER TITLE OF DOCUMENT ------ ----------------- 4.2 Second Supplemental Indenture dated March 28, 2003, relating to the Notes. 5. Opinion of Haynes and Boone, LLP 23. Consent of Haynes and Boone, LLP (included in Exhibit 5 filed herewith) 99.1 Press Release dated March 25, 2003. 99.2 Press Release dated March 26, 2003. 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 hereunto duly authorized. HCC INSURANCE HOLDINGS, INC. By: /s/ Stephen L. Way -------------------------- Dated: March 27, 2003 Name: Stephen L. Way Title: President & Chief Executive Officer EXHIBIT INDEX EXHIBIT NUMBER TITLE OF DOCUMENT ------ ----------------- 1.1 Underwriting Agreement, dated March 25, 2003 by and between the Company and Salomon Smith Barney Inc., Raymond James & Associates, Inc., Wells Fargo Securities, LLC, William Blair & Company, L.L.C. and Advest, Inc. as representatives of the several underwriters on Schedule I thereto, with respect to the issuance and sale of $125,000,000 aggregate principal amount of the Company's 1.30% Convertible Notes due 2023 ("Notes") and up to an additional $18,750,000 of Notes if the underwriters exercise their over-allotment option in full. 4.1 Indenture dated August 23, 2001 relating to the Notes, incorporated herein by reference to the Form 8-K filed August 23, 2001. 4.2 Second Supplemental Indenture dated March 28, 2003, relating to the Notes. 5. Opinion of Haynes and Boone, LLP 23. Consent of Haynes and Boone, LLP (included in Exhibit 5 filed herewith) 99.1 Press Release dated March 25, 2003. 99.2 Press Release dated March 26, 2003. EX-1.1 3 h04438exv1w1.txt UNDERWRITING AGREEMENT DATED 3/25/03 EXHIBIT 1.1 EXECUTION COPY HCC Insurance Holdings, Inc. $125,000,000 1.30% Convertible Senior Notes Due 2023* Underwriting Agreement New York, New York March 25, 2003 Salomon Smith Barney Inc. Raymond James & Associates, Inc. Wells Fargo Securities, LLC William Blair & Company, L.L.C. Advest, Inc. As Representatives of the several Underwriters c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: HCC Insurance Holdings, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), proposes to sell to the several underwriters named in Schedule I hereto (the "Underwriters"), for whom you (the "Representatives") are acting as representatives, $125,000,000 principal amount of its 1.30% Convertible Senior Notes due 2023 (the "Underwritten Securities"), to be issued under an indenture dated as of August 23, 2001, as supplemented by the second supplemental indenture dated as of the Closing Date (as defined in Section 3 below) (collectively, the "Indenture"), between the Company and Wachovia Bank, National Association (as successor to First Union National Bank), as trustee (the "Trustee"). The Company also proposes to grant to the Underwriters an option to purchase up to $18,750,000 additional principal amount of such Notes to cover over-allotments (the "Option Securities"; the Option Securities, together with the Underwritten Securities, being hereinafter called the "Securities"). The Securities are convertible into shares of Common Stock, par value $1.00 per share (the "Common Stock"), of the Company at the conversion price set forth therein. To the extent there are no additional Underwriters listed on Schedule I hereto other than you, the term Representatives as used herein shall mean you, as Underwriters, and the terms Representatives and Underwriters shall mean either the singular or plural as the context requires. Any reference herein to the Registration Statement, the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed - ------------- * Plus an option to purchase up to $18,750,000 additional principal amount from the Company to cover over-allotments. under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the Basic Prospectus, such Preliminary Final Prospectus or the Final Prospectus, as the case may be; and any reference herein to the terms "amend," "amendment" or "supplement" with respect to the Registration Statement, the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement or the issue date of the Basic Prospectus, such Preliminary Final Prospectus or the Final Prospectus, as the case may be, deemed to be incorporated therein by reference. Certain terms used herein are defined in Section 17 hereof. 1. Representations and Warranties. The Company represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1. (a) The Company meets the requirements for use of Form S-3 under the Act and has prepared and filed with the Commission registration statements, file numbers 333-58350 and 333-76122, on Form S-3, including a related basic prospectus, for registration under the Act of the offering and sale of the Securities. The Company may have filed one or more amendments thereto, including a Preliminary Final Prospectus, each of which has previously been furnished to you. The Company will next file with the Commission one of the following: (1) after the Effective Date of such registration statement, a final prospectus supplement relating to the Securities in accordance with Rules 430A and 424(b); (2) prior to the Effective Date of such registration statement, an amendment to such registration statement (including the form of final prospectus supplement); or (3) a final prospectus in accordance with Rules 415 and 424(b). In the case of clause (1), the Company has included in such registration statement, as amended at the Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in such registration statement and the Final Prospectus. As filed, such final prospectus supplement or such amendment and form of final prospectus supplement shall contain all Rule 430A Information, together with all other such required information, and, except to the extent the Representatives shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the Basic Prospectus and any Preliminary Final Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. The Registration Statement, at the Execution Time, meets the requirements set forth in Rule 415(a)(1)(x). (b) On the Effective Date, the Registration Statement did or will, and when the Final Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date (as defined in Section 3 below) and on any date on which Option Securities are purchased, if such date is not the Closing Date (a "settlement date"), the Final Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder; on the Effective Date and at the Execution Time, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, on the Effective Date, the Final Prospectus, if not filed 2 pursuant to Rule 424(b), will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement date, the Final Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement or the Final Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Final Prospectus (or any supplement thereto). (c) Each of the Company and its subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Final Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification and where the failure to be so qualified could reasonably be expected, individually or in the aggregate, to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"). (d) All the outstanding shares of capital stock of each subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Prospectus, all outstanding shares of capital stock of the subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest or any other security interests, claims, liens or encumbrances. (e) The Company's authorized equity capitalization is as set forth in the Final Prospectus; the capital stock of the Company conforms in all material respects to the description thereof contained in the Final Prospectus; and the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable. (f) The Securities have been duly authorized, and, when executed and authenticated in accordance with the provisions of the Indenture and issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will constitute the legal, valid and binding obligations of the Company entitled to the benefits of the Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity) and will be convertible into Common Stock in accordance with their terms; the Common Stock into which the Securities are convertible will, prior to issuance, be duly listed, and admitted and authorized for trading, subject to official notice of issuance, on the New York Stock Exchange; the certificates for the Securities are in valid and sufficient form; the shares of Common Stock initially issuable upon conversion of the Securities when issued upon conversion against payment 3 of the conversion price and in accordance with the terms of the Indenture and the Securities, will be validly issued, fully paid and nonassessable; the Board of Directors of the Company has duly and validly adopted resolutions reserving such shares of Common Stock for issuance upon conversion; and the holders of the outstanding shares of capital stock of the Company are not entitled to any preemptive or other rights to subscribe for the Securities or the shares of the Common Stock issuable upon conversion thereof; and, except as set forth in the Final Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding. (g) There is no franchise, contract or other document of a character required to be described in the Registration Statement or Final Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required or to be filed as an exhibit thereto, which is not described or filed as required; and the statements included or incorporated by reference in the Final Prospectus under the headings "Certain Legal Matters," "Business--Legal Proceedings," and "Legal Matters" fairly summarize the matters therein described. (h) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company. (i) The Indenture has been duly authorized and, assuming due authorization, execution and delivery thereof by the Trustee, when executed and delivered by the Company, will constitute a legal, valid and binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity); (j) The Company is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Final Prospectus, will not be an "investment company" as defined in the Investment Company Act of 1940, as amended. (k) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Final Prospectus. (l) Neither the issue and sale of the Securities nor the consummation of any other of the transactions contemplated herein, including the issuance of the Common Stock upon the conversion of the Securities, nor the fulfillment of the terms hereof will conflict with, result in a breach or violation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of its subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan 4 agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which its or their property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any of its or their properties. (m) No holders of securities of the Company have rights to the registration of such securities under the Registration Statement. (n) The consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included in the Final Prospectus and the Registration Statement present fairly in all material respects the financial condition, results of operations and cash flows of the Company and its consolidated subsidiaries as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein). The summary financial and operating data set forth under the caption "Summary Financial and Operating Data" in the Final Prospectus fairly present, on the basis stated in the Final Prospectus, the information included therein. No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the performance of this Agreement or the consummation of any of the transactions contemplated hereby or (ii) could reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Prospectus (exclusive of any supplement thereto). (o) No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a Material Adverse Effect on the performance of this Agreement or the consummation of any of the transactions contemplated hereby or (ii) could reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Prospectus (exclusive of any supplement thereto). (p) Each of the Company and each of its subsidiaries owns or leases all such properties as are necessary to the conduct of its operations as presently conducted. (q) Neither the Company nor any subsidiary is in violation or default of (i) any provision of its charter or bylaws, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject, or (iii) except where any such violation or default could not reasonably be 5 expected, individually or in the aggregate, to have a Material Adverse Effect, any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable. (r) PricewaterhouseCoopers LLP, who have certified certain financial statements of the Company and its consolidated subsidiaries and delivered their report with respect to the audited consolidated financial statements and schedules included or incorporated by reference in the Final Prospectus, are independent public accountants with respect to the Company within the meaning of the Act and the applicable published rules and regulations thereunder. (s) The Company has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Prospectus (exclusive of any supplement thereto) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Prospectus (exclusive of any supplement thereto). (t) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (u) The Company is not required to be licensed as an insurance company in any state. Houston Casualty Company ("HCC"), U.S. Specialty Insurance Company ("USSIC"), HCC Life Insurance Company ("HCCLIC"), Avemco Insurance Company ("AIC"), National Insurance Underwriters, HCC Specialty Insurance Company, HCC Reinsurance Company, Ltd., Houston Casualty Company Europe, Seguros y Reaseguros S.A. and Centris Insurance Company, the ("Insurance Subsidiaries") are the only subsidiaries of the Company which are insurance companies. Each of HCC and USSIC is duly licensed as an insurer under the insurance laws and regulations of Texas. Each of HCCLIC and AIC is duly licensed as an insurer under the insurance laws and regulations of Indiana and Maryland, respectively. HCC operates a branch office in London, England which is subject to regulation by regulatory authorities in the United Kingdom. Since January 1, 2001, the Company and each of its Insurance Subsidiaries have filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file with any state or foreign 6 insurance commission, agency or authority. As of their respective dates, such reports, registrations and statements complied in all material respects with all of the laws, statutes, rules and regulations of each such jurisdiction, including, without limitation, those rules and regulations promulgated by the applicable insurance commission, agency or authority in any such state. (v) No loss experience has occurred since December 31, 2001, which would require or make it necessary or appropriate for the Company to change, alter, modify or amend the Company's methodology or assumptions relating to losses. (w) The Company has delivered to the Underwriters, for the year 2001, copies of the statutory Annual Statements and for the period January 1, 2002, through September 30, 2002, Quarterly Statements (collectively, the "Statutory Statements") of HCC and USSIC filed with the Texas Department of Insurance, and HCCLIC and AIC filed with the Indiana Department of Insurance and the Maryland Insurance Administration, respectively. The statutory financial statements contained in each Statutory Statement fairly present the statutory financial condition of each of the respective corporations at the date of each such statement, and the statutory results of operations and other data contained therein for each of the periods then ended, have been prepared in accordance with the prescribed or permitted statutory insurance accounting requirements and practices, and in accordance with accounting practices prescribed or permitted by the National Association of Insurance Commissioners, and have been applied on a consistent basis except as expressly set forth or disclosed in the notes, exhibits or schedules thereto. The exhibits and schedules included in each Statutory Statement fairly present the data purported to be shown thereby. (x) Except as set forth in the Final Prospectus, all reinsurance treaties, contracts, agreements and arrangements to which the Company or any of the Insurance Subsidiaries is a party and as to which any of them reported recoverables, premiums due or other amounts in its most recent Statutory Statement are in full force and effect and none of the Company or any of its Insurance Subsidiaries is in violation of, or in default in the performance, observance or fulfillment of, any material obligation, agreement, covenant or condition contained therein, which violation or default would, singly or in the aggregate, have a Material Adverse Effect. (y) Each of the Insurance Subsidiaries holds all licenses, certificates and permits from insurance departments and other governmental authorities ("Insurance Licenses") necessary to conduct its business as presently conducted, except where the failure to hold any such Insurance Licenses would not have a Material Adverse Effect. Each of the Insurance Subsidiaries has fulfilled and performed all material obligations necessary to maintain its Insurance Licenses, and no event or events have occurred which would result in the impairment, modification, termination or revocation of such Insurance Licenses, except where such impairment, modification, termination or revocation would not have a Material Adverse Effect. (z) A.M. Best Company, Inc. ("A.M. Best") has not taken any action to, or to the Company's knowledge, threatened to: (i) downgrade the ratings or any of the 7 Insurance Company Subsidiaries or (ii) publicly announce or otherwise indicate to the Company that its ratings of any of the Insurance Subsidiaries are under review. Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter. 2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties set forth herein, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of 97.75% of the principal amount thereof, plus accrued interest, if any, from March 28, 2003, to the Closing Date, the principal amount of Underwritten Securities set forth opposite such Underwriter's name in Schedule I hereto. (b) Subject to the terms and conditions and in reliance upon the representations and warranties set forth herein, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, the Option Securities at the same purchase price as the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of the Final Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. The principal amount of Option Securities to be purchased by each Underwriter shall be the same percentage of the principal amount of the Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to eliminate any fractional securities. 3. Delivery and Payment. Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the third Business Day prior to the Closing Date) shall be made on March 28, 2003, at 10:00 a.m. New York City time, or at such time on such later date not more than three Business Days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being called herein the "Closing Date"). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Underwritten Securities and the Option Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct. If the option provided for in Section 2(b) hereof is exercised after the third Business Day prior to the Closing Date, the Company will deliver the Option Securities (at the expense of the Company) to the Representatives, at 388 Greenwich Street, New York, New York, on the date specified by the Representatives (which shall be within three Business Days 8 after exercise of said option) for the respective accounts of the several Underwriters, against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof. 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Final Prospectus. 5. Agreements. The Company agrees with the several Underwriters that: (a) The Company will use its best efforts to cause the Registration Statement, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement (including the Final Prospectus or any Preliminary Final Prospectus) to the Basic Prospectus or any Rule 462(b) Registration Statement unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Final Prospectus is otherwise required under Rule 424(b), the Company will cause the Final Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (1) when the Registration Statement, if not effective at the Execution Time, shall have become effective, (2) when the Final Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall have been filed with the Commission, (3) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (4) of any request by the Commission or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement, or for any supplement to the Final Prospectus or for any additional information, (5) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (6) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Final Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the 9 circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Final Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, the Company promptly will (1) notify the Representatives of any such event, (2) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance and (3) supply any supplemented Final Prospectus to you in such quantities as you may reasonably request. (c) As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (d) The Company will furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, as many copies of each Preliminary Final Prospectus and the Final Prospectus and any supplement thereto as the Representatives may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering. (e) The Company will arrange, if necessary, for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may designate, will maintain such qualifications in effect so long as required for the distribution of the Securities and will pay any fee of the National Association of Securities Dealers, Inc., in connection with its review of the offering, if required; provided, that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. (f) The Company will not, without the prior written consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, any shares of capital stock of the Company or any securities convertible into, or exercisable or exchangeable for, shares of such capital stock (other than the Securities), or publicly announce an intention to effect any such transaction, for a period of 45 days after the date of the Final Prospectus, provided, however, that the Company may (i) issue and sell Common Stock pursuant to any employee stock option plan, stock ownership plan or dividend reinvestment plan of the Company in effect at the Execution 10 Time and (ii) issue Common Stock issuable upon the conversion of securities or the exercise of warrants or options outstanding at the Execution Time. (g) The Company will reserve and keep available at all times, free of preemptive rights, the full number of shares of Common Stock issuable upon conversion of the Securities. (h) The Company will not take, directly or indirectly, any action that constitutes or that is designed to or might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (i) The Company has furnished or will furnish to the Representatives "lock-up" letters substantially in the form of Exhibit A hereto, signed by each of its current officers and directors, pursuant to which each such person shall agree not to offer, sell, contract to sell or otherwise dispose of, or grant any options or warrants to purchase, any shares of capital stock of the Company or any securities convertible into, or exercisable or exchangeable for, shares of such capital stock, for a period of 45 days after the date of this Agreement without the prior written consent of Salomon Smith Barney Inc., other than shares of Common Stock disposed of as bona fide gifts approved by Salomon Smith Barney Inc. and other than the disposition to the Company of any shares of Common Stock utilized in connection with the exercise of outstanding stock options. 6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3 hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) If the Registration Statement has not become effective prior to the Execution Time, unless the Representatives agree in writing to a later time, the Registration Statement will become effective not later than (i) 6:00 PM New York City time on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM New York City time on such date or (ii) 9:30 AM on the Business Day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM New York City time on such date; if filing of the Final Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Final Prospectus, and any such supplement, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. (b) The Company shall have requested and caused Haynes and Boone, LLP, counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that: 11 (i) each of the Company and the Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Final Prospectus, and the Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction specified in the Management Certificate attached hereto as Exhibit B; (ii) all the outstanding shares of capital stock of each Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and, to the knowledge of such counsel, after due inquiry, any other security interest, claim, lien or encumbrance, except for such security interest, claim, lien or encumbrance arising out of the Company's existing credit facilities; (iii) the Company's authorized equity capitalization is as set forth in the Final Prospectus; the capital stock of the Company conforms in all material respects to the description thereof contained in the Final Prospectus; and the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable; (iv) the Securities have been duly authorized, and, when executed and authenticated in accordance with the provisions of the Indenture and issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will constitute the legal, valid and binding obligations of the Company entitled to the benefits of the Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity) and will be convertible into Common Stock in accordance with their terms; the Common Stock into which the Securities are convertible has been duly listed, and admitted and authorized for trading, subject to official notice of issuance, on the New York Stock Exchange; the certificates for the Securities are in valid and sufficient form; the shares of Common Stock initially issuable upon conversion of the Securities when issued upon conversion against payment of the conversion price and in accordance with the terms of the Indenture and the Securities, will be validly issued, fully paid and nonassessable; the Board of Directors of the Company has duly and validly adopted resolutions reserving such shares of Common Stock for issuance upon conversion; and the holders of the outstanding shares of capital stock of the Company are not entitled to any preemptive or other rights to subscribe for the Securities or the shares of the Common Stock issuable upon conversion thereof; and, except as set forth in the Final Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding; 12 (v) to the knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property of a character required to be disclosed in the Registration Statement which is not adequately disclosed in the Final Prospectus, and there is no franchise, contract or other document of a character required to be described in the Registration Statement or the Final Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required; and the statements included or incorporated by reference in the Final Prospectus under the heading "Legal Proceedings," insofar as such statements summarize legal matters, agreements, documents, or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings. (vi) the Registration Statement has become effective under the Act; any required filing of the Basic Prospectus, any Preliminary Final Prospectus and the Final Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued, no proceedings for that purpose have been instituted or threatened, and the Registration Statement and the Final Prospectus (other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder; and such counsel has no reason to believe that on the Effective Date or the date the Registration Statement was last deemed amended the Registration Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Final Prospectus as of its date and on the Closing Date included or includes any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (in each case, other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion); (vii) this Agreement has been duly authorized, executed and delivered by the Company; (viii) the Indenture has been duly authorized and, assuming due authorization, execution and delivery thereof by the Trustee, when executed and delivered by the Company, will constitute a legal, valid and binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity); (ix) the Company is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the 13 Final Prospectus, will not be an "investment company" as defined in the Investment Company Act of 1940, as amended; (x) no consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated in this Agreement and in the Final Prospectus and such other approvals (specified in such opinion) as have been obtained; (xi) neither the issue and sale of the Securities, nor the consummation of any other of the transactions contemplated herein, including the issuance of the Common Stock upon the conversion of the Securities, nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of or imposition of any lien, charge or encumbrance upon any property or assets of the Company or its subsidiaries pursuant to, (i) the charter or by-laws of the Company or its subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or its subsidiaries is a party or bound or to which its or their property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or its subsidiaries or any of its or their properties; and (xii) no holders of securities of the Company have rights to the registration of such securities under the Registration Statement. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the general corporate law of the State of Delaware or the Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Final Prospectus in this paragraph (b) include any supplements thereto at the Closing Date. (c) The Representatives shall have received from Christopher L. Martin, Esq., Executive Vice President and General Counsel of the Company, his opinion, dated the Closing Date and addressed to the Representatives, to the effect that each of the Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification and where the failure to be so qualified could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. 14 (d) The Representatives shall have received from Cleary, Gottlieb, Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Registration Statement, the Final Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (e) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Final Prospectus, any supplements to the Final Prospectus and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; (ii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company's knowledge, threatened; and (iii) since the date of the most recent financial statements included or incorporated by reference in the Final Prospectus (exclusive of any supplement thereto), there has been no material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Prospectus (exclusive of any supplement thereto). (f) The Company shall have requested and caused PricewaterhouseCoopers LLP to have furnished to the Representatives, at the Closing Date, a letter (which may refer to letters previously delivered to one or more of the Representatives), dated as of the Closing Date, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable rules and regulations adopted by the Commission thereunder and stating in effect, that: (i) In their opinion the audited financial statements and financial statement schedules included or incorporated by reference in the Registration Statement and the Final Prospectus and reported on by them comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related rules and regulations adopted by the Commission. (ii) For purposes of these letters they have read minutes of the meetings of the 15 stockholders, the Board of Directors of the Company and the Audit Committee as set forth in the minute books at March 25, 2003, officials of the Company having advised them that (a) there are no minutes maintained with respect to the Company's Investment Committee and (b) with the exception of the March 20, 2003, Board of Directors' meeting, the minutes of all such meetings through that date were set forth therein; and they have carried out other procedures to March 25, 2003, as follows (their work did not extend to the period from March 26, 2003, to March 28, 2003, inclusive): (1) With respect to the three-month period ended March 31, 2002, the three- and six- month periods ended June 30, 2002 and the three- and nine-month periods ended September 30, 2002 and each of the corresponding periods in 2001, they have - (I) performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in SAS No. 71 or SAS 100, "Interim Financial Information", on the unaudited condensed consolidated balance sheets as of the end of each such period and the unaudited condensed consolidated statements of income, retained earnings (shareholders' equity), and cash flows for each of such periods included or incorporated by reference in the Registration Statement and the Final Prospectus; and (II) inquired of certain officials of the Company who have responsibility for accounting and financial matters whether the unaudited condensed consolidated financial statements referred to in (I) above comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations. (2) Company officials have advised them that no such financial statements as of any date or for any period subsequent to December 31, 2002 were available. (3) As mentioned in 2(3), Company officials have advised them that no financial statements as of any date or for any period subsequent to December 31, 2002, are available; accordingly, the procedures carried out by them with respect to changes in financial statement items after December 31, 2002, have, of necessity, been even more limited than those with respect to the periods referred to in (1) and (2) above. They have inquired of certain officials of the Company who have responsibility for financial and 16 accounting matters whether (I) at March 25, 2003, there was any change in the total debt of the Company and its subsidiaries or decreases in total assets of the Company and its subsidiaries or shareholders' equity of the Company as compared with the amounts shown on the December 31, 2002, unaudited condensed consolidated balance sheet included or incorporated by reference in the Registration Statement and the Final Prospectus, or (II) for the period from December 31, 2002, to March 25, 2003, there were any decreases, as compared with the corresponding period in the preceding year, in total revenue, earnings before income tax provision, net earnings and basic and diluted earnings per share of the Company and its subsidiaries. Those officials stated that (x) at March 25, 2003, total debt increased to approximately $241,527,000, and to the best of their knowledge they do not believe that there were decreases in total assets or shareholders' equity of the Company as compared with the amounts shown on the December 31, 2002, unaudited condensed consolidated balance sheet included or incorporated by reference in the Registration Statement and the Final Prospectus; and (y) to the best of their knowledge they do not believe there were decreases for the period from January 1, 2003 to March 25, 2003, as compared with the corresponding period in the preceding year, in total revenue, earnings before income tax provision, net earnings and basic and diluted earnings per share of the Company and its subsidiaries. (iii) On the basis of the foregoing nothing came to their attention which caused them to believe that: (1) any unaudited condensed consolidated financial statements referred to in (ii)(1) above do not comply as to form in all material respects with applicable accounting requirements of the Act and with the related rules and regulations adopted by the Commission with respect to financial 17 statements included or incorporated by reference in quarterly reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated by reference in the Registration Statement and the Final Prospectus, except for the implementation of SAS No. 142 entitled "Goodwill and Other Intangible Assets"; or (2) the information included or incorporated by reference in the Registration Statement and Final Prospectus in response to Regulation S-K, Item 301 (Selected Financial Data), Item 302 (Supplementary Financial Information) and Item 402 (Executive Compensation) is not in conformity with the applicable disclosure requirements of Regulation S-K. (iv) They have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth or incorporated by reference in the Registration Statement and the Final Prospectus, including the information set forth under the captions "Summary Financial Data" and "Recent Developments" in the Final Prospectus, the information included or incorporated by reference in Items 1, 2, 6, 7 and 11 of the Company's Annual Report on Form 10-K, incorporated by reference in the Registration Statement and the Final Prospectus, and the information included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Final Prospectus or included in the Company's Quarterly Reports on Form 10-Q or Current Report on Form 8-K dated February 20, 2003, incorporated by reference in the Registration Statement and the Final Prospectus agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation. References to the Final Prospectus in this paragraph (f) include any supplement thereto at the date of the letter. (g) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Final Prospectus (exclusive of any supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (e) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Prospectus (exclusive of any supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or 18 delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof) and the Final Prospectus (exclusive of any supplement thereto). (h) At the Execution Time, the Company shall have furnished to the Representatives a letter substantially in the form of Exhibit A hereto from each officer and director of the Company addressed to the Representatives. (i) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing. The documents required to be delivered by this Section 6 shall be delivered at the office of Cleary, Gottlieb, Steen & Hamilton, counsel for the Underwriters, at One Liberty Plaza, New York, New York 10006, on the Closing Date. 7. Reimbursement of Underwriters' Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally through Salomon Smith Barney Inc. on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company 19 will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the indemnity from the Company to each Underwriter set forth in paragraph (a) of this Section 8, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company acknowledges that the statements set forth in the last paragraph of the cover page regarding delivery of the Securities and, under the heading "Underwriting" or "Plan of Distribution," (i) the list of underwriters and their respective participation in the sale of the Securities, (ii) the sentences related to concessions and reallowances and (iii) the paragraphs related to stabilization, syndicate covering transactions and penalty bids in the Basic Prospectus, any Preliminary Final Prospectus and the Final Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) of this Section 8 unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) of this Section 8. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (1) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (2) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (3) the indemnifying 20 party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (4) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities; provided, however, that in no case shall any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Final Prospectus. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 21 9. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Final Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder. 10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in the Company's Common Stock shall have been suspended by the Commission or the New York Stock Exchange, or trading in securities generally shall have been suspended or limited or minimum prices shall have been established on the New York Stock Exchange, (ii) a banking moratorium shall have been declared by either Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Prospectus (exclusive of any supplement thereto). 11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement. 12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Salomon Smith Barney Inc. General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney Inc., at 388 Greenwich Street, New York, New York 10013, Attention: General Counsel; or, if sent to the Company, will be mailed, delivered or 22 telefaxed to (713) 744-9648 and confirmed to it at HCC Insurance Holdings, Inc., 13403 Northwest Freeway, Houston, Texas 77040, attention of the General Counsel. 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder. 14. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. 15. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. 16. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 17. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated. "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Basic Prospectus" shall mean the prospectus referred to in Section 1(a) hereof contained in the Registration Statement at the Effective Date. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Effective Date" shall mean each date and time that the Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or become effective. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Final Prospectus" shall mean the prospectus supplement relating to the Securities that was first filed pursuant to Rule 424(b) after the Execution Time, together with the Basic Prospectus. "Material Adverse Effect" shall have the meaning set forth in Section 1(c) above. 23 "Preliminary Final Prospectus" shall mean any preliminary prospectus supplement to the Basic Prospectus which describes the Securities and the offering thereof and is used prior to filing of the Final Prospectus, together with the Basic Prospectus. "Registration Statement" shall mean the registration statement referred to in Section 1(a) hereof, including exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective), and, in the event any post-effective amendment thereto or any Rule 462(b) Registration Statement becomes effective prior to the Closing Date, shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A. "Rule 415," "Rule 424," "Rule 430A" and "Rule 462" refer to such rules under the Act. "Rule 430A Information" shall mean information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. "Rule 462(b) Registration Statement" shall mean a registration statement and any amendments thereto filed pursuant to Rule 462(b) relating to the offering covered by the registration statement referred to in Section 1(a) hereof. "Subsidiary" shall mean the subsidiaries of the Company that are "significant subsidiaries" as defined by Rule 1-02 of Regulation S-X. 24 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Underwriters. Very truly yours, HCC Insurance Holdings, Inc. By: /s/ EDWARD H. ELLIS, JR. ---------------------------- Name: Edward H. Ellis, Jr. Title: Executive Vice President and Chief Financial Officer The foregoing Agreement is hereby confirmed and accepted as of March 25, 2003 Salomon Smith Barney Inc. Raymond James & Associates, Inc. Wells Fargo Securities, LLC William Blair & Company, L.L.C. Advest, Inc. By: Salomon Smith Barney Inc. By: /s/ TIM DEVINE ------------------------ Name: Tim Devine Title: Director For themselves and the several Underwriters, named in Schedule I to the foregoing Agreement. 25 EX-4.2 4 h04438exv4w2.txt 2ND SUPPLEMENTAL INDENTURE DATED 3/28/03 EXHIBIT 4.2 HCC INSURANCE HOLDINGS, INC. as Issuer AND Wachovia Bank, National Association as Trustee --------------- SECOND SUPPLEMENTAL INDENTURE Dated as of March 28, 2003 --------------- Supplement to Indenture dated as of August 23, 2001 Table of Contents Page ---- ARTICLE 1 CREATION OF THE NOTES Section 1.01. Designation of Series.........................................1 Section 1.02. Form of Notes.................................................1 Section 1.03. Limit on Amount of Series.....................................1 Section 1.04. Interest......................................................2 Section 1.05. Certificate of Authentication.................................2 Section 1.06. No Sinking Fund...............................................2 Section 1.07. Issuance in Global Form.......................................2 Section 1.08. Discharge of Indenture; Defeasance............................2 Section 1.09. Other Terms Of Notes..........................................2 Section 1.10. Additional Definitions........................................3 ARTICLE 2 CONVERSION OF NOTES Section 2.01. Conversion Privilege..........................................4 Section 2.02. Exercise of Conversion Privilege..............................5 Section 2.03. Fractions Of Common Stock Shares..............................6 Section 2.04. Adjustment of Conversion Price................................6 Section 2.05. Reorganization of the Company................................14 Section 2.06. Notice of Adjustments of Conversion Price....................15 Section 2.07. Notice of Certain Corporate Action...........................16 Section 2.08. Company to Reserve Common Stock..............................16 Section 2.09. Taxes on Conversions.........................................17 Section 2.10. Covenant as to Common Stock..................................17 Section 2.11. Cancellation of Converted Securities.........................17 Section 2.12. Right of Holders to Convert..................................17 Section 2.13. Cash Conversion Option.......................................17 ARTICLE 3 REDEMPTION OF NOTES Section 3.01. Optional Redemption by the Company...........................18 Section 3.02. Applicability of Article.....................................18 ARTICLE 4 PURCHASE OF NOTES BY THE COMPANY AT THE OPTION OF THE HOLDERS Section 4.01. Purchase at Option of Holders on Specified Purchase Dates....19 Section 4.02. Purchase at Option of Holders Upon Change of Control ........22 Section 4.03. Certain Article 4 Definitions................................26 i ARTICLE 5 EVENTS OF DEFAULT Section 5.01. Additional Events Of Default.................................27 Section 5.02. Amendment....................................................28 ARTICLE 6 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 6.01. With Consent of Holders......................................28 ARTICLE 7 MISCELLANEOUS Section 7.01. Application of Second Supplemental Indenture.................29 Section 7.02. Effective Date...............................................29 Section 7.03. Counterparts.................................................29 ii SECOND SUPPLEMENTAL INDENTURE, dated as of March 28, 2003 by and between HCC INSURANCE HOLDINGS, INC., a Delaware corporation, as issuer (the "Company"), and Wachovia Bank, National Association, a national banking association duly organized and existing under the laws of the United States of America, as Trustee under the Indenture (as hereinafter defined) (the "Trustee"). RECITALS WHEREAS, the Company and the Trustee are parties to that certain Indenture dated as of August 23, 2001 (the "Indenture," all capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Indenture) providing for the issuance by the Company of securities from time to time; WHEREAS, the Company desires to issue a new series of Securities under the Indenture, and has duly authorized the creation and issuance of such Securities and the execution and delivery of this Second Supplemental Indenture to modify the Indenture and provide certain additional provisions as hereinafter described; WHEREAS, the Company and the Trustee deem it advisable to enter into this Second Supplemental Indenture for the purposes of establishing the terms of such series of Securities; WHEREAS, the execution and delivery of this Second Supplemental Indenture has been authorized by a Board Resolution; WHEREAS, concurrent with the execution hereof, the Company has delivered an Officers' Certificate and has caused its counsel to deliver to the Trustee an Opinion of Counsel; and WHEREAS, all things necessary to make this Second Supplemental Indenture a valid agreement of the Company in accordance with its terms have been done, and the execution and delivery thereof have been in all respects duly authorized by the parties hereto. NOW, THEREFORE, THIS INDENTURE WITNESSED: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Notes (as hereinafter defined), as follows: ARTICLE 1 CREATION OF THE NOTES Section 1.01. Designation of Series. Pursuant to the terms hereof and Section 301 of the Indenture, the Company hereby creates a series of Securities designated as the "1.30% Convertible Notes Due 2023" (the "Notes"), which Notes shall be deemed "Securities" for all purposes under the Indenture. Section 1.02. Form of Notes. The Notes shall be substantially in the form set forth in Exhibit A attached hereto, which is incorporated herein and made part hereof. The Stated Maturity of the principal amount of the Notes shall be April 1, 2023. SECTION 1.03. Limit on Amount of Series. The Notes shall not exceed U.S. $143,750,000 in aggregate principal amount, and may, upon the execution and delivery of this Second Supplemental Indenture or from time to time thereafter, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes upon a Company Order and delivery of an Officers' Certificate and Opinion of Counsel as contemplated by Section 303 of the Indenture. Section 1.04. Interest. The issue date for the Notes will be March 28, 2003. The Company shall pay interest on the aggregate principal amount of the Notes at 1.30% per annum from March 28, 2003 until April 1, 2023. The Company shall pay interest, semi-annually in arrears on April 1 and October 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day, commencing on October 1, 2003 (each an "Interest Payment Date") and such interest shall be paid to the Person in whose name the Note is registered at the close of business on the Regular Record Date immediately preceding the Interest Payment Date. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Interest shall be payable at the office of the Company maintained by the Company for such purposes in the Borough of Manhattan, City of New York, which shall initially be an office or agency of the Trustee and may, as the Company shall specify to the Paying Agent in writing by each Regular Record Date, be paid either (i) by check mailed to the address of the Person entitled thereto as it appears in the Security Register (provided that the Holder of Notes with an aggregate principal amount in excess of $2,000,000 shall, at the written election of such Holder, be paid by wire transfer in immediately available funds) or (ii) by wire transfer to an account maintained by such Person located in the United States; provided, however, that payments to the Depositary will be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. Maturity, conversion, purchase by the Company at the option of the Holder or redemption of a Note will cause interest to cease to accrue on such Note. The Company can not reissue a Note that has matured or been converted, purchased by the Company at the option of the Holder, redeemed or otherwise cancelled, except for registration of transfer, exchange or replacement of such Note. Section 1.05. Certificate of Authentication. The Trustee's certificate of authentication to be borne on the Notes shall be substantially as provided in the Form of Note attached hereto as Exhibit A. Section 1.06. No Sinking Fund. No sinking fund will be provided with respect to the Notes. Section 1.07. Issuance in Global Form. The Notes shall be issued as one or more Global Notes, representing the aggregate principal amount of the Notes, and shall be deposited with the Trustee as custodian for the Depositary. The Notes shall be registered in the name of Cede & Co., or other nominee of the Depositary. Section 1.08. Discharge of Indenture; Defeasance. The Notes shall not be subject to defeasance or covenant defeasance. Section 1.09. Other Terms Of Notes. The other terms of the Notes shall be as expressly set forth in Article 2, Article 3, Article 4, Article 5 and Article 6 hereof and Exhibit A hereto. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Second Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision. 2 Section 1.10. Additional Definitions. For purposes of this Second Supplemental Indenture, the following terms shall have the following definitions: "CASH SETTLEMENT AVERAGING PERIOD" has the meaning set forth in Section 2.13. "CASH SETTLEMENT NOTICE PERIOD" has the meaning set forth in Section 2.13. "CHANGE OF CONTROL" has the meaning set forth in Section 4.03(a). "CHANGE OF CONTROL DATE" has the meaning set forth in Section 4.02(a). "CHANGE OF CONTROL NOTICE" has the meaning set forth in Section 4.02(b). "CHANGE OF CONTROL OFFER" has the meaning set forth in Section 4.02 (a). "CHANGE OF CONTROL PURCHASE DATE" has the meaning set forth in Section 4.02(a). "CHANGE OF CONTROL PURCHASE NOTICE" has the meaning set forth in Section 4.02(c). "CHANGE OF CONTROL PURCHASE PRICE" has the meaning set forth in Section 4.02(a). "COMMON STOCK" means the Common Stock of the Company, par value $1.00 per share. "CONVERSION AGENT" means the conversion agent appointed by the Company pursuant to Section 3 of the Global Note. "CONVERSION OBLIGATION" has the meaning set forth in Section 2.13. "CONVERSION PRICE" means initially $33.97, subject to adjustment as provided in Article 2. "CONVERSION RETRACTION PERIOD" has the meaning set forth in Section 2.13. "DEPOSITARY" means The Depository Trust Company, 55 Water Street, New York, New York. "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. "GLOBAL NOTE" means a Security that evidences all or part of the Notes and bears the legend set forth in the Form of Note attached hereto as Exhibit A. "INTEREST PAYMENT DATE" has the meaning set forth in Section 1 of the Form of Note attached hereto as Exhibit A. "ISSUE DATE" of any Note means the date on which the Note was originally issued or deemed issued as set forth on the face of the Note. "MARKET PRICE" means the average of the Sale Prices of the Common Stock for the five Trading Days ending on the third Business Day prior to the applicable Purchase Date or Change of Control Purchase Date (if the third Business Day prior to the applicable Purchase Date or Change of Control Purchase Date is a Trading Day, or if not, then on the last Trading Day prior to such third Business Day), 3 appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such five Trading Day period and ending on such Purchase Date or Change of Control Purchase Date, as the case may be, of any event described in Section 2.04 or Section 2.05. "PURCHASE DATE" has the meaning set forth in Section 4.01(a). "PURCHASE NOTICE" has the meaning set forth in Section 4.01(a)(ii). "PURCHASE PRICE" has the meaning set forth in Section 4.01(a). "REGULAR RECORD DATE" means each of March 15 and September 15 of each year. "SALE PRICE" of the Common Stock on any date means the closing per share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and average ask prices) on such date as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System. To the extent that the trading of Common Stock regular way continues past 4:00 p.m. New York City time, the closing price of the Common Stock shall be deemed to refer to the price at the time that is then customary for determining the Trading Day's index levels for stocks traded on such national securities exchange or automated quotation system. "TRADING DAY" means a day on which the security, the closing price of which is being determined, (a) is not suspended from trading on any national or regional securities exchange or association or over-the-counter-market at the close of business and (b) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of such security. ARTICLE 2 CONVERSION OF NOTES Section 2.01. Conversion Privilege. Subject to and upon compliance with the provisions of this Article 2, at the option of the Holder thereof, any Note or any portion of the principal amount thereof which is $1,000 or an integral multiple of $1,000, and which has not previously been redeemed pursuant to Article 3 hereof or purchased pursuant to Article 4 hereof, may be converted into that number of fully paid and nonassessable shares of Common Stock (as such shares shall then be constituted) obtained by dividing the principal amount of the Note or portion thereof surrendered for conversion by the Conversion Price in effect at such time, by surrender of the Note to be so converted in whole or in part together with any required funds, in the manner provided in Section 2.02, at any time following the issuance of the Notes and prior to the close of business on April 1, 2023. In addition, the Company may, subject to Section 2.13, at the company's option, elect to pay all or a portion of the Conversion Obligation in cash. Holders may surrender Notes for conversion into Common Stock on any date within a calendar quarter if, as of the last day of the preceding calendar quarter, the Sale Price of the Common Stock for at least 20 consecutive Trading Days in a period of 30 consecutive Trading Days ending on the last Trading Day of the quarter is more than 130% of the Conversion Price on the last Trading Day of the quarter. The Conversion Agent will, on behalf of the Company, determine at the end of each quarter if the Notes are convertible and notify the Company and the Trustee and, upon receipt of such determination each quarter, 4 if the Notes are convertible, the Company shall issue a press release indicating that the Notes are convertible and publish such information on the Company's web site. In addition, even if the condition in the preceding paragraph has not been satisfied, a Holder may surrender for conversion a Note or portion of a Note: (i) if such Note or such portion thereof has been called for redemption pursuant to Article 3 hereof, until the close of business on the day that is two Business Days prior to the Redemption Date unless the Company defaults on payment of the Redemption Price in which case the conversion right shall terminate at the close of business on the date such default is cured and such payment is made; (ii) if the Company consolidates with or merges into another corporation, 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 2.05 hereof, 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; or (iii) during any period after December 1, 2003 in which (A) the credit rating assigned to the Notes by Standard & Poor's Rating Services is below BBB-, (B) the credit rating assigned to the Notes by such rating agency is suspended or withdrawn or (C) such rating agency is not then rating the Notes. A Note in respect of which a Holder has delivered a Purchase Notice or Change of Control Purchase Notice pursuant to Section 4.01 or Section 4.02 exercising the option of such Holder to require the Company to purchase such Note may be converted only if such notice of exercise is withdrawn in accordance with the terms of such Section, unless the Company defaults in the payment of the applicable Purchase Price or Change of Control Purchase Price, in which case such Note may be converted without such withdrawal until such default is cured and such payment is made. Section 2.02. Exercise of Conversion Privilege. In order to exercise the conversion privilege, the Holder of any Note to be converted shall surrender such Note, duly endorsed or assigned to the Company or in blank, at the Corporate Trust Office of the Trustee, located at 5847 San Felipe, Suite 1050, Houston, Texas 77057, Attn: Kevin M. Dobrava, accompanied by a duly signed and completed written notice to the Company at the Corporate Trust Office that the Holder elects to convert such Note. Notes that are surrendered for conversion during the period from the close of business on any Regular Record Date immediately preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except in the case of Notes or portions thereof which have been called for redemption or in respect of which a Purchase Notice or Change of Control Purchase Notice delivered by the Holder has not been withdrawn, the conversion rights of which would terminate during the period between such Regular Record Date and the close of business on such Interest Payment Date) be accompanied by payment in immediately available funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of Notes being surrendered for conversion; provided, however, that no such payment shall be required if there shall exist at the time of conversion a default in the payment of interest on the Notes. No payment or adjustment shall be made upon any conversion on account of any interest accrued on the Notes surrendered for conversion from the Interest Payment Date preceding the day of conversion. Rather, such amount shall be deemed to be paid in full to the Holder through delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares), or cash or a combination of cash and Common Stock, in exchange for the Note being converted pursuant to the provisions hereof, and the fair market value of such shares of Common 5 Stock (together with any such cash payment in lieu of fractional shares), or cash or a combination of cash and Common Stock, shall be treated as issued, to the extent thereof, first in exchange for accrued and unpaid interest and the balance, if any, of such fair market value of such Common Stock (and any such cash payment) shall be treated as issued in exchange for the principal amount of the Note being converted pursuant to the provisions hereof. In addition, no adjustment or payment shall be made upon any conversion on account of any dividends on the Common Stock issued upon conversion. In addition, Holders shall not be entitled to receive any dividends payable to holders of Common Stock as of any Record Date before the close of business on the conversion date. Notes shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Notes for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Notes as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and shall deliver to the Trustee at its Corporate Trust Office a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share thereof, as provided in Section 2.03 hereof, and the Trustee shall forward such certificate or certificates at the addresses set forth in the written notices sent to the Company by the Holders electing to convert their Notes. Section 2.03. Fractions Of Common Stock Shares. No fractional shares of Common Stock shall be issued upon conversion of the Notes. If more than one Note shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Notes so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any Note or Notes, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Sale Price on the Trading Day immediately preceding the date of conversion. Section 2.04. Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time as follows: (a) In case the Company shall, at any time or from time to time while any of the Notes are outstanding, pay a dividend or make a distribution in shares of Common Stock to all holders of its outstanding shares of Common Stock, then 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 Record Date (as hereinafter defined) 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 Record Date fixed for such determination. If any dividend or distribution of the type described in this Section 2.04(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. 6 (b) In case the Company shall, at any time or from time to time while any of the Notes are outstanding, subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, then 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 the Company shall, at any time or from time to time while any of the Notes are outstanding, combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then 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 the case may be, shall 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, at any time or from time to time while any of the Notes are outstanding, issue rights or warrants (other than any rights or warrants referred to in Section 2.04(d)) to all holders of its 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 Sale Price on the Business Day immediately preceding the date of the announcement of such issuance (treating the conversion price per share of the securities convertible into Common Stock as equal to (x) the sum of (i) the price for a unit of the security convertible into Common Stock and (ii) any additional consideration initially payable upon the conversion of such security into Common Stock divided by (y) the number of shares of Common Stock initially underlying such convertible security), then 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 date of announcement by a fraction: (i) the numerator of which shall be the number of shares of Common Stock outstanding on the close of business on the date of announcement, plus the number of shares or securities which the aggregate offering price of the total number of shares or securities so offered for subscription or purchase (or the aggregate conversion price of the convertible securities so offered) would purchase at such Sale Price of the Common Stock; and (ii) the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date of announcement, 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 date of announcement of such issuance. To the extent that shares of Common Stock (or securities convertible into shares of 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 shares of 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 the 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 shares of Common Stock at less than such Sale 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. 7 (d) (i) In case the Company shall, at any time or from time to time while any of the Notes are outstanding, by dividend or otherwise, distribute to all holders of its shares of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation and the Common Stock is not changed or exchanged), cash, shares of its capital stock (other than any dividends or distributions to which Section 2.04(a) applies), evidences of its indebtedness or other assets, including securities, but excluding (x) any rights or warrants referred to in Section 2.04(c), (y) 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 2.05 applies and (z) dividends and distributions paid exclusively in cash (such capital stock, evidence of its indebtedness, cash, other assets or securities being distributed hereinafter in this Section 2.04(d) called the "distributed assets"), then, in each such case, subject to Section 2.04(d)(iv), Section 2.04(d)(v), Section 2.04(d)(vi) and Section 2.04(d)(vii), 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 Record Date with respect to such distribution by a fraction: (A) the numerator of which shall be the Current Market Price of the Common Stock, less the Fair Market Value (as hereinafter defined) 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 Record Date) (determined as provided in Section 2.04(g)) on such date; and (B) the denominator of which shall be such Current Market Price. Such reduction shall become effective immediately prior to the opening of business on the day following the Record Date for such distribution. 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. (ii) If the Board of Directors determines the Fair Market Value of any distribution for purposes of this Section 2.04(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 pursuant to Section 2.04(g) to the extent possible, unless the Board of Directors determines in good faith that determining the Fair Market Value during the Reference Period would not be in the best interest of the Holders. (iii) In the event any such distribution consists of shares of capital stock of, or similar equity interests in, one or more of the Company's Subsidiaries (a "Spin-Off"), the Fair Market Value of the securities to be distributed shall equal the average of the closing sale prices of such securities on the principal securities market on which such securities are traded for the five consecutive Trading Days commencing on and including the sixth day of trading of those securities after the effectiveness of the Spin-Off, and the Current Market Price shall be measured for the same period. In the event, however, that an underwritten initial public offering of the securities in the Spin-Off occurs simultaneously with the Spin-Off, Fair Market Value of the securities distributed in the Spin-Off shall mean the initial public offering price of such securities and the Current Market Price shall mean the Sale Price for the Common Stock on the same Trading Day. 8 (iv) Rights or warrants distributed by the Company to all holders of its shares of Common Stock entitling them 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 ("Trigger Event"), (x) are deemed to be transferred with such shares of Common Stock, (y) are not exercisable and (z) are also issued in respect of future issuances of shares of Common Stock, shall be deemed not to have been distributed for purposes of this Section 2.04(d) (and no adjustment to the Conversion Price under this Section 2.04(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 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 2.04(d): (A) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder of shares of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of shares of Common Stock as of the date of such redemption or repurchase; and (B) 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. (v) For purposes of this Section 2.04(d) and Section 2.04(a), Section 2.04(b) and Section 2.04(c), any dividend or distribution to which this Section 2.04(d) is applicable that also includes (i) shares of Common Stock, (ii) a subdivision or combination of shares of Common Stock to which Section 2.04(b) applies or (iii) rights or warrants to subscribe for or purchase shares of Common Stock to which Section 2.04(c) applies (or any combination thereof), shall be deemed instead to be: (A) 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 Section 2.04(a), Section 2.04(b) and Section 2.04(c) apply, respectively (and any Conversion Price reduction required by this Section 2.04(d) with respect to such dividend or distribution shall then be made), immediately followed by (B) 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 Section 2.04(a), Section 2.04(b) and Section 2.04(c) with respect to such dividend or distribution shall then be made), except: 9 (I) the Record Date of such dividend or distribution shall be substituted as (i) "the date fixed for the determination of stockholders entitled to receive such dividend or other distribution," and "Record Date fixed for such determination" within the meaning of Section 2.04(a), (ii) "the day upon which such subdivision becomes effective" and "the day upon which such combination becomes effective" within the meaning of Section 2.04(b), and (iii) as "the date fixed for the determination of stockholders entitled to receive such rights or warrants" within the meaning of Section 2.04(c); and (II) 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 2.04(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. (vi) In the event of any distribution referred to in this Section 2.04(d) in which (1) the Fair Market Value (as determined by the Board of Directors) of such distribution applicable to one share of Common Stock (determined as provided above) equals or exceeds the average of the Sale Prices of the Common Stock over the ten consecutive Trading Day period ending on the Record Date for such distribution or (2) the average of the Sale Prices of the Common Stock over the ten consecutive Trading Day period ending on the Record Date for such distribution exceeds the Fair Market Value of such distribution by less than $1.00, then, in each such case, in lieu of an adjustment to the Conversion Price, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Security, in addition to shares of Common Stock, the kind and amount of such distribution such Holder would have received had such Holder converted such Security immediately prior to the Record Date for determining the shareholders entitled to receive the distribution. (vii) In the event of any distribution described in Section 2.04(d), where the Fair Market Value of such distribution per share of Common Stock (as determined by the Board of Directors) exceeds 10% of the Sale Price of a share of Common Stock on the Business Day immediately preceding the declaration date for such distribution, or in the event of any distribution referred to in Section 2.04(c), then, if the Notes are otherwise convertible pursuant to this Article 2, the Company will be required to give notice to the Holders of Securities at least 20 days prior to the Ex-Dividend Time for the distribution and, upon the giving of notice, the Notes 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 the Company announces that such distribution will not take place. No adjustment to the Conversion Price or the ability of a Holder of a Note to convert will be made if the Holder will otherwise participate in such distribution without conversion. (e) In case the Company shall, at any time or from time to time while any of the Notes are outstanding, by dividend or otherwise, distribute to all holders of its shares of 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 2.05 applies or as part of a distribution referred to in Section 2.04(d)), in an aggregate amount that, combined together with: (i) the aggregate amount of any other such distributions to all holders of shares of Common Stock made exclusively in cash within the 12 months preceding the date of payment of 10 such distribution, and in respect of which no adjustment pursuant to this Section 2.04(e) has been made; and (ii) the aggregate amount of any cash, plus the Fair Market Value (as determined by the Board of Directors) of consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for all or any portion of the shares of Common Stock concluded within the 12 months preceding the date of such distribution, and in respect of which no adjustment pursuant to Section 2.04(f) has been made; exceeds 10% of the product of the Current Market Price of the Common Stock on the Record Date with respect to such distribution, times the number of shares of Common Stock outstanding on such date, 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 Record Date by a fraction: (iii) the numerator of which shall be equal to the Current Market Price on the Record Date, less an amount equal to the quotient of (x) the excess of such combined amount over such 10% and (y) the number of shares of Common Stock outstanding on the Record Date; and (iv) the denominator of which shall be equal to the Current Market Price on such date. However, in the event that the then Fair Market Value (as so determined) of the portion of cash and other securities, if any, so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the 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 in excess of such 10% such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such 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 shares of 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 shares tendered) of an aggregate consideration having a Fair Market Value (as determined by the Board of Directors) that combined together with: (i) the aggregate amount of the cash, plus the Fair Market Value (as determined by the Board of Directors), as of the expiration of such tender offer, of consideration payable in respect of any other tender offers, by the Company or any of its Subsidiaries for all or any portion of the shares of 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 2.04(f) has been made; and (ii) the aggregate amount of any distributions to all holders of shares of 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 2.04(e) has been made; exceeds 10% of the product of the Current Market Price of the Common Stock as of the last time (the "Expiration Time") tenders could have been made pursuant to such tender offer (as it may be amended), times the number of shares of Common Stock outstanding (including any tendered shares) on the 11 Expiration Time (such excess, the "Excess Amount"), 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 the close of business on the date of the Expiration Time by a fraction: (iii) the numerator of which shall be the (x) the product of (i) the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time and (ii) the Current Market Price of the Common Stock at the Expiration Time, less (y) the Excess Amount; and (iv) the denominator shall be the product of the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time and the Current Market Price of the Common Stock at 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 or a portion of such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such (or such portion of the) tender offer had not been made. If the application of this Section 2.04(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 2.04(f). (g) For purposes of this Article 2, the following terms shall have the meanings indicated: "CURRENT MARKET PRICE" on any date means the average of the daily Sale Prices per share of Common Stock for the ten consecutive Trading Days immediately prior to such date; provided, however, that if: (i) 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 2.04(a), Section 2.04(b), Section 2.04(c), Section 2.04(d), Section 2.04(e) or Section 2.04(f) occurs during such ten consecutive Trading Days, the Sale Price for each Trading Day prior to the "ex" date for such other event shall be adjusted by dividing such Sale Price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event; (ii) 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 2.04(a), Section 2.04(b), Section 2.04(c), Section 2.04(d), Section 2.04(e) or Section 2.04(f) occurs on or after the "ex" date for the issuance or distribution requiring such computation and prior to the day in question, the Sale Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by dividing such Sale 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 (iii) 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 Sale 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 2.04(d), Section 2.04(e) or Section 2.04(f)) of the evidences of indebtedness, shares of 12 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 2.04(f), 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 2.04(a), Section 2.04(b), Section 2.04(c), Section 2.04(d), Section 2.04(e) or Section 2.04(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 Sale Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by dividing such Sale 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: (iv) with respect to any issuance or distribution, means the first date on which the shares of Common Stock trade regular way on the relevant exchange or in the relevant market from which the Sale Price was obtained without the right to receive such issuance or distribution; (v) 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 (vi) with respect to any tender or exchange offer, means the first date on which the shares of Common Stock trade 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 2.04, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 2.04 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors. "FAIR MARKET VALUE" shall mean the amount which a willing buyer would pay a willing seller in an arm's length transaction (as determined by the Board of Directors, whose determination shall be conclusive). "RECORD DATE" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of shares of Common Stock have the right to receive any cash, securities or other property or in which the shares of 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). (h) The Company shall be entitled to make such additional reductions in the Conversion Price, in addition to those required by Section 2.04(a), Section 2.04(b), Section 2.04(c), Section 2.04(d), Section 2.04(e) or Section 2.04(f), as shall be necessary in order that any dividend or distribution of Common Stock, any subdivision, reclassification or combination of shares of Common Stock or any issuance of rights or warrants referred to above shall not be taxable to the holders of Common Stock for United States Federal income tax purposes. (i) To the extent and in the manner permitted by applicable law, the Company may from time to time reduce the Conversion Price by any amount for any period of time. If the Conversion Price is reduced, it must be reduced the same amount for all Holders of Notes for the same period of time. Whenever the Conversion Price is reduced, the Company shall mail to Holders and file with the Trustee 13 and the Conversion Agent a notice of such reduction and shall issue a press release in a commercially reasonable manner describing such reduction. The Company shall mail the notice at least 20 Business Days before the date the reduced Conversion Price takes effect. The notice shall state the reduced Conversion Price, the period it will be in effect and the material tax and legal ramifications of the reduced Conversion Price and such reduction shall be irrevocable during the period designated for such reduction in such notice. (j) All calculations under this Section 2.04 shall be made to the nearest cent or ten-thousandth of a share, with one-half cent and 0.00005 of a share, respectively, being rounded upward. Notwithstanding any other provision of this Section 2.04, the Company shall not be required to make any adjustment of the Conversion Price unless such adjustment would require an increase or decrease of at least 1% of such price. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% in such price. Any adjustments under this Section 2.04 shall be made successively whenever an event requiring such an adjustment occurs. (k) In any case in which this Section 2.04 shall require that any adjustment be made effective as of or retroactively immediately following a Record Date, the Company may elect to defer (but only for five Trading Days following the filing of the statement referred to in Section 2.06) issuing to the Holder of any Securities converted after such Record Date the shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the Conversion Price prior to adjustment; provided, however, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (l) In the event that at any time, as a result of an adjustment made pursuant to this Section 2.04, the Holder of any Notes thereafter surrendered for conversion shall become entitled to receive any shares of stock of the Company other than shares of Common Stock into which the Securities originally were convertible, the Conversion Price of such other shares so receivable upon conversion of any such Security shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in subparagraphs (a) through (k) of this Section 2.04, and the provisions of Section 2.01, Section 2.02, Section 2.03 and Section 2.05 through Section 2.12 with respect to the Common Stock shall apply on like or similar terms to any such other shares and the determination of the Board of Directors as to any such adjustment shall be conclusive. (m) No adjustment shall be made pursuant to this Section 2.04(i) if (i) the effect thereof would be to reduce the Conversion Price below the par value (if any) of the Common Stock or (ii) if the Holders of the Notes may participate in the transaction that would otherwise give rise to an adjustment pursuant to this Section 2.04. SECTION 2.05. Reorganization of the Company. If any of the following events occurs, namely: (1) 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); (2) any merger, consolidation, statutory share exchange or combination of the Company with another corporation as a result of which holders of Common Stock shall be 14 entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock; or (3) any sale or conveyance of the properties and assets of the Company as, or substantially as, an entirety to any other corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock; the Company or the successor or purchasing corporation, 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 the Notes 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 2.05, 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 2. 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 corporation other than the successor or purchasing corporation, 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 corporation and shall contain such additional provisions to protect the interests of the Holders of the Notes as the Board of Directors shall reasonably consider necessary by reason of the foregoing. 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 Security Register of the Security 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 2.05 shall similarly apply to successive reclassifications, mergers, consolidations, statutory share exchanges, combinations, sales and conveyances. If this Section 2.05 applies to any event or occurrence, Section 2.04 shall not apply so long as such non-application is fair to the Holders. Section 2.06. Notice of Adjustments of Conversion Price. Whenever the Conversion Price is adjusted as herein provided: (a) the Company shall compute the adjusted Conversion Price in accordance with Section 2.04 hereof and shall prepare an Officers' Certificate, one of the signatories of which shall be the Treasurer or Chief Financial Officer of the Company, setting forth the adjusted Conversion Price (certified by the Company's independent public accountants or other certified public accountant) and 15 showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 2.03 hereof; and (b) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall forthwith be required, and as soon as practicable after it is required, such notice shall be given by the Company to the Trustee and all Holders in the manner provided for in Sections 106 and 107 of the Indenture. The Trustee shall not be deemed to have notice of any change in the Conversion Price unless and until it receives the Officers' Certificate provided for in the foregoing clause (a) setting forth such change. In the event the independent public accountant, called upon to certify the Officers' Certificate containing the adjusted Conversion Price, requires the Trustee to agree to the calculations performed in deriving the adjusted Conversion Price, the Trustee shall so agree only if directed in writing by the Company to do so; it being understood and agreed that the Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Company and the Trustee makes no independent inquiry as to, and shall have no obligation or liability in respect of, the validity or correctness of such calculations. SECTION 2.07. Notice of Certain Corporate Action. In case: (a) the Company shall declare a dividend or make any other distribution that would require any adjustment pursuant to Section 2.04 hereof; or (b) 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 any other rights; or (c) of any reclassification of the Common Stock of the Company, or any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or any action by the Company that would require a supplemental indenture pursuant to Section 2.05; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company, then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 2.03 hereof, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the register for the Securities, at least 20 days prior to the applicable record or effective date hereinafter specified, a notice (which notice shall also be sent by release to Reuters Economic Services and Bloomberg Business News) stating (x) 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 Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, share exchange, sale, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders 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, consolidation, merger, share exchange, sale, conveyance, 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 described in clauses (a) through (d) of this Section 2.07. If at the time the Trustee shall not be the conversion agent, a copy of such notice shall also forthwith be filed by the Company with the Trustee. The Company shall cause to be filed at the Corporate Trust Office and each office or agency maintained for the purpose of conversion of Notes pursuant to Section 305 of the Indenture, and shall cause to be provided to all Holders in accordance with Section 106 of the Indenture, notice of any tender offer by the Company or any Subsidiary for all or any portion of the Common Stock at or about the time that such notice of tender offer is provided to the public generally. SECTION 2.08. 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 Notes, the full number of shares of Common Stock then issuable upon the conversion of all outstanding Notes. 16 SECTION 2.09. Taxes on Conversions. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Notes pursuant hereto. The Company shall not, however, be required to pay any tax 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 Note or Notes to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. SECTION 2.10. Covenant as to Common Stock. The Company covenants that all shares of Common Stock which may be issued upon conversion of Notes will upon issue be fully paid and nonassessable and, except as provided in Section 2.09 hereof, the Company will pay all taxes, liens and charges with respect to the issue thereof. The Company will endeavor promptly to comply with all Federal and state securities laws regulating the issuance and delivery of shares of Common Stock upon conversion of Notes, if any, and will use its best efforts to list or cause to have quoted all such shares of Common Stock on each United States national securities exchange or over-the-counter or other domestic market on which the Common Stock is then listed or quoted. SECTIO 2.11. Cancellation of Converted Securities. All Notes delivered for conversion shall be delivered to the Trustee to be canceled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 309 of the Indenture. SECTION 2.12. Right of Holders to Convert. The limitations set forth in Section 507 of the Indenture shall not apply to the right of a Holder to bring a suit for the enforcement of such Holder's right to convert Notes pursuant to this Article 2. SECTION 2.13. Cash Conversion Option. If a Holder elects to convert all or any portion of a Note into shares of Common Stock as set forth in Sections 2.01 and 2.02, the Company may choose to satisfy all or any portion of its conversion obligation (the "Conversion Obligation") in cash. If the Company elects to satisfy all or any portion of its Conversion Obligation in cash at any time other than following the delivery of a notice of redemption or within 20 days of the Stated Maturity, the Company will notify such Holder through the Trustee of the dollar amount to be satisfied in cash (which must be expressed either as 100% of the Conversion Obligation or as a fixed dollar amount) at any time on or before the date that is two Business Days following receipt of written notice of conversion as specified in Sections 2.01 and 2.02 (such period, the "Cash Settlement Notice Period"). If the Company elects to pay cash for any portion of the shares otherwise issuable to the Holder, the Holder may retract the conversion notice at any time during the two Business Day period beginning on the day after the final day of the Cash Settlement Notice Period (a "Conversion Retraction Period"); no such retraction can be made (and a conversion notice shall be irrevocable) if the Company does not elect to deliver cash in lieu of shares (other than cash in lieu of fractional shares). If the conversion notice has not been retracted, then settlement (in cash and/or shares) will occur on the Business Day following the final day of the 10 Trading Day period beginning on the day after the final day of the Conversion Retraction Period (the "Cash Settlement Averaging Period"). Cash to be paid in the event of the election to pay all or a portion of the Conversion Obligation in cash will be the product obtained by multiplying (x) the number of shares the Holders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be of the Conversion Obligation in cash and (y) the Market Price of a share of Common Stock. 17 Notwithstanding the foregoing, a Security in respect of which a Holder has delivered a Purchase Notice or Change of Control Purchase Notice exercising such Holder's option to require the Company to repurchase such Security may be converted as described in Sections 2.01 and 2.02 or this Section 2.13 only if such notice of exercise is withdrawn in accordance with Sections 4.01 and 4.02 hereof. If a Holder elects to convert all or any portion of a Note into shares of Common Stock after the Company has delivered a notice of redemption or within 20 days of the Stated Maturity, the Company may choose to satisfy all or any portion of the Conversion Obligation in cash provided the Company notifies such Holder through the Trustee of the dollar amount to be satisfied in cash (which must be expressed either as 100% of the Conversion Obligation or as a fixed dollar amount) at any time on or before the date that is 20 days prior to Stated Maturity or Redemption Date. Cash settlement amounts will be computed in the same manner as set forth above in this Section 2.13(a). ARTICLE 3 REDEMPTION OF NOTES Pursuant to Section 301(8) of the Indenture, so long as any of the Notes are outstanding, the following provisions shall be applicable to the Notes: SECTION 3.01. Optional Redemption by the Company. At any time on or after April 4, 2009, the Notes may be redeemed at the option of the Company for cash, in whole or in part, upon notice as set forth in Section 1104 of the Indenture, at a redemption price equal to the principal amount of the Notes plus accrued and unpaid interest on the Notes to (but excluding) the date of redemption (the "Redemption Price". The date of any such redemption is known as the "Redemption Date". Notes called for redemption may be surrendered for conversion from the date of notice of the redemption until the close of business on the Redemption Date. If the Company redeems fewer than all of the outstanding Notes, the Trustee will select the Notes to be redeemed in accordance with the provisions of Section 1103 of the Indenture. If the Trustee selects a portion of a Holder's Notes for partial redemption and the Holder converts a portion of the same Notes, the converted portion will be deemed to be from the portion selected for redemption. The Notes will be redeemed in integral multiples of $1,000 principal amount. In no event will any Note be redeemable before April 4, 2009. The Company may not give notice of any redemption if the Company has defaulted in payment of interest and the default is continuing. SECTION 3.02. Applicability of Article. Redemption of the Notes at the election of the Company or otherwise, as permitted or required by any provision of the Notes or this Second Supplemental Indenture, shall be made in accordance with such provision, Article XI of the Indenture and this Article 3. 18 ARTICLE 4 PURCHASE OF NOTES BY THE COMPANY AT THE OPTION OF THE HOLDERS So long as any of the Notes are outstanding, the following provisions shall be applicable to the Notes: SECTION 4.01. Purchase at Option of Holders on Specified Purchase Dates. (a) At the option of the Holder thereof, Notes shall be purchased by the Company on April 1, 2009, April 1, 2014 and April 1, 2019 (each, a "Purchase Date") at a purchase price equal to the principal amount of the Notes plus accrued and unpaid interest on the Notes to (but excluding) the applicable Purchase Date (the "Purchase Price"). Purchases of Notes hereunder shall be made upon: (i) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Purchase Notice") at any time from the opening of business on the date that is 20 Business Days prior to the applicable Purchase Date until the close of business on the applicable Purchase Date; and (ii) delivery of the Notes to be purchased to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid only if the Notes so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice, as determined by the Company. (b) In connection with any purchase of Notes, the Company shall mail a written notice to each Holder at their addresses shown in the Security Register of the Security Registrar (and to beneficial owners as required by applicable law) on a date not less than 20 Business Days prior to each Purchase Date setting forth the following: (i) whether the Company will pay the Purchase Price of Notes in cash or Common Stock or any combination thereof, specifying the percentages of each; (ii) if the Company elects to pay in Common Stock, the method of calculating the Market Price of the Common Stock; and (iii) the procedures that Holders must follow to require the Company to purchase their Notes. (c) The Purchase Notice given by each Holder electing to have the Company purchase some or all of the Notes held by such Holder must state: (i) the certificate numbers of the Holder's Notes to be delivered for purchase (or, if the Notes are not certificated, such other identification necessary to comply with the procedures of the Depositary); (ii) the portion of the principal amount of Notes to be purchased, which must be $1,000 or an integral multiple of $1,000; 19 (iii) that the Notes are to be purchased by the Company pursuant to the terms and conditions specified in Article 4; and (iv) in the event the Company elects, pursuant to the notice referred to in Section 4.01(b) to pay the Purchase Price in Common Stock, in whole or in part, but the Purchase Price is ultimately to be paid to the Holder entirely in cash because any of the conditions to payment of the Purchase Price or portion of the Purchase Price in Common Stock is not satisfied prior to the close of business on the Purchase Date, as described below, whether the Holder elects: (A) to withdraw the Purchase Notice as to some or all of the Notes to which it relates, or (B) to receive cash in respect of the entire Purchase Price for all Notes or portions of Notes subject to such Purchase Notice. (d) If a Holder, in such Holder's Purchase Notice and in any written notice of withdrawal delivered by such Holder, fails to indicate such Holder's choice with respect to the election set forth in Section 4.01(c)(iv) above, such Holder shall be deemed to have elected to receive cash in respect of the entire Purchase Price for all Notes subject to such Purchase Notice in the circumstances set forth in such Section 4.01(c)(iv). (e) Notwithstanding anything herein to the contrary, any Holder delivering a Purchase Notice to the Paying Agent shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent. The notice will specify: (i) the principal amount of Notes being withdrawn; (ii) the certificate numbers of the Notes being withdrawn (or, if the Notes are not certificated, such withdrawal notice must comply with the procedures of the Depositary); and (iii) the principal amount, if any, of the Notes that remain subject to the Purchase Notice (which number must be $1,000 or an integral multiple of $1,000). (f) The Company may, subject to Section 4.01(h), at the Company's option, elect to pay all or a portion of the Purchase Price of the Notes in shares of Common Stock. The number of shares of Common Stock to be delivered in the event of such election shall equal the quotient obtained by dividing (x) the amount of cash to which the Holders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Notes in cash by (y) the Market Price of a share of Common Stock. The Company will not issue a fractional share of Common Stock in payment of the Purchase Price. Instead the Company will pay cash in lieu of fractional shares in an amount equal to the same fraction of the Market Price per share of Common Stock. It is understood that if a Holder elects to have more than one Note purchased, the number of shares of Common Stock shall be based on the aggregate principal amount of Notes to be purchased. (g) Upon determination of the actual number of shares of Common Stock to be issued for each $1,000 principal amount of Notes pursuant to this Section 4.01, the Company will publish such information on its web site on the World Wide Web or through such other public medium as the Company may use at such time. 20 (h) The Company's right to exercise its election to purchase Notes through the issuance of Common Stock pursuant to this Section 4.01 shall be conditioned upon: (i) prior to issuance of the Common Stock, listing such Common Stock on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or its reasonable equivalent in the United States; (ii) the Company having given notice pursuant to Section 4.01(b) of its election to purchase all or a specified percentage of the Notes with Common Stock as provided herein; (iii) the registration of such Common Stock under the Securities Act, and the Exchange Act, in each case, if required; (iv) any necessary qualification or registration under applicable securities laws or the availability of an exemption from such qualification and registration; and (v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture and (B) the Common Stock to be issued by the Company in payment of the Purchase Price in respect of Notes has been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Purchase Price in respect of the Notes, will be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights, and, in the case of such Officers' Certificate, stating that the conditions (i) and (ii) above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that the conditions (iii) and (iv) above has been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 principal amount of Notes and the Sale Price of a share of Common Stock on each Trading Day during the period commencing on the first Trading Day of the period during which the Market Price is calculated and ending on April 1, 2009, April 1, 2014 and April 1, 2019, as the case may be. The Company may pay the Purchase Price (or any portion thereof) in Common Stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation in the United States. If the foregoing conditions of this Section 4.01(h) are not satisfied with respect to a Holder or Holders prior to the close of business on the Purchase Date whether or not the Company has elected to purchase the Notes through the issuance of Common Stock, the Company shall pay the entire Purchase Price of the Notes of such Holder or Holders in cash. Once the conditions described in this Section 4.01(h) have been satisfied and the Company has given Holders notice pursuant to Section 4.01(b) with respect to its election, the Company may not change the form or components or percentages of components of consideration to be paid for the Notes. (i) The Company shall to the extent applicable: (i) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable and (ii) file the related Schedule TO (or any successor schedule, form or report) or any other required schedule under the Exchange Act; and (iii) otherwise comply with all applicable securities laws. (j) The Company shall (i) accept for payment Notes or portions thereof validly tendered pursuant to the Purchase Notice, (ii) deposit with the Paying Agent (no later than 10:00 A.M. New York 21 City time on the Purchase Date) money, in immediately available funds, or fully paid and nonassessable shares of Common Stock, or any combination thereof in accordance with the Company's election under Section 4.01(b) hereof, sufficient to pay the Purchase Price of all Notes or portions thereof so tendered and accepted and (iii) deliver, or direct the Paying Agent to deliver, to the Trustee the Notes so accepted together with an Officers' Certificate setting forth the Notes or portions thereof tendered to and accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to the Holders of Notes so accepted payment in an amount equal to the portion of the Purchase Price to be paid in cash, and deliver shares of Common Stock sufficient to cover the portion of the Purchase Price to be paid in Common Stock, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion to the Notes surrendered; provided that each such new Note shall be issued in an original principal amount in denominations of $1,000 and integral multiples thereof. Any Notes not validly tendered and not accepted by the Company shall be promptly mailed or delivered by the Company to the Holder thereof. (k) With respect to each Note for which a Purchase Notice has been given, if the Paying Agent holds money sufficient to pay the Purchase Price on the Business Day following the applicable Purchase Date, in accordance with the terms of the Indenture, then immediately after the Purchase Date interest on such Note will cease to accrue, whether or not such Note is delivered to the Paying Agent. Thereafter, all other rights of the Holder shall terminate, other than the right to receive the Purchase Price upon delivery of such Note. (l) There shall be no purchase of any Notes pursuant to this Section 4.01 if there has occurred and is continuing an Event of Default (other than a default in the payment of the Purchase Price). The Paying Agent will promptly return to the respective Holders thereof any Notes: (i) with respect to which a Purchase Notice has been withdrawn in compliance with the Indenture or (ii) held by it during the continuance of an Event of Default (other than a default in the payment of the Purchase Price) in which case, upon such return, the Purchase Notice with respect thereto shall be deemed to have been withdrawn. Section 4.02. Purchase at Option of Holders Upon Change of Control . (a) Upon the occurrence of a Change of Control on or prior to April 1, 2009 (the date of such occurrence, the "Change of Control Date"), the Company shall notify the Holders of the Notes in writing of such occurrence in accordance with paragraph (b) below, and shall make an offer to purchase (a "Change of Control Offer"), and shall purchase, on a Business Day (a "Change of Control Purchase Date") that is 40 Business Days following the Change of Control Date all of the then outstanding Notes validly tendered at a purchase price equal to the principal amount of the Notes plus accrued and unpaid interest on the Notes to (but excluding) the Change of Control Purchase Date (the "Change of Control Purchase Price"). (b) Notice of a Change of Control Offer (a "Change of Control Notice") shall be sent, by first-class mail, postage prepaid, by the Company within 15 Business Days after the Change of Control Date to the Holders of the Notes at their addresses shown in the Security Register of the Security Registrar (and to beneficial owners as required by applicable law) with a copy to the Trustee and the Paying Agent (and shall also be given by release made to Reuters Economic Services and Bloomberg Business News). The Change of Control Offer shall remain open from the time of delivery of the Change of Control Notice for at least 15 Business Days and until 5:00 p.m., New York City time, on the Business Day prior to the Change of Control Purchase Date. The Change of Control Notice, which shall govern the terms of the Change of Control Offer, shall include such disclosures as are required by law and shall state: (i) briefly, the events causing a Change of Control and Change of Control Date; 22 (ii) the date by which the Change of Control Purchase Notice pursuant to this Section 4.02 must be delivered to the Paying Agent; (iii) the Change of Control Purchase Price; (iv) the Change of Control Purchase Date; (v) the name and address of the Paying Agent and the Conversion Agent; (vi) the Conversion Price and any adjustments thereto; (vii) that Notes as to which a Change of Control Purchase Notice has been given may be converted if they are otherwise convertible pursuant to Article 2 hereof only if the Change of Control Purchase Notice has been withdrawn in accordance with the terms of this Section 4.02; (viii) whether the Company will pay the Change of Control Purchase Price in cash or Common Stock or any combination thereof, specifying the percentages of each; (ix) if the Company elects to pay in Common Stock, the method of calculating the Market Price of the Common Stock; (x) that Notes must be surrendered to the Paying Agent to collect payment; (xi) that the Change of Control Purchase Price for any Note as to which a Change of Control Purchase Notice has been duly given and not withdrawn will be paid promptly following the later of the Change of Control Purchase Date and the time of surrender of such Note as described in Section 4.02(h); (xii) briefly, the procedures the Holder must follow to exercise rights under this Section 4.02(b); (xiii) the procedures for withdrawing a Change of Control Notice as set forth in Section 4.02(d) hereof; (xiv) that, unless the Company defaults in making payment of such Change of Control Purchase Price, interest, if any, on Notes surrendered for purchase by the Company will cease to accrue on and after the Change of Control Purchase Date; and (xv) the CUSIP number of the Notes. (c) To exercise a purchase right pursuant to this Section 4.02, a Holder shall deliver to the Paying Agent a written notice (a "Change of Control Purchase Notice") of such Holder's exercise of such right, in accordance with the terms and conditions set forth in the Change of Control Notice. The notice (which must be delivered to the Paying Agent prior to the close of business on the Change of Control Purchase Date) shall state: (i) the certificate numbers of the Holder's Notes to be delivered for purchase (or, if the Notes are not certificated, such other identification necessary to comply with the procedures of the Depositary); (ii) the portion of the principal amount of Notes to be purchased, which portion must be $1,000 or an integral multiple thereof; and 23 (iii) that such Notes shall be purchased pursuant to the terms and conditions specified in Article 4. Upon receipt by the Paying Agent of a Change of Control Purchase Notice, the Holder of the Note in respect of which such Change of Control Purchase Notice was given shall (unless such Change of Control Purchase Notice is withdrawn) thereafter be entitled to receive solely the Change of Control Purchase Price with respect to such Note. (d) Notwithstanding anything herein to the contrary, a Holder shall have the right to withdraw any Change of Control Purchase Notice at any time prior to the close of business on the Change of Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent. The notice will specify: (i) the principal amount of Notes being withdrawn; (ii) the certificate numbers of the Notes being withdrawn (or, if the Notes are not certificated, such withdrawal notice must comply with the procedures of the Depositary); and (iii) the principal amount, if any, of the Notes that remain subject to the Purchase Notice (which number must be $1000 or an integral multiple of $1,000). Notes in respect of which a Change of Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock on or after the date of the delivery of such Change of Control Purchase Notice, unless such Change of Control Purchase Notice has first been validly withdrawn as set forth in the foregoing paragraph, unless the Company has defaulted in the payment of the Change of Control Purchase Price. (e) The Company may, subject to Section 4.02(g), at the Company's option, elect to pay all or a portion of the Change of Control Purchase Price of the Notes in shares of Common Stock. The number of shares of Common Stock to be delivered in the event of such election shall equal the quotient obtained by dividing (x) the amount of cash to which the Holders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Change of Control Purchase Price of such Notes in cash by (y) the Market Price of a share of Common Stock. The Company will not issue a fractional share of Common Stock in payment of the Purchase Price. Instead the Company will pay cash in lieu of fractional shares in an amount equal to the same fraction of the Market Price per share of Common Stock. It is understood that if a Holder elects to have more than one Note purchased, the number of shares of Common Stock shall be based on the aggregate principal amount of Notes to be purchased. (f) Upon determination of the actual number of shares of Common Stock to be issued for each $1,000 principal amount of Notes pursuant to this Section 4.02, the Company will publish such information on its web site on the World Wide Web or through such other public medium as the Company may use at such time. (g) The Company's right to exercise its election to purchase Notes through the issuance of Common Stock pursuant to this Section 4.02 shall be conditioned upon: (i) prior to issuance of the Common Stock, listing such Common Stock on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, on the 24 National Association of Securities Dealers Automated Quotation System or its reasonable equivalent in the United States; (ii) the Company having given notice pursuant to Section 4.02(b) of its election to purchase all or a specified percentage of the Notes with Common Stock as provided herein; (iii) the registration of such Common Stock under the Securities Act, and the Exchange Act, in each case, if required; (iv) any necessary qualification or registration under applicable securities laws or the availability of an exemption from such qualification and registration; and (v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture and (B) the Common Stock to be issued by the Company in payment of the Change of Control Purchase Price in respect of Notes has been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Change of Control Purchase Price in respect of the Notes, will be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights, and, in the case of such Officers' Certificate, stating that the conditions (i) and (ii) above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that the conditions (iii) and (iv) above has been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 principal amount of Notes and the Sale Price of a share of Common Stock on each Trading Day during the period commencing on the first Trading Day of the period during which the Market Price is calculated and ending on the Change of Control Purchase Date. The Company may pay the Change of Control Purchase Price (or any portion thereof) in Common Stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation in the United States. If the foregoing conditions of this Section 4.02 (g) are not satisfied with respect to a Holder or Holders prior to the close of business on the Change of Control Purchase Date whether or not the Company has elected to purchase the Notes through the issuance of Common Stock, the Company shall pay the entire Change of Control Purchase Price of the Notes of such Holder or Holders in cash. Once the conditions described in this Section 4.02(g)have been satisfied and the Company has given Holders notice pursuant to Section 4.02(b) with respect to its election, the Company may not change the form or components or percentages of components of consideration to be paid for the Notes. (h) On the Change of Control Purchase Date, the Company shall (i) accept for payment Notes or portions thereof validly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent (no later than 10:00 A.M. New York City time on the Change of Control Purchase Date) money, in immediately available funds or fully paid nonassessable shares of Common Stock, or any combination thereof, sufficient to pay the Change of Control Purchase Price of all Notes or portions thereof so tendered and accepted, (iii) deliver, or direct the Paying Agent to deliver, to the Trustee the Notes so accepted, and (iv) deliver to the Trustee an Officers' Certificate setting forth the Notes or portions thereof tendered to and accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to the Holders of Notes so accepted for payment in an amount equal to the Change of Control Purchase Price to be paid in cash, and deliver shares of Common Stock sufficient to cover the portion of the Change of Control Purchase Price to be paid in Common Stock, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion to the Notes surrendered; provided that each such new Note shall be issued in an 25 original principal amount in denominations of $1,000 and integral multiples thereof. Any Notes not validly tendered and not accepted by the Company shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Change of Control Offer not later than the third Business Day following the Change of Control Purchase Date. (i) The Company shall to the extent applicable: (i) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable and (ii) file the related Schedule TO (or any successor schedule, form or report) or any other required schedule under the Exchange Act; and (iii) otherwise comply with all applicable securities laws. (j) With respect to each Note for which a Change of Control Purchase Notice has been given, if the Paying Agent holds money sufficient to pay the Change of Control Purchase Price on the Business Day following the Change of Control Purchase Date, in accordance with the terms of the Indenture, then immediately after the Change of Control Purchase Date, interest on the principal amount of such Note will cease to accrue, whether or not such Note is delivered to the Paying Agent. Thereafter, all other rights of the Holder shall terminate, other than the right to receive the Change of Control Purchase Price upon delivery of such Note. (k) There shall be no purchase of any Notes pursuant to this Section 4.02 if there has occurred and is continuing an Event of Default (other than a default in the payment of the Change of Control Purchase Price). The Paying Agent will promptly return to the respective Holders thereof of any Notes: (i) with respect to which a Change of Control Purchase Notice has been withdrawn in compliance with Section 4.02(d) or (ii) held by it during the continuance of an Event of Default (other than a default in the payment of the Change of Control Purchase Price) in which case, upon such return, the Change of Control Purchase Notice with respect thereto shall be deemed to have been withdrawn. Section 4.03. Certain Article 4 Definitions. For purposes of this Article 4: (a) the term "Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or any of its subsidiaries, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 50% of the total voting power of all Voting Stock of the Company; (ii) the Company consolidates with, or merges with or into, another person or sells, assigns, conveys, transfers, leases or otherwise disposes of, all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the outstanding Voting Stock of the Company is converted into or exchanged for Voting Stock (other than Disqualified Capital Stock) of the surviving or transferee corporation constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee corporation immediately after giving effect to such issuance. 26 (iii) at any time during any consecutive two-year period, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election by such board of directors or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Company then in office; or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation; provided, however, that a Change of Control shall not be deemed to have occurred if (I) the Sale Price of the 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 clauses (ii) or (iii) above) shall, in the case of each of such five Trading Days, equal or exceed 105% of the Conversion Price of the Notes in effect on each of such five Trading Days or (II) all of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters' appraisal rights) in a merger or consolidation otherwise constituting a Change of Control under clause (i) and/or clause (ii) above consists of shares of common stock traded on a national securities exchange or quoted on the Nasdaq National Market (or will be so traded or quoted immediately following such merger or consolidation) and as a result of such merger or consolidation the Notes become convertible solely into such common stock; (b) the term "Voting Stock" means, with respect to any Person, securities of any class or classes of capital stock in such Person entitling the holders thereof to vote under ordinary circumstances in the election of members of the board of directors or other governing body of such Person. (c) the term "Disqualified Capital Stock" means any capital stock of a Person which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the Stated Maturity of the Notes, for cash or securities constituting indebtedness of such Person. ARTICLE 5 EVENTS OF DEFAULT Section 5.01. Additional Events Of Default. Pursuant to Sections 301(16) and 501(7) of the Indenture, so long as any of the Notes are outstanding, the following shall be an Event of Default with respect to the Notes, in addition to the Events of Default contained in Section 501 of the Indenture: (a) The Company defaults in the payment of the principal amount, Redemption Price, Purchase Price or Change of Control Purchase Price with respect to any Note when such becomes due and payable. (b) The Company defaults in payment of any accrued and unpaid interest which default continues for 30 days. 27 (c) The Company fails to convert any portion of the principal amount of a Note in accordance with its terms following exercise by the Holder of the right to convert such Note. SECTION 5.02. Amendment. Section 501 of the Indenture is hereby amended solely with respect to a series of Securities that consists of the Notes, as follows: (a) By amending paragraph (4) of Section 501 by deleting the number "90" appearing therein and replacing it with number "60" and by adding the words "of that series" immediately after the words "Outstanding Securities" appearing therein. (b) By amending paragraph (5) of Section 501 by deleting the number "90" appearing therein and replacing it with the number "60". (c) By deleting the period at the end of paragraph (7) of Section 501 and replacing it with "; or", and adding the following paragraph immediately after paragraph (7) in Section 501: (8) if any event of default, as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of the Company for money borrowed, whether such indebtedness now exists or shall hereafter be created, shall happen and shall result in such indebtedness in principal amount in excess of $35,000,000 becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, and such acceleration shall not be rescinded or annulled within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of not less than 25% in principal amount of the Outstanding Securities of that series, a written notice specifying such event of default and requiring the Company to cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder. ARTICLE 6 AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 6.01. With Consent of Holders. Pursuant to Section 902 of the Indenture, so long as any of the Notes are outstanding, without the consent of each Holder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 513 of the Indenture, may not (in addition to the events described in paragraphs (1) through (3) of Section 902 of the Indenture): (a) make any change that impairs or adversely affects the right to convert any Notes into Common Stock; (b) impair or adversely affect the right of a Holder to institute suit for the enforcement of any payment with respect to, or conversion of, the Notes; (c) make any change that adversely affects the right to require the Company to purchase the Notes pursuant to and in accordance with Article 4 hereof; or (d) reduce or impair or adversely affect the right of a Holder to receive the applicable Redemption Price set forth in Section 3.01 hereof or the Purchase Price or Change of Control Purchase Price pursuant to Article 4 hereof. 28 ARTICLE 7 MISCELLANEOUS SECTION 7.01. Application of Second Supplemental Indenture. Each and every term and condition contained in this Second Supplemental Indenture that modifies, amends or supplements the terms and conditions of the Indenture shall apply only to the Notes created hereby and not to any future series of Securities established under the Indenture. Except as specifically amended and supplemented by, or to the extent inconsistent with, this Second Supplemental Indenture, the Indenture shall remain in full force and effect and is hereby ratified and confirmed. SECTION 7.02. Effective Date. This Second Supplemental Indenture shall be effective as of the date first above written and upon the execution and delivery hereof by each of the parties hereto. SECTION 7.03. Counterparts. This Second Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. [SIGNATURE PAGE FOLLOWS] 29 IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed by their respective officers hereunto duly authorized, all as of the day and year first above written. HCC INSURANCE HOLDINGS, INC. By: /s/ STEPHEN L. WAY --------------------------------------- Name: Stephen L. Way Title: Chairman, President and Chief Executive Officer Wachovia Bank, National Association, as Trustee By: /s/ KEVIN M. DOBRAVA --------------------------------------- Name: Kevin M. Dobrava Title: Vice President 30 EXHIBIT A [Face of Security] 1.30% Convertible Notes due 2023 If the registered owner of this security is The Depository Trust Company or a nominee thereof, the following legend is applicable: THIS SECURITY IS IN GLOBAL FORM WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY (AS HEREINAFTER DEFINED) OR A NOMINEE OF THE DEPOSITARY OR A SUCCESSOR DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITARY," OR "DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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. CUSIP No. 404132 AB 8 $125,000,000 HCC INSURANCE HOLDINGS, INC., a Delaware corporation, promises to pay to Cede & Co. or registered assigns, the principal amount of ONE HUNDRED TWENTY-FIVE MILLION and no/100 Dollars ($125,000,000) on April 1, 2023. Interest Payment Dates: April 1 and October 1, commencing October 1, 2003. Record Dates: March 15 and September 15. Reference is hereby made to the further provisions of this Security set forth on the reverse side of this Security, 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 instrument to be duly executed under its corporate seal. Dated: March 28, 2003 HCC INSURANCE HOLDINGS, INC. By: ------------------------------ Name: Title: 1 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture: Wachovia Bank, National Association, as Trustee By: --------------------------- Name: Title: 2 [Back of Security] 1.30% Convertible Notes due 2023 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. HCC Insurance Holdings, Inc., a Delaware corporation (the "Company") promises to pay interest on the principal amount of the Notes at 1.30% per annum from March 28, 2003 until repayment in full at April 1, 2023, redemption or purchase. The Company shall pay interest, semi-annually in arrears on April 1 and October 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"), commencing on October 1, 2003. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal from time to time on demand at a rate equal to the per annum rate on the Notes then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. Except as provided below, interest will be paid (i) on the Global Notes to DTC in immediately available funds, (ii) on any definitive Notes having an aggregate principal amount of $2,000,000 or less, by check mailed to the Holders of such Notes; and (iii) on any definitive Notes having an aggregate principal amount of more than $2,000,000, by wire transfer in immediately available funds at the election of the Holders of these Notes. At Stated Maturity, the Company will pay interest on definitive Notes at the Company's office or agency in New York City, which initially will be the Corporate Trust Office of the trustee in New York City. Principal on definitive Notes will be payable, upon Stated Maturity or when due, at the office or agency of the Company in New York City, maintained for such purpose, initially the Corporate Trust Office of the Trustee in New York City. Subject to the terms and conditions of the Indenture, the Company will make payments in cash, shares of Common Stock or a combination thereof, as the case may be, in respect of Redemption Prices, Purchase Prices, Change of Control Purchase Prices and at Stated Maturity to Holders who surrender Notes to a Paying Agent to collect such payments in respect of the Notes. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND SECURITY REGISTRAR. Initially, Wachovia Bank, National Association will act as Paying Agent, Conversion Agent and Security Registrar. The Company may appoint and change any Paying Agent, Conversion Agent, Security Registrar or co-registrar without notice, other than notice to the Trustee, except that the Company will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Security Registrar or co-registrar. 4. INDENTURE. The Company issued the Notes under an Indenture, dated as of August 23, 2001 (the "Base Indenture"), as supplemented by the Second Supplemental Indenture dated as of March 28, 2003 (the "Second Supplemental Indenture" and, together with the Base Indenture, the 3 "Indenture"), between the Company and Wachovia Bank, National Association, as trustee (the "Trustee"). The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes issued under the Indenture are general unsecured obligations of the Company limited to $143,750,000 in aggregate principal amount (including the Notes which the Company may issue pursuant to an over-allotment option). 5. OPTIONAL REDEMPTION. At any time on or after April 4, 2009, the Company may redeem in cash any portion of the Notes, in whole or in part, on at least 30 days, but no more than 60 days, notice at a Redemption Price equal to the principal amount of the Notes or such portion thereof plus accrued and unpaid interest on the Notes to, but excluding, the Redemption Date. In the event the Company redeems less than all of the outstanding Notes, the Notes to be redeemed shall be selected by the Trustee in accordance with Section 1103 of the Indenture. If the Trustee selects a portion of a Holder's Notes for partial redemption and the Holder converts a portion of the same Notes, the converted portion will be deemed to be from the portion selected for redemption. The Company may not give notice of any redemption if the Company has defaulted in payment of interest and the default is continuing. 6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of the Notes to be redeemed at such Holder's address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the Redemption Date, interest ceases to accrue on the Notes or portions of them called for redemption. 7. MANDATORY REDEMPTION. Except as set forth in paragraph 8 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 8. REPURCHASE AT OPTION OF HOLDER. Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, all or any portion of the Notes held by such Holder on April 1, 2009, April 1, 2014 and April 1, 2019 (each, a "Purchase Date") at a Purchase Price equal to the principal amount of such Notes, plus accrued and unpaid interest on the Notes to, but excluding, the applicable Purchase Date, upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on such Purchase Date and upon delivery of the Notes to the Paying Agent by the Holder as set forth in the Indenture. The Purchase Price may be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock, or in any combination thereof, subject to the terms and conditions of the Indenture. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or a portion of the Notes held by such Holder 40 Business Days after the occurrence of a Change of Control of the Company occurring on or prior to April 1, 2009, for a Change of Control Purchase Price equal to the principal amount of such Notes, plus accrued and unpaid interest on the Notes to, but excluding, the Change of Control Purchase Date, which Change of Control Purchase Price shall be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock or any combination thereof, subject to the terms and conditions of the Indenture. 4 Holders have the right to withdraw any Purchase Notice or Change of Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or securities if permitted under the Indenture) sufficient to pay the Purchase Price or Change of Control Purchase Price, as the case may be, of all Notes or portions thereof to be purchased as of the Purchase Date or the Change of Control Purchase Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Change of Control Purchase Date, as the case may be, interest will cease to accrue on such Notes (or portions thereof) immediately after such Purchase Date or Change of Control Purchase Date, as the case may, be whether or not such Notes have been delivered to the Paying Agent, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Change of Control Purchase Price, as the case may be, upon surrender of such Notes). 9. CONVERSION. Subject to and in compliance with the provisions of the Indenture (including, without limitation, the conditions to conversion set forth in Section 2.01 of the Second Supplemental Indenture), a Holder is entitled, at such Holder's option, to convert the Holder's Note (or any portion of the principal amount thereof that is $1,000 or an integral multiple $1,000), into fully paid and nonassessable shares of Common Stock at the Conversion Price in effect at the time of conversion. or, at the option of the Company, an equivalent cash amount. The Company will notify Holders of any event triggering the right to convert the Holder's Note as specified above in accordance with the Indenture. A Note in respect of which a Holder has delivered a Purchase Notice or Change of Control Purchase Notice, as the case may be, exercising the option of such Holder to require the Company to purchase such Security may be converted only if such Purchase Notice or Change of Control Purchase Notice, as the case may be, is withdrawn in accordance with the terms of the Indenture. The initial Conversion Price is $33.97, subject to adjustment in certain events described in the Indenture. To convert a Note, a Holder must (1) complete and manually sign the conversion notice below (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) surrender the Note to the Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (4) pay any transfer or similar tax, if required. No fractional shares of Common Stock shall be issued upon conversion of any Security. Instead of any fractional share of Common Stock that would otherwise be issued upon conversion of such Security, the Company shall pay a cash adjustment as provided in the Indenture. Notes that are surrendered for conversion during the period from the close of business on any Regular Record Date immediately preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except in the case of Notes or portions thereof which have been called for redemption or in respect of which a Purchase Notice or Change of Control Purchase Notice delivered by the Holder has not been withdrawn, the conversion rights of which would terminate during the period between such Regular Record Date and the close of business on such Interest Payment Date) be accompanied by payment in immediately available funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of Notes being surrendered for conversion; provided, however, that no such payment shall be required if there shall 5 exist at the time of conversion a default in the payment of interest on the Notes. No payment or adjustment shall be made upon any conversion on account of any interest accrued on the Notes surrendered for conversion from the Interest Payment Date preceding the day of conversion. Rather, such amount shall be deemed to be paid in full to the Holder through delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares), or cash or a combination of cash and Common Stock, in exchange for the Note being converted pursuant to the provisions hereof, and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares), or cash or a combination of cash and Common Stock, shall be treated as issued, to the extent thereof, first in exchange for accrued and unpaid interest and the balance, if any, of such fair market value of such Common Stock (and any such cash payment) shall be treated as issued in exchange for the principal amount of the Note being converted pursuant to the provisions hereof. In addition, no adjustment or payment shall be made upon any conversion on account of any dividends on the Common Stock issued upon conversion. In addition, Holders shall not be entitled to receive any dividends payable to holders of Common Stock as of any Record Date before the close of business on the conversion date. If the Company (i) is a party to a consolidation, merger or binding share exchange or (ii) reclassifies the Common Stock or (iii) conveys, transfers or leases its properties and assets substantially as an entirety to any Person, the right to convert a Note into shares of Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or such other Person, in each case in accordance with the Indenture. The above description of conversion of the Security is qualified by reference to, and is subject in its entirety by, the more complete description thereof contained in the Indenture. 10. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered form without coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Security Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. 11. PERSONS DEEMED OWNERS. The registered Holder of this Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions set forth in the Indenture, (i) the Second Supplemental Indenture or the Notes may be amended with the written consent of the Holders of a majority in aggregate principal amount of the Notes at the time outstanding and (ii) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes at the time outstanding. Without the consent of any Holder of the Notes, the Second Supplemental Indenture or the Notes may be amended or supplemented to, in addition to other events more fully described in the Indenture, cure any ambiguity, defect or inconsistency, to establish the form or terms of the Securities to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company contained in the Indenture, to secure the Securities, and to make any change that does not materially adversely affect the interests of any Holder under the Indenture. 13. DEFAULTS AND REMEDIES. If any Event of Default with respect to the Notes shall occur and be continuing, the principal of all the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. 14. TRUSTEE DEALINGS WITH COMPANY. Subject to certain limitations imposed by the Trust Indenture Act, the Trustee under the Indenture, in its individual or any other capacity, may 6 become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or shareholder of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability including any rights against any general partner of the Company in its capacity as general partner. The waiver and release are part of the consideration for the issuance of the Notes. 16. AUTHENTICATION. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. 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). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes 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 the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 19. UNCLAIMED MONEY OR SECURITIES. 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 Notes 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. 20. GOVERNING LAW. THE INDENTURE AND THE NOTES WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: HCC Insurance Holdings, Inc. 13403 Northwest Freeway Houston, Texas 77057 Attn: Christopher L. Martin 7 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's soc. sec. or tax ID no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ______________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: ______________________ Your Signature: __________________________________ ________________________________________________________________________________ (Sign exactly as your name appears on the other side of this Security) 8 CONVERSION NOTICE To convert this Security into Common Stock of the Company, check the box: [ ] To convert only part of this Security, state the Principal Amount to be converted (which must be $1,000 or an integral multiple of $1,000): $_______________________________________________________________________________ If you want the stock certificate made out in another person's name, fill in the form below: ________________________________________________________________________________ ________________________________________________________________________________ (Insert other person's soc. sec. or tax ID no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type other person's name, address and zip code) ________________________________________________________________________________ Date: _______________________ Your Signature: _________________________________ ________________________________________________________________________________ (Sign exactly as your name appears on the other side of this Security) 9 EX-5 5 h04438exv5.txt OPINION OF HAYNES AND BOONE, LLP EXHIBIT 5 March 28, 2003 HCC Insurance Holdings, Inc. 13403 Northwest Freeway Houston, Texas 77040 Ladies and Gentlemen: We have advised HCC Insurance Holdings, Inc., a Delaware corporation (the "Company") in connection with (i) the Registration on Form S-3 as amended (File Nos. 333-76122 and 333-58350) (the "Registration Statement") filed by the Company with the Securities and Exchange Commission for the purpose of offering under the Securities Act of 1933, as amended, the Company's debt securities, debt warrants, common stock, common stock warrants, preferred stock, preferred stock warrants and Trust Preferred shares to be offered from time to time by the Company on terms to be determined at the time of the offering and (ii) the issuance by the Company of up to $143,750,000 aggregate principal amount, including the underwriters overallotment of $18,750,000, of the Company's 1.30% Convertible Notes due 2023 (the "Notes") as described in the Company's Prospectus Supplement, dated March 25, 2003 (the "Prospectus Supplement"), and pursuant to an indenture, dated August 23, 2001, between the Company and Wachovia Bank, National Association (as successor to First Union National Bank), as trustee (the "Trustee"), as supplemented by a Second Supplemental Indenture, dated as of March 28, 2003 (the "Indenture"), and the public offering of the Notes pursuant to an underwriting agreement dated March 25, 2003, (the "Underwriting Agreement") between the Company and Salomon Smith Barney, as representative of the several underwriters. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Prospectus Supplement or the Indenture. We have examined such corporate records, certificates and other documents, and reviewed such questions of law, as we have considered necessary or appropriate for the purpose of this opinion. On the basis of such examination and review, we advise you that, in our opinion, when the Notes have been duly issued and sold in the manner contemplated by the Registration Statement and the Prospectus Supplement, and assuming due authentication thereof by the Trustee in accordance with the provision of the Indenture, the Notes will constitute valid and legally binding obligations of the Company, enforceable against the HCC Insurance Holdings, Inc. March 28, 2003 Page 2 Company in accordance with their terms, subject to bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditor's rights generally and to general principles of equity regardless of whether enforcement is considered in a proceeding in equity or at law. We hereby consent to the filing as an exhibit to the Company's Current Report on Form 8-K of this opinion and to its incorporation by reference in the Registration Statement. We also hereby consent to the references to us under the heading "Legal Matters" in the Registration Statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder by the Securities and Exchange Commission. Very truly yours, /s/ Haynes and Boone, LLP Haynes and Boone, LLP EX-99.1 6 h04438exv99w1.txt PRESS RELEASE DATED 3/25/03 EXHIBIT 99.1 HCC ANNOUNCES CONVERTIBLE NOTE OFFERING HOUSTON (March 25, 2003) . . . HCC INSURANCE HOLDINGS, INC. (NYSE SYMBOL: HCC) announced today that it is making a public offering of convertible notes (the "Notes") under its previously filed shelf registration statement. Salomon Smith Barney will be acting as sole book-running manager for this offering. The Notes will be convertible into shares of HCC's common stock, when the market price of the shares reaches certain specified thresholds. The Notes cannot be called for six years after issuance and mature in 20 years, although the holders can require HCC to repurchase the Notes on certain dates and upon the occurrence of certain change in control events. The gross proceeds from the sale will be $125 million before the underwriters' over-allotment option. HCC intends to use the proceeds of the offering to repay outstanding debt, for general corporate purposes and to fund future acquisitions and strategic investments. This press release does not constitute an offer to sell or the solicitation of an offer to purchase these securities. The Notes may be offered only by means of a prospectus, including a prospectus supplement. A copy of the prospectus may be obtained from Salomon Smith Barney. HCC is an international insurance holding company and a leading specialty insurance group. HCC has assets of $3.7 billion and its shares trade on the NYSE (symbol: HCC), with a market capitalization of over $1.6 billion. HCC is rated AA (Very Strong) by Standard & Poor's and A+ (Superior) by A.M. Best Company. For more information, visit our website at www.hcch.com. ------------ Contact: L. Byron Way, Vice President HCC Insurance Holdings, Inc. Telephone: (713) 690-7300 Forward-looking statements contained in this press release are made under "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The types of risks and uncertainties which may affect the Company are set forth in its periodic reports filed with the Securities and Exchange Commission. * * * * * EX-99.2 7 h04438exv99w2.txt PRESS RELEASE DATED 3/26/03 EXHIBIT 99.2 HCC ANNOUNCES CONVERTIBLE NOTE PRICING HOUSTON (March 26, 2003) . . . HCC INSURANCE HOLDINGS, INC. (NYSE SYMBOL: HCC) announced today that it will receive $125,000,000 in gross proceeds from the sale of convertible notes (the "Notes") due in 2023. HCC intends to use the proceeds of the offering to repay outstanding debt, to fund future acquisitions and strategic investments, and for general corporate purposes. The Notes, which are convertible into HCC's common stock, were offered under HCC's shelf registration statement and have been underwritten by Salomon Smith Barney as sole book-running manager with Raymond James and Associates, Inc., Wells Fargo Inc., William Blair and Company, Inc., and Advest Inc., as co-managers. The Notes carry a coupon rate of 1.30 percent per annum with an initial conversion price of $33.969 per share. The underwriters have a 30-day option to purchase up to an additional $18,750,000 principal amount of the Notes to cover over-allotments. Each $1,000 principal amount of the Notes will be convertible into 29.4386 shares of HCC's common stock upon the occurrence of any of the following events: (1) the closing price of HCC's shares of common stock on the New York Stock Exchange reaches certain specified thresholds; (2) HCC calls the Notes for redemption; or (3) HCC is a party to certain mergers or consolidations. HCC may redeem the Notes for cash on or after April 4, 2009 at their face value plus accrued and unpaid interest. HCC may be required to repurchase the Notes at their face value plus accrued and unpaid interest, at the option of the holders on each of April 1, 2009, 2014 and 2019. In such event, HCC may choose to pay the purchase price for such repurchases in cash or shares of its common stock. HCC may also be required to repurchase the Notes for cash, or its common stock, at face value plus accrued and unpaid interest upon the occurrence of certain change in control events occurring prior to April 1, 2009. This press release does not constitute an offer to sell or the solicitation of an offer to buy these securities. The Notes may be offered only by means of a prospectus, including a prospectus supplement. A copy of the prospectus may be obtained from Salomon Smith Barney, Raymond James and Associates, Inc., Wells Fargo, Inc., William Blair and Company, Inc., or Advest Inc. HCC is an international insurance holding company and a leading specialty insurance group since 1974. HCC has assets of $3.7 billion and its shares trade on the NYSE (symbol: HCC), with a market capitalization of over $1.5 billion. HCC is rated AA (Very Strong) by Standard & Poor's and A+ (Superior) by A.M. Best Company. For more information, visit our website at www.hcch.com. ------------ Contact: L. Byron Way, Vice President HCC Insurance Holdings, Inc. Telephone: (713) 690-7300 Forward-looking statements contained in this press release are made under "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The types of risks and uncertainties which may affect the Company are set forth in its periodic reports filed with the Securities and Exchange Commission. * * * * * 2 -----END PRIVACY-ENHANCED MESSAGE-----