Document:

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                                                                   EXHIBIT 10.30

                            PRIDE INTERNATIONAL, INC.

                          EMPLOYMENT/NON-COMPETITION/
                           CONFIDENTIALITY AGREEMENT

                               NICOLAS J. EVANOFF

                           EFFECTIVE OCTOBER 31, 2002

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              EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT

DATE:                      October 31, 2002

COMPANY/EMPLOYER:          Pride International, Inc.
                           a Delaware corporation
                           5847 San Felipe, Suite 3300
                           Houston, Texas 77057

EXECUTIVE/EMPLOYEE:        Nicolas J. Evanoff

         This Agreement is made as of the date first above written and to become
effective as herein provided.

                                    PREAMBLE

         WHEREAS, the Company wishes to attract and retain well-qualified
Executies and key personnel and to assure itself of the continuity of its
management;

         WHEREAS, Executive will be elected an officer of the Company with
significant management responsibilities in the conduct of its business;

         WHEREAS, the Company recognizes that Executive is a valuable resource
of the Company , however this Agreement is no assurance of continued employment;

         WHEREAS, the Company desires to obtain assurances that Executive will
devote his best efforts to his employment with the Company and will not enter
into competition with the Company in its business as now conducted and to be
conducted, or solicit customers or other employees of the Company to terminate
their relationships with the Company;

         WHEREAS, Executive is a key employee of the Company and he acknowledges
that his talents and services to the Company are of a special, unique, unusual
and extraordinary character and are of particular and peculiar benefit and
importance to the Company;

         WHEREAS, the Company is concerned that in the event of a possible or
threatened Change in Control of the Company the Executive may feel insecure, and
therefore the Company desires to provide security to Executive in the event of a
Change in Control;

         WHEREAS, the Company further desires to assure Executive that, if a
possible or threatened Change in Control should arise and Executive should be
involved in deliberations or negotiations in connection therewith, Executive
would be in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and to

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this end desires to protect Executive from any direct or implied threat to his
financial well-being by a Change in Control;

         WHEREAS, Executive is willing to continue to serve as such but desires
assurances that in the event of such a Change in Control he will have fair and
reasonable severance protection;

         WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of Change in Control and/or none has occurred, as opposed to
circumstances under which a Change in Control is rumored, threatened, occurring
or has occurred. For this reason this Change in Control Agreement deals with
circumstances whereby a Change in Control is threatened, occurring or has
occurred; and

         WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement provisions set forth herein in
consideration of this Agreement.

                                    AGREEMENT

         NOW, THEREFORE, the parties agree as follows:

I.       PRIOR AGREEMENTS/CONTRACTS.

1.01     PRIOR AGREEMENTS. Executive has no continuing non-competition
         agreements with any prior employers that have not been disclosed to
         Company. Executive has completed a Company employment application and
         all information provided therein is true and correct and is
         incorporated herein by reference.

II       DEFINITION OF TERMS.

2.01     COMPANY. Company means Pride International, Inc., a Delaware
         corporation, as the same presently exists, as well as any and all
         successors, regardless of the nature of the entity or the State or
         Nation of organization, whether by reorganization, merger,
         consolidation, absorption or dissolution. For the purpose of the
         Non-Competition and Confidentiality Agreement, Company includes any
         subsidiary or affiliate of the Company to the extent it is carrying on
         any portion of the business of the Company or a business similar to
         that being conducted by the Company.

2.02     EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Nicolas J.
         Evanoff.

2.03     OFFICE/POSITION/TITLE. The Office, Position and Title for which the
         Executive is employed is that of Vice-President Corporate and
         Governmental Affairs of Pride International, Inc.

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2.04     EFFECTIVE DATE. This Agreement becomes effective and binding as of
         October 31, 2002.

2.05     CHANGE IN CONTROL. The term "Change in Control" of the Company shall
         mean, and shall be deemed to have occurred on the date of the first to
         occur of any of the following:

         a.    there occurs a Change in Control of the Company of the nature
               that would be required to be reported in response to item 6(e) of
               Schedule 14A of Regulation 14A or Item 1 of Form 8(k) promulgated
               under the Securities Exchange Act of 1934 as in effect on the
               date of this Agreement, or if neither item remains in effect, any
               regulations issued by the Securities and Exchange Commission
               pursuant to the Securities Exchange Act of 1934 which serve
               similar purposes;

         b.    any "person" (as such term is used in Sections 12(d) and 14(d)(2)
               of the Securities Exchange Act of 1934) is or becomes a
               beneficial owner, directly or indirectly, of securities of the
               company representing twenty percent (20%) or more of the combined
               voting power of the Company's then outstanding securities;

         c.    the individuals who were members of the Board of Directors of the
               Company immediately prior to a meeting of the shareholders of the
               Company involving a contest for the election of Directors shall
               not constitute a majority of the Board of Directors following
               such election;

         d.    the Company shall have merged into or consolidated with another
               corporation, or merged another corporation into the Company, on a
               basis whereby less than fifty percent (50%) of the total voting
               power of the surviving corporation is represented by shares held
               by former shareholders of the Company prior to such merger or
               consolidation;

         e.    the Company shall have sold, transferred or exchanged all, or
               substantially all, of its assets to another corporation or other
               entity or person.

2.06     TERMINATION. The term "termination" shall mean termination, for any
         reason other than cause (as described below) or voluntary resignation
         (as described below):

         a.    The term "cause" means: (i) the failure of the Executive to
               perform his duties with the Company (other than any failure due
               to physical or mental incapacity) after a demand for substantial
               performance is delivered to him by his supervisor which
               specifically identifies the manner in which he believes he has
               not substantially performed his duties, (ii) misconduct
               materially and demonstrably injurious to the Company, (iii)
               violation of any Company policy including the covenant not to
               compete (except after termination under the change in Control
               provisions and confidentiality provisions hereof), or

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               (iv) making a false statement on his employment application which
               is incorporated herein by reference. The unwillingness of the
               Executive to accept any change in the nature or scope of his
               position, authorities or duties or any other reasonable request
               of the Company in respect of his position, authority, or
               responsibility may be considered by his supervisor to be a
               failure to perform by the Executive unless it occurs after a
               Change in Control. Notwithstanding the foregoing, the Executive
               shall not be deemed to have been terminated for cause for
               purposes of this Agreement unless and until there shall have been
               delivered to him a letter setting out the particulars and basis
               for his termination for cause.

         b.    The resignation of the Executive shall be deemed "voluntary" if
               it is for any reason other than one or more of the following:

               (1)   the Executive's resignation or retirement is requested
                     by the Company other than for cause;

               (2)   any reduction in the Executive's total compensation or
                     benefits from that provided herein;

               (3)   the material breach by the Company of any other provision
                     of this Agreement;

         Termination that entitles the Executive to the payments and benefits
provided herein shall not be deemed or treated by the Company as the termination
of the Executive's employment or the forfeiture of his participation, award, or
eligibility, for the purpose of any plan, practice or other agreement of the
Company.

2.07     CUSTOMER. The term "Customer" includes all persons, firms or entities
         that are purchasers or end-users of services or products offered,
         provided, developed, designed, sold or leased by the Company during the
         relevant time periods, and all persons, firms or entities which
         control, or which are controlled by, the same person, firm or entity
         which controls such purchase.

III.     CHANGE IN CONTROL.

3.01     CHANGE IN CONTROL TERMINATION PAYMENTS AND BENEFITS. In the event the
         Executive is terminated (except for cause) within two (2) years
         following a Change in Control, the Executive will receive the payments
         and benefits specified below:

         a.    An amount equal to two (2) full years of his base salary
               (including the amount allocated to the covenant not to compete),
               which base salary is here defined as twelve (12) times the then
               current monthly salary in effect for the Executive and all other
               benefits due him based upon the salary in effect on the Date of
               Termination (but not less than the highest annual base salary
               paid

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               to the Executive during any of the three (3) years immediately
               preceding his Date of Termination). There shall be deducted
               only such amounts as may be required by law to be withheld for
               taxes and other applicable deductions.

         b.    The Company shall make available to Executive and his immediate
               family for a period of two (2) full years following the Date of
               Termination, life, health, accident and disability insurance
               which are not less than the highest benefits furnished to the
               Executive and his immediate family during the term of this
               Agreement.

         c.    An amount equal to two (2) times the target award that the
               Executive under the Company's annual bonus plan for the fiscal
               year in which the termination occurs, provided that if the
               Executive has deferred his award for such year under a Company
               plan, the payment due the Executive under this subparagraph shall
               be paid in accordance with the terms of the deferral or as
               specified by the Executive.

3.02     VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive
         voluntarily resigns his employment within six (6) months after a Change
         in Control (whether or not Company may be alleging the right to
         terminate employment for cause), he will receive the same payments,
         compensation and benefits as if he had been terminated on the date of
         resignation after Change in Control.

3.03     This Agreement is no guaranty of continued employment. Executive
         remains an "at-will" employee hereunder and may be terminated at any
         time for any reason or for no reason.

IV.      NON-COMPETITION AND CONFIDENTIALITY

4.01     CONSIDERATION. The base salary awarded to the Executive and to be paid
         to the Executive in the future includes consideration for the
         Non-Competition and Confidentiality agreement set forth herein and
         under a Change in Control, hereof constitute payment, in part, for the
         Non-Competition and Confidentiality of the Executive. It is contracted,
         stipulated and agreed that fifteen percent (15%) of such amount paid
         and to be paid to the Executive shall constitute the consideration for
         the non-Competition and Confidentiality Agreement set forth herein.

4.02     NON-COMPETITION. Executive acknowledges that his employment with the
         Company has in the past and will, of necessity, provide him with
         specialized knowledge which, if used in competition with the Company
         could cause serious harm to the Company. Accordingly, the Executive
         agrees that during his employment with the company and for a period of
         one (1) year after he is no longer employed by the Company (unless his
         employment is terminated after a Change in Control, in which event
         there will be no covenant not to compete and the provisions of the
         covenant not to compete herein contained will terminate on the date of
         termination of Executive). Executive will not, directly or indirectly,
         either as an individual, proprietor, stockholder {other than as a
         holder of up to one percent (1%) of the

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         outstanding shares of a corporation whose shares are listed on a stock
         exchange or traded in accordance with the automated quotation system of
         the National Association of Securities Dealers}, partner, officer,
         employee or otherwise:

         a.    work for, become an employee of, invest in, provide consulting
               services or in any way engage in any business which provides,
               produces, leases or sells products or services of the same or
               similar type provided, produced, leased or sold by the Company
               and with regard to which Executive was engaged , or over which
               Executive had direct or indirect supervision or control, within
               one (1) year preceding the Executive's termination of employment,
               in any area where the company provided, produced, leased or sold
               such products or services at any time during the one (1) year
               preceding such termination of employment; or

         b.    provide, sell, offer to sell, lease, offer to lease, or solicit
               any orders for any products or services which the Company
               provided and with regard to which the Executive had direct or
               indirect supervision or control, within one (1) year preceding
               Executive's termination of employment, to or from any person,
               firm or entity which was a customer for such products or services
               of the Company during the one (1) year preceding such termination
               from whom the Company had solicited business during such one (1)
               year; or

         c.    solicit, aid, counsel or encourage any officer, director,
               employee or other individual to (i) leave his or her employment
               or position with the Company or (ii) compete with the business of
               the Company, or (iii) violate the terms of any employment,
               non-competition or similar agreement with the Company; or

         d.    employ, directly or indirectly, permit the employment of,
               contract for services or work to be performed by, or otherwise
               use, utilize or benefit from the services of any officer,
               director, employee or any other individual holding a position
               with the Company within two (2) years after the Date of
               Termination of employment of Executive with the Company or within
               two (2) years after such officer, director, employee or
               individual terminated employment with the Company, whichever
               occurs earlier.

4.03     CONFIDENTIALITY. Executive acknowledges that his employment with the
         Company has in the past and will, of necessity, provide him with
         specialized knowledge which, if used in competition with the Company,
         or divulged to others, could cause serious harm to the Company.
         Accordingly, Executive will not at any time during or after his
         employment by the Company, directly or indirectly, divulge, disclose or
         communicate to any person, firm or corporation in any manner whatsoever
         any information concerning any matter affecting or relating to the
         Company or the business of the Company. While engaged as an employee of
         the Company, Executive may only use information concerning any matters
         affecting or relating to the Company or the business of the company for
         a purpose which is necessary to

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         the carrying out of the Executive's duties as an employee of the
         company, and Executive may not make use of any information of the
         Company after he is no longer an employee of the company. Executive
         agrees to the foregoing without regard to whether all of the foregoing
         matters will be deemed confidential, material or important, it being
         stipulated by the parties that all information, whether written or
         otherwise, regarding the Company's business, including, but not limited
         to, information regarding customers, customer lists, costs, prices,
         earnings, products, services, formulae, compositions, machines,
         equipment, apparatus, systems, manufacturing procedures, operations,
         potential acquisitions, new location plans, prospective and executed
         contracts and other business arrangements, and sources of supply, is
         prima facie presumed to be important, material and confidential
         information of the Company for the purposes of this Agreement, except
         to the extent that such information may be otherwise lawfully and
         readily available to the general public. Executive further agrees that
         he will, upon termination of his employment with the Company, return to
         the company all books, records, lists and other written, typed or
         printed materials, whether furnished by the company or prepared by
         Executive, which contain any information relating to the Company's
         business, and Executive agrees that he will neither make nor retain any
         copies of such materials after termination of employment.

4.04     GEOGRAPHICAL AREA. The geographical area within which the
         non-competition covenants of this Agreement shall apply is that
         territory within two hundred (200) miles of: (i) any of the Company's
         present offices, (ii) any of the Company's present rig yards or rig
         operations, and (iii) any additional location where the Company, as of
         the date of any action taken in violation of the non-competition
         covenants of this Agreement, has an office, a rig yard, rig operation
         or definitive plans to locate an office, a rig operation or a rig yard
         or has recently conducted rig operations. Notwithstanding the
         foregoing, if the two hundred (200) mile radius extends into another
         country or its territorial waters and the Company is not then doing
         business in that other country, there will be no territorial
         limitations extending into such other country.

4.05     COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY
         AGREEMENT. Without limiting the right of the Company to pursue all
         other legal and equitable rights available to it for violation of any
         of the covenants made by Executive herein, it is agreed that:

         a.    the skills, experience and contacts of Executive are of a
               special, unique, unusual and extraordinary character which give
               them a peculiar value;

         b.    because of the business of the Company, the restrictions agreed
               to by Executive as to time and area contained in this Agreement
               are reasonable; and

         c.    the injury suffered by the Company by a violation of any covenant
               in this Agreement resulting from loss of profits created by the
               competitive use of such skills, experience and contacts and
               otherwise will be difficult to

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               calculate in damages in an action at law and cannot fully
               compensate the Company for any violation of any covenant in this
               Agreement, accordingly:

               (i)   the Company shall be entitled to injunctive relief to
                     prevent violations thereof and to prevent Executive from
                     rendering any services to any person, firm or entity in
                     breach of such covenant and to prevent Executive from
                     divulging any confidential information; and

               (ii)  compliance with this Agreement is a condition precedent to
                     the Company's obligation to make payments of any nature to
                     Executive.

4.06     TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
         CONFIDENTIALITY. If Executive's termination was not after a Change in
         Control and if Executive shall be violating the Confidentiality and/or
         Non-Competition Agreement or any agreement he may have signed as an
         employee of the Company, Executive agrees that after receipt of written
         notice and he shall continue such action and that there shall be no
         obligation on the part of the Company to provide any payments or
         benefits (other than payments or benefits already earned or accrued)
         described in this Agreement, subject to the other provisions hereof.
         There will be no withholding of benefits or payments if the termination
         occurred after a Change in Control and Executive will not be bound by
         the non-competition provisions if terminated while the Change in
         Control provisions hereof are applicable.

V.       GENERAL

5.01     ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a
         Change in Control, or under other circumstances even when a Change in
         Control has not occurred, the Board of Directors or a shareholder of
         the Company may then cause or attempt to cause the Company to refuse to
         comply with its obligations under this Agreement, or may cause or
         attempt to cause the Company to institute, or may institute, litigation
         seeking to have this Agreement declared unenforceable, or may take, or
         attempt to take, other action to deny Executive the benefits intended
         under this Agreement; or actions may be taken to enforce the
         non-competition or confidentiality provisions of this Agreement. In
         these circumstances, the purpose of this Agreement could be frustrated.
         It is the intent of the parties that the Executive not be required to
         incur the legal fees and expenses associated with the protection or
         enforcement of his rights under this agreement by litigation or other
         legal action because such costs would substantially detract from the
         benefits intended to be extended to Executive hereunder, nor be bound
         to negotiate any settlement of his rights hereunder under threat of
         incurring such costs. Accordingly, if at any time after the Effective
         Date of this Agreement, it should appear to Executive that the Company
         is or has acted contrary to or is failing or has failed to comply with
         any of its obligations under this Agreement for the reason that it
         regards this Agreement to be void or unenforceable, that Executive has
         violated the terms of this Agreement, or for any other reason, or that
         the company has purported to terminate his

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         employment for cause or is in the course of doing so, or is withholding
         payments or benefits, or is threatening to withhold payments or
         benefits, contrary to this Agreement, or in the event that the Company
         or any other person takes any action to declare this Agreement void or
         unenforceable, or institutes any litigation or other legal action
         designed to deny, diminish or to recover from Executive the benefits
         provided or intended to be provided to him hereunder, and Executive has
         acted in good faith to perform his obligations under this Agreement,
         the Company irrevocably authorized Executive from time to time to
         retain counsel of his choice at the expense of the company to represent
         him in connection with the protection and enforcement of his rights
         hereunder, including, without limitation, representation in connection
         with termination of his employment or withholding of benefits or
         payments contrary to this Agreement or with the initiation or defense
         of any litigation or any other legal action, whether by or against
         Executive or the company or any Director, Officer, Shareholder or other
         person affiliated with the Company, in any jurisdiction. Company is not
         authorized to withhold the periodic payments of attorneys' fees and
         expenses hereunder based upon any belief or assertion by the Company
         that Executive has not acted in good faith or has violated this
         Agreement. If Company subsequently establishes that Executive was not
         acting in good faith and has violated this Agreement, Executive will be
         liable to the company for reimbursement of amounts paid due to
         Executive's actions not based on good faith and in violation of this
         Agreement. The reasonable fees and expenses of counsel selected from
         time to time by Executive as hereinabove provided shall be paid or
         reimbursed to Executive by the Company, on a regular, periodic basis
         within thirty (30) days after presentation by Executive of a statement
         or statements prepared by such counsel in accordance with its customary
         practices, up to a maximum aggregate amount of Fifty Thousand Dollars
         ($50,000.00).

5.02     INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and
         will pay all income tax liability by virtue of any payments made to
         Executive under this Agreement, as if the same were earned and paid in
         the normal course of business and not the result of a Change in
         Control.

5.03     PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of
         Executive is for cause and not after a Change in Control, the Company
         will have the right to withhold all payments; provided however, that if
         a final judgment is entered finding that cause did not exist for
         termination, the Company will pay all benefits to Executive to which he
         would have been entitled had the termination not been for cause, plus
         interest on all amounts withheld from Executive at the rate specified
         for judgments under Article 5069-1.05 V.A.T.S. If the termination for
         cause occurs after a Change in Control, the Company shall have the
         right to suspend or withhold payments to Executive under any provision
         of this Agreement until or unless a final judgment is entered upholding
         the company's determination that the termination was for cause, in
         which event Executive will be liable to the Company for all amounts
         paid, plus interest at the rate allowed for judgments under Article
         5069-1.05 V.A.T.S.

5.04     NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein
         are not intended to exclude or limit Executive's participation in other
         benefits available to executive personnel generally, or to preclude or
         limit other compensation or benefits as may be

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         authorized by the Board of Directors of the company at any time, or to
         limit or reduce any compensation or benefits to which Executive would
         be entitled but for this Agreement.

5.05     NOTICES. Notices, requests, demands and other communications provided
         for by this Agreement shall be in writing and shall either be
         personally delivered by hand or sent by: (i) Registered or Certified
         Mail, Return Receipt Requested, postage prepaid, properly packaged,
         addressed and deposited in the United States Postal System; (ii) via
         facsimile transmission if the receiver acknowledges receipt; or (iii)
         via Federal Express or other expedited delivery service provided that
         acknowledgment of receipt is received and retained by the deliverer and
         furnished to the sender, if to Executive, at the last address he has
         filed, in writing, with the Company, or if to the Company, to its
         Corporate Secretary at is principal executive offices.

5.06     NON-ALIENATION. Executive shall not have any right to pledge,
         hypothecate, anticipate, or in any way create a lien upon any amounts
         provided under this Agreement, and no payments or benefits due
         hereunder shall be assignable in anticipation of payment either by
         voluntary or involuntary acts or by operation of law. So long as
         Executive lives, no person, other than the parties hereto, shall have
         any rights under or interest in this Agreement or the subject matter
         hereof. Upon the death of Executive, his Executors, Administrators,
         Devisees and Heirs, in that order, shall have the right to enforce the
         provisions hereof.

5.07     ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
         agreement of the parties with respect of the subject matter hereof. No
         provision of this Agreement may be amended, waived, or discharged
         except by the mutual written agreement of the parties. The consent of
         any other person(s) to any such amendment, waiver or discharge shall
         not be required.

5.08     SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
         to the benefit of the Company, its successors and assigns, by operation
         of law or otherwise, including, without limitation, any corporation or
         other entity or persons which shall succeed (whether direct or
         indirect, by purchase, merger, consolidation or otherwise) to all or
         substantially all of the business and/or assets of the Company, and the
         Company will require any successor, by agreement in form and substance
         satisfactory to Executive, expressly to assume and agree to perform
         this Agreement. Except as otherwise provided herein, this agreement
         shall be binding upon and inure to the benefit of Executive and his
         legal representatives, heirs and assigns, provided however, that in the
         event of Executive's death prior to payment or distribution of all
         amounts, distributions and benefits due him hereunder, each such unpaid
         amount and distribution shall be paid in accordance with this Agreement
         to the person or persons designated by Executive to the company to
         receive such payment or distribution and in the event Executive has
         made no applicable designation, to his Estate. If the Company should
         split, divide or otherwise become more than one entity, all liability
         and obligations of the Company shall be the joint and several liability
         and obligation of all of the parts.

5.09     GOVERNING LAW. Except to the extent required to be governed by the laws
         of the State of Delaware because the company is incorporated under the
         laws of said State, the validity,

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         interpretation and enforcement of this Agreement shall be governed by
         the laws of the State of Texas.

5.10     VENUE. Venue for all proceedings hereunder will be in the U.S. District
         Court for the Southern District of Texas, Houston Division. Executive
         hereby waives his right to request a jury.

5.11     HEADINGS. The headings in this Agreement are inserted for convenience
         of reference only and shall not affect the meaning or interpretation of
         this Agreement.

5.12     SEVERABILITY. In the event that any provision or portion of this
         Agreement shall be determined to be invalid or unenforceable for any
         reason, the remaining provisions of this Agreement shall be unaffected
         hereby and shall remain in full force and effect.

5.13     PARTIAL INVALIDITY. In the event that any part, portion or Section of
         this Agreement is found to be invalid or unenforceable for any reason,
         the remaining provisions of this Agreement shall be binding upon the
         parties hereto and the Agreement will be construed to give meaning to
         the remaining provisions of this Agreement in accordance with the
         intent of this Agreement.

5.14     COUNTERPARTS. This Agreement may be executed in one or more
         counterparts, each of which shall be deemed to be original, but all of
         which together constitute one and the same instrument.

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         IN WITNESS WHEREOF, Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors and the Compensation Committee,
the Company has caused these presents to be executed in its name and on its
behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.

         EXECUTED in multiple originals and/or counterparts as of the Effective
Date.

                                      /s/ NICOLAS J. EVANOFF
                                      ------------------------------------------
                                      NICOLAS J. EVANOFF

                                      PRIDE INTERNATIONAL, INC.

                                      BY: /s/ PAUL A. BRAGG
                                          --------------------------------------
                                          PAUL A. BRAGG
                                          President and Chief Executive Officer

                                       12<PAGE>
                                                                     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
<PAGE>
                                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

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                                    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
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      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

<PAGE>
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
<PAGE>
      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
<PAGE>
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
<PAGE>
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
<PAGE>
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.

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<PAGE>
      (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
<PAGE>
      (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
<PAGE>
            (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
<PAGE>
                        (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
<PAGE>
      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
<PAGE>
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
<PAGE>
      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
<PAGE>
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
<PAGE>
      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
<PAGE>
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
<PAGE>
      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
<PAGE>
            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
<PAGE>
                                    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
<PAGE>
            (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
<PAGE>
      (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
<PAGE>
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
<PAGE>
            (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
<PAGE>
            (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
<PAGE>
      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
<PAGE>
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
<PAGE>
            (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
<PAGE>
      (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
<PAGE>
                                    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
<PAGE>
      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
<PAGE>
                                    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
<PAGE>

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
<PAGE>
                               [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
<PAGE>
"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
<PAGE>
      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
<PAGE>
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
<PAGE>
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
<PAGE>
                                 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
<PAGE>
                                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

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