Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is made and entered into as of
December 18, 2006 by and among Third Wave Technologies, Inc., a Delaware corporation (the
“Company”), and the purchaser(s) identified on the signature pages hereto (each a
“Purchaser” and collectively, the “Purchasers”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506
of Regulation D promulgated thereunder, the Company desires to offer, issue and sell to the
Purchasers (the “Offering”), and the Purchasers, severally and not jointly, desire to
purchase from the Company, in the aggregate, up to $20,000,000 (at maturity) of Convertible Senior
Subordinated Zero-Coupon Promissory Notes (the “Notes”), convertible into shares (the
“Shares”) of the Company’s common stock, par value $0.001 per share (the “Common
Stock”) (which in no event shall exceed 19.99% of the Common Stock then outstanding), for an
aggregate purchase price of $14,881,878. The Initial Conversion Price (as defined in the Notes)
shall be $6.00 per share of Common Stock. The Notes and the Shares are sometimes collectively
referred to herein as the “Securities”.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this
Agreement, and for other good and valuable consideration the receipt and adequacy of which is
hereby acknowledged, the Company and each of the Purchasers agree as follows:

A. Purchase and Sale

     (1) Subject to the terms and conditions set forth in this Agreement, at the Closing (as
defined below) the Company shall issue and sell to each Purchaser, and each Purchaser shall,
severally and not jointly, purchase from the Company, the principal maturity amount of Notes set
forth on such Purchaser’s signature page to this Agreement (“Principal Amount”). The
Closing shall take place at the offices of Foley & Lardner LLP, 111 Huntington Avenue, Boston,
Massachusetts 02199, on the Closing Date or at such other location or time as the parties may agree
(the “Closing”). “Closing Date” means the business day on which all of the
conditions set forth in Sections G.1 and G.2 hereof are satisfied or waived, or such other date as
the parties may agree.

     (2) At the Closing, each Purchaser shall deliver or cause to be delivered to the Company the
aggregate purchase price for the Notes to be purchased by such Purchaser as set forth on the
signature page of such Purchaser hereto (the “Investment Amount”). The Notes shall be
issued at an original issue discount from their Principal Amount.

     (3) At the Closing, the Company shall (i) issue to each Purchaser a Note in the Principal
Amount, registered in the name of such Purchaser, and in the form annexed hereto as Exhibit
A; (ii) deliver to the Purchasers and to Robert W. Baird & Co. Incorporated, the placement
agent for the Offering (the “Placement Agent”), a certificate stating that the
representations and warranties made by the Company in Section C of this Agreement were true and
correct in all material respects when made and are true and correct in all material respects on

 

 

the date of the Closing relating to the Securities purchased pursuant to this Agreement as
though made on and as of such Closing Date (provided, however, that representations and warranties
that speak as of a specific date shall continue to be true and correct as of the Closing with
respect to such date); and (iii) cause to be delivered to the Purchasers opinions of Kennedy
Covington Lobdell & Hickman, L.L.P. and Medlen & Carroll, LLP substantially in the forms of
Exhibit B-1 and Exhibit B-2 hereto, respectively. The obligations of the Company
described in the foregoing clauses (i) through (iii) shall be conditions precedent to each
Purchaser’s obligation to complete the purchase of the Notes as contemplated by this Agreement.

     (4) Each Purchaser acknowledges and agrees that the purchase of Notes by such Purchaser
pursuant to the Offering is subject to all the terms and conditions set forth in this Agreement.

     (5) The purchase by the Purchaser of the Notes issuable to it at the Closing will not result
in such Purchaser (individually or together with any other Person with whom such Purchaser has
identified, or will have identified, itself as part of a “group” in a public filing made with the
SEC involving the Company’s securities) acquiring, or obtaining the right to acquire, in excess of
9.99% of the outstanding shares of Common Stock or the voting power of the Company on a post
transaction basis that assumes that the Closing shall have occurred.

B. Representations and Warranties of the Purchaser

     Each Purchaser, severally and not jointly, hereby represents and warrants to the Company as of
the date hereof and as of the Closing Date, and agrees with the Company as follows:

     (1) The Purchaser has carefully read this Agreement and the form of Note attached hereto as
Exhibit A (collectively the “Offering Documents”), and is familiar with and
understands the terms of the Offering. The Purchaser has also carefully read and considered the
Company’s (a) Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (the “2005
Form 10-K”), including, without limitation, the financial statements included therein and the
sections therein entitled “Item 1. Business,” “Risk Factors” (which immediately follows “Item 1.
Business”), and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” (b) Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, including,
without limitation, the subsections of such Form 10-Q entitled “Item 1. Financial Statements,” and
“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
(c) Current Reports on Form 8-K filed on January 18, 2006, February 6, 2006, February 28, 2006,
April 6, 2006, April 17, 2006, April 25, 2006, June 20, 2006, July 25, 2005, September 8, 2006 and
November 2, 2006, respectively, (d) Definitive Proxy Statement on Schedule 14A filed on April 28,
2006, (e) correspondence with the SEC filed on June 30, 2006 and August 4, 2006 respectively
(collectively, the items identified in subclauses (a) through (e) are referred to herein as the
“2006 SEC Filings”). In addition, the Purchaser has read and is familiar with the
Company’s financial statements for the quarter ended September 30, 2006 including the notes thereto
(the “Q3 Financials”), along with other information provided by the Company. The Purchaser fully
understands all of the risks related to the purchase of the Notes. The Purchaser has carefully
considered and has discussed with the Purchaser’s professional legal, tax, accounting and financial
advisors, to the extent the Purchaser has deemed necessary, the suitability of an investment in the
Notes for the Purchaser’s particular

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tax and financial situation and has determined that the Notes being purchased by the Purchaser
are a suitable investment for the Purchaser. The Purchaser recognizes that an investment in the
Notes involves substantial risks, including the possible loss of the entire amount of such
investment. The Purchaser further recognizes that the Company has broad discretion concerning the
use and application of the proceeds from the Offering.

     (2) The Purchaser acknowledges that (i) the Purchaser has had the opportunity to request
copies of any documents, records, and books pertaining to this investment and (ii) any such
documents, records and books that the Purchaser requested have been made available for inspection
by the Purchaser, the Purchaser’s attorney, accountant or other advisor(s). The Purchaser has
requested, received, reviewed and considered all information it deems relevant in making an
informed decision to purchase the Notes.

     (3) The Purchaser and the Purchaser’s advisor(s) have had a reasonable opportunity to ask
questions of and receive answers from representatives of the Company or Persons acting on behalf of
the Company concerning the Company, the Offering and the Securities and all such questions have
been answered to the full satisfaction of the Purchaser. For purposes of this Agreement,
“Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     (4) The Purchaser is not subscribing for Notes as a result of or subsequent to any
advertisement, article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar, meeting or
conference whose attendees have been invited by any general solicitation or general advertising.

     (5) If the Purchaser is a natural Person, the Purchaser has reached the age of majority in the
state in which the Purchaser resides. The Purchaser has adequate means of providing for the
Purchaser’s current financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Securities for an indefinite period of time, has no need for
liquidity in such investment and can afford a complete loss of such investment.

     (6) The Purchaser has sufficient knowledge and experience in financial, tax and business
matters to enable the Purchaser to utilize the information made available to the Purchaser in
connection with the Offering, to evaluate the merits and risks of an investment in the Securities
and to make an informed investment decision with respect to an investment in the Securities on the
terms described in the Offering Documents. The Purchaser has independently evaluated the merits
and risks of its decision to purchase Notes pursuant to the Offering Documents, and the Purchaser
confirms that it has not relied on the advice of the Company’s or any other Purchaser’s business
and/or legal counsel in making such decision. Such Purchaser has not relied on the business or
legal advice of Robert W. Baird & Co. Incorporated or any of its agents, counsel or affiliates in
making its investment decision hereunder, and confirms that none of such Persons has made any
representations or warranties to such Purchaser in connection with the transactions contemplated by
the Transaction Documents.

     (7) The Purchaser will not sell or otherwise transfer the Securities without registration
under the Securities Act and applicable state securities laws or an applicable

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exemption therefrom. The Purchaser acknowledges that neither the offer nor sale of the
Securities has been registered under the Securities Act or under the securities laws of any state.
The Purchaser represents and warrants that the Purchaser is acquiring the Securities for the
Purchaser’s own account, for investment purposes and not with a view toward resale or distribution
within the meaning of the Securities Act, except pursuant to sales registered or exempted under the
Securities Act. The Purchaser is acquiring the Securities in the ordinary course of business. The
Purchaser has not offered or sold the Securities being acquired nor does the Purchaser have any
present intention of selling, distributing or otherwise disposing of such Securities either
currently or after the passage of a fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstances in violation of the Securities Act. The
Purchaser is aware that (i) the Securities are not currently eligible for sale in reliance upon
Rule 144 promulgated under the Securities Act and (ii) the Company has no obligation to register
the Securities purchased hereunder, except as provided in Section E hereof. By making these
representations herein, the Purchaser is not making any representation or agreement to hold the
Securities for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration statement or an available
exemption to the registration requirements of the Securities Act.

     (8) The Purchaser understands that except as provided in Section E hereof: (i) The Securities
have not been and are not being registered under the Securities Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) the Purchaser shall have delivered to the Company an opinion of counsel, in a form
reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from such registration,
or (C) the Purchaser provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as
amended, (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in
which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other Person is under any obligation to register the Securities under the
Securities Act or any state securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing, the Securities may be pledged in connection
with a bona fide margin account or other loan secured by the Securities with a financial
institution that is an “Accredited Investor” as defined in Rule 501(a) under the Securities Act and
such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Purchaser effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Offering Document, including, without limitation, this Section
(B)(8); provided, that in order to make any sale, transfer or assignment of Securities, the
Purchaser and its pledgee shall make such disposition in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.

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     (9) The Purchaser acknowledges that the Notes and, upon the conversion of the Notes, the
Shares, shall bear any legend required by the securities laws of any state and be stamped or
otherwise imprinted with a legend substantially in the following form:

The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and
neither the securities nor any interest therein may be offered,
sold, transferred, pledged or otherwise disposed of except pursuant
to an effective registration under such act or an exemption from
registration, which, in the opinion of counsel reasonably
satisfactory to this corporation, is available. Notwithstanding the
foregoing, the Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured
by the Securities with a financial institution that is an
“Accredited Investor” as defined in Rule 501(a) under the Securities
Act.

     Certificates evidencing the Shares shall not be required to contain such legend or any other
legend (i) following any sale of such Shares pursuant to Rule 144, or (ii) if such Shares have been
sold under Rule 144(k) or pursuant to the Registration Statement (as hereafter defined) and in
compliance with the obligations set forth in Section E(6), below, or (iii) such legend is not
required under applicable requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the Staff of the Securities and Exchange Commission (“SEC”)),
in each such case (i) through (iii) to the extent reasonably determined by the Company’s legal
counsel. Subject to the foregoing, at such time and to the extent a legend is no longer required
for the Shares, the Company will use its commercially reasonable efforts to, no later than three
(3) trading days following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a legended certificate representing such Shares (together with such accompanying
documentation or representations, which shall have been completed and signed by such Purchaser, as
reasonably required by counsel to the Company), (x) deliver or cause to be delivered a certificate
representing such Shares that is free from the foregoing legend or (y) issue such Shares to the
Purchaser by electronic delivery at the applicable balance account at the Depository Trust Company
(“DTC”). Each Purchaser, severally and not jointly with the other Purchasers, agrees that
the removal of such legend from certificates evidencing the Shares is predicated upon (i) the
Company’s reliance that the Purchaser will sell any Shares pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery requirements, or
an exemption therefrom, and/or (ii) that in the context of a sale under Rule 144, if requested by
the Company’s transfer agent, the Purchaser shall have signed and delivered a representation letter
relating to the Purchaser’s Shares.

     Provided that the Purchaser has fully complied with its obligations hereunder, including,
without limitation, delivery of all required documentation, if within three (3) trading days after
the Company’s or the Company’s transfer agent’s receipt of a legended certificate representing such
Shares or a conversion notice pursuant to a Note, the Company’s transfer agent shall fail to issue
and deliver to such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends, and if on or after such trading day the Purchaser purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale

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by the Purchaser of shares of Common Stock that the Purchaser anticipated receiving from the
Company without any restrictive legend (a “Buy-In”), then the Company shall, within three (3)
trading days after the Purchaser’s request and in the Purchaser’s discretion, either (i) pay cash
to the Purchaser in an amount equal to the Purchaser’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate shall terminate, or (ii) promptly honor
its obligation to deliver to the Purchaser a certificate or certificates representing such shares
of Common Stock and pay cash to the Purchaser in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the closing
bid price on the date of delivery of such legended certificate; provided, however,
that the Company shall have no obligation under this provision if the Company has delivered to the
Company’s transfer agent the documentation required to meet its obligations hereunder and the
failure of such obligations to be met is the sole responsibility of the Company’s transfer agent.

     (10) If this Agreement is executed and delivered on behalf of a partnership, corporation,
trust, estate or other entity: (i) such partnership, corporation, trust, estate or other entity is
duly organized and validly existing and has the full legal right and power and all authority and
approval required (a) to execute and deliver this Agreement and all other instruments executed and
delivered by or on behalf of such partnership, corporation, trust, estate or other entity in
connection with the purchase of its Notes, and (b) to purchase and hold such Notes; (ii) the
signature of the party signing on behalf of such partnership, corporation, trust, estate or other
entity is binding upon such partnership, corporation, trust, estate or other entity; and (iii) such
partnership, corporation, trust or other entity has not been formed for the specific purpose of
acquiring such Notes.

     (11) If the Purchaser is a retirement plan or is investing on behalf of a retirement plan, the
Purchaser acknowledges that an investment in the Notes poses additional risks, including the
inability to use losses generated by an investment in the Notes to offset taxable income.

     (12) The information contained in the purchaser questionnaire in the form of Exhibit C
attached hereto (the “Purchaser Questionnaire”) delivered by the Purchaser in connection
with this Agreement is complete and accurate in all respects. The Purchaser is an “accredited
investor” as defined in Rule 501(a) of Regulation D under the Securities Act on the basis indicated
therein and is a resident of the jurisdiction set forth therein. The Purchaser is not required to
be a registered broker-dealer under Section 15 of the Exchange Act. The information contained in
the selling stockholder questionnaire in the form of Exhibit D attached hereto (the
“Selling Stockholder Questionnaire”) delivered by the Purchaser in connection with this
Agreement is complete and accurate in all respects. The Purchaser will notify the Company
immediately of any changes in any such information contained in such Purchaser’s Selling
Stockholder Questionnaire until such time as the Purchaser has sold all of its Shares or until the
Company is no longer required to keep the Registration Statement effective, except to the extent
that such changed information is not required under the Securities Act to be disclosed in an
amendment or supplement to the Registration Statement.

     (13) The Purchaser acknowledges that the Company will have the authority to issue shares of
Common Stock, in excess of those being issued in connection with the Offering, and that the Company
may issue additional shares of Common Stock from time to time. The

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issuance of additional shares of Common Stock may cause dilution of the existing shares of
Common Stock and a decrease in the market price of such existing shares.

     (14) The Purchaser acknowledges that the Company has engaged the Placement Agent in connection
with the Offering and, as consideration for its services, has agreed (i) to pay the Placement Agent
an aggregate cash commission equal to four percent (4%) of the gross proceeds resulting from the
Offering, and (ii) to reimburse the Placement Agent for its expenses incurred in connection with
the Offering. In addition the Purchaser acknowledges that the Company has engaged Monroe
Securities, Inc. (“Monroe”) as its financial advisor in connection with the Offering and as
consideration for its services, has agreed to pay Monroe a financial advisory fee equal to one
percent (1%) of the gross proceeds resulting from the Offering, and to reimburse Monroe for its
expenses incurred in connection with its financial advisory services.

     (15) The Purchaser understands that the Notes are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and accuracy of, and the
Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the Notes.

     (16) The Purchaser understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the Securities.

     (17) This Agreement has been duly and validly authorized, executed and delivered on behalf of
the Purchaser and shall constitute the legal, valid and binding obligations of such Purchaser
enforceable against the Purchaser in accordance its terms.

     (18) The execution, delivery and performance by the Purchaser of this Agreement and the
consummation by the Purchaser of the transactions contemplated hereby will not (i) result in a
violation of the organizational documents of the Purchaser or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Purchaser is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to the Purchaser, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of the Purchaser
to perform its obligations hereunder.

     (19) The Purchaser has not entered into any agreement or arrangement that would entitle any
broker or finder to compensation by the Company in connection with the sale of the Notes to such
Purchaser.

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     (20) The Purchaser has, in connection with its purchase of the Notes, complied with all
applicable provisions of the Securities Act, including the rules and regulations promulgated by the
SEC thereunder, and applicable state securities laws.

     (21) Other than the transaction contemplated hereunder, the Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any purchase or disposition, including Short Sales, in the securities of the
Company since December 9, 2006, the time that such Purchaser was first contacted by the Company or
the Placement Agent regarding an investment in the Company. Such Purchaser covenants that neither
it nor any Person acting on its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed. “Short Sales” include,
without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under
the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales
and other transactions through non-US broker dealers or foreign regulated brokers. Each Purchaser
understands and acknowledges, that the SEC currently takes the position that coverage of Short
Sales “against the box” prior to the Effective Date of the Registration Statement is a violation of
Section 5 of the Securities Act, as set forth in Item 65, Section A, of the Manual of Publicly
Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance. Notwithstanding the foregoing, in the case of a Purchaser that is
a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of
such Purchaser’s assets, the representation and covenant set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the investment decision
to purchase the Notes covered by this Agreement.

C. Representations and Warranties of the Company

     Except as set forth in or incorporated by reference into the SEC Reports (defined below) or
the Company Disclosure Schedule annexed hereto as Schedule B, the Company hereby makes the
following representations and warranties to the Purchasers:

     (1) Organization, Good Standing and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as currently conducted. The Company is
duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions
in which the character of the property owned or leased or the nature of the business transacted by
it makes qualification necessary, except where any failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on (i) the business, properties,
financial condition or results of operations of the Company or (ii) the transactions contemplated
hereby and by the other Offering Documents or by the agreements and instruments to be entered into
in connection herewith or therewith or on the ability of the Company to perform its obligations
under the Offering Documents (a “Material Adverse Effect”). The Company is not a
participant in any joint venture, partnership or similar arrangement material to the business of
the Company.

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     (2) Capitalization. The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock and 10,000,000 shares of Series A participating preferred stock,
par value $0.001 per share. As of November 30, 2006, there were 41,846,951 shares of Common Stock
and no shares of preferred stock issued and outstanding. As of November 30, 2006, the Company had
reserved (i) 10,531,011 shares of Common Stock for issuance to employees, directors and consultants
pursuant to the Company’s 2000 Stock Plan, as amended (the “Option Plan”), of which 8,014,848
shares of Common Stock are subject to outstanding, unexercised options as of such date, and (ii)
306,347 shares of common stock for issuance to employees pursuant to the Company’s 2000 Employee
Stock Purchase Plan (the “Purchase Plan,” and together with the Option Plan, the “Plans”). Other
than as otherwise set forth above or as contemplated in this Agreement, (a) there are no other
options, warrants, calls, rights, commitments or agreements of any character to which the Company
is a party or by which either the Company is bound or obligating the Company to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement and (b) the issuance and sale of the
Notes contemplated hereby will not give rise to any preemptive rights, rights of first refusal or
other similar rights on behalf of any Person.

     (3) Issuance; Reservation of Shares. The issuance of the Notes has been duly and
validly authorized by all necessary corporate action and no further action is required by the
Company or its stockholders in connection therewith. The Notes, when issued and paid for pursuant
to this Agreement, will be validly issued obligations of the Company, free from all taxes, liens
and charges with respect to such issuance. The issuance of the Shares have been duly and validly
authorized by all necessary corporate action and no further action is required by the Company or
its stockholders in connection therewith. As of the Closing, a number of shares of Common Stock
shall have been duly authorized and reserved for issuance which equals or exceeds 100% of the
aggregate of the maximum number of shares of Common Stock issuable upon conversion of the Notes.
The Shares, when issued and paid for upon the due conversion of the Notes, will be validly issued,
fully paid and non-assessable shares of Common Stock of the Company. The issuance of the
Securities will not result in the right of any holder of any securities of the Company to adjust
the exercise, conversion, exchange or reset price under such securities. The Company has reserved,
and will reserve, at all times that the Notes remain outstanding, such number of shares of Common
Stock sufficient to enable the full conversion of the Notes.

     (4) Authorization; Enforceability. The Company has all corporate right, power and
authority to enter into this Agreement and to consummate the transactions contemplated hereby. All
corporate action on the part of the Company necessary for the authorization, execution, delivery
and performance of this Agreement by the Company has been taken and no further action is required
by the Company or its stockholders in connection therewith. This Agreement has been (or upon
delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting enforcement
of creditors’ rights generally, (ii) laws relating to the

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availability of specific performance, injunctive relief or other equitable remedies, and (iii)
laws, or public policy underlying such laws, relating to indemnification and contribution.

     (5) No Conflict; Governmental and Other Consents.

          (a) The execution and delivery by the Company of this Agreement and the Notes and the
consummation of the transactions contemplated hereby and thereby will not result in the violation
of (i) assuming the accuracy of the representations and warranties of each Purchaser, any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental
authority to or by which the Company is bound (including federal and state securities laws and
regulations and the rules and regulations of the Nasdaq Global Market (“Nasdaq”)), or (ii)
of any provision of the Certificate of Incorporation or Bylaws of the Company, and will not
conflict with, or result in a breach or violation of, any of the terms or provisions of, or
constitute (with due notice or lapse of time or both) a default under or give to others any rights
of termination, amendment, acceleration or cancellation of, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which the Company is a
party or by which it is bound or to which any of its properties or assets is subject, nor result in
the creation or imposition of any lien upon any of the properties or assets of the Company, except
in each case to the extent that any such violation, conflict or breach would not be reasonably
likely to have a Material Adverse Effect. No holder of any of the securities of the Company or any
subsidiaries has any rights (“demand,” “piggyback” or otherwise) to have such securities registered
by reason of the intention to file, filing or effectiveness of a Registration Statement (as defined
in Section E hereof), other than the registration rights of the other Purchasers purchasing Notes
in the Offering. The Company is eligible to register its Common Stock for resale by the Purchasers
on Form S-3 promulgated under the Securities Act.

          (b) Assuming the accuracy of the representations and warranties of each Purchaser party
hereto, no consent, approval, authorization or other order of any governmental authority or other
third-party is required to be obtained by the Company in connection with the authorization,
execution and delivery of this Agreement or with the authorization, issue and sale of the
Securities, except such post-Closing filings as may be required to be made with the SEC, and with
any state or foreign blue sky or securities regulatory authority, or as would not be reasonably
likely to have a Material Adverse Effect on the Company. The Company is not in violation of the
listing requirements of Nasdaq in any material respect and has no knowledge of any facts that would
reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

     (6) Litigation. There are no pending or, to the Company’s knowledge, threatened legal
or governmental proceedings against the Company or any of its subsidiaries or any of their
respective officers or directors, which, if adversely determined, would individually or in the
aggregate be reasonably likely to have a Material Adverse Effect on the Company. There is no
action, suit or proceeding, and to the knowledge of the Company, no inquiry or investigation,
before or by any court, public board or body (including, without limitation, the SEC or Nasdaq)
pending or, to the knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries or any of their respective officers or directors, wherein an unfavorable decision,
ruling or finding could adversely affect the validity or enforceability of, or the authority

10

 

or ability of the Company to perform its obligations under this Agreement. Neither the
Company nor any subsidiary, nor any director or officer thereof (in his or her capacity as such),
is or has been the subject of any action involving a claim or violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. The SEC has not issued
any stop order or other order suspending the effectiveness of any registration statement filed by
the Company or any subsidiary under the Exchange Act or the Securities Act.

     (7) Accuracy of Reports. All reports required to be filed by the Company during the
two years preceding the date hereof (the “SEC Reports”) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), have been timely filed with the SEC, complied at
the time of filing in all material respects with the requirements of their respective forms and,
except to the extent any such SEC Report has been updated or superseded prior to the date of this
Agreement by any subsequently filed report, were complete and correct in all material respects as
of the dates at which the information was furnished, and contained (as of such dates) no untrue
statements of a material fact nor omitted to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Report is, or has been, required to be
amended or updated under applicable law (except for such statements as have been amended or updated
in subsequent filings made prior to the date hereof). As of their respective dates, the financial
statements of the Company included in the SEC Reports complied in all material respects with
applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto in effect as of the time of filing. There are no unresolved SEC staff comments with
respect to any of the Company’s reports filed under the Exchange Act.

     (8) Financial Information. The Company’s financial statements that appear in the SEC
Reports have been prepared in accordance with United States generally accepted accounting
principles (“GAAP”), except in the case of unaudited statements, as permitted by Form 10-Q
of the SEC or as may be indicated therein or in the notes thereto, applied on a consistent basis
throughout the periods indicated and such financial statements fairly present in all material
respects the financial condition and results of operations and cash flows of the Company as of the
dates and for the periods indicated therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments).

     (9) Accounting and Disclosure Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
accountability for assets and liabilities; (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets and liabilities is compared with existing assets and liabilities
at reasonable intervals and appropriate action is taken with respect to any differences. The
Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-14 under
the Exchange Act) that are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and forms of the SEC,
including, without limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under

11

 

the Exchange Act is accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required disclosure.

     (10) Sarbanes-Oxley Act of 2002. The Company is in compliance with all applicable
provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder
or is implementing the provisions thereof that are in effect and is taking reasonable steps to
ensure that it will be in compliance with other applicable provisions of the Sarbanes-Oxley Act of
2002 not currently in effect upon the effectiveness of such provisions, except where such
noncompliance would not have, individually or in the aggregate, a Material Adverse Effect.

     (11) Absence of Certain Changes. Since September 30, 2006, the date of the Company’s
financial statements in the latest of the SEC Reports, (i) there has not occurred any undisclosed
event that individually or in the aggregate has caused a Material Adverse Effect or any occurrence,
circumstance or combination thereof that reasonably would be likely to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course of business, (B) liabilities
that would not be required to be reflected in the Company’s financial statements pursuant to GAAP
or that would not be required to be disclosed in filings made with the Commission or (C)
obligations pursuant to engagement agreements with the Placement Agent and Monroe, (iii) the
Company has not (A) declared or paid any dividends, (B) amended or changed the Certificate of
Incorporation or Bylaws of the Company or its subsidiaries, or (C) altered its method of accounting
or the identity of its auditors and (iv) the Company has not made a material change in officer
compensation except in the ordinary course of business consistent with past practice.

     (12) Investment Company. The Company is not an “investment company” within the
meaning of such term under the Investment Company Act of 1940, as amended, and the rules and
regulations of the SEC thereunder.

     (13) Subsidiaries. The Company has no subsidiaries. For the purposes of this
Agreement, “subsidiary” shall mean any company or other entity of which at least 50% of the
securities or other ownership interest having ordinary voting power for the election of directors
or other Persons performing similar functions are at the time owned directly or indirectly by the
Company or any of its other subsidiaries.

     (14) Certain Fees. Other than fees payable to the Placement Agent and Monroe (for
which the Company shall be responsible), no brokers’, finders’ or financial advisory fees or
commissions will be payable by the Company with respect to the transactions contemplated by this
Agreement.

     (15) Material Agreements. All material agreements to which the Company is a party or
to which its property or assets are subject that are required to be filed as exhibits to the SEC
Reports under Item 601 of Regulation S-K are included as part of, or specifically identified in,
the SEC Reports (other than the engagement agreements with the Placement Agent and Monroe.) The
Company has not received any notice of default by the Company, and, to the Company’s knowledge, the
Company is not in default under, any such material agreement now in effect, the

12

 

result of which would individually or in the aggregate be reasonably likely to have a Material
Adverse Effect.

     (16) Transactions with Affiliates. None of the officers or directors of the Company
has entered into any transaction with the Company that would be required to be disclosed pursuant
to Item 404(a) of Regulation S-K.

     (17) Taxes. The Company has filed or has valid extensions of the time to file all
necessary material federal, state, and foreign income and franchise tax returns due prior to the
date hereof and has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of any material tax deficiency which has been or might be asserted or threatened against
it which could reasonably be expected to result in a Material Adverse Effect.

     (18) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the Company believes are
prudent and customary in the businesses in which the Company is engaged. The Company has no
knowledge that it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business without an increase in cost significantly greater than general increases in
cost experienced for similar companies in similar industries with respect to similar coverage.

     (19) Intellectual Property Rights and Licenses.

          (a) The Company owns or possesses adequate licenses to use, any and all (i) information, (ii)
know-how, trade secrets, (iii) United States and foreign patents, copyrights, trademarks, service
marks and trade names, and (iv) domain names, software, formulae, methods, processes and other
intangible properties, in each case that are of a such nature and significance to the business that
the failure to own or have the right to use such items individually or in the aggregate would have
a Material Adverse Effect (“Intangible Rights”).

          (b) The Company has not received any notice that it is in conflict with or infringing upon the
asserted intellectual property rights of others in connection with the Intangible Rights, and, to
the Company’s knowledge, neither the use of the Intangible Rights nor the operation of the
Company’s businesses is infringing or has infringed upon any intellectual property rights of
others.

          (c) All payments have been duly made that are necessary to maintain the Intangible Rights in
force.

          (d) The Company and each of its subsidiaries have taken reasonable steps to obtain and
maintain in force all licenses and other permissions under Intangible Rights of third parties
necessary to conduct their businesses as heretofore conducted by them, and now being conducted by
them, and the Company and each of its subsidiaries are not or have not been in material breach of
any such license or other permission.

          (e) no third parties have obtained rights to any such Intangible Rights that would hinder the
Company’s use of such Intangible Rights;

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          (f) to the Company’s knowledge, other than as described on the Company Disclosure Schedule,
there is no infringement or misappropriation by third parties of any such Intangible Rights;

          (g) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the Company’s rights in or to any such Intangible Rights, and the
Company is unaware of any facts which would form a basis for any such claim;

          (h) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the validity, enforceability, or scope of any such Intangible Rights,
and the Company is unaware of any facts which would form a basis for any such claim;

          (i) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others that any of the Company’s products, product candidates, or services infringes,
misappropriates, or otherwise violates, or would infringe upon, misappropriate or otherwise violate
any patent, trademark, copyright, trade secret or other proprietary right of others, and the
Company is unaware of any facts which would form a basis for any such claim;

          (j) to the Company’s knowledge there is no patent, or patent application that is likely to
issue, that contains claims that cover or may cover any Intangible Rights described in SEC Reports
as being necessary for the conduct of their business as currently or contemplated to be conducted
or that interferes with the issued or pending claims of any such Intangible Rights;

          (k) there is no prior art or public or commercial activity of which the Company is aware that
is reasonably anticipated to render any patent held by the Company invalid or any patent
application held by the Company unpatentable, which has not been disclosed to the U.S. Patent and
Trademark Office; and

          (l) the Company has not committed any act or omitted to undertake any act the effect of such
commission or omission would render the Intangible Rights invalid or unenforceable in whole or in
part. To the Company’s knowledge, none of the technology employed by the Company has been obtained
or is being used by the Company in violation of the rights of any Person or third party. The
Company knows of no infringement or misappropriation by others of the Intangible Rights, except
such infringement or misappropriation which would not have a Material Adverse Effect.

     (20) Compliance with Law; Foreign Corrupt Practices. The Company is in compliance
with all applicable laws, except for such noncompliance that individually or in the aggregate are
not reasonably likely to have a Material Adverse Effect. The Company has not received any notice
of, nor does the Company have any knowledge of, any violation (or of any investigation, inspection,
audit or other proceeding by any governmental entity involving allegations of any violation) of any
applicable law involving or related to the Company which has not been dismissed or otherwise
disposed of that individually or in the aggregate is reasonably likely to have a Material Adverse
Effect. The Company has not received notice or otherwise has any knowledge that the Company is
charged with, threatened with or under investigation with respect to, any violation of any
applicable law that individually or in the aggregate is reasonably likely to

14

 

have a Material Adverse Effect. Neither the Company nor any of its subsidiaries nor, to the
knowledge of the Company, any employee or agent of the Company or any subsidiary has, in the course
of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic government
official or employee

     (21) Ownership of Property. Except as set forth in the Company’s financial statements
included in the SEC Reports, the Company has (i) good and marketable fee simple title to its owned
real property, if any, free and clear of all liens, except for liens which do not individually or
in the aggregate have a Material Adverse Effect; (ii) a valid leasehold interest in all leased real
property, and each of such leases is valid and enforceable in accordance with its terms (subject to
laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules
of law governing specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy), except as would not be reasonably likely to have a Material Adverse
Effect, and (iii) good title to, or valid leasehold interests in, all of its other material
properties and assets free and clear of all liens, except for liens disclosed in the SEC Reports or
which otherwise do not individually or in the aggregate have a Material Adverse Effect.

     (22) No Integrated Offering. Neither the Company, nor, to its knowledge, any of its
affiliates or other Person acting on the Company’s behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security under circumstances
that would cause the Offering of the Notes to be integrated with prior offerings by the Company for
purposes of the Securities Act, when integration would cause the Offering not to be exempt from the
registration requirements of Section 5 of the Securities Act.

     (23) No General Solicitation. Neither the Company nor, to its knowledge, any Person
acting on behalf of the Company, has offered or sold any of the Notes by any form of “general
solicitation” within the meaning of Rule 502 under the Securities Act. To the knowledge of the
Company, no Person acting on its behalf has offered the Notes for sale other than to the Purchasers
and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

     (24) No Registration. Assuming the accuracy of the representations and warranties
made by, and compliance with the covenants of, the Purchasers in Section B hereof, no registration
of the Securities under the Securities Act is required in connection with the offer and sale of the
Notes by the Company to the Purchasers or the issuance of the Shares upon conversion of the Notes.

     (25) No Brokers. Except with respect to the Placement Agent and Monroe, neither the
Company nor any subsidiary of the Company has taken action that would give rise to any claim by any
Person for brokerage commissions, finder’s fees, financial advisory fees or similar payments in
connection with the transactions contemplated by this Agreement and neither the Company nor any of
the subsidiaries has incurred, or shall incur, directly or indirectly, any

15

 

liability for any claim for brokerage commissions, finder’s fees, financial advisory or
similar payments in connection with this Agreement or the Offering Documents or any transaction
contemplated hereby or thereby.

     (26) Application of Takeover Protections; Rights Agreement. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the
laws of the State of Delaware which is or could become applicable to any Purchaser as a result of
the transactions contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Purchaser ownership of the Securities. The Company has not
adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial
ownership of its common stock or a change in control of the Company.

     (27) Solvency. Based on the financial condition of the Company as of the Closing Date
(and assuming the Closing shall have occurred), (i) the Company’s fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the Company’s existing
debts and other liabilities (including known contingent liabilities) as they mature; (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii) the current cash
flow of the Company, together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would be sufficient to
pay all amounts on or in respect of its debt when such amounts (including the Notes) are required
to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on or in respect of
its debt).

     (28) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its Exchange Act filings and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse Effect.

     (29) Transfer Taxes. On the Closing Date, all transfer or other taxes (other than
income or similar taxes) which are required to be paid in connection with the sale and transfer of
the Notes to be sold to each Purchaser hereunder will be, or will have been, fully paid or provided
for by the Company, and all laws imposing such taxes will be or will have been complied with.

     (30) Environmental Matters. The Company has obtained, or has applied for, and is in
compliance with and in good standing under all permits required under Environmental Laws (except
for such failures that individually or in the aggregate would not be reasonably likely to have a
Material Adverse Effect) and the Company has no knowledge of any proceedings to substantially
modify or to revoke any such permit. There are no investigations of which the Company has
knowledge, proceedings or litigation pending or, to the Company’s knowledge,

16

 

threatened against the Company or any of the Company’s facilities relating to Environmental Laws or
Hazardous Substances. “Environmental Laws” shall mean all federal, national, state, regional and
local laws, statutes, ordinances and regulations, in each case as amended or supplemented from time
to time, and any judicial or administrative interpretation thereof, including orders, consent
decrees or judgments relating to the regulation and protection of human health, safety, the
environment and natural resources.

     (31) Disclosure. To the Company’s knowledge, no material event or circumstance has
occurred or information exists with respect to the Company or its business, properties, operations
or financial conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly announced or
disclosed.

     (32) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Company
acknowledges and agrees that no Purchaser is (i) an officer or director of the Company, (ii) an
“affiliate” of the Company (as defined in Rule 144) or (iii) to the knowledge of the Company, a
“beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule
13d-3 of the Exchange Act). The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the
Offering Documents and the transactions contemplated hereby and thereby.

     (33) Dilutive Effect. The Company understands and acknowledges that the number of
Shares issuable upon conversion of the Notes may, under certain circumstances described in the
Note, increase. The Company further acknowledges that its obligation to issue the Shares upon
conversion of the Notes in accordance with this Agreement and the Notes is absolute and
unconditional regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.

     (34) Employee Relations.

     (i) The Company is not a party to any collective bargaining agreement and, to its knowledge,
its employees are not union members. The Company believes that its relations with its employees
are good. No executive officer of the Company (as defined in Rule 501(f) of the Securities Act)
has notified the Company that such officer intends to leave the Company or otherwise terminate such
officer’s employment with the Company. No executive officer of the Company, to the knowledge of
the Company, is in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or any other contract
or agreement or any restrictive covenant relating to such executive officer’s employment with the
Company, and the continued employment of each such executive officer does not, to the knowledge of
the Company, subject the Company to any liability with respect to any of the foregoing matters;

     (ii) The Company is in compliance with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in compliance would not,
either individually or in the aggregate, reasonably be expected to result in a Material Adverse
Effect; and

17

 

     (iii) No material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any employees of the Company.

     (35) Manipulation of Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Notes, (ii) other than the Placement Agent, sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the Notes, or (iii) other than the
Placement Agent, paid or agreed to pay to any Person any compensation for soliciting another to
purchase any other securities of the Company.

     (36) Indebtedness and Other Contracts. Neither the Company nor any of its subsidiaries
(i) has any outstanding Indebtedness (as defined below) in excess of $100,000, individually, or
$500,000, in the aggregate from any one lender (together with such lender’s affiliates), (ii) is a
party to any contract, agreement or instrument, the violation of which, or default under which, by
the other party(ies) to such contract, agreement or instrument could reasonably be expected to
result in a Material Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv)
is a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse
Effect. The Company does not have any Indebtedness except as described in the 2006 SEC Filings.
There are no financing statements securing obligations in any material amounts, either singly or in
the aggregate, filed in connection with the Company or any of its subsidiaries. For purposes of
this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness
for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase
price of property or services, including (without limitation) “capital leases” in accordance with
generally accepted accounting principles (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect to letters of
credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (F) all monetary obligations under any leasing
or similar arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the payment of such indebtedness, and
(H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person

18

 

with respect to any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or that the holders of
such liability will be protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.

     (37) Ranking of Notes. Other than Permitted Senior Indebtedness (as defined in the
Notes), no Indebtedness of the Company is senior to or ranks pari passu with the Notes in right of
payment, whether with respect of payment of redemptions, interest, damages or upon liquidation or
dissolution or otherwise. Other than in connection with Permitted Liens (as defined in the Notes),
no Indebtedness of the Company is secured by any assets of the Company.

     (38) FDA Compliance. The Company and each of its subsidiaries are conducting their
business in compliance with the rules and regulations of the United States Food and Drug
Administration (the “FDA”) and all applicable federal, state and local laws, orders, rules,
regulations, directives, decrees and judgments of each of the jurisdictions in which it is
conducting business, including, without limitation, all applicable local, state and federal laws
and regulations governing health, sanitation, safety, zoning and land use, except where the failure
to be so in compliance would not have a Material Adverse Effect. There are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, claims, liens, notices of
noncompliance or violation, investigation or proceedings before the FDA or any other federal,
state, local or foreign governmental bodies that involve or effect the Company, its existing
products, product candidates or any of its Subsidiaries which, individually or in the aggregate,
are reasonably likely to result in a Material Adverse Effect.

D. Understandings

     Each of the Purchasers understands, acknowledges and agrees with the Company as follows:

     (1) No federal or state agency or authority has made any finding or determination as to the
accuracy or adequacy of the Offering Documents or as to the fairness of the terms of the Offering
nor any recommendation or endorsement of the Securities. Any representation to the contrary is a
criminal offense. In making an investment decision, Purchasers must rely on their own examination
of the Company and the terms of the Offering, including the merits and risks involved.

     (2) The Offering is intended to be exempt from registration under the Securities Act by virtue
of Section 4(2) of the Securities Act and the provisions of Rule 506 of Regulation D thereunder,
which is in part dependent upon the truth, completeness and accuracy of the statements made by the
Purchaser herein and in the Purchaser Questionnaire.

     (3) Notwithstanding the registration obligations provided herein, there can be no assurance
that the Purchaser will be able to sell or dispose of the Securities. It is understood that in
order not to jeopardize the Offering’s exempt status under Section 4(2) of the Securities Act

19

 

and Regulation D, any transferee may, at a minimum, be required to fulfill the investor
suitability requirements thereunder.

     (4) The Purchaser acknowledges that the Offering is confidential and non-public and agrees
that all information about the Offering shall be kept in confidence by the Purchaser until the
public announcement of the Offering by the Company. The Purchaser acknowledges that the foregoing
restrictions on the Purchaser’s use and disclosure of any such confidential, non-public information
contained in the above-described documents restricts the Purchaser from trading in the Company’s
securities to the extent such trading is on the basis of material, non-public information. Except
for the terms of the transaction documents and the fact that the Company is considering
consummating the transactions contemplated therein, and except where the Purchaser or its agent has
executed a Non-Disclosure Agreement with the Company, the Company confirms that neither the Company
nor, to its knowledge, any other Person acting on its behalf, has provided any of the Purchasers or
their agents or counsel with any information that constitutes material, non-public information.

     (5) The Purchaser agrees that beginning on the date hereof until the Offering is publicly
announced by the Company (which the Company has agreed to undertake in accordance with the
provisions of Section F.1. hereof), the Purchaser will not enter into any Short Sales. For
purposes of determining whether a Purchaser has an equivalent offsetting long position in the
Common Stock, all Common Stock that would be issuable upon exercise in full of all options then
held by such Purchaser (assuming that such options were then fully exercisable, notwithstanding any
provisions to the contrary, and giving effect to any exercise price adjustments scheduled to take
effect in the future) shall be deemed to be held long by such Purchaser.

E. Registration Rights

     (1) Certain Definitions. For purposes of this Section E, the following terms shall
have the meanings ascribed to them below.

          (a) “Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the Offering of any portion of the Registrable Securities covered by
the Registration Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed to be incorporated
by reference in such Prospectus.

          (b) “Registrable Securities” shall mean any Shares issuable pursuant to the Offering
Documents together with any securities issued or issuable upon any stock split, dividend or other
distribution, adjustment, recapitalization or similar event with respect to the foregoing.

          (c) “Registration Statement” means the registration statement required to be filed
under this Section E, including the Prospectus, amendments and supplements to such

20

 

registration statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.

     (2) Registration Statement.

          (a) The Company shall use its reasonable best efforts to prepare and file with the SEC a
Registration Statement covering the resale of all Registrable Securities for an offering to be made
on a continuous basis pursuant to Rule 415 under the Securities Act on or prior to the 30th day
following the Closing Date (such date of actual filing, the “Filing Date”). The
Registration Statement shall be on Form S-3 (or on such other form appropriate for such purpose)
and shall contain (except if otherwise directed by the Purchasers and reasonably agreed to by the
Company) a “Plan of Distribution” substantially in the form attached hereto as Exhibit E.
Each Purchaser will furnish to the Company, at the Closing, a completed questionnaire in the form
set forth as Exhibit D hereto. Each Purchaser agrees to promptly update such questionnaire
in order to make the information previously furnished to the Company by such Purchaser not
materially misleading and deliver such updated questionnaire to the Company. By 9:30 a.m. on the
business day following the date on which the Registration Statement is declared effective by the
SEC, the Company shall file with the SEC in accordance with Rule 424 under the Securities Act the
final prospectus to be used in connection with sales pursuant to such Registration Statement.

          (b) The Company shall use its reasonable best efforts to cause the Registration Statement to
be declared effective by the SEC (the “Effective Date”) on or prior to the 90th day
following the Closing Date or on the 120th day following the Closing Date in the event that the SEC
has reviewed the Registration Statement, and shall use its reasonable best efforts to keep the
Registration Statement continuously effective under the Securities Act until the earliest of (i)
the second anniversary of the Effective Date of the Registration Statement, (ii) the date when all
Registrable Securities are eligible for resale under Rule 144(k) of the Securities Act or (iii) the
date when all Registrable Securities covered by such Registration Statement have been sold (the
“Effectiveness Period”).

          (c) The Company shall request effectiveness of the Registration Statement (and any
post-effective amendments thereto) within five (5) business days following the Company’s receipt of
notice from the SEC that the Registration Statement will not be reviewed by the SEC or that the SEC
has completed its review of such Registration Statement and has no further comments. The Company
will telephonically request that the Registration Statement be declared effective as of 4:00 p.m.
Eastern time on the Effective Date.

          (d) Upon the occurrence of any Event (as defined below), as relief for the damages suffered
therefrom by the Purchasers (the parties hereto agree that the liquidated damages provided for in
this Paragraph (2)(d) constitute a reasonable estimate of the damages that may be incurred by the
purchasers by reason of an Event), the Company shall pay to each Purchaser, as liquidated damages
and not as a penalty (it being agreed that it would not be feasible to ascertain the extent of such
damages with precision), such amounts and at such times as shall be determined pursuant to this
Paragraph (2)(d). For such purposes, each of the following shall constitute an “Event”:

21

 

     (i) the Filing Date does not occur on or prior to the 30th day following the Closing
Date (such date is defined herein as the “Filing Default Date”), in which case the
Company shall pay to each Purchaser an amount in cash equal to one percent (1.0%) of the
aggregate purchase price paid by such Purchaser, on a pro-rata basis over a 30-day period,
for each 30-day period thereafter or any portion thereof until the Filing Date, to be paid
within ten days of the end of each 30-day period;

     (ii) the Registration Statement is not declared effective on or prior to the date that
is 90 days after the Closing Date or 120 days after the Closing Date in the event that the
SEC has reviewed the Registration Statement (the “Required Effectiveness Date”), in
which case the Company shall pay to each Purchaser an amount in cash equal to one percent
(1.0%) of the aggregate purchase price paid by such Purchaser, on a pro-rata basis over a
30-day period, for each 30-day period after such 90th day or 120th, as applicable, until the
Registration Statement is deemed effective, no later than ten days following the end of each
30-day period; or

     (iii) after the Effective Date, the SEC issues any stop order suspending the
effectiveness of the Registration Statement, in which case the Company shall pay to each
Purchaser an amount in cash equal to one percent (1.0%) of the aggregate purchase price paid
by such Purchaser, on a pro-rata basis over a 30-day period, for each 30-day period after
the effective date of such stop order until the Registration Statement is again deemed
effective, no later than ten days following the end of each 30-day period.

The payment obligations of the Company under this Section E(2)(d) shall be cumulative.
Notwithstanding anything to the contrary contained herein, in no event shall the aggregate amount
of liquidated damages payable by the Company pursuant to this Paragraph 2(d) exceed twelve percent
(12%) of the aggregate purchase price paid by each Purchaser.

     (3) Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:

          (a) (i) prepare and file with the SEC such amendments, including post-effective amendments, to
the Registration Statement as may be necessary to keep the Registration Statement continuously
effective as to the Registrable Securities for the Effectiveness Period; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; and (iii) respond as promptly as
reasonably practicable to any comments received from the SEC with respect to the Registration
Statement or any amendment thereto.

          (b) Notify the Placement Agent and the Purchasers as promptly as reasonably possible, and (if
reasonably requested by the Placement Agent) confirm such notice in writing, upon becoming aware of
any of the following events: (i) the SEC notifies the Company whether there will be a “review” of
the Registration Statement; (ii) if the SEC issues any stop order suspending the effectiveness of
the Registration Statement or initiates any action, claim, suit, investigation or proceeding (a
“Proceeding”) for that purpose; (iii) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such

22

 

purpose; or (iv) the financial statements included in the Registration Statement become
ineligible for inclusion therein or any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference is untrue in any
material respect or any revision to the Registration Statement, Prospectus or other document is
required so that it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. Notwithstanding the foregoing,
the Company shall not intentionally include any material non-public information in any notice
provided to any Purchaser under this Section E(3)(b).

          (c) Use its reasonable best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment; provided,
however, that the Company may suspend sales pursuant to the Registration Statement for a
period of up to sixty (60) days (unless the holders of a majority of the then-eligible Registrable
Securities consent in writing to a longer delay of up to an additional sixty (60) days) no more
than once in any twelve-month period if the Company furnishes to the holders of the Registrable
Securities a certificate signed by the Company’s Chief Executive Officer stating that in the good
faith judgment of the Company’s Board of Directors, (i) the offering could reasonably be expected
to interfere in any material respect with any acquisition, corporate reorganization or other
material transaction under consideration by the Company or (ii) there is some other material
development relating to the operations or condition (financial or other) of the Company that has
not been disclosed to the general public and as to which it is in the Company’s best interests not
to disclose such development; provided further, however, that the Company may not so suspend sales
more than once in any calendar year without the written consent of the holders of at least a
majority of the then-eligible Registrable Securities. Each violation of the Company’s obligation
not to suspend sales pursuant to the Registration Statement longer than permitted pursuant to the
proviso of this Paragraph 3(c) shall be deemed an “Event” and for each such default, Purchaser
shall be entitled to the payment provisions set forth in Paragraph 2(d)(i).

          (d) Deliver to each Purchaser, which delivery may be made electronically, by the business day
after the date first available, without charge, such reasonable number of copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as
such Purchasers may reasonably request.

          (e) To the extent required by law, prior to any public offering of Registrable Securities, use
its reasonable best efforts to register or qualify or cooperate with the selling Purchasers in
connection with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the securities or “blue sky”
laws of such jurisdictions within the United States as any Purchaser requests in writing, to keep
each such registration or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required for any such purpose to (i)
qualify generally to do business as a foreign corporation in any jurisdiction

23

 

wherein it would not be otherwise required to qualify but for the requirements of this
Paragraph (3)(e), or (ii) subject itself to taxation.

          (f) Comply in all material respects with all applicable rules and regulations of the SEC and
the principal stock exchange or market on which the Common Stock is then listed or eligible for
trading.

     (4) Registration Expenses. The Company shall pay all fees and expenses incident to
the performance of or compliance with this Agreement by the Company, including without limitation
(a) all registration and filing fees and expenses, including without limitation those related to
filings with the SEC, in connection with applicable state securities or “Blue Sky” laws and to
Nasdaq, (b) printing expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing copies of Prospectuses reasonably requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel
for the Company and (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing, each Purchaser shall pay any and all costs, fees, discounts or
commissions attributable to the sale of its respective Registrable Securities and all fees and
expenses of its counsel and other advisors.

     (5) Indemnification.

          (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless
each Purchaser, the partners, members, officers and directors of each Purchaser and each Person or
entity, if any, who controls such Purchaser or any of the foregoing within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any losses, claims,
damages or liabilities (collectively, “Losses”) to which they may become subject (under the
Securities Act or otherwise) insofar as such Losses (or actions or proceedings in respect thereof)
arise out of, or are based upon, any material breach of this Agreement or other Offering Document
by the Company or any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or arise out of any failure by the Company
to fulfill any undertaking included in the Registration Statement and the Company will, as
incurred, reimburse such Purchaser, partner, member, officer, director or controlling Person for
any legal or other expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such Loss arises out of, or is based upon, an untrue statement or
omission or alleged untrue statement or omission made in such Registration Statement in reliance
upon and in conformity with written information furnished to the Company by or on behalf of such
Purchaser, partner, member, officer, director or controlling Person specifically for use in
preparation of the Registration Statement or any breach of this Agreement by such Purchaser;
provided further, however, that the Company shall not be liable to any Purchaser of Registrable
Securities (or any partner, member, officer, director or controlling Person of such Purchaser) to
the extent that any such Loss is caused by an untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus if either (i) (A) such Purchaser failed to
send or deliver a copy of the final prospectus

24

 

with or prior to, or, if Rule 172 is then in effect, such Purchaser failed to confirm that a
final prospectus was deemed to be delivered prior to, the delivery of written confirmation of the
sale by such Purchaser to the Person asserting the claim from which such Loss resulted and (B) the
final prospectus corrected such untrue statement or omission, (ii) (X) such untrue statement or
omission is corrected in an amendment or supplement to the prospectus and (Y) having previously
been furnished by or on behalf of the Company with copies of the prospectus as so amended or
supplemented or, if Rule 172 is then in effect, notified by the Company that such amended or
supplemented prospectus has been filed with the SEC, such Purchaser thereafter fails to deliver
such prospectus as so amended or supplemented, with or prior to, or, if Rule 172 is then in effect,
such Purchaser fails to confirm that the prospectus as so amended or supplemented was deemed to be
delivered prior to, the delivery of written confirmation of the sale of a Registrable Security to
the Person asserting the claim from which such Loss resulted or (iii) such Purchaser sold
Registrable Securities in violation of such Purchaser’s covenant contained in Paragraph (6) below.

          (b) Indemnification by Purchasers. Each Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Company (and each Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each
officer of the Company who signs the Registration Statement and each director of the Company), from
and against any losses, claims, damages or liabilities to which the Company (or any such officer,
director or controlling Person) may become subject (under the Securities Act or otherwise), insofar
as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon, any material breach of this Agreement by such Purchaser or any untrue
statement or alleged untrue statement of a material fact contained in the Registration Statement or
any omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading in each case, on the Effective Date thereof, if, and to the extent, such untrue
statement or omission or alleged untrue statement or omission was made in reliance upon and in
conformity with written information furnished by or on behalf of such Purchaser specifically for
use in preparation of the Registration Statement, including without limitation the Purchaser
Questionnaire and the Selling Stockholder Questionnaire, and such Purchaser will reimburse the
Company (and each of its officers, directors or controlling Persons) for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend any such action,
proceeding or claim for which such Purchaser is determined, in a final non-appealable judgment, to
have an indemnification obligation under this Paragraph 5(b); provided, however, that in no event
shall any indemnity under this Paragraph 5(b) be greater in amount than the dollar amount of the
proceeds received by such Purchaser upon the sale of such Registrable Securities.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall be entitled to
participate therein, and to the extent that it shall wish, assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof. After notice from the Indemnifying
Party to such Indemnified Party of its election to assume the defense thereof, such

25

 

Indemnifying Party shall not be liable to such Indemnified Party for any legal expenses
subsequently incurred by Indemnified Party in connection with the defense thereof. An Indemnified
Party shall have the right to employ separate counsel in any such Proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties. If there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the Indemnified Party for the same counsel to
represent both the Indemnified Party and such Indemnifying Party or any affiliate or associate
thereof, the Indemnified Party shall be entitled to retain its own counsel at the expense of such
Indemnifying Party; provided, further, that no Indemnifying Party shall be responsible for the fees
and expense of more than one separate counsel for all Indemnified Parties. The Indemnifying Party
shall not settle an action without the consent of the Indemnified Party, which consent shall not be
unreasonably withheld, unless such settlement includes an unconditional release of such Indemnified
Party from all liability on claims that are the subject matter of such Proceeding. All reasonable
fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten
business days of written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).

          (d) Contribution. If a claim for indemnification under Paragraph (5)(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or related to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Paragraph (5)(c), any reasonable attorneys’ or other reasonable
fees or expenses incurred by such party in connection with any Proceeding to the extent such party
would have been indemnified for such fees or expenses if the indemnification provided for in this
Paragraph 5(d) was available to such party in accordance with its terms.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Paragraph (5)(d) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provision of this Paragraph (5)(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by which the net
proceeds actually received by such Purchaser from the sale of the Registrable Securities subject

26

 

to the Proceeding exceeds the amount of any damages that such Purchaser has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

     (6) Dispositions. Each Purchaser agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement. Each Purchaser further agrees that,
upon receipt of a notice from the Company of the occurrence of any event of the kind described in
Paragraphs (3)(b), such Purchaser will discontinue disposition of such Registrable Securities under
the Registration Statement until such Purchaser’s receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement, or until it is advised in writing (the
“Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company
may provide appropriate stop orders to enforce the provisions of this paragraph.

     (7) Piggy-Back Registrations. If at any time during the Effectiveness Period, other
than any suspension period referred to in Paragraph (3)(f), there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall determine to prepare and
file with the SEC a registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee benefit plans, then
the Company shall send to each Purchaser written notice of such determination and if, within
fifteen (15) days after receipt of such notice, any such Purchaser shall so request in writing, the
Company shall include in such registration statement all or any part of such Registrable Securities
not already covered by an effective Registration Statement such Purchaser requests to be
registered. The Company shall not allow “piggy-back” rights with respect to the Registration
Statement and will not include therein securities of Persons other than the Purchasers.

     (8) Rule 144. Until such time as the Registrable Securities are eligible for resale
pursuant to Rule 144(k) under the Securities Act, the Company agrees with each holder of
Registrable Securities to:

          (a) comply with the requirements of Rule 144(c) under the Securities Act with respect to
current public information about the Company;

          (b) to file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time it is subject to such reporting
requirements); and

          (c) furnish to any holder of Registrable Securities upon request (i) a written statement by
the Company as to its compliance with the requirements of said Rule 144(c) and the

27

 

reporting requirements of the Securities Act and the Exchange Act (at any time it is subject
to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such holder may reasonably
request to avail itself of any similar rule or regulation of the SEC allowing it to sell any such
securities without registration.

F. Covenants of the Company

     (1) Not later than 8:30 a.m. Eastern time on Tuesday, December 19, 2006, the Company shall
make a public announcement of the execution of this Agreement by filing with the SEC a Current
Report on Form 8-K and issuing a press release, with such public announcement complying with the
safe harbor provisions of Rule 135c of the Securities Act.

     (2) Not later than 8:30 a.m. Eastern time on the business day following the Closing, the
Company shall make a public announcement of the Closing of the Offering by filing with the SEC a
Current Report on Form 8-K and issuing a press release.

     (3) The Company shall not, and shall cause each of its officers, directors, employees and
agents not to, knowingly provide any Purchaser with any material nonpublic information regarding
the Company from and after the issuance of the above referenced filings and press releases without
the express written consent of such Purchaser.

     (4) The Company agrees to file one or more Forms D with respect to the Securities on a timely
basis as required under Regulation D under the Securities Act to claim the exemption provided by
Rule 506 of Regulation D and to provide a copy thereof to the Placement Agent and its counsel
promptly after such filing. The Company, on or before the Closing Date, shall take such action as
the Company shall reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Purchasers at the Closing pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an
exemption from such qualification), and shall provide evidence of any such action so taken to the
Purchasers on or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable securities or “Blue Sky”
laws of the states of the United States following the Closing Date.

     (5) The Company shall (i) timely file with Nasdaq a Listing of Additional Shares Notification
with respect to the Shares to the extent required by applicable Nasdaq rules for Nasdaq listing
eligibility of the Shares (ii) to the extent applicable, take all commercially reasonable steps
necessary to cause such Registrable Securities to be approved for listing on Nasdaq as soon as
possible thereafter; and (iii) use its commercially reasonable efforts to maintain the listing of
the Company’s Common Stock on Nasdaq.

     (6) Other than pursuant to the Registration Statement, prior to the Effective Date, the
Company may not file any registration statement (other than on Form S-8) with the SEC with respect
to any securities of the Company. Until 90 days after the Effective Date, the Company will not
offer, sell, grant any option to purchase, or otherwise dispose of (or announce any of the
foregoing) any of its equity or equity equivalent securities, including, without limitation, any
debt, preferred stock or other instrument or security that is, at any time during its life and
under

28

 

any circumstances, convertible into or exchangeable or exercisable for Common Stock or Common
Stock equivalents, other than with respect to (i) grants of options or sales of Common Stock
pursuant to the Plans or (ii) in connection with the acquisition of all of the capital stock or all
or substantially all of the assets of another business.

     (7) The Company will not sell, offer to sell, solicit offers to buy or otherwise negotiate in
respect of any “security” (as defined in the Securities Act) that is or could be integrated with
the sale of the Securities in a manner that would require the registration of the Securities under
the Securities Act. During the six months following the Closing Date, the Company shall not issue
any “Future Priced Securities” as such term is described by NASD IM-4350-1.

     (8) During the Effectiveness Period, as long as any Purchaser owns Securities, the Company
covenants (i) to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act, and (ii) maintain compliance with all applicable provisions of the
Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder, except where
noncompliance would not have, individually or in the aggregate, a Material Adverse Effect. During
the Effectiveness Period, as long as any Purchaser owns Securities, if the Company is not required
to file reports pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Shares under Rule 144. The Company further covenants that it will take such
further action during the Effectiveness Period as any holder of Securities may reasonably request,
all to the extent required from time to time to enable such Person to sell the Shares and Warrant
Shares without registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.

     (9) Restriction on Redemption and Cash Dividends. So long as any Notes are
outstanding, the Company shall not, directly or indirectly, redeem, or declare or pay any cash
dividend or distribution on, the Common Stock without the prior express written consent of the
holders of Notes representing not less than a majority of the aggregate Principal Amount of the
then outstanding Notes, except for repurchases of securities pursuant to, and in accordance with,
the Company’s equity compensation plans.

     (10) Additional Notes; Variable Securities; Dilutive Issuances. So long as any
Purchaser beneficially owns any Notes, the Company will not issue any Notes other than to the
Purchasers as contemplated hereby and the Company shall not issue any other securities that would
cause a breach or default under the Notes. For so long as any Notes remain outstanding, the Company
shall not, in any manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the Common Stock,
including by way of one or more reset(s) to any fixed price unless the conversion, exchange or
exercise price of any such security cannot be less than the then applicable Initial Conversion
Price (as defined in the Notes) with respect to the Common Stock into which any Note is
convertible.

29

 

     (11) Restrictions on Additional Indebtedness. So long as any of the Notes are
outstanding, the Company shall not incur any indebtedness other than Permitted Indebtedness (as
defined in the Notes) or grant or suffer any liens on its assets other than Permitted Liens.

     (12) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than 100% of the number of
shares of Common Stock issuable upon conversion of the Notes issued at the Closing (without taking
into account any limitations on the Conversion of the Notes set forth in the Notes).

G. Conditions to Closing; Termination

     (1) Conditions Precedent to the Obligations of the Purchasers to Purchase Securities.
The obligation of each Purchaser to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Purchaser, at or before the Closing, of each of the following
conditions:

          (a) The representations and warranties of the Company contained herein shall be true and
correct in all material respects (other than those representations and warranties that are
qualified by “materiality” or Material Adverse Effect qualifiers shall be true and correct in all
respects) as of the date when made and as of the Closing as though made on and as of such date
(except to the extent that such representation or warranty speaks of an earlier date, in which case
such representation and warranty shall be true and correct in all material respects as though made
on and as of the Closing Date);

          (b) The Company shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Offering Documents to be performed, satisfied
or complied with by it at or prior to the Closing;

          (c) No statute, rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions contemplated by the
Offering Documents;

          (d) Since the date of execution of this Agreement, no event or series of events shall have
occurred is reasonably expect to have or result in a Material Adverse Effect;

          (e) Trading in the Common Stock shall not have been suspended by the SEC or Nasdaq (except for
any suspensions of trading of limited duration agreed to by the Company) at any time since the date
of execution of this Agreement, and the Common Stock shall have been at all times since such date
listed for trading on Nasdaq;

          (f) The Company shall have delivered the items required to be delivered by the Company in
accordance with Section A.3;

          (g) This Agreement shall not have been terminated as to such Purchaser in accordance with
Section G.3.

30

 

     (2) Conditions Precedent to the Obligations of the Company to sell Securities. The
obligation of the Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following conditions:

          (a) The representations and warranties of each Purchaser contained herein shall be true and
correct in all material respects (other than those representations and warranties that are
qualified by “materiality” or Material Adverse Effect qualifiers, which shall be true and correct
in all respects) as of the date when made and as of the Closing Date as though made on and as of
such date;

          (b) Each Purchaser shall have performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Offering Documents to be performed,
satisfied or complied with by such Purchaser at or prior to the Closing;

          (c) No statute, rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions contemplated by the
Offering Documents;

          (d) Each Purchaser shall have delivered its Investment Amount in accordance with Section A.2;

          (e) This Agreement shall not have been terminated as to such Purchaser in accordance with
Section G.3.

     (3) Termination. This Agreement may be terminated prior to Closing:

          (a) by written agreement of the Purchasers and the Company; and

          (b) by the Company or a Purchaser (as to itself but no other Purchaser) upon written notice to
the other, if the Closing shall not have taken place by 6:30 p.m. Eastern time on or before
December 31, 2006; provided, that the right to terminate this Agreement under this Section G.3
shall not be available to any Person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to occur on or before
such time.

     In the event of a termination pursuant to Section G.3, the Company shall promptly notify all
non-terminating Purchasers. Upon a termination in accordance with this Section G.3, the Company and
the terminating Purchaser(s) shall not have any further obligation or liability (including as
arising from such termination) to the other and no Purchaser will have any liability to any other
Purchaser under the Offering Documents as a result thereof.

H. Miscellaneous

     (1) All pronouns and any variations thereof used herein shall be deemed to refer to the
masculine, feminine, singular or plural, as identity of the Person or Persons may require.

31

 

     (2) Any notice or other communication required or permitted to be given or delivered under
this Agreement shall be in writing and shall be deemed given and effective on the earliest of (a)
the date of transmission, if such notice or communication is delivered by fax prior to 6:30 p.m.
Eastern Time on a business day, (b) the next business day after the date of transmission, if such
notice or communication is delivered by fax on a day that is not a business day or later than 6:30
p.m. Eastern Time on a business day, (c) upon receipt, if sent by an internationally recognized
overnight delivery service (with charges prepaid), or (d) upon actual receipt by the party to whom
such notice or other communication is required to be given:

	 	(i)	 	if to the Company, to it at:

Third Wave Technologies, Inc.

502 South Rosa Road

Madison, Wisconsin 53719

Fax No.:

Attention:

or such other address as it shall have specified to the Purchaser in writing, with a
copy (which shall not constitute notice) to:

Kennedy Covington Lobdell & Hickman, L.L.P.

4350 Lassiter at North Hills Avenue

Suite 300

Raleigh, NC 27609

Facsimile: (919) 516-2028

Attention: Scott Coward, Esq.

	 	(ii)	 	if to a Purchaser, to it at its address set forth on the signature page to this
Agreement, or such other address as it shall have specified to the Company in
writing;

provided, however, that no notice shall be deemed effective unless there is a confirmation of
receipt (such as a fax confirmation sheet or a delivery receipt from certified mail).

     (3) Failure of the Company to exercise any right or remedy under this Agreement or any other
agreement between the Company and the Purchaser, or otherwise, or delay by the Company in
exercising such right or remedy, will not operate as a waiver thereof. No waiver by the Company
will be effective unless and until it is in writing and signed by the Company.

     (4) This Agreement shall be enforced, governed and construed in all respects in accordance
with the laws of the State of New York, as such laws are applied by the New York courts to
agreements entered into and to be performed in New York by and between residents of New York, and
shall be binding upon the Purchaser, the Purchaser’s heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Company, its successors and assigns.
The Company and each Purchaser hereby agree to submit to the jurisdiction of the courts of the
State of New York with respect to any proceeding arising out of or relating to this Agreement, and
hereby irrevocably waives, and agrees not to assert in any suit,

32

 

action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     (5) If any provision of this Agreement is held to be invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed modified to conform with
such statute or rule of law. Any provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provisions hereof.

     (6) The parties understand and agree that, unless provided otherwise herein, money damages
would not be a sufficient remedy for any breach of the Agreement by the Company or the Purchaser
and that the party against which such breach is committed shall be entitled to equitable relief,
including injunction and specific performance, as a remedy for any such breach. Such remedies
shall not, unless provided otherwise herein, be deemed to be the exclusive remedies for a breach by
either party of the Agreement but shall be in addition to all other remedies available at law or
equity to the party against which such breach is committed.

     (7) The obligations of each Purchaser under this Agreement are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser hereunder, except as may result from the
actions of any such Purchaser other than through the execution hereof. Nothing contained herein
solely by virtue of being contained herein shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any similar entity, or create a presumption that
the Purchasers are in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated hereby.

     (8) This Agreement, together with the agreements and documents executed and delivered in
connection with this Agreement, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof.

     (9) This Agreement may be executed in two or more identical counterparts, all of which shall
be considered one and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party or parties; provided that a facsimile
signature shall be considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile signature.

33

 

     (10) The headings of this Agreement are for convenience of reference and shall not form part
of, or affect the interpretation of, this Agreement.

     (11) This Agreement and the other Offering Documents (including any schedules and exhibits
hereto and thereto) supersede all other prior oral or written agreements between the Purchaser, the
Company, their affiliates and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and other Offering Documents (including any schedules and exhibits
hereto and thereto) and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor any Purchaser makes any representation, warranty,
covenant or undertaking with respect to such matters.

     (12) No provision of this Agreement may be amended other than by an instrument in writing
signed by the Company and Purchasers holding or being obligated to purchase at least a majority of
the Shares. No consideration shall be offered or paid to any Purchaser to amend or consent to a
waiver or modification of any provision of any Offering Document unless the same consideration is
also offered to all Purchasers who then hold Notes or Shares. No provision hereof may be waived
other than by an instrument in writing signed by the party against whom enforcement is sought.

     (13) Any Purchaser may assign any or all of its rights under this Agreement to any Person,
provided that such transferee agrees in writing to be bound by the terms and provisions of this
Agreement and, to the extent applicable, the other Offering Documents, and such transfer is in
compliance with the terms and provisions of this Agreement and permitted by federal and state
securities laws.

     (14) The representations and warranties of the parties contained herein or in any other
agreements or documents executed in connection herewith shall survive the Closing.

     (15) Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.

* * * * * * *

34

 

SIGNATURE PAGE

     The Purchaser hereby agrees to purchase the Principal Amount of Notes, in exchange for the
Investment Amount, as set forth below, and agrees to be bound by the terms and conditions of this
Agreement.

	 	 	 	 	 	 
	PURCHASER	 	 	 	 	 
	 
	 	 	 	 	 
	Principal Amount:
	 	$	20,000,000	 	 
	 
	 	 	 	 	 
	Investment Amount:
	 	$	14,881,878	 	 
	 
	 	 	 	 	 
	Stark
Onshore Master Holding LLC
	 	 

	 	 	 	 	 
	By:  	Stark
Offshore Management LLC	 	 	 
	 	Its Investment Manager	 

	 	 	 	 
	/s/
Brian H. Davidson, Authorized Signatory
	 	 	 
	 

Signature of Purchaser
(and title, if applicable)

	 	 

Signature of Joint Purchaser
(if any)	 
	 
	 	 	 
	 
	 	 	 
	 

Taxpayer Identification or Social
Security Number

	 	 

Taxpayer Identification or Social
Security Number of Joint Purchaser (if any)	 
	 
	 	 
	 
	 

Name (please print as name will appear
on Note)
	 	 
	 
	 
	 	 
	 

Number and Street
	 	 
	 
	 	 
	 

	City, State        
            
            
        
              Zip Code	 	 

	 	 	 	 	 
	ACCEPTED BY:

THIRD WAVE TECHNOLOGIES, INC.

 	 	 
	By:  	/s/
Kevin T. Conroy	 	 
	 	Name: Kevin T. Conroy	 	 	 
	 	Title:   President/CEO	 	 	 

 

 

	 	 	 	 	 

Schedule A

Wire Transfer Instructions

PLEASE SEND WIRE TRANSFERS TO THE COMPANY’S ACCOUNT AS FOLLOWS:

			
	               Bank:	 	US Bank

777 East Wisconsin Avenue

Milwaukee, WI 53202

			
	               Routing No.:	 	075000022

			
	               Account Name:	 	Third Wave Technologies, Inc.

502 S. Rosa Rd.

Madison, WI 53719

			
	               Account No.:	 	182380231924

 

 

Schedule B

Company Disclosure Schedule

 

 

Exhibit A

Form of Note

(attached)

 

 

[FORM OF NOTE]

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION, WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THIS CORPORATION, IS AVAILABLE. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR”
AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT.

FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), THIS
SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR PURPOSES OF SECTION 1273 OF THE CODE, THE ISSUE PRICE IS
$[                    ] AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $[                    ], IN EACH CASE PER
$1,000 PRINCIPAL AMOUNT OF THIS SECURITY. FOR PURPOSES OF SECTION 1275 OF THE CODE, THE ISSUE DATE
OF THIS SECURITY IS DECEMBER [___], 2006. FOR PURPOSES OF SECTION 1272 OF THE CODE, THE YIELD TO
MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 6%.

Third Wave Technologies, Inc.

Convertible Senior Subordinated Zero-Coupon Promissory Note

Issue Date: December [__], 2006

Issue Price: $[                    ] (for each $1,000 principal amount at maturity)

Original Issue Discount: $[                    ] (for each $1,000 principal amount at maturity)

Principal Amount at Maturity: $[                    ]

     FOR VALUE RECEIVED, Third Wave Technologies, Inc., a Delaware corporation (the “Company”),
hereby promises to pay to the order of [                    ] (“Holder”) the principal amount at maturity of
$[                    ] (as may be reduced pursuant to the terms hereof from time to time pursuant to
redemption, conversion or otherwise, the “Principal”) upon December [___], 2011 (the “Maturity
Date”), acceleration, redemption or otherwise (in each case in accordance with the terms hereof).
This Convertible Senior Subordinated Zero-Coupon Promissory Note (including all Convertible Senior
Subordinated Zero-Coupon Promissory Notes issued in exchange, transfer or replacement hereof, this
“Note”) is one of an issue of Convertible Senior Subordinated Zero-Coupon Promissory Notes
(collectively, the “Notes” and such other

 

 

Convertible Senior Subordinated Zero-Coupon Promissory Notes, the “Other Notes”) issued
pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are
defined in Section 19 of this Note.

1. Maturity. On the Maturity Date, the Holder shall surrender this Note to the Company
and the Company shall pay to the Holder an amount in cash representing all outstanding Principal.

2. Original Issue Discount; Interest. This Note shall not bear cash interest except
as otherwise expressly provided below. Original Issue Discount shall accrue on the Issue Price in
the period during which this Note remains outstanding. If the Principal is not paid on the
Maturity Date, or other amounts payable hereunder (including in connection with a redemption) are
not paid when due hereunder, then in each such case the overdue amount shall, to the extent
permitted by law, bear cash interest at the rate of 6% per annum (together with Late Charges
pursuant to Section 14(b)), compounded semiannually, which interest shall accrue from the date such
overdue amount was originally due to the date payment of such amount, including interest thereon,
has been made or duly provided for. All such interest shall be payable in cash on demand but if
not so demanded shall be paid quarterly to the Holder on the last day of each quarter.

3. Conversion. This Note shall be convertible into shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), on the terms and conditions set forth in
this Section 3.

     (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times
on or after the Issue Date, the Holder shall be entitled to convert the Accreted Value of all
Principal (or any portion equal to $1,000 of Principal or any integral multiple of $1,000 of
Principal in excess thereof) (such Principal or portion thereof, the “Conversion Amount”) into
fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common
Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of
Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest
whole share. The Company shall pay any and all taxes that may be payable with respect to the
issuance and delivery of Common Stock upon conversion of any Principal.

     (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of
any Principal pursuant to Section 3(a) shall be initially [_________] shares of Common Stock for
each $1,000 of Conversion Amount (the “Conversion Rate”). The Conversion Rate shall be adjusted in
certain instances as provided in Section 3(f) hereof.

     (c) Optional Conversion. To convert any Conversion Amount into shares of Common Stock
on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed
conversion notice in the form attached hereto as Annex 1 (the “Conversion Notice”) to the Company
in accordance with Section 14 hereof, with a copy to the Company’s transfer agent (the “Transfer
Agent”) for the Common Stock, Computershare Trust Co., per notice instructions provided by the
Company and (B) if required by Section 3(e), surrender this Note to

2

 

a common carrier for delivery to the Company as soon as practicable on or following such date
(or an indemnification undertaking with respect to this Note in the case of its loss, theft or
destruction). On or before the second (2nd) Business Day following the date of receipt of a
Conversion Notice (the “Share Delivery Date”), the Company shall (X) provided that the Transfer
Agent is participating in the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer
Program credit such aggregate number of shares of Common Stock to which the Holder shall be
entitled (the “Conversion Shares”) to the Holder’s or its designee’s balance account with DTC
through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the
address as specified in the Conversion Notice, a certificate, registered in the name of the Holder
or its designee, for the Conversion Shares. If this Note is physically surrendered for conversion
as required by Section 3(e) and the outstanding Principal of this Note is greater than the
Principal portion of the Conversion Amount being converted, then the Company shall as soon as
practicable and in no event later than three (3) Business Days after receipt of this Note and at
its own expense, issue and deliver to the holder a new Note (in accordance with Section 7 hereof)
representing the outstanding Principal not converted. The Person or Persons entitled to receive
Conversion Shares upon a conversion of this Note shall be treated for all purposes as the record
holder or holders of such shares on the Conversion Date. Provided that the Holder has fully
complied with its obligations hereunder, including, without limitation, delivery of all required
documentation, if within three (3) Trading Days after the Company’s and the Transfer Agent’s
receipt of Conversion Notice, the Transfer Agent shall fail to issue and deliver to such Holder a
certificate representing the Conversion Shares that is free from all restrictive and other legends,
and if on or after such trading day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of
Common Stock that the Holder anticipated receiving from the Company without any restrictive legend
(a “Buy-In”), then the Company shall, within three (3) Trading Days after the Holder’s request and
in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate
shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock and pay cash to the Holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common
Stock, times (B) the closing bid price on the Conversion Date; provided, however, that the Company
shall have no obligation under this provision if the Company has delivered to the Transfer Agent
the documentation required to meet its obligations hereunder and the failure of such obligations to
be met is the sole responsibility of the Transfer Agent.

     (d) Mandatory Conversion. If at any time from and after the second (2nd) anniversary
of the Issue Date (the “Mandatory Conversion Eligibility Date”), the Closing Sale Price of the
Common Stock for each of twenty (20) consecutive Trading Days following the Mandatory Conversion
Eligibility Date (the “Mandatory Conversion Measuring Period”) exceeds 150% of the Initial
Conversion Price (as equitably adjusted for any stock splits, stock dividends, recapitalizations,
combinations, reverse stock splits or other similar events during such period), the Company shall
have the right to require the Holder to convert all, or any portion, of the Conversion Amount then
remaining under this Note as designated in the Mandatory Conversion Notice into fully paid, validly
issued and nonassessable shares of

3

 

Common Stock in accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory
Conversion Date (as defined below) (a “Mandatory Conversion”), provided, however, there is on such
Mandatory Conversion Date an effective Registration Statement (as defined in Securities Purchase
Agreement) covering the shares of Common Stock issuable upon such Mandatory Conversion. The
Company may exercise its right to require conversion under this Section 3(d) by delivering to the
Holder within not more than three (3) Trading Days following the end of any such Mandatory
Conversion Measuring Period a written notice thereof by facsimile or overnight courier (the
“Mandatory Conversion Notice” and the date the Holder received such notice is referred to as the
“Mandatory Conversion Notice Date”). The Mandatory Conversion Notice shall state (i) the Trading
Day selected for the Mandatory Conversion, which Trading Day shall be at least twenty (20) Business
Days but not more than sixty (60) Business Days following the Mandatory Conversion Notice Date (the
“Mandatory Conversion Date”), (ii) the aggregate Conversion Amount of this Note subject to
Mandatory Conversion and (iii) the number of shares of Common Stock to be issued to the Holder on
the Mandatory Conversion Date. All Conversion Amounts converted by the Holder after the Mandatory
Conversion Notice Date shall reduce the Conversion Amount of this Note required to be converted on
the Mandatory Conversion Date. The mechanics of conversion set forth in Section 3(c) and Section
3(e) shall apply to any Mandatory Conversion as if the Company and the Transfer Agent had received
from the Holder a Conversion Notice with respect to the Conversion Amount being converted pursuant
to the Mandatory Conversion.

     (e) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon
conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be
required to physically surrender this Note to the Company unless (i) the full Conversion Amount
represented by this Note is being converted or (ii) the Holder has provided the Company with prior
written notice (which notice may be included in a Conversion Notice) requesting reissuance of this
Note upon physical surrender. The Holder and the Company shall maintain records showing the
Conversion Amount converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of
this Note upon conversion.

     (f) Adjustment of Conversion Rate. The Conversion Rate shall be adjusted from time to
time by the Company as follows:

     (i) Stock Dividends and Splits. If the Company, at any time while this Note
is outstanding: (1) pays a stock dividend on its Common Stock payable in shares of Common
Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (2) subdivides outstanding shares of Common Stock into a larger
number of shares, or (3) combines outstanding shares of Common Stock into a smaller number
of shares, then in each such case the Conversion Rate shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding immediately
after such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately before such event. Any adjustment made pursuant to clause
(1) of this paragraph shall become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause

4

 

(2) or (3) of this paragraph shall become effective immediately after the effective
date of such subdivision or combination.

     (ii) Pro Rata Distributions. If the Company, at any time while this Note is
outstanding, distributes to all holders of Common Stock (1) evidences of its indebtedness,
(2) any security (other than a distribution of Common Stock covered by the preceding
paragraph), (3) rights or warrants to subscribe for or purchase any security, or (4) any
other asset (in each case, "Distributed Property"), then, at the request of the Holder
delivered before the 90th day after the record date fixed for determination of
shareholders entitled to receive such distribution, the Company will deliver to the
Holder, within five Trading Days after such request (or, if later, on the effective date
of such distribution), the Distributed Property that the Holder would have been entitled
to receive in respect of the shares of Common Stock for which this Note could have been
converted immediately prior to such record date. If such Distributed Property is not
delivered to the Holder pursuant to the preceding sentence, then upon any conversion of
this Note that occurs after such record date, the Holder shall be entitled to receive, in
addition to the shares of Common Stock otherwise issuable upon such conversion, the
Distributed Property that the Holder would have been entitled to receive in respect of
such number of shares of Common Stock had the Holder been the record holder of such shares
of Common Stock immediately prior to such record date. Notwithstanding the foregoing, this
Section 3(f)(ii) shall not apply to any distribution of rights or securities in respect of
adoption by the Company of a shareholder rights plan, which events shall be covered by
Section 3(f)(i).

     (iii) Fundamental Transactions. If, at any time while this Note is
outstanding, the Company effects any Fundamental Transaction, then upon any subsequent
conversion of this Note, the Holder shall have the right to receive, for each share of
Common Stock that would have been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or property as it would have
been entitled to receive upon the occurrence of such Fundamental Transaction if it had
been, immediately prior to such Fundamental Transaction, the holder of one share of Common
Stock (the “Alternate Consideration”). For purposes of any such conversion, the Company
shall apportion the Conversion Amount among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any conversion of this
Note following such Fundamental Transaction.

     (iv) Reclassifications; Share Exchanges. In case of any reclassification of
the Common Stock, or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property (other than compulsory share exchanges
which constitute Change of Control transactions), the Holder shall have the right
thereafter to convert such shares only into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock following
such reclassification or share exchange, and the Holder shall be entitled upon

5

 

such event to receive such amount of securities, cash or property as a holder of the
number of shares of Common Stock of the Company into which such shares of this Note could
have been converted immediately prior to such reclassification or share exchange would
have been entitled. This provision shall similarly apply to successive reclassifications
or share exchanges.

     (v) Calculations. All calculations under this Section 3(f) shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be considered
an issue or sale of Common Stock.

     (vi) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 3(f), the Company at its expense will promptly compute such adjustment in
accordance with the terms hereof and prepare a certificate describing in reasonable detail
such adjustment and the transactions giving rise thereto, including all facts upon which
such adjustment is based, and promptly deliver a copy of each such certificate to the
Holder.

     (vii) Notice of Corporate Events. If the Company (1) declares a dividend or
any other distribution of cash, securities or other property in respect of its Common
Stock, including without limitation any granting of rights or warrants to subscribe for or
purchase any capital stock of the Company or any subsidiary, (2) authorizes and publicly
approves, or enters into any agreement contemplating or solicits shareholder approval for
any Fundamental Transaction or (3) publicly authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the Company shall use
commercially reasonable efforts to make the Holder aware of the material terms and
conditions of such transaction in advance of the applicable record or effective date on
which a Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take steps reasonably necessary in order
to give the Holder the practical opportunity to convert this Note prior to such time so as
to participate in or vote with respect to such transaction; provided, however, that the
failure to comply with the foregoing provisions shall not affect the validity of any
corporate action.

     (g) Limitations on Conversions.

     (i)
Notwithstanding anything in this Note to the contrary (except as set
forth below in this subsection with regard to Mandatory Conversions), the Company shall not
effect any conversion of this Note, and the Holder of this Note shall not have the right
to convert any portion of this Note pursuant to Section 3, to the extent that after giving
effect to such conversion, the Holder (together with the Holder’s affiliates) would
beneficially own in excess of 4.99% (the “Maximum Percentage”) of the number of shares of
Common Stock outstanding immediately after giving effect to such
conversion; provided, however, that this provision shall not be
deemed to apply a 4.99% Maximum Percentage to restrict or limit the
Company’s right to require and effect Mandatory Conversion under
Section 3(d) of this Note. For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned by the
Holder and its affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of such sentence is being
made, but shall exclude the number of

6

 

shares of Common Stock which would be issuable upon (1) conversion of the remaining,
nonconverted portion of this Note beneficially owned by the Holder or any of its
affiliates and (2) exercise or conversion of the unexercised or nonconverted portion of
any other securities of the Company (including, without limitation, any Other Notes or
warrants) subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 3(g)(i), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. For any reason at any time, upon the written or oral request of
the Holder, the Company shall within three (3) Business Days confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Note, by the
Holder or its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. By written notice to the Company, the Holder may increase or
decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified
in such notice; provided that (A) any such increase will not be effective until the
sixty-first (61st) day after
such notice is delivered to the Company, and (B) any such increase or decrease will apply only to the Holder and not to any other holder of
Notes. Notwithstanding anything in this Note to the contrary, the Maximum Percentage with respect to any
Mandatory Conversion under Section 3(d) of this Note shall be 9.99% and not subject to decrease by
the Holder (“Mandatory Conversion Maximum Percentage”); provided, however, that in the event the
Mandatory Conversion Maximum Percentage is applied to limit the amount of any Mandatory Conversion,
then (x) the unconverted portion of the Note shall cease to accrue or accrete interest beyond the
then-Accreted Value of that portion of the Note as of the date such portion would have otherwise
been converted but for the application of the Mandatory Conversion Maximum Percentage, (y) any
right or remedy (including Late Charges) that the Holder may have hereunder with respect to an
Event of Default (including any payment default, whether before, at, or after the Maturity Date)
with respect to the unconverted portion is stayed, and (z) and as soon as Holder’s beneficial
ownership percentage declines (whether because more stock is issued or because Holder sells shares
of Company common stock or other securities), the remaining portion of the note will automatically
convert up to the 9.99% Mandatory Conversion Maximum Percentage. Notwithstanding the foregoing, the limitations in this Section 3(g)(i) shall not
apply if, as of the Subscription Date, the Holder beneficially owned in excess of 9.99% of
the Company’s outstanding shares of Common Stock.

     (ii) The Company shall not be obligated to issue any shares of Common Stock upon
conversion of this Note if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may issue upon conversion of
the Notes without breaching the Company’s obligations under the rules or regulations of
the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in
the event that the Company (1) obtains the approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of Common Stock in excess of such
amount or (2) obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to the Required
Holders. Until such approval or written opinion is obtained, no purchaser of the Notes
pursuant to the Securities Purchase Agreement (the “Purchasers”) shall be issued in the
aggregate upon conversion of Notes, shares of Common Stock in an amount greater than the
product of the Exchange Cap multiplied by a fraction, the numerator of which is the
principal amount of Notes issued to such Purchaser pursuant to the Securities Purchase
Agreement on the Closing Date and the denominator of which is the aggregate principal
amount of all Notes issued to the Purchasers pursuant to the Securities Purchase Agreement
on the Closing Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In
the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s
Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange
Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee
with respect to the portion of the Exchange Cap Allocation allocated to such transferee.
In the event that any holder of Notes shall convert all of such holder’s Notes into a
number of shares of

7

 

Common Stock which, in the aggregate, is less than such holder’s Exchange Cap
Allocation, then the difference between such holder’s Exchange Cap Allocation and the
number of shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of Notes on a pro rata basis
in proportion to the aggregate principal amount of the Notes then held by each such
holder.

4. Event of Default.

     (a) Each of the following events shall constitute an “Event of Default”:

     (i) the failure of the applicable Registration Statement required to be filed
pursuant to the Securities Purchase Agreement to be declared effective by the SEC on or
prior to the date that is one hundred and fifty (150) days after the applicable Required
Effectiveness Date (as defined in the Securities Purchase Agreement), or, while the
applicable Registration Statement is required to be maintained effective pursuant to the
terms of the Securities Purchase Agreement, the effectiveness of the applicable
Registration Statement lapses for any reason (including, without limitation, the issuance
of a stop order) or is unavailable to any holder of the Notes for sale of all of such
holder’s Registrable Securities (as defined in the Securities Purchase Agreement) in
accordance with the terms of the Securities Purchase Agreement, and such lapse or
unavailability continues for a period of thirty (30) consecutive days or for more than an
aggregate of sixty (60) days in any 365-day period (other than days permitted by Section
E.3(c) of the Securities Purchase Agreement);

     (ii) the suspension from trading or failure of the Common Stock to be listed on the
Principal Market or on an Eligible Market for a period of five (5) consecutive days or for
more than an aggregate of ten (10) days in any 365-day period;

     (iii) the Company’s (1) failure to cure a Conversion Failure by delivery of the
required number of shares of Common Stock within fifteen (15) Business Days after the
applicable Conversion Date or (2) notice, written or oral, to any holder of the Notes,
including by way of public announcement or through any of its agents, at any time, of its
intention not to comply with a request for conversion of any Notes into shares of Common
Stock that is tendered in accordance with the provisions of the Notes;

     (iv) the Company’s failure to pay to the Holder any amount of Principal or other
amounts when and as due under this Note or the Securities Purchase Agreement (including,
without limitation, the Company’s failure to pay any redemption payments or amounts
hereunder) if such failure continues for a period of at least five (5) Business Days;

     (v) any default (which has not been cured or waived) under, redemption of or
acceleration prior to maturity of any Indebtedness of the Company in excess of $1,000,000
or any of its subsidiaries other than with respect to any Other Notes;

     (vi) the Company or any of its Significant Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the

8

 

relief of debtors (collectively, “Bankruptcy Law”), (1) commences a voluntary case,
(2) consents to the entry of an order for relief against it in an involuntary case, (3)
consents to the appointment of a receiver, trustee, assignee, liquidator or similar
official (a “Custodian”), (4) makes a general assignment for the benefit of its creditors
or (5) admits in writing that it is generally unable to pay its debts as they become due;

     (vii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (1) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case, (2) appoints a Custodian of the Company or any of its
Significant Subsidiaries or (3) orders the liquidation of the Company or any of its
Significant Subsidiaries;

     (viii) a final judgment or judgments for the payment of money aggregating in excess
of $250,000 are rendered against the Company or any of its Significant Subsidiaries and
which judgments are not, within ninety (90) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within ninety (90) days after
the expiration of such stay; provided, however, that any judgment which is covered by
insurance or an indemnity from a credit worthy party shall not be included in calculating
the $250,000 amount set forth above so long as the Company provides the Holder a written
statement from such insurer or indemnity provider (which written statement shall be
reasonably satisfactory to the Holder) to the effect that such judgment is covered by
insurance or an indemnity and the Company will receive the proceeds of such insurance or
indemnity within thirty (30) days of the issuance of such judgment;

     (ix) the Company breaches any representation, warranty, covenant or other term or
condition of the Securities Purchase Agreement in a manner that is materially adverse in
the aggregate to the Holder, except, in the case of a breach of a covenant which is
curable, only if such breach continues for a period of at least fifteen (15) consecutive
Business Days;

     (x) any breach or failure in any respect to comply with Section 6 of this Note; or

     (xi) any Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.

     (b) Redemption Right. Upon the occurrence of an Event of Default with respect to this
Note or any Other Note, the Company shall within one (1) Business Day deliver written notice
thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. At any
time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder
becoming aware of an Event of Default, the Holder may require the Company to redeem all or any
portion of the Principal of this Note by delivering written notice thereof (the “Event of Default
Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the
portion of the Principal of this Note the Holder is electing to redeem. Each portion of this Note
subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company
at a price equal to the Accreted Value of the portion of the Principal of this

9

 

Note to be redeemed times 110% (the “Event of Default Redemption Price”). Redemptions
required by this Section 4(b) shall be made in accordance with the provisions of Section 5. To the
extent redemptions required by this Section 4(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. The parties hereto agree that in the event of the Company’s redemption of
any portion of the Note under this Section 4(b), the Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any Event of Default Redemption Price due under this Section 4(b) is intended by the
parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its
investment opportunity and not as a penalty.

     (c) Conversion. Nothing contained in this Section 4 or elsewhere in this Note is
intended to or shall impair the Holder’s right, which is absolute and unconditional, to convert
this Note in accordance with the terms hereof notwithstanding the occurrence or continuation of an
Event of Default.

5. Redemption.

     (a) Redemption at Company Option. This Note is redeemable for cash at the option of
the Company, in whole or in part, at any time or from time to time on, or after the third
(3rd) anniversary of the Issue Date upon not less than 30 nor more than 60 days’ written
notice for a redemption price equal to the Accreted Value of the portion of the Principal of the
Note so redeemed up to (but excluding) the effective date of such redemption (the “Optional
Redemption Price”). The Company may exercise its right to require redemption under this Section
5(a) by delivering a written notice thereof by facsimile and overnight courier to the Holder (the
“Optional Redemption Notice” and the date the Holder received such notice is referred to as the
“Optional Redemption Notice Date”). The Optional Redemption Notice delivered shall be irrevocable
and shall state (A) the date on which the Optional Redemption shall occur (the “Optional Redemption
Date”) and (B) the Optional Redemption Price and the portion of the Principal of the Notes which
the Company has elected to be subject to Optional Redemption pursuant to this Section 5(a) on the
Optional Redemption Date. All Conversion Amounts converted by the Holder after the Optional
Redemption Notice Date shall reduce the Principal required to be redeemed on the Optional
Redemption Date. Redemptions made pursuant to this Section 5(a) shall be made in accordance with
Section 5(c).

     (b) Redemption at Holder Option This Note is redeemable for cash at the option of the
Holder, in whole or in part, at any time or from time to time following the occurrence of a Change
of Control upon not less than 30 nor more than 60 day’s written notice (the “Change of Control
Redemption Notice”) for a redemption price equal to the Accreted Value of the portion Principal of
the of the Note so redeemed up to (but excluding) the Redemption Date times 110% (the “Change of
Control Redemption Price”).

     (c) Payment of Redemption Price. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Business Days after the Company’s receipt of
the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Change of Control
Redemption Notice in accordance with Section 5(b), the Company shall

10

 

deliver the applicable Change of Control Redemption Price to the Holder concurrently with the
consummation of such Change of Control if such notice is received prior to the consummation of such
Change of Control and within five (5) Business Days after the Company’s receipt of such notice
otherwise. The Company shall deliver the Optional Redemption Price to the Holder on the Optional
Redemption Date. In the event of a redemption of less than all of the Principal of this Note, the
Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance
with Section 7(b)) representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder within the time period
required, at any time thereafter and until the Company pays such unpaid Redemption Price in full,
the Holder shall have the option, in lieu of redemption, to require the Company to promptly return
to the Holder all or any portion of this Note representing the Principal that was submitted for
redemption and for which the applicable Redemption Price (together with any Late Charges thereon)
has not been paid. Upon the Company’s receipt of such notice, (i) the Redemption Notice shall be
null and void with respect to such Principal, and (ii) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 7(b)) to the Holder representing such
Conversion Amount. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of
its rights following such notice shall not affect the Company’s obligations to make any payments of
Late Charges which have accrued prior to the date of such notice with respect to the Conversion
Amount subject to such notice.

6. Covenants.

     (a) Incurrence of Indebtedness. So long as this Note is outstanding, the Company shall
not, and the Company shall not permit any of its subsidiaries to, directly or indirectly, incur or
guarantee, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness.

     (b) Existence of Liens. So long as this Note is outstanding, the Company shall not
directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including accounts and contract
rights) owned by the Company (collectively, “Liens”) other than Permitted Liens.

7. Reissuance of this Note.

     (a) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the
case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with Section 7(b))
representing the outstanding Principal.

     (b) Issuance of New Notes. Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii)
shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or
the Principal designated by the Holder which, when added to the principal represented by the other
new Notes issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an
issue date, as indicated on the face of such new Note, which is the same as the

11

 

Issue Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v)
shall represent accrued and unpaid interest and Late Charges on the Principal and interest of this
Note, if any, from the Issue Date.

8. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The
remedies provided in this Note shall be cumulative and in addition to all other remedies available
under this Note and the Securities Purchase Agreement at law or in equity (including a decree of
specific performance and/or other injunctive relief). Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall be the amounts to
be received by the Holder and shall not, except as expressly provided herein, be subject to any
other obligation of the Company (or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being required.

9. Payment Of Collection, Enforcement And Other Costs. If (a) this Note is placed in
the hands of an attorney for collection or enforcement or is collected or enforced through any
legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors’ rights and involving
a claim under this Note, then the Company shall pay the costs incurred by the Holder for such
collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

10. Reservation of Authorized Shares.

     (a) Reservation. The Company shall initially reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock for each of the Notes equal to 100% of the
Conversion Rate with respect to the Conversion Amount of each such Note as of the Issue Date. So
long as any of the Notes are outstanding, the Company shall take all action necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Notes, 100% of the number of shares of Common Stock as shall from
time to time be necessary to effect the conversion of all of the Notes then outstanding; provided
that at no time shall the number of shares of Common Stock so reserved be less than the number of
shares required to be reserved by the previous sentence (without regard to any limitations on
conversions) (the “Required Reserve Amount”).

     (b) Insufficient Authorized Shares. If at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the
Required Reserve Amount for the Notes then outstanding. Without

12

 

limiting the generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each stockholder with a proxy statement and shall use
its best efforts to solicit its stockholders’ approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to the stockholders that they approve
such proposal.

11. Construction; Headings. This Note shall be deemed to be jointly drafted by the
Company and all the Purchasers and shall not be construed against any person as the drafter hereof.
The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.

12. Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in
the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.

13. Dispute Resolution. In the case of a dispute as to the determination of the
Closing Sale Price or the arithmetic calculation of the Conversion Rate or any redemption price,
the Company shall submit the disputed determinations or arithmetic calculations via facsimile
within one (1) Business Day of receipt of the Conversion Notice or redemption notice or other event
giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation within three (3) Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder, then the Company
shall, within three (3) Business Days submit via facsimile (a) the disputed determination of the
Closing Sale Price to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or any
redemption price to the Company’s independent, outside accountant. The Company, at the Company’s
expense, shall cause the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the results no later than
five (5) Business Days from the time it receives the disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation, as the case may be, shall be
binding upon all parties absent demonstrable error.

14. Notices; Payments.

     (a) Notices. Whenever notice is required to be given under this Note, unless otherwise
provided herein, such notice shall be given in accordance with Section H(2) of the Securities
Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Note, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon any adjustment of the Conversion Rate, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20)
days prior to the date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock,

13

 

or (B) for determining rights to vote with respect to any Fundamental Transaction, dissolution
or liquidation, provided in each case that such information shall be made known to the public prior
to or in conjunction with such notice being provided to the Holder.

     (b) Payments. Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier service to such
Person at such address as previously provided to the Company in writing (which address, in the case
of each of the Purchasers, shall initially be as set forth in the Securities Purchase Agreement);
provided that the Holder may elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice setting out such request and the
Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this
Note is due on any day which is not a Business Day, the same shall instead be due on the next
succeeding day which is a Business Day. Any amount of Principal or other amounts due under this
Note or the Securities Purchase Agreement, other than interest payable pursuant to Section 2, which
is not paid when due shall result in a late charge being incurred and payable by the Company in an
amount equal to interest on such amount at the rate of fifteen percent (15.0%) per annum from the
date such amount was due until the same is paid in full (“Late Charge”).

15. Cancellation. After all Principal, accrued interest and other amounts at any time
owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be
surrendered to the Company for cancellation and shall not be reissued.

16. Waiver of Notice. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

17. Governing Law. This Note shall be construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and performance of this Note
shall be governed by, the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of New York. The Company hereby irrevocably submits to the jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. In the event that any provision of this Note
is invalid or unenforceable under any applicable statute or rule of law, then such provision shall
be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Company in any other

14

 

 jurisdiction to collect on the Company’s obligations to the Holder, to realize on any
collateral or any other security for such obligations, or to enforce a judgment or other court
ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

18. Subordination.

     (a) The Company covenants and agrees, and the Holder, by the Holder’s acceptance of this
Note, likewise covenants and agrees, that: (1) the Indebtedness represented by this Note and the
payment of the principal of and interest on this Note is hereby expressly subordinated and
junior, to the extent and in the manner set forth and as set forth in this Section 18, in right of
payment to the prior payment in full of all Permitted Senior Indebtedness; and (2) this Note and
the Indebtedness of the Company thereunder shall remain at all times unsecured and the Company
shall not grant, and the Holders shall not accept, a lien on any asset of the Company to secure
such Indebtedness.

     (i) In the event of any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency, reorganization or receivership proceedings or upon an assignment for the
benefit of creditors or any other marshalling of the assets and liabilities of the Company
or otherwise, the holders of all Permitted Senior Indebtedness shall first be entitled to
receive payment of the full amount due thereon in respect of all such Permitted Senior
Indebtedness, in cash or other form of payment satisfactory to the holders of Permitted
Senior Indebtedness, before the Holder is entitled to receive any payment or distribution
of any character, whether in cash, securities or other property, on account of the
principal of or interest on the Indebtedness evidenced by this Note.

     (ii) In the event of any mandatory redemption of this Note upon the occurrence of an
Event of Default, unless and until the full amount then due and payable in respect of all
Permitted Senior Indebtedness is paid in cash or other form of payment satisfactory to the
holders of Permitted Senior Indebtedness (which amount may be paid by one or more of the
Holders, in their sole and absolute discretion), no payment shall be made by the Company
with respect to the principal of or interest on this Note, or to redeem or otherwise
acquire all or any portion of this Note (including any prepayment or repurchase), and the
Company shall give prompt written notice of such acceleration or redemption to such
holders of Permitted Senior Indebtedness.

     (iii) In the event of and during the continuance of any “event of default” under (and
as defined in) any agreement evidencing Permitted Senior Indebtedness (after the lapse of
any applicable grace or notice and cure periods provided therein), whether in payment of
the principal of or premium, if any, or interest on, rent or other payment obligation in
respect of Permitted Senior Indebtedness (each, a “Payment Default”), or any other default
in respect of any Permitted Senior Indebtedness (each, a “Non-

15

 

Payment Default”), then, upon receipt by the Holder of written notice thereof from
the holder of such defaulted Permitted Senior Indebtedness, no payment of principal of or
interest on this Note may be made by the Company, and no redemption or other acquisition
of all or any portion of this Note (including any prepayment or repurchase) may be made by
the Company, (A) in case of a Payment Default, unless and until such Payment Default is
cured or waived, or (B) in the case of a Non-Payment Default, for a period (each, a
“Payment Blockage Period”) commencing on the date of receipt of such notice and ending 179
days thereafter (unless and until, in each case, such Payment Blockage Period shall
otherwise be terminated by (I) written notice to the Holder from such representatives for
such holder of Permitted Senior Indebtedness, or (II) payment in full of such Permitted
Senior Indebtedness in cash or other form of payment satisfactory to the holders of
Permitted Senior Indebtedness (which amount may be paid by one or more of the Holders, in
their sole and absolute discretion), (III) such Non-Payment Default is otherwise cured or
waived) or (IV) such Non-Payment Default shall give rise to a Payment Default, in which
case such payment blockage shall continue until such Payment Default is cured or waived).
Not more than one such Payment Blockage Period may be commenced with respect to the
payment of principal of or interest on or redemption of this Note during any period of 360
consecutive days. Notwithstanding anything in this Note to the contrary, there must be 180
consecutive days in any 360-day period in which no Payment Blockage Period is in effect.
No Non-Payment Default that existed or was continuing (it being acknowledged that any
subsequent action that would give rise to a Non-Payment Default pursuant to any provision
under which a Non-Payment Default previously existed or was continuing shall constitute a
new Non-Payment Default for this purpose) on the date of the commencement of any Payment
Blockage Period with respect to holder(s) of the Permitted Senior Indebtedness initiating
such Payment Blockage Period shall be, or shall be made, the basis for the commencement of
a second Payment Blockage Period by the representative for, or the holders of, such
Permitted Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such Non-Payment Default shall have been cured or waived for a period of not less
than 90 consecutive days.

     (b) In the event that, notwithstanding the foregoing provisions of Section 18(a) hereof, any
payment on account of principal or interest on this Note shall be made by the Company and received
by the Holder:

     (i) after the occurrence of an event specified in Section 18(a)(i) or 18(a)(ii),
then, unless all Permitted Senior Indebtedness is paid in full in cash, or provision shall
be made therefor reasonably satisfactory to the holders of the Permitted Senior
Indebtedness, or

     (ii) after the happening of an event of default of the type specified in Section
18(a)(iii) above, then, unless the amount of such Permitted Senior Indebtedness then due
shall have been paid in full, or provision made therefor satisfactory to the holders of
the Permitted Senior Indebtedness or such other event of default shall have been cured or
waived;

16

 

	 	 	in each such case, such payment shall be held in trust for the benefit of, and shall be paid over
upon the Holder’s receipt of written demand therefor to, the holders of Permitted Senior
Indebtedness or their representative or representatives or the trustee or trustees under any
indenture under which any instruments evidencing any of the Permitted Senior Indebtedness may have
been issued, as their interests may appear.

     (c) All or any portion of the Permitted Senior Indebtedness may, at any time, be paid by one
or more of the Holders, in their sole and absolute discretion. Subject to the payment in full in
cash or other form of payment satisfactory to the holders of Permitted Senior Indebtedness of all
Permitted Senior Indebtedness to which the Indebtedness evidenced by this Note is in the
circumstances subordinated as provided in Section 18(a) hereof, the Holder shall be subrogated to
the rights of the holders of such Permitted Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to such Permitted Senior
Indebtedness until all amounts owing on this Note shall be paid in full and, as between the
Company, its creditors (other than holders of such Permitted Senior Indebtedness) and the Holder,
no such payment or distribution made to the holders of Permitted Senior Indebtedness by virtue of
this Section 18 which otherwise would have been made to the holder of this Note shall be deemed to
be a payment by the Company on account of such Permitted Senior Indebtedness, provided that the
provisions of this Section 18 are and are intended solely for the purpose of defining the relative
rights of the Holder, on the one hand, and the holders of Permitted Senior Indebtedness, on the
other hand.

     (d) Nothing contained in this Section 18 or elsewhere in this Note is intended to or shall
impair, as between the Company, its creditors (other than the holders of Permitted Senior
Indebtedness) and the Holder, the obligation of the Company, which obligation are absolute and
unconditional, to pay to the Holder the principal of and interest on this Note as and when the
same shall become due and payable in accordance with the terms hereof, or is intended to or shall
affect the relative rights of the Holder and creditors of the Company (other than the holders of
Permitted Senior Indebtedness), nor shall anything contained herein or therein prevent the Holder
from exercising all remedies otherwise permitted by applicable law upon the occurrence of an Event
of Default under this Note, subject to the rights, if any, under this Section 18 of the holders of
Permitted Senior Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.

     (e) Upon the maturity of any Permitted Senior Indebtedness by lapse of time, acceleration or
otherwise, all principal of or premium, if any, or interest on, rent or other payment obligations
in respect of, all such matured Permitted Senior Indebtedness shall first be paid in full, or such
payment shall have been duly provided for to the reasonable satisfaction of the holders of the
Permitted Senior Indebtedness, before any payment on account of principal or interest is made upon
this Note.

     (f) Except as expressly provided in this Section 18, nothing contained in this Section 18
shall affect the obligation of the Company to make, or prevent the Company from making, payments
of the principal of or interest on this Note, or redeeming this Note, in accordance with the
provisions hereof.

17

 

     (g) No right of any present or future holder of any Permitted Senior Indebtedness to
enforce the subordination herein shall at any time or in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any noncompliance by the Company with the
terms, provisions and covenants of this Note, regardless of any knowledge thereof any such holder
may have or be otherwise charged with.

     (h) For the purposes of this Section 18 only:

     (i) notwithstanding any contrary provision of this Section 18, neither continued
accretion of the Note nor the issuance and delivery of shares of Common Stock issuable
upon conversion of any Conversion Amount pursuant to Section 3 hereof shall be deemed to
constitute a payment or distribution on account of the principal of or interest on this
Note or on account of the purchase or other acquisition of all or any portion of this
Note, and

     (ii) the payment, issuance or delivery of cash, property or securities (other than
Common Stock) upon conversion of all or any portion of this Note shall be deemed to
constitute payment on account of the principal of or interest on this Note or portion
thereof.

     (i) Nothing contained in this Section 18 or elsewhere in this Note is intended to or shall
impair the Holder’s right, which is absolute and unconditional, to convert this Note in accordance
with the terms hereof notwithstanding the occurrence or continuation of a Payment Blockage Period.

19. Certain Definitions. For purposes of this Note, the following terms shall have the
following meanings:

     “Accreted Value” means, at any time of determination, the Issue Price plus Accrued
Original Issue Discount

     “Accrued Original Issue Discount” represents the accrued portion of Original Issue
Discount.

     “Bloomberg” means Bloomberg Financial Markets.

     “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required by law to remain closed.

     “Change of Control” means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the Common Stock in which holders of the
Company’s voting power immediately prior to such reorganization, recapitalization or
reclassification continue after such reorganization, recapitalization or reclassification to hold
publicly traded securities and, directly or indirectly, the voting power of the surviving entity or
entities necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, or (ii) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of incorporation of the
Company.

18

 

     “Closing Sale Price” means, for any security as of any date, the last closing trade
price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the closing trade price,
then the last trade price of such security prior to 4:00:00 p.m., New York Time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market
for such security, the last trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the last trade price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any market makers for
such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation
Bureau, Inc.). If the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 13. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.

     “Contingent Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.

     “Conversion Failure” means the Company’s failure to issue a certificate to the Holder
or credit the Holder’s balance account with DTC for the number of share of Common Stock to which
the Holder is entitled upon conversion of any Conversion Amount on or prior to the date which is
three (3) Business Days after the Conversion Date if the Holder shall have provided the Company
with proper notice of such conversion in accordance with Section 3.

     “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the
American Stock Exchange or The Nasdaq Capital Market.

     “Fundamental Transaction” means that the Company shall, directly or indirectly, in one
or more related transactions, (i) consolidate or merge with or into (whether or not the Company is
the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of either the outstanding shares

19

 

of Common Stock or the outstanding shares of Common Stock (not including any shares of Common
Stock held by the other Person or other Persons making or party to, or associated or affiliated
with the other Persons making or party to, such stock purchase agreement or other business
combination), (v) reorganize, recapitalize or reclassify its Common Stock or (vi) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is
or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 50% of the outstanding shares of Common Stock.

     “GAAP” means United States generally accepted accounting principles, consistently
applied.

     “Indebtedness” of any Person means, without duplication (i) all indebtedness for
borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services, including (without limitation) “capital leases” in accordance with
generally accepted accounting principles (other than trade payables entered into in the ordinary
course of business), (iii) all reimbursement or payment obligations with respect to letters of
credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses, (v) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (vi) all monetary obligations under any leasing
or similar arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the payment of such indebtedness, and
(viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.

     “Initial Conversion Price” means $[                    ].

     “Issue Date” means the date on which this Note was originally issued or deemed issued
as set forth on the face hereof.

     “Issue Price” means, in connection with the original issuance of this Note, the
initial issue price per $1,000 principal amount at maturity at which this Note is sold, as set
forth on the face of this Note.

     “Original Issue Discount” means the amount that accrues in respect of this Note daily
at a rate of 6.00% per year on the Accreted Value of the Note, beginning on the Issue Date.
Original Issue Discount will be calculated [on a semi-annual bond equivalent basis], using a
360-day year comprised of twelve 30-day months.

20

 

     “Permitted Indebtedness” means (i) Permitted Senior Indebtedness, (ii) Indebtedness
incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness
evidenced by this Note, as reflected in a written agreement reasonably acceptable to the Holder and
approved by the Holder in writing, (iii) Indebtedness secured by Permitted Liens, (iv) Indebtedness
to trade creditors incurred in the ordinary course of business, (v) Indebtedness not otherwise
included as Permitted Indebtedness under any other clause of this definition (which Indebtedness
for purposes hereof may not be extended, renewed or refinanced in amounts greater than the amounts
outstanding immediately prior to the Subscription Date) reflected in the SEC Reports (as such term
is defined in the Securities Purchase Agreement); provided that the aggregate amount of such
Indebtedness set forth in clause (v) does not exceed $3,000,000 as of the Subscription Date, (vi)
additional unsecured Indebtedness not to exceed $1,000,000 in aggregate principal amount at any
time outstanding, and (vii) extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the terms modified to impose
more burdensome terms upon the Company.

     “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or delinquent, (iii)
any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other
similar liens, arising in the ordinary course of business with respect to a liability that is not
yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv)
Liens securing the Company’s obligations under Permitted Senior Indebtedness, (v) Liens (A) upon or
in any equipment acquired or held by the Company or any of its subsidiaries to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so acquired and improvements
thereon, and the proceeds of such equipment, (vi) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (i)
and (v) above, provided that any extension, renewal or replacement Lien shall be limited to the
property encumbered by the existing Lien, (vii) leases or subleases and licenses and sublicenses
granted to others in the ordinary course of the Company’s business, not interfering in any material
respect with the business of the Company and its subsidiaries taken as a whole, (viii) Liens in
favor of customs and revenue authorities arising as a matter of law to secure payments of custom
duties in connection with the importation of goods and (ix) Liens arising from judgments, decrees
or attachments in circumstances not constituting an Event of Default under Section 4 of this Note.

     “Permitted Senior Indebtedness” means: the principal of (and premium, if any),
interest on, and all fees and other amounts (including, without limitation, any reasonable
out-of-pocket costs, enforcement expenses (including reasonable out-of-pocket legal fees and
disbursements), collateral protection expenses and other reimbursement or indemnity obligations
relating thereto) payable by Company and/or its subsidiaries under or in connection with (i) the
Company’s and/or its subsidiaries existing term loans, equipment leases and loans, and letters of
credit, (ii) future working capital loans, including working capital revolving lines of credit, in
an aggregate amount not exceeding $3,000,000 at any given time and letters of credit in an
aggregate amount

21

 

not exceeding $1,000,000 at any given time and (iii) Indebtedness secured by Liens (A) upon or
in any equipment acquired or held by the Company or any of its subsidiaries to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so acquired and improvements
thereon, and the proceeds of such equipment.

     “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a government
or any department or agency thereof.

     “Principal Market” means the Nasdaq Global Market.

     “Redemption Price” means, as applicable, the Change of Control Redemption Price, Event
of Default Redemption Price or the Optional Redemption Price.

     “Required Holders” means the holders of Notes representing at least a majority of the
aggregate principal amount of the Notes then outstanding.

     “Securities Purchase Agreement” means that certain securities purchase agreement dated
the Subscription Date by and among the Company and the initial holders of the Notes pursuant to
which the Company issued the Notes.

     “Significant Subsidiaries” means the “significant subsidiaries” as such term is used
under Regulation S-X significant subsidiaries under the Securities Exchange Act of 1934, as
amended.

     “Subscription Date” means December [___], 2006.

     “Trading Day” means any day on which the Common Stock is traded on the Principal
Market, or, if the Principal Market is not the principal trading market for the Common Stock, then
on the principal securities exchange or securities market on which the Common Stock is then traded;
provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York Time).

22

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issue Date set
out above.

	 	 	 	 	 
	 	THIRD WAVE TECHNOLOGIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

Annex 1

CONVERSION NOTICE

Reference is made to the Convertible Senior Subordinated Zero-Coupon Promissory Note (the “Note”)
issued to the undersigned by Third Wave Technologies, Inc., (the “Company”). In accordance with and
pursuant to the Note, the undersigned (the “Holder”) hereby elects to convert the Conversion Amount
(as defined in the Note) of the Note indicated below into shares of Common Stock, par value $0.001
per share (the “Common Stock”), as of the date specified below.

	 	 	 
	 

	 	Date of Conversion:           
                   
                  
                        
                   
                    
                     
                   
       
	 
	 	 
	 

	 	Conversion Amount:            
                              
                  
                        
                   
                    
                     
             
	 
	 	 
	 

	 	Conversion Rate:           
                
                    
                  
                         
                    
                  
                     
             
	 
	 	 
	 

	 	Number of Shares of Common
Stock to be Issued:                     
                  
                          
                                  
             

1. If this Section 1 is completed, the Holder elects to have the Common Stock issuable pursuant to
this Conversion Notice electronically transmitted to the account of the Holder or its nominee with
the Depository Trust Company through its Deposit Withdrawal Agent Commission system ( “DWAC
Transfer”).

	 	 	 
	 

	 	Name of DTC Prime Broker:                    
                  
                   
                                   
                    
                     
             
	 
	 	 
	 

	 	Account Number:                    
                  
                      
                        
                   
                    
                     
                  

2. If this Section 2 is completed, in lieu of receiving shares of Common Stock issuable pursuant to
this Notice of Conversion by way of a DWAC Transfer, the Holder hereby requests that the Company
issue a certificate or certificates for the number of shares of Common Stock set forth below in the
name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

	 	 	 
	 

	 	Name:                    
                  
                  
                   
                        
                   
                    
                     
                
	 
	 	 
	 

	 	Address:                    
                     
                  
                   
                        
                   
                   
                     
            

	 	 	 	 	 	 
	By: 
	 	 
	 	 	Name: 	 	 
	 	 	Title: 
	 	 

 

 

Acknowledgement

The Company hereby acknowledges this Conversion Notice and hereby directs Computershare Trust Co.
to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated December [___], 2006 from the Company and acknowledged and agreed to by
Computershare Trust Co.

	 	 	 	 	 	 
	By: 
	 	 
	 	 	Name: 	 	 
	 	 	Title: 
	 	 

 

 

Exhibit B-1

Legal Matters (Corporate)

December ___, 2006

[Insert Names and

Addresses of Purchasers]

Ladies and Gentlemen:

     We have acted as counsel to Third Wave Technologies, Inc. , a Delaware corporation (the
“Company”), in connection with the transactions (the “Transaction”) contemplated by
the Securities Purchase Agreement dated December ___, 2006 (the “Agreement”) by and among
the Company and the purchasers identified on the signature pages thereto (the
“Purchasers”). This opinion letter is delivered pursuant to Section A(3) of the Agreement.
All capitalized terms used and not otherwise defined herein shall have the same meanings as are
ascribed to them in the Agreement.

     In rendering the opinions set forth herein, we have reviewed:

     (a) the Agreement; and

     (b) the Notes.

     The documents described and identified in clauses (a) and (b) above are referred to as the
“Transaction Documents.”

     We have also reviewed a copy of the certificate of incorporation of the Company as certified
by the Delaware Secretary of State on December ___, 2006 (the “Certificate of
Incorporation”), the by-laws of the Company (the “By-Laws”), certified copies of
resolutions of the board of directors of the Company and such other documents, and have considered
such matters of law and fact, in each case as we, in our professional judgment, have deemed
appropriate to render the opinions contained herein. With respect to certain facts, we have
considered it appropriate to rely upon certificates or other comparable documents of public
officials and officers or other appropriate representatives of the Company without investigation or
analysis of any underlying data contained therein.

     The phrases “to our knowledge” and “known to us” mean the conscious awareness by lawyers in
the primary lawyer group of factual matters such lawyers recognize as being relevant to the opinion
so qualified. Where any opinion is qualified by the phrase “to our knowledge” or “known to us,”
the lawyers in the primary lawyer group are without knowledge, or conscious awareness, that the
opinion is untrue. “Primary lawyer group” means any lawyer in this firm (i) who signs this
opinion letter, (ii) who is actively involved in negotiating or documenting the

 

 

Transaction or (iii) solely as to information relevant to a particular opinion, who is primarily
responsible for providing the response concerning the particular opinion or issue.

     The opinions set forth herein are limited to matters governed by the laws of the State of
North Carolina, the General Corporation Law of the State of Delaware and the federal laws of the
United States, and no opinion is expressed herein as to the laws of any other jurisdiction. We
note that the Transaction Documents provide that they are to be governed by the laws of the State
of New York. Our opinions in paragraph 3 as to the validity and enforceability of the Notes and in
paragraph 4 as to the validity and binding nature of the Agreement is intended to address the
validity, enforceability and binding nature, as applicable, of the Notes and the Agreement were
they, notwithstanding such provision, governed by the laws of the State of North Carolina, and is
not intended to address matters of New York law. We express no opinion concerning any matter
respecting or affected by any laws other than laws that a lawyer exercising customary professional
diligence would reasonably recognize as being directly applicable to the Company, the Transaction
or both.

     Based upon and subject to the foregoing and the further assumptions, limitations and
qualifications hereinafter expressed, it is our opinion that:

     1. The Company is a corporation, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power to execute and deliver the Agreement and to
perform its obligations thereunder.

     2. The authorized capital stock of the Company consists of 100,000,000 shares of common stock,
par value $0.001 per share (the “Common Stock”), and 10,000,000 shares of Series A
participating preferred stock, $0.001 par value per share (the “Preferred Stock”).

     3. The Notes have been duly authorized by all necessary corporate action and, when issued and
delivered against payment therefor in accordance with the provisions of the Agreement, will be
validly issued obligations of the Company enforceable against the Company in accordance with their
terms. The Common Stock issuable upon conversion of the Notes has been duly authorized for
issuance and reserved by the Company and, when issued and delivered upon conversion of the Notes,
will be validly issued, fully paid and non-assessable.

     4. The execution and delivery by the Company of the Agreement, and the consummation by the
Company of the Transaction, have been duly authorized by all necessary corporate and stockholder
action on the part of the Company. The Agreement constitutes the valid and binding obligation of
the Company.

     5. The execution and delivery by the Company of the Transaction Documents, and the
consummation by the Company of the Transaction, do not (a) violate applicable provisions of
statutory laws or regulations; (b) violate the provisions of the Certificate of Incorporation or
By-laws; (c) to our knowledge, violate any existing obligation of the Company under any judgment,
decree, order or award of any court, governmental body or arbitrator specifically naming the
Company and applicable to it or its properties; or (d) with or without notice or the passage of
time, conflict with or result in the material breach or termination of any material term or
provision of, or constitute a material default under, or cause any acceleration of any material

 

 

obligation under, or cause the creation of any material lien, charge or encumbrance upon the
material properties or assets of the Company pursuant to any contract or instrument in the form
included as an exhibit to the Company’s Annual Report on 10-K for the fiscal year ended December
31, 2005 and subsequent SEC Reports; except that, for all purposes of this paragraph 5, we express
no opinion as to state securities or blue sky laws or as to compliance with the antifraud
provisions of federal and state securities laws.

     6. Assuming (a) the accuracy of the representations made by the Company and each Purchaser in
the Agreement; (b) that neither the Company, the Placement Agent nor any person acting on behalf of
either the Company or the Placement Agent has offered or sold the Notes by any form of general
solicitation or general advertising within the meaning of Rule 502(c) of Regulation D promulgated
(the “Regulation D”) under the Securities Act; (c) that no offerings or sales of securities
of the Company after the date hereof in a transaction can be “integrated” with any sales of the
Notes; (d) that each person or entity that purchased securities of the Company directly from the
Company or its agents and without registration between the date six months prior to the Closing of
the Offering and the date of the Agreement was, as of the date of such purchase, an “accredited
investor” as defined in Rule 501 of Regulation D; (e) the due performance by the Company of the
covenants and agreements set forth in the Agreement; and (f) the compliance by the Purchasers with
the offering and transfer procedures and restrictions set forth in the Agreement, the sale of the
Notes to the Purchasers at the Closing under the circumstances contemplated by this Agreement will
not require registration under Section 5 of the Securities Act, it being understood that we express
no opinion as to any subsequent reoffer or resale of any of the Notes or the Shares.

     We call your attention to the fact that as a matter of customary practice, certain assumptions
underlying opinions are understood to be implicit. In addition, the opinions expressed above are
subject to the following assumptions, qualifications and limitations:

     (a) This opinion is subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws affecting the enforcement
of creditors’ rights generally.

     (b) This opinion is subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law), which may, among other things,
deny rights of specific performance.

     (c) In rendering our opinion in paragraph 1 that the Company is “validly existing and
in good standing,” we have relied solely upon a Certificate regarding the Company from the
Delaware Secretary of State dated December ___, 2006.

     (d) We express no opinion as to any provisions contained in the Transaction Documents
that (i) purport to excuse a party for liability for its own acts or (ii) impose liquidated
damages, penalties or forfeiture or that limit or alter laws requiring mitigation of
damages.

 

 

     (e) We do not express any opinion as to provisions of the Transaction Documents
concerning choice of law, choice of forum or consent to the jurisdiction of courts or venue
of actions.

     (f) We do not express any opinion as to provisions of the Transaction Documents
purporting to waive the right of jury trial.

     (g) We do not express any opinion as to provisions of the Transaction Documents
relating to indemnity and contribution for liabilities under federal or state securities
laws.

* * *

     This opinion letter is delivered solely for your benefit in connection with the closing under
the Agreement occurring on the date hereof and may not be disclosed to, used or relied upon by any
other person or for any other purpose without our prior written consent in each instance, except
that Robert W. Baird & Co. Incorporated, the placement agent for the Offering, may rely upon this
opinion letter as if it were an addressee on the date hereof. Our opinions expressed herein are as
of the date hereof, and we undertake no obligation to advise you of any changes in applicable law
or any other matters that may come to our attention after the date hereof that may affect our
opinions expressed herein.

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	 	 
	 	 	 
	 	 	 

 

 

Exhibit B-2

Legal Matters (Intellectual Property)

December 15, 2006

ADD ADDRESSEE

Dear Sirs and Madams:

     This opinion relates to the Securities Purchase Agreement dated as of December ___, 2006
between Third Wave Technologies Inc. (“the Company”) and the Purchasers named therein. We are but
one of several law firms used by the Company. Because the Company employs other counsel, we are not
familiar with all of the issues of the Company and cannot comment on the entirety of language
pertaining to legal matters in the Securities Purchase Agreement.

     We are generally familiar with the Company’s technology and generally familiar with the manner
in which the Company uses that technology. However, there may be internal procedures or
improvements of which we are unaware.

     To our knowledge after due investigation, except as described in the SEC Reports, we are of
the opinion that:

     (a) We have disclosed or intend to disclose to the United States Patent and Trademark Office
and foreign Patent Offices, where applicable, any references known by us to be material to the
patentability of the claimed inventions of the patent applications of the Company being prosecuted
by us listed on Schedule I (attached hereto) in accordance with 37 C.F.R. § 1.56 and the
corresponding foreign equivalent provisions;

     (b) the Company has valid license rights or clear title to the Intangible Rights referenced in
the Agreement, and there are no rights of third parties to any such Intangible Rights that would
hinder the Company’s use of any such Intangible Rights;

     (c) there is no infringement, misappropriation, or other violation by third parties of any of
the Intangible Rights;

     (d) there is no infringement, misappropriation, or other violation by the Company of any
Intangible Rights of others;

     (e) there is no pending or threatened action, suit, proceeding or claim by governmental
authorities or others that the Company infringes or otherwise violates any Intangible Rights of
others, and we are unaware of any facts which would form a reasonable basis for any such claim;

 

 

     (f) there is no pending or threatened action, suit, proceeding or claim by governmental
authorities or others challenging the rights of the Company in or to, or challenging the scope of,
any Intangible Rights of the Company, and we are unaware of any facts which would form a reasonable
basis for any such claim; and

     (g) the statements in Section C.19 of the Agreement, insofar as such matters constitute
matters of law or legal conclusions, are accurate and correct in all material respects and fairly
present such matters, and with respect to the Company’s patent, trademark, copyright and trade
secret matters, nothing has come to our attention which would lead us to believe that Section C.19
of the Agreement, as of the date hereof, contains any untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to make the statements therein not
misleading.

     To our knowledge after due investigation, except as described in the SEC Reports, the patents
and patent applications of the Company presently on file disclose patentable subject matter
(however, there can be no absolute assurance that any particular patent will issue with valid
claims). We are not aware of any inventorship challenges, any interference which has been declared
or provoked, or any other material fact with respect to the patent applications of the Company
presently on file that: (a) would preclude the issuance of patents with respect to such
applications, or (b) would lead us to conclude that such patents, when issued, would not be valid
and enforceable in accordance with applicable regulations.

     This opinion letter is delivered solely for your benefit in connection with the closing under
the Agreement occurring on the date hereof and may not be disclosed to, used or relied upon by any
other person or for any other purpose without our prior written consent in each instance, except
that Robert W. Baird & Co. Incorporated, the placement agent for the Offering, may rely upon this
opinion letter as if it were an addressee on the date hereof. Our opinions expressed herein are as
of the date hereof, and we undertake no obligation to advise you of any changes in applicable law
or any other matters that may come to our attention after the date hereof that may affect our
opinions expressed herein.

     Capitalized terms not otherwise defined herein have the same meanings given to them in the
Securities Purchase Agreement.

     One of the partners of Medlen & Carroll, not myself, owns stock in the Company.

	 	 	 	 	 
	 	Very truly yours,

MEDLEN & CARROLL, LLP

David A. Casimir

 	 
	 	 	 
	 	 	 
	 	 	 
	 

 

 

Exhibit C

Third Wave Technologies, Inc.

Confidential Purchaser Questionnaire

Before any sale of Notes by Third Wave Technologies, Inc. can be made to you, this
Questionnaire must be completed and returned to Maneesh Arora.

	1.	 	IF YOU ARE AN INDIVIDUAL PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN (A) IF YOU ARE AN
ENTITY PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN (B)

     A. INDIVIDUAL IDENTIFICATION QUESTIONS

Name  

(Exact name as it should appear on stock certificate)

Residence Address  

Home Telephone Number  

Fax Number  

Date of Birth  

Social Security Number  

     B. IDENTIFICATION QUESTIONS FOR ENTITIES

Name  

(Exact name as it will appear on stock certificate)

Address of Principal Place of Business  

State (or Country) of Formation or Incorporation  

Contact Person  

Telephone Number (     ) 

Type of entity (corporation, partnership, trust, etc.)  

Was entity formed for the purpose of this investment?

Yes         No      

	2.	 	DESCRIPTION OF INVESTOR
	 
	 	 	The following information is required to ascertain whether you would be deemed an
“accredited investor” as defined in Rule 501 of Regulation D under the Securities Act.
Please check whether you are any of the following:

	 	o  	 	a corporation, limited liability company or partnership with total assets in
excess of $5,000,000, not organized for the purpose of this particular
investment
	 
	 	o  	 	private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940
	 
	 	o  	 	a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment
Act of 1958
	 
	 	o  	 	an investment company registered under the Investment Company Act of 1940 or
a business development company as defined in Section 2(a)(48) of that Act
	 
	 	o  	 	a trust not organized to make this particular investment, with total assets
in excess of $5,000,000 whose purchase is directed by a sophisticated Person
as described in Rule 506(b)(2)(ii) of the Securities Act of 1933 and who
completed item 4 below of this questionnaire
	 
	 	o  	 	a bank as defined in Section 3(a)(2) or a savings and loan association or
other institution defined in Section 3(a)(5)(A) of the Securities Act of
1933 acting in either an individual or fiduciary capacity
	 
	 	o  	 	an insurance company as defined in Section 2(13) of the Securities Act of
1933

 

 

	 	o  	 	an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 (i) whose investment decision is made
by a fiduciary which is either a bank, savings and loan association,
insurance company, or registered investment advisor, or (ii) whose
total assets exceed $5,000,000, or (iii) if a self-directed plan, whose
investment decisions are made solely by a Person who is an accredited
investor and who completed Part I of this questionnaire;
	 
	 	o  	 	a charitable, religious, educational or other organization described in
Section 501(c)(3) of the Internal Revenue Code, not formed for the purpose
of this investment, with total assets in excess of $5,000,000
	 
	 	o  	 	a broker or dealer registered under Section 15 of the Securities Exchange
Act of 1934
	 
	 	o  	 	a plan having assets exceeding $5,000,000 established and maintained by a
government agency for its employees
	 
	 	o  	 	an individual who had individual income from all sources during each of the
last two years in excess of $200,000 or the joint income of you and
your spouse (if married) from all sources during each of such years in
excess of $300,000 and who reasonably excepts that either your own
income from all sources during the current year will exceed $200,000
or the joint income of you and your spouse (if married) from all
sources during the current year will exceed $300,000
	 
	 	o  	 	an individual whose net worth as of the date you purchase the securities
offered, together with the net worth of your spouse, be in excess of
$1,000,000
	 
	 	o  	 	an entity in which all of the equity owners are accredited investors

	3.	 	BUSINESS, INVESTMENT AND EDUCATIONAL EXPERIENCE 

Occupation  

Number of Years  

Present Employer  

Position/Title  

Educational Background  

 

 

     Frequency of prior investment (check one in each column):

	 	 	 	 	 
	 	 	Stocks & Bonds	 	Venture Capital Investments
	Frequently
	 	 	 	 
	Occasionally
	 	 	 	 
	Never
	 	 	 	 

	4.	 	SIGNATURE

The above information is true and correct. The undersigned recognizes that the Company and its
counsel are relying on the truth and accuracy of such information in reliance on the exemption
contained in Subsection 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The undersigned agrees to notify the Company promptly of any changes in
the foregoing information which may occur prior to the investment.

Executed at                                         , on                    , 2006

	 	 	 	 	 
	 	 	 
	 	 	 	 
	 	 	 	(Signature) 	 
	 	 	 	 
	 

 

 

Exhibit D

Selling Stockholder Questionnaire

			
	To:	 	Third Wave Technologies, Inc.

c/o Scott Coward

Kennedy Covington Lobdell & Hickman, L.L.P.

4350 Lassiter at North Hills Avenue

Suite 300

Raleigh, NC 27609

Facsimile: (919) 516-2028

     Reference is made to the Securities Purchase Agreement (the “Agreement”), made between Third
Wave Technologies, Inc., a Delaware corporation (the “Company”), and the Purchasers noted therein.

     Pursuant to Section B(12) of the Agreement, the undersigned hereby furnishes to the Company
the following information for use by the Company in connection with the preparation of the
Registration Statement contemplated by Section E of the Agreement. For purposes of this
Questionnaire, “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a government
or any department or agency thereof.

	 	 	 	 	 	 	 	 	 
	 	 	(1	)	 	 	Name and Contact Information:
	 	 	 	 	 	 	(If you hold Company Securities through more than one entity,
wither or not affiliated, please complete a copy of this
Questionnaire for each entity.)
	 
	 	 	 	 	 	 	 	 
	 	 	Full legal name of record holder as it should appear
in the Registration Statement:	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	Address of record holder:	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	Social Security Number or Taxpayer identification number of record holder:	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	Identity of beneficial owner (if different than record holder):	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	Name of contact person:	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	Telephone number of contact person:	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	Fax number of contact person:	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	E-mail address of contact person:	 	 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Is the record holder a publicly held entity or a subsidiary
of a publicly held entity (i.e., an entity that has a class
of securities registered under the Securities and Exchange
Act of 1934.	 	Yes o         No o 

	 
	 	 	 	 	 	 	 	 
	 	 	(2) 	 	 	Beneficial Ownership of Registrable Securities:
	 
	 	 	 	 	 	 	 	 
	 	 	(a) Number of Registrable Securities owned by Selling Stockholder:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(b) Number of Registrable Securities requested to be registered:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(3) 	 	 	Beneficial Ownership of Other Securities of the Company Owned
by the Selling Stockholder:
	 
	 	 	 	 	 	 	 	 
	 	 	Except as set forth below in this Item (3), the undersigned is not the
beneficial or registered owner of any securities of the Company other than
the Registrable Securities listed above in Item (2)(a).
	 
	 	 	 	 	 	 	 	 
	 	 	Type and amount of other securities beneficially owned by the Selling
Stockholder:
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(4	)	 	 	Relationships with the Company:
	 
	 	 	 	 	 	 	 	 
	 	 	Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (5% or more) has
held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
	 
	 	 	 	 	 	 	 	 
	 	 	State any exceptions here:
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(5)	 	 	Plan of Distribution:
	 
	 	 	 	 	 	 	 	 
	 	 	Except as set forth below, the undersigned intends to distribute pursuant to
the Registration Statement the Registrable Securities listed above in Item
(2) in accordance with the draft of the “Plan of Distribution” section set
forth in Exhibit E to the Agreement:

 

 

	 	 	 	 	 	 	 	 	 
	 	 	State any exceptions here:
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(6)	 	 	Selling Stockholder Affiliations:
	 
	 	 	 	 	 	 	 	 
	 	 	(a) Is the Selling Stockholder a registered broker-dealer?
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(b) If the answer to Item 6(a) is yes, did the Selling Stockholder receive
the Registrable Securities as compensation for underwriting activities and,
if so, provide a brief description of the transaction(s) involved?
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(c) Is the Selling Stockholder an affiliate of a registered
broker-dealer(s)? (For purposes of this response, an “affiliate” of, or
Person “affiliated” with, a specified Person, is a Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the Person specified.)
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(d) If the answer to Item (6)(c) is yes, identify the registered
broker-dealer(s) and describe the nature of the affiliation(s):
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(e) If the answer to Item (6)(c) is yes, did the Selling Stockholder acquire
the Registrable Securities in the ordinary course of business (if not,
please explain)?
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(f) If the answer to Item (6)(c) is yes, did the Selling Stockholder, at the
time of purchase of the Registrable Securities, have any agreements, plans
or understandings, directly or indirectly, with any Person to distribute the
Registrable Securities (if yes, please explain)?
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 
	 	 	 	 	 	 	 	 
	 	 	(7)	 	 	Voting or Investment Control over the Registrable Securities:
	 
	 	 	 	 	 	 	 	 
	 	 	If the Selling Stockholder is not a natural Person, please identify all of
the natural Person or Persons who have voting or investment control over the
Registrable Securities listed in Item (2) above and their relation to the
Selling Stockholder:
	 
	 	 	 

 

 

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	(8	)	 	 	If you have specific language regarding any of the above
information that you would like included as a footnote to
the Selling Stockholder section of the Registration Statement,
please so state (attached additional pages if necessary) 1:
	 
	 	 	 	 	 	 	 	 
	 	 	 

 

			
	1	 	No representation is made that such language will be included in the
Registration Statement in the exact form provided.

[The remainder of this page has intentionally been left blank. Please continue to the
following page.]

 

 

     Pursuant to Section E(3) of the Agreement, the undersigned acknowledges that the Company may,
by notice to the Placement Agent and to each Purchaser at its last known address, suspend or
withdraw the Registration Statement and require that the undersigned immediately cease sales of
Registrable Securities pursuant to the Registration Statement under certain circumstances described
in the Agreement. At any time that such notice has been given, the undersigned may not sell
Registrable Securities pursuant to the Registration Statement.

     The undersigned hereby further acknowledges that pursuant to Section E.5(b) of the Agreement,
the undersigned shall indemnify the Company and each of its directors and officers against, and
hold the Company and each of its directors and officers harmless from, any losses, claims, damages,
expenses or liabilities (including reasonable attorneys fees) to which the Company or its directors
and officers may become subject by reason of any statement or omission in the Registration
Statement made in reliance upon, or in conformity with, a written statement by the undersigned,
including the information furnished or omitted in this Questionnaire by the undersigned.

     By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items (1) through (8) above and the inclusion of such information in the
Registration Statement, any amendments thereto and the related prospectus. The undersigned
understands that such information will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement and the related prospectus.

     The undersigned has reviewed the answers to the above questions and affirms that the same are
true, complete and accurate. THE UNDERSIGNED AGREES TO NOTIFY THE COMPANY IMMEDIATELY OF ANY
CHANGES IN THE FOREGOING INFORMATION.

	 	 	 	 
	 	 	 
	Dated:                                         , 2006

	 	 
	 
	 	 
Signature of Record Holder
	 	 	(Please sign your name in exactly the same
manner as the certificate(s) for the shares
being registered)

 

 

Exhibit E

Plan of Distribution

     We are registering the shares offered by this prospectus on behalf of the selling
stockholders. The selling stockholders, which as used herein includes donees, pledgees, transferees
or other successors-in-interest selling shares of common stock or interests in shares of common
stock received after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock or interests in shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of
sale, at prices related to the prevailing market price, at varying prices determined at the time of
sale, or at negotiated prices. To the extent any of the selling stockholders gift, pledge or
otherwise transfer the shares offered hereby, such transferees may offer and sell the shares from
time to time under this prospectus, provided that this prospectus has been amended under Rule
424(b)(3) or other applicable provision of the Securities Act to include the name of such
transferee in the list of selling stockholders under this prospectus.

     The selling stockholders may use any one or more of the following methods when disposing of
shares or interests therein:

	 	•	 	ordinary brokerage transactions and transactions in
which the broker-dealer solicits purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt
to sell the shares as agent, but may position and
resell a portion of the block as principal to
facilitate the transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale
by the broker-dealer for its account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	short sales;
	 
	 	•	 	through the writing or settlement of options or
other hedging transactions, whether through an
options exchange or otherwise;
	 
	 	•	 	broker-dealers may agree with the selling
stockholders to sell a specified number of such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.

 

 

     The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock,
from time to time, under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus.

     In connection with the sale of our common stock or interests therein, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The selling stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).

     The aggregate proceeds to the selling stockholders from the sale of the common stock offered
by them will be the purchase price of the common stock less discounts or commissions, if any. Each
of the selling stockholders reserves the right to accept and, together with their agents from time
to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering.

     The selling stockholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet
the criteria and conform to the requirements of that rule.

     The selling stockholders might be, and any broker-dealers that act in connection with the sale
of securities will be, deemed to be “underwriters” within the meaning of Section 2(11) of the
Securities Act, and any commissions received by such broker-dealers and any profit on the resale of
the securities sold by them while acting as principals will be deemed to be underwriting discounts
or commissions under the Securities Act. Each selling stockholder has represented and warranted to
the company that it does not have any agreement or understanding, directly or indirectly with any
Person to distribute shares.

     To the extent required, the shares of our common stock to be sold, the names of the selling
stockholders, the respective purchase prices and public offering prices, the names of any agents,
dealers or underwriters, and any applicable commissions or discounts with respect to a particular
offer will be set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement that includes this prospectus.

-2-

 

     In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and
is complied with.

     We have advised the selling stockholders that the anti-manipulation rules of Regulation M
under the Exchange Act may apply to sales of shares in the market and to the activities of the
selling stockholders and their affiliates. Regulation M’s prohibition on purchases may include
purchases to cover short positions by the selling stockholders, and a selling stockholder’s failure
to cover a short position at a lender’s request and subsequent purchases by the lender in the open
market of shares to cover such short positions, may be deemed to constitute an inducement to buy
shares, which is prohibited by Regulation M.

     We will make copies of this prospectus (as it may be supplemented or amended from time to
time) available to the selling stockholders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.

     We have advised the selling stockholders that if a particular offer of shares is to be made on
terms constituting a material change from the information described under a final prospectus, then,
to the extent required, a supplement to the final prospectus must be distributed setting forth the
terms and related information as required.

     We have agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the registration of the
shares offered by this prospectus.

-3-Exhibit 4.1

 

Exhibit 4.1

 

TSB FINANCIAL CORPORATION,

as Issuer

INDENTURE

Dated as of December 14, 2006

WILMINGTON TRUST COMPANY,

as Trustee

FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

DUE 2036

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	Section 1.1. Definitions
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II. DEBENTURES
	 	 	8	 
	 
	 	 	 	 
	Section 2.1. Authentication and Dating
	 	 	8	 
	Section 2.2. Form of Trustee’s Certificate of Authentication
	 	 	8	 
	Section 2.3. Form and Denomination of Debentures
	 	 	9	 
	Section 2.4. Execution of Debentures
	 	 	9	 
	Section 2.5. Exchange and Registration of Transfer of Debentures
	 	 	9	 
	Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures
	 	 	11	 
	Section 2.7. Temporary Debentures
	 	 	12	 
	Section 2.8. Payment of Interest and Additional Interest
	 	 	12	 
	Section 2.9. Cancellation of Debentures Paid, etc
	 	 	13	 
	Section 2.10. Computation of Interest
	 	 	14	 
	Section 2.11. Extension of Interest Payment Period
	 	 	15	 
	Section 2.12. CUSIP Numbers
	 	 	16	 
	 
	 	 	 	 
	ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY
	 	 	16	 
	 
	 	 	 	 
	Section 3.1. Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures
	 	 	16	 
	Section 3.2. Offices for Notices and Payments, etc
	 	 	17	 
	Section 3.3. Appointments to Fill Vacancies in Trustee’s Office
	 	 	17	 
	Section 3.4. Provision as to Paying Agent
	 	 	17	 
	Section 3.5. Certificate to Trustee
	 	 	18	 
	Section 3.6. Additional Sums
	 	 	18	 
	Section 3.7. Compliance with Consolidation Provisions
	 	 	19	 
	Section 3.8. Limitation on Dividends
	 	 	19	 
	Section 3.9. Covenants as to the Trust
	 	 	19	 
	Section 3.10. Additional Junior Indebtedness
	 	 	20	 
	 
	 	 	 	 
	ARTICLE IV. SECURITYHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
	 	 	20	 
	 
	 	 	 	 
	Section 4.1. Securityholders’ Lists
	 	 	20	 
	Section 4.2. Preservation and Disclosure of Lists
	 	 	20	 
	 
	 	 	 	 
	ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
	 	 	21	 
	 
	 	 	 	 
	Section 5.1. Events of Default
	 	 	21	 
	Section 5.2. Payment of Debentures on Default; Suit Therefor
	 	 	23	 
	Section 5.3. Application of Moneys Collected by Trustee
	 	 	24	 
	Section 5.4. Proceedings by Securityholders
	 	 	24	 
	Section 5.5. Proceedings by Trustee
	 	 	25	 
	Section 5.6. Remedies Cumulative and Continuing; Delay or Omission Not a Waiver
	 	 	25	 

i

 

	 	 	 	 	 
	 	 	Page
	Section 5.7. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders
	 	 	25	 
	Section 5.8. Notice of Defaults
	 	 	26	 
	Section 5.9. Undertaking to Pay Costs
	 	 	26	 
	 
	 	 	 	 
	ARTICLE VI. CONCERNING THE TRUSTEE
	 	 	26	 
	 
	 	 	 	 
	Section 6.1. Duties and Responsibilities of Trustee
	 	 	26	 
	Section 6.2. Reliance on Documents, Opinions, etc
	 	 	27	 
	Section 6.3. No Responsibility for Recitals, etc
	 	 	28	 
	Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures
	 	 	28	 
	Section 6.5. Moneys to be Held in Trust
	 	 	29	 
	Section 6.6. Compensation and Expenses of Trustee
	 	 	29	 
	Section 6.7. Officers’ Certificate as Evidence
	 	 	29	 
	Section 6.8. Eligibility of Trustee
	 	 	30	 
	Section 6.9. Resignation or Removal of Trustee
	 	 	30	 
	Section 6.10. Acceptance by Successor Trustee
	 	 	31	 
	Section 6.11. Succession by Merger, etc
	 	 	32	 
	Section 6.12. Authenticating Agents
	 	 	32	 
	 
	 	 	 	 
	ARTICLE VII. CONCERNING THE SECURITYHOLDERS
	 	 	33	 
	 
	 	 	 	 
	Section 7.1. Action by Securityholders
	 	 	33	 
	Section 7.2. Proof of Execution by Securityholders
	 	 	33	 
	Section 7.3. Who Are Deemed Absolute Owners
	 	 	34	 
	Section 7.4. Debentures Owned by Company Deemed Not Outstanding
	 	 	34	 
	Section 7.5. Revocation of Consents; Future Holders Bound
	 	 	34	 
	 
	 	 	 	 
	ARTICLE VIII. SECURITYHOLDERS’ MEETINGS
	 	 	34	 
	 
	 	 	 	 
	Section 8.1. Purposes of Meetings
	 	 	34	 
	Section 8.2. Call of Meetings by Trustee
	 	 	35	 
	Section 8.3. Call of Meetings by Company or Securityholders
	 	 	35	 
	Section 8.4. Qualifications for Voting
	 	 	35	 
	Section 8.5. Regulations
	 	 	35	 
	Section 8.6. Voting
	 	 	36	 
	Section 8.7. Quorum; Actions
	 	 	36	 
	 
	 	 	 	 
	ARTICLE IX. SUPPLEMENTAL INDENTURES
	 	 	37	 
	 
	 	 	 	 
	Section 9.1. Supplemental Indentures without Consent of Securityholders
	 	 	37	 
	Section 9.2. Supplemental Indentures with Consent of Securityholders
	 	 	38	 
	Section 9.3. Effect of Supplemental Indentures
	 	 	39	 
	Section 9.4. Notation on Debentures
	 	 	39	 
	Section 9.5. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee
	 	 	39	 
	 
	 	 	 	 
	ARTICLE X. REDEMPTION OF SECURITIES
	 	 	39	 
	 
	 	 	 	 
	Section 10.1. Optional Redemption
	 	 	39	 
	Section 10.2. Special Event Redemption
	 	 	39	 
	Section 10.3. Notice of Redemption; Selection of Debentures
	 	 	39	 
	Section 10.4. Payment of Debentures Called for Redemption
	 	 	40	 

ii

 

	 	 	 	 	 
	 	 	Page
	ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
	 	 	40	 
	 
	 	 	 	 
	Section 11.1. Company May Consolidate, etc., on Certain Terms
	 	 	40	 
	Section 11.2. Successor Entity to be Substituted
	 	 	41	 
	Section 11.3. Opinion of Counsel to be Given to Trustee
	 	 	41	 
	 
	 	 	 	 
	ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE
	 	 	41	 
	 
	 	 	 	 
	Section 12.1. Discharge of Indenture
	 	 	41	 
	Section 12.2. Deposited Moneys to be Held in Trust by Trustee
	 	 	42	 
	Section 12.3. Paying Agent to Repay Moneys Held
	 	 	42	 
	Section 12.4. Return of Unclaimed Moneys
	 	 	42	 
	 
	 	 	 	 
	ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
	 	 	42	 
	 
	 	 	 	 
	Section 13.1. Indenture and Debentures Solely Corporate Obligations
	 	 	42	 
	 
	 	 	 	 
	ARTICLE XIV. MISCELLANEOUS PROVISIONS
	 	 	43	 
	 
	 	 	 	 
	Section 14.1. Successors
	 	 	43	 
	Section 14.2. Official Acts by Successor Entity
	 	 	43	 
	Section 14.3. Surrender of Company Powers
	 	 	43	 
	Section 14.4. Addresses for Notices, etc
	 	 	43	 
	Section 14.5. Governing Law
	 	 	43	 
	Section 14.6. Evidence of Compliance with Conditions Precedent
	 	 	43	 
	Section 14.7. Table of Contents, Headings, etc
	 	 	44	 
	Section 14.8. Execution in Counterparts
	 	 	44	 
	Section 14.9. Separability
	 	 	44	 
	Section 14.10. Assignment
	 	 	44	 
	Section 14.11. Acknowledgment of Rights
	 	 	44	 
	 
	 	 	 	 
	ARTICLE XV. SUBORDINATION OF DEBENTURES
	 	 	44	 
	 
	 	 	 	 
	Section 15.1. Agreement to Subordinate
	 	 	44	 
	Section 15.2. Default on Senior Indebtedness
	 	 	45	 
	Section 15.3. Liquidation, Dissolution, Bankruptcy
	 	 	45	 
	Section 15.4. Subrogation
	 	 	46	 
	Section 15.5. Trustee to Effectuate Subordination
	 	 	47	 
	Section 15.6. Notice by the Company
	 	 	47	 
	Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness
	 	 	47	 
	Section 15.8. Subordination May Not Be Impaired
	 	 	48	 

Exhibit A       Form of Floating Rate Junior Subordinated Deferrable Interest Debenture

Exhibit B       Form of Certificate to Trustee

iii

 

     THIS INDENTURE, dated as of December 14, 2006, between TSB Financial Corporation, a North
Carolina corporation (the “Company”), and Wilmington Trust Company, a Delaware banking
corporation, as debenture trustee (the “Trustee”).

WITNESSETH:

     WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of
its Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036 (the
“Debentures”) under this Indenture to provide, among other things, for the execution and
authentication, delivery and administration thereof, and the Company has duly authorized the
execution of this Indenture; and

     WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to
its terms, have been done and performed;

     NOW, THEREFORE, This Indenture Witnesseth:

     In consideration of the premises, and the purchase of the Debentures by the holders thereof,
the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the
respective holders from time to time of the Debentures as follows:

ARTICLE I.

DEFINITIONS

     Section 1.1. Definitions. The terms defined in this Section 1.1 (except as herein
otherwise expressly provided or unless the context otherwise requires) for all purposes of this
Indenture and of any indenture supplemental hereto shall have the respective meanings specified in
this Section 1.1. All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted accounting principles and the
term “generally accepted accounting principles” means such accounting principles as are generally
accepted in the United States at the time of any computation. The words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.

     “Acceleration Event of Default” means an Event of Default under Section 5.1(a), (d),
(e) or (f), whatever the reason for such Acceleration Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or governmental body.

     “Additional Interest” has the meaning set forth in Section 2.11.

     “Additional Junior Indebtedness” means, without duplication and other than the
Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the
Company, under debt securities (or guarantees in respect of debt securities) initially issued after
the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity
affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is
defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the
Company or any Subsidiary of the Company in connection with the issuance by that entity of
preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment
(or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as
then in effect and applicable to the Company (or, if the Company is not a bank holding company,
such guidelines applied to the Company as if the Company were subject to such guidelines);
provided, however, that the inability of the Company to treat all or any portion of
the Additional Junior
Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if
such inability results from the Company having cumulative preferred stock, minority interests in
consolidated

1

 

subsidiaries, or any other class of security or interest which the Federal Reserve now
or may hereafter accord Tier 1 capital treatment (including the Debentures) in excess of the amount
which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.

     “Additional Sums” has the meaning set forth in Section 3.6.

     “Affiliate” has the same meaning as given to that term in Rule 405 of the Securities
Act or any successor rule thereunder.

     “Authenticating Agent” means any agent or agents of the Trustee which at the time
shall be appointed and acting pursuant to Section 6.12.

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

     “Board of Directors” means the board of directors or the executive committee or any
other duly authorized designated officers of the Company.

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

     “Business Day” means any day other than a Saturday, Sunday or any other day on which
banking institutions in New York City or Wilmington, Delaware are permitted or required by any
applicable law or executive order to close.

     “Capital Securities” means undivided beneficial interests in the assets of the Trust
which rank pari passu with Common Securities issued by the Trust; provided,
however, that upon the occurrence and continuance of an Event of Default (as defined in the
Declaration), the rights of holders of such Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of such Capital Securities.

     “Capital Securities Guarantee” means the guarantee agreement that the Company enters
into with Wilmington Trust Company, as guarantee trustee, or other Persons that operates directly
or indirectly for the benefit of holders of Capital Securities of the Trust.

     “Capital Treatment Event” means the receipt by the Company and the Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of the occurrence of any
amendment to, or change (including any announced prospective change) in, the laws, rules or
regulations of the United States or any political subdivision thereof or therein, or as the result
of any official or administrative pronouncement or action or decision interpreting or applying such
laws, rules or regulations, which amendment or change is effective or which pronouncement, action
or decision is announced on or after the date of original issuance of the Debentures, there is more
than an insubstantial risk that the Company will not, within 90 days of the date of such opinion,
be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities
as “Tier 1 Capital” (or its then equivalent) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank
holding company or otherwise is not subject to the Federal Reserve’s risk-based capital adequacy
guidelines, such guidelines applied to the Company as if the Company were subject to such
guidelines); provided, however, that the inability of the Company to treat all or
any portion of the liquidation amount of the Capital Securities as Tier 1 Capital shall not
constitute the basis
for a Capital Treatment Event, if such inability results from the Company having cumulative
preferred stock, minority interests in consolidated subsidiaries, or any other class of security or
interest which the

2

 

Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1
Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier
1 Capital under applicable capital adequacy guidelines; provided further,
however, that the distribution of Debentures in connection with the liquidation of the
Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall
have occurred in connection with a Tax Event or an Investment Company Event.

     “Certificate” means a certificate signed by any one of the principal executive
officer, the principal financial officer or the principal accounting officer of the Company.

     “Common Securities” means undivided beneficial interests in the assets of the Trust
which rank pari passu with Capital Securities issued by the Trust; provided,
however, that upon the occurrence and continuance of an Event of Default (as defined in the
Declaration), the rights of holders of such Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of such Capital Securities.

     “Company” means TSB Financial Corporation, a North Carolina corporation, and, subject
to the provisions of Article XI, shall include its successors and assigns.

     “Coupon Rate” has the meaning set forth in Section 2.8.

     “Debenture” or “Debentures” has the meaning stated in the first recital of
this Indenture.

     “Debenture Register” has the meaning specified in Section 2.5.

     “Declaration” means the Amended and Restated Declaration of Trust of the Trust, as
amended or supplemented from time to time.

     “Default” means any event, act or condition that with notice or lapse of time, or
both, would constitute an Event of Default.

     “Defaulted Interest” has the meaning set forth in Section 2.8.

     “Distribution Period” means (i) with respect to interest paid on the first Interest
Payment Date, the period beginning on (and including) the date of original issuance and ending on
(but excluding) the Interest Payment Date in March 2007 and (ii) thereafter, with respect to
interest paid on each successive Interest Payment Date, the period beginning on (and including) the
preceding Interest Payment Date and ending on (but excluding) such current Interest Payment Date.

     “Determination Date” has the meaning set forth in Section 2.10.

     “Event of Default” means any event specified in Section 5.1, continued for the period
of time, if any, and after the giving of the notice, if any, therein designated.

     “Extension Period” has the meaning set forth in Section 2.11.

     “Federal Reserve” means the Board of Governors of the Federal Reserve System, or its
designated district bank, as applicable, and any successor federal agency that is primarily
responsible for regulating the activities of bank holding companies.

     “Indenture” means this instrument as originally executed or, if amended or
supplemented as herein provided, as so amended or supplemented, or both.

     “Institutional Trustee” has the meaning set forth in the Declaration.

3

 

     “Interest Payment Date” means March 15, June 15, September 15 and December 15 of each
year during the term of this Indenture, or if such day is not a Business Day, then the next
succeeding Business Day (it being understood that interest accrues for any such non-Business Day),
commencing in March 2007.

     “Interest Rate” means for the Distribution Period beginning on (and including) the
date of original issuance and ending on (but excluding) the Interest Payment Date in March 2007 the
rate per annum of 7.07%, and for each Distribution Period beginning on or after the Interest
Payment Date in March 2007, the Coupon Rate for such Distribution Period.

     “Investment Company Event” means the receipt by the Company and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of
a change in law or regulation or written change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that the Trust is or,
within 90 days of the date of such opinion will be considered an “investment company” that is
required to be registered under the Investment Company Act of 1940, as amended which change or
prospective change becomes effective or would become effective, as the case may be, on or after the
date of the issuance of the Debentures.

     “Liquidation Amount” means the stated amount of $1,000.00 per Trust Security.

     “Maturity Date” means December 15, 2036.

     “Officers’ Certificate” means a certificate signed by the Chairman of the Board, the
Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice
President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the
Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee. Each such certificate shall include the statements provided for in
Section 14.6 if and to the extent required by the provisions of such Section.

     “Opinion of Counsel” means an opinion in writing signed by legal counsel, who may be
an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the
Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the
extent required by the provisions of such Section.

     The term “outstanding,” when used with reference to Debentures, means, subject to the
provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by
the Trustee or the Authenticating Agent under this Indenture, except:

     (a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to
the Trustee for cancellation;

     (b) Debentures, or portions thereof, for the payment or redemption of which moneys in the
necessary amount shall have been deposited in trust with the Trustee or with any paying agent
(other than the Company) or shall have been set aside and segregated in trust by the Company (if
the Company shall act as its own paying agent); provided, however, that, if such
Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such
redemption shall have been given as provided in Section 10.3 or provision satisfactory to the
Trustee shall have been made for giving such notice; and

     (c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other
Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless
proof

4

 

satisfactory to the Company and the Trustee is presented that any such Debentures are held by
bona fide holders in due course.

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

     “Predecessor Security” of any particular Debenture means every previous Debenture
evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and,
for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in
lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the
lost, destroyed or stolen Debenture.

     “Principal Office of the Trustee,” or other similar term, means the office of the
Trustee, at which at any particular time its corporate trust business shall be principally
administered, which at the time of the execution of this Indenture shall be Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust
Administration.

     “Redemption Date” has the meaning set forth in Section 10.1.

     “Redemption Price” means 100% of the principal amount of the Debentures being
redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures
to the Redemption Date.

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

     “Securities Act” means the Securities Act of 1933, as amended from time to time or any
successor legislation.

     “Securityholder,” “holder of Debentures,” or other similar terms, means any Person in
whose name at the time a particular Debenture is registered on the register kept by the Company or
the Trustee for that purpose in accordance with the terms hereof.

     “Senior Indebtedness” means, with respect to the Company, (i) the principal, premium,
if any, and interest in respect of (A) indebtedness of the Company for all borrowed and purchased
money and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar
instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all
obligations of the Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company under any title
retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of
credit, any banker’s acceptance, any security purchase facility, any repurchase agreement or
similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under
options or any similar credit or other transaction; (v) all obligations of the Company associated
with derivative products such as interest and foreign exchange rate contracts, commodity contracts,
and similar arrangements; (vi) all obligations of the type referred to in clauses (i) through (v)
above of other Persons for the payment of which the Company is responsible or liable as obligor,
guarantor or otherwise including, without limitation, similar obligations arising from off-balance
sheet guarantees and direct credit substitutes; and (vii) all obligations of the type referred
to in clauses (i) through (vi) above of other Persons secured by any lien on any property or asset
of the Company (whether

5

 

or not such obligation is assumed by the Company), whether incurred on or
prior to the date of this Indenture or thereafter incurred. Notwithstanding the foregoing, “Senior
Indebtedness” shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued
pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable
of the Company arising in the ordinary course of business (such trade accounts payable being pari
passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the
instrument creating or evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are pari passu, junior or otherwise not superior in right of payment
to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then
required under the applicable guidelines of the regulating entity, has received approval from) the
Federal Reserve (if the Company is a bank holding company). Senior Indebtedness shall continue to
be Senior Indebtedness and be entitled to the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.

     “Special Event” means any of a Capital Treatment Event, an Investment Company Event or
a Tax Event.

     “Special Redemption Date” has the meaning set forth in Section 10.2.

     “Special Redemption Price” means the price set forth in the following table for any
Special Redemption Date that occurs on the date indicated below (or if such day is not a Business
Day, then the next succeeding Business Day), expressed as the percentage of the principal amount of
the Debentures being redeemed:

	 	 	 	 	 	 
	Month in which Special	 	 	 
	Redemption Date Occurs	 	 	Special Redemption Price
	March 2007
	 	 	 	104.625	%
	 
	 	 	 	 	 
	June 2007
	 	 	 	104.300	%
	 
	 	 	 	 	 
	September 2007
	 	 	 	104.000	%
	 
	 	 	 	 	 
	December 2007
	 	 	 	103.650	%
	 
	 	 	 	 	 
	March 2008
	 	 	 	103.350	%
	 
	 	 	 	 	 
	June 2008
	 	 	 	103.000	%
	 
	 	 	 	 	 
	September 2008
	 	 	 	102.700	%
	 
	 	 	 	 	 
	December 2008
	 	 	 	102.350	%
	 
	 	 	 	 	 
	March 2009
	 	 	 	102.050	%
	 
	 	 	 	 	 
	June 2009
	 	 	 	101.700	%
	 
	 	 	 	 	 
	September 2009
	 	 	 	101.400	%
	 
	 	 	 	 	 
	December 2009
	 	 	 	101.050	%
	 
	 	 	 	 	 
	March 2010
	 	 	 	100.750	%

6

 

	 	 	 	 	 	 
	Month in which Special	 	 	 
	Redemption Date Occurs	 	 	Special Redemption Price
	June 2010
	 	 	 	100.450	%
	 
	 	 	 	 	 
	September 2010
	 	 	 	100.200	%
	 
	 	 	 	 	 
	December 2010 and thereafter
	 	 	 	100.000	%

plus, in each case, accrued and unpaid interest (including any Additional Interest) on such
Debentures to the Special Redemption Date.

     “Subsidiary” means with respect to any Person, (i) any corporation at least a majority
of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one
or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any
general partnership, joint venture or similar entity, at least a majority of the outstanding
partnership or similar interests of which shall at the time be owned by such Person, or by one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any
limited partnership of which such Person or any of its Subsidiaries is a general partner. For the
purposes of this definition, “voting stock” means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having ordinary voting power
for the election of a majority of the directors (or the equivalent) of such Person, other than
shares, interests, participations or other equivalents having such power only by reason of the
occurrence of a contingency.

     “Tax Event” means the receipt by the Company and the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to or change
(including any announced prospective change) in the laws or any regulations thereunder of the
United States or any political subdivision or taxing authority thereof or therein, or as a result
of any official administrative pronouncement (including any private letter ruling, technical advice
memorandum, field service advice, regulatory procedure, notice or announcement, including any
notice or announcement of intent to adopt such procedures or regulations) (an “Administrative
Action”) or judicial decision interpreting or applying such laws or regulations, regardless of
whether such Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Company or the Trust and whether or not subject to review or appeal, which
amendment, clarification, change, Administrative Action or decision is enacted, promulgated or
announced, in each case on or after the date of original issuance of the Debentures, there is more
than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such
opinion, subject to United States federal income tax with respect to income received or accrued on
the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of
the date of such opinion, will not be, deductible by the Company, in whole or in part, for United
States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental
charges.

     “3-Month LIBOR” has the meaning set forth in Section 2.10.

     “Telerate Page 3750” has the meaning set forth in Section 2.10.

     “Trust” shall mean TSB Statutory Trust I, a Delaware statutory trust, or any other
similar trust created for the purpose of issuing Capital Securities in connection with the issuance
of Debentures under this Indenture, of which the Company is the sponsor.

     “Trust Securities” means Common Securities and Capital Securities of the Trust.

7

 

     “Trustee” means Wilmington Trust Company, and, subject to the provisions of Article VI
hereof, shall also include its successors and assigns as Trustee hereunder.

ARTICLE II.

DEBENTURES

     Section 2.1. Authentication and Dating. Upon the execution and delivery of this
Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in
excess of $3,093,000.00 may be executed and delivered by the Company to the Trustee for
authentication, and the Trustee, upon receipt of a written authentication order from the Company,
shall thereupon authenticate and make available for delivery said Debentures to or upon the written
order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer,
Vice Chairman, the President, Chief Financial Officer, one of its Managing Directors or one of its
Vice Presidents without any further action by the Company hereunder. Notwithstanding anything to
the contrary contained herein, the Trustee shall be fully protected in relying upon the
aforementioned authentication order in authenticating and delivering said Debentures. In
authenticating such Debentures, and accepting the additional responsibilities under this Indenture
in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section
6.1) shall be fully protected in relying upon:

     (a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable,
an appropriate record of any action taken pursuant to such resolution, in each case certified by
the Secretary or an Assistant Secretary of the Company, as the case may be; and

     (b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:

     (1) that such Debentures, when authenticated and delivered by the Trustee and
issued by the Company in each case in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, subject to or limited by applicable bankruptcy,
insolvency, reorganization, conservatorship, receivership, moratorium and other
statutory or decisional laws relating to or affecting creditors’ rights or the
reorganization of financial institutions (including, without limitation, preference
and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in
effect, affecting the rights of creditors generally; and

     (2) that all laws and requirements in respect of the execution and delivery by
the Company of the Debentures have been complied with and that authentication and
delivery of the Debentures by the Trustee will not violate the terms of this
Indenture.

     The Trustee shall have the right to decline to authenticate and deliver any Debentures under
this Section if the Trustee, being advised in writing by counsel, determines that such action may
not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that
such action would expose the Trustee to personal liability to existing holders.

     The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved
borders or may be produced in any other manner, all as determined by the officers executing such
Debentures, as evidenced by their execution of such Debentures.

     Section 2.2. Form of Trustee’s Certificate of Authentication.
The Trustee’s certificate of authentication on all Debentures shall be in substantially the
following form:

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     This is one of the Debentures referred to in the within-mentioned Indenture.

     WILMINGTON TRUST COMPANY, as Trustee

     By                                                             

     Authorized Signer

     Section 2.3. Form and Denomination of Debentures. The Debentures shall be
substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered,
certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of
$1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an
aggregate principal amount of less than $100,000.00 shall be deemed to be void and of no legal
effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such
Debentures for any purpose, including, but not limited to the receipt of payments on such
Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such
Debentures. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner
or in accordance with such plans as the officers executing the same may determine with the approval
of the Trustee as evidenced by the execution and authentication thereof.

     Section 2.4. Execution of Debentures. The Debentures shall be signed in the name and
on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of
Directors, Chief Executive Officer, Vice Chairman, President or Chief Financial Officer, one of its
Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice
Presidents. Only such Debentures as shall bear thereon a certificate of authentication
substantially in the form herein before recited, executed by the Trustee or the Authenticating
Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the
Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that
the Debenture so authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.

     In case any officer of the Company who shall have signed any of the Debentures shall cease to
be such officer before the Debentures so signed shall have been authenticated and delivered by the
Trustee or the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless
may be authenticated and delivered or disposed of as though the Person who signed such Debentures
had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the
Company by such Persons as, at the actual date of the execution of such Debenture, shall be the
proper officers of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.

     Every Debenture shall be dated the date of its authentication.

     Section 2.5. Exchange and Registration of Transfer of Debentures. The Company shall
cause to be kept, at the office or agency maintained for the purpose of registration of transfer
and for exchange as provided in Section 3.2, a register (the “Debenture Register”) for the
Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration and transfer of all Debentures as in this
Article II provided. The Debenture Register shall be in written form or in any other form capable
of being converted into written form within a reasonable time.

     Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any
office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and
the Company shall execute, the Company or the Trustee shall register and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in exchange therefor the
Debenture or

9

 

Debentures which the Securityholder making the exchange shall be entitled to receive.
Upon due presentment for registration of transfer of any Debenture at the Principal Office of the
Trustee or at any office or agency of the Company maintained for such purpose as provided in
Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee
or the Authenticating Agent shall authenticate and make available for delivery in the name of the
transferee or transferees a new Debenture for a like aggregate principal amount. Registration or
registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed
pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the
registration or registration of transfer of such Debenture.

     All Debentures presented for registration of transfer or for exchange or payment shall (if so
required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be
accompanied by a written instrument or instruments of transfer in form satisfactory to the Company
and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly
authorized in writing.

     No service charge shall be made for any exchange or registration of transfer of Debentures,
but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or
other governmental charge that may be imposed in connection therewith.

     The Company or the Trustee shall not be required to exchange or register a transfer of any
Debenture for a period of 15 days next preceding the date of selection of Debentures for
redemption.

     Notwithstanding anything herein to the contrary, Debentures may not be transferred except in
compliance with the restricted securities legend set forth below, unless otherwise determined by
the Company, upon the advice of counsel, in accordance with applicable law:

     THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES
OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A,
(D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904
(AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED
INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE

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REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY
OF WHICH MAY BE OBTAINED FROM THE COMPANY.

     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT
IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT
TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND
NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST
THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY
PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY
ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE
MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A
TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON
OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii)
SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

     THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE
PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY
ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN
$100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

     THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

     Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures. In case any Debenture
shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its
written request the Trustee shall authenticate and deliver, a new Debenture bearing a
number not contemporaneously outstanding, in exchange and substitution for the mutilated
Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In
every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee
such security or indemnity as may be required by them to save each of them harmless, and, in every
case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee
evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the
ownership thereof.

     The Trustee may authenticate any such substituted Debenture and deliver the same upon the
written request or authorization of any officer of the Company. Upon the issuance of any
substituted

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Debenture, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debenture which has matured or is about to mature or has been called for
redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead
of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender
thereof except in the case of a mutilated Debenture) if the applicant for such payment shall
furnish to the Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the
Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership
thereof.

     Every substituted Debenture issued pursuant to the provisions of this Section 2.6 by virtue of
the fact that any such Debenture is destroyed, lost or stolen shall constitute an additional
contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall
be found at any time, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be
held and owned upon the express condition that, to the extent permitted by applicable law, the
foregoing provisions are exclusive with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment of negotiable instruments or other securities without their surrender.

     Section 2.7. Temporary Debentures. Pending the preparation of definitive Debentures,
the Company may execute and the Trustee shall authenticate and make available for delivery
temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be
issuable in any authorized denomination, and substantially in the form of the definitive Debentures
in lieu of which they are issued but with such omissions, insertions and variations as may be
appropriate for temporary Debentures, all as may be determined by the Company. Every such
temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the
same conditions and in substantially the same manner, and with the same effect, as the definitive
Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the
Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be
surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any
office or agency maintained by the Company for such purpose as provided in Section 3.2, and the
Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange
for such temporary Debentures a like aggregate principal amount of such definitive Debentures.
Such exchange shall be made by the Company at its own expense and without any charge therefor
except that in case of any such exchange involving a registration of transfer the Company may
require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be
entitled to the same benefits under this Indenture as definitive Debentures authenticated and
delivered hereunder.

     Section 2.8. Payment of Interest and Additional Interest. Interest at the Interest
Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly
provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name
said Debenture (or one or more Predecessor Securities) is registered at the close of business on
the regular record date for such interest installment except that interest and any Additional
Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid.

     Each Debenture shall bear interest for the period beginning on (and including) the date of
original issuance and ending on (but excluding) the Interest Payment Date in March 2007 at a rate
per annum of 7.07%, and shall bear interest for each successive Distribution Period beginning on or
after the Interest

12

 

Payment Date in March 2007 at a rate per annum equal to the 3-Month LIBOR,
determined as described in Section 2.10, plus 1.72% (the “Coupon Rate”), applied to the
principal amount thereof, until the principal thereof becomes due and payable, and on any overdue
principal and to the extent that payment of such interest is enforceable under applicable law
(without duplication) on any overdue installment of interest (including Additional Interest) at the
Interest Rate in effect for each applicable period compounded quarterly. Interest shall be payable
(subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with
the first installment of interest to be paid on the Interest Payment Date in March 2007.

     Any interest on any Debenture, including Additional Interest, that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted
Interest”) shall forthwith cease to be payable to the registered holder on the relevant regular
record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the
Company to the Persons in whose names such Debentures (or their respective Predecessor Securities)
are registered at the close of business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in
writing at least 25 days prior to the date of the proposed payment of the amount of Defaulted
Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at
the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the
payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to
the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the special record date therefor to be mailed, first class
postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not
less than 10 days prior to such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names such Debentures (or their respective
Predecessor Securities) are registered on such special record date and shall be no longer payable.

     The Company may make payment of any Defaulted Interest on any Debentures in any other lawful
manner after notice given by the Company to the Trustee of the proposed payment method;
provided, however, the Trustee in its sole discretion deems such payment method to
be practical.

     Any interest (including Additional Interest) scheduled to become payable on an Interest
Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be
payable on such other date as may be specified in the terms of such Debentures.

     The term “regular record date” as used in this Section shall mean the close of business on the
15th Business Day preceding the applicable Interest Payment Date.

     Subject to the foregoing provisions of this Section, each Debenture delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture
shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such
other Debenture.

     Section 2.9. Cancellation of Debentures Paid, etc. All Debentures surrendered for the
purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the
Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if
surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no

13

 

Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the
Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs
the Trustee in writing. If the Company shall acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by
such Debentures unless and until the same are surrendered to the Trustee for cancellation.

     Section 2.10. Computation of Interest. The amount of interest payable for each
Distribution Period will be calculated by applying the Interest Rate to the principal amount
outstanding at the commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360. All percentages resulting from any
calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or
resulting from such calculation will be rounded to the nearest cent (with one-half cent being
rounded upward)).

     (a) “3-Month LIBOR” means the London interbank offered interest rate for three-month,
U.S. dollar deposits determined by the Trustee in the following order of priority:

     (1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a
three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on
the related Determination Date (as defined below). “Telerate Page 3750” means the display
designated as “Page 3750” on the Moneyline Telerate Service or such other page as may
replace Page 3750 on that service or such other service or services as may be nominated by
the British Bankers’ Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits;

     (2) if such rate cannot be identified on the related Determination Date, the Trustee
will request the principal London offices of four leading banks in the London interbank
market to provide such banks’ offered quotations (expressed as percentages per annum) to
prime banks in the London interbank market for U.S. dollar deposits having a three-month
maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two
quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;

     (3) if fewer than two such quotations are provided as requested in clause (2) above,
the Trustee will request four major New York City banks to provide such banks’ offered
quotations (expressed as percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two
such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;
and

     (4) if fewer than two such quotations are provided as requested in clause (3) above,
3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period
immediately preceding such current Distribution Period.

     If the rate for U.S. dollar deposits having a three-month maturity that initially appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded
on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination
Date, then the corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.

     (b) The Interest Rate for any Distribution Period will at no time be higher than the maximum
rate then permitted by New York law as the same may be modified by United States law.

14

 

     (c) “Determination Date” means the date that is two London Banking Days (i.e., a
business day in which dealings in deposits in U.S. dollars are transacted in the London interbank
market) preceding the particular Distribution Period for which a Coupon Rate is being determined.

     (d) The Trustee shall notify the Company, the Institutional Trustee and any securities
exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon
Rate and the Determination Date for each Distribution Period, in each case as soon as practicable
after the determination thereof but in no event later than the thirtieth (30th) day of the relevant
Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities
exchange or interdealer quotation system, or any defect in said notice, shall not affect the
obligation of the Company to make payment on the Debentures at the applicable Coupon Rate. Any
error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice
delivered as above provided. Upon the request of a holder of a Debenture, the Trustee shall
provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next
Distribution Period.

     (e) Subject to the corrective rights set forth above, all certificates, communications,
opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained
for the purposes of the provisions relating to the payment and calculation of interest on the
Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee
will (in the absence of willful default, bad faith and manifest error) be final, conclusive and
binding on the Trust, the Company and all of the holders of the Debentures and the Capital
Securities, and no liability shall (in the absence of willful default, bad faith or manifest error)
attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise
by either of them or their respective powers, duties and discretion.

     Section 2.11. Extension of Interest Payment Period. So long as no Acceleration Event
of Default has occurred and is continuing, the Company shall have the right, from time to time, and
without causing an Event of Default, to defer payments of interest on the Debentures by extending
the interest payment period on the Debentures at any time and from time to time during the term of
the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment
period, an “Extension Period”), during which Extension Period no interest (including
Additional Interest) shall be due and payable (except any Additional Sums that may be due and
payable). No Extension Period may end on a date other than an Interest Payment Date. During an
Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued
interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension
Period, compounded quarterly from the date such interest would have been payable were it not for
the Extension Period, to the
extent permitted by law (such interest referred to herein as “Additional Interest”).
At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid
on the Debentures (together with Additional Interest thereon); provided, however,
that no Extension Period may extend beyond the Maturity Date; provided further,
however, that during any such Extension Period, the Company shall not and shall not permit
any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company’s or such Affiliate’s
capital stock (other than payments of dividends or distributions to the Company) or make any
guarantee payments with respect to the foregoing or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company
or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures
(other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock
purchase plan or in connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange
or conversion of any

15

 

class or series of the Company’s capital stock (or any capital stock of a
subsidiary of the Company) for any class or series of the Company’s capital stock or of any class
or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (c)
the purchase of fractional interests in shares of the Company’s capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any stockholders’ rights plan, or
the issuance of rights, stock or other property under any stockholders’ rights plan, or the
redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the dividend is being
paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional
shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee).
Prior to the termination of any Extension Period, the Company may further extend such period,
provided that such period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.
Upon the termination of any Extension Period and upon the payment of all accrued and unpaid
interest and Additional Interest, the Company may commence a new Extension Period, subject to the
foregoing requirements. No interest or Additional Interest shall be due and payable during an
Extension Period, except at the end thereof, but each installment of interest that would otherwise
have been due and payable during such Extension Period shall bear Additional Interest to the extent
permitted by applicable law. The Company must give the Trustee notice of its election to begin or
extend an Extension Period by the close of business at least 15 Business Days prior to the Interest
Payment Date with respect to which interest on the Debentures would have been payable except for
the election to begin or extend such Extension Period. The Trustee shall give notice of the
Company’s election to begin a new Extension Period to the Securityholders.

     Section 2.12. CUSIP Numbers. The Company in issuing the Debentures may use “CUSIP”
numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Securityholders; provided, however, that any such
notice may state that no representation is made as to the correctness of such numbers either as
printed on the Debentures or as contained in any notice of a redemption and that reliance may be
placed only on the other identification numbers printed on the Debentures, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company will promptly
notify the Trustee in writing of any change in the CUSIP numbers.

ARTICLE III.

PARTICULAR COVENANTS OF THE COMPANY

     Section 3.1. Payment of Principal, Premium and Interest; Agreed Treatment of the
Debentures.

     (a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest and any Additional Interest and other payments
on the Debentures at the place, at the respective times and in the manner provided in this
Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by
mailing checks for such interest payable to the order of the holders of Debentures entitled thereto
as they appear on the registry books of the Company if a request for a wire transfer has not been
received by the Company or (ii) by wire transfer to any account with a banking institution located
in the United States designated in writing by such Person to the paying agent no later than the
related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the
Institutional Trustee, the payment of the principal of and interest on this Debenture will be made
in immediately available funds at such place and to such account as may be designated by the
Institutional Trustee.

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     (b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect
of the principal amount of such Debentures as interest, for all United States federal income tax
purposes. All payments in respect of such Debentures will be made free and clear of United States
withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form
W8 BEN (or any substitute or successor form) establishing its non-United States status for United
States federal income tax purposes.

     (c) As of the date of this Indenture, the Company has no present intention to exercise its
right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension
Period.

     (d) As of the date of this Indenture, the Company believes that the likelihood that it would
exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing
an Extension Period at any time during which the Debentures are outstanding is remote because of
the restrictions that would be imposed on the Company’s ability to declare or pay dividends or
distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its
outstanding equity and on the Company’s ability to make any payments of principal of or interest
on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with
(or junior in interest to) the Debentures.

     Section 3.2. Offices for Notices and Payments, etc. So long as any of the Debentures
remain outstanding, the Company will maintain in Wilmington, Delaware, an office or agency where
the Debentures may be presented for payment, an office or agency where the Debentures may be
presented for registration of transfer and for exchange as in this Indenture provided and an office
or agency where notices and demands to or upon the Company in respect of the Debentures or of this
Indenture may be served. The Company will give to the Trustee written notice of the location of
any such office or agency and of any change of location thereof. Until otherwise designated from
time to time by the Company in a notice to the Trustee, or specified as contemplated by Section
2.5, such office or agency for all of the above purposes shall be the office or agency of the
Trustee. In case the Company shall fail to maintain any such office or agency in Wilmington,
Delaware, or shall fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at the Principal Office of
the Trustee.

     In addition to any such office or agency, the Company may from time to time designate one or
more offices or agencies outside Wilmington, Delaware, where the Debentures may be presented for
registration of transfer and for exchange in the manner provided in this Indenture, and the Company
may from time to time rescind such designation, as the Company may deem desirable or expedient;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain any such office or agency in Wilmington,
Delaware, for the purposes above mentioned. The Company will give to the Trustee prompt written
notice of any such designation or rescission thereof.

     Section 3.3. Appointments to Fill Vacancies in Trustee’s Office. The Company,
whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner
provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.

     Section 3.4. Provision as to Paying Agent.

     (a) If the Company shall appoint a paying agent other than the Trustee, it will cause such
paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree
with the Trustee, subject to the provision of this Section 3.4,

(1) that it will hold all sums held by it as such agent for the payment of the
principal of and premium, if any, or interest, if any, on the Debentures (whether
such sums have

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been paid to it by the Company or by any other obligor on the
Debentures) in trust for the benefit of the holders of the Debentures;

(2) that it will give the Trustee prompt written notice of any failure by the
Company (or by any other obligor on the Debentures) to make any payment of the
principal of and premium, if any, or interest, if any, on the Debentures when the
same shall be due and payable; and

(3) that it will, at any time during the continuance of any Event of Default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such paying agent.

     (b) If the Company shall act as its own paying agent, it will, on or before each due date of
the principal of and premium, if any, or interest or other payments, if any, on the Debentures, set
aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum
sufficient to pay such principal, premium, interest or other payments so becoming due and will
notify the Trustee in writing of any failure to take such action and of any failure by the Company
(or by any other obligor under the Debentures) to make any payment of the principal of and premium,
if any, or interest or other payments, if any, on the Debentures when the same shall become due and
payable.

     Whenever the Company shall have one or more paying agents for the Debentures, it will, on or
prior to each due date of the principal of and premium, if any, or interest, if any, on the
Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium, interest or
other payments so becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify
the Trustee in writing of its action or failure to act.

     (c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any
time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or
for any
other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by
the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein
contained.

     (d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums
in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.

     Section 3.5. Certificate to Trustee. The Company will deliver to the Trustee on or
before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder,
a Certificate stating that in the course of the performance by the signers of their duties as
officers of the Company they would normally have knowledge of any default during such fiscal year
by the Company in the performance of any covenants contained herein, stating whether or not they
have knowledge of any such default and, if so, specifying each such default of which the signers
have knowledge and the nature and status thereof. A form of this Certificate is attached hereto as
Exhibit B.

     Section 3.6. Additional Sums. If and for so long as the Trust is the holder of all
Debentures and the Trust is required to pay any additional taxes (including withholding taxes),
duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay
such additional amounts (“Additional Sums”) on the Debentures as shall be required so that
the net amounts received and retained by the Trust after paying taxes (including withholding
taxes), duties, assessments or other governmental charges will be equal to the amounts the Trust
would have received if no such taxes, duties, assessments or other governmental charges had been
imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the
payment of principal of or interest on the Debentures, such mention shall be deemed to include
mention of payments of the Additional Sums provided for in this paragraph to the

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extent that, in
such context, Additional Sums are, were or would be payable in respect thereof pursuant to the
provisions of this paragraph and express mention of the payment of Additional Sums (if applicable)
in any provisions hereof shall not be construed as excluding Additional Sums in those provisions
hereof where such express mention is not made; provided, however, that the deferral
of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the
payment of any Additional Sums that may be due and payable.

     Section 3.7. Compliance with Consolidation Provisions. The Company will not, while
any of the Debentures remain outstanding, consolidate with, or merge into any other Person, or
merge into itself, or sell or convey all or substantially all of its property to any other Person
unless the provisions of Article XI hereof are complied with.

     Section 3.8. Limitation on Dividends. If Debentures are initially issued to the Trust
or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust
(regardless of whether Debentures continue to be held by such Trust) and (i) there shall have
occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect
to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company
shall have given notice of its election to defer payments of interest on the Debentures by
extending the interest payment period as provided herein and such period, or any extension thereof,
shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company
to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company’s capital stock or its Affiliates’ capital
stock (other than payments of dividends or distributions to the Company) or make any guarantee
payments with respect to
the foregoing or (y) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari
passu in all respects with or junior in interest to the Debentures (other than, with respect to
clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers, directors or consultants,
in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Company (or securities convertible into or exercisable for
such capital stock) as consideration in an acquisition transaction entered into prior to the
applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or
series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company’s capital stock or of any class or series of the Company’s
indebtedness for any class or series of the Company’s capital stock, (3) the purchase of fractional
interests in shares of the Company’s capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged, (4) any declaration
of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or
other property under any stockholders’ rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where
the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is
the same stock as that on which the dividend is being paid or ranks pari passu with or junior to
such stock and any cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).

     Section 3.9. Covenants as to the Trust. For so long as the Trust Securities remain
outstanding, the Company shall maintain 100% ownership of the Common Securities; provided,
however, that any permitted successor of the Company under this Indenture may succeed to
the Company’s ownership of such Common Securities. The Company, as owner of the Common Securities,
shall, except in connection with a distribution of Debentures to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, cause the Trust (a) to
remain a statutory trust, (b) to otherwise

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continue to be classified as a grantor trust for United
States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated
as owning an undivided beneficial interest in the Debentures.

     Section 3.10. Additional Junior Indebtedness. The Company shall not, and it shall not
cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional
Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise,
other than Additional Junior Indebtedness (i) that, by its terms, is expressly stated to be either
junior and subordinate or pari passu in all respects to the Debentures, and (ii) of which the
Company has notified (and, if then required under the applicable guidelines of the regulating
entity, has received approval from) the Federal Reserve, if the Company is a bank holding company.

ARTICLE IV.

SECURITYHOLDERS’ LISTS AND REPORTS

BY THE COMPANY AND THE TRUSTEE

     Section 4.1. Securityholders’ Lists. The Company covenants and agrees that it will
furnish or cause to be furnished to the Trustee:

     (a) on each regular record date for the Debentures, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Securityholders of the Debentures as of such
record date; and

     (b) at such other times as the Trustee may request in writing, within 30 days after the
receipt by the Company of any such request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished;

except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in
possession thereof by reason of its acting as Debenture registrar.

     Section 4.2. Preservation and Disclosure of Lists.

     (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the holders of Debentures (1) contained in the most
recent list furnished to it as provided in Section 4.1 or (2) received by it in the capacity of
Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as
provided in Section 4.1 upon receipt of a new list so furnished.

     (b) In case three or more holders of Debentures (hereinafter referred to as “applicants”)
apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such
applicant has owned a Debenture for a period of at least 6 months preceding the date of such
application, and such application states that the applicants desire to communicate with other
holders of Debentures with respect to their rights under this Indenture or under such Debentures
and is accompanied by a copy of the form of proxy or other communication which such applicants
propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such
application, at its election, either:

(1) afford such applicants access to the information preserved at the time by the
Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or

(2) inform such applicants as to the approximate number of holders of Debentures
whose names and addresses appear in the information preserved at the time by the
Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and
as to

20

 

the approximate cost of mailing to such Securityholders the form of proxy or
other communication, if any, specified in such application.

     If the Trustee shall elect not to afford such applicants access to such information, the
Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name
and address appear in the information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication
which is specified in such request with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within five days after such tender, the Trustee shall mail to such applicants and
file with the Securities and Exchange Commission, if permitted or required by applicable law,
together with a copy of the material to be mailed, a written statement to the effect that, in the
opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all
Debentures, as the case may be, or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. If said Commission, as permitted or required by
applicable law, after opportunity for a hearing upon the objections specified in the written
statement so filed, shall enter an order refusing to sustain any of such objections or if, after
the entry of an order sustaining one or more of such objections, said Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have been met and shall
enter an order so declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of
any obligation or duty to such applicants respecting their application.

     (c) Each and every holder of Debentures, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held
accountable by reason of the disclosure of any such information as to the names and addresses of
the holders of Debentures in accordance with the provisions of subsection (b) of this Section 4.2,
regardless of the source from which such information was derived, and that the Trustee shall not be
held accountable by reason of mailing any material pursuant to a request made under said subsection
(b).

ARTICLE V.

REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS

UPON AN EVENT OF DEFAULT

     Section 5.1. Events of Default. “Event of Default,” wherever used herein, means any
one of the following events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or governmental body):

     (a) the Company defaults in the payment of any interest upon any Debenture, including any
Additional Interest in respect thereof, following the nonpayment of any such interest for twenty or
more consecutive Distribution Periods; or

     (b) the Company defaults in the payment of all or any part of the principal of (or premium, if
any, on) any Debentures as and when the same shall become due and payable either at maturity, upon
redemption, by declaration of acceleration or otherwise; or

     (c) the Company defaults in the performance of, or breaches, any of its covenants or
agreements in this Indenture or in the terms of the Debentures established as contemplated in this
Indenture (other than a covenant or agreement a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal
amount of the

21

 

outstanding Debentures, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

     (d) a court of competent jurisdiction shall enter a decree or order for relief in respect of
the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part
of its property, or ordering the winding-up or liquidation of its affairs and such decree or order
shall remain unstayed and in effect for a period of 90 consecutive days; or

     (e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or
other similar official) of the Company or of any substantial part of its property, or shall make
any general assignment for the benefit of creditors, or shall fail generally to pay its debts as
they become due; or

     (f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its
business or otherwise terminated its existence except in connection with (i) the distribution of
the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust,
(ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.

     If an Acceleration Event of Default occurs and is continuing with respect to the Debentures,
then, and in each and every such case, unless the principal of the Debentures shall have already
become due and payable, either the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company
(and to the Trustee if given by Securityholders), may declare the entire principal of the
Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable. If an Event of Default
under Section 5.1(b) or (c) occurs and is continuing with respect to the Debentures, then, and in
each and every such case, unless the principal of the Debentures shall have already become due and
payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of
the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee
if given by Securityholders), may proceed to remedy the default or breach thereunder by such
appropriate judicial proceedings as the Trustee or such holders shall deem most effectual to remedy
the defaulted covenant or enforce the provisions of this Indenture so breached, either by suit in
equity or by action at law, for damages or otherwise.

     The foregoing provisions, however, are subject to the condition that if, at any time after the
principal of the Debentures shall have been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been obtained or entered as hereinafter
provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Debentures and the principal of and premium, if any,
on the Debentures which shall have become due otherwise than by acceleration (with interest upon
such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient
to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, if
any, and (ii) all Events of Default under this Indenture, other than the non-payment of the
principal of or premium, if any, on Debentures which shall have become due by acceleration, shall
have been cured, waived or otherwise remedied as provided herein — then and in every such case the
holders of a majority in aggregate principal amount of the Debentures then outstanding, by written
notice to the Company and to the Trustee, may

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waive all defaults and rescind and annul such
declaration and its consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent thereon.

     In case the Trustee shall have proceeded to enforce any right under this Indenture and such
proceedings shall have been discontinued or abandoned because of such rescission or annulment or
for any other reason or shall have been determined adversely to the Trustee, then and in every such
case the Company, the Trustee and the holders of the Debentures shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and powers of the Company,
the Trustee and the holders of the Debentures shall continue as though no such proceeding had been
taken.

     Section 5.2. Payment of Debentures on Default; Suit Therefor. The Company covenants
that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or (b) then, upon demand
of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the
Debentures the whole amount that then shall have become due and payable on all Debentures for
principal and premium, if any, or interest, or both, as the case may be, with Additional
Interest accrued on the Debentures (to the extent that payment of such interest is enforceable
under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust,
without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and,
in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of
collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel,
and any other amounts due to the Trustee under Section 6.6. In case the Company shall fail
forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any such judgment or final decree against
the Company or any other obligor on such Debentures and collect in the manner provided by law out
of the property of the Company or any other obligor on such Debentures wherever situated the moneys
adjudged or decreed to be payable.

     In case there shall be pending proceedings for the bankruptcy or for the reorganization of the
Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or
trustee shall have been appointed for the property of the Company or such other obligor, or in the
case of any other similar judicial proceedings relative to the Company or other obligor upon the
Debentures, or to the creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Debentures shall then be due and payable as therein
expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and
empowered, by intervention in such proceedings or otherwise,

	 	(i)	 	to file and prove a claim or claims for the whole amount of principal and
interest owing and unpaid in respect of the Debentures,
	 
	 	(ii)	 	in case of any judicial proceedings, to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for reasonable compensation to the Trustee and each
predecessor Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all other amounts due to the Trustee under Section 6.6), and of the
Securityholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Debentures, or to the creditors or property of the Company or such
other obligor, unless prohibited by applicable law and regulations, to vote on behalf
of the holders of the Debentures in any election of a trustee or a standby trustee in
arrangement,

23

 

	 	 	 	reorganization, liquidation or other bankruptcy or insolvency proceedings
or Person performing similar functions in comparable proceedings,
	 
	 	(iii)	 	to collect and receive any moneys or other property payable or deliverable on
any such claims, and
	 
	 	(iv)	 	to distribute the same after the deduction of its charges and expenses.

Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of
the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other amounts due to the
Trustee under Section 6.6.

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

     All rights of action and of asserting claims under this Indenture, or under any of the
Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the
production thereof at any trial or other proceeding relative thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall be for the ratable benefit of the holders of the
Debentures.

     In any proceedings brought by the Trustee (and also any proceedings involving the
interpretation of any provision of this Indenture to which the Trustee shall be a party), the
Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary
to make any holders of the Debentures parties to any such proceedings.

     Section 5.3. Application of Moneys Collected by Trustee. Any moneys collected by the
Trustee pursuant to this Article V shall be applied in the following order, at the date or dates
fixed by the Trustee for the distribution of such moneys, upon presentation of the several
Debentures in respect of which moneys have been collected, and stamping thereon the payment, if
only partially paid, and upon surrender thereof if fully paid:

     First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee,
its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;

     Second: To the payment of all Senior Indebtedness of the Company if and to the extent
required by Article XV;

     Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and
premium, if any), and interest on the Debentures, in respect of which or for the benefit of which
money has been collected, ratably, without preference or priority of any kind, according to the
amounts due on such Debentures (including Additional Interest); and

     Fourth: The balance, if any, to the Company.

     Section 5.4. Proceedings by Securityholders. No holder of any Debenture shall have
any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder
previously shall have given to the Trustee written notice of an Event of Default with respect to
the Debentures and

24

 

unless the holders of not less than 25% in aggregate principal amount of the
Debentures then outstanding shall have given the Trustee a written request to institute such
action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for
60 days after its receipt of such notice, request and offer of indemnity shall have failed to
institute any such action, suit or proceeding.

     Notwithstanding any other provisions in this Indenture, however, the right of any holder of
any Debenture to receive payment of the principal of, premium, if any, and interest, on such
Debenture when due, or to institute suit for the enforcement of any such payment, shall not be
impaired or affected without the consent of such holder and by accepting a Debenture hereunder it
is expressly understood, intended and covenanted by the taker and holder of every Debenture with
every other such taker and holder and the Trustee, that no one or more holders of Debentures shall
have any right in any manner whatsoever by virtue or by availing itself of any provision of this
Indenture to affect, disturb or prejudice the rights of the
holders of any other Debentures, or to obtain or seek to obtain priority over or preference to
any other such holder, or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of Debentures. For the
protection and enforcement of the provisions of this Section, each and every Securityholder and the
Trustee shall be entitled to such relief as can be given either at law or in equity.

     Section 5.5. Proceedings by Trustee. In case of an Event of Default hereunder the
Trustee may in its discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power granted in this
Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture
or by law.

     Section 5.6. Remedies Cumulative and Continuing; Delay or Omission Not a Waiver.
Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the
Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and
not exclusive of any other powers and remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture or otherwise established with respect to the
Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to
exercise any right, remedy or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right, remedy or power, or shall be construed to be a waiver of any
such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power
and remedy given by this Article V or by law to the Trustee or to the Securityholders may be
exercised from time to time, and as often as shall be deemed expedient, by the Trustee (in
accordance with its duties under Section 6.1) or by the Securityholders.

     Section 5.7. Direction of Proceedings and Waiver of Defaults by Majority of
Securityholders. The holders of a majority in aggregate principal amount of the Debentures
affected (voting as one class) at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to such Debentures;
provided, however, that (subject to the provisions of Section 6.1) the Trustee
shall have the right to decline to follow any such direction if the Trustee shall determine that
the action so directed would be unjustly prejudicial to the holders not taking part in such
direction or if the Trustee being advised by counsel determines that the action or proceeding so
directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that
the action or proceedings so directed would involve the Trustee in personal liability.

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     The holders of a majority in aggregate principal amount of the Debentures at the time
outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously
granted waiver of) any past default or Event of Default, and its consequences, except a default (a)
in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in
respect of covenants or provisions hereof which cannot be modified or amended without the consent
of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section
3.9; provided, however, that if the Debentures are held by the Trust or a trustee
of such trust, such waiver or modification to such waiver shall not be effective until the holders
of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such
waiver or modification to such waiver, provided, further, that if the consent of
the holder of each
outstanding Debenture is required, such waiver shall not be effective until each holder of the
Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the
default covered thereby shall be deemed to be cured for all purposes of this Indenture and the
Company, the Trustee and the holders of the Debentures shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon. Whenever any default or Event
of Default hereunder shall have been waived as permitted by this Section, said default or Event of
Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured
and to be not continuing.

     Section 5.8. Notice of Defaults. The Trustee shall, within 90 days after the actual
knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to
the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon
the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee,
unless such defaults shall have been cured before the giving of such notice (the term “defaults”
for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a),
(b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for
therein); provided, however, that, except in the case of default in the payment of
the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good
faith determines that the withholding of such notice is in the interests of the Securityholders.

     Section 5.9. Undertaking to Pay Costs. All parties to this Indenture agree, and each
holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and
expenses, against any party litigant in such suit, having due regard to the merits and good faith
of the claims or defenses made by such party litigant; provided, however, that the
provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than
10% in principal amount of the Debentures outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Debenture against the Company on or after the same shall have become due and
payable.

ARTICLE VI.

CONCERNING THE TRUSTEE

     Section 6.1. Duties and Responsibilities of Trustee. With respect to the holders of
Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Debentures and after the curing or waiving of all Events of Default which may have
occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants shall be read into this
Indenture against the Trustee. In

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case an Event of Default with respect to the Debentures has
occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

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

     (a) prior to the occurrence of an Event of Default with respect to Debentures and after the
curing or waiving of all Events of Default which may have occurred

(1) the duties and obligations of the Trustee with respect to Debentures shall be
determined solely by the express provisions of this Indenture, and the Trustee shall
not be liable except for the performance of such duties and obligations with respect
to the Debentures as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the Trustee, and

(2) in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but, in the case of
any such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Indenture;

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

     (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by
it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7,
relating to the time, method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

     None of the provisions contained in this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if there is ground for believing that the
repayment of such funds or liability is not assured to it under the terms of this Indenture or
indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.

     Section 6.2. Reliance on Documents, Opinions, etc. Except as otherwise provided in
Section 6.1:

     (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;

     (b) any request, direction, order or demand of the Company mentioned herein shall be
sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof be
herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;

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     (c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel
shall be full and complete authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

     (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to
the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby;

     (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and
believed by it to be authorized or within the discretion or rights or powers conferred upon it by
this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation,
upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured
or waived) to exercise with respect to Debentures such of the rights and powers vested in it by
this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own affairs;

     (f) the Trustee shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to
do so by the holders of not less than a majority in aggregate principal amount of the outstanding
Debentures affected thereby; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to so proceeding;

     (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents (including any Authenticating Agent) or
attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of
any such agent or attorney appointed by it with due care; and

     (h) with the exceptions of defaults under Sections 5.1(a) or (b), the Trustee shall not be
charged with knowledge of any Default or Event of Default with respect to the Debentures unless a
written notice of such Default or Event of Default shall have been given to the Trustee by the
Company or any other obligor on the Debentures or by any holder of the Debentures.

     Section 6.3. No Responsibility for Recitals, etc. The recitals contained herein and
in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating
Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating
Agent make no representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or
application by the Company of any Debentures or the proceeds of any Debentures authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this
Indenture.

     Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar
May Own Debentures. The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Debenture registrar, in its individual or any other capacity, may become the
owner or pledgee of Debentures with the same rights it would have if it were not Trustee,
Authenticating Agent, paying agent, transfer agent or Debenture registrar.

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     Section 6.5. Moneys to be Held in Trust.
Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying
agent shall, until used or applied as herein provided, be held in trust for the purpose for which
they were received, but need not be segregated from other funds except to the extent required by
law. The Trustee and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company. So long as no
Event of Default shall have occurred and be continuing, all interest allowed on any such moneys
shall be paid from time to time upon the written order of the Company, signed by the Chairman of
the Board of Directors, the Chief Executive Officer, the President, the Chief Financial Officer, a
Managing Director, a Vice President, the Treasurer or an Assistant Treasurer of the Company.

     Section 6.6. Compensation and Expenses of Trustee. The Company covenants and agrees
to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its counsel and of all
Persons not regularly in its employ) except any such expense, disbursement or advance as may arise
from its negligence or willful misconduct. For purposes of clarification, this Section 6.6 does
not contemplate the payment by the Company of acceptance or annual administration fees owing to the
Trustee pursuant to the services to be provided by the Trustee under this Indenture or the fees and
expenses of the Trustee’s counsel in connection with the closing of the transactions contemplated
by this Indenture. The Company also covenants to indemnify each of the Trustee or any predecessor
Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against,
any and all loss, damage, claim, liability or expense including taxes (other than taxes based on
the income of the Trustee) incurred without negligence or willful misconduct on the part of the
Trustee and arising out of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim of liability. The
obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of
the Debentures upon all property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the holders of particular Debentures.

     Without prejudice to any other rights available to the Trustee under applicable law, when the
Trustee incurs expenses or renders services in connection with an Event of Default specified in
Section 5.1(d), (e) or (f), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or other similar law.

     The provisions of this Section shall survive the resignation or removal of the Trustee and the
defeasance or other termination of this Indenture.

     Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall
have no obligation whatsoever to advance funds to pay any principal of or interest on or other
amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company.

     Section 6.7. Officers’ Certificate as Evidence. Except as otherwise provided in
Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking
or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the
Trustee, be deemed to be conclusively proved and established by an Officers’ Certificate
delivered to the Trustee, and such certificate, in the absence of negligence or willful
misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or
omitted by it under the provisions of this Indenture upon the faith thereof.

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     Section 6.8. Eligibility of Trustee. The Trustee hereunder shall at all times be a
corporation organized and doing business under the laws of the United States of America or any
state or territory thereof or of the District of Columbia or a corporation or other Person
authorized under such laws to exercise corporate trust powers, having (or whose obligations under
this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state,
territorial, or District of Columbia authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.8 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth in its most recent
records of condition so published.

     The Company may not, nor may any Person directly or indirectly controlling, controlled by, or
under common control with the Company, serve as Trustee.

     In case at any time the Trustee shall cease to be eligible in accordance with the provisions
of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect
specified in Section 6.9.

     If the Trustee has or shall acquire any “conflicting interest” within the meaning of § 310(b)
of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to
the extent and in the manner described by this Indenture.

Section 6.9. Resignation or Removal of Trustee

     (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by
giving written notice of such resignation to the Company and by mailing notice thereof, at the
Company’s expense, to the holders of the Debentures at their addresses as they shall appear on the
Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint
a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board
of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy
to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted
appointment within 30 days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on
behalf of himself and all others similarly situated, petition any such court for the appointment of
a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper
and prescribe, appoint a successor Trustee.

     (b) In case at any time any of the following shall occur —

(1) the Trustee shall fail to comply with the provisions of Section 6.8 after
written request therefor by the Company or by any Securityholder who has been a bona
fide holder of a Debenture or Debentures for at least 6 months, or

(2) the Trustee shall cease to be eligible in accordance with the provisions of
Section 6.8 and shall fail to resign after written request therefor by the Company
or by any such Securityholder, or

(3) the Trustee shall become incapable of acting, or shall be adjudged as bankrupt
or insolvent, or a receiver of the Trustee or of its property shall be appointed, or
any public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,

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then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by
written instrument, in duplicate, executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or,
subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a
Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may
deem proper and prescribe, remove the Trustee and appoint successor Trustee.

     (c) Upon prior written notice to the Company and the Trustee, the holders of a majority in
aggregate principal amount of the Debentures at the time outstanding may at any time remove the
Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee
unless within 10 Business Days after such nomination the Company objects thereto, in which case, or
in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or
any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this
Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a
successor.

     (d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant
to any of the provisions of this Section shall become effective upon acceptance of appointment by
the successor Trustee as provided in Section 6.10.

     Section 6.10. Acceptance by Successor Trustee. Any successor Trustee appointed as
provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its
predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the rights, powers,
duties and obligations with respect to the Debentures of its predecessor hereunder, with like
effect as if originally named as Trustee herein; but, nevertheless, on the written request of the
Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts
then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument
transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act
and shall duly assign, transfer and deliver to such successor Trustee all property and money held
by such retiring Trustee thereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments in writing for more fully and certainly vesting in and confirming
to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure
any amounts then due it pursuant to the provisions of Section 6.6.

     If a successor Trustee is appointed, the Company, the retiring Trustee and the successor
Trustee shall execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Debentures as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or
change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the Trust hereunder by
more than one Trustee, it being understood that nothing herein or in such supplemental indenture
shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be
Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee.

     No successor Trustee shall accept appointment as provided in this Section unless at the time
of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.

     In no event shall a retiring Trustee be liable for the acts or omissions of any successor
Trustee hereunder.

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     Upon acceptance of appointment by a successor Trustee as provided in this Section 6.10, the
Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures
at their addresses as they shall appear on the Debenture Register. If the Company fails to mail
such notice within 10 Business Days after the acceptance of appointment by the successor Trustee,
the successor Trustee shall cause such notice to be mailed at the expense of the Company.

     Section 6.11. Succession by Merger, etc. Any Person into which the Trustee may be
merged or converted or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all
or substantially all of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided such Person shall be otherwise eligible and qualified
under this Article.

     In case at the time such successor to the Trustee shall succeed to the trusts created by this
Indenture any of the Debentures shall have been authenticated but not delivered, any such successor
to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver
such Debentures so authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee may authenticate such Debentures either in the
name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Debentures or in this
Indenture provided that the certificate of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of any predecessor
Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.

     Section 6.12. Authenticating Agents. There may be one or more Authenticating Agents
appointed by the Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Debentures issued upon exchange or
registration of transfer thereof as fully to all intents and purposes as though any such
Authenticating Agent had been expressly authorized to authenticate and deliver Debentures;
provided, however, that the Trustee shall have no liability to the Company for any
acts or omissions of the Authenticating Agent with respect to the authentication and delivery of
Debentures. Any such Authenticating Agent shall at all times be a Person organized and doing
business under the laws of the United States or of any state or territory thereof or of the
District of Columbia authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by
federal, state, territorial or District of Columbia authority. If such Person publishes reports of
condition at least annually pursuant to law or the requirements of such authority, then for the
purposes of this Section 6.12 the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner and with the effect
herein specified in this Section.

     Any Person into which any Authenticating Agent may be merged or converted or with which it may
be consolidated, or any Person resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any Person succeeding to all or substantially all of the
corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating
Agent hereunder, if such successor Person is otherwise eligible under this Section 6.12 without the
execution or filing of any paper or any further act on the part of the parties hereto or such
Authenticating Agent.

     Any Authenticating Agent may at any time resign by giving written notice of resignation to the
Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating
Agent with respect to the Debentures by giving written notice of termination to such Authenticating

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Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination,
or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12,
the Trustee may, and upon the request of the Company shall, promptly appoint a successor
Authenticating Agent eligible under this Section 6.12, shall give written notice of such
appointment to the Company and shall mail notice of such appointment to all holders of Debentures
as the names and addresses of such holders appear on the Debenture Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all
rights, powers, duties and responsibilities with respect to the Debentures of its predecessor
hereunder, with like effect as if originally named as Authenticating Agent herein.

     The Company agrees to pay to any Authenticating Agent from time to time reasonable
compensation for its services. Any Authenticating Agent shall have no responsibility or liability
for any action taken by it as such in accordance with the directions of the Trustee.

ARTICLE VII.

CONCERNING THE SECURITYHOLDERS

     Section 7.1. Action by Securityholders. Whenever in this Indenture it is provided
that the holders of a specified percentage in aggregate principal amount of the Debentures may take
any action (including the making of any demand or request, the giving of any notice, consent or
waiver or the taking of any other action) the fact that at the time of taking any such action the
holders of such specified percentage have joined therein may be evidenced (a) by any instrument or
any number of instruments of similar tenor executed by such Securityholders in person or by agent
or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor
thereof at any meeting of such Securityholders duly called and held in accordance with the
provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such
record of such a meeting of such Securityholders or (d) by any other method the Trustee deems
satisfactory.

     If the Company shall solicit from the Securityholders any request, demand, authorization,
direction, notice, consent, waiver or other action or revocation of the same, the Company may, at
its option, as evidenced by an Officers’ Certificate, fix in advance a record date for such
Debentures for the determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation of the same, but
the Company shall have no obligation to do so. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other action or revocation of the same
may be given before or after the record date, but only the Securityholders of record at the close
of business on the record date shall be deemed to be Securityholders for the purposes of
determining whether Securityholders of the requisite proportion of outstanding
Debentures have authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action or revocation of the same, and for that purpose
the outstanding Debentures shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by such Securityholders on the
record date shall be deemed effective unless it shall become effective pursuant to the provisions
of this Indenture not later than 6 months after the record date.

     Section 7.2. Proof of Execution by Securityholders. Subject to the provisions of
Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent
or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The
ownership of Debentures shall be proved by the Debenture Register or by a certificate of the
Debenture registrar. The Trustee may require such additional proof of any matter referred to in
this Section as it shall deem necessary.

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     The record of any Securityholders’ meeting shall be proved in the manner provided in Section
8.6.

     Section 7.3. Who Are Deemed Absolute Owners. Prior to due presentment for
registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any
paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such
Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute
owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of
receiving payment of or on account of the principal of, premium, if any, and interest on such
Debenture and for all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall
be affected by any notice to the contrary. All such payments so made to any holder for the time
being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to
satisfy and discharge the liability for moneys payable upon any such Debenture.

     Section 7.4. Debentures Owned by Company Deemed Not Outstanding. In determining
whether the holders of the requisite aggregate principal amount of Debentures have concurred in any
direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any
other obligor on the Debentures or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such
determination; provided, however, that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures
which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as outstanding for the
purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the
pledgee’s right to vote such Debentures and that the pledgee is not the Company or any such other
obligor or Person directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In the case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.

     Section 7.5. Revocation of Consents; Future Holders Bound. At any time prior to (but
not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action
by the holders of the percentage in aggregate principal amount of the Debentures
specified in this Indenture in connection with such action, any holder (in cases where no
record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in
cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture
issued in whole or in part in exchange or substitution therefor) the serial number of which is
shown by the evidence to be included in the Debentures the holders of which have consented to such
action may, by filing written notice with the Trustee at the Principal Office of the Trustee and
upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such
Debenture (or so far as concerns the principal amount represented by any exchanged or substituted
Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be
conclusive and binding upon such holder and upon all future holders and owners of such Debenture,
and of any Debenture issued in exchange or substitution therefor or on registration of transfer
thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture
or any Debenture issued in exchange or substitution therefor.

ARTICLE VIII.

SECURITYHOLDERS’ MEETINGS

     Section 8.1. Purposes of Meetings. A meeting of Securityholders may be called at any
time and from time to time pursuant to the provisions of this Article VIII for any of the following
purposes:

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     (a) to give any notice to the Company or to the Trustee, or to give any directions to the
Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any
other action authorized to be taken by Securityholders pursuant to any of the provisions of Article
V;

     (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of
Article VI;

     (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to
the provisions of Section 9.2; or

     (d) to take any other action authorized to be taken by or on behalf of the holders of any
specified aggregate principal amount of such Debentures under any other provision of this Indenture
or under applicable law.

     Section 8.2. Call of Meetings by Trustee. The Trustee may at any time call a meeting
of Securityholders to take any action specified in Section 8.1, to be held at such time and at such
place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting
forth the time and the place of such meeting and in general terms the action proposed to be taken
at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall
appear on the Debentures Register and, if the Company is not a holder of Debentures, to the
Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date
fixed for the meeting.

     Section 8.3. Call of Meetings by Company or Securityholders. In case at any time the
Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal
amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to
call a meeting of Securityholders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within 20 days after receipt of such request, then the Company or such Securityholders may
determine the time and the place for such meeting and may call such meeting to take any action
authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2.

     Section 8.4. Qualifications for Voting. To be entitled to vote at any meeting of
Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the
meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of
one or more such Debentures. The only Persons who shall be entitled to be present or to speak at
any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

     Section 8.5. Regulations. Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies,
and in regard to the appointment and duties of inspectors of votes, the submission and examination
of proxies, certificates and other evidence of the right to vote, and such other matters concerning
the conduct of the meeting as it shall think fit.

     The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting,
unless the meeting shall have been called by the Company or by Securityholders as provided in
Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may
be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote at the meeting.

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     Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with
respect to which such meeting is being held or proxy therefor shall be entitled to one vote for
each $1,000.00 principal amount of Debentures held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any Debenture
challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him
or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of
other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of
Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or
not constituting a quorum, and the meeting may be held as so adjourned without further notice.

     Section 8.6. Voting. The vote upon any resolution submitted to any meeting of holders
of Debentures with respect to which such meeting is being held shall be by written ballots on which
shall be subscribed the signatures of such holders or of their representatives by proxy and the
serial number or numbers of the Debentures held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for
or against any resolution and who shall make and file with the secretary of the meeting their
verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Securityholders shall be prepared by the secretary of the
meeting and there shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in
favor of or against any resolution. The record shall be signed and verified by the affidavits of
the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to
the
Company and the other to the Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting.

     Any record so signed and verified shall be conclusive evidence of the matters therein stated.

     Section 8.7. Quorum; Actions. The Persons entitled to vote a majority in principal
amount of the Debentures then outstanding shall constitute a quorum for a meeting of
Securityholders; provided, however, that if any action is to be taken at such
meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or
other action which may be given by the holders of not less than a specified percentage in principal
amount of the Debentures then outstanding, the Persons holding or representing such specified
percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the
absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting
shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting
may be adjourned for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such
adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10
days as determined by the permanent chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided
in Section 8.2, except that such notice need be given only once not less than 5 days prior to the
date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the principal amount of the
Debentures then outstanding which shall constitute a quorum.

     Except as limited by the provisos in the first paragraph of Section 9.2, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as
aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount
of the Debentures then outstanding; provided, however, that, except as limited by
the provisos in the first paragraph of

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Section 9.2, any resolution with respect to any consent,
waiver, request, demand, notice, authorization, direction or other action which this Indenture
expressly provides may be given by the holders of not less than a specified percentage in principal
amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly
reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the
holders of a not less than such specified percentage in principal amount of the Debentures then
outstanding.

     Any resolution passed or decision taken at any meeting of holders of Debentures duly held in
accordance with this Section shall be binding on all the Securityholders, whether or not present or
represented at the meeting.

ARTICLE IX.

SUPPLEMENTAL INDENTURES

     Section 9.1. Supplemental Indentures without Consent of Securityholders. The Company,
when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter
into an indenture or indentures supplemental hereto, without the consent of the Securityholders,
for one or more of the following purposes:

     (a) to evidence the succession of another Person to the Company, or successive successions,
and the assumption by the successor Person of the covenants, agreements and obligations of the
Company, pursuant to Article XI hereof;

     (b) to add to the covenants of the Company such further covenants, restrictions or conditions
for the protection of the holders of Debentures as the Board of Directors shall consider to be for
the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants, restrictions or conditions a default
or an Event of Default permitting the enforcement of all or any of the several remedies provided in
this Indenture as herein set forth; provided, however, that in respect of any such
additional covenant restriction or condition such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or longer than that allowed
in the case of other defaults) or may provide for an immediate enforcement upon such default or may
limit the remedies available to the Trustee upon such default;

     (c) to cure any ambiguity or to correct or supplement any provision contained herein or in any
supplemental indenture which may be defective or inconsistent with any other provision contained
herein or in any supplemental indenture, or to make such other provisions in regard to matters or
questions arising under this Indenture; provided that any such action shall not materially
adversely affect the interests of the holders of the Debentures;

     (d) to add to, delete from, or revise the terms of Debentures, including, without limitation,
any terms relating to the issuance, exchange, registration or transfer of Debentures, including to
provide for transfer procedures and restrictions substantially similar to those applicable to the
Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of
Debentures is required under the Securities Act); provided, however, that any such
action shall not adversely affect the interests of the holders of the Debentures then outstanding
(it being understood, for purposes of this proviso, that transfer restrictions on Debentures
substantially similar to those that were applicable to Capital Securities shall not be deemed to
materially adversely affect the holders of the Debentures);

     (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee
with respect to the Debentures and to add to or change any of the provisions of this Indenture as

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shall be necessary to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee;

     (f) to make any change (other than as elsewhere provided in this paragraph) that does not
adversely affect the rights of any Securityholder in any material respect; or

     (g) to provide for the issuance of and establish the form and terms and conditions of the
Debentures, to establish the form of any certifications required to be furnished pursuant to the
terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.

     The Trustee is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and stipulations which may be
therein contained and to accept the conveyance, transfer and assignment of any property thereunder,
but the Trustee shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee’s own rights, duties or immunities under this
Indenture or otherwise.

     Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by
the Company and the Trustee without the consent of the holders of any of the Debentures at the time
outstanding, notwithstanding any of the provisions of Section 9.2.

     Section 9.2. Supplemental Indentures with Consent of Securityholders. With the
consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding affected by such supplemental
indenture (voting as a class), the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of
the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the
rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall without the consent of the holders of each Debenture then outstanding
and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount
thereof or any premium thereon, or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any
interest or premium thereon payable in any coin or currency other than that provided in the
Debentures, or impair or affect the right of any Securityholder to institute suit for payment
thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the
aforesaid percentage of Debentures the holders of which are required to consent to any such
supplemental indenture; provided further, however, that if the Debentures
are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective
until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to
such supplemental indenture; provided further, however, that if the consent
of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall
not be effective until each holder of the Trust Securities shall have consented to such
supplemental indenture.

     Upon the request of the Company accompanied by a Board Resolution authorizing the execution of
any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such supplemental indenture.

     Promptly after the execution by the Company and the Trustee of any supplemental indenture
pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage
prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such
supplemental indenture, to the Securityholders as their names and addresses appear upon the
Debenture Register. Any

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failure of the Trustee to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such supplemental indenture.

     It shall not be necessary for the consent of the Securityholders under this Section 9.2 to
approve the particular form of any proposed supplemental indenture, but it shall be sufficient if
such consent shall approve the substance thereof.

     Section 9.3. Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and
be deemed to be modified and amended in accordance therewith and the respective rights, limitations
of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and
the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject
in all respects to such modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.

     Section 9.4. Notation on Debentures. Debentures authenticated and delivered after the
execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a
notation as to any matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Debentures so modified
as to conform, in the opinion of the Board of Directors of the Company, to any modification of
this Indenture contained in any such supplemental indenture may be prepared and executed by the
Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the
Debentures then outstanding.

     Section 9.5. Evidence of Compliance of Supplemental Indenture to be Furnished to
Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to
the documents required by Section 14.6, receive an Officers’ Certificate and an Opinion of Counsel
as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the
requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant to this Article IX is authorized or
permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee
under the provisions of this Article IX to join in the execution thereof.

ARTICLE X.

REDEMPTION OF SECURITIES

     Section 10.1. Optional Redemption. The Company shall have the right (subject to the
receipt by the Company of prior approval from the Federal Reserve, if then required under
applicable capital guidelines or policies of the Federal Reserve to redeem the Debentures, in whole
or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any
Interest Payment Date on or after the Interest Payment Date in December 2011 (the “Redemption
Date”), at the Redemption Price.

     Section 10.2. Special Event Redemption. If a Special Event shall occur and be
continuing, the Company shall have the right (subject to the receipt by the Company of prior
approval from the Federal Reserve, if then required under applicable capital guidelines or policies
of the Federal Reserve to redeem the Debentures in whole, but not in part, at any Interest Payment
Date, within 120 days following the occurrence of such Special Event (the “Special Redemption
Date”) at the Special Redemption Price.

     Section 10.3. Notice of Redemption; Selection of Debentures. In case the Company
shall desire to exercise the right to redeem all, or, as the case may be, any part of the
Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than
60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so
to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture
Register. Such mailing shall be by first class

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mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not the holder receives
such notice. In any case, failure to give such notice by mail or any defect in the notice to the
holder of any Debenture designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Debenture.

     Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be
redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price
or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place
or places of payment, that payment will be made upon presentation and surrender of such Debentures,
that interest accrued to the date fixed for redemption will be paid as specified in said notice,
and that on and after said
date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less
than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of
the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice
of redemption shall state the portion of the principal amount thereof to be redeemed and shall
state that on and after the date fixed for redemption, upon surrender of such Debenture, a new
Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.

     Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as
applicable, the Company will deposit with the Trustee or with one or more paying agents an amount
of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable,
all the Debentures so called for redemption at the appropriate Redemption Price or Special
Redemption Price.

     If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee
notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or
Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be
redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem
appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be
redeemed.

     Section 10.4. Payment of Debentures Called for Redemption. If notice of redemption
has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect
to which such notice has been given shall become due and payable on the Redemption Date or Special
Redemption Date, as applicable, and at the place or places stated in such notice at the applicable
Redemption Price or Special Redemption Price and on and after said date (unless the Company shall
default in the payment of such Debentures at the Redemption Price or Special Redemption Price, as
applicable) interest on the Debentures or portions of Debentures so called for redemption shall
cease to accrue. On presentation and surrender of such Debentures at a place of payment specified
in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the
Company at the applicable Redemption Price or Special Redemption Price.

     Upon presentation of any Debenture redeemed in part only, the Company shall execute and the
Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of
the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal
to the unredeemed portion of the Debenture so presented.

ARTICLE XI.

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

     Section 11.1. Company May Consolidate, etc., on Certain Terms. Nothing contained in
this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with
or into any other Person (whether or not affiliated with the Company) or successive consolidations
or mergers in which the Company or its successor or successors shall be a party or parties, or
shall prevent any sale,

40

 

conveyance, transfer or other disposition of the property of the Company or
its successor or successors as an entirety, or substantially as an entirety, to any other Person
(whether or not affiliated with the Company, or its successor or successors) authorized to acquire
and operate the same; provided, however, that the Company hereby covenants and
agrees that, upon any such consolidation, merger (where the Company is not the surviving
corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the
principal of (and premium, if any) and interest on all of the Debentures in accordance with their
terms, according to their tenor, and the due and punctual performance and observance of all the
covenants and conditions of this Indenture to be kept or performed
by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to
the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or
into which the Company shall have been merged, or by the entity which shall have acquired such
property.

     Section 11.2. Successor Entity to be Substituted. In case of any such consolidation,
merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor
entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form
to the Trustee, of the due and punctual payment of the principal of and premium, if any, and
interest on all of the Debentures and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed or observed by the Company, such
successor entity shall succeed to and be substituted for the Company, with the same effect as if it
had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any
further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon
may cause to be signed, and may issue in its own name, any or all of the Debentures issuable
hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee
or the Authenticating Agent; and, upon the order of such successor entity instead of the Company
and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee
or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall
have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating
Agent for authentication, and any Debentures which such successor entity thereafter shall cause to
be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit under this
Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Debentures had been issued at the date of the execution hereof.

     Section 11.3. Opinion of Counsel to be Given to Trustee. The Trustee, subject to the
provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required
by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale,
conveyance, transfer or other disposition, and any assumption, permitted or required by the terms
of this Article XI complies with the provisions of this Article XI.

ARTICLE XII.

SATISFACTION AND DISCHARGE OF INDENTURE

     Section 12.1. Discharge of Indenture. When

	 	(a)	 	the Company shall deliver to the Trustee for cancellation all Debentures
theretofore authenticated (other than any Debentures which shall have been destroyed,
lost or stolen and which shall have been replaced or paid as provided in Section 2.6)
and not theretofore canceled, or
	 
	 	(b)	 	all the Debentures not theretofore canceled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become due and
payable within 1 year or are to be called for redemption within 1 year under
arrangements satisfactory to the Trustee for the giving of notice of redemption, and
the Company shall

41

 

	 	 	 	deposit with the Trustee, in trust, funds, which shall be immediately
due and payable, sufficient to pay at maturity or upon redemption all of the Debentures
(other than any Debentures which shall have been destroyed, lost or stolen and which
shall have been
replaced or paid as provided in Section 2.6) not theretofore canceled or delivered
to the Trustee for cancellation, including principal and premium, if any, and
interest due or to become due to such date of maturity or redemption date, as the
case may be, but excluding, however, the amount of any moneys for the payment of
principal of, and premium, if any, or interest on the Debentures (1) theretofore
repaid to the Company in accordance with the provisions of Section 12.4, or (2) paid
to any state or to the District of Columbia pursuant to its unclaimed property or
similar laws,

and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of
further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9
and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections
6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers’
Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been complied with, and at
the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of
and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in connection with this
Indenture or the Debentures.

     Section 12.2. Deposited Moneys to be Held in Trust by Trustee. Subject to the
provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be
held in trust in a non-interest bearing account and applied by it to the payment, either directly
or through any paying agent (including the Company if acting as its own paying agent), to the
holders of the particular Debentures for the payment of which such moneys have been deposited with
the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and
interest.

     Section 12.3. Paying Agent to Repay Moneys Held. Upon the satisfaction and discharge
of this Indenture all moneys then held by any paying agent of the Debentures (other than the
Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon
such paying agent shall be released from all further liability with respect to such moneys.

     Section 12.4. Return of Unclaimed Moneys. Any moneys deposited with or paid to the
Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on
Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after
the date upon which the principal of, and premium, if any, or interest on such Debentures, as the
case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be
repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any
of the Debentures shall thereafter look only to the Company for any payment which such holder may
be entitled to collect, and all liability of the Trustee or such paying agent with respect to such
moneys shall thereupon cease.

ARTICLE XIII.

IMMUNITY OF INCORPORATORS, STOCKHOLDERS,

OFFICERS AND DIRECTORS

     Section 13.1. Indenture and Debentures Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or interest on any
Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental
indenture, or in any such Debenture, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator,

42

 

stockholder, employee, officer or director, as
such, past, present or future, of the Company or of any successor Person of the Company, either
directly or through the Company or any successor Person of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, it being expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this Indenture and the
issue of the Debentures.

ARTICLE XIV.

MISCELLANEOUS PROVISIONS

     Section 14.1. Successors. All the covenants, stipulations, promises and agreements of
the Company in this Indenture shall bind its successors and assigns whether so expressed or not.

     Section 14.2. Official Acts by Successor Entity. Any act or proceeding by any
provision of this Indenture authorized or required to be done or performed by any board, committee
or officer of the Company shall and may be done and performed with like force and effect by the
like board, committee, officer or other authorized Person of any entity that shall at the time be
the lawful successor of the Company.

     Section 14.3. Surrender of Company Powers. The Company by instrument in writing
executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the
Trustee may surrender any of the powers reserved to the Company and thereupon such power so
surrendered shall terminate both as to the Company, and as to any permitted successor.

     Section 14.4. Addresses for Notices, etc. Any notice, consent, direction, request,
authorization, waiver or demand which by any provision of this Indenture is required or permitted
to be given, made, furnished or served by the Trustee or by the Securityholders on or to the
Company may be given or served in writing by being deposited postage prepaid by registered or
certified mail in a post office letter box addressed (until another address is filed by the
Company, with the Trustee for the purpose) to the Company, 1057 Providence Road, Charlotte, North
Carolina 28207, Attention: Jan H. Hollar. Any notice, consent, direction, request,
authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at
the office of the Trustee, addressed to the Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration. Any notice, consent,
direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to
have been sufficiently given or made, for all purposes, if given or made in writing at the address
set forth in the Debenture Register.

     Section 14.5. Governing Law.
This Indenture and each Debenture shall be deemed to be a contract made under the law of the
State of New York, and for all purposes shall be governed by and construed in accordance with the
law of said State, without regard to conflict of laws principles thereof.

     Section 14.6. Evidence of Compliance with Conditions Precedent. Upon any application
or demand by the Company to the Trustee to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that in the
opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion
of such counsel, all such conditions precedent have been complied with.

     Each certificate or opinion provided for in this Indenture and delivered to the Trustee with
respect to compliance with a condition or covenant provided for in this Indenture shall include (1)
a statement that the person making such certificate or opinion has read such covenant or condition;
(2) a brief

43

 

statement as to the nature and scope of the examination or investigation upon which the
statements or opinions contained in such certificate or opinion are based; (3) a statement that, in
the opinion of such person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not in the opinion of such person, such
condition or covenant has been complied with.

     Section 14.7. Table of Contents, Headings, etc. The table of contents and the titles
and headings of the articles and sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way modify or restrict any
of the terms or provisions hereof.

     Section 14.8. Execution in Counterparts. This Indenture may be executed in any number
of counterparts, each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.

     Section 14.9. Separability. In case any one or more of the provisions contained in
this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures
shall be construed as if such invalid or illegal or unenforceable provision had never been
contained herein or therein.

     Section 14.10. Assignment. The Company will have the right at all times to assign any
of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary
of the Company, provided that, in the event of any such assignment, the Company will remain liable
for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to
the benefit of the parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties hereto.

     Section 14.11. Acknowledgment of Rights.
The Company agrees that, with respect to any Debentures held by the Trust or the Institutional
Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under
this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a
majority in Liquidation Amount of the Capital Securities of such Trust have so directed such
Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent
permitted by law, institute legal proceedings directly against the Company to enforce such
Institutional Trustee’s rights under this Indenture without first instituting any legal proceedings
against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing and such event is attributable to the failure of the Company to pay
interest (or premium, if any) or principal on the Debentures on the date such interest (or premium,
if any) or principal is otherwise payable (or in the case of redemption, on the redemption date),
the Company agrees that a holder of record of Capital Securities of the Trust may directly
institute a proceeding against the Company for enforcement of payment to such holder directly of
the principal of (or premium, if any) or interest on the Debentures having an aggregate principal
amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or
after the respective due date specified in the Debentures.

ARTICLE XV.

SUBORDINATION OF DEBENTURES

     Section 15.1. Agreement to Subordinate. The Company covenants and agrees, and each
holder of Debentures by such Securityholder’s acceptance thereof likewise covenants and agrees,
that all Debentures shall be issued subject to the provisions of this Article XV; and each holder
of a Debenture,

44

 

whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.

     The payment by the Company of the principal of, and premium, if any, and interest on all
Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior
in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred.

     No provision of this Article XV shall prevent the occurrence of any default or Event of
Default hereunder.

     Section 15.2. Default on Senior Indebtedness. In the event and during the
continuation of any default by the Company in the payment of principal, premium, interest or any
other payment due on any Senior Indebtedness of the Company following any grace period, or in the
event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a
default and such acceleration has not been rescinded or canceled and such Senior Indebtedness has
not been paid in full, then, in either case, no payment shall be made by the Company with respect
to the principal (including redemption) of, or premium, if any, or interest on the Debentures.

     In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee
when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment
shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent that the holders of
the Senior Indebtedness (or their representative or representatives or a trustee) notify the
Trustee in writing within 90 days of such payment
of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in
such notice to the Trustee shall be paid to the holders of Senior Indebtedness.

     Section 15.3. Liquidation, Dissolution, Bankruptcy. Upon any payment by the Company
or distribution of assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in
full, or payment thereof provided for in money in accordance with its terms, before any payment is
made by the Company, on account of the principal (and premium, if any) or interest on the
Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment
by the Company, or distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Securityholders or the Trustee would be entitled to receive
from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment
or distribution, or by the Securityholders or by the Trustee under this Indenture if received by
them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis
of the respective amounts of Senior Indebtedness held by such holders, as calculated by the
Company) or their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been
issued, as their respective interests may appear, to the extent necessary to pay such Senior
Indebtedness in full, in money or money’s worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness, before any payment or distribution
is made to the Securityholders or to the Trustee.

     In the event that, notwithstanding the foregoing, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, prohibited by the
foregoing,

45

 

shall be received by the Trustee before all Senior Indebtedness is paid in full, or
provision is made for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or delivered to the
holders of such Senior Indebtedness or their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing such Senior
Indebtedness may have been issued, as their respective interests may appear, as calculated by the
Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the benefit of the holders of
such Senior Indebtedness.

     For purposes of this Article XV, the words “cash, property or securities” shall not be deemed
to include shares of stock of the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Article XV with respect to
the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding,
provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting
from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior
Indebtedness are not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article XI of this Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such
other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the
conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section
shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this
Indenture.

     Section 15.4. Subrogation. Subject to the payment in full of all Senior Indebtedness,
the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of cash, property or securities of the Company, applicable to
such Senior Indebtedness until the principal of (and premium, if any) and interest on the
Debentures shall be paid in full. For the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property or securities to
which the Securityholders or the Trustee would be entitled except for the provisions of this
Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit
of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the
Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of
the Debentures be deemed to be a payment or distribution by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended
solely for the purposes of defining the relative rights of the holders of the Securities, on the
one hand, and the holders of such Senior Indebtedness, on the other hand.

     Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is
intended to or shall impair, as between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute
and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any)
and interest on the Debentures as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the holders of the Debentures
and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if
any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property
or securities of the Company, received upon the exercise of any such remedy.

46

 

     Upon any payment or distribution of assets of the Company referred to in this Article XV, the
Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall
be entitled to conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or
other Person making such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purposes of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XV.

     Section 15.5. Trustee to Effectuate Subordination. Each Securityholder by such
Securityholder’s acceptance thereof authorizes and directs the Trustee on such Securityholder’s
behalf to take such action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder’s attorney-in-fact for any
and all such purposes.

     Section 15.6. Notice by the Company. The Company shall give prompt written notice to
a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to
the Company that would prohibit the making of any
payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions
of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of
the Trustee at the Principal Office of the Trustee shall have received written notice thereof from
the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before
the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of
this Indenture, shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice provided
for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the payment of the
principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to
the contrary notwithstanding, the Trustee shall have full power and authority to receive such money
and to apply the same to the purposes for which they were received, and shall not be affected by
any notice to the contrary that may be received by it within 2 Business Days prior to such date.

     The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to
conclusively rely on the delivery to it of a written notice by a Person representing himself to be
a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to
establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or
representative on behalf of any such holder or holders. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any Person as a holder
of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article
XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article XV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as to the right of such
Person to receive such payment.

     Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in
its individual capacity shall be entitled to all the rights set forth in this Article XV in respect
of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.

47

 

     With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to
observe only such of its covenants and obligations as are specifically set forth in this Article
XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article
VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if
it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or
otherwise.

     Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 6.6.

     Section 15.8. Subordination May Not Be Impaired. No right of any present or future
holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the
part of the Company, or by any act or failure to act, in good faith, by any such holder, or by
any noncompliance by the Company, with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or otherwise be charged with.

     Without in any way limiting the generality of the foregoing paragraph, the holders of Senior
Indebtedness may, at any time and from time to time, without the consent of or notice to the
Trustee or the Securityholders, without incurring responsibility to the Securityholders and without
impairing or releasing the subordination provided in this Article XV or the obligations hereunder
of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of
the following: (i) change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such
Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable
in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company, and any other Person.

Signatures appear on the following page

48

 

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their
respective officers thereunto duly authorized, as of the day and year first above written.

	 	 	 	 	 
	 	TSB FINANCIAL CORPORATION

 	 
	 	By  	/s/
Jan H. Hollar	 
	 	 	Name:  	Jan H. Hollar	 
	 	 	Title:  	CFO	 
	 

	 	 	 	 	 
	 	WILMINGTON TRUST COMPANY, as Trustee

 	 
	 	By  	/s/
Christopher J. Monigle	 
	 	 	Name:  	Christopher J. Monigle	 
	 	 	Title:  	Vice President	 

49

 

	 	 	 	 	 

EXHIBIT A

FORM OF FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE

[FORM OF FACE OF SECURITY]

     THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES
OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE
INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT
IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT
TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE
ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY
INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER
U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14
OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY

A-1

 

SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING.
ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY
OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE
EXEMPTION.

     THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE
PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY
ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN
$100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

     THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

     IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT
SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Floating Rate Junior Subordinated Deferrable Interest Debenture

of

TSB Financial Corporation

December 14, 2006

     TSB Financial Corporation, a North Carolina corporation (the “Company” which term includes any
successor Person under the Indenture hereinafter referred to), for value received promises to pay
to Wilmington Trust Company, not in its individual capacity but solely as Institutional Trustee for
TSB Statutory Trust I (the “Holder”) or registered assigns, the principal sum of three million
ninety-three thousand dollars ($3,093,000.00) on December 15, 2036, and to pay interest on said
principal sum from December 14, 2006, or from the most recent Interest Payment Date (as defined
below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set
forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year or if such
day is not a Business Day, then the next succeeding Business Day (each such date, an “Interest
Payment Date”) (it being understood that interest accrues for any such non-Business Day),
commencing on the Interest Payment Date in March 2007, at an annual rate equal to 7.07% beginning
on (and including) the date of original issuance and ending on (but excluding) the Interest Payment
Date in March 2007 and at an annual rate for each successive period beginning on (and including)
the Interest Payment Date in March 2007, and each succeeding Interest Payment Date, and ending on
(but excluding) the next succeeding Interest Payment Date (each a “Distribution Period”), equal to
3-Month LIBOR, determined as described below, plus 1.72% (the “Coupon Rate”), applied to the
principal amount hereof, until the principal hereof is paid or duly provided for or made available
for payment, and on any overdue principal and (without duplication and to the extent that payment
of such interest is enforceable under applicable law) on any overdue

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installment of interest (including Additional Interest) at the Interest Rate in effect for
each applicable period, compounded quarterly, from the dates such amounts are due until they are
paid or made available for payment. The amount of interest payable for any period will be computed
on the basis of the actual number of days in the Distribution Period concerned divided by 360. The
interest installment so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one
or more Predecessor Securities) is registered at the close of business on the regular record date
for such interest installment, which shall be fifteen Business Days prior to the day on which the
relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or
duly provided for shall forthwith cease to be payable to the Holder on such regular record date and
may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is
registered at the close of business on a special record date.

     “3-Month LIBOR” as used herein, means the London interbank offered interest rate for
three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i)
the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month
maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the
Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such
other service or services as may be nominated by the British Bankers’ Association as the
information vendor for the purpose of displaying London interbank offered rates for U.S. dollar
deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee
will request the principal London offices of four leading banks in the London interbank market to
provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the
London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m.
(London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are
provided as requested in clause (ii) above, the Trustee will request four major New York City banks
to provide such banks’ offered quotations (expressed as percentages per annum) to leading European
banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at
least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii)
above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period
immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits
having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate
by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted
on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used
herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day
in which dealings in deposits in U.S. dollars are transacted in the London interbank market)
preceding the commencement of the relevant Distribution Period.

     The Interest Rate for any Distribution Period will at no time be higher than the maximum rate
then permitted by New York law as the same may be modified by United States law.

     All percentages resulting from any calculations on the Debentures will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of
a percentage point rounded upward (e.g., 9.876545% (or .09876545)
being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).

     The principal of and interest on this Debenture shall be payable at the office or agency of
the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any
coin or

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currency of the United States of America that at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made by check mailed to the registered holder at such address as shall appear in the
Debenture Register if a request for a wire transfer by such holder has not been received by the
Company or by wire transfer to an account appropriately designated by the holder hereof.
Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional
Trustee, the payment of the principal of and interest on this Debenture will be made in immediately
available funds at such place and to such account as may be designated by the Trustee.

     So long as no Acceleration Event of Default has occurred and is continuing, the Company shall
have the right, from time to time, and without causing an Event of Default, to defer payments of
interest on the Debentures by extending the interest payment period on the Debentures at any time
and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods
(each such extended interest payment period, an “Extension Period”), during which Extension Period
no interest (including Additional Interest) shall be due and payable (except any Additional Sums
that may be due and payable). No Extension Period may end on a date other than an Interest Payment
Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest
on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for
such Extension Period, compounded quarterly from the date such interest would have been payable
were it not for the Extension Period, to the extent permitted by law (such interest referred to
herein as “Additional Interest”). At the end of any such Extension Period the Company shall pay
all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon);
provided, however, that no Extension Period may extend beyond the Maturity Date;
provided further, however, that during any such Extension Period, the
Company shall not and shall not permit any Affiliate to engage in any of the activities or
transactions described on the reverse side hereof and in the Indenture. Prior to the termination
of any Extension Period, the Company may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall not exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest,
the Company may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension Period, except at the
end thereof, but each installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of
its election to begin or extend an Extension Period by the close of business at least 15 Business
Days prior to the Interest Payment Date with respect to which interest on the Debentures would have
been payable except for the election to begin or extend such Extension Period.

     The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture,
subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness,
and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each
holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may
be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder
hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of Senior
Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.

     This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred
to, be valid or become obligatory for any purpose until the certificate of authentication hereon
shall have been signed by or on behalf of the Trustee.

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     The provisions of this Debenture are continued on the reverse side hereof and such provisions
shall for all purposes have the same effect as though fully set forth at this place.

A-5

 

     IN WITNESS WHEREOF, the Company has duly executed this certificate.

	 	 	 	 	 
	 	TSB FINANCIAL CORPORATION

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

CERTIFICATE OF AUTHENTICATION

     This is one of the Debentures referred to in the within-mentioned Indenture.

	 	 	 	 	 
	 	WILMINGTON TRUST COMPANY, as Trustee

 	 
	 	By:  	 	 
	 	 	Authorized Officer 	 
	 	 	 	 

A-6

 

	 	 	 	 	 

[FORM OF REVERSE OF DEBENTURE]

     This Debenture is one of the floating rate junior subordinated deferrable interest debentures
of the Company, all issued or to be issued under and pursuant to the Indenture dated as of December
14, 2006 (the “Indenture”), duly executed and delivered between the Company and the Trustee, to
which Indenture reference is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the
Debentures. The Debentures are limited in aggregate principal amount as specified in the
Indenture.

     Upon the occurrence and continuation of a Special Event prior to the Interest Payment Date in
December 2011, the Company shall have the right to redeem the Debentures in whole, but not in part,
at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at
the Special Redemption Price.

     In addition, the Company shall have the right to redeem the Debentures, in whole or in part,
but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest
Payment Date on or after the Interest Payment Date in December 2011, at the Redemption Price.

     Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as
applicable, the Company will deposit with the Trustee or with one or more paying agents an amount
of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable,
all the Debentures so called for redemption at the appropriate Redemption Price or Special
Redemption Price.

     If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee
notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or
Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be
redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem
appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be
redeemed.

     Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to
the receipt of any and all required regulatory approvals.

     In case an Acceleration Event of Default shall have occurred and be continuing, upon demand of
the Trustee, the principal of all of the Debentures shall become due and payable in the manner,
with the effect and subject to the conditions provided in the Indenture.

     The Indenture contains provisions permitting the Company and the Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the Debentures at the time
outstanding, to execute supplemental indentures for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders of the Debentures;
provided, however, that no such supplemental indenture shall without the consent of
the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity
of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate
or extend the time of payment of interest thereon, or reduce any amount payable on redemption
thereof or make the principal thereof or any interest or premium thereon payable in any coin or
currency other than that provided in the Debentures, or impair or affect the right of any
Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at
the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of
which are required to consent to any such supplemental indenture.

A-7

 

     The Indenture also contains provisions permitting the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding on behalf of the holders of all of the
Debentures to waive (or modify any previously granted waiver of) any past default or Event of
Default, and its consequences, except a default (a) in the payment of principal of, premium, if
any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of
the Indenture which cannot be modified or amended without the consent of the holder of each
Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture;
provided, however, that if the Debentures are held by the Trust or a trustee of
such trust, such waiver or modification to such waiver shall not be effective until the holders of
a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such
waiver or modification to such waiver, provided, further, that if the consent of
the holder of each outstanding Debenture is required, such waiver shall not be effective until each
holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such
waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by the Indenture, said default or
Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been
cured and to be not continuing.

     No reference herein to the Indenture and no provision of this Debenture or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and premium, if any, and interest, including Additional Interest, on this
Debenture at the time and place and at the rate and in the money herein prescribed.

     The Company has agreed that if Debentures are initially issued to the Trust or a trustee of
such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether
Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing
an Event of Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of
its election to defer payments of interest on the Debentures by extending the interest payment
period as provided herein and such Extension Period, or any extension thereof, shall be continuing,
then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with
respect to, any of the Company’s capital stock or its Affiliates’ capital stock (other than
payments of dividends or distributions to the Company) or make any guarantee payments with respect
to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari
passu in all respects with or junior in interest to the Debentures (other than, with respect to
clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers, directors or consultants,
in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Company (or securities convertible into or exercisable for
such capital stock) as consideration in an acquisition transaction entered into prior to the
applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or
series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company’s capital stock or of any class or series of the Company’s
indebtedness for any class or series of the Company’s capital stock, (3) the purchase of fractional
interests in shares of the Company’s capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged, (4) any declaration
of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or
other property under any stockholders’ rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where
the

A-8

 

dividend stock or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to
such stock and any cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).

     The Debentures are issuable only in registered, certificated form without coupons and in
minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. As provided
in the Indenture and subject to the transfer restrictions and limitations as may be contained
herein and therein from time to time, this Debenture is transferable by the holder hereof on the
Debenture Register of the Company. Upon due presentment for registration of transfer of any
Debenture at the Principal Office of the Trustee or at any office or agency of the Company
maintained for such purpose as provided in Section 3.2 of the Indenture, the Company shall execute,
the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery in the name of the transferee or transferees a new
Debenture for a like aggregate principal amount. All Debentures presented for registration of
transfer or for exchange or payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments
of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly
executed by the holder or his attorney duly authorized in writing. No service charge shall be made
for any exchange or registration of transfer of Debentures, but the Company or the Trustee may
require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in connection therewith.

     Prior to due presentment for registration of transfer of any Debenture, the Company, the
Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar
may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to
be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall
be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Debenture and for all other purposes; and neither the Company nor the
Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture
registrar shall be affected by any notice to the contrary. All such payments so made to any holder
for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

     No recourse for the payment of the principal of or premium, if any, or interest on any
Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental
indenture, or in any such Debenture, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, officer or director, as
such, past, present or future, of the Company or of any successor Person of the Company, either
directly or through the Company or any successor Person of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, it being expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of the Indenture and the
issue of the Debentures.

     Capitalized terms used and not defined in this Debenture shall have the meanings assigned in
the Indenture dated as of the date of original issuance of this Debenture between the Trustee and
the Company.

     THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.

A-9

 

EXHIBIT B

FORM OF CERTIFICATE TO TRUSTEE

     Pursuant to Section 3.5 of the Indenture between TSB Financial Corporation, as the Company
(the “Company”), and Wilmington Trust Company, as Trustee, dated as of December 14, 2006 (the
“Indenture”), the undersigned hereby certifies as follows:

	 	1.	 	In my capacity as an officer of the Company, I would normally have knowledge of
any default by the Company during the last fiscal year in the performance of any
covenants of the Company contained in the Indenture.
	 
	 	2.	 	[To my knowledge, the Company is not in default in the performance of any
covenants contained in the Indenture.
	 
	 	 	 	or, alternatively:
	 
	 	 	 	I am aware of the default(s) in the performance of covenants in the Indentures, as
specified below.]

     Capitalized terms used herein, and not otherwise defined herein, have the respective meanings
ascribed thereto in the Indenture.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate.

Date:

                                                            

Name:

Title:

B-1

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