Document:

PMA Capital Corporation Exhibit 4-9

Exhibit
4.9

PMA
CAPITAL CORPORATION 

TO

U.S.
BANK NATIONAL ASSOCIATION, TRUSTEE 

SECOND
SUPPLEMENTAL INDENTURE 

DATED
AS OF NOVEMBER 15, 2004 

$15,000,000

6.50%
SENIOR SECURED CONVERTIBLE DEBENTURES 

DUE
SEPTEMBER 30, 2022 

	
      TABLE
      OF CONTENTS1 

	 	 	
      Page

	
      ARTICLE
      I
      Definitions
	 	
      2

	
      Section
      1.01
	
      Definitions.
	
      2

	
      Section
      1.02
	
      Certain
      Terms Defined in the Indenture.
	
      11

	
      Section
      1.03
	
      Grant
      of Security Interest in Collateral and Additional
    Collateral.
	
      14

	
      Section
      1.04
	
      Release
      of Security Interest in Collateral and Additional
    Collateral.
	
      17

	
      Section
      1.05
	
      Authorization
      of Actions to be Taken by Collateral Agent Under the Collateral Agent
      Agreement.
	
      18

	
      Section
      1.06
	
      Authorization
      of Receipt of Funds by the Trustee Under the Collateral Agent
      Agreement.
	
      19

	
      Section
      1.07
	
      Authorization
      of Trustee to Enter into the Collateral Agent Agreement
	
      19

	
      ARTICLE
      II
      6.50% Senior Secured Convertible Debentures
	
      19

	
      Section
      2.01
	
      Establishment.
	
      19

	
      Section
      2.02
	
      Terms
      of the Debentures.
	
      20

	
      Section
      2.03
	
      Payment
      of Interest; Interest Rights Reserved.
	
      32

	
      Section
      2.04
	
      Events
      of Default; Acceleration of Maturity.
	
      33

	
      Section
      2.05
	
      Supplemental
      Indentures with Consent of Holders.
	
      34

	
      Section
      2.06
	
      Reserved.
	
      34

	
      Section
      2.07
	
      Selection
      by Trustee of Securities to be Redeemed.
	
      34

	
      Section
      2.08
	
      Reserved.
	
      35

	
      Section
      2.09
	
      Purchase
      at the Option of Holders.
	
      35

	
      Section
      2.10
	
      Application
      of the Article of the Indenture Regarding Defeasance
	 
	
       
	
      and
      Covenant Defeasance.
	
      44

	
      Section
      2.11
	
      Conversions.
	
      44

	
      Section
      2.12
	
      Trustee’s
      Right to Exercise Remedies Against Security.
	
      62

	
      Section
      2.13
	
      Trustee
      to Hold Collateral and Additional Collateral.
	
      62

	
      Section
      2.14
	
      Additional
      Amounts.
	
      63

	
      ARTICLE
      III
      ADDITIONAL COVENANTS
	
      63

	
      Section
      3.01
	
      Maintenance
      of Properties.
	
      63

	
      Section
      3.02
	
      Payment
      of Taxes and Other Claims.
	
      63

	
      Section
      3.03
	
      Limitation
      on Liens on Capital Stock of Restricted Subsidiaries.
	
      64

	
      Section
      3.04
	
      Limitation
      on Sale or Issuance of Capital Stock of Restricted
      Subsidiaries.
	
      64

	
      Section
      3.05
	
      Limitation
      on Restricted Payments.
	
      65

	
      Section
      3.06
	
      Merger,
      Consolidation and Sale of Assets.
	
      67

	
      Section
      3.07
	
      Limitations
      on Transactions with Affiliates.
	
      69

	
      Section
      3.08
	
      Protection
      of Collateral and the Additional Collateral.
	
      70

	
      Section
      3.09
	
      The
      Company to Remain a Holding Company.
	
      71

	
      Section
      3.10
	
      Limitation
      on Incurrence of Additional Indebtedness.
	
      71

	
      ARTICLE
      IV
      MISCELLANEOUS PROVISIONS
	
      73

	
      Section
      4.01
	
      Recitals
      by Company.
	
      73

	
      Section
      4.02
	
      Ratification
      and Incorporation of Original Indenture.
	
      73

	
      Section
      4.03
	
      Executed
      in Counterparts.
	
      73

1 This
Table of Contents does not constitute part of the Indenture or have any bearing
upon the interpretation of any of its terms and provisions.

i

THIS
SECOND SUPPLEMENTAL INDENTURE (the “Second Supplemental Indenture”) is made as
of the 15th day of November, 2004, by and between PMA CAPITAL CORPORATION, a
company duly organized and existing under the laws of the Commonwealth of
Pennsylvania (hereinafter called the “Company”), having its principal executive
office located at 380 Sentry Parkway, Blue Bell, Pennsylvania 19422, and U.S.
BANK NATIONAL ASSOCIATION, a national banking association duly organized and
existing under the laws of the United States (hereinafter called the “Trustee”),
having its Corporate Trust Office located at 225 Asylum Street, Hartford,
Connecticut 06103. 

WITNESSETH:

WHEREAS,
the Company has heretofore entered into an Indenture, dated as of November 15,
2004, (the “Original Indenture”), with U.S. Bank National Association and the
First Supplemental Indenture, dated as of November 15, 2004 (the “First
Supplemental Indenture”) pursuant to which the Company’s publicly issued
debentures in the aggregate principal amount of $84,140,000 with terms identical
to the Debentures to be issued hereby were issued (the “Publicly Issued
Debentures”); 

WHEREAS,
the Original Indenture as amended and supplemented by the First Supplemental
Indenture and this Second Supplemental Indenture, is herein called the
“Indenture”; 

WHEREAS,
under the Original Indenture, a new series of Securities may at any time be
established in or pursuant to a resolution of the Board of Directors of the
Company and set forth in an Officer’s Certificate in accordance with the
provisions of the Original Indenture and the terms of such series may be
described by a supplemental indenture executed by the Company and the Trustee;

WHEREAS,
the Company desires to (a) add additional Events of Default for the benefit of
the Holders of all series of Securities (except as may be provided in a future
supplemental indenture to the Indenture (a “Future Supplemental Indenture”)),
(b) add additional covenants of the Company, (c) establish the form and terms of
a new series of Securities, (d) provide whether certain Articles of the
Indenture will apply to all series of Securities, including the Debentures
established hereby (except as may be provided in a Future Supplemental
Indenture) and (e) otherwise amend and supplement the Original Indenture as set
forth herein; 

WHEREAS,
all conditions necessary to authorize the execution and delivery of this Second
Supplemental Indenture and to make it a valid and binding obligation of the
Company have been done or performed. 

NOW,
THEREFORE, in consideration of the agreements and obligations set forth herein
and for other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows: 

ARTICLE
I

Definitions

Section
1.01 Definitions. 

The
following defined terms used herein shall, unless the context otherwise
requires, have the meanings specified below. Capitalized terms used herein for
which no definition is provided herein shall have the meanings set forth in the
Original Indenture. 

“ACL RBC”
means “authorized control level risk based capital” as then defined and
calculated in accordance with the Risk Based Capital (RBC) for Insurers Model
Act of the National Association of Insurance Commissioners. 

“Acquired
Indebtedness” means Indebtedness of a Person or any of its Subsidiaries existing
at the time such Person becomes a Restricted Subsidiary of the Company or at the
time it merges or consolidates with or into the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company or such acquisition, merger or consolidation. 

“Asset
Acquisition” means (1) an Investment by the Company or any Restricted Subsidiary
of the Company in any other Person pursuant to which such Person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company, or (2) the acquisition by the Company or any
Restricted Subsidiary of the Company of the assets of any Person (other than a
Restricted Subsidiary of the Company) which constitute all or substantially all
of the assets of such Person or comprise any division or line of business of
such Person or any other properties or assets of such Person other than in the
ordinary course of business. 

“Average
Life” means, as of the date of determination, with respect to any Indebtedness,
the quotient obtained by dividing: (1) the sum of the products of the number of
years from the date of determination to the dates of each successive scheduled
principal payment of or redemption or similar payment with respect to such
Indebtedness multiplied by the amount of such payment by (2) the sum of all such
payments. 

“Cash
Equivalents” means: 

(1) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the
date of acquisition thereof; 

(2) commercial
paper maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody’s; 

2

(3) investments
in demand accounts, time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any State thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt which is rated “A”
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act); 

(4) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (1) above entered into with any bank meeting the
qualifications specified in clause (3) above; 

(5) investment
in money market funds which invest at least 95% of their assets in securities of
the types described in clauses (1) through (4) above. 

“Collateral
Agent” means, U.S. Bank National Association, in its capacity as collateral
agent under the Collateral Agent Agreement and its permitted successors and
assigns. 

“Collateral
Agent Agreement” means the Collateral Agent Agreement dated as of November 15,
2004 by and among the Company, U.S. Bank National Association, as Collateral
Agent, the Trustee for the Debentures, the trustee for the Publicly Issued
Debentures and the trustee for the Company’s 8.50% Monthly Income Senior Notes
due 2018, as such may be amended from time to time in accordance with the terms
of the Indenture and the Collateral Agent Agreement.

“Consolidated
Fixed Charges” means, with respect to any Person for any period, the sum,
without duplication, of: 

(1) Consolidated
Interest Expense; plus 

(2) the
product of (x) the amount of all dividend payments on any series of Preferred
Stock of such Person (other than dividends paid in Qualified Capital Stock)
paid, accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local income
tax rate of such Person, expressed as a decimal. 

“Consolidated
Interest Expense” means, with respect to any Person for any period, the sum of,
without duplication: 

(1) the
aggregate of the interest expense of such Person and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP
(which, for greater clarity, excludes interest on funds held under reinsurance
contracts), including without limitation: (a) any amortization of debt discount
and amortization or write-off of deferred financing costs; (b) the net costs
under Interest Rate Hedging Agreements; (c) all capitalized interest; (d) the
interest portion of any deferred payment obligation; and (e) imputed interest
with respect of Attributable Debt; and 

3

(2) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Restricted Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP. 

“Consolidated
Net Income” means, with respect to any Person, for any period, the aggregate net
income (or loss) of such Person and its Restricted Subsidiaries for such period
on a consolidated basis, determined in accordance with GAAP;
provided that
there shall be excluded therefrom: 

(1) after-tax
items classified as extraordinary gains or losses; 

(2) solely
for purposes of Section 3.05 of this Second Supplemental Indenture, the net
income of any Person prior to the date it becomes a Restricted Subsidiary of the
referent Person or is merged or consolidated with the referent Person or any
Restricted Subsidiary of the referent Person; 

(3) the net
income of any Person, other than a Restricted Subsidiary of the referent Person,
except to the extent of cash (or to the extent immediately converted to cash)
dividends or distributions paid to the referent Person or to a Wholly Owned
Restricted Subsidiary of the referent Person by such Person; 

(4) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date; and 

(5) in the
case of a successor to the referent Person by consolidation or merger or as a
transferee of the referent Person’s assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets.

“Currency
Hedge Obligations” means, at any time as to the Company and its Restricted
Subsidiaries, the obligations of such Person at such time that were incurred in
the ordinary course of business pursuant to any foreign currency exchange
agreement, option or futures contract or other similar agreement or arrangement
designed to protect against or manage such Person’s or any of its Subsidiaries’
exposure to fluctuations in foreign currency exchange rates. 

“Default”
means any event which is, or after notice or passage of time or both would be,
an Event of Default. 

“Disinterested
Director” means, with respect to an Affiliate Transaction or series of related
Affiliate Transactions, a member of the Board of Directors of the Company who
has no financial interest, and whose employer has no financial interest, in such
Affiliate Transaction or series of related Affiliate Transactions. 

4

“Distributable
Amount” means, with respect to the Company at the last day of any fiscal
quarter, (a) the maximum amount of cash that the then Insurance Subsidiaries
could have distributed directly to the Company as a dividend, distribution,
repayment of intercompany indebtedness or payment of interest thereon as of such
date (calculated as if such date were the relevant test date for determining
compliance with applicable Insurance Laws) without prior governmental approval
(or any required passage of time in nondisapproval states) and which is not
prohibited, directly or indirectly, by the terms of any charter or any
agreement, instrument, judgment, decree, order, writ, injunction, certificate,
statute, rule, law, code, ordinance or government regulation applicable to such
Insurance Subsidiaries unless any such restriction has been legally waived, plus
(b) the amount of any dividend, distribution, repayment of intercompany
indebtedness or payment of interest thereon paid during the four fiscal quarters
coming immediately prior to the date of determination by the Insurance
Subsidiaries to the Company to the extent that such dividend, distribution,
repayment of intercompany indebtedness or payment of interest thereon reduces
the amount described in clause (a) that could be distributed at the date of
determination; provided that in
making any determination of the Distributable Amount to Consolidated Fixed
Charges Coverage Ratio, any asset sales or other dispositions or Asset
Acquisitions (including, without limitation, any amount which such Restricted
Subsidiary could have distributed to such Person as a dividend to such Person
that is attributable to the assets which are the subject of the Asset
Acquisition or asset sale or other disposition during the four fiscal quarters
occurring immediately prior to the date of testing) occurring during the four
quarter period immediately prior to the date of such testing, shall be given
effect to as if such asset sale or other disposition or Asset Acquisition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) had occurred on the first day of such four quarter period.

“Distributable
Amount to Consolidated Fixed Charge Coverage Ratio” means, at any time, the
ratio of the Distributable Amount on the last day of the most recently ended
fiscal quarter for which financial statements are available to Consolidated
Fixed Charges of the Company during the four full fiscal quarters (the “Four
Quarter Period”) ending prior to such time for which financial statements are
available. In addition to and without limitation of the foregoing, for purposes
of this definition, Consolidated Fixed Charges shall be calculated after giving
effect on a pro forma basis for the period of such calculation to: 

(1) the
incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period; and

(2) any asset
sales or other dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness attributable to the assets which are the subject of the Asset
Acquisition or asset sale or other 

 

 

5

 

disposition
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such asset sale or other disposition or Asset
Acquisition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If
such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. 

For
purposes of this definition, Transaction Date means the date of the incurrence,
repayment, asset sale, disposition or Asset Acquisition, as applicable, giving
rise to the need to calculate the Distributable Amount to Consolidated Fixed
Charge Coverage Ratio. 

Furthermore,
in calculating “Consolidated Fixed Charges” for purposes of determining the
denominator of this “Distributable Amount to Consolidated Fixed Charge Coverage
Ratio”: 

(1) interest
on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; and 

(2) notwithstanding
clause (1) above, interest on Indebtedness determined on a fluctuating basis, to
the extent such interest is covered by agreements relating to Interest Rate
Hedging Agreements, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements. 

“Extraordinary
Dividends” means any dividends that are defined as Extraordinary Dividends
pursuant to Section 991.1405 of the Pennsylvania Insurance Statutes.

“Equity
Offering” means any underwritten public offering of Capital Stock (other than
Disqualified Capital Stock) of the Company pursuant to a registration statement
filed pursuant to the Securities Act or any private placement of Capital Stock
(other than Disqualified Capital Stock) of the Company (other than to any Person
who, prior to such private placement, was an Affiliate of the Company) which
offering or placement is consummated after the Issue Date. 

“GAAP”
means generally accepted accounting principles as in effect in the United States
of America as of the Issue Date. 

“Incur”
means issue, assume, guarantee or otherwise become liable for. 

“Independent
Financial Advisor” means a firm (which may be a broker-dealer): (1) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company or any of its Affiliates
(other than ownership of less than 5% of any class of publicly traded securities
of the Company or any of its Affiliates); and (2) which is otherwise independent
of the Company and qualified to perform the task for which it is to be engaged.

6

 

“Insurance
Law” means any applicable law, statute, rule, regulation, judgment or agreement
with any regulatory authority that regulates the provision of insurance or
reinsurance. 

“Insurance
Subsidiary” means any Subsidiary of the Company that is regulated as an
insurance company under applicable Insurance Laws or as an equivalent entity
under corresponding applicable foreign law or regulation, or otherwise holds
itself out as a provider of insurance or reinsurance. 

“Interest
Rate Hedging Agreements” means, with respect to the Company and its Restricted
Subsidiaries, the obligations of such Persons under (a) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements and
(b) other agreements or arrangements designed to protect any such Person or any
of its Subsidiaries against fluctuations in interest rates. 

“Invested
Assets” means, with respect to any Person that is an insurance company that
files statutory financial statements with any governmental authority, the amount
to be shown on the line item “Cash and Invested Assets” (or any equivalent line
item(s) setting forth the type of assets that would be reflected in the line
item “Cash and Invested Assets” on the Issue Date) on such insurance company’s
balance sheet included in its most recent statutory financial statements filed
with such governmental authority. 

“Investment”
means, with respect to any Person, all investments by such Person in other
Persons (including Affiliates) in the form of any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business) or
other extension of credit (including by way of guarantee or similar arrangement,
but excluding any debt or extension of credit represented by a bank deposit
other than a time deposit) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by, such Person and all other
items that are or would be classified as investments on a balance sheet prepared
in accordance with GAAP; provided that
endorsements of negotiable instruments and documents in the ordinary course of
business shall not be deemed to be an Investment. 

For
purposes of Section 3.05 of this Second Supplemental Indenture: 

(1) “Investment”
will include the portion (proportionate to the Company’s equity interest in a
Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the
fair market value of the net assets of such Restricted Subsidiary of the Company
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary; provided,
however, that
upon a redesignation of such Subsidiary as Restricted Subsidiary, the Company
will be deemed to continue to have a permanent “Investment” in an Unrestricted
Subsidiary in an amount (if positive) equal to (a) the Company’s “Investment” in
such Subsidiary at the time of such redesignation less (b) the
portion (proportionate to the Company’s equity interest in such Subsidiary) of
the fair market value of the net assets (as conclusively determined by the Board
of Directors of the Company in good faith) of such Subsidiary at the time that
such Subsidiary is so re-designated a Restricted Subsidiary; and, 

7

(2) any
property transferred to or from an Unrestricted Subsidiary will be valued at its
fair market value at the time of such transfer, in each case as determined in
good faith by the Board of Directors of the Company. 

If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Voting Stock of any Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such entity is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value (as conclusively determined by the Board of Directors of the Company in
good faith) of the Capital Stock of such Subsidiary not sold or disposed of.

“Issue
Date” means the date on which the Debentures are originally issued.

“Maturity
Date” means September 30, 2022. 

“Net Cash
Proceeds” means with respect to any sale of Capital Stock, cash proceeds of such
sale net of attorneys’ fees, accountants’ fees, underwriting or placement
agents’ fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such sale and net of taxes paid or payable
as a result thereof, as and where received. 

“Permitted
Investments” means: 

(1) Investments
by the Company or any Restricted Subsidiary in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary or that
will merge or consolidate into the Company or a Wholly Owned Restricted
Subsidiary of the Company; 

(2) Investments
in the Company by any Restricted Subsidiary; provided that any Indebtedness
evidencing such Investment and held by a Restricted Subsidiary that is not a
guarantor of the Securities is unsecured and subordinated, pursuant to a written
agreement, to the Company’s obligations under the Securities and the Indenture;

(3) Investments
in cash and Cash Equivalents; 

(4) loans and
advances to employees, directors and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
not in excess of two million dollars ($2,000,000) at any one time outstanding;

8

(5) Currency
Hedge Obligations and Interest Rate Hedging Agreements entered into in the
ordinary course of the Company’s or its Restricted Subsidiaries’ businesses and
otherwise in compliance with the Indenture; 

(6) Investments
in securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers or in good faith settlement of delinquent
obligations of such trade creditors or customers; 

(7) Investments
the payment for which is solely Qualified Capital Stock of the Company;

(8) Investments
by any Insurance Subsidiary constituting Invested Assets and made in compliance
with Insurance Laws, including Investments determined subsequent to acquisition
not to comply with applicable Insurance Laws so long as such noncompliance is
cured within 30 days of the chief investment officer of the Company or the
applicable Subsidiary becoming aware of such noncompliance; provided that (a) no
more than 15% of Invested Assets may be in persons that are Affiliates of the
Company and (b) if, as a result of any direct or indirect action by the Company
such Person becomes an Affiliate of the Company then any such Investment in such
Person pursuant to this clause (8) that was made prior to the date such Person
became an Affiliate of the Company shall be deemed to have been made on the date
and immediately after such Person became an Affiliate of the Company;

(9) any
Investment that replaces, refinances or refunds an Investment existing on the
Issue Date, provided that such Investment is in an amount that does not exceed
the amount replaced, refinanced or refunded and is made in the same Person as
the Investment replaced, refinanced or refunded; and 

(10) other
Investments not to exceed ten million dollars ($10,000,000) at any one time
outstanding. 

“Pooled
Companies” means (Pennsylvania Manufacturers’ Association Insurance Company,
Pennsylvania Manufacturers Indemnity Company and Manufacturers Alliance
Insurance Company). 

“QIB”
means a “Qualified Institutional Buyer” as defined in Rule 144A under the
Securities Act.

“Qualified
Capital Stock” means any Capital Stock that is not Disqualified Capital Stock.

“Ratio
Test” means the Distributable Amount to Consolidated Fixed Charge Coverage Ratio
of the Company is greater than 2.0 to 1.0. 

“Restricted
Subsidiary” means any Subsidiary of the Company that at the time of
determination is not an Unrestricted Subsidiary. 

9

 

“Securities”
means, for the purpose of this Second Supplemental Indenture only, the
Debentures. 

“Unrestricted
Subsidiary” of any Person means: 

(1)
 any
Subsidiary of such Person that at the time of determination shall be or continue
to be designated an Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided below; and 

(2)
 any
Subsidiary of an Unrestricted Subsidiary. 

The Board
of Directors may designate any Subsidiary (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the Company
or any other Subsidiary that is not a Subsidiary of the Subsidiary to be so
designated; provided that: 

(1)
 The
Company certifies to the Trustee that such designation complies with Section
3.05 of this Second Supplemental Indenture; and 

(2)
 each
Subsidiary to be so designated and each of its Subsidiaries has not at the time
of designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries. 

For
purposes of making the determination of whether any such designation of a
Subsidiary as an Unrestricted Subsidiary complies with Section 3.05 of this
Second Supplemental Indenture, the portion of the fair market value of the net
assets of such Subsidiary of the Company at the time that such Subsidiary is
designated as an Unrestricted Subsidiary that is represented by the interest of
the Company and its Restricted Subsidiaries in such Subsidiary, in each case as
determined in good faith by the Board of Directors of the Company, shall be
deemed to be an Investment. Such designation will be permitted only if such
Investment would be permitted at such time under Section 3.05 of this Second
Supplemental Indenture. As of the Issue Date, there are no Unrestricted
Subsidiaries. 

The Board
of Directors may designate any Unrestricted Subsidiary as a Restricted
Subsidiary only if: 

(1)
 immediately
after giving effect to such designation, the Ratio Test shall be met; and

(2)
 immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. 

Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of a board resolution of the
Company giving effect to such designation and an Officer’s Certificate
certifying that such designation complied with the foregoing provisions.

10

“Wholly
Owned Restricted Subsidiary” means a Restricted Subsidiary all of the Capital
Stock of which (other than directors’ qualifying shares) is owned, directly or
indirectly, by the Company or one or more Subsidiaries of which all the
outstanding Voting Stock are owned by the Company or by any of its Wholly Owned
Restricted Subsidiaries. 

Section
1.02 Certain
Terms Defined in the Indenture. 

(a) Except as
may be provided in a Future Supplemental Indenture, for the benefit of the
Holders of all Securities, including the Debentures, Section 1.1 of the Original
Indenture shall be amended by adding the following new definitions:

“Class A
Common Stock” means the Company’s Class A Common Stock, par value $5.00 per
share. 

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

“NYSE”
means The New York Stock Exchange, Inc. 

“Securities
Act” means the Securities Act of 1933, as amended. 

“Trading
Day” means a day during which trading in securities generally occurs on the NYSE
or, if the Class A Common Stock is not listed on the NYSE, on the principal
other national or regional securities exchange on which the Class A Common Stock
then is listed or, if the Class A Common Stock is not listed on a national or
regional securities exchange, on the National Association of Securities Dealers
Automated Quotation System or, if the Class A Common Stock is not quoted on the
National Association of Securities Dealers Automated Quotation System, on the
principal other market on which the Class A Common Stock is then traded.

(b) Except as
may be provided in a Future Supplemental Indenture, for the benefit of the
Holders of all Securities, including the Debentures, Section 1.1 of the Original
Indenture shall be amended by deleting the definition of “Original Issue
Discount Security” in its entirety and replacing such definition with the
following: 

“Original
Issue Discount Security” means a Security issued pursuant to this Indenture that
is treated as having original issue discount within the meaning of Section 1273
of the Internal Revenue Code of 1986, as amended, and Treasury Regulations
Section 1.1273-1(c)(a). 

(c) Definitions
of the following terms in this Second Supplemental Indenture may be found in the
Sections of the Indenture indicated (or this Second Supplemental Indenture where
indicated) as follows: 

 

11

 

	
       

      Term
	
      Defined
      in Section

	
      “Additional
      Collateral”
	
      Section
      1.03(a) of this Second Supplemental Indenture

	
      “Affiliate
      Transaction”
	
      Section
      3.07 of this Second Supplemental Indenture

	
      “A.M.
      Best”
	
      Section
      1.03(a) of this Second Supplemental Indenture

	
      “Amendment”
	
      Section
      16.7

	
      “Applicable
      Stock”
	
      Section
      2.02(g)(ii) of this Second Supplemental Indenture

	
      “Asset
      Sale”
	
      Section
      13.2(b)

	
      “Asset
      Sale Purchase Date”
	
      Section
      13.2(b)

	
      “Asset
      Sale Purchase Notice”
	
      Section
      13.2(d)

	
      “Asset
      Sale Purchase Price”
	
      Section
      13.2(b)

	
      “Cash
      Amount”
	
      Section
      16.13(a)

	
      “Cash
      Settlement Averaging Period”
	
      Section
      16.13(a)

	
      “Cash
      Settlement Notice Period”
	
      Section
      16.13(a)

	
      “cash”
	
      Section
      13.3

	
      “Change
      of Control”
	
      Section
      13.2(a)

	
      “Change
      of Control Purchase Date”
	
      Section
      13.2(a)

	
      “Change
      of Control Purchase Notice”
	
      Section
      13.2(d)

	
      “Change
      of Control Purchase Price”
	
      Section
      13.2(a)

	
      “Collateral”
	
      Section
      1.03(a) of this Second Supplemental Indenture

	
      “Collateral
      Companies”
	
      Section
      1.03(a) of this Second Supplemental
Indenture

 

 

12

 

	
      “Conversion
      Agent”
	
      Section
      2.02(c) of this Second Supplemental Indenture

	
      “Conversion
      Obligation”
	
      Section
      16.13(a)

	
      “Conversion
      Price”
	
      Section
      2.02(h) of this Second Supplemental Indenture

	
      “Conversion
      Rate”
	
      Section
      16.1(b)

	
      “Conversion
      Retraction Period”
	
      Section
      16.13(a) 

	
      “Conversion
      Value”
	
      Section
      16.1(b)

	
      “Current
      Market Price”
	
      Section
      16.3(g)

	
      “Debentures”
	
      Section
      2.01(a) of this Second Supplemental Indenture

	
      “Depositary”
	
      Section
      2.01(a) of this Second Supplemental Indenture

	
      “Distributed
      Assets”
	
      Section
      16.3(d)

	
      “Excess
      Amount”
	
      Section
      16.3(e)

	
      “Excess
      Tender Amount”
	
      Section
      16.3(f)

	
      “Ex-Dividend
      Time”
	
      Section
      16.1(d)

	
      “Expiration
      Time”
	
      Section
      16.3(f)

	
      “Fair
      Market Value”
	
      Section
      16.3(g)

	
      “First
      Supplemental Indenture”
	
      Recitals
      of this Second Supplemental Indenture

	
      “Future
      Supplemental Indenture”
	
      Recitals
      of this Second Supplemental Indenture

	
      “Indenture”
	
      Recitals
      of this Second Supplemental Indenture

	
      “Measurement
      Period”
	
      Section
      16.1(b)

 

 

 

13

 

	
      “Non-Electing
      Share”
	
      Section
      16.4

	
      “Original
      Indenture”
	
      Recitals
      of this Second Supplemental Indenture

	
      “Paying
      Agent”
	
      Section
      2.02(c) of this Second Supplemental Indenture

	
      “Permitted
      Indebtedness”
	
      Section
      3.10 of this Second Supplemental Indenture

	
      “Permitted
      Lien”
	
      Section
      3.10 of this Second Supplemental Indenture

	
      “Purchase
      Date”
	
      Section
      13.1

	
      “Purchase
      Notice”
	
      Section
      13.1

	
      “Purchase
      Price”
	
      Section
      13.1

	
      “Record
      Date”
	
      Section
      16.3(g)

	
      “Reference
      Period”
	
      Section
      16.3(d)

	
      “Released
      Interest”
	
      Section
      1.04 of this Second Supplemental Indenture

	
      “Restricted
      Securities”
	
      Section
      2.02(i) of this Second Supplemental Indenture

	
      “Sale
      Price”
	
      Section
      16.1(b)

	
      “Spin-Off”
	
      Section
      16.3(d)

	
      “transfer”
	
      Section
      2.02(i) of this Second Supplemental Indenture

	
      “Trigger
      Event”
	
      Section
      16.3(d)

Section
1.03  Grant
of Security Interest in Collateral and Additional Collateral. 

(a) The
Company does hereby grant to the Trustee, as trustee for the benefit of the
Holders of the Debentures, a first priority Lien and security interest, equal
and ratable with a Lien and security interest in favor of the trustee for the
holders of the Company’s Publicly Issued Debentures and the trustee for the
Company’s 8.50% Monthly Income Senior Notes due 2018, in and to 20% of the
outstanding Capital Stock of the Company’s Significant Subsidiaries (such
companies, collectively, the “Collateral Companies”), and all rights and
privileges of the Company with respect thereto, including all dividends,
distributions and other payments with respect thereto and in and to all proceeds
thereof (the 

 

 

14

“Collateral”)
to have and to hold in trust to secure the payment of principal of and premiums,
if any, and interest on, and any other amounts (including all fees, expenses,
counsel fees and other amounts, including fees and expenses of the Collateral
Agent, due and owing to the Trustee) owing in respect of the Debentures equally
and ratably, with the Company’s Publicly Issued Debentures and the Company’s
8.50% Monthly Income Senior Notes due 2018, without prejudice, preference,
priority or distinction, except as expressly provided in the Indenture (and the
indenture for the Company’s Publicly Issued Debentures and the indenture for the
Company’s 8.50% Monthly Income Senior Notes due 2018), and to secure performance
by the Company of all the Company’s obligations under the Indenture (equally and
ratably with the Company’s obligations with respect to the Company’s Publicly
Issued Debentures and the Company’s 8.50% Monthly Income Senior Notes due 2018),
all as provided for in this Indenture (and the indenture for the Company’s
Publicly Issued Debentures and the indenture for the Company’s 8.50% Monthly
Income Senior Notes due 2018). Additionally, if the financial strength ratings
of the Pooled Companies from A.M. Best Company, Inc. (“A.M. Best”) are not at
least “A-” on December 31, 2005, or if the financial strength ratings of the
Pooled Companies from A.M. Best are reduced to below “B++” prior to December 31,
2005, the Company does hereby grant to the Trustee, as trustee for the benefit
of the Holders of the Debentures, a first priority Lien and security interest
equal and ratable with a Lien and security interest in favor of the trustee for
the holders of the Company’s Publicly Issued Debentures and the trustee for the
holders of the Company’s 8.50% Monthly Income Senior Notes due 2018, in and to
the remaining outstanding Capital Stock of the Collateral Companies and all
rights and privileges of the Company with respect thereto, including all
dividends, distributions and other payments with respect thereto and all
proceeds thereof, (“Additional Collateral”) to have and to hold in trust to
secure the payment of principal of and premiums if any, and interest on, and any
other amounts (including all fees, expenses, counsel fees and other amounts,
including fees and expenses of the Collateral Agent, due and owing to the
Trustee) owing in respect of the Debentures, equally and ratably with the
Company’s Publicly Issued Debentures and the Company’s 8.50% Monthly Income
Senior Notes due 2018, without prejudice, preference, priority or distinction,
except as expressly provided in the Indenture (and the indenture for the
Company’s Publicly Issued Debentures and the indenture for the Company’s 8.50%
Monthly Income Senior Notes due 2018), and to secure performance by the Company
of the Company’s obligations under this Indenture (equally and ratably with the
Company’s obligations with respect to the Company’s Publicly Issued Debentures
and the Company’s 8.50% Monthly Income Senior Notes due 2018) with respect to
the Debentures and the Company’s Publicly Issued Debentures and the Company’s
8.50% Monthly Income Senior Notes due 2018, all as provided for under the
Indenture (and the indenture for the Company’s Publicly Issued Debentures and
the indenture for the Company’s 8.50% Monthly Income Senior Notes due 2018).

The
Trustee, as trustee on behalf of the Holders of the Debentures, acknowledges
this grant, accepts the trusts hereunder in accordance with the provisions
hereof and agrees to perform its duties herein required and agrees that subject
to the provisions of the Collateral Agent Agreement, the Trustee holds the
Collateral and the Additional Collateral in trust for the benefit of the Holders
of the Debentures. 

15

(b) The
Company will file, and the Trustee and the Collateral Agent are hereby
authorized to file, such financing statements and continuation statements, and
perform such acts necessary or desirable to perfect and maintain a first
priority security interests in the Collateral and the Additional Collateral
granted in Section 1.03(a) of this Indenture. In the case of any Additional
Collateral, the Company shall do all such things within 90 days of December 31,
2005 or such earlier date as the financial strength ratings of the Pooled
Companies from A.M. Best are reduced to below B++. 

(c) Each
Holder, by accepting a Debenture, agrees to all of the terms and provisions of
the Collateral Agent Agreement (including, without limitation, the provisions
providing for foreclosure and release of the Collateral and the Additional
Collateral) as the same may be in effect or may be amended from time to time in
accordance with the terms thereof and hereof, and authorizes and directs the
Trustee, acting through the Collateral Agent, to perform its obligations and
exercise its rights under the Collateral Agent Agreement in accordance
therewith; provided,
however, that if
any provisions of the Collateral Agent Agreement limit, qualify or conflict with
the duties imposed by the provisions of the Trust Indenture Act, the Trust
Indenture Act will control. 

(d) As more
fully set forth in, and subject to the provisions of, the Collateral Agent
Agreement, the Holders, and the Trustee and the Collateral Agent on behalf of
such Holders, will have rights in and to the Collateral and the Additional
Collateral that are subject to the rights that have been or may be created in
favor of the holders of other Indebtedness and obligations of the Company.

(e) As among
the Holders, the Collateral and the Additional Collateral shall be held for the
equal and ratable benefit of the Holders without preference, priority or
distinction of any thereof over any other. 

(f) In the
event the Trustee acts as Collateral Agent, the Trustee (i) shall not be deemed
to have breached its fiduciary duty as Trustee to the Holders as a result of the
performance of its duties as Collateral Agent to the extent it acts in
compliance with the Collateral Agent Agreement and (ii) shall not be liable to
the Holders for any such action or inaction. The rights and interests created
under this Indenture shall be subject to the terms of the Collateral Agent
Agreement. 

(g) The
Company will do or cause to be done all such acts and things as may be required
by the provisions of the Collateral Agent Agreement to which it is a party, to
assure and confirm to the Trustee and the Collateral Agent, the Liens on the
Collateral and the Additional Collateral contemplated by the Indenture and the
Collateral Agent Agreement to which it is a party, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Debentures secured thereby, as applicable, according
to the intent and purposes herein and therein expressed. The Company will take
all actions required pursuant to the Indenture and the Collateral Agent
Agreement to cause the Liens created pursuant to the Indenture to be valid,
enforceable and perfected (except as expressly provided therein) Liens in and on
all the Collateral and the Additional Collateral in favor of the Collateral
Agent for the benefit of the Trustee and for the equal and ratable benefit of
the Holders of the Debentures, the holders of the Company’s Publicly Issued
Debentures and the holders of the Company’s 8.50% Monthly Income Senior Notes
due 2018 in accordance with the terms of the Indenture and the Collateral Agent
Agreement. With respect to any proceeds that are cash or Cash Equivalents, the
Company shall deposit such proceeds into an account under the control of the
Collateral Agent in accordance with the provisions of the Collateral Agent
Agreement. 

 

 

16

Section
1.04 Release
of Security Interest in Collateral and Additional Collateral. 

(a) Additionally,
in the event of a sale or other disposition of Collateral (or Additional
Collateral) in compliance with the provisions of Section 3.04 of this Second
Supplemental Indenture, upon satisfaction of the conditions set forth below, the
Liens securing the Debentures, the Company’s Publicly Issued Debentures and the
Company’s 8.50% Monthly Income Senior Notes due 2018 will automatically
terminate as to the assets sold on the date of their sale and as to the Net Cash
Proceeds at the close of business on the Business Day immediately prior to any
Asset Sale Purchase Date in accordance with the provisions set forth below.

The
Company shall have the right to obtain automatic release of items of Collateral
(and Additional Collateral) (the “Released Interest”) securing the Debentures,
the Company’s Publicly Issued Debentures and the Company’s 8.50% Monthly Income
Senior Notes due 2018 subject to the provisions of Section 3.04 of this Second
Supplemental Indenture upon compliance with the condition that the Company
deliver to the Trustee and the Collateral Agent the following: 

(i) a notice
from the Company requesting the release of the Released Interests: 

(1) Describing
the proposed Released Interest and certifying that the purchase price received
is at least equal to the fair market value of the Released Interest; and

(2) in the
event that any assets other than cash or Cash Equivalents comprise a portion of
the consideration received in such Asset Sale, specifically describing such
assets; 

(ii) an
Officers’ Certificate stating that: 

(1) (a) the
stated fair market value of such Asset Sale of Collateral does not include the
sale of assets other than the Released Interest and (b) such Asset Sale complies
with the terms and conditions of Section 3.04 of this Second Supplemental
Indenture with respect to Asset Sales; 

17

(2) all Net
Cash Proceeds from the sale of the Released Interest will be applied pursuant to
the provisions of Section 13.2(b) of the Indenture; 

(3) all
conditions precedent in the Indenture relating to the release in question have
been complied with; and 

(4) no
Default or Event of Default has occurred or would occur immediately prior to or
immediately after such release; 

(iii) evidence
satisfactory to the Trustee that any consideration from the Asset Sale has been
pledged to secure the Debentures, the Company’s Publicly Issued Debentures and
the Company’s 8.50% Monthly Income Senior Notes due 2018 in a manner that
creates a perfected security interest therein of the same priority as the
Collateral sold; 

(iv) all
documentation necessary to evidence the grant to the Trustee (or any collateral
agent), on behalf of the Holders of the Debentures and perfection of a security
interest in and Lien (of the same priority as the Lien on the assets subject to
the Asset Sale) on all consideration other than Net Cash Proceeds received in
such Asset Sale, if any, equal and ratable with a security interest in and Lien
on such consideration in favor of the trustee for the holders of the Company’s
Publicly Issued Debentures and the trustee for the Company’s 8.50% Monthly
Income Senior Notes due 2018; and 

(v) all
documentation required by the Trust Indenture Act prior to the release of
Collateral and the Additional Collateral by the Trustee. 

(b) Any
automatic release of items of Collateral (and Additional Collateral) securing
the Debentures, the Company’s Publicly Issued Debentures and the Company’s 8.50%
Monthly Income Senior Notes due 2018 made in compliance with the provisions of
this Section 1.04 and subject to Section 3.04 of this Second Supplemental
Indenture shall not be deemed to impair the security under this Second
Supplemental Indenture in contravention of the provisions hereof. 

Section
1.05 Authorization
of Actions to be Taken by Collateral Agent Under the Collateral Agent
Agreement. 

The
Collateral Agent may (but shall not be obligated to), in its sole discretion and
without the consent of the Holders, on behalf of the Trustee and the Holders,
take all actions it deems necessary or appropriate in order to (a) enforce any
of the terms of the Collateral Agent Agreement and (b) collect and receive any
and all amounts payable in respect of the obligations of the Company hereunder.
The Trustee, directly or through the Collateral Agent, shall have the power to
institute and to maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral and the Additional Collateral by any
acts that may be unlawful or in violation of the Collateral Agent Agreement or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interests and the interests of the Holders in the
Collateral 

 

18

 

and the
Additional Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other government enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders or of the Trustee). 

 

Section
1.06 Authorization
of Receipt of Funds by the Trustee Under the Collateral Agent
Agreement. 

The
Trustee, directly or through Collateral Agent, is authorized to receive any
funds for the benefit of the Holders distributed under the Collateral Agent
Agreement, and to make further distributions of such funds to the Holders
according to the provisions of this Indenture and the Collateral Agent
Agreement. 

 

Section
1.07 Authorization
of Trustee to Enter into the Collateral Agent Agreement. 

The
Trustee, hereby agrees that it shall, upon the written request of the Company,
enter into the Collateral Agent Agreement appointing a Collateral Agent to hold
and enforce rights against the Collateral and Additional Collateral on behalf of
the Trustee, the trustee for the Company’s Publicly Issued Debentures and the
Company’s 8.50% Monthly Income Senior Notes due 2018. The Trustee and the
Company may enter into amendments to the Collateral Agent Agreement without the
consent of the Holders; provided, however, that the consent of the Holders shall
be required for any amendment that would adversely affect the Holders’ rights in
the Collateral or Additional Collateral.

ARTICLE
II

6.50%
Senior Secured Convertible Debentures

Section
2.01 Establishment. 

(a) There is
hereby established a new series of Securities to be issued under the Indenture,
to be designated as the Company’s 6.50% Senior Secured Convertible Debentures
due September 30, 2022 (the “Debentures”). 

There are
to be authenticated and delivered Debentures, limited in aggregate principal
amount of $15,000,000, and no further Debentures shall be authenticated and
delivered except as provided by Section 2.3, 3.5, 3.6, 9.5 or 11.7 and Article
13 of the Original Indenture. The Debentures shall be issued in definitive fully
registered form. 

The
Debentures shall be issued in the form of one or more global Securities in
substantially the form set out in Exhibit
A hereto.
The Depositary with respect to the Debentures shall be The Depository Trust
Company. 

The form
of the Trustee’s Certificate of Authentication for the Debentures shall be in
substantially the form set forth in Section 2.2 of the Original Indenture.

Each
Debenture shall be dated the date of authentication thereof. 

19

(b) Denominations. The
Debentures may be issued in denominations of $1,000, or any integral multiple
thereof. 

(c) Global
Securities. The
Debentures will be issued in the form of one or more global Securities
registered in the name of the Depositary or its nominee. Except under the
limited circumstances described below, Debentures represented by the global
Security will not be exchangeable for, and will not otherwise be issuable as,
Debentures in definitive form. The global Securities described above may not be
transferred except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or to a successor Depositary or its nominee. 

Owners of
beneficial interests in such a global Security will not be considered the
Holders thereof for any purpose under the Indenture except Section 10.4, and no
global Security representing a Debenture shall be exchangeable, except for
another global Security of like denomination and tenor to be registered in the
name of the Depositary or its nominee or to a successor Depositary or its
nominee. The rights of Holders of such global Security shall be exercised only
through the Depositary. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its
participants, the operation of customary practices of such Depositary governing
the exercise of the rights of a holder of a beneficial interest in any global
Security. 

A global
Security shall be exchangeable for Debentures registered in the names of Persons
other than the Depositary or its nominee only as provided by Section 3.5 of the
Original Indenture. Any global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for Debentures registered in such names
as the Depositary shall direct. 

(d) Interest
Payment Date and Record Date. The
Interest Payment Date for the Debentures is March 30 and September 30 of each
year, beginning March 30, 2005. Interest shall be computed on the basis of a
360-day year consisting of twelve 30-day months. The Regular Record Date with
respect to each Interest Payment Date is the close of business on the
15th calendar
day preceding such Interest Payment Date. 

(e) Definitive
Debentures.
Debentures issued in certificated form shall be substantially in the form of
Exhibit
A attached
hereto, but without including the text referred to therein as applying only to
global Debentures. 

(f) Transfer. No
service charge will be made for any registration of transfer or exchange of
Debentures, but payment will be required of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.

 

Section
2.02 Terms
of the Debentures. 

The
following terms relating to the Debentures are hereby established: 

20

(a) Stated
Maturity. The
entire outstanding principal of the Debentures shall be due and payable, unless
accelerated, redeemed or required to be repurchased pursuant to the Indenture,
on September 30, 2022. 

(b) Interest.

(i) The rate
at which the Debentures shall bear interest shall be 6.50% per annum; the date
from which interest shall accrue on the Debentures shall be the Issue Date, or
the most recent Interest Payment Date to which interest has been paid or
provided for. Interest shall be paid in cash. No contingent interest will be
paid with respect to the Debentures. 

(ii) If the
Company elects to redeem, or the Holders elect to require the Company to
repurchase, the Debentures on a date that is after the Regular Record Date and
prior to the corresponding Interest Payment Date, the Company will pay accrued
and unpaid interest, if any, on the Debentures to, but not including, the
applicable Redemption Date, Purchase Date or Change of Control Purchase Date, as
the case may be, to the holder of record on the Regular Record Date.

Except as
provided below, if any Debentures are surrendered for conversion on any date
other than an Interest Payment Date, the Holder of such Debentures will not be
entitled to receive any interest, if any, that has accrued on such Debentures
since the prior Interest Payment Date. By delivery to the Holder of the number
of shares of Class A Common Stock or other consideration issuable upon
conversion in accordance with Article 16 of the Indenture (as amended by Section
2.11 of this Second Supplemental Indenture), any accrued and unpaid interest on
such Debentures will be deemed to have been paid in full. 

All
Holders agree, by their acceptance of a Debenture, that if a Holder of
Debentures converts on a date after a Regular Record Date for an interest
payment but prior to the corresponding Interest Payment Date, the Holder of such
Debentures (subject to the right of Holders of record on the immediately
preceding Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Redemption Date) will receive on that Interest
Payment Date accrued and unpaid interest on such Debentures, but, at the time
the Holder surrenders such Debentures for conversion, the Holder must pay the
Company the interest that has accrued and will be paid on such Interest Payment
Date. No such payment need be made with respect to Debentures that will be
redeemed by the Company after a Regular Record Date but prior to the
corresponding Interest Payment Date. 

(iii) If the
principal amount of or any portion of such principal amount of, or any interest,
if any, on, any Debentures is not paid when due (whether upon acceleration
pursuant to Section 5.2 of the Indenture or on the Stated Maturity or on
Redemption Date, Purchase Date or Change of Control Purchase Date), then in each
such case the overdue amount shall, to the extent permitted by law, bear
interest at the applicable interest rate, compounded semi-annually, which
interest shall accrue from the date of such overdue amount was originally due to
the date of payment of such amount, including interest thereon, has been made or
duly provided for. All such interest shall be payable on demand. 

21

(c) Paying
Agent and Conversion Agent. The
Company shall maintain an office or agency where Debentures may be presented for
purchase or payment (“Paying Agent”) and an office or agency where Debentures
may be presented for conversion (“Conversion Agent”). The Company may have one
or more additional Paying Agents and one or more additional Conversion Agents.

The
Company shall enter into an appropriate agency agreement with any Paying Agent
or Conversion Agent (other than the Trustee). The agreement shall implement the
provisions of this Indenture that relate to such agent. If the Company fails to
maintain a Paying Agent or Conversion Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 6.7
of the Indenture. The Company or any Subsidiary or an Affiliate of any of them
may act as Paying Agent or Conversion Agent. 

The
Company initially appoints the Trustee as Conversion Agent and Paying Agent in
connection with the Debentures. The Trustee shall be entitled to appropriate
compensation for acting in such capacities. 

(d) Place
of Payment.

(i) The Place
of Payment for the Debentures and the place or places where the Debentures may
be surrendered for registration of transfer, exchange, repurchase, redemption or
conversion and where notices may be given to the Company in respect of the
Debentures is at the Corporate Trust Office of the Trustee or such other office
or agency of the Company as may be designated for such purpose. Payment of
principal and interest, if any, on the Debentures will be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts (or shares as provided above or a
combination of cash and those shares). 

(ii) The
Company will pay principal on (1) global Debentures to the Depositary in
immediately available funds and (2) any definitive Debentures in immediately
available funds at the Company’s office or agency in New York City, which
initially will be the Place of Payment as provided in Section 10.2 of the
Indenture. 

(iii) The
Company will pay interest, if any, on (1) global Debentures to the Depositary in
immediately available funds, (2) any definitive Debentures having an aggregate
principal amount of $5,000,000 or less by check mailed to the Holders of such
Debentures, and (3) any definitive Debentures having an aggregate principal
amount of more than $5,000,000 by wire transfer in immediately available funds
if requested by the Holders of such Debentures. At Stated Maturity the Company
will pay interest on (1) any definitive Debentures at the Company’s office or
agency in New York City, which initially will be the Place of Payment as
provided in Section 10.2 of the Indenture and (2) or global Debenture to the
Depositary in immediately available funds. 

22

(e) Redemption.

(i) At the
Option of the Company. At any
time from October 1, 2008, the Company, at its option, may redeem in principal
amounts of $1,000 or integral multiples of $1,000 the Debentures for cash as a
whole, or from time to time in part, at a Redemption Price of 114% of the
principal amount of the Debentures, plus accrued and unpaid interest, if any,
to, but excluding, the Redemption Date: 

(ii) Mandatory
Redemption with Extraordinary Dividends. From
January 1, 2006 to and including December 31, 2006, in the event the
Company receives any Extraordinary Dividends from any of its subsidiaries, the
Company shall redeem the Debentures and the Publicly Issued Debentures, pro rata
in principal amounts of $1,000 or integral multiples of $1,000 with 50% of the
amount of such dividends for cash at a Redemption Price of 110% of the principal
amount of the Debentures plus accrued unpaid interest, if any, to the Redemption
Date. The aggregate principal amount of the Debentures plus the Publicly Issued
Debentures to be redeemed pursuant to this Section 2.02(e)(ii) shall not exceed
$35,000,000. 

(iii) Additional
Terms of Redemption. For
redemptions pursuant to clause (i) above, the Company shall notify the Trustee
and the Holders of any redemption at least 30 but not more than 60 days prior to
any redemption by mail. For redemptions pursuant to clause (ii) above, the
Company shall notify the Trustee and the Holders by mail no later than five (5)
days after the receipt by it of an Extraordinary Dividend from any Subsidiary
(and at least 20 Business Days, but no more than 45 Business Days prior to the
Redemption Date), which notice shall specify the amount of the Extraordinary
Dividend and the Redemption Date. All notices of redemptions will contain
information concerning the premium, if any, payable with respect to the
applicable redemption. No less than one (1) Business Day prior to the Redemption
Date specified in the Company’s notice, the Holders shall provide the Company
with notice of their election to receive any premium payable with respect to the
applicable redemption in the Applicable Stock. Such notice will contain the
information set forth in Section 13.1(1)(A), (B) and (C) of the Original
Indenture (as amended by Section 2.09 of this Second Supplemental Indenture).
Any Holder who fails to provide a notice of election to receive the applicable
premium in shares of the Company’s Class A Common Stock shall be deemed to have
elected to receive cash in respect of any applicable premium for all Debentures
subject to the redemption in which a premium is payable. The Company shall
provide the Trustee with copies of the Holders’ notices of election immediately
upon receipt.

Debentures
or portions thereof to be redeemed as of a Redemption Date will be convertible
by the Holders of such Debentures until the close of business on the second
Business Day prior to the Redemption Date. 

23

If the
Company does not redeem all of the Debentures, the Trustee shall select the
Debentures to be redeemed in principal amounts of $1,000 or integral multiples
thereof, by lot or on a pro rata basis. If any Debentures are to be redeemed in
part only, the Company shall issue a Security or Debenture with a principal
amount equal to the unredeemed principal portion thereof. If a portion of a
Holder’s Securities or Debentures is selected for partial redemption and the
Holder converts a portion of its Securities or Debentures the converted portion
shall be deemed to be taken from the portion selected for redemption.

(f) Repurchase.

(i) Upon a
Change of Control, the Debentures shall be purchased by the Company, at the
option of the Holder thereof, at a price equal to the price (which, in this
context shall be the “Change of Control Purchase Price”) set forth below and in
Section 7 of the Debentures and in accordance with the provisions of this
Indenture, including, without limitation, Article 13 (as amended by Section 2.09
of this Second Supplemental Indenture): 

 

	
       

      Purchase
      Date
	
      Purchase Price

      as % of Principal

	
      From
      the date of issuance to and including September 30, 2005
	
      101%

	
      From
      October 1, 2005 to and including September 30, 2006
	
      103%

	
      From
      October 1, 2006 to and including September 30, 2007
	
      106%

	
      From
      October 1, 2007 to and including September 30, 2008
	
      110%

	
      From
      October 1, 2008 to and including June 30, 2009
	
      114%

	
      From
      July 1, 2009 to and including September 30, 2022
	
      101%

 

(ii) Upon an
Asset Sale, the Debentures shall be repurchased by the Company, at the option of
the Holder thereof, at a price equal to the price (which, in this context shall
be the “Asset Sale Purchase Price”) set forth below and in accordance with the
provisions of the Indenture, including, without limitation, Article 13 (as
amended by Section 2.09 of this Second Supplemental Indenture). 

 

	
       

      Purchase
      Date
	
      Purchase Price

      as % of Principal

	
      From
      the date of issuance to and including September 30, 2005
	
      101
      %

	
      From
      October 1, 2005 to and including September 30, 2006
	
      103
      %

	
      From
      October 1, 2006 to and including September 30, 2007
	
      106
      %

	
      From
      October 1, 2007 to and including September 30, 2008
	
      110
      %

	
      From
      October 1, 2008 to and including June 30, 2009
	
      114
      %

	
      From
      July 1, 2009 to and including September 30, 2022
	
      100
      %

 

(iii) On June
30, 2009 the Debentures shall be repurchased by the Company, at the option of
the Holders, at the Repurchase Price of 114% of the principal amount of the
Debentures to be repurchased, plus accrued and unpaid interest, if any, to the
Purchase Date and in accordance with the provisions of the Indenture including,
without limitation, Article 13 (as amended by Section 2.09 of this Second
Supplemental Indenture) . 

24

(g) Premium
Payable in Stock at Option of the Holder.

(i) In
connection with any premium (the portion of the consideration payable in excess
of principal amount) payable to a Holder of the Debentures in connection with
redemptions pursuant to Section 2.02(e)(i) and (ii) of this Second Supplemental
Indenture and repurchases pursuant to Section 2.02(f) of this Second
Supplemental Indenture which, in each case, results from an event or action
occurring on or prior to June 30, 2009, each Holder will have the option to
elect to receive such premium in cash or in shares of Applicable Stock (defined
below). For the purposes of calculating the number of shares issuable to any
Holder of the Debentures who elects to exercise such option, the shares of
Applicable Stock will be valued at $8.00 per share as adjusted pursuant to
Section 16.3 of the Indenture (as amended by Section 2.11 of this Second
Supplemental Indenture) as if such $8.00 were the Conversion Price. In lieu of
issuing any fractional shares of the Applicable Stock, the Company shall pay the
remainder of the premium in cash as if the cash value of a full share were
$8.00. In the event any premium is payable to a Holder in Applicable Stock, the
Company shall, to the extent applicable, comply with the tender offer rules and
all other applicable laws in accordance with Section 13.7 of the Indenture (as
amended by 2.09 of this Second Supplemental Indenture). 

(ii) The
Company shall designate, in the notice delivered pursuant to Sections
2.02(e)(iii) and 2.02(f) of this Second Supplemental Indenture and Sections 13.1
and 13.2 of the Indenture (as amended by Section 2.09 of this Second
Supplemental Indenture), the number of shares of Applicable Stock (defined
below) payable for any applicable premium; provided that the Company will pay
cash for fractional interests as set forth below. 

“Applicable
Stock” means (i) the Class A Common Stock and (ii) in the event of a merger,
consolidation or other similar transaction involving the Company that is
otherwise permitted hereunder in which the Company is not the surviving
corporation, the common stock, ordinary shares or American Depositary Shares of
such surviving corporation or its direct or indirect parent corporation.

(iii) On each
Redemption Date, Change of Control Purchase Date, Asset Sale Purchase Date or
Purchase Date, in each case, resulting from an event or action occurring on or
prior to June 30, 2009, any applicable premium shall be paid, at the option of
the Holder, in shares of Applicable Stock equal to the quotient obtained by
dividing (i) the aggregate amount of the premium that a Holder has elected to be
paid in shares of Applicable Stock by (ii) $8.00 as adjusted pursuant to Section
16.3 of the Indenture (as amended by Section 2.11 of this Second Supplemental
Indenture) as if such $8.00 value were the Conversion Price. 

25

The
Company will not issue fractional shares of Applicable Stock in payment of any
premium. Instead, the Company will pay cash equal to $8.00 times such fraction
for all fractional shares. 

The
Company’s issuance of shares of Applicable Stock shall be conditioned upon:

(i) the
registration of such shares of Applicable Stock under the Securities Act and the
Exchange Act, in each case, if required; 

(ii) such
shares of Applicable Stock being first listed on a national securities exchange
or such shares of Applicable Stock being first quoted in an inter-dealer
quotation system of any registered United States national securities
association; 

(iii) any
necessary qualification or registration under applicable state securities laws
or the availability of an exemption from such qualification and registration;
and 

(iv) the
receipt by the Trustee of an Officer’s Certificate and an Opinion of Counsel
each stating that (A) the terms of the issuance of the shares of Applicable
Stock are in conformity with this Indenture and (B) the shares of Applicable
Stock to be issued by the Company in payment of the applicable premium in
respect of Debentures have been duly authorized and, when issued and delivered
pursuant to the terms of this Indenture in payment of the applicable premiums,
in respect of the Debentures, will be validly issued, fully paid and
non-assessable and, to the best of such counsel’s knowledge, free from
preemptive rights, and, in the case of such Officer’s Certificate, setting forth
the number of Applicable Stock to be issued and stating that all applicable
conditions have been satisfied and, in the case of such Opinion of Counsel,
stating that the conditions in clauses (i) through (iii) above have been
satisfied. 

The
Company hereby covenants to satisfy the foregoing conditions. 

Upon
determination of the actual number of shares of Applicable Stock to be issued,
the Company shall disseminate a press release through Dow Jones & Company,
Inc. or Bloomberg Business News containing this information or publish the
information through such other public medium as the Company may use at that
time. 

(i) All
shares of Class A Common Stock delivered in respect of any applicable premium
shall be newly issued shares or treasury shares, shall be duly authorized,
validly issued, fully paid and nonassessable, and shall be free from preemptive
rights and free of any Lien or adverse claim. 

(ii) If a
Holder is paid in shares of Applicable Stock, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on such issue of
Applicable Stock. However, the Holder shall pay any such tax which is due
because the Holder requests the Applicable Stock to be issued in a name other
than the Holder’s name. The Paying Agent may refuse to deliver the certificates

26

 

representing
the shares of Applicable Stock being issued in a name other than the Holder’s
name until the Paying Agent receives a sum sufficient to pay any tax which will
be due because the shares of Applicable Stock are to be issued in a name other
than the Holder’s name. Nothing herein shall preclude any income tax withholding
required by law or regulations. 

(h) Conversion. The
Debentures shall be convertible at any time prior to the Stated Maturity from
and after the date of issuance in accordance with the provisions of the
Indenture, including, without limitation, Article 16 (as amended by Section 2.11
of this Second Supplemental Indenture). 

“Conversion
Price” means initially $16.368, subject to adjustment as set forth in Article 16
of the Indenture (as amended by Section 2.11 of this Second Supplemental
Indenture). 

(i) Restrictions
on Transfer.

(i) Every
Debenture that bears or is required under this Section 2.02(i)(i) to bear the
legend set forth in this Section (together with any Common Stock issued upon
conversion of the Debentures and required to bear the legend set forth in
Subsection (ii) below, collectively, the “Restricted Securities”) shall be
subject to the restrictions on transfer set forth in this Subsection (i)
(including those set forth in the legend below) unless such restrictions on
transfer shall be waived by written consent of the Company, and the holder of
each such Restricted Security, by such holder’s acceptance thereof, agrees to be
bound by all such restrictions on transfer. As used in Section 2.02(i)(i) and
(ii), the term “transfer” encompasses any sale, pledge, loan, transfer or other
disposition whatsoever of any Restricted Security or any interest
therein.

(1) Until the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision), any certificate
evidencing any Debenture (and all securities issued in exchange therefor or
substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.02(i)(ii), if
applicable) shall bear a legend in substantially the following form, unless any
Debenture has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer) or pursuant to Rule 144 under the Securities Act
or any similar provision then in force, or unless otherwise agreed by the
Company in writing, with written notice thereof to the Trustee:

THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. 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, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT IT IS A

 

27

 

“QUALIFIED
INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
(“RULE 144A”)); (2) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY
INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF
SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
OF THIS SECURITY UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), ONLY (A) TO PMA CAPITAL CORPORATION (THE “ISSUER”),
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER), (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, IN COMPLIANCE WITH RULE 144A TO A PERSON IT
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS
SECURITY PURSUANT TO CLAUSE 2(B) ABOVE OR UPON ANY TRANSFER OF THIS
SECURITY UNDER RULE 144 UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION).

(2) Debentures
resold to persons who are not QIBs will be issued in definitive registered form
and may not be represented by the global Debenture. Any transfer of a beneficial
interest in the global Debenture which cannot be effected through book-entry
settlement must be effected by the delivery to the transferee (or its nominee)
of a definitive Debenture or Debentures registered in the name of the transferee
(or its nominee) on the books maintained by the Trustee in accordance with the
transfer restrictions set forth herein. With respect to any such transfer, the
Trustee or the custodian, at the direction of the 

 

28

 

Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the custodian, the aggregate principal amount of the
global Debenture to be reduced by the principal amount of the beneficial
interest in the global Debenture being transferred and, following such
reduction, the Company will execute and the Trustee will authenticate and
deliver to the transferee (or such transferee's nominee, as the case may be), a
Debenture or Debentures in the appropriate aggregate principal amount in the
name of such transferee (or its nominee) and bearing such restrictive legends as
may be required by this Second Supplemental Indenture.

(3)  So long
as the Debentures are eligible for book-entry settlement, unless otherwise
required by law, upon any transfer of a definitive Debenture to a QIB in
accordance with Rule 144A under the Securities Act and upon receipt of the
definitive Debenture or Debentures being so transferred, together with a
certification from the transferor that the transferee is a QIB (or other
evidence satisfactory to the Company and the Trustee), the Trustee shall make or
direct the custodian to make, an endorsement on the global Debenture to reflect
an increase in the aggregate principal amount of the Debentures represented by
the global Debenture by the principal amount of the Debenture being transferred
to the QIB, the Trustee shall cancel such definitive Debenture or Debentures and
cause, or direct the custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the custodian,
the aggregate principal amount of Debentures represented by the global Debenture
to be increased accordingly; provided,
that, no
definitive Debenture, or portion thereof, in respect of which the Company or an
Affiliate of the Company held any beneficial interest shall be included in the
global Debenture until such definitive Debenture is freely tradable in
accordance with Rule 144(k) under the Securities Act; provided,
further,
that, the
Trustee shall authenticate and deliver Debentures in definitive form upon any
transfer of a beneficial interest in the global Debenture to the Company or any
Affiliate of the Company.

(4)  Any
global Debenture may be endorsed with or have incorporated in the text thereof
such legends or recitals or changes not inconsistent with the provisions of this
Supplemental Indenture as may be required by the custodian, the Depositary or by
the National Association of Securities Dealers, Inc. in order for the Debentures
to be tradeable on The Portal Market or as may be required for the Debentures to
be tradeable on any other market developed for trading of securities pursuant to
Rule 144A under the Securities Act or required to comply with any applicable law
or any regulation thereunder or with the rules and regulations of any securities
exchange or automated quotation system upon which the Debentures may be listed
or traded or designated for issuance or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any
particular Debentures are subject.

(5) Any
Debenture (or security issued in exchange or substitution therefor) as to which
such restrictions on transfer shall have expired in accordance with their terms
or as to conditions for the removal of the foregoing legend may have been
satisfied may, upon surrender of such Debenture for exchange to the Debenture
registrar in accordance with the provisions of this Section, be exchanged for a
new Debenture or Debentures, of like tenor and 

 

29

 

aggregate
principal amount, which shall not bear the restrictive legend required by this
Section. If the Restricted Security surrendered for exchange is represented by a
global Debenture bearing the legend set forth in this Section 2.02(i)(i), the
principal amount of the legended global Debenture shall be reduced by the
appropriate principal amount and the principal amount of a global Debenture
without the legend set forth in this Section 2.02(i)(i) shall be increased by an
equal principal amount. If a global Debenture without the legend set forth in
this Section 2.02(i)(i) has not been executed, authenticated and delivered, the
Company shall execute and the Trustee shall authenticate and deliver an
unlegended global Debenture to the Depositary.

(ii) Until the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision), any stock certificate
representing Common Stock issued upon conversion of any Debenture shall bear a
legend in substantially the following form, unless such Common Stock has been
sold pursuant to a registration statement that has been declared effective under
the Securities Act (and which continues to be effective at the time of such
transfer) or pursuant to Rule 144 under the Securities Act or any similar
provision then in force, or such Common Stock has been issued upon conversion of
Debentures that have been transferred pursuant to a registration statement that
has been declared effective under the Securities Act or pursuant to Rule 144
under the Securities Act or any similar provision then in force, or unless
otherwise agreed by the Company in writing with written notice thereof to the
transfer agent:

THE
COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. 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, SUCH REGISTRATION. THE HOLDER OF
THIS COMMON STOCK, BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT IT IS A
“QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT (“RULE 144A”)); (2) AGREES ON ITS OWN BEHALF AND ON
BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH COMMON STOCK, PRIOR TO THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF COMMON STOCK UNDER RULE 144(k) UNDER
THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), ONLY (A) TO PMA CAPITAL
CORPORATION (THE “ISSUER”), (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE 

 

30

 

UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER), (C) FOR SO LONG AS THE COMMON STOCK IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, IN COMPLIANCE WITH RULE 144A TO A PERSON IT
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS COMMON STOCK IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS
COMMON STOCK PURSUANT TO CLAUSE 2(B) ABOVE OR UPON ANY TRANSFER OF THIS
SECURITY UNDER RULE 144 UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION).

Any such
Common Stock as to which such restrictions on transfer shall have expired in
accordance with their terms may, upon surrender of the certificates representing
such shares of Common Stock for exchange in accordance with the procedures of
the transfer agent for the Common Stock, be exchanged for a new certificate or
certificates for a like aggregate number of shares of Common Stock, which shall
not bear the restrictive legend required by this
Section 2.02(i)(ii).

(iii) Any
Debenture or Common Stock issued upon the conversion or exchange of a Debenture
that, prior to the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), is
purchased or owned by the Company or any Affiliate thereof may not be resold by
the Company or such Affiliate unless registered under the Securities Act or
resold pursuant to an exemption from the registration requirements of the
Securities Act in a transaction which results in such Debentures or Common
Stock, as the case may be, no longer being “restricted securities” (as defined
under Rule 144 under the Securities Act); or provided,
that, such
restriction shall not apply if appropriate measures are taken that such
Debentures or Common Stock are sold in such a manner that such other Debentures
and Common Stock that constitute “restricted securities” (as defined under Rule
144 under the Securities Act) are not commingled with Debentures or Common Stock
being sold. 

31

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

(j) Rule
144A Information Requirement. Within
the period prior to the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
the Company covenants and agrees that it shall, during any period in which it is
not subject to Section 13 or 15(d) under the Exchange Act, make available to any
holder or beneficial holder of Debentures or any Common Stock issued upon
conversion thereof which continue to be Restricted Securities in connection with
any sale thereof and any prospective purchaser of Debentures or such Common
Stock designated by such holder or beneficial holder, the information required
pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any
holder or beneficial holder of the Debentures or such Common Stock and it will
take such further action as any holder or beneficial holder of such Debentures
or such Common Stock may reasonably request, all to the extent required from
time to time to enable such holder or beneficial holder to sell its Debentures
or Common Stock without registration under the Securities Act within the
limitation of the exemption provided by Rule 144A, as such Rule may be amended
from time to time. Upon the request of any holder or any beneficial holder of
the Debentures or such Common Stock, the Company will deliver to such holder a
written statement as to whether it has complied with such
requirements.

 

Section
2.03 Payment
of Interest; Interest Rights Reserved. 

Except as
may be provided in a Future Supplemental Indenture, for the sole benefit of the
Holders of the Debentures, Section 3.7 of the Original Indenture shall be
amended by replacing the final paragraph of Section 3.7 of the Original
Indenture with the following paragraph: 

In the
event Securities of any series or a portion thereof is surrendered for
conversion or exchange during a period after the Regular Record Date immediately
preceding any Interest Payment Date and on or prior to such Interest Payment
Date (unless such Securities or portion thereof which is being surrendered for
conversion or exchange has been called for redemption on a Redemption Date
within such period), the Company will pay on such Interest Payment Date or
payment date, as the case may be, interest due and payable on such Interest
Payment Date or payment date, as the case may be, notwithstanding such
conversion or exchange, and the Company will pay such interest (whether or not
punctually paid or duly provided for) to the Person in whose name such
Securities (or one or more Predecessor Securities) are registered at the close
of business on such Regular Record Date; provided, however, that such payment of
interest shall be subject to the payment to the Company by the Holder of such
Securities or portion thereof surrendered for conversion or exchange (such
payment to accompany such surrender) of an amount equal to the amount of such
interest, in accordance with Section 16.9 hereof. Except as otherwise provided
in the immediately preceding sentence, in the case of any Security which is
converted, interest due and payable after the date of conversion of such
Security shall not be payable. 

 

32

 

Section
2.04 Events
of Default; Acceleration of Maturity. 

(a) Except as
may be provided by a Future Supplemental Indenture, for the benefit of the
Holders of all Securities, including the Debentures, Section 5.1 of the Original
Indenture shall be amended by deleting Subsections (1) and (2) thereof in their
entirety and replacing such Subsections with new Subsections (1) and (2) and
adding new Subsections (9), (10), (11), (12) and (13) to Section 5.1 thereof,
and changing Subsection (9) of Section 5.1 thereof to Subsection (14), as
follows: 

(1)
 default
in the payment of any interest upon, or any Additional Amount payable in respect
of, any Security of that series or of any coupon appertaining thereto, when such
interest or coupon or Additional Amount becomes due and payable, and continuance
of such default for a period of 30 days; or 

(2)
 default
in the payment (including any premiums payable in stock) of the principal of (or
premium, if any, on), or Redemption Price, Purchase Price, Asset Sale Purchase
Price or Change of Control Purchase Price of, any Security of that series when
it becomes due and payable at its Maturity, at the Redemption Date, at the
Purchase Date, Asset Sale Purchase Date or at the Change of Control Purchase
Date, as applicable; or 

(9)
 failure
to convert any Security of that series into shares of the Company’s Class A
Common Stock or cash as provided herein upon exercise of a Holder’s conversion
right, unless such failure is cured within five days after written notice of
default is given to the Company by the Trustee or to the Company and the Trustee
by the holder of such Security; or 

(10)
 a breach
of a covenant set forth in Sections 3.04, 3.06 or 3.08 of this Second
Supplemental Indenture. 

(11)
 the Liens
created by the Indenture and the Collateral Agent Agreement shall at any time
not constitute valid and perfected Liens on the Collateral and the Additional
Collateral intended to be covered thereby (to the extent perfection by filing,
registration, recordation or possession is required herein or therein) in favor
of the Collateral Agent, free and clear of all other Liens (other than Permitted
Liens), or, except for expiration in accordance with its terms or amendment,
modification, waiver, termination or release in accordance with the terms of
this Indenture and the Collateral Agent Agreement shall for whatever reason be
terminated or cease to be in full force and effect; 

(12)
 failure
of the Company to make, when due, any transfer, delivery, pledge, assignment or
grant of Collateral or the Additional Collateral required to be made by it;

(13)
 the
delivery by the trustee for the Company’s 8.50% Monthly Income Senior Notes due
2018 and/or authorized representative of any other secured Indebtedness issued
pursuant to the terms of the Indenture to the Collateral Agent of a notice
requiring that the Collateral Agent commence proceedings to realize on the
Collateral or the Additional Collateral. 

33

(b) Except as
may be provided by a Future Supplemental Indenture, for the benefit of all
Holders of the Securities, including the Debentures, the first and second
paragraphs of Section 5.2 are amended by deleting the phrase “specified in
clause (7) or (8)” and replacing it with the phrase “specified in clause (7),
(8), or (13).” 

 

Section
2.05 Supplemental
Indentures with Consent of Holders. 

Except as
may be provided by a Future Supplemental Indenture, for the benefit of the
Holders of all Securities, including the Debentures, Section 9.2 of the Original
Indenture shall be amended by deleting Subsection (1) thereof in its entirety
and replacing such Subsection with a new Subsection (1) and adding new
Subsections (16) and (17) to Section 9.2 as follows: 

(1)
 change
the Stated Maturity of the principal of, or any premium or installment of
interest, on or any Additional Amounts or Redemption Date with respect to, any
Security, or reduce the principal amount thereof or the rate (or modify the
calculation of such rate) of interest, thereon or any Additional Amounts with
respect thereto, or any amount payable upon the redemption thereof or otherwise,
or change the obligation of the Company to pay Additional Amounts pursuant to
Section 10.4 (except as contemplated by Section 8.1(1) and permitted by Section
9.1(1)), or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 5.2 or the amount thereof provable in
bankruptcy pursuant to Section 5.4, or adversely affect the right of repayment
at the option of any Holder as contemplated by Article 13, or change the Place
of Payment, Currency in which the principal of, any premium or interest, on, or
any Additional Amounts with respect to any Security is payable, or impair the
right to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date or, in the case of repayment at the option of the Holder, on or
after the Asset Sale Purchase Date, the Change of Control Purchase Date or
Purchase Date, as applicable), or 

(16)
 adversely
affect the existence, nature, extent or priority of the Lien of the Holders of
the Debentures or the holders of the 8.50% Monthly Income Senior Notes due 2018
or the holders of other secured Indebtedness secured by the Collateral (or
Additional Collateral) on the Collateral (or Additional Collateral) as provided
in Section 1.03 of this Second Supplemental Indenture; or 

(17)
 modify
any of the provisions of this section 9.2. 

 

Section
2.06 Reserved. 

 

Section
2.07 Selection
by Trustee of Securities to be Redeemed. 

Except as
may be provided by a Future Supplemental Indenture, for the sole benefit of the
Holders of the Debentures, Section 11.3 of the Original Indenture shall be
amended by adding a new sentence at the end thereof as follows: 

“If the
Trustee selects a portion of a Holder’s Securities of any series for partial
redemption and the Holder converts a portion of the same Securities, the
converted portion will be deemed to be from the portion selected for
redemption.” 

 

34

Section
2.08 Reserved. 

 

Section
2.09 Purchase
at the Option of Holders. 

For the
sole benefit of the Holders of the Debentures, Article 13 of the Original
Indenture shall be replaced in its entirety with the following: 

ARTICLE
13 

PURCHASE
AT THE OPTION OF HOLDERS

SECTION
13.1. Purchase
of Debentures by the Company at Option of the Holder.

(a)
 General.
Debentures shall be purchased by the Company at the option of the Holder as set
forth in Section 2.02(f)(iii) of this Second Supplemental Indenture (in this
context, the “Purchase Date”), at a purchase price equal to the price payable as
set forth in such Section 2.02(f)(iii) (which, in this context shall be the
“Purchase Price”), subject to the provisions of Section 3.04 of the Second
Supplemental Indenture. Purchases of Debentures hereunder shall be made, at the
option of the Holder thereof, upon: 

(1) delivery
to the Paying Agent by the Holder of a written notice of purchase (a “Purchase
Notice”) during the period beginning at any time from the opening of business on
the date that is 20 Business Days prior to the relevant Purchase Date until the
close of business on the third Business Day prior to such Purchase Date stating:

	 	
      (A)
	
      the
      certificate number of the Debenture which the Holder will deliver to be
      purchased or the appropriate Depositary procedures if Debentures in
      certificated form have not been issued, 

	 	
      (B)
	
      the
      portion of the principal amount of the Debenture which the Holder will
      deliver to be purchased, which portion must be in principal amounts of
      $1,000 or an integral multiple of $1,000, 

	 	
      (C)
	
      whether
      the Holder elects to receive any premium payable with respect to such
      purchase in cash or shares of Applicable Stock,

	 	
      (D)
	
      that
      such Debenture shall be purchased by the Company as of the Purchase Date
      pursuant to the terms and conditions specified in this Indenture, and
      

(2) delivery
of such Debenture to the Paying Agent at any time after delivery of the Purchase
Notice (together with all necessary endorsements) at the offices of the Paying
Agent, such delivery being a condition to receipt by the Holder of the Purchase
Price therefor; provided, however, that such Purchase Price shall be so paid
pursuant to this Section 13.1 only if the Debenture so delivered to the Paying
Agent shall conform in all material respects to the description thereof in the
related Purchase Notice. 

35

In the
event a Holder is making an election to receive any applicable premium in
Applicable Stock, notice of such election may be delivered to the Paying Agent
on a date that is no less than one (1) Business Day prior to the Purchase Date
pursuant to 2.02(g).

If a
Holder, in such Holder’s Purchase Notice and in any written notice of withdrawal
delivered by such Holder pursuant to the terms of Section 13.4, fails to
indicate such Holder’s choice with respect to the election set forth in clause
(C) of this Section 13.1(a)(1), and does not provide a subsequent notice of its
election to receive the premium in Applicable Stock to the Company and the
Paying Agent no later than one (1) Business Day before the Purchase Date, such
Holder shall be deemed to have elected to receive cash in respect of any
applicable premium for all Debentures subject to such Purchase Notice.

(b)
 No later
than 30 Business Days prior to the Purchase Date, the Company shall mail a
written notice by first class mail to the Trustee and to each Holder (and to
beneficial owners as required by applicable law). The notice shall include a
form of Purchase Notice to be completed by the Holder and shall briefly state,
as applicable: 

(1) that the
Company has the obligation to purchase the Debentures at the option of the
Holders; 

(2) the date
by which the Purchase Notice pursuant to this Section 13.1 must be delivered to
the Paying Agent in order for a Holder to exercise the repurchase rights;

(3) the
Purchase Date; 

(4) the
Purchase Price; 

(5) the name
and address of the Paying Agent and the Conversion Agent; 

(6) the
Conversion Rate and any adjustments thereto; 

(7) that the
Debentures as to which a Purchase Notice has been given may be converted if they
are otherwise convertible pursuant to Article 16 hereof only if the Purchase
Notice has been withdrawn in accordance with the terms of this Indenture;

(8) that the
Debentures must be surrendered to the Paying Agent to collect payment;

(9) that the
Purchase Price for any Debenture as to which a Notice has been duly given and
not withdrawn will be paid promptly following the later of the Purchase Date and
the time of surrender of such Debenture as described in (9); 

(10) the
procedures the Holder must follow to exercise rights under this Section 13.1;

(11) the
conversion rights of the Debentures; 

36

(12) the
procedures for withdrawing a Purchase Notice; 

(13) the
number of shares of Applicable Stock payable for any applicable
premium;

(14) that,
unless the Company defaults in making payment of such Purchase Price, interest,
if any, on Debentures surrendered for purchase to the Company will cease to
accrue on and after the Purchase Date and the Debentures will cease to be
convertible; and 

(15) the CUSIP
number(s) of the Debentures. 

If a
Debenture is only to be purchased in part, the Company shall purchase from the
Holder thereof, pursuant to this Section 13.1, such portion of a Debenture, if
the principal amount of such portion is $1,000 or an integral multiple of
$1,000. Provisions of this Indenture that apply to the purchase of all of a
Debenture also apply to the purchase of such portion of such Debenture.

Any
purchase by the Company contemplated pursuant to the provisions of this Section
13.1 shall be consummated by the delivery of the consideration to be received by
the Holder promptly following the later of the Purchase Date and the time of
delivery of the Debenture. 

Notwithstanding
anything herein to the contrary, any Holder delivering to the Paying Agent the
Purchase Notice contemplated by this Section 13.1 shall have the right to
withdraw such Purchase Notice at any time prior to the close of business on the
third Business Day prior to the Purchase Date by delivery of a written notice of
withdrawal to the Paying Agent in accordance with Section 13.4. 

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

SECTION
13.2. Purchase
of Debentures at Option of the Holder upon Change of Control or Upon the Sale of
Certain Assets.

(a) If a
Change of Control occurs, the Debentures not previously purchased by the Company
shall be purchased by the Company, at the option of the Holder thereof, during
the periods and at a purchase price equal to the price payable at such time as
set forth in Section 2.02(f)(i) of this Second Supplemental Indenture plus
accrued and unpaid interest, if any (which, in this context shall be the “Change
of Control Purchase Price”), as of the date that is 30 days after the date of a
notice of Change of Control delivered by the Company (the “Change of Control
Purchase Date”), subject to satisfaction by or on behalf of the Holder of the
requirements set forth in Section 13.2(d). 

A “Change
of Control” will be deemed to have occurred at such time after the Debentures
are originally issued when any of the following events shall occur:

(i)
 the
acquisition by any person, including any syndicate or group deemed to be a
“person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership,
directly or indirectly through a purchase, merger or other acquisition
transaction or series of purchase, merger or other acquisition transactions, of
shares of the Capital Stock of the Company entitling that person to exercise 50%
or more of the total voting power of all shares of the Capital Stock of the
Company entitled to vote generally in elections of directors, other than any
acquisition by any of the Company’s Subsidiaries or any of its employee benefit
plans; or 

37

(ii)
 during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved pursuant to a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; or 

(iii)
 the
Company consolidates or merges with or into any other person, any merger of
another person into the Company, or any conveyance, transfer, sale, lease or
other disposition of all or substantially all of the Company’s properties and
assets to another person, other than: 

(A)
 any
transaction: (1) that does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of the Company’s Capital Stock;
and (2) pursuant to which holders of the Company’s Capital Stock immediately
prior to the transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of Capital Stock
entitled to vote generally in elections of directors of the continuing or
surviving Person immediately after giving effect to such issuance; and (B) any
merger, share exchange, transfer of assets or similar transaction solely for the
purpose of changing the Company’s jurisdiction of incorporation and resulting in
a reclassification, conversion or exchange of outstanding shares of Class A
Common Stock, if at all, solely into shares of common stock, ordinary shares or
American Depositary Shares of the surviving Person or a direct or indirect
parent of the surviving corporation. 

For the
purposes of this Section 13.2, (x) whether a person is a “beneficial owner”
shall be determined in accordance with Rule 13d-3 under the Exchange Act and (y)
the term “person” includes any syndicate or group that would be deemed to be a
“person” under Section 13(d)(3) of the Exchange Act. 

(b)
 If an
Asset Sale occurs, the Debentures not previously purchased by the Company shall
be purchased by the Company, at the option of the Holder thereof, during the
periods and at a purchase price equal to the price payable at such time as set
forth in Section 2.02(f)(ii) of this Second Supplemental Indenture plus accrued
and unpaid interest, if any, (which, in this context shall be the “Asset Sale
Purchase Price”) to be paid, on a pro rata basis together with the Publicly
Issued Debentures from Net Cash Proceeds as of the date that is specified in a
notice of Asset Sale delivered by the Company (the “Asset Sale Purchase Date”)
pursuant to Subsection (c)(3) below, subject to satisfaction by or on behalf of
the Holder of the requirements set forth in Section 13.2(d).  If the
aggregate purchase price of the Securities tendered (as described below) exceeds
such Net Cash Proceeds, the Trustee shall select the Securities to be purchased
on a pro rata basis but in denominations of $1,000 principal amount or multiples
thereof. 

38

An “Asset
Sale” will be deemed to have occurred, if, at any time after the Debentures are
originally issued, a sale permitted under Section 3.04 of the First Supplemental
Indenture has been completed. 

(c)
 No later
than 30 days after the occurrence of a Change of Control or five (5) days after
the occurrence of an Asset Sale, the Company shall mail a written notice of the
Change of Control or Asset Sale by first class mail to the Trustee and to each
Holder (and to beneficial owners as required by applicable law). The notice
shall include a form of Change of Control Purchase Notice or Asset Sale Purchase
Notice to be completed by the Holder and shall briefly state, as applicable:

(1) the
events causing a Change of Control or Asset Sale and the date of such Change of
Control or Asset Sale; 

(2) the date
by which the Change of Control or Asset Sale Purchase Notice pursuant to this
Section 13.2 must be delivered to the Paying Agent in order for a Holder to
exercise the repurchase rights; 

(3) the
Change of Control Purchase Date (which shall be 30 days from the Change of
Control Notice Date) or Asset Sale Purchase Date (which shall be 20 Business
Days from the Asset Sale Notice Date); 

(4) the
Change of Control or Asset Sale Purchase Price; 

(5) the name
and address of the Paying Agent and the Conversion Agent; 

(6) the
Conversion Rate and any adjustments thereto; 

(7) that the
Debentures as to which a Change of Control or Asset Sale Purchase Notice has
been given may be converted if they are otherwise convertible pursuant to
Article 16 hereof only if the Change of Control or Asset Sale Purchase Notice
has been withdrawn in accordance with the terms of this Indenture; 

(8) that the
Debentures must be surrendered to the Paying Agent to collect payment;

(9) that the
Change of Control or Asset Sale Purchase Price for any Debenture as to which a
Change of Control or Asset Sale Purchase Notice has been duly given and not
withdrawn will be paid promptly following the later of the Change of Control or
Asset Sale Purchase Date and the time of surrender of such Debenture as
described in (9); 

39

(10) the
procedures the Holder must follow to exercise rights under this Section 13.2;

(11) the
conversion rights of the Debentures; 

(12) the
procedures for withdrawing a Change of Control or Asset Sale Purchase Notice;

(13) the
number of shares of Applicable Stock payable for any applicable
premium;

(14) that,
unless the Company defaults in making payment of such Change of Control or Asset
Sale Purchase Price, interest, if any, on Debentures surrendered for purchase to
the Company will cease to accrue on and after the Change of Control or Asset
Sale Purchase Date and the Debentures will cease to be convertible; and

(15) the CUSIP
number(s) of the Debentures. 

(d)
 A Holder
may exercise its rights specified in Section 13.2(a) and (b) upon delivery of a
written notice of purchase (a “Change of Control Purchase Notice” or an “Asset
Sale Purchase Notice”) to the Paying Agent no later than the close of business
on the third Business Day immediately preceding the Change of Control or Asset
Sale Purchase Date stating: 

(1) the
certificate number of the Debenture which the Holder will deliver to be
purchased or the appropriate depositary procedures if Certificated Debentures
have not been issued; 

(2) the
portion of the principal amount of the Debenture which the Holder will deliver
to be purchased, which portion must be $1,000 or an integral multiple of $1,000;

(3) that such
Debenture shall be purchased pursuant to the terms and conditions specified in
Section 7 of the Debentures and in this Indenture; and 

(4) whether
the Holder elects to receive any premium payable with respect to such purchase
in cash or in shares of Applicable Stock. 

In the
event a Holder is making an election to receive any applicable premium in
Applicable Stock, notice of such election may be delivered to the Paying Agent
on a date that is no less than one (1) Business Day prior to the Change of
Control Purchase Date or Asset Sale Purchase Date, as applicable, pursuant to
2.02 (g).

The
delivery of such Debenture to the Paying Agent with the Change of Control or
Asset Sale Purchase Notice (together with all necessary endorsements) at the
offices of the Paying Agent shall be a condition to the receipt by the Holder of
the Change of Control or Asset Sale Purchase Price therefore; provided,
however, that
such Change of Control or Asset Sale Purchase Price shall be so paid pursuant to
this Section 13.2 and Section 13.3 only if the Debenture so delivered to the
Paying Agent shall conform in all material respects to the description thereof
set forth in the related Change of Control or Asset Sale Purchase Notice.

40

If a
Holder, in such Holder’s Change of Control or Asset Sale Purchase Notice and in
any written notice of withdrawal delivered by such Holder pursuant to the terms
of Section 13.4, fails to indicate such Holder’s choice with respect to the
election set forth in Section 13.2(d)(4) and does not provide a subsequent
notice of its election to receive the premium in Applicable Stock to the Company
and the Paying Agent no later than one (1) Business Day before the Change of
Control Purchase Date or Asset Sale Purchase Date such Holder shall be deemed to
have elected to receive cash in respect of the entire Change of Control or Asset
Sale Purchase Price for all Debentures subject to such Change of Control or
Asset Sale Purchase Notice in the circumstances set forth in such Section
13.2(c)(4). 

If a
Debenture is only to be purchased in part, the Company shall purchase from the
Holder thereof, pursuant to this Section 13.2 and Section 13.3, such portion of
a Debenture if the principal amount of such portion is $1,000 or an integral
multiple of $1,000. Provisions of this Indenture that apply to the purchase of
all of a Debenture also apply to the purchase of such portion of such Debenture.

Any
purchase by the Company contemplated pursuant to the provisions of this Section
13.2 and Section 13.3 shall be consummated by the delivery of the consideration
to be received by the Holder on the Change of Control or Asset Sale Purchase
Date. 

Notwithstanding
anything herein to the contrary, any Holder delivering to the Paying Agent the
Change of Control or Asset Sale Purchase Notice contemplated by this Section
13.2(c) shall have the right to withdraw such Change of Control or Asset Sale
Purchase Notice at any time prior to the close of business on the last Business
Day immediately preceding the Change of Control or Asset Sale Purchase Date by
delivery of a written notice of withdrawal to the Paying Agent in accordance
with Section 13.4. 

The
Paying Agent shall promptly notify the Company in writing of the receipt by it
of any Change of Control or Asset Sale Purchase Notice or written withdrawal
thereof. 

SECTION
13.3. Payment
of Purchase Price, Asset Sale Purchase Price and Change of Control Purchase
Price.

The
Company shall pay the Purchase Price or Change of Control Purchase Price or
Asset Sale Purchase Price, as the case may be, of Debentures in respect of which
a Purchase Notice pursuant to Section 13.1(a) or Change of Control or Asset Sale
Purchase Notice pursuant to Section 13.2(c), as the case may be, has been given
in U.S. legal tender (“cash”) equal to the aggregate Purchase Price or Change of
Control Purchase Price, or Asset Sale Purchase Price or, with respect to any
premium, if the Holder so elects, in Applicable Stock. 

SECTION
13.4. Effect
of Purchase Notice or Change of Control Purchase Notice or Asset Sale Purchase
Notice.

Upon
receipt by the Paying Agent of the Purchase Notice or Change of Control Purchase
Notice or Asset Sale Purchase Notice specified in Section 13.1(b) or Section
13.2(d), as applicable, the Holder of the Debenture in respect of which such
Purchase Notice or Change of Control Purchase Notice or Asset Sale Purchase
Notice, as the case may be, was given shall (unless such Purchase Notice or
Change of Control Purchase Notice or Asset Sale Purchase Notice, as the case may
be, is withdrawn as specified in the following two 

 

 

41

 

paragraphs)
thereafter be entitled to receive solely the Purchase Price or Change of Control
Purchase Price or Asset Sale Purchase Price, as the case may be, with respect to
such Debenture. Such Purchase Price or Change of Control Purchase Price or Asset
Sale Purchase Price shall be paid to such Holder, subject to receipt of funds
and/or securities by the Paying Agent, promptly following the later of (x) the
Purchase Date or the Change of Control Purchase Date or Asset Sale Purchase
Date, as the case may be, with respect to such Debenture (provided the
conditions in Section 13.1 or Section 13.2(d), as applicable, have been
satisfied) and (y) the time of delivery of such Debenture to the Paying Agent by
the Holder thereof in the manner required by Section 13.1 or Section 13.2(d), as
applicable. Debentures in respect of which a Purchase Notice or Change of
Control Purchase Notice or Asset Sale Purchase Notice has been given by the
Holder thereof may not be converted pursuant to Article 16 hereof on or after
the date of the delivery of such Purchase Notice or Change of Control Purchase
Notice or Asset Sale Purchase Notice unless such Purchase Notice or Change of
Control Purchase Notice or Asset Sale Purchase Notice has first been validly
withdrawn as specified in the following two paragraphs. 

A
Purchase Notice or Change of Control Purchase Notice or Asset Sale Purchase
Notice may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent in accordance with the Purchase Notice or Change
of Control Purchase Notice or Asset Sale Purchase Notice, as the case may be, at
any time prior to the close of business on the Business Day prior to the Change
of Control Purchase Date or Asset Sale Purchase Date, as the case may be,
specifying: 

(1) the
certificate number, if any, of the Debenture in respect of which such notice of
withdrawal is being submitted, 

(2) the
principal amount of the Debenture with respect to which such notice of
withdrawal is being submitted, and 

(3) the
principal amount, if any, of such Debenture which remains subject to the
original Purchase Notice or Change of Control Purchase Notice or Asset Sale
Purchase Notice, as the case may be, and which has been or will be delivered for
purchase by the Company. 

A written
notice of withdrawal of a Purchase Notice shall contain the information set
forth above. 

A written
notice of withdrawal of a Change of Control or Asset Sale Purchase Notice may
contain the information set forth above or may be in the form of (i) a
conditional withdrawal contained in a Change of Control Purchase Notice or Asset
Sale Purchase Notice pursuant to the terms of Section 13.2 or (ii) a withdrawal
containing the information set forth in Section 13.2 and the preceding Section
and contained in a written notice of withdrawal delivered to the Paying Agent as
set forth in the preceding paragraph. 

42

 

SECTION
13.5. Deposit
of Redemption Price, Purchase Price, Change of Control Purchase Price or Asset
Sale Purchase Price.

(a)
 Prior to
10:00 am (local time in The City of New York) on a Redemption Date, the Company
shall deposit with the Trustee or with the Paying Agent (or, if the Company or a
Subsidiary or an Affiliate of either of them is acting as the Paying Agent,
shall segregate and hold in trust as provided in Section 10.3 hereof) an amount
of cash (in immediately available funds) or, with respect to any premium payable
on any such date, shares of Applicable Stock sufficient to pay such premium to
the Holders entitled thereto who have elected to receive such premium in
Applicable Stock sufficient as evidenced in writing by a certified public
accountant to pay the aggregate Redemption Price (and any applicable premium) of
all the Debentures or portion thereof which are to be redeemed or purchased, as
the case may be, as of the Redemption Date. 

(b)
 Prior to
10:00 a.m. (local time in The City of New York) on the Business Day following a
Purchase Date or the Change of Control Purchase Date or Asset Sale Purchase
Date, as the case may be, the Company shall deposit with the Trustee or with the
Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of
them is acting as the Paying Agent, shall segregate and hold in trust as
provided in Section 10.3 hereof) an amount of cash (in immediately available
funds) or, with respect to any premium payable on any such date, shares of
Applicable Stock sufficient to pay such premium to the Holders entitled thereto
who have elected to receive such premium in Applicable Stock sufficient as
evidenced in writing by a certified public accountant to pay the aggregate
Purchase Price, Change of Control Purchase Price or Asset Sale Purchase Price,
as the case may be, (and any applicable premium) of all the Debentures or
portions thereof which are to be purchased as of the Purchase Date, Change of
Control Purchase Date or Asset Sale Purchase Date, as the case may be.

(c) If the
Company has deposited the Redemption Price, Purchase Price, Change of Control
Purchase Price or Asset Sale Purchase Price in accordance with Section 13.5(a)
or (b), as applicable, on the Redemption Date, Purchase Date, Change of Control
Purchase Date or Asset Sale Purchase Date, as the case may be, such Debenture
will cease to be Outstanding and the right of the Holder in respect thereof
shall terminate (other than the right to receive the Redemption Price, the
Purchase Price, the Change of Control Purchase Price or the Asset Sale Purchase
Price, as the case may be, and any accrued and unpaid interest, as aforesaid).

SECTION
13.6. Debentures
Purchased in Part.

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

43

 

SECTION
13.7. Covenant
to Comply With Securities Laws Upon Purchase of Debentures.

When
complying with the provisions of Section 2.02(g) of this Second Supplemental
Indenture or Sections 13.1 or 13.2 hereof (provided that such offer or purchase
constitutes an “issuer tender offer” for purposes of Rule 13e-4 (which term, as
used herein, includes any successor provision thereto) under the Exchange Act at
the time of such offer or purchase), and subject to any exemptions available
under applicable law, the Company shall (i) comply with Rule 13e- 4 and Rule
14e-1 (or any successor provision) under the Exchange Act, (ii) file the related
Schedule TO (or any successor schedule, form or report) under the Exchange Act,
and (iii) otherwise comply with all Federal and state securities laws so as to
permit the rights and obligations under Section 2.02(g) of this Second
Supplemental Indenture or Sections 13.1 and 13.2 hereof to be exercised in the
time and in the manner specified in Section 2.02(g) of this Second Supplemental
Indenture or Sections 13.1 and 13.2 hereof. 

SECTION
13.8. Repayment
to the Company.

The
Trustee and the Paying Agent shall return to the Company any cash or shares of
Applicable Stock that remain unclaimed as provided in Section 12 of the
Debentures, together with interest or dividends, if any, thereon (subject to the
provisions of Section 6.6), held by them for the payment of the Purchase Price
or Change of Control Purchase Price or Asset Sale Purchase Price, as the case
may be; provided, however, that to the extent that the aggregate amount of cash
or shares of Applicable Stock deposited by the Company pursuant to Section 13.5
exceeds the aggregate Purchase Price or Change of Control Purchase Price or
Asset Sale Purchase Price, as the case may be, of the Debentures or portions
thereof which the Company is obligated to purchase as of the Purchase Date or
Change of Control Purchase Date or Asset Sale Purchase Date, as the case may be,
then, unless otherwise agreed in writing with the Company, promptly after the
Business Day following the Purchase Date or Change of Control Purchase Date or
Asset Sale Purchase Date, as the case may be, the Trustee shall return any such
excess to the Company together with interest or dividends, if any, thereon
(subject to the provisions of Section 6.6 hereof). 

 

Section
2.10 Application
of the Article of the Indenture Regarding Defeasance and Covenant
Defeasance. 

Section
4.2 of the Original Indenture concerning defeasance and covenant defeasance of
the Securities shall not apply to the Debentures. 

 

Section
2.11 Conversions. 

Except as
may be provided by a Future Supplemental Indenture, for the sole benefit of the
Holders of the Debentures, a new Article 16 shall be added to the Original
Indenture as follows: 

44

 

ARTICLE
16 

CONVERSIONS

SECTION
16.1. Conversion
Privilege.

(a)
 Subject
to and upon compliance with the provisions of this Article 16, a Holder of a
Debenture shall have the right, at such Holder’s option, at any time to convert
all or any portion (if the portion to be converted is $1,000 or an integral
multiple of $1,000) of such Debenture into shares of Class A Common Stock at the
Conversion Rate in effect on the date of conversion. 

(b)
 The “Sale
Price” of the shares of the Company’s Class A Common Stock on any date means the
closing per share sale price (or, if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and the average ask prices) on such date as reported
on the NYSE or, if the shares of the Company’s Class A Common Stock are not
listed on the NYSE, as reported on a national securities exchange, or if not
reported on a national securities exchange, as reported by the Nasdaq system. In
the absence of such quotations, the Company’s Board of Directors shall be
entitled to determine the sales price on the basis of such quotations as it
considers appropriate in good faith. 

The
Conversion Rate, at any time, shall equal (A) $1,000 divided by (B) the
Conversion Price at such time, rounded to four (4) decimal places (rounded up if
the fifth decimal place thereof is five (5) or more and otherwise rounded down).

SECTION
16.2. Conversion
Procedure; Conversion Price; Fractional Shares.

(a)
 Each
Debenture shall be convertible at the office of the Conversion Agent into fully
paid and nonassessable shares (calculated to the nearest 1/100th of a share) of
Class A Common Stock. The Debenture will be converted into shares Class A Common
Stock at the Conversion Price therefor. No payment or adjustment shall be made
in respect of dividends on the Class A Common Stock or accrued interest on a
converted Debenture, except as described in Section 16.9 hereof. The Company
shall not issue any fraction of a share of Class A Common Stock in connection
with any conversion of Debentures, but instead shall, subject to Section 16.2(b)
hereof, make a cash payment (calculated to the nearest cent) equal to such
fraction multiplied by the Sale Price of the Class A Common Stock on the last
Trading Day prior to the date of conversion. Notwithstanding the foregoing, a
Debenture in respect of which a Holder has delivered a Purchase Notice or Change
of Control Purchase Notice or Asset Sale Purchase Notice exercising such
Holder’s option to require the Company to repurchase such Debenture may be
converted only if such notice of exercise is withdrawn in accordance with the
Section 13.4 hereof. 

(b)
 Before
any Holder of a Debenture shall be entitled to convert the same into Class A
Common Stock, such Holder shall, in the case of Debentures issued in global
form, comply with the procedures of the Depositary in effect at that time, and
in the case of definitive Debentures, surrender such Debentures, duly endorsed
to the Company or in blank, at the office of the Conversion Agent, and shall
give written notice to the Company at said office or place that such Holder
elects to convert the same and shall state in writing therein the principal
amount of Debenture to be converted and the name or names (with addresses) in
which such Holder wishes the certificate or certificates for Class A Common
Stock to be issued. 

45

 

Before
any such conversion, a Holder also shall pay all funds required, if any,
relating to interest on the Debentures, as provided in Section 16.9, and all
taxes or duties, if any, as provided in Section 16.8. 

If more
than one Debenture shall be surrendered for conversion at one time by the same
Holder, the number of full shares of Class A Common Stock which shall be
deliverable upon conversion shall be computed on the basis of the aggregate
principal amount of the Debenture (or specified portions thereof to the extent
permitted thereby) so surrendered. Subject to the next succeeding sentence, the
Company will, as soon as practicable thereafter, issue and deliver at said
office or place to such Holder of a Debenture, or to such Holder’s nominee or
nominees, certificates for the number of full shares of Class A Common Stock to
which such Holder shall be entitled as aforesaid, together, subject to the next
to last sentence of Section (a) above, with cash in lieu of any fraction of a
share to which such Holder would otherwise be entitled. The Company shall not be
required to deliver certificates for shares of Class A Common Stock while the
stock transfer books for such stock or the security register are duly closed for
any purpose, but certificates for shares of Class A Common Stock shall be issued
and delivered as soon as practicable after the opening of such books or security
register. 

(c)
 A
Debenture shall be deemed to have been converted as of the close of business on
the date of the surrender of such Debenture for conversion as provided above,
and the person or persons entitled to receive the Class A Common Stock issuable
upon such conversion shall be treated for all purposes as the record Holder or
Holders of such Class A Common Stock as of the close of business on such date.

(d)
 In case
any Debenture shall be surrendered for partial conversion, the Company shall
execute and the Trustee shall authenticate and deliver to or upon the written
order of the Holder of the Debenture so surrendered, without charge to such
Holder (subject to the provisions of Section 16.8 hereof), a new Debenture or
Debentures in authorized denominations in an aggregate principal amount equal to
the unconverted portion of the surrendered Debentures. 

SECTION
16.3. Adjustment
of Conversion Price for Class A Common Stock.

The
Conversion Price shall be adjusted from time to time as follows: 

(a)
 In case
the Company shall, at any time or from time to time while any of the Debentures
are outstanding, pay a dividend or make a distribution in shares of Class A
Common Stock to all holders of its outstanding shares of Class A Common Stock,
then the Conversion Price in effect at the opening of business on the date next
following the Record Date fixed for the determination of stockholders entitled
to receive such dividend or other distribution shall be reduced by multiplying
such Conversion Price by a fraction: 

(1)
 the
numerator of which shall be the number of shares of Class A Common Stock
outstanding at the close of business on the Record Date fixed for such
determination; and 

46

 

(2)
 the
denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution. 

Such
reduction shall become effective immediately after the opening of business on
the day following the Record Date fixed for such determination. If any dividend
or distribution of the type described in this Section 16.3(a) is declared but
not so paid or made, the Conversion Price shall again be adjusted to the
Conversion Price which would then be in effect if such dividend or distribution
had not been declared. 

(b)
 In case
the Company shall, at any time or from time to time while any of the Debentures
are outstanding, subdivide its outstanding shares of Class A Common Stock into a
greater number of shares of Class A Common Stock, then the Conversion Price in
effect at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case the Company shall, at any time or from time to time while any of the
Debentures are outstanding, combine its outstanding shares of Class A Common
Stock into a smaller number of shares of Class A Common Stock, then the
Conversion Price in effect at the opening of business on the day following the
day upon which such combination becomes effective shall be proportionately
increased. 

Such
reduction or increase, as the case may be, shall become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective. 

(c)
 In case
the Company shall, at any time or from time to time while any of the Debentures
are outstanding, issue rights or warrants (other than any rights or warrants
referred to in Section 16.3(d)), or securities convertible into or exchangeable
or exercisable for Class A Common Stock, to all holders of its shares of Class A
Common Stock entitling them to subscribe for or purchase shares of Class A
Common Stock (or securities convertible into or exchangeable or exercisable for
shares of Class A Common Stock), at a price per share (or having a conversion
price per share) less than the Sale Price on the Business Day immediately
preceding the date of the announcement of such issuance (treating the conversion
price per share of the securities convertible into Class A Common Stock as equal
to (x) the sum of (i) the price for a unit of the security convertible into
Class A Common Stock and (ii) any additional consideration initially payable
upon the conversion of such security into Class A Common Stock divided by (y)
the number of shares of Class A Common Stock initially underlying such
convertible security), then the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price in
effect at the opening of business on the date after such date of announcement by
a fraction: 

(1)
 the
numerator of which shall be the number of shares of Class A Common Stock
outstanding on the close of business on the date of announcement, plus the
number of shares or securities which the aggregate offering price of the total
number of shares or securities so offered for subscription or purchase (or the
aggregate conversion price of the convertible securities so offered) would
purchase at such Sale Price of the Class A Common Stock; and 

47

 

(2)
 the
denominator of which shall be the number of shares of Class A Common Stock
outstanding at the close of business on the date of announcement, plus the total
number of additional shares of Class A Common Stock so offered for subscription
or purchase (or into which the convertible securities so offered are
convertible). 

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

(d)
 In case
the Company shall, at any time or from time to time while any of the Debentures
are outstanding, by dividend or otherwise, distribute to all holders of its
shares of Class A Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation and the Class A Common Stock is not changed or exchanged), shares of
its Capital Stock (other than any dividends or distributions to which Section
16.3(a) applies), evidences of its Indebtedness or other assets, including
securities, but excluding (i) any rights or warrants referred to in Section
16.3(c), (ii) dividends or distributions of stock referred to in Section
16.3(a), (iii) dividends and distributions of stock, securities or other
property or assets (including cash) in connection with the reclassification,
change, merger, consolidation, statutory share exchange, combination, sale or
conveyance to which Section 16.4 applies and (iv) dividends and distributions
paid exclusively in cash referred to in Section 16.3(e) (such capital stock,
evidence of its indebtedness, other assets or securities being distributed
hereinafter in this Section 16.3(d) called the “Distributed Assets”), then, in
each such case, subject to the other provisions of this Section 16.3(d), the
Conversion Price shall be reduced so that the same shall be equal to the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on the Record Date with respect to such distribution by a
fraction: 

(1)
 the
numerator of which shall be the Current Market Price of the Class A Common
Stock, less the Fair Market Value on such date of the portion of the distributed
assets so distributed applicable to one share of Class A Common Stock
(determined on the basis of the number of shares of Class A Common Stock
outstanding on the Record Date) (determined as provided in Section 16.3(g)) on
such date; and 

48

 

(2)
 the
denominator of which shall be such Current Market Price. 

Such
reduction shall become effective immediately prior to the opening of business on
the day following the Record Date for such distribution. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared. 

If the
Board of Directors determines the Fair Market Value of any distribution for
purposes of this Section 16.3(d) by reference to the actual or when issued
trading market for any distributed assets comprising all or part of such
distribution, it must in doing so consider the prices in such market over the
period of the four consecutive fiscal quarters ending with the last full fiscal
quarter for which financial information is available immediately preceding any
date upon which any determination is to be made pursuant to the terms of either
Indenture or the related Securities (the “Reference Period”) used in computing
the Current Market Price pursuant to Section 16.3(g) to the extent possible,
unless the Board of Directors determines in good faith that determining the Fair
Market Value during the Reference Period would not be in the best interest of
the Holders. 

In the
event any such distribution consists of shares of capital stock of, or similar
equity interests in, one or more of the Company’s Subsidiaries (a “Spin-Off”),
the Fair Market Value of the securities to be distributed shall equal the
average of the closing sale prices of such securities on the principal
securities market on which such securities are traded for the five consecutive
Trading Days commencing on and including the sixth Trading Day of those
securities after the effectiveness of the Spin-Off, and the Current Market Price
shall be measured for the same period. In the event, however, that an
underwritten initial public offering of the securities in the Spin-Off occurs
simultaneously with the Spin-Off, Fair Market Value of the securities
distributed in the Spin-Off shall mean the initial public offering price of such
securities and the Current Market Price shall mean the Sale Price for the Class
A Common Stock on the same Trading Day. 

Rights or
warrants distributed by the Company to all holders of its shares of Class A
Common Stock entitling them to subscribe for or purchase shares of the Company’s
Capital Stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events (“Trigger Event”),
(i) are deemed to be transferred with such shares of Class A Common Stock, (ii)
are not exercisable and (iii) are also issued in respect of future issuances of
shares of Class A Common Stock shall be deemed not to have been distributed for
purposes of this Section 16.3(d) (and no adjustment to the Conversion Price
under this Section 16.3(d) will be required) until the occurrence of the
earliest Trigger Event. If such right or warrant is subject to subsequent
events, upon the occurrence of which such right or warrant shall become
exercisable to purchase different distributed assets, evidences of indebtedness
or other assets, or entitle the holder to purchase a different number or amount
of the foregoing or to purchase any of the foregoing at a different purchase
price, then the occurrence of each such event shall be deemed to be the date of
issuance and record date with respect to a new right or warrant (and a
termination or expiration of the existing right or warrant without exercise by
the holder thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto, that resulted in
an adjustment to the Conversion Price under this Section 16.3(d): 

49

 

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

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

For
purposes of this Section 16.3(d) and Sections 16.3(a), 16.3(b) and 16.3(c), any
dividend or distribution to which this Section 16.3(d) is applicable that also
includes (i) shares of Class A Common Stock, (ii) a subdivision or combination
of shares of Class A Common Stock to which Section 16.3(b) applies or (iii)
rights or warrants to subscribe for or purchase shares of Class A Common Stock
or securities convertible into or exercisable or exchangeable for Class A Common
Stock to which Section 16.3(c) applies (or any combination thereof), shall be
deemed instead to be: 

(1)
 a
dividend or distribution of the evidences of indebtedness, assets, shares of
capital stock, rights or warrants, other than such shares of Class A Common
Stock, such subdivision or combination or such rights or warrants or securities
convertible into or exercisable or exchangeable for Class A Common Stock to
which Sections 16.3(a), 16.3(b) and 16.3(c) apply, respectively (and any
Conversion Price reduction required by this Section 16.3(d) with respect to such
dividend or distribution shall then be made), immediately followed by

(2)
 a
dividend or distribution of such shares of Class A Common Stock, such
subdivision or combination or such rights or warrants or securities convertible
into or exercisable or exchangeable for Class A Common Stock (and any further
Conversion Price reduction required by Sections 16.3(a), 16.3(b) and 16.3(c)
with respect to such dividend or distribution shall then be made), except:

(A)
 the
Record Date of such dividend or distribution shall be substituted as (i) “the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution,” “Record Date fixed for such determinations” and
“Record Date” within the meaning of Section 16.3(a), (ii) “the day upon which
such subdivision becomes effective” and “the day upon which such combination
becomes effective” within the meaning of Section 16.3(b), and (iii) as “the date
fixed for the determination of stockholders entitled to receive such rights or
warrants,” “the Record Date fixed for the determination of the stockholders
entitled to receive such rights or warrants” and such “Record Date” within the
meaning of Section 16.3(c); and 

50

(B)
 any
shares of Class A Common Stock included in such dividend or distribution shall
not be deemed “outstanding at the close of business on the date fixed for such
determination” within the meaning of Section 16.3(a) and any reduction or
increase in the number of shares of Class A Common Stock resulting from such
subdivision or combination shall be disregarded in connection with such dividend
or distribution. 

In the
event of any distribution referred to in this Section 16.3(d) in which (1) the
Fair Market Value (as determined in good faith by the Board of Directors) of
such distribution applicable to one share of Class A Common Stock (determined as
provided above) equals or exceeds the average of the Sale Prices of the Class A
Common Stock over the ten consecutive Trading Day period ending on the Record
Date for such distribution or (2) the average of the Sale Prices of the Class A
Common Stock over the ten consecutive Trading Day period ending on the Record
Date for such distribution exceeds the Fair Market Value of such distribution by
less than $1.00, then, in each such case, in lieu of an adjustment to the
Conversion Price, adequate provision shall be made so that each Holder shall
have the right to receive upon conversion of a Debenture, in addition to shares
of Class A Common Stock, the kind and amount of such distribution such Holder
would have received had such Holder converted such Debenture immediately prior
to the Record Date for determining the shareholders entitled to receive the
distribution. 

In the
event of any distribution referred to in Section 16.3(c) or 16.3(d), where, in
the case of a distribution described in Section 16.3(d), the Fair Market Value
of such distribution per share of Class A Common Stock (as determined in good
faith by the Board of Directors) exceeds 10% of the Sale Price of a share of
Class A Common Stock on the Business Day immediately preceding the declaration
date for such distribution, then, if such distribution would also trigger a
conversion right under Section 16.1(b) or the Debentures are otherwise
convertible pursuant to this Article 16, the Company will be required to give
notice to the Holders of Debentures at least 20 days prior to the Ex-Dividend
Time for the distribution and, upon the giving of notice, the Debentures may be
surrendered for conversion at any time thereafter, until the close of business
on the Business Day prior to the Ex-Dividend Time or the Company announces that
such distribution will not take place. No adjustment to the Conversion Price or
the ability of a Holder of a Debenture to convert will be made if the Holder
will otherwise participate in such distribution without conversion.

(e)
 In case
the Company shall, at any time or from time to time while any of the Debentures
are outstanding, by dividend or otherwise, distribute to all holders of its
shares of Class A Common Stock, cash (excluding any cash that is distributed
upon a reclassification, change, merger, consolidation, statutory share
exchange, combination, sale or conveyance to which Section 16.4 applies or as
part of a distribution referred to in Section 16.3(d)), in an aggregate amount
that, combined together with: 

51

 

(1)
 the
aggregate amount of any other such distributions to all holders of shares of
Class A Common Stock made exclusively in cash within the 12 months preceding the
date of payment of such distribution, and in respect of which no adjustment
pursuant to this Section 16.3(e) has been made; and 

(2)
 the
aggregate amount of any cash, plus the Fair Market Value, as of the expiration
of such tender offer, of any other consideration paid in respect of any tender
offer by the Company or any of its Subsidiaries for all or any portion of the
shares of Class A Common Stock concluded within the 12 months preceding the date
of such distribution, and in respect of which no adjustment pursuant to Section
16.3(f) has been made; 

exceeds
10% of the product of the Sale Price of the Class A Common Stock on the Record
Date with respect to such distribution, times the number of shares of Class A
Common Stock outstanding on such date (such excess over 10%, the “Excess
Amount”), then, and in each case, immediately after the close of business on
such date, the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the close of business of such Record Date by a fraction: 

(1)
 the
numerator of which shall be equal to the Current Market Price on the Record
Date, less an amount equal to the quotient of (x) the Excess Amount and (y) the
number of shares of Class A Common Stock outstanding on the Record Date; and

(2)
 the
denominator of which shall be equal to the Current Market Price on such date.

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

(f)
 In case a
tender offer made by the Company or any of its Subsidiaries for all or any
portion of the shares of Class A Common Stock shall expire and such tender offer
(as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of shares tendered) of an aggregate consideration having a
Fair Market Value (as determined in good faith by the Board of Directors) that
combined together with: 

(1)
 the
aggregate amount of the cash, plus the fair market value, as of the expiration
of such tender offer, of any other consideration payable in respect of any other
tender offers, by the Company or any of its Subsidiaries for all or any portion
of the shares of Class A Common Stock expiring within the 12 months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to this Section 16.3(f) has been made; and 

52

 

(2)
 the
aggregate amount of any distributions to all holders of shares of Class A Common
Stock made exclusively in cash within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to Section 16.3(e)
has been made; 

exceeds
10% of the product of the Sale Price of the Class A Common Stock as of the last
time (the “Expiration Time”) tenders could have been made pursuant to such
tender offer (as it may be amended), times the number of shares of Class A
Common Stock outstanding (including any tendered shares) on the Expiration Time
(such excess, the “Excess Tender Amount”), then, and in each such case,
immediately prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date of the Expiration Time by
a fraction: 

(1)
 the
numerator of which shall be the (x) the product of (i) the number of shares of
Class A Common Stock outstanding (including any tendered shares) at the
Expiration Time and (ii) the Current Market Price of the Class A Common Stock at
the Expiration Time, less (y) the Excess Tender Amount; and 

(2)
 the
denominator shall be the product of the number of shares of Class A Common Stock
outstanding (including any tendered shares) at the Expiration Time and the
Current Market Price of the Class A Common Stock at the Expiration Time.

Such
reduction (if any) shall become effective immediately prior to the opening of
business on the day following the Expiration Time. In the event that the Company
is obligated to purchase shares pursuant to any such tender offer, but the
Company is permanently prevented by applicable law from effecting any such
purchases or all or a portion of such purchases are rescinded, the Conversion
Price shall again be adjusted to be the Conversion Price which would then be in
effect if such (or such portion of the) tender offer had not been made. If the
application of this Section 16.3(f) to any tender offer would result in an
increase in the Conversion Price, no adjustment shall be made for such tender
offer under this Section 16.3(f). 

Pursuant
to rights issued under any of the Company’s rights plans, if holders of the
Debentures exercising the right of conversion attaching after the date the
rights separate from the underlying Class A Common Stock are not entitled to
receive the rights that would otherwise be attributable to the shares of Class A
Common Stock received upon conversion, the Conversion Price will be adjusted as
though the rights were being distributed to holders of Class A Common Stock on
the date of such separation. If such an adjustment is made and the rights are
later redeemed, invalidated or terminated, then a corresponding reversing
adjustment will be made to the conversion price on an equitable basis.

53

 

(g)
 For
purposes of this Article 16, the following terms shall have the meanings
indicated: 

“Current
Market Price” on any date means the average of the daily Sale Prices per share
of Class A Common Stock for the ten consecutive Trading Days immediately prior
to such date; provided,
however, that
if: 

(1)
 the “ex”
date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 16.3(a), (b), (c), (d), (e), or (f) occurs
during such ten consecutive Trading Days, the Sale Price for each Trading Day
prior to the “ex” date for such other event shall be adjusted by dividing such
Sale Price by the same fraction by which the Conversion Price is so required to
be adjusted as a result of such other event; 

(2)
 the “ex”
date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 16.3(a), (b), (c), (d), (e), or (f) occurs on or after the “ex” date for
the issuance or distribution requiring such computation and prior to the day in
question, the Sale Price for each Trading Day on and after the “ex” date for
such other event shall be adjusted by dividing such Sale Price by the reciprocal
of the fraction by which the Conversion Price is so required to be adjusted as a
result of such other event; and 

(3)
 the “ex”
date for the issuance or distribution requiring such computation is prior to the
day in question, after taking into account any adjustment required pursuant to
clause (1) or (2) of this proviso, the Sale Price for each Trading Day on or
after such “ex” date shall be adjusted by adding thereto the amount of any cash
and the Fair Market Value (as determined in good faith by the Board of Directors
in a manner consistent with any determination of such value for purposes of
Section 16.3(d), (e) or (f)) of the evidences of Indebtedness, shares of capital
stock or assets being distributed applicable to one share of Class A Common
Stock as of the close of business on the day before such “ex” date.

For
purposes of any computation under Section 16.3(f), if the “ex” date for any
event (other than the tender offer requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 16.3(a), (b), (c), (d),
(e) or (f) occurs on or after the Expiration Time for the tender or exchange
offer requiring such computation and prior to the day in question, the Sale
Price for each Trading Day on and after the “ex” date for such other event shall
be adjusted by dividing such Sale Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term “ex” date, when used:

(1)
 with
respect to any issuance or distribution, means the first date on which the
shares of Class A Common Stock trade regular way on the relevant exchange or in
the relevant market from which the Sale Price was obtained without the right to
receive such issuance or distribution; 

54

 

(2)
 with
respect to any subdivision or combination of shares of Class A Common Stock,
means the first date on which the shares of Class A Common Stock trade regular
way on such exchange or in such market after the time at which such subdivision
or combination becomes effective; and 

(3)
 with
respect to any tender or exchange offer, means the first date on which the
shares of Class A Common Stock trade regular way on such exchange or in such
market after the Expiration Time of such offer. 

Notwithstanding
the foregoing, whenever successive adjustments to the Conversion Price are
called for pursuant to this Section 16.3, such adjustments shall be made to the
Current Market Price as may be necessary or appropriate to effectuate the intent
of this Section 16.3 and to avoid unjust or inequitable results as determined in
good faith by the Board of Directors. 

“Fair
Market Value” shall mean the amount which a willing buyer would pay a willing
seller in an arm’s length transaction (as determined in good faith by the Board
of Directors, whose good faith determination shall be conclusive). 

“Record
Date” shall mean, with respect to any dividend, distribution or other
transaction or event in which the holders of shares of Class A Common Stock have
the right to receive any cash, securities or other property or in which the
shares of Class A Common Stock (or other applicable security) is exchanged for
or converted into any combination of cash, securities or other property, the
date fixed for determination of stockholders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of
Directors or by statute, contract or otherwise). 

(h)
 The
Company shall be entitled to make such additional reductions in the Conversion
Price, in addition to those required by Sections 16.3(a), (b), (c), (d), (e) and
(f), as shall be necessary in order that any dividend or distribution of Class A
Common Stock, any subdivision, reclassification or combination of shares of
Class A Common Stock or any issuance of rights or warrants referred to above
shall not be taxable to the holders of Class A Common Stock for United States
Federal income tax purposes. 

(i)
 To the
extent permitted by applicable law, the Company may, from time to time, reduce
the Conversion Price by any amount for any period of time, if such period is at
least 20 days, the Board of Directors determines that the reduction in the
Conversion Price is in the best interest of the Company, and the reduction is
irrevocable during the period. Whenever the Conversion Price is reduced pursuant
to the preceding sentence, the Company shall mail to the Trustee and each Holder
at the address of such Holder as it appears in the register of the Debentures
maintained by the Registrar, at least 15 days prior to the date the reduced
Conversion Price takes effect, a notice of the reduction stating the reduced
Conversion Price and the period during which it will be in effect. 

(j)
 In any
case in which this Section 16.3 shall require that any adjustment be made
effective as of or retroactively immediately following a Record Date, the
Company may elect to defer (but only for five Trading Days following the filing
of the statement referred to in Section 16.5) issuing to the Holder of any
Debentures converted after such Record Date the shares of Class A Common Stock
issuable upon such conversion over and above the shares of Class A Common Stock
issuable upon such conversion on the basis of the Conversion Price prior to
adjustment; provided,
however, that
the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder’s right to receive such additional shares upon
the occurrence of the event requiring such adjustment. 

55

 

(k)
 All
calculations under this Section 16.3 shall be made to the nearest cent or
one-hundredth of a share, with one-half cent and 0.005 of a share, respectively,
being rounded upward. Notwithstanding any other provision of this Section 16.3,
the Company shall not be required to make any adjustment of the Conversion Price
unless such adjustment would require an increase or decrease of at least 1% of
such price. Any lesser adjustment shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment which, together
with any adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least 1% in such price. Any adjustments under this
Section 16.3 shall be made successively whenever an event requiring such an
adjustment occurs. 

(l)
 In the
event that at any time, as a result of an adjustment made pursuant to this
Section 16.3, the Holder of any Debentures thereafter surrendered for conversion
shall become entitled to receive any shares of stock of the Class A Company
other than shares of Class A Common Stock into which the Debentures originally
were convertible, the Conversion Price of such other shares so receivable upon
conversion of any such Debenture shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Class A Common Stock contained in subparagraphs (a)
through (1) of this Section 16.3, and the provision of Sections 16.1, 16.2 and
16.4 through 16.9 with respect to the Class A Common Stock shall apply on like
or similar terms to any such other shares and the good faith determination of
the Board of Directors as to any such adjustment shall be conclusive.

(m)
 No
adjustment shall be made pursuant to this Section 16.3(i) if the effect thereof
would be to reduce the Conversion Price below the par value (if any) of the
Class A Common Stock or (ii) if the Holders of the Debentures may participate in
the transaction that would otherwise give rise to an adjustment pursuant to this
Section 16.3. 

SECTION
16.4. Consolidation
or Merger of the Company.

If any of
the following events occurs, namely: 

(1)
 any
reclassification or change of the outstanding Class A Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); 

(2)
 any
merger, consolidation, statutory share exchange or combination of the Company
with another corporation as a result of which holders of Class A Common Stock
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Class A Common Stock;
or 

56

(3)
 any sale
or conveyance of the properties and assets of the Company as, or substantially
as, an entirety to any other corporation as a result of which holders of Class A
Common Stock shall be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such Class A Common
Stock; 

the
Company or the successor or purchasing corporation, as the case may be, shall
execute with the Trustee a supplemental indenture (which shall comply with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture, if such supplemental indenture is then required to so comply)
providing that such Debentures shall be convertible into the kind and amount of
shares of stock and other securities or property or assets (including cash)
which such Holder would have been entitled to receive upon such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance had such Debentures been converted into Class A
Common Stock immediately prior to such reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or conveyance
assuming such holder of Class A Common Stock did not exercise its rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon such merger, consolidation, statutory share exchange, sale or
conveyance (provided, that if the kind or amount of securities, cash or other
property receivable upon such merger, consolidation, statutory share exchange,
sale or conveyance is not the same for each share of Class A Common Stock in
respect of which such rights of election shall not have been exercised
(“Non-Electing Share”), then for the purposes of this Section 16.4, the kind and
amount of securities, cash or other property receivable upon such merger,
consolidation, statutory share exchange, sale or conveyance for each
Non-Electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares). Such supplemental indenture
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 16. If, in the case
of any such reclassification, change, merger, consolidation, statutory share
exchange, combination, sale or conveyance, the stock or other securities and
assets receivable thereupon by a holder of Class A Common Stock includes shares
of stock or other securities and assets of a corporation other than the
successor or purchasing corporation, as the case may be, in such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the Holders of the Debentures as the Board of
Directors shall reasonably consider necessary by reason of the foregoing,
including to the extent practicable the provisions providing for the repurchase
rights set forth in Article 13 hereof. 

The
Company shall cause notice of the execution of such supplemental indenture to be
mailed to each Holder, in accordance with Section 1.6 of this Indenture, within
20 days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture. 

The above
provisions of this Section 16.4 shall similarly apply to successive
reclassifications, changes, mergers, consolidations, statutory share exchanges,
combinations, sales and conveyances. 

57

If this
Section 16.4 applies to any event or occurrence, Section 16.3 shall not apply.

SECTION
16.5. Notice
of Adjustment.

Whenever
an adjustment in the Conversion Price with respect to the Debentures is
required: 

(1)
 the
Company shall forthwith place on file with the Trustee and any Conversion Agent
for such securities a certificate of the Treasurer of the Company, stating the
adjusted Conversion Price determined as provided herein and setting forth in
reasonable detail such facts as shall be necessary to show the reason for and
the manner of computing such adjustment; and 

(2)
 a notice
stating that the Conversion Price has been adjusted and setting forth the
adjusted Conversion Price shall forthwith be given by the Company or, at the
Company’s request, by the Trustee in the name and at the expense of the Company,
to each Holder in the manner provided in Section 1.6 of this Indenture. Any
notice so given shall be conclusively presumed to have been duly given, whether
or not the Holder receives such notice. 

SECTION
16.6. Notice
in Certain Events.

In case:

(1) of a
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company is required, or of the sale or conveyance to
another Person or entity or group of Persons or entities acting in concert as a
partnership, limited partnership, syndicate or other group (within the meaning
of Rule 13d-3 under the Exchange Act) of all or substantially all of the
property and assets of the Company; or 

(2) of
the voluntary or involuntary dissolution, liquidation or winding up of the
Company; or 

(3) of
any action triggering an adjustment of the Conversion Price referred to in
clauses (x) or (y) below; 

then, in
each case, the Company shall cause to be filed with the Trustee and the
Conversion Agent, and shall cause to be given, to the Holders of the Debentures
in the manner provided in Section 1.6 of this Indenture, at least 15 days prior
to the applicable date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of any distribution or grant of
rights or warrants or other securities triggering an adjustment to the
Conversion Price pursuant to this Article 16, or, if a record is not to be
taken, the date as of which the holders of record of Class A Common Stock
entitled to such distribution, rights or warrants or other securities are to be
determined, or (y) the date on which any reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up triggering an
adjustment to the Conversion Price pursuant to this Article 16 is expected to
become effective, and the date as of which it is expected that holders of Class
A Common Stock of record shall be entitled to exchange their Class A Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger sale, conveyance, dissolution, liquidation or winding up.

58

 

Failure
to give such notice or any defect therein shall not affect the legality or
validity of the proceedings described in clause (1), (2) or (3) of this Section
16.6. 

SECTION
16.7. Company
To Reserve Stock: Registration; Listing.

(a)
 The
Company shall, in accordance with the laws of the Commonwealth of Pennsylvania,
at all times reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Class A Common Stock for the purpose of
effecting the conversion of the Debentures, such number of its duly authorized
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all Debentures then Outstanding into such Class A
Common Stock at any time (assuming that, at the time of the computation of such
number of shares or securities, all such Debentures would be held by a single
Holder); provided, however, that nothing contained herein shall preclude the
Company from satisfying its obligations in respect of the conversion of the
Debentures by delivery of purchased shares of Class A Common Stock which are
then held in the treasury of the Company. The Company covenants that all shares
of Class A Common Stock which may be issued upon conversion of Debentures will
upon issue be fully paid and nonassessable and free from all liens and charges
and, except as provided in Section 16.8, taxes with respect to the issue
thereof. 

(b)
 If any
shares of Class A Common Stock which would be issuable upon conversion of
Debentures hereunder require registration with or approval of any governmental
authority before such shares or securities may be issued upon such conversion,
the Company will use its commercially reasonable efforts to cause such shares or
securities to be duly registered or approved, as the case may be. The Company
further covenants that so long as the Class A Common Stock shall be listed on
the Nasdaq National Market System, the Company will use its commercially
reasonable efforts, if permitted by the rules of such exchange, to list and keep
listed all Class A Common Stock issuable upon conversion of the Debentures, and
the Company will use its commercially reasonable efforts to list the shares of
Class A Common Stock required to be delivered upon conversion of the Debentures
prior to such delivery upon any other national securities exchange upon which
the outstanding Class A Common Stock is listed at the time of such delivery.

SECTION
16.8. Taxes
on Conversion.

The issue
of stock certificates on conversion of Debentures shall be made without charge
to the converting Holder for any documentary, stamp or similar issue or transfer
taxes in respect of the issue thereof, and the Company shall pay any and all
documentary, stamp or similar issue or transfer taxes that may be payable in
respect of the issue or delivery of shares of Class A Common Stock on conversion
of Debentures pursuant hereto. The Company shall not, however, be required to
pay any such tax which may be payable in respect of any transfer involved in the
issue or delivery of shares of Class A Common Stock or the portion, if any, of
the Debentures which are not so converted in a name other than that in which the
Debentures so converted were registered, and no such issue or delivery shall be
made unless and until the Person requesting such issue has paid to the Company
the amount of such tax or has established to the satisfaction of the Company
that such tax has been paid. 

59

 

The
Company agrees, and each Holder is deemed to agree, that delivery to such Holder
of the full number of Class A Common Stock into which each Debenture is
convertible, together with any cash payment of such Holder’s fractional shares
or otherwise in accordance with Section 16.13, will be treated as a contingent
payment (in an amount equal to the sum of the then Fair Market Value of such
Class A Common Stock and such cash payment, if any) on the Debentures for
purposes of the Contingent Payment Debt Regulations governing contingent payment
debt obligations. 

SECTION
16.9. Conversion
After Record Date.

Except as
provided below, if any Debentures are surrendered for conversion on any day
other than an Interest Payment Date, the Holder of such Debentures shall not be
entitled to receive any interest that has accrued on such Debentures since the
prior Interest Payment Date. By delivery to the Holder of the number of shares
of Class A Common Stock or other consideration issuable upon conversion in
accordance with this Article 16, any accrued and unpaid interest on such
Debentures will be deemed to have been paid in full. 

If any
Debentures are surrendered for conversion subsequent to the Record Date
preceding an Interest Payment Date but prior to such Interest Payment Date, the
Holder of such Debentures at the close of business on such Record Date shall
receive the interest payable on such Debenture on such Interest Payment Date
notwithstanding the conversion thereof. Debentures surrendered for conversion
during the period from the close of business on any Record Date preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
shall (except in the case of Debentures which have been called for redemption on
a Redemption Date within such period) be accompanied by payment by Holders, for
the account of the Company, in New York Clearing House funds or other funds of
an amount equal to the interest payable on such Interest Payment Date on the
Debentures being surrendered for conversion. Except as provided in this Section
16.9, no adjustments in respect of payments of interest on Debentures
surrendered for conversion or any dividends or distributions or interest on the
Class A Common Stock issued upon conversion shall be made upon the conversion of
any Debentures. 

SECTION
16.10. Company
Determination Final.

Any
determination that the Company or the Board of Directors must make pursuant to
this Article 16 shall be conclusive if made in good faith and in accordance with
the provisions of this Article, absent manifest error, and set forth in a Board
Resolution. 

SECTION
16.11. Responsibility
of Trustee for Conversion Provisions.

The
Trustee has no duty to determine when an adjustment under this Article 16 should
be made, how it should be made or what it should be. The Trustee makes no
representation as to the validity or value of any securities or assets issued
upon conversion of Debentures. The Trustee shall not be responsible for any
failure of the Company to comply with this Article 16. Each Conversion Agent
other than the Company shall have the same protection under this Section 16.11
as the Trustee. 

60

 

The
rights, privileges, protections, immunities and benefits given to the Trustee
under the Indenture including, without limitation, its rights to be indemnified,
are extended to, and shall be enforceable by, the Trustee in each of its
capacities hereunder, and each Paying Agent or Conversion Agent acting
hereunder. 

SECTION
16.12. Unconditional
Right of Holders to Convert.

Notwithstanding
any other provision in this Indenture, the Holder of any Debenture shall have
the right, which is absolute and unconditional, to convert its Debenture in
accordance with this Article 16 and to bring an action for the enforcement of
any such right to convert, and such rights shall not be impaired or affected
without the consent of such Holder. 

SECTION
16.13. Cash
Conversion Option.

(a)
 If a
Holder elects to convert all or any portion of a Debenture into shares of Class
A Common Stock as set forth in Section 16.1, the Company may choose to satisfy
all or any portion of its conversion obligation (the “Conversion Obligation”) in
cash. Upon such election, the Company will notify such Holder through the
Trustee of the dollar amount to be satisfied in cash (which must be expressed
either as a percentage of the Conversion Obligation or as a fixed dollar amount)
at any time on or before the date that is two Business Days following receipt of
written notice of conversion as specified in Section 16.2 (such period, the
“Cash Settlement Notice Period”). If the Company elects to pay cash for any
portion of the shares otherwise issuable to the Holder, the Holder may retract
the conversion notice at any time during the two Business Day period beginning
on the day after the final day of the Cash Settlement Notice Period (a
“Conversion Retraction Period”); no such retraction may be made (and a
conversion notice shall be irrevocable) if the Company does not elect to deliver
cash in lieu of shares (other than cash in lieu of fractional shares). If the
conversion notice has not been retracted, then settlement (in cash and/or
shares) will occur on the Business Day following the final day of the 20 Trading
Day period beginning on the day after the final day of the Conversion Retraction
Period (the “Cash Settlement Averaging Period”). Settlement amounts will be
computed as follows: 

(i) if the
Company elects to satisfy the entire Conversion Obligation in shares of Class A
Common Stock, the Company will deliver to such Holder a number of shares equal
to (1) the aggregate original principal amount at maturity of the Debentures to
be converted divided by 1,000, multiplied by (2) the Conversion Rate;

(ii)
 if the
Company elects to satisfy the entire Conversion Obligation in cash, the Company
will deliver to such Holder cash in an amount equal to the product of:

(1) a
number equal to (x) the aggregate original principal amount at maturity of
Debentures to be converted divided by 1,000, multiplied by (y) the Conversion
Rate, and 

61

 

(2) the
average Sale Price of the Class A Common Stock during the Cash Settlement
Averaging Period; and 

(iii)
 if the
Company elects to satisfy a fixed portion (other than 100%) of the Conversion
Obligation in cash, the Company will deliver to such Holder such cash amount
(“Cash Amount”) and a number of shares equal to the excess, if any, of the
number of shares calculated as set forth in clause (i) above over the number of
shares equal to the sum, for each day of the Cash Settlement Averaging Period,
of (x) the pro rated portion of the Cash Amount for such day divided by (y) the
Sale Price of the Class A Common Stock on such day. 

Notwithstanding
the foregoing, a Debenture in respect of which a Holder has delivered a Purchase
Notice or Change of Control Purchase Notice exercising such Holder’s option to
require the Company to repurchase such Debenture may be converted as described
in this Section 16.13 (a) only if such notice of exercise is withdrawn in
accordance with the Section 13.4 hereof. 

(b)
 If a
Holder elects to convert all or any portion of a Debenture into shares of Class
A Common Stock after the Company has exercised its right to redeem all or any
portion of the Debentures pursuant to Section 5 of the Debentures or within 20
days of the Stated Maturity, the Company may choose to satisfy all or any
portion of the Conversion Obligation in cash provided the Company notifies such
Holder through the Trustee of the dollar amount to be satisfied in cash (which
must be expressed either as a percentage of the Conversion Obligation or as a
fixed dollar amount) at any time on or before the date that is 20 days prior to
Stated Maturity or Redemption Date. Settlement amounts will be computed in the
same manner as set forth in (a) above except that the “Cash Settlement Averaging
Period” shall be the 20 Trading Day period beginning on the day after the Stated
Maturity or Redemption Date, as the case may be. Settlement (in cash and/or
shares) will occur on the Business Day following the final day of such Cash
Settlement Averaging Period. 

 

Section
2.12 Trustee’s
Right to Exercise Remedies Against Security. 

Notwithstanding
anything to the contrary in this Second Supplemental Indenture, upon an Event of
Default under their respective indentures, the Trustee under this Second
Supplemental Indenture, the trustee under the indenture governing the Company’s
Publicly Issued Debentures and the trustee under the indenture governing the
Company’s 8.50% Monthly Income Senior Notes due 2018 each have the right to
exercise remedies against the Collateral and Additional Collateral for the
benefit of the holders of, respectively, these Debentures, the Company’s
Publicly Issued Debentures and the Company’s 8.50% Monthly Income Senior Notes
due 2018. Any recoveries shall be for the equal and ratable benefit of such
holders. 

 

Section
2.13 Trustee
to Hold Collateral and Additional Collateral. 

The
Trustee or the Collateral Agent shall hold any and all Collateral and any
Additional Collateral for the purpose of perfecting the security interest of the
Holders of the Debentures, the holders of the Company’s 8.50% Monthly Income
Senior Notes due 2018 and the holders of the Company’s Publicly Issued
Debentures. The Trustee hereby acknowledges, and any Collateral Agent shall
similarly acknowledge in any Collateral Agent Agreement, that, to the extent it
is holding the Collateral or any Additional Collateral, it is 

 

62

 

holding
the Collateral and any Additional Collateral for the equal and ratable benefit
of the Holders of the Debentures, the holders of the Company’s 8.50% Monthly
Income Senior Notes due 2018 and the holders of the Company’s Publicly Issued
Debentures, that the security interest of each of such series of Securities is
subject to the security interest of the other such series of Securities and
acknowledges that the Trustee shall act in accordance with the provisions of
Section 2.12 of this Second Supplemental Indenture and that each trustee shall
have the right to exercise remedies against the Collateral and any Additional
Collateral. 

 

Section
2.14 Additional
Amounts. 

Notwithstanding
the provisions of Sections 5.8 and 10.4 of the Original Indenture, or any other
provision thereof, the Company shall not be obligated to pay, and a Holder shall
have no right to receive, any Additional Amounts with respect to the Debentures.

ARTICLE
III

 

ADDITIONAL
COVENANTS 

 

In
addition to the covenants and agreements contained in the Original Indenture,
the Company covenants and agrees for the benefit of the Holders of the
Debentures (all of which covenants and agreements, other than the covenants
contained in Sections 3.01, 3.02, 3.04, 3.06 and 3.08, will terminate on July 1,
2009 unless a Default or Event of Default shall have occurred and be continuing)
as follows: 

 

Section
3.01 Maintenance
of Properties. 

The
Company will cause all properties used or useful in the conduct of its business
or the business of any Subsidiary of the Company to be maintained and kept in
good condition, repair and working order, normal wear and tear excepted, and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the reasonable judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided,
however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the reasonable judgment of the Company, desirable in the conduct of its business
or the business of any Subsidiary of the Company and not disadvantageous in any
material respect to the Holders. 

 

Section
3.02 Payment
of Taxes and Other Claims. 

The
Company will pay or discharge or cause to be paid or discharged, before the same
shall become delinquent, (1) all taxes, assessments and governmental charges
levied or imposed upon the Company or any Subsidiary of the Company or upon the
income, profits or property of the Company or any Subsidiary of the Company, and
(2) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a Lien upon the property of the Company or any Subsidiary of the
Company; provided,
however, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.

 

63

 

Section
3.03 Limitation
on Liens on Capital Stock of Restricted Subsidiaries. 

The
Company will not, and it will not permit any Restricted Subsidiary of the
Company to, at any time directly or indirectly create, assume, incur or permit
to exist any Indebtedness secured by a Lien on the Capital Stock of any
Restricted Subsidiary without making effective provision whereby the Debentures,
the Company’s Publicly Issued Debentures and the Company’s 8.50% Monthly Income
Senior Notes due 2018 shall be secured by a first Lien on such Capital Stock,
which is senior and prior to such Lien securing such other Indebtedness so long
as such other Indebtedness shall be secured. 

 

Section
3.04 Limitation
on Sale or Issuance of Capital Stock of Restricted Subsidiaries. 

The
Company will not issue, sell, lease, transfer or otherwise dispose of any
Capital Stock of any Restricted Subsidiary, except to a Wholly Owned Restricted
Subsidiary of the Company, nor will it permit any Restricted Subsidiary to issue
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) any Capital Stock (other than directors’ qualifying shares) of a
Restricted Subsidiary if, after giving effect to any such transaction, such
Subsidiary would not continue to be a Wholly Owned Restricted Subsidiary.
Notwithstanding the foregoing, (i) the Company may merge or consolidate any
Wholly Owned Restricted Subsidiary into or with another Wholly Owned Restricted
Subsidiary and (ii) the Company may, subject to the provisions of Section 3.06
of this Second Supplemental Indenture, sell, lease, transfer or otherwise
dispose of the entire Capital Stock of a Restricted Subsidiary at one time for
cash consideration for at least fair market value consideration, as determined
by the Board of Directors pursuant to a Board Resolution adopted in good faith
and supported by an opinion as to fairness from a financial point of view by an
Independent Financial Advisor of recognized standing, so long as (1) the Net
Cash Proceeds received by the Company (or its Restricted Subsidiaries, as the
case may be) from such issue, sale, lease, transfer or other disposition are
applied in accordance with Section 13.2(b) and (2) the Debentures, the Company’s
Publicly Issued Debentures and the Company’s 8.50% Monthly Income Senior Notes
due 2018 shall thereafter be secured by a first Lien on any Collateral or
Additional Collateral, which is senior and prior to any Lien on such Collateral
or Additional Collateral securing any other Indebtedness of the Company or any
Restricted Subsidiary. 

Additionally,
the Company covenants to do or cause to be done all things necessary to perfect
the first priority security interests in such portion of any additional Capital
Stock that may be issued in accordance with this Section in order to maintain
the Trustee’s Lien on the appropriate percentage of each Subsidiary’s Capital
Stock in accordance with Sections 1.03 and 3.08 of this Indenture. To the extent
that the assets which are the subject of any Asset Sale constitute Collateral,
all proceeds thereof shall, to the extent permitted by law, be subject to a
perfected Lien in favor of the Collateral Agent, and all proceeds constituting
cash and Cash Equivalents received from such an Asset Sale shall be deposited in
the account under the control of the Collateral Agent established by the
Collateral Agent Agreement. 

 

64

 

Section
3.05 Limitation
on Restricted Payments. 

The
Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly: 

(a) declare
or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company’s Capital Stock to holders of such Capital
Stock (other than to the Company or a Restricted Subsidiary); 

(b) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the Company
or any Restricted Subsidiary or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock (other than any Indebtedness
convertible into Capital Stock of the Company, excluding any such shares of
Capital Stock, warrants, rights or options owned by the Company or any
Restricted Subsidiary); or 

(c) redeem,
defease, repurchase, retire or otherwise acquire or retire for value prior to
any scheduled maturity repayment or sinking fund payment, Indebtedness of the
Company which is subordinate in right of payment to the Debentures; and

(d) make any
Investment (other than Permitted Investments); 

(each of
the foregoing actions set forth in clauses (a), (b),(c) and (d) being referred
to as a “Restricted Payment”), if at the time of such Restricted Payment or
immediately after giving effect thereto and to the incurrence of any
Indebtedness incurred to finance such Restricted Payment, 

(i) a Default
or an Event of Default shall have occurred and be continuing; or 

(ii) (x) the
Ratio Test is not met; (y) the ratio of policyholders’ surplus to ACL RBC for
each of the Insurance Subsidiaries for the last reported fiscal quarter is less
than 250%; or (z) the ratio of combined policyholders surplus of all of the
Insurance Subsidiaries to consolidated long-term Indebtedness of the Company is
less than 2.0 to 1.0; or 

(iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property as
determined in good faith by the Board of Directors of the Company) shall exceed
the sum of: 

(1) 50% of
the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Company earned subsequent to
the Issue Date and on or prior to the date the Restricted Payment occurs (the
“Reference Date”) (treating such period as a single accounting period); plus

65

 

(2) 100% of
the aggregate Net Cash Proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock of
the Company or warrants, options or other rights to acquire Qualified Capital
Stock of the Company (but excluding any debt security that is convertible into,
or exchangeable for, Qualified Capital Stock); plus 

(3) without
duplication of any amounts included in clause (iii)(1) above, 100% of the
aggregate Net Cash Proceeds of any equity contribution received by the Company
from a holder of the Company s Capital Stock (excluding, in the case of clauses
(iii)(2) and (3), any Net Cash Proceeds from an Equity Offering to the extent
used to redeem or purchase the Debentures in compliance with the provisions set
forth in Sections 13.1 and 13.2 of the
Indenture); plus 

(4) 100% of
the proceeds of any Indebtedness of the Company or any Restricted Subsidiary
incurred after the Issue Date that has been converted into or exchanged for
Qualified Capital Stock of the Company; plus 

(5) without
duplication, the sum of: 

a. the
aggregate amount returned in cash to the Company on or with respect to
Investments (other than Permitted Investments) made subsequent to the Issue Date
whether through interest payments, principal payments, dividends or other
distributions or payments and not included in clause (iii)(1) above;

b. the Net
Cash Proceeds received by the Company from the disposition of all or any portion
of such Investments (other than to a Subsidiary of the Company); and

c. upon
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair
market value of such Subsidiary; 

provided,
however, that
the sum of clauses (a), (b) and (c) above shall not exceed the aggregate amount
of all such Investments made subsequent to the Issue Date. 

Notwithstanding
the foregoing, the provisions set forth in the immediately preceding paragraph
do not prohibit (provided that with respect to clause (b) or (e) below no
Default or Event of Default shall have occurred and be continuing):

(a) the
payment of any dividend within 60 days after the date of declaration of such
dividend if the dividend would have been permitted on the date of declaration;

(b) the
redemption, repurchase or retirement or other acquisition of any shares of
Capital Stock of the Company or any Restricted Subsidiary, either (i) solely in
exchange for shares of Qualified Capital Stock of the Company or (ii) through
the application of Net Cash Proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital Stock
of the Company; 

66

 

(c) any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value of Indebtedness of the Company which is subordinate in right of
payment to the Debentures (“Repurchased Subordinated Indebtedness”) made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness, provided, however, that: 

(i) such
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Repurchased Subordinated Indebtedness; 

(ii) such
Indebtedness has an Average Life at the time it is Incurred that is equal to or
greater than the Average Life of the Repurchased Subordinated Indebtedness; and

(iii) such
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus fees and expenses,
including any premium and defeasance cost) under the Repurchased Subordinated
Indebtedness; 

(d) the
deemed repurchase of Capital Stock of the Company or any Restricted Subsidiary
upon the exercise of stock options; 

(e) pro rata
dividends or other distributions made by a Restricted Subsidiary to minority
holders of equity interests in such Restricted Subsidiary; and 

(f) other
Restricted Payments in an aggregate amount not to exceed ten million dollars
($10,000,000) since the Issue Date. 

In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the first paragraph of this
Section 3.05, amounts expended pursuant to clauses (a), (b)(ii) and (f) shall be
included in such calculation. 

Under
GAAP, Consolidated Net Income is not reduced by unrealized losses or increased
by unrealized gains. 

 

Section
3.06 Merger,
Consolidation and Sale of Assets. 

The
Company will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, continue in another jurisdiction,
or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary of the Company to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of the Company’s
assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: 

67

 

(i) the
Company shall be the surviving or continuing corporation; or 

(ii) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and assets of
the Company and its Restricted Subsidiaries substantially as an entirety (the
“Surviving Entity”): 

(x) shall
be a corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia; provided that if the
Person is a partnership or limited liability company, a corporation wholly owned
by such Person organized or existing under the laws of the United States, any
state of the United States or the District of Columbia that does not and will
not have any material assets or operations, shall promptly thereafter become a
co-issuer of the Debentures pursuant to a supplemental indenture; and

(y) shall
expressly assume, by supplemental indenture (in form and substance satisfactory
to the Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on all of the
Debentures and the performance of every covenant of the Debentures and, the
Indenture on the part of the Company to be performed or observed; 

(b) immediately
after giving effect to such transaction and the assumption contemplated by
clause (a)(ii)(y) above (including giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred in connection with
or in respect of such transaction), the Company or such Surviving Entity, as the
case may be, shall meet the Ratio Test; 

(c) immediately
before and immediately after giving effect to such transaction and the
assumption contemplated by clause (a)(ii)(y) above (including, without
limitation, giving effect to any Lien granted in connection with or in respect
of the transaction), no Default or Event of Default shall have occurred or be
continuing; and 

(d) the
Company or the Surviving Entity shall have delivered to the Trustee an Officer’s
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to such
transaction have been satisfied. 

Notwithstanding
clause (b) of the immediately preceding paragraph, any Restricted Subsidiary may
consolidate or combine with, merge into or transfer all or part of its
properties and assets to the Company or another Wholly Owned Restricted
Subsidiary. 

 

For
purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.

 

68

Upon any
consolidation, combination or merger or any transfer (other than a lease) of all
or substantially all of the assets of the Company in accordance with the
foregoing in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company
hereunder and the Debentures. 

 

Section
3.07 Limitations
on Transactions with Affiliates. 

(a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with, or for
the benefit of, any of its Affiliates (each, an “Affiliate Transaction”), other
than (x) Affiliate Transactions permitted under clause (c) of this covenant and
(y) Affiliate Transactions on terms that are on the whole no less favorable than
those that might reasonably have been obtained in a comparable transaction at
such time on an arm’s-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary. 

(b) All
Affiliate Transactions (and each series of related Affiliate Transactions which
are similar or part of a common plan) involving aggregate payments or other
property with a fair market value in excess of five million dollars ($5,000,000)
shall be approved by the Board of Directors (and by a majority of the
Disinterested Directors) of the Company or such Restricted Subsidiary, as the
case may be, such approval to be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary of the Company
enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair market
value of more than fifteen million dollars ($15,000,000), the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee. 

(c) The
restrictions set forth in paragraphs (a) and (b) of this Section 3.07 shall not
apply to: 

(i) reasonable
fees, compensation benefits and incentives paid to, and indemnity provided on
behalf of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company’s Board of Directors or senior management; 

69

 

(ii) transactions
exclusively between or among the Company and any of its Restricted Subsidiaries
or exclusively between or among such Restricted Subsidiaries, so long as such
transactions are not otherwise prohibited by the Indenture; 

(iii) any
agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto)
or in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any material
respect than the original agreement; 

(iv) Restricted
Payments permitted by Section 3.05 of this Second Supplemental Indenture;

(v) customary
stockholders and registration rights agreements among the Company or any
Restricted Subsidiary and the stockholders thereof; and 

(vi) ordinary
course insurance or reinsurance contracts or other agreements with respect to
the provision of services (a) requiring approval of any governmental or
regulatory insurance agency that are so approved by such agency (and on the
terms so approved), or (b) requiring the passage of time to have occurred
without disapproval of any governmental or regulatory insurance agency for which
the required time has passed (and on the terms presented to such agency).

Section
3.08 Protection
of Collateral and the Additional Collateral. 

The
Company will from time to time execute and deliver all such supplements and
amendments hereto and all such filings, financing statements, continuation
statements, instruments of further assurance and other instruments, and will
take such other action necessary or advisable to: 

(a) maintain
and preserve the Lien and security interest (and the priority thereof) granted
to the Trustee in the Collateral and the Additional Collateral pursuant to this
Indenture or carry out more effectively the purposes hereof; 

(b) perfect,
publish notice of or protect the validity of any grant of security made or to be
made by this Indenture; 

(c) enforce
the Lien granted to the Trustee in any of the Collateral or the Additional
Collateral; 

(d) preserve
and defend title to the Collateral or the Additional Collateral and the rights
of the Trustee, the Collateral Agent and the Holders of the Debentures in the
Collateral and the Additional Collateral against the claims of all Persons and
parties; and 

(e) pay any
and all taxes levied or assessed up on all or any part of the Collateral or the
Additional Collateral. 

70

 

The
Company hereby authorizes the Trustee to file and designates the Trustee its
agent and attorney-in-fact to execute and file any financing statement,
continuation statement or other instrument required by the Trustee pursuant to
this Section 3.08 of the Indenture. 

 

Section
3.09 The
Company to Remain a Holding Company. 

During
the time any Debentures are Outstanding under this Indenture, the Company shall
conduct no activities other than as a holding company. 

 

Section
3.10 Limitation
on Incurrence of Additional Indebtedness. 

The
Company shall not create, incur, assume, guarantee, acquire or become liable for
(collectively, “incur”) any Indebtedness (other than Permitted Indebtedness),
unless the Ratio Test is met on a pro forma basis for such incurrence or the
ratio of consolidated debt to total capitalization of the Company as of the end
of the last reported fiscal quarter of the Company, on a pro forma basis giving
effect to such incurrence, is less than 35%. 

“Permitted
Indebtedness” means, without duplication, each of the following: 

(1) Indebtedness
issued under the Indenture in an aggregate principal amount not to exceed
$101,250,000; 

(2) other
Indebtedness outstanding on the date of issuance of the Debentures;

(3) interest
swap obligations; provided, however, that the notional principal amount of such
interest swap obligation does not, at the time of the incurrence thereof, exceed
the principal amount of the Indebtedness to which such interest swap obligation
relates; 

(4) Indebtedness
under currency agreements; provided that in the case of currency agreements
which relate to Indebtedness, such currency agreements do not increase the
Indebtedness of the Company outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder; 

(5) Indebtedness
of the Company to a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by a Wholly Owned Restricted Subsidiary of the
Company or the holder of a Lien permitted under this Indenture (a “Permitted
Lien”), in each case subject to no Lien other than a Permitted Lien; provided
that (a) any Indebtedness of the Company to any Wholly Owned Restricted
Subsidiary of the Company is unsecured and subordinated, pursuant to a written
agreement, to the Company’s obligations under this Indenture and the new
debentures and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company or the holder of a Permitted Lien owns or
holds any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness under this clause (5) by the Company;

71

 

(6) Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of business;
provided, however, that such Indebtedness is extinguished within two business
days of incurrence; 

(7) Indebtedness
in respect of performance bonds, bankers’ acceptances, workers’ compensation
claims, surety or appeal bonds, payment obligations in connection with
self-insurance or similar obligations, letters of credit issued to secure claim
obligations, and bank overdrafts (and letters of credit in respect thereof) in
the ordinary course of business; 

(8) Indebtedness
represented by Capital Lease Obligations and purchase money indebtedness of the
Company and its Restricted Subsidiaries incurred in the ordinary course of
business not to exceed $15,000,000 at any one time outstanding (which may not be
secured by Liens on the Collateral or the Additional Collateral); 

(9) Refinancing
Indebtedness (defined below); 

(10) Indebtedness
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of assets;
and 

(11) Indebtedness
of the Company to the extent the proceeds are used to pay interest on the
Debentures substantially concurrently with the incurrence thereof. 

For
purposes of determining compliance with this covenant, in the event that an item
of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (1) through (11) above, the Company
may, in its sole discretion, classify (or later reclassify) such item of
Indebtedness in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Capital Stock in the
form of additional shares of the same class of Disqualified Capital Stock will
not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified
Capital Stock for purposes of this covenant. 

“Refinancing
Indebtedness” means any refinancing of indebtedness incurred in accordance with
this covenant, in each case that does not: 

(1) result in
an increase in the aggregate principal amount of Indebtedness of such Person as
of the date of such proposed refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by such Person
in connection with such refinancing); or 

72

 

(2) create
Indebtedness with: (a) an Average Life that is less than the Average Life of the
Indebtedness being refinanced; or (b) a final maturity earlier than the final
maturity of the Indebtedness being refinanced; provided that if such
Indebtedness being refinanced is subordinated or junior to the new debentures,
then such Refinancing Indebtedness shall be subordinated or junior to the new
debentures at least to the same extent and in the same manner as the
Indebtedness being refinanced. 

ARTICLE
IV

 

MISCELLANEOUS
PROVISIONS 

 

Section
4.01 Recitals
by Company. 

The
recitals in this Second Supplemental Indenture are made by the Company only and
not by the Trustee, and all of the provisions contained in the Original
Indenture in respect of the rights, privileges, immunities, powers and duties of
the Trustee shall be applicable in respect of the Debentures and of this Second
Supplemental Indenture as fully and with like effect as if set forth herein in
full. 

 

Section
4.02 Ratification
and Incorporation of Original Indenture. 

As
supplemented hereby, the Original Indenture is in all respects ratified and
confirmed, and the Original Indenture and this Second Supplemental Indenture
shall be read, taken and construed as one and the same instrument. 

 

Section
4.03 Executed
in Counterparts. 

This
Second Supplemental Indenture may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.

73

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

PMA
CAPITAL CORPORATION

By:
/s/
William E. Hitselberger

William
E. Hitselberger

Senior
Vice President, Chief Financial Officer and Treasurer

U.S. BANK
NATIONAL ASSOCIATION, as Trustee

By:
/s/
Michael M. Hopkins

Michael
M. Hopkins

Vice
President

74

EXHIBIT A

THIS
DEBENTURE Form of
6.50% Senior Secured Convertible Debenture due September 30, 2022 

[The
following legends apply only if the Debenture is a global Security:

IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS DEBENTURE
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A DEBENTURE REGISTERED, AND NO
TRANSFER OF THIS DEBENTURE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN SUCH DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE. 

UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT AND SUCH CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS
REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] 

FOR
PURPOSES OF SECTION 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS DEBENTURE
IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES. THE ISSUE DATE IS NOVEMBER 15, 2004 AND THE YIELD TO MATURITY FOR
PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 6.50% PER ANNUM.

[Include
only for Debentures that are Restricted Securities]

THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. 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, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
("RULE 144A")); (2) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY
INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY OR ANY COMMON 

 

A-1

 

STOCK
ISSUABLE UPON CONVERSION OF SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THIS SECURITY UNDER RULE 144(k) UNDER
THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), ONLY (A) TO PMA CAPITAL
CORPORATION (THE "ISSUER"), (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER), (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, IN COMPLIANCE WITH
RULE 144A TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM; AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THIS SECURITY PURSUANT TO CLAUSE 2(B) ABOVE OR
UPON ANY TRANSFER OF THIS SECURITY UNDER RULE 144 UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION).

A-2

PMA
CAPITAL CORPORATION

6.50%
Senior Secured Convertible Debenture due September 30, 2022 

 

	
       

      No.
      1
	
      CUSIP:
      693419
      AE3            

	
      Issue
      Date: November 15, 2004
	
      Principal
      Amount: $ ______ 

 

PMA
CAPITAL CORPORATION, a Pennsylvania corporation, promises to pay
to _____________ or
registered assigns, the principal amount of              Dollars
($            ) on
September 30, 2022. 

Interest
Payment Dates: March 30 and September 30, commencing March 30, 2005.

Record
Dates: March 15 and September 15. 

Reference
is hereby made to the further provisions of this Debenture set forth on the
reverse side of this Debenture, which further provisions shall for all purposes
have the same effect as if set forth at this place. 

IN
WITNESS WHEREOF, PMA Capital Corporation has caused this instrument to be duly
executed under its corporate seal. 

 

	
       

       Dated:
      ______________________
	
      PMA
      CAPITAL CORPORATION

	 	
      By:
	
       

	 	
       
	
       
      Name:

	 	
       
	
       
      Title:

 

	
       

      Attest:

	
      Name:

	
      Title:

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION 

This is
one of the Securities of the series designated therein referred to in the within
mentioned Indenture.  

	
       

      U.S.
      BANK NATIONAL ASSOCIATION,

      as
      Trustee

	
      By:
	
       

	
       
	
       
      Authorized Signatory

 

A-3

[FORM OF
REVERSE OF GLOBAL SECURITY] 

6.50%
Senior Secured Convertible Debenture due September 30, 2022 

This
Debenture is one of a duly authorized issue of 6.50% Senior Secured Convertible
Debentures due September 30, 2022 (the “Debentures”) of PMA Capital Corporation,
a Pennsylvania corporation (including any successor corporation under the
Indenture hereinafter referred to, the “Company”) issued under an Indenture,
dated as of November 15, 2004 (the “Original Indenture”), as supplemented by the
Second Supplemental Indenture, dated as of November 15, 2004 (the “Second
Supplemental Indenture”, and together with the Original Indenture, the
“Indenture”), between the Company and U.S. Bank National Association, as trustee
(the “Trustee”, which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitation of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Debentures issued thereunder and of the terms upon which said Debentures are,
and are to be, authenticated and delivered. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this
Debenture and the terms of the Indenture, the terms of the Indenture shall
control. Capitalized terms used but not defined herein have the meanings
assigned to them in the Indenture unless otherwise indicated. 

The
Debenture is subject to certain restrictions on its transfer as more fully
described in the Second Supplemental Indenture. The Holders of the Debentures
also have certain registration rights pursuant to the Registration Rights
Agreement between the Company and Banc of America Securities LLC as Initial
Purchaser, dated as of November 15, 2004.

1. Interest.

General. The
Company promises to pay interest on the principal amount of the Debentures at
the interest rate specified herein from the date of issuance until repayment in
full at September 30, 2022, conversion, redemption or purchase. The Company will
pay interest on this Debenture semi-annually in arrears on March 30 and
September 30 of each year (each, an “Interest Payment Date”), commencing March
30, 2005. The Company will pay interest in cash. 

(a) The
Debentures shall bear interest from the Issue Date until the principal amount
thereof is paid or made available for payment, or until such date on which the
Debentures are converted, redeemed or purchased as provided herein at a rate of
6.50% per annum. 

(b) Interest
on the Debentures shall be computed on the basis of a 360-day year of twelve
30-day months and, for such periods of less than a month, the actual number of
days elapsed over a 30-day month. Holders are not entitled to receive contingent
interest. 

(c) If this
Debenture is redeemed or the Holder elects to require the Company to purchase
this Debenture pursuant to Section 7 of this Debenture, on a date that is after
the Regular Record Date and on or prior to the corresponding Interest Payment
Date, interest, if any, accrued and unpaid hereon to but not including the
applicable Redemption Date, Purchase Date or Change of Control Purchase Date as
the case may be will be paid to the Holder of record on the Regular Record Day.

A-4

 

Interest
on Debentures converted after a Regular Record Date but prior to the
corresponding Interest Payment Date will be paid to the Holder of the Debentures
on the record date but, all Holders agree, by their acceptance of a Debenture
that upon conversion, the Holder must pay the Company the interest, which has
accrued and will be paid on such Interest Payment Date. No such payment need be
made with respect to Debentures which will be redeemed after a Regular Record
Date but prior to the corresponding Interest Payment Date. 

If the
principal amount hereof or any portion of such principal amount or any interest,
if any, on any Debenture is not paid when due (whether upon acceleration
pursuant to Section 5.2 of the Indenture or on the Stated Maturity or on the
Redemption Date, Purchase Date, Change of Control Purchase Date or Asset Sale
Purchase Date), then in each such case the overdue amount shall, to the extent
permitted by law, bear interest at the applicable interest rate, compounded
semi-annually, 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 on
demand. 

2. Method
of Payment.

Except as
provided below, interest will be paid (i) on a global Debenture to the
Depositary in immediately available funds, (ii) on any definitive Debentures
having an aggregate principal amount of $5,000,000 or less, by check mailed to
the Holders of such Debentures; and (iii) on any definitive Debentures having an
aggregate principal amount of more than $5,000,000, by wire transfer in
immediately available funds at the election of the Holders of such Debentures.

At Stated
Maturity the Company will pay interest on (i) definitive Debentures at the
Company’s office or agency in New York City, which initially will be the Place
of Payment as provided in Section 10.2 of the Indenture and (ii) on global
Debentures to the Depositary in immediately available funds. 

Principal
(i) on definitive Debentures will be payable, upon Stated Maturity or when due,
in immediately available funds at the office or agency of the Company in New
York City, which, initially will be the Place of Payment as provided in Section
10.2 of the Indenture and (ii) on global Debentures to the Depositary in
immediately available funds. 

Subject
to the terms and conditions of the Indenture, the Place of Payment for the
Debentures and the place or places where the Debentures may be surrendered for
registration of transfer, exchange, repurchase, redemption or conversion and
where notices may be given to the Company in respect of the Debentures is at the
Corporate Trust Office of the Trustee or such other office or agency of the
Company as may be designated for such purpose. Payment of principal and interest
on the Debentures will be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts. 

A-5

 

3. Paying
Agent, Conversion Agent and Security Registrar.

Initially,
the Trustee will act as Paying Agent, Conversion Agent and Security Registrar
with respect to the Debentures. The Company may appoint and change any Paying
Agent, Conversion Agent or Security Registrar without notice, other than notice
to the Trustee. The Company may have one or more additional paying agents and
one or more additional conversion agents. The Company or any of its Subsidiaries
or any of their Affiliates may act as Paying Agent, Conversion Agent or Security
Registrar. 

4. Indenture
and Security for the Debentures.

The
Debentures are issued under the Indenture. The Company is limited in the amount
of indebtedness it can issue under the Indenture to $101,250,000. The Debentures
are general obligations of the Company limited to $15,000,000 aggregate
principal amount. The Second Supplemental Indenture limits Liens on the Capital
Stock of Restricted Subsidiaries (as defined therein) and limits the amount of
Indebtedness that the Company can issue. The Debentures, along with certain
other securities of the Company, are secured by certain shares of the Capital
Stock of certain of the Company’s operating Subsidiaries, as set forth in the
Indenture. The security will be automatically released under certain
circumstances set forth in the Indenture. The Collateral and any Additional
Collateral will be held by a Collateral Agent under the terms of a Collateral
Agent Agreement. 

5. Redemption.

(a) At the
Option of the Company. At any
time from October 1, 2008, the Company, at its option, may redeem in principal
amounts of $1,000 or integral multiples of $1,000 the Debentures for cash as a
whole, or from time to time in part, at a Redemption Price of 114% of the
principal amount of the Debentures, plus accrued and unpaid interest, if any,
to, but excluding, the Redemption Date. 

(b) Mandatory
Redemption with Extraordinary Dividends. From
January 1, 2006 to December 31, 2006, in the event the Company receives any
Extraordinary Dividends from any of its subsidiaries, the Company shall redeem
the Debentures and certain other securities issued under the Original Indenture
pro rata in principal amounts of $1,000 or integral multiples of $1,000 with 50%
of the amount of such dividends for cash at a Redemption Price of 110% of the
principal amount of the Debentures plus accrued and unpaid interest, if any, to
the Redemption Date. The aggregate principal amount of Debentures plus any other
securities issued under the Indenture to be redeemed in this instance shall not
exceed $35,000,000. 

Debentures
or portions thereof to be redeemed as of a Redemption Date will be convertible
by the Holders of such Debentures until the close of business on the second
Business Day prior to the Redemption Date. 

6. Premium
Payable in Stock at Option of Holder.

Subject
to the terms of the Indenture, in connection with any premium payable to a
holder of the Debentures in connection with redemptions pursuant to Section 5
above and repurchases pursuant to Section 7 below, which, in each case, are as a
result of an event or action which occurs on or prior to June 30, 2009, each
holder will have the option to elect to receive such premium in shares of
Applicable Stock. For the purposes of calculating the number of shares issuable
to any Holder of the Debentures who elects to exercise such option, the shares
of Applicable Stock will be valued at $8.00 per share subject to adjustment as
set forth in the Indenture. The Company shall notify the Trustee and the Holders
of any premium in accordance with the terms of the Indenture. 

A-6

 

7. (a) Repurchase
By the Company at the Option of the Holder.

Subject
to the terms and conditions of the Indenture, the Company shall become obligated
to repurchase, at the option of the Holder, all or any portion of the Debentures
held by such Holder on June 30, 2009 in integral multiples of $1,000 at a
Purchase Price of 114% of the principal amount of the Debentures to be
repurchased, plus accrued and unpaid interest, if any, on such Debentures on the
Purchase Date. To exercise such right, a Holder shall deliver to the Company a
Purchase Notice containing the information set forth in the Indenture, at any
time from the opening of business on the date that is 20 Business Days prior to
such Purchase Date until the close of business on the third Business Day prior
to such Purchase Date, and shall deliver the Debentures to the Paying Agent as
set forth in the Indenture. 

(b) Purchase
of Debentures at Option of the Holder upon Change of Control.

Subject
to the terms and conditions of the Indenture, the Company shall become obligated
to purchase, at the option of the Holder, all or any portion of the Debentures
held by such Holder within 30 days after delivery of the Change of Control
Purchase Notice for a Change of Control Purchase Price equal to the price
payable as set forth below plus accrued and unpaid interest, if any, of such
Debenture on the Change of Control Purchase Date. The Change of Control Purchase
Price shall be paid in cash. 

	
       

       Purchase
      Date
	
       

      Purchase Price 

      as
      % of Principal

	
      From
      the date of issuance to and including September 30, 2005
	
      101%

	
      From
      October 1, 2005 to and including September 30, 2006
	
      103%

	
      From
      October 1, 2006 to and including September 30, 2007
	
      106%

	
      From
      October 1, 2007 to and including September 30, 2008
	
      110%

	
      From
      October 1, 2008 to and including June 30, 2009
	
      114%

	
      From
      July 1, 2009 to and including September 30, 2022
	
      101%

 

(c) Purchase
of Debentures at Option of Holder Upon an Asset Sale.

Subject
to the terms and the conditions of the Indenture, the Company shall become
obligated to purchase out of the Net Cash Proceeds (as defined in the Indenture)
of such sale, at the option of the Holder, all or any portion of the Debentures
held by such Holder within 20 Business Days after delivery of the Asset Sale
Purchase Notice for an Asset Sale Purchase Price equal to the Redemption Price
payable as set forth below plus accrued and unpaid interest, if any, of such
Debentures on the Asset Sale Purchase Date. The Asset Sale Purchase Price shall
be paid in cash. 

 

 

A-7

 

	
       

       Purchase
      Date
	
      Purchase Price

      as % of Principal

	
      From
      the date of issuance to and including September 30, 2005
	
      101
      %

	
      From
      October 1, 2005 to and including September 30, 2006
	
      103
      %

	
      From
      October 1, 2006 to and including September 30, 2007
	
      106
      %

	
      From
      October 1, 2007 to and including September 30, 2008
	
      110
      %

	
      From
      October 1, 2008 to and including June 30, 2009
	
      114
      %

	
      From
      July 1, 2009 to and including September 30, 2022
	
      100
      %

 

(d) Certain
Procedures.

Holders
have the right to withdraw any Purchase Notice or Change of Control or Asset
Sale Purchase Notice, as the case may be, by delivering to the Paying Agent a
written notice of withdrawal in accordance with the provisions of the Indenture.

If cash,
or Applicable Stock with respect to any applicable premium, sufficient to pay
the Purchase Price or Change of Control or Asset Sale Purchase Price, as the
case may be, of all Debentures or portions thereof to be purchased as of the
Purchase Date or the Change of Control or Asset Sale Purchase Date, as the case
may be, is deposited with the Paying Agent, on the Business Day following the
Purchase Date or the Change of Control or Asset Sale Purchase Date, interest
will cease to accrue on such Debentures (or portions thereof) immediately after
such Purchase Date or Change of Control or Asset Sale Purchase Date, and the
Holder thereof shall have no other rights as such other than the right to
receive the Purchase Price or Change of Control or Asset Sale Purchase Price
upon surrender of such Debenture. 

8. Notice
of Redemption, Change of Control Purchase or Asset Sale Purchase.

The
Company shall notify the Trustee and the Holders by mail of any redemption under
clause 5(a) above at least 30 but not more than 60 days prior to any redemption
and under clause 5(b) above no later than five (5) days after the receipt of an
Extraordinary Dividend and at least 20 Business Days but no more than 45
Business Days prior to any redemption, which notice will specify the amount of
the Extraordinary Dividend and the Redemption Date. Notice of a Change of
Control or of an Asset Sale pursuant to Section 7 of this Debenture will be
mailed no later than 30 days after the occurrence of a Change of Control or five
(5) days after the occurrence of an Asset Sale, as applicable, to the Trustee
and the Holders, each notice will contain certain information required by the
Indenture. If money sufficient to pay the Redemption, Change of Control or Asset
Sale Purchase Price of all Debentures (or portions thereof) to be redeemed on
the Redemption Date, Change of Control Purchase Date or Asset Sale Purchase Date
is deposited with the Paying Agent prior to or on the Redemption Date, or in the
case of a Change of Control Purchase Date or Asset Sale Purchase Date
immediately after such Change of Control Purchase Date or Asset Sale Purchase
Date, interest ceases to accrue on such Debentures or portions thereof.
Debentures in denominations larger than $1,000 of principal amount may be
redeemed in part but only in integral multiples of $1,000 of principal amount.

 

 

A-8

 

9. Conversion.

Subject
to and in compliance with the provisions of the Indenture, a Holder is entitled,
at such Holder’s option, to convert the Holder’s Debenture (or any portion of
the principal amount thereof that is $1,000 or an integral multiple $1,000),
into fully paid and nonassessable shares of Class A Common Stock at the
Conversion Rate in effect at the time of conversion. 

The
Company will notify Holders of any event triggering the right to convert the
Debentures as specified above in accordance with the Indenture. 

A
Debenture in respect of which a Holder has delivered a Purchase Notice or Change
of Control Purchase Notice, as the case may be, exercising the option of such
Holder to require the Company to purchase such Debenture may be converted only
if such Purchase Notice or Change of Control Purchase Notice, as the case may
be, is withdrawn in accordance with the terms of the Indenture. 

The
initial Conversion Price is $16.368 subject to adjustment in certain events
described in the Indenture. 

The
Conversion Rate, at any time, shall equal (A) $1,000 divided by (B) the
Conversion Price at such time, rounded to four (4) decimal places (rounded up if
the fifth decimal place thereof is five (5) or more and otherwise rounded down).

To
surrender a Debenture for conversion, a Holder must (1) complete and manually
sign the conversion notice below (or complete and manually sign a facsimile of
such notice) and deliver such notice to the Conversion Agent, (2) surrender the
Debenture to the Conversion Agent, (3) furnish appropriate endorsements and
transfer documents and (4) pay any transfer or similar tax, if required pursuant
to the Indenture. 

No
fractional shares of Class A Common Stock shall be issued upon conversion of any
Debenture. Instead of any fractional share of Class A Common Stock that would
otherwise be issued upon conversion of such Debenture, the Company shall pay a
cash adjustment as provided in the Indenture. 

No
payment or adjustment will be made for dividends on the shares of Class A Common
Stock, except as provided in the Indenture. 

On
conversion of a Debenture, accrued interest with respect to the converted
Debenture shall not be cancelled, extinguished or forfeited, but rather shall be
deemed to be paid in full to the Holder thereof through the delivery of the
Class A Common Stock (together with the cash payment, if any, in lieu of
fractional shares) in exchange for the Debenture being converted pursuant to the
terms hereof. 

 

 

A-9

 

Upon
conversion, the Company may choose to deliver, in lieu of Class A Common Stock,
cash or a combination of cash and Class A Common Stock in accordance with the
Indenture. 

If the
Company (i) is a party to a consolidation, merger or statutory share exchange
(ii) reclassifies the Class A Common Stock or (iii) conveys, transfers or leases
its properties and assets substantially as an entirety to any Person, the right
to convert a Debenture into shares of Class A Common Stock may be changed into a
right to convert it into securities, cash or other assets of the Company or such
other Person, in each case in accordance with the Indenture. 

10. Denominations;
Transfer; Exchange.

The
Debentures are in fully registered form, without coupons, in denominations of
$1,000 principal amount and integral multiples of $1,000. A Holder may transfer
or exchange Debentures in accordance with the Indenture. The Security Registrar
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law as
permitted by the Indenture. The Security Registrar need not transfer or exchange
any Debentures selected for redemption (except, in the case of a Debenture to be
redeemed in part, the portion of the Debenture not to be redeemed) or any
Debentures in respect of which a Purchase Notice or Change of Control Purchase
Notice has been given and not withdrawn (except, in the case of a Debenture to
be purchased in part, the portion of the Debenture not to be purchased) or any
Debentures for a period of 15 days before the mailing of a notice of redemption
of Debentures to be redeemed. 

11. Persons
Deemed Owners. 

The
registered Holder of this Debenture may be treated as the owner of this
Debenture for all purposes. 

12. Unclaimed
Money or Debentures. 

The
Trustee, the Paying Agent and the Conversion Agent shall return to the Company
upon written request any money or securities held by them for the payment of any
amount with respect to the Debentures that remains unclaimed for two years,
subject to applicable unclaimed property law. After return to the Company,
Holders entitled to such money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another person.

13. Amendment;
Waiver. 

The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the securities of the Debentures. Such amendment may be effected
under the Indenture at any time by the Company and the Trustee with the consent
of the Holders of not less than a majority in aggregate principal amount of the
outstanding Debentures affected thereby. The Indenture also contains provisions
permitting the Holders of not less than a majority in aggregate principal amount
of the Debentures at the time outstanding, on behalf of the Holders of all
outstanding Debentures, to waive compliance by the Company with certain
provisions of the Indenture. Furthermore, provisions in the Indenture permit the
Holders of not less than a majority in aggregate principal amount of the
outstanding Debentures to waive on behalf of all of the Holders of Debentures
certain past defaults under the Indenture and their consequences. Any such
consent or waiver shall be conclusive and binding upon the Holders of the
Debentures and upon all future Holders of the Debentures and of any Debenture
issued upon the registration of transfer hereof or in exchange for this
Debenture or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Debenture. 

A-10

 

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 interest on this Debenture (or in
the case of redemption, to receive the Redemption Price and accrued interest on
the Redemption Date, or in the case of a repurchase, to receive the Purchase
Price and accrued interest on the Purchase Date, or in the case of a Change of
Control or Asset Sale, to receive the Change of Control or Asset Sale Purchase
Price and accrued interest on the Change of Control or Asset Sale Purchase Date)
at the time, place, and rate, and in the coin or currency, herein prescribed.

14. Defaults
and Remedies. 

If any
Event of Default with respect to Debentures shall occur and be continuing, the
principal of all the Debentures may be declared due and payable in the manner
and with the effect provided in the Indenture. 

15. Trustee
Dealings with the Company. 

Subject
to certain limitations imposed by the Trust Indenture Act, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Debentures and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.

16. Calculations
in Respect of Debentures. 

The
Company or its agents will be responsible for making all calculations called for
under the Debentures, including, but not limited to, determination of the Market
Price, the market price of the Class A Common Stock, the Current Market Price
and the amounts of interest, if any, on the Debentures. Any calculations made in
good faith and without manifest error will be final and binding on Holders of
the Debentures. The Company or its agents will be required to deliver to the
Trustee a schedule of its calculations and the Trustee will be entitled to
conclusively rely upon the accuracy of such calculations without independent
verification. 

 

 

A-11

17. No
Recourse Against Others. 

No
recourse under or upon any obligation, covenant or agreement contained in the
Indenture or in this Debenture, or for any claim based thereon, shall be had
against any incorporator, shareholder, officer or director, as such, past,
present or future, of the Company, either directly or through 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 the Indenture and the obligations issued therein are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, shareholders, officers or
directors, as such, of the Company, or any of them, because of the creation of
the indebtedness hereby authorized; and that any and all such personal
liability, and any and all such rights and claims, are hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issuance of such Security. 

18. Authentication.

This
Debenture shall not be valid until an authorized signatory of the Trustee
manually signs the Trustee’s Certificate of Authentication on the other side of
this Debenture. 

19. Abbreviations.

Customary
abbreviations may be used in the name of a Holder or an assignee, such as TEN
COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint
tenants with right of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 

20. GOVERNING
LAW. 

THE LAWS
OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS DEBENTURE.

The
Company will furnish to any Holder upon written request and without charge a
copy of the Indenture which has in it the text of this Debenture. Requests may
be made to: 

PMA
Capital Corporation 

380
Sentry Parkway

Blue
Bell, Pennsylvania 19422

Attention:
Investor Relations Department 

 

A-12

	
      ASSIGNMENT
      FORM 
	
      CONVERSION
      NOTICE

	
      To
      assign this Debenture, fill in the form below: 
	
      To
      convert this Debenture into Class A Common Stock of the Company, check
      

      the
      box [ ] 

	
      I
      or we assign and transfer this Debenture to 
	 
	 	
      To
      convert only part of this Debenture, state the principal amount to be
      converted (which must be $1,000 or an integral multiple of $1,000):
      

	
      (Insert
      assignee’s soc. sec. or tax ID no.) 
	 
	 	
      If
      you want the stock certificate made out in another person’s name fill in
      the form below:

	 	 
	 	 
	
      (Print
      or type assignee’s name, address and zip code) 
	
      (Insert
      the other person’s soc. sec. or tax ID no.) 

	
      and
      irrevocably appoint
	 
	
      __________________________
      agent to transfer this 

      Debenture
      on the books of the Company. The agent 

      may
      substitute another to act for him.
	 
	 	
      (Print
      or type other person’s name, address and zip
code)

	
       

      Date:
      _________________________
	 	Your Signature:
	 __________________________
	 
	
      (Sign
      exactly as your name appears on the other side of this
      Debenture)

	 
	
      Signature
      Guaranteed

	
      Participant
      in a Recognized Signature Guarantee Medallion Program

	
      By:
      __________________________________
	 
	 	
      Authorized
      Signatory
	 

A-13PMA Capital Corporation Exhibit 4.11

Exhibit
4-11

EXECUTION
COPY

BANC
OF AMERICA SECURITIES LLC

$15,000,000
AGGREGATE PRINCIPAL AMOUNT

PMA
Capital Corporation 

6.50%
SENIOR SECURED CONVERTIBLE DEBENTURES 

DUE
2022

Registration
Rights Agreement

dated
as of November 15, 2004

 

REGISTRATION
RIGHTS AGREEMENT, dated as of November 15, 2004, between PMA Capital
Corporation, a Pennsylvania corporation (together with any successor entity,
herein referred to as the “Company”) and
Banc of America Securities LLC, in its capacity as initial purchaser (the
“Initial
Purchaser”) under
the Purchase Agreement (as defined below).

Pursuant
to the Purchase Agreement, dated November 10, 2004 (the “Purchase
Agreement”),
between the Company and the Initial Purchaser, the Initial Purchaser has agreed
to purchase from the Company $15,000,000 in aggregate principal amount of the
Company’s 6.50% Senior Secured Convertible Debentures due September 30, 2022
(the “Notes”). The
Notes will be convertible, on the terms, and subject to the conditions, set
forth in the Indenture (as defined herein), into fully paid, nonassessable
shares of Class A common stock, par value $5.00 per share, of the Company
together with the rights evidenced by such Common Stock to the extent provided
in the Rights Agreement dated as of May 3, 2000 between the Company and The Bank
of New York, as rights agent (collectively, the “Common
Stock”). To
induce the Initial Purchaser to purchase the Notes, the Company has agreed to
provide the registration rights set forth in this Agreement pursuant to Section
5(h) of the Purchase Agreement. 

The
parties hereby agree as follows:

1.
Definitions.
Capitalized
terms used in this Agreement without definition shall have their respective
meanings set forth in the Purchase Agreement. As used
in this Agreement, the following capitalized terms shall have the following
meanings:

“Additional
Amounts”: As
defined in Section 3(a) hereof.

“Additional
Amounts Payment Date”: Each
March 30 and September 30.

“Affiliate” of any
specified person means any other person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such specified
person. For purposes of this definition, control of a person means the power,
direct or indirect, to direct or cause the direction of the management and
policies of such person whether by contract or otherwise; and the terms
“controlling” and “controlled” have meanings correlative to the
foregoing.

“Agreement”: This
Registration Rights Agreement.

“Amendment
Effectiveness Deadline Date” has the
meaning set forth in Section 2(e) hereof.

“Blue
Sky Application”: As
defined in Section 6(a)(i) hereof.

 

 

“Business
Day”: The
definition of “Business Day” in the Indenture.

“Commission”:
Securities and Exchange Commission.

“Common
Stock”: As
defined in the preamble hereto.

“Company”: As
defined in the preamble hereto.

“Effectiveness
Period”: As
defined in Section 2(a)(iii) hereof.

“Effectiveness
Target Date”: As
defined in Section 2(a)(ii) hereof.

“Exchange
Act”:
Securities Exchange Act of 1934, as amended.

“Holder”: A
Person who owns, beneficially or otherwise, Transfer Restricted
Securities.

“Indemnified
Holder”: As
defined in Section 6(a) hereof.

“Indenture”: The
Indenture, dated as of November 15, 2004 among the Company and U.S. Bank
National Association, as trustee (the “Trustee”),
pursuant to which the Notes are to be issued, as such Indenture is amended,
modified or supplemented from time to time in accordance with the terms
thereof.

“Initial
Purchaser”: As
defined in the preamble hereto.

“Majority
of Holders”:
Holders holding over 50% of the aggregate principal amount of Notes outstanding;
provided that, for the purpose of this definition, a holder of shares of Common
Stock which constitute Transfer Restricted Securities and issued upon
conversion, redemption or repurchase of the Notes shall be deemed to hold an
aggregate principal amount of Notes (in addition to the principal amount of
Notes held by such holder) equal to the product of (x) the number of such shares
of Common Stock held by such holder and (y) the conversion price in effect at
the time of such conversion, redemption or repurchase as determined in
accordance with the Indenture.

“NASD”:
National Association of Securities Dealers, Inc. 

“Notes”: As
defined in the preamble hereto.

“Notice
and Questionnaire”: A
written notice executed by the respective Holder and delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex
A to the
Offering Memorandum of the Company, dated November 10, 2004 relating to the
Notes.

 

 

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“Notice
Holder”: On any
date, a Holder that has delivered a Notice and Questionnaire to the Company on
or prior to such date.

“Person”: An
individual, partnership, corporation, company, unincorporated organization,
trust, joint venture or a government or agency or political subdivision
thereof.

“Purchase
Agreement”: As
defined in the preamble hereto.

“Prospectus”: The
prospectus included in a Shelf Registration Statement, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all documents incorporated by reference
into such prospectus.

“Record
Holder”: With
respect to any Additional Amounts Payment Date, each Person who is a Holder on
the 15th day
preceding the relevant Additional Amounts Payment Date. In the case of a Holder
of shares of Common Stock issued upon conversion of the Notes, “Record Holder”
shall mean each Person who is a Holder of shares of Common Stock which
constitute Transfer Restricted Securities on the 15th day
preceding the relevant Additional Amounts Payment Date.

“Registration
Default”: As
defined in Section 3(a) hereof.

“Requisite
Information”: As
defined in Section 4(d) hereof.

“Securities
Act”:
Securities Act of 1933, as amended.

“Shelf
Filing Deadline”: As
defined in Section 2(a)(i) hereof.

“Shelf
Registration Statement”: As
defined in Section 2(a)(i) hereof.

“Special
Counsel”: means
Katten Muchin Zavis Rosenman or one such other successor counsel as shall be
specified by the Majority of Holders, but which may, with the written consent of
the Initial Purchaser (which shall not be unreasonably withheld), be another
nationally recognized law firm experienced in securities law matters designated
by the Company.

“Subsequent
Shelf Registration Statement” has the
meaning set forth in Section 2(c) hereof.

 

 

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“Suspension
Notice”: As
defined in Section 4(c) hereof.

“Suspension
Period”: As
defined in Section 4(b)(i) hereof.

“TIA”: Trust
Indenture Act of 1939, as amended, and the rules and regulations of the
Commission thereunder, in each case, as in effect on the date the Indenture is
qualified under the TIA.

“Transfer
Restricted Securities”: Each
Note and each share of Common Stock issued upon conversion of Notes until the
earlier of:

(i) the date
on which the offer and sale of such Note or such share of Common Stock issued
upon conversion has been effectively registered under the Securities Act and
such Note or such share of Common Stock have been disposed of in accordance with
the Shelf Registration Statement;

(ii) the date
on which such Note or such share of Common Stock issued upon conversion is
transferred in compliance with Rule 144 under the Securities Act or may be sold
or transferred by a person who is not an affiliate of the Company pursuant to
Rule 144 under the Securities Act (or any other similar provision then in force)
without any volume or manner of sale restrictions thereunder; or

(iii) the date
on which such Note or such share of Common Stock issued upon conversion ceases
to be outstanding (whether as a result of redemption, repurchase and
cancellation, conversion or otherwise).

“Underwritten
Registration”: A
registration in which Notes of the Company are sold to an underwriter for
reoffering to the public.

Unless
the context otherwise requires, the singular includes the plural, and words in
the plural include the singular.

2.
Shelf
Registration.

(a) The
Company shall:

(i) not later
than 90 days after the date hereof (the “Shelf
Filing Deadline”), cause
to be filed a registration statement pursuant to Rule 415 under the Securities
Act (the “Shelf
Registration Statement”), which
Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities held by Holders that have provided the information
required pursuant to the terms of Section 2(b) hereof;

 

 

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(ii) use
reasonable efforts to cause the Shelf Registration Statement to be declared
effective by the Commission not later than 180 days after the date hereof (the
“Effectiveness
Target Date”);
and

(iii) use
reasonable efforts to keep the Shelf Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
4(b) hereof to the extent necessary to ensure that (A) it is available for
resales by the Holders of Transfer Restricted Securities entitled, subject to
Section 2(b), to the benefit of this Agreement and (B) conforms with the
requirements of this Agreement and the Securities Act and the rules and
regulations of the Commission promulgated thereunder as announced from time to
time, for a period (the “Effectiveness
Period”) until
the earliest of:

(1) two years
following the last date of original issuance of any of the Notes;

(2) the date
when the Holders of Transfer Restricted Securities are able to sell all such
Transfer Restricted Securities immediately without restriction pursuant to the
volume limitation provisions of Rule 144 under the Securities Act; or

(3) the date
when all of the Transfer Restricted Securities have been sold either pursuant to
the Shelf Registration Statement or pursuant to Rule 144 under the Securities
Act or any similar provision then in force. 

(b) At the
time the Shelf Registration Statement is declared effective, each Holder that
became a Notice Holder on or prior to the date fifteen (15) Business Days prior
to such time of effectiveness shall be named as a selling securityholder in the
Shelf Registration Statement and the related Prospectus in such a manner as to
permit such Holder to deliver such Prospectus to purchasers of Transfer
Restricted Securities in accordance with applicable law. None of the Company’s
securityholders (other than the Holders of Transfer Restricted Securities) shall
have the right to include any of the Company’s securities in the Shelf
Registration Statement.

 

 

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(c) If the
Shelf Registration Statement or any Subsequent Shelf Registration Statement
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because all Transfer Restricted Securities registered
thereunder shall have been resold pursuant thereto or shall have otherwise
ceased to be Transfer Restricted Securities), the Company shall use reasonable
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within ten (10) Business Days of
such cessation of effectiveness amend the Shelf Registration Statement in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are Transfer
Restricted Securities (a “Subsequent
Shelf Registration Statement”). If a
Subsequent Shelf Registration Statement is filed, the Company shall use
reasonable efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.

(d) The
Company shall supplement and amend the Shelf Registration Statement if required
by the rules, regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration Statement, if required by the
Securities Act or as reasonably requested by the Initial Purchaser or by the
Trustee on behalf of the Holders of the Transfer Restricted Securities covered
by such Shelf Registration Statement.

(e) Each
Holder agrees that if such Holder wishes to sell Transfer Restricted Securities
pursuant to a Shelf Registration Statement and related Prospectus, it will do so
only in accordance with this Section 2(e) and Section 4(b). Each Holder wishing
to sell Transfer Restricted Securities pursuant to a Shelf Registration
Statement and related Prospectus agrees to deliver a Notice and Questionnaire to
the Company at least three (3) Business Days prior to any intended distribution
of Transfer Restricted Securities under the Shelf Registration Statement. From
and after the date the Shelf Registration Statement is declared effective the
Company shall, as promptly as practicable after the date a Notice and
Questionnaire is delivered, and in any event upon the later of (x) fifteen (15)
Business Days after such date (but no earlier than fifteen (15) Business Days
after effectiveness) or (y) fifteen (15) Business Days after the expiration of
any Suspension Period in effect when the Notice and Questionnaire is delivered
or put into effect within fifteen (15) Business Days of such delivery date or,
if the Company is required to file with the Commission a new Shelf Registration
Statement, within thirty (30) calendar days after the date a Notice and
Questionnaire is delivered:

 

 

6

(i) if
required by applicable law, file with the Commission a post-effective amendment
to the Shelf Registration Statement or an additional Shelf Registration
Statement or prepare and, if required by applicable law, file a supplement to
the related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that the Holder
delivering such Notice and Questionnaire is named as a selling securityholder in
the Shelf Registration Statement and the related Prospectus in such a manner as
to permit such Holder to deliver such Prospectus to purchasers of the Transfer
Restricted Securities in accordance with applicable law and, if the Company
shall file a post-effective amendment to the Shelf Registration Statement or
such additional Shelf Registration Statement, as the case may be, use reasonable
efforts to cause such post-effective amendment or such additional Shelf
Registration Statement, as the case may be, to be declared effective under the
Securities Act as promptly as is practicable, but in any event by the date (the
“Amendment
Effectiveness Deadline Date”) that is
sixty (60) days after the date such post effective amendment or such additional
Shelf Registration Statement is required by this clause to be
filed;

(ii) upon its
request, provide such Holder copies of any documents filed pursuant to Section
2(e)(i); and

(iii) notify
such Holder as promptly as practicable after the effectiveness under the
Securities Act of any post-effective amendment filed pursuant to Section
2(e)(i);

provided that if
such Notice and Questionnaire is delivered during a Suspension Period, the
Company shall so inform the Holder delivering such Notice and Questionnaire and
shall take the actions set forth in clauses (i), (ii) and (iii) above upon
expiration of the Suspension Period in accordance with Section 4(b).
Notwithstanding anything contained herein to the contrary, (i) the Company shall
not be under any obligation to name any Holder that is not a Notice Holder as a
selling securityholder in any Registration Statement or related Prospectus and
(ii) the Amendment Effectiveness Deadline Date shall be extended by up to
fifteen (15) Business Days from the expiration of a Suspension Period (and the
Company shall not incur any obligation to pay Additional Amounts during such
extension) if such Suspension Period shall be in effect on the Amendment
Effectiveness Deadline Date.

 

 

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3.
Additional
Amounts.

(a) If:

(i) the Shelf
Registration Statement is not filed with the Commission prior to or on the Shelf
Filing Deadline;

(ii) the Shelf
Registration Statement has not been declared effective by the Commission prior
to or on the Effectiveness Target Date;

(iii) the
Company has failed to perform its obligations set forth in Section 2(e) within
the time period required therein;

(iv) any
post-effective amendment to a Shelf Registration Statement or additional Shelf
Registration Statement filed pursuant to Section 2(e)(i) has not become
effective under the Securities Act on or prior to the Amendment Effectiveness
Deadline Date;

(v) except as
provided in Section 4(b)(i) hereof, the Shelf Registration Statement is filed
and declared effective but, during the Effectiveness Period, shall thereafter
cease to be effective or fail to be usable for its intended purpose without
being succeeded within ten (10) Business Days by a post-effective amendment to
the Shelf Registration Statement, a supplement to the Prospectus or a report
filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act that cures such failure and, in the case of a post-effective
amendment, is itself immediately declared effective; provided that the fact that
a Shelf Registration Statement is not usable by a particular Holder at any given
time solely as a result of the failure of such Holder to provide Requisite
Information with respect to it shall not be relevant for purposes of this clause
unless such Holder shall have provided such information to the Company and the
Company shall have failed to file an appropriate Prospectus supplement or
post-effective amendment to the shelf Registration Statement; or

 

 

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(vi) (A) prior
to or on the 45th day, as the case may be, of any Suspension Period, such
suspension has not been terminated or (B) Suspension Periods exceed an aggregate
of 120 days in any 360 day period,

(each
such event referred to in foregoing clauses (i) through (vi), a “Registration
Default”), the
Company hereby agrees to pay interest (“Additional
Amounts”) with
respect to the Transfer Restricted Securities as provided herein from and
including the day following the Registration Default to but excluding the
earlier of (1) the day on which the Registration Default has been cured and (2)
the date the Shelf Registration Statement is no longer required to be kept
effective as set out below:

(A) in
respect of the Notes, the Company agrees to pay interest to each Holder,
accruing at a rate (x) with respect to the first 90-day period during which a
Registration Default shall have occurred and be continuing, equal to 0.25% per
annum of the aggregate principal amount of the Notes held by such Holder, and
(y) with respect to the period commencing on the 91st day following the day the
Registration Default shall have occurred and be continuing, equal to 0.50% per
annum of the aggregate principal amount of the Notes held by such Holder;
provided that in
no event shall Additional Amounts accrue at a rate per year exceeding 0.50% of
the aggregate principal amount of the Notes held by such Holder;
and

(B) in
respect of Notes submitted for conversion into Common Stock during a
Registration Default only, the Company agrees to pay accrued and unpaid
Additional Amounts to the holders of such Notes calculated in accordance with
paragraph (A) up to and including the Conversion Date (as defined in the
Indenture) and to issue, or cause to be issued, additional shares to each Holder
that has submitted for conversion some or all of its Notes into Common Stock
equal to 3% of the applicable Conversion Rate (as defined in the Indenture) for
each $1,000 principal amount of Notes (except to the extent the Company elects
to deliver cash upon conversion in accordance with the terms of the Indenture);
and 

 

 

 

9

(C) in
respect of Common Stock, each Holder of such Common Stock will not be entitled
to any Additional Amounts.

Notwithstanding
the provisions in this Section 3(a), if any Additional Amounts are payable as a
result of the Company’s failure to add the name of a Holder as an additional
selling securityholder in the Shelf Registration Statement and the related
Prospectus in such a manner as to permit such Holder to deliver such Prospectus
to purchasers of the Transfer Restricted Securities in accordance with
applicable law and if such failure shall have not resulted in a Registration
Default with respect to the other Holders, only such Holder shall be entitled to
receive such Additional Amounts.

(b) All
Additional Amounts accrued in accordance with paragraph (A) above shall be paid
in arrears to Record Holders by the Company on each Additional Amounts Payment
Date. All Additional Amounts and additional shares of Common Stock payable in
accordance with paragraph (B) above shall be paid and delivered on the
settlement date relating to the applicable Conversion Date. Upon the cure of all
Registration Defaults relating to any particular Note or share of Common Stock,
the accrual of Additional Amounts with respect to such Note or share of Common
Stock will cease.

All
obligations of the Company set forth in this Section 3 that are outstanding with
respect to any Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time as all such
obligations with respect to such Transfer Restricted Security shall have been
satisfied in full. 

The
Additional Amounts set forth above shall be the exclusive monetary remedy
available to the Holders of Transfer Restricted Securities for each Registration
Default.

4.
Registration
Procedures.

(a) In
connection with the Shelf Registration Statement, the Company shall comply with
all the provisions of Section 4(b) hereof and shall use reasonable efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities, and pursuant thereto, shall as expeditiously as possible but no
later than the Shelf Filing Deadline prepare and file with the Commission a
Shelf Registration Statement relating to the registration on any appropriate
form under the Securities Act.

 

 

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(b) In
connection with the Shelf Registration Statement and any Prospectus required by
this Agreement to permit the sale or resale of Transfer Restricted Securities,
the Company shall:

(i) Subject
to any notice by the Company in accordance with this Section 4(b) of the
existence of any fact or event of the kind described in Section 4(b)(iii)(D),
use reasonable efforts to keep the Shelf Registration Statement continuously
effective during the Effectiveness Period; upon the occurrence of any event that
would cause the Shelf Registration Statement or the Prospectus contained therein
(A) to contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (B) not to be effective and usable for resale of
Transfer Restricted Securities during the Effectiveness Period, the Company
shall file promptly an appropriate amendment to the Shelf Registration
Statement, a supplement to the Prospectus or a report filed with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case
of clause (A), correcting any such misstatement or omission, and, in the case of
either clause (A) or (B), use reasonable efforts to cause such amendment to be
declared effective and the Shelf Registration Statement and the related
Prospectus to become usable for their intended purposes as soon as practicable
thereafter. Notwithstanding the foregoing, the Company may suspend the
effectiveness of the Shelf Registration Statement by written notice to the
Holders for a period not to exceed an aggregate of 45 days in any 90-day period
(each such period, a “Suspension
Period”)
if:

(x) an
event occurs and is continuing as a result of which the Shelf Registration
Statement, the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein would, in the Company’s judgment, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and

 

 

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(y) the
Company determines in good faith that the disclosure of such event at such time
would be seriously detrimental to the Company and its subsidiaries;

provided that,
the Suspension Periods shall not exceed an aggregate of 120 days in any 360-day
period. The Company shall not be required to specify in the written notice to
the Holders the nature of the event giving rise to the Suspension Period. Each
Holder agrees, by acquisition of a Transfer Restricted Security, to hold any
communication by the Company in response to a notice of proposed sale in
confidence. No Additional Amounts shall be payable or accrue during any
Suspension Period permitted under this Section 4(b)(i).

(ii) Prepare
and file with the Commission such amendments and post-effective amendments to
the Shelf Registration Statement as may be necessary to keep the Shelf
Registration Statement effective during the Effectiveness Period; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act, and to
comply fully with the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all Notes or shares of Common
Stock covered by the Shelf Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the sellers
thereof set forth in the Shelf Registration Statement or supplement to the
Prospectus.

(iii) Advise
the selling Holders, the Initial Purchaser and the Special Counsel promptly and,
if requested by any of them, to confirm such advice in writing, except as
provided in clause (D) below:

(A) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to the Shelf Registration Statement or any
post-effective amendment thereto, when the same has become
effective,

(B) of any
request by the Commission for amendments to the Shelf Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto if in the Company’s reasonable judgment such request could
cause a failure for the Company to cause the Shelf Registration Statement to be
declared effective under the Securities Act by the Effectiveness Target
Date,

 

 

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(C) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Shelf Registration Statement under the Securities Act or of the suspension by
any state securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, or

(D) of the
existence of any fact or the happening of any event, during the Effectiveness
Period, that makes any statement of a material fact made in the Shelf
Registration Statement, the Prospectus, any amendment or supplement thereto, or
any document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Shelf Registration Statement or the
Prospectus in order to make the statements therein not misleading.

If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Shelf Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company shall use reasonable efforts to obtain
the withdrawal or lifting of such order at the earliest possible time and will
provide to each Holder who is named in the Shelf Registration Statement prompt
notice of the withdrawal of any such order.

(iv) Make
available at the offices where normally kept during reasonable business hours
for inspection by a representative of the selling Holders, designated in writing
by a Majority of Holders whose Transfer Restricted Securities are included in
the Shelf Registration Statement, and any attorney or accountant retained by
such selling Holders, all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonably necessary to
enable them to conduct a reasonable investigation within the meaning of Section
11 of the Securities Act, and cause the Company’s respective officers,
directors, managers and employees to supply all information reasonably requested
by any such representative or representatives of the selling Holders, attorney
or accountant in connection therewith, in each case as customary for comparable
due diligence examinations; provided,
however, that
the Company shall not have any obligation to deliver information to any selling
Holder or representative pursuant to this Section 4(b)(iv) unless such selling
Holder or representative shall have executed and delivered a confidentiality
agreement in a form acceptable to the Company relating to such information.

 

 

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(v) If
requested by any selling Holders, promptly incorporate in the Shelf Registration
Statement or Prospectus within the applicable time period set forth in Section
2(e), pursuant to a supplement or post-effective amendment if necessary, such
information concerning such selling Holders as such selling Holders may
reasonably request to have included therein, including, without limitation,
information relating to the “Plan of Distribution” of the Transfer Restricted
Securities.

(vi) Furnish
to each selling Holder, the Initial Purchaser and the Special Counsel upon their
request, without charge, at least one copy of the Shelf Registration Statement,
as first filed with the Commission, and of each amendment thereto (and any
documents incorporated by reference therein or exhibits thereto (or exhibits
incorporated in such exhibits by reference) as such Person may reasonably
request).

(vii) Deliver
to each selling Holder, the Initial Purchaser and the Special Counsel without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
and any amendment or supplement thereto as such Persons reasonably may request;
subject to any notice by the Company in accordance with this Section 4(b) of the
existence of any fact or event of the kind described in Section 4(b)(iii)(D),
the Company hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders in connection with the
offering and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto.

 

 

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(viii) Before
any public offering of Transfer Restricted Securities, cooperate with the
selling Holders and Special Counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or Blue
Sky laws of such jurisdictions in the United States as the selling Holders may
reasonably request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the Shelf Registration Statement; provided,
however, that
the Company shall not be required (A) to register or qualify as a foreign
corporation or a dealer of securities where it is not now so qualified or to
take any action that would subject it to the service of process in any
jurisdiction where it is not now so subject or (B) to subject itself to general
or unlimited service of process or to taxation in any such jurisdiction if they
are not now so subject.

(ix) Cooperate
with the selling Holders to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and not
bearing any restrictive legends (unless required by applicable securities laws);
and enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders may request at least two Business Days
before any sale of Transfer Restricted Securities.

(x) Use
reasonable efforts to cause the Transfer Restricted Securities covered by the
Shelf Registration Statement to be registered with or approved by such other
U.S. governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities.

(xi) Subject
to Section 4(b)(i) hereof, if any fact or event contemplated by Section
4(b)(iii)(D) hereof shall exist or have occurred, use reasonable efforts to
prepare a supplement or post-effective amendment to the Shelf Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of Transfer Restricted Securities, the Prospectus will not
contain an 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 in which they are made, not
misleading.

 

 

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(xii) Obtain
CUSIP numbers for all Transfer Restricted Securities not later than the
effective date of the Shelf Registration Statement and provide the Trustee under
the Indenture with certificates for the Notes that are in a form eligible for
deposit with The Depository Trust Company.

(xiii) Cooperate
and assist in any filings required to be made with the NASD and in the
performance of any due diligence investigation by any underwriter that is
required to be retained in accordance with the rules and regulations of the
NASD.

(xiv) Otherwise
use reasonable efforts to comply with all applicable rules and regulations of
the Commission and all reporting requirements under the rules and regulations of
the Exchange Act.

(xv) Cause the
Indenture to be qualified under the TIA not later than the effective date of the
Shelf Registration Statement required by this Agreement, and, in connection
therewith, cooperate with the Trustee and the holders of Notes to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use
reasonable efforts to cause the Trustee thereunder to execute all documents that
may be required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner.

(xvi) Cause all
Common Stock covered by the Shelf Registration Statement to be listed or quoted,
as the case may be, on each securities exchange or automated quotation system on
which Common Stock is then listed or quoted.

(xvii) Provide
to each Holder and the Initial Purchaser upon written request each document
filed with the Commission pursuant to the requirements of Section 13 and Section
15 of the Exchange Act after the effective date of the Shelf Registration
Statement, unless such document is available through the Commission’s EDGAR
system.

 

 

16

(c) Each
Holder agrees by acquisition of a Transfer Restricted Security that, upon
receipt of any notice (a “Suspension
Notice”) from
the Company of the existence of any fact of the kind described in Section
4(b)(iii)(D) hereof, such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the Shelf Registration Statement
until:

(i) such
Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 4(b)(xi) hereof; or

(ii) such
Holder is advised in writing by the Company that the use of the Prospectus may
be resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus unless such filings are
made pursuant to the requirements of Section 13 and Section 15 of the Exchange
Act and such filings are available through the Commission’s EDGAR system.

If so
directed by the Company, each Holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such
Holder’s possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice of
suspension.

(d) Each
Holder agrees, by acquisition of a Transfer Restricted Security, that no Holder
shall be entitled to sell any of such Transfer Restricted Securities pursuant to
a Registration Statement or to receive a Prospectus relating thereto, unless
such Holder has furnished the Company with a completed Notice and Questionnaire
as required pursuant to Section 2(e) hereof (including the information required
to be included in such Notice and Questionnaire) and the information set forth
in the next sentence. Each Notice Holder agrees promptly to furnish to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Notice Holder not
misleading and any other information regarding such Notice Holder and the
distribution of such Transfer Restricted Securities as the Company may from time
to time reasonably request in writing (“Requisite
Information”). Any
sale of any Transfer Restricted Securities by any Holder shall constitute a
representation and warranty by such Holder that the information relating to such
Holder and its plan of distribution is as set forth in the Prospectus delivered
by such Holder in connection with such disposition, that such Prospectus does
not as of the time of such sale contain any untrue statement of a material fact
relating to or provided by such Holder to its plan of distribution and that such
Prospectus does not as of the time of such sale omit to state any material fact
relating to or provided by such Holder or its plan of distribution necessary to
make the statements in such Prospectus, in the light of the circumstances under
which they were made not misleading.

 

 

17

5.
Registration
Expenses.

All
expenses incident to the Company’s performance of or compliance with this
Agreement shall be borne by the Company regardless of whether a Shelf
Registration Statement becomes effective, including, without limitation:

(i) all
registration and filing fees and expenses (including filings made with the
NASD);

(ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; 

(iii) all
expenses of printing (including printing of Prospectuses and certificates for
the Common Stock to be issued upon conversion of the Notes) and the Company’s
expenses for messenger and delivery services and telephone; 

(iv) all fees
and disbursements of counsel to the Company;

(v) all
application and filing fees in connection with listing (or authorizing for
quotation) the Common Stock on a national securities exchange or automated
quotation system pursuant to the requirements hereof; 

(vi) all fees
and disbursements of independent certified public accountants of the Company;
and

(vii) the
reasonable fees and disbursements of the Special Counsel.

The
Company shall bear its internal expenses (including, without limitation, all
salaries and expenses of their officers and employees performing legal,
accounting or other duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by the
Company.

6.
Indemnification
And Contribution.

 

 

18

(a) The
Company agrees to indemnify and hold harmless each Holder of Transfer Restricted
Securities covered by the Shelf Registration Statement (including in such
capacity, the Initial Purchaser), its directors, officers, and employees and
each person, if any, who controls any such Holder within the meaning of the
Securities Act or the Exchange Act (each, an “Indemnified
Holder”),
against any loss, claim, damage, liability or expense, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to resales of the Transfer Restricted
Securities), to which such Indemnified Holder may become subject, insofar as any
such loss, claim, damage, liability or action arises out of, or is based
upon:

(i) any
untrue statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement as originally filed or in any amendment thereof, in
any Prospectus, or in any amendment or supplement thereto, or

(ii) the
omission or alleged omission to state therein any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,

and
agrees to reimburse each Indemnified Holder promptly upon demand for any legal
or other expenses reasonably incurred by such Indemnified Holder in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided,
however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder (or its related Indemnified Holder)
specifically for use therein. The foregoing indemnity agreement is in addition
to any liability which the Company may otherwise have. 

(b) Each
Holder, severally and not jointly, agrees to indemnify and hold harmless the
Company, its respective directors, officers and employees and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act to the same extent as the foregoing indemnity from the Company to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Company by or on behalf of such Holder specifically
for inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement set forth in this Section shall be in addition to any
liabilities which any such Holder may otherwise have. In no event shall any
Holder, its directors, officers or any person who controls such Holder be liable
or responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Shelf Registration Statement exceeds (i) the amount
paid by such Holder for such Transfer Restricted Securities and (ii) the amount
of any damages that such Holder, its directors, officers or any person who
controls such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.

 

 

19

(c) Promptly
after receipt by an indemnified party under this Section 6 of notice of any
claim or the commencement of any action, the indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party in writing of the claim or the
commencement of that action; provided,
however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 6 except to the extent it has been
materially prejudiced by such failure and, provided,
further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided,
however, that the
Holders shall have the right to employ a single counsel to represent jointly the
Holders and their officers, employees and controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Holders against the Company under this Section 6 if the Holders
seeking indemnification shall have been advised by legal counsel that there may
be one or more legal defenses available to such Holders and their respective
officers, employees and controlling persons that are different from or
additional to those available to the Company, and in that event, the fees and
expenses of such separate counsel shall be paid by the Company. No indemnifying
party shall:

 

 

20

(i) without
the prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld) settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or

(ii) be liable
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment for the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss of liability by reason of such
settlement or judgment.

(d) The
indemnifying party under this Section shall not be liable for any settlement of
any proceeding effected without its written consent, which shall not be withheld
unreasonably, but if settled with such consent or if there is a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
6(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent (x) includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, suit or proceeding and (y) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.

 

 

21

(e) If the
indemnification provided for in this Section 6 shall for any reason be
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b) in respect of any loss, claim, damage or liability (or action in
respect thereof) referred to therein, each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability (or
action in respect thereof):

(i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company from the offering and sale of the Transfer Restricted Securities on the
one hand and a Holder with respect to the sale by such Holder of the Transfer
Restricted Securities on the other, or

(ii) if the
allocation provided by Section (6)(e)(i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in Section 6(e)(i) but also the relative fault of the Company on the
one hand and the Holders on the other in connection with the statements or
omissions or alleged statements or alleged omissions that resulted in such loss,
claim, damage or liability (or action in respect thereof), as well as any other
relevant equitable considerations.

The
relative benefits received by the Company on the one hand and a Holder on the
other with respect to such offering and such sale shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Notes
purchased under the Purchase Agreement (before deducting expenses) received by
the Company, on the one hand, bear to the total proceeds received by such Holder
with respect to its sale of Transfer Restricted Securities on the other. The
relative fault of the parties shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Holders on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each Holder agree that it would not
be just and equitable if the amount of contribution pursuant to this Section
6(e) 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 first sentence of this paragraph
(e).

 

 

22

The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 6 shall be deemed to include, for purposes of this Section 6, any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending or preparing to defend any such action or
claim.

Notwithstanding
the provisions of this Section 6, no Holder shall be required to contribute any
amount in excess of the amount by which the total price at which the Transfer
Restricted Securities purchased by it were resold exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of any
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. The Holders’ obligations to
contribute as provided in this Section 6(e) are several and not
joint.

(f) The
provisions of this Section 6 shall remain in full force and effect, regardless
of any investigation made by or on behalf of any Holder, the Company or any of
the officers, directors or controlling persons referred to in Section 6 hereof,
and will survive the sale by a Holder of Transfer Restricted
Securities.

7.
Rule
144A and Rule 144. The
Company agrees with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which the Company (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder, to such Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make
all filings required thereby in a timely manner in order to permit resales of
such Transfer Restricted Securities pursuant to Rule 144.

8.
No
Participation In Underwritten Registrations. No Holder
may participate in any Underwritten Registration hereunder.

 

 

23

9.
Miscellaneous.

(a) Remedies. The
Company acknowledges and agrees that any failure by the Company to comply with
its obligations under Section 2 hereof may result in material irreparable injury
to the Initial Purchaser or the Holders for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries
precisely, and that, in the event of any such failure, the Initial Purchaser or
any Holder may obtain such relief as may be required to specifically enforce the
Company’s obligations under Section 2 hereof. The Company further agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.

(b) Actions
Affecting Transfer Restricted Securities. The
Company shall not, directly or indirectly, take any action with respect to the
Transfer Restricted Securities as a class that would adversely affect the
ability of the Holders of Transfer Restricted Securities to include such
Transfer Restricted Securities in a registration undertaken pursuant to this
Agreement.

(c) No
Inconsistent Agreements. The
Company has not, as of the date hereof, entered into, nor shall, on or after the
date hereof, enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. In addition, the Company shall
not grant to any of its securityholders (other than the Holders of Transfer
Restricted Securities in such capacity) the right to include any of its
securities in the Shelf Registration Statement provided for in this Agreement
other than the Transfer Restricted Securities.

(d) Amendments
and Waivers. This
Agreement may not be amended, modified or supplemented, and waivers or consents
to or departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of a Majority of Holders; provided,
however, that
with respect to any matter that directly or indirectly adversely affects the
rights of the Initial Purchaser hereunder, the Company shall obtain the written
consent of the Initial Purchaser against which such amendment, qualification,
supplement, waiver or consent is to be effective. Notwithstanding the foregoing
(except the foregoing proviso), a waiver or consent to depart from the
provisions hereof, with respect to a matter, which relates exclusively to the
rights of Holders whose securities are being sold pursuant to a Shelf
Registration Statement and does not directly or indirectly adversely affect the
rights of other Holders, may be given by the Majority of Holders, determined on
the basis of Notes being sold rather than registered under such Shelf
Registration Statement.

 

 

24

(e) Notices. All
notices and other communications provided for or permitted hereunder shall be
made in writing by hand delivery, first class mail (registered or certified,
return receipt requested), telex, facsimile transmission, or air courier
guaranteeing overnight delivery:

(i) if to a
Holder, at the address set forth on the records of the registrar under the
Indenture or the transfer agent of the Common Stock, as the case may be;
and

(ii) if to the
Company, initially at its address set forth in the Purchase
Agreement.

All such
notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; three Business Days after being
deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if
transmitted by facsimile; at the time acknowledged by a return receipt, if sent
by electronic mail; and on the next Business Day, if timely delivered to an air
courier guaranteeing overnight delivery.

Any party
hereto may change the address for receipt of communications by giving written
notice to the others.

(f) Successors
and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders of Transfer Restricted
Securities. The Company hereby agrees to extend the benefit of this Agreement to
any Holder and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.

(g) Counterparts. This
Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.

(h) Notes
Held by the Company or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Transfer
Restricted Securities is required hereunder, Transfer Restricted Securities held
by the Company or its Affiliates (other than subsequent Holders if such
subsequent Holders are deemed to be Affiliates solely by reason of their holding
of such Notes) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

 

 

25

(i) Headings. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

(j) Governing
Law. This
Agreement shall be governed by and construed in accordance with the law of the
State of New York.

(k) Severability. If any
one or more of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.

(l) Entire
Agreement. This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the registration
rights granted by the Company with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.

 

[SIGNATURE
PAGE FOLLOWS]

 

 

26

 

 

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.

PMA
CAPTAL CORPORATION 

By
/s/
William Hitselberger

  Name:
William Hitselberger

Title:
Executive Vice President and

Chief
Financial Officer

BANC OF
AMERICA SECURITIES LLC

By
/s/
Derek Dillon

 Name:
Derek Dillon 

Title:
Managing Director

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