Document:

Third Supplemental Indenture

 Exhibit 4.1 
  
 EXECUTION COPY 

 EVEREST REINSURANCE HOLDINGS, INC. 
  
 To 
  
 JPMORGAN CHASE BANK 
                                       
    Trustee 
  

  

THIRD SUPPLEMENTAL INDENTURE 
  
 Dated as of October 12, 2004 
  
 5.40% Senior Notes due October 15, 2014 
  

  

 TABLE OF CONTENTS1 
  

					
	 	 	 	  	Page

	 	 	ARTICLE I	  	 
			
	 	 	5.40% Senior Notes due October 15, 2014	  	 
			
	 SECTION 101.
	 	Establishment.	  	1
	 SECTION 102.
	 	Definitions.	  	3
	 SECTION 103.
	 	Payment of Principal and Interest.	  	3
	 SECTION 104.
	 	Denominations.	  	4
	 SECTION 105.
	 	Global Securities.	  	4
	 SECTION 106.
	 	Redemption at the Option of the Company.	  	5
	 SECTION 107.
	 	Paying Agent.	  	7
			
	 	 	ARTICLE II	  	 
			
	 	 	Miscellaneous Provisions	  	 
			
	 SECTION 201.
	 	Recitals by Company.	  	7
	 SECTION 202.
	 	Ratification and Incorporation of Original Indenture.	  	7
	 SECTION 203.
	 	Executed in Counterparts.	  	7
		
	 Exhibit A. Form of 5.40% Senior Note due October 15, 2014
	  	 
		
	 Exhibit B. Certificate of Authentication
	  	 

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

  

 -i- 

 THIS THIRD SUPPLEMENTAL INDENTURE is made as of the 12th day of October, 2004, by and between EVEREST REINSURANCE HOLDINGS, INC., a Delaware corporation, having its principal office at 477 Martinsville Road,
P.O. Box 830, Liberty Corner, New Jersey 07938 (the “Company”), and JPMORGAN CHASE BANK, a New York banking corporation, as Trustee (the “Trustee”). 
  
 W I T N E S S E T H: 
  
 WHEREAS, the Company has heretofore entered into an Indenture, dated as of
March 14, 2000 (the “Original Indenture”), with JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee; 
  
 WHEREAS, the Original Indenture is incorporated herein by this reference and the Original Indenture, as amended and supplemented to the date hereof,
including by this Supplemental Indenture, is herein called the “Indenture”; 
  
 WHEREAS, under the Indenture, a new series of Securities may at any time be established in accordance with the provisions of the Indenture and the terms of such series may be described by a supplemental indenture
executed by the Company and the Trustee; 
  
 WHEREAS, the Company
proposes to create under the Indenture a new series of Securities; 
  
 WHEREAS, additional Securities of other series hereafter established, except as may be limited in the Indenture as at the time supplemented and modified, may be issued from time to time pursuant to the Indenture as at the time supplemented
and modified; and 
  
 WHEREAS, all conditions necessary to
authorize the execution and delivery of this 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 
  
 5.40%
Senior Notes due October 15, 2014 
  
 SECTION
101. Establishment. 
  
 There is hereby established a new
series of Securities to be issued under the Indenture, to be designated as the Company’s 5.40% Senior Notes due October 15, 2014 (the “Notes”). 
  
 There are to be authenticated and delivered $250,000,000 principal amount of Notes, and no further Notes shall be
authenticated and delivered except as provided by Section 301(2), 304, 305, 306, 906 or 1107 of the Original Indenture. The Notes shall be issued in fully registered form without coupons. 

 The Notes shall be in substantially the form set out in Exhibit A hereto, and the form of the
Trustee’s Certificate of Authentication for the Notes shall be in substantially the form set forth in Exhibit B hereto. 
  
 Each Note shall be dated the date of authentication thereof and shall bear interest from the date of original issuance thereof or from the most recent
Interest Payment Date to which interest has been paid or duly provided for. 
  
 There shall be the following additions to the covenants set forth in the Original Indenture with respect to the Notes, which shall be effective only so long as any of the Notes are Outstanding: 
  
 Limitations on Sales of Restricted Subsidiaries’ Capital Stock.
The Company shall not sell, transfer or otherwise dispose of any shares of capital stock of a Restricted Subsidiary (other than directors’ qualifying shares or sales to Restricted Subsidiaries), and it shall not permit any Restricted Subsidiary
to sell, transfer or otherwise dispose of any shares of capital stock of any other Restricted Subsidiary (other than directors’ qualifying shares or sales or other transfers to the Company or to a Restricted Subsidiary), unless the entire
capital stock of such Restricted Subsidiary at the time owned by the Company and its Restricted Subsidiaries shall be disposed of at the same time for a consideration consisting of cash or other property, which, in the opinion of the Board of
Directors of the Company, is at least equal to the fair value thereof. 
  
 Limitations on Liens on Restricted Subsidiaries’ Capital Stock. The Company shall not, and it shall not permit any Restricted Subsidiary at any time directly or indirectly to, create, assume, incur or permit to exist any
indebtedness secured by a pledge, lien or other encumbrance on the capital stock of any Restricted Subsidiary without making effective provision whereby the Notes then Outstanding (and, if the Company so elects, any other indebtedness ranking on a
parity with the Notes) shall be equally and ratably secured with such secured indebtedness so long as such other indebtedness shall be secured. 
  
 For purposes of the Indenture, “Restricted Subsidiary” means a Subsidiary which is a regulated insurance company principally engaged in
one or more of the life, annuity, property and casualty insurance businesses; provided, however, that no such Subsidiary shall be a Restricted Subsidiary if (1) (a) the total assets of such Subsidiary are less than 10% of the total assets of
the Company and its consolidated Subsidiaries (including such Subsidiary), in each case as set forth on the most recent fiscal year-end balance sheets of such Subsidiary and the Company and its consolidated Subsidiaries, respectively, and computed
in accordance with United States generally accepted accounting principles (“GAAP”), and (b) the total revenues of such Subsidiary are less than 10% of the total revenues of the Company and its consolidated Subsidiaries (including
such Subsidiary), in each case as set forth on the most recent fiscal year-end 
  

 -2- 

 income statements of such Subsidiary and the Company and its consolidated Subsidiaries, respectively, and computed in
accordance with GAAP or (2) in the judgment of the Board of Directors, as evidenced by a Board Resolution, such Subsidiary is not material to the financial condition of the Company and its consolidated Subsidiaries taken as a whole. 
  
 The preceding additional covenants are included in the Original Indenture
solely for the benefit of the Holders of the Notes, and for purposes of Sections 1009 and 1303 of the Original Indenture, shall be deemed covenants provided by Sections 301(19), 901(1) and 901(3) thereof for the benefit of such Holders 

 
 SECTION 102. 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. 
  
 “Interest Payment Dates” means April 15 and October 15 of each year, commencing April 15, 2005. 

 
 “Original Issue Date” means October 12, 2004. 

 
 “Regular Record Date” means, with respect to each
Interest Payment Date, the close of business on the respective April 1 and October 1 (whether or not a Business Day) prior to such Interest Payment Date. 
  
 “Stated Maturity” means October 15, 2014. 
  
 SECTION 103. Payment of Principal and Interest. 
  
 The principal of the Notes shall be due at Stated Maturity (unless earlier redeemed). The unpaid principal amount of the
Notes shall bear interest at the rate of 5.40% per annum until paid or duly provided for, such interest to accrue from October 12, 2004 or from the most recent Interest Payment Date to which interest has been paid or duly provided for. Interest
shall be paid semi-annually in arrears on each Interest Payment Date to the Person or Persons in whose name the Notes are registered on the Regular Record Date for such Interest Payment Date; provided, however, that interest payable at the
Stated Maturity of principal or on a Redemption Date as provided herein shall be paid to the Person to whom principal is payable. Any such interest that is not so punctually paid or duly provided for shall forthwith cease to be payable to the
Holders on such Regular Record Date and may either be paid to the Person or Persons in whose name the Notes are registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee
(“Special Record Date”), notice whereof shall be given to Holders of the Notes not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange, if any, on which the Notes may be listed, and upon such notice as may be required by any such exchange, all as more fully provided in the Original Indenture. 
  

 -3- 

 Payments of interest on the Notes shall include interest accrued to but excluding the respective Interest
Payment Dates. Interest payments for the Notes shall be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Notes is not a Business Day, then payment of the
interest payable on such date shall be made on the next succeeding day that is a Business Day (and without any interest or payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally
payable. “Business Day” means a day other than (i) a Saturday or a Sunday, (ii) a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on which
the Corporate Trust Office is closed for business. 
  
 Payment of
principal of, premium, if any, and interest on the Notes shall be made 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. Payments of principal of, premium, if
any, and interest on Notes represented by a Global Security shall be made by wire transfer of immediately available funds to the Holder of such Global Security; provided, however, that in the case of payments of principal and premium, if any,
such Global Security is first surrendered to the Paying Agent. If any of the Notes are no longer represented by a Global Security, (i) payments of principal, premium, if any, and interest due at the Stated Maturity or on a Redemption Date shall be
made at the office of the Paying Agent upon surrender of such Notes to the Paying Agent and (ii) payments of interest shall be made, at the option of the Company, subject to such surrender where applicable, (A) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register or (B) by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen
(16) days prior to the date for payment by the Person entitled thereto. 
  
 SECTION 104. Denominations. 
  
 The Notes shall be issued in denominations of $2,000 or any integral multiple of $1,000 in excess thereof. 
  
 SECTION 105. Global Securities. 
  
 The Notes shall initially be issued in the form of one or more Global Securities registered in the name of the Depositary (which initially shall be The
Depository Trust Company) or its nominee. Except under the limited circumstances described below, Notes represented by such Global Security or Global Securities shall not be exchangeable for, and shall not otherwise be issuable as, Notes 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. 
  

 -4- 

 Subject to the procedures of the Depositary, a Global Security shall be exchangeable for Notes registered
in the names of persons other than the Depositary or its nominee only if (i) the Depositary notifies the Trustee and the Company that it is no longer willing or able to properly discharge its responsibilities as a Depositary for such Global Security
and no qualified successor Depositary shall have been appointed by the Company within ninety (90) days of receipt by the Company of such notification, or if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act
at a time when the Depositary is required to be so registered to act as such Depositary and no qualified successor Depositary shall have been appointed by the Company within ninety (90) days after it becomes aware of such cessation, (ii) the Company
executes and delivers to the Trustee a Company Order stating that the Company elects to terminate the book-entry system through the Depositary, or (iii) there shall have occurred and be continuing an Event of Default with respect to the Global
Security. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Notes as provided in the Original Indenture. 
  
 SECTION 106. Redemption at the Option of the Company. 
  
 The Notes shall be redeemable, in whole or from time to time in part, at the option of the Company on any date (a
“Redemption Date”), at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest
thereon (exclusive of interest accrued to such Redemption Date) discounted to such Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus twenty (20) basis points, plus, in
either case, accrued and unpaid interest on the principal amount being redeemed to such Redemption Date. 
  
 “Comparable Treasury Issue” means the United States Treasury security selected by the Independent Investment Banker as having a maturity
comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Notes. 
  
 “Comparable Treasury
Price” means, with respect to any Redemption Date for the Notes, the average of the Reference Treasury Dealer Quotations for the Redemption Date. 
  
 “Independent Investment Banker” means either Goldman, Sachs & Co. or Wachovia Capital Markets, LLC (as selected by the Company) and
any successor firm or, if each firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Trustee after consultation with the Company. 
  

 -5- 

 “Reference Treasury Dealer” means Goldman, Sachs & Co. and any two (2) of the
following as determined by the Company: Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc.; provided, however, that (i) if any of the foregoing shall cease to be a primary treasury dealer in
U.S. Government Securities, the Company will substitute therefor another primary treasury dealer in its place and (ii) if the Company fails to select a substitute within a reasonable period of time, then the substitute will be any other primary
treasury dealer in U.S. Government Securities selected by the Trustee after consultation with the Company. 
  
 “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. New York City
time on the third (3rd) Business Day preceding such Redemption Date. 
  
 “Treasury Rate” means, with respect to any Redemption Date,
the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date. The Treasury Rate shall be calculated on the third (3rd) Business Day
preceding the Redemption Date. 
  
 Notwithstanding Section 1104 of
the Original Indenture, the notice of redemption with respect to the foregoing redemption need not set forth the Redemption Price or an estimate thereof, but only the manner of calculation thereof. 
  
 The Company shall notify the Trustee of the Redemption Price with respect to
the foregoing redemption promptly after the calculation thereof. The Trustee shall not be responsible for calculating said Redemption Price. 
  
 The third paragraph of Section 1104 of the Original Indenture shall be applicable to the foregoing redemption. 
  
 If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions of the Notes to be redeemed by such method as the Trustee shall deem fair and appropriate. The Trustee may select for redemption Notes and portions of Notes in amounts of whole multiples of $1,000; provided, that the
unredeemed portion of any Note may not be less than $2,000. 
  
 The Notes shall not have a sinking fund. 
  

 -6- 

 SECTION 107. Paying Agent. 
  
 The Trustee shall initially serve as Paying Agent with respect to the Notes,
with the Place of Payment initially being the Corporate Trust Office. 
  
 ARTICLE II 
  
 Miscellaneous Provisions

  
 SECTION 201. Recitals by Company.

  
 The recitals in this 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 Notes and this Supplemental
Indenture as fully and with like effect as if set forth herein in full. 
  
 SECTION 202. 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 Supplemental Indenture shall
be read, taken and construed as one and the same instrument. 
  
 SECTION 203. Executed in Counterparts. 
  
 This Supplemental Indenture may be 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. 
  

 -7- 

 IN WITNESS WHEREOF, each party hereto has caused this instrument to be signed in its name and behalf by
its duly authorized officers, all as of the day and year first above written. 
  

							
	 	 	 	 	 EVEREST REINSURANCE HOLDINGS, INC.

				
	 	 	 	 	 By:
	 	 /s/ Stephen L. Limauro

	 	 	 	 	 Name:
	 	 Stephen L. Limauro

	 	 	 	 	 Title:
	 	 Executive Vice President & Chief Financial Officer

				
	 Attest:
	 	 /s/ Joseph A. Gervasi

	 	 	 	 
			
	 	 	 	 	 JPMORGAN CHASE BANK,
              as Trustee

				
	 	 	 	 	 By:
	 	 /s/ James D. Heaney

	 	 	 	 	 Name:
	 	 James D. Heaney

	 	 	 	 	 Title:
	 	 Vice President

				
	 Attest:
	 	 /s/ Virginia Dominguez

	 	 	 	 

  

 -8- 

 Exhibit A 
  

Form of 
 5.40% Senior Note due
October 15, 2014 
  
 EVEREST REINSURANCE HOLDINGS, INC.

 5.40% Senior Note due October 15, 2014 
  

			
	 No.
	 	 
		
	 CUSIP No. 299808 AD 7
	 	 Principal Amount: $

  
 Regular Record Date:
close of business on the respective April 1 and October 1 (whether or not a Business Day) prior to the relevant Interest Payment Date. 
  
 Original Issue Date: October 12, 2004 
  
 Stated Maturity: October 15, 2014 
  
 Interest Payment Dates: April 15 and October 15 
  
 Interest Rate: 5.40% per annum 
  
 Authorized Denomination: $2,000 or any integral multiple of $1,000 in excess thereof 
  
 EVEREST REINSURANCE HOLDINGS, INC., a Delaware corporation (the “Company,” which term includes any
successor corporation under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to                 , or registered assigns, the
principal sum of                  DOLLARS ($                 ) on the Stated Maturity
shown above and to pay interest thereon from the Original Issue Date shown above, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on each Interest Payment Date as specified
above, commencing on April 15, 2005, and on the Stated Maturity and each Redemption Date at the rate per annum shown above (the “Interest Rate”) until the principal hereof is paid or made available for payment and on any overdue
principal and premium, if any, and on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date (other than an Interest Payment Date that is the Stated Maturity or a
Redemption Date) will, as provided in the Indenture, be paid to the Person in whose name this 5.40% Senior Note due October 15, 2014 (this “Security”) is registered on the Regular Record Date as specified above next preceding such
Interest Payment Date; provided, however, that any interest payable at Stated Maturity or on a Redemption Date will be paid to the Person to whom principal is payable. Except as otherwise provided in the Indenture, any such interest not so
punctually paid or duly provided for will 
  

 A-1 

 forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose
name this Security is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than ten (10)
days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which the Securities of this series shall be listed, and upon such notice as may
be required by any such exchange, all as more fully provided in the Indenture. 
  
 Payments of interest on this Security will include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for this Security shall be computed and paid on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is payable on this Security is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without
any interest or payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. “Business Day” means a day other than (i) a Saturday or a Sunday, (ii) a day on which
banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office is closed for business. 
  
 Payment of principal of, premium, if any, and interest on the Securities of
this series shall be made 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. Payments of principal of, premium, if any, and interest on Securities of this
series represented by a Global Security shall be made by wire transfer of immediately available funds to the Holder of such Global Security; provided, however, that in the case of payments of principal and premium, if any, such Global
Security is first surrendered to the Paying Agent. If any of the Securities of this series are no longer represented by a Global Security, (i) payments of principal, premium, if any, and interest due at the Stated Maturity or on a Redemption Date
shall be made at the office of the Paying Agent upon surrender of such Securities to the Paying Agent and (ii) payments of interest shall be made, at the option of the Company, subject to such surrender where applicable, (A) by check mailed to the
address of the Person entitled thereto as such address shall appear in the Security Register or (B) by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at
least sixteen (16) days prior to the date for payment by the Person entitled thereto. 
  
 REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

  

 A-2 

 Unless the certificate of authentication hereon has been executed by the Trustee by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 
  
 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. 
  

									
	 Dated:
	 	 	 	 	 	 	 	 
				
	 	 	 	 	 	 	 EVEREST REINSURANCE HOLDINGS, INC.

					
	 	 	 	 	 	 	 By:
	 	  

	 	 	 Attest:
	 	  

	 	 	 	 

  

 A-3 

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

			
	 JPMORGAN CHASE BANK,
         as Trustee

		
	 By:
	 	  

  

 A-4 

 (Reverse of Security) 
  
 This Security is one of a duly authorized issue of Securities of the Company (the “Securities”), issued and
issuable in one or more series under an Indenture, dated as of March 14, 2000, (the “Senior Indenture”) as supplemented by the Third Supplemental Indenture dated as of October 12, 2004 (the “Supplemental Indenture”
and together with the Senior Indenture, the “Indenture”), between the Company and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), 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 Securities issued thereunder and of the terms upon which said Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof as 5.40% Senior Notes due October 15, 2014 in
the initial aggregate principal amount of $250,000,000. Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Indenture. 
  
 The Securities of this series will be redeemable, in whole or from time to time in part, at the option of the Company on any
date (a “Redemption Date”), at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon (exclusive of interest accrued to such Redemption Date) discounted to such Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 20 basis points,
plus, in either case, accrued and unpaid interest on the principal amount being redeemed to such Redemption Date. 
  
 “Comparable Treasury Issue” means the United States Treasury security selected by the Independent Investment Banker as having a maturity
comparable to the remaining term of the Securities of this series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Securities of this series. 
  
 “Comparable Treasury Price” means, with respect to any Redemption Date for the Securities of this series, the average of the Reference Treasury Dealer Quotations for the Redemption Date. 
  
 “Independent Investment Banker” means either Goldman, Sachs
& Co. or Wachovia Capital Markets, LLC (as selected by the Company) and any successor firm or, if each firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing
appointed by the Trustee after consultation with the Company. 
  
 “Reference Treasury Dealer” means Goldman, Sachs & Co. and any two (2) of the following as determined by the Company: Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc.;
provided, however, that (i) if any of the foregoing 
  

 A-5 

 shall cease to be a primary treasury dealer in U.S. Government Securities, the Company will substitute therefor another
primary treasury dealer in its place and (ii) if the Company fails to select a substitute within a reasonable period of time, then the substitute will be any other primary treasury dealer in U.S. Government Securities selected by the Trustee after
consultation with the Company. 
  
 “Reference Treasury
Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. New York City time on the third (3rd) Business Day preceding such Redemption Date. 
  
 “Treasury Rate” means, with respect to any Redemption Date for the Securities of this series, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. The Treasury Rate shall be calculated on the third (3rd) Business Day preceding the Redemption Date. 
  
 Notice of any redemption by the Company will be mailed at least 30 days but not more than 60 days before any Redemption Date
to each Holder of Securities of this series to be redeemed. If less than all the Securities of this series are to be redeemed at the option of the Company, the Trustee shall select, in such manner as it shall deem fair and appropriate, the
Securities of this series to be redeemed in whole or in part. The Trustee may select for redemption Securities of this series and portions of Securities of this series in amounts of whole multiples of $1,000; provided, that the unredeemed
portion of any Security of this series may not be less than $2,000. 
  
 In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion will be issued in the name of the Holder hereof upon the cancellation hereof. 
  
 If an Event of Default with respect to the Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. 
  
 The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected 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 principal amount of the Securities of each series affected thereby at the time Outstanding. The Indenture contains provisions permitting the Holders of not less than a majority in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of 
  

 A-6 

 such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. 
  
 No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. 
  

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the office or agency of the Company for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security
Registrar and duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and of like tenor and for the same aggregate principal amount, will be
issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. 
  
 As provided in and subject to the
provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall
have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than a majority in principal amount of the Outstanding Securities of this series shall have made
written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of
Outstanding Securities of this series a direction inconsistent with such request and shall have failed to institute any such proceeding for sixty (60) days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply
to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. 
  
 The Indenture contains provisions for defeasance at any time of the entire
indebtedness of the Securities of this series and for covenant defeasance at any time of certain covenants in the Indenture upon compliance with certain conditions set forth in the Indenture. 
  
 Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this 
  

 A-7 

 Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the contrary. 
  
 The Securities of this series are issuable only in registered form without coupons in denominations of $2,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to the
limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same upon surrender of
the Security or Securities to be exchanged at the office or agency of the Company. 
  
 This Security shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to conflict of laws principles thereof. 
  

 A-8 

 ABBREVIATIONS 
  
 The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations: 
  

							
	 TEN COM — as tenants in common
	 	UNIF GIFT MIN ACT—                 Custodian
                
	 	 	 	 	             (Cust)

	 	 	 (Minor)
	 	 
	 	 	 	 	 under Uniform Gifts to Minors Act

			
	 TEN ENT— as tenants by the entireties
	 	 	 	  

	 	 	 	 	(State)
	 JT TEN — as joint tenants with rights of survivorship and not as tenants in common
	 	 	 	 

  
 Additional abbreviations may also be
used though not on the above list. 
  
 FOR VALUE RECEIVED, the undersigned hereby
sell(s) and transfer(s) unto                          (please insert Social Security or other identifying number of
assignee) 
  

  

  

  
 PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE 
  
 the within Security and all rights thereunder, hereby irrevocably constituting and appointing
                                        
                 agent to transfer said Security on the books of the Company, with full power of substitution in the premises. 
  

							
	 Dated:
	 	  

	 	 By:
	 	  

	 	 	 	 	NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement, or
any change whatever.

  

 A-9 

 Exhibit B 
  

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

			
	 JPMORGAN CHASE BANK,
         as Trustee

		
	 By:
	 	  

	 	 	         Authorized Officer

  

 B-1Form of Warrant

 EXHIBIT 4.1 
  
 NEITHER THIS WARRANT, NOR THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH ACT. 
  

			
	 No-
	 	Void after June 30, 2013

  
 WARRANT TO PURCHASE
SHARES 
  
 OF 
  
 THE COMMON STOCK 
  
 Of 
  
 ARROWHEAD RESEARCH CORPORATION, 
 A Delaware
corporation 
  
 This certifies that, for value received, the
Holder identified as such on the signature page hereof (together with its successors and assigns) is entitled to subscribe for and purchase, on the terms hereof, shares of the Common Stock, $0.001 par value (the “Common Stock”) of
Arrowhead Research Corporation, a Delaware corporation (the “Company”), subject to adjustment as provided herein. 
  
 This Warrant is subject to the following terms and conditions: 
  

1. Exercise of Warrant. The terms and conditions upon which this Warrant may be exercised, and the shares of Common Stock subject hereto may be
purchased, are as follows: 
  
 1.1 Term. Subject to the
terms hereof, this Warrant may be exercised at any time after the date hereof, or from time to time, in whole or in part; provided, however, that in no event may this Warrant be exercised later than 5:00 p.m. (Pacific Time) on June 30, 2013, on
which date this Warrant will expire (the “Expiration Date”) . 
  
 1.2 Number of Shares. This Warrant may be exercised to purchase up to an aggregate of                      shares of Common
Stock. 
  
 1.3 Exercise Price. The exercise price per share
for all shares of Common Stock to be issued upon exercise of this Warrant shall be $1.50, subject to adjustment as provided herein. 
  
 1.4 Method of Exercise. The exercise of the purchase rights evidenced by this Warrant shall be effected by (a) the surrender of the Warrant,
together with a duly executed copy of the form of Subscription Notice attached hereto as Schedule 1, to the Company at its principal offices and (b) the delivery of the exercise price by check or bank draft payable to the Company’s order or by
wire transfer to the Company’s account for the number of shares for which the purchase rights hereunder are being exercised or any other form of consideration approved by the Company’s Board of Directors (the “Board”). Each
exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided herein or at such later date as may be specified in the
executed form of subscription, and at such time the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exercise as provided herein shall be deemed to have become the holder
or holders of record thereof. 
  

 W-1 

 2. Adjustments to Exercise Price. The number and kind of shares of Common Stock (or any shares of
stock or other securities which may be) issuable upon the exercise of this Warrant and the exercise price hereunder shall be subject to adjustment from time to time upon the happening of certain events, as follows: 
  
 2.1 Dividends, Distributions, Stock Splits or Combinations. If the
Company shall at any time or from time to time after the date hereof make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the exercise price hereunder then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by
multiplying the exercise price hereunder then in effect by a fraction: (a) the numerator of which shall be the total number of shares of Common Stock (assuming the conversion of all outstanding securities of the Company that are convertible into
Common Stock and the exercise of all options to purchase Common Stock or securities that are convertible into Common Stock) issued and outstanding immediately prior to the time of issuance or the close of business on such record date; and (b) the
denominator of which shall be the total number of shares of Common Stock (assuming the conversion of all outstanding securities of the Company that are convertible into Common Stock and the exercise of all options to purchase Common Stock or
securities that are convertible into Common Stock) issued and outstanding immediately after the time of issuance or the close of business on such record date. If the Company shall at any time subdivide the outstanding shares of Common Stock, or if
the Company shall at any time combine the outstanding shares of Common Stock, then the exercise price hereunder immediately shall be decreased proportionally (in the case of a subdivision) or increased proportionally (in the case of a combination).
Any such adjustment shall become effective at the close of business on the date the subdivision or combination becomes effective. 
  
 2.2 Reclassification or Reorganization. If the Common Stock issuable upon the exercise of this Warrant shall be changed into the same or different
number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for in Section 2.1 above, or a reorganization, merger,
consolidation or sale of assets provided for in Section 2.3 below), then and in each such event the Holder shall be entitled to receive upon the exercise of this Warrant the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, to which a holder of the number of shares of Common Stock issuable upon the exercise of this Warrant would have received if this Warrant had been exercised immediately prior to
such reorganization, reclassification or other change, all subject to further adjustment as provided herein. 
  
 2.3 Merger, Consolidation or Sale of Assets. If at any time or from time to time there shall be a capital reorganization of the Common Stock (other
than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 2) or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the
Company’s assets and properties to any other person or entity, then as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holder shall thereafter be entitled to receive upon the exercise of this
Warrant, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such reorganization, merger, consolidation or sale, to which a holder of the number of shares of Common Stock (or
any shares of stock or other securities which may be) issuable upon the exercise of this Warrant would have received if this Warrant had been exercised immediately prior to such reorganization, merger, consolidation or sale. 
  
 2.4 Notice of Adjustments and Record Dates. The Company shall promptly
notify the Holder in writing of each adjustment or readjustment of the exercise price hereunder and the number of shares of Common Stock (or any shares of stock or other securities which may be) issuable upon the exercise of this Warrant. Such
notice shall state the adjustment or readjustment and show in reasonable detail the facts on which that adjustment or readjustment is based. In the event of any taking by the Company of a record of the holders of Common Stock for the purpose of
determining the holders thereof who are entitled to receive any dividend or other distribution, the Company shall notify the Holder in writing of such record date at least twenty (20) days prior to the date specified therein. 
  
 2.5 No Impairment. The Company shall not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant. Without limiting the generality of the
foregoing, the Company (a) shall at all times reserve and keep available a number of its authorized shares of Common Stock, free from all preemptive rights therein, which shall be sufficient to permit the exercise of this Warrant and (b) shall take
all such action as may be necessary or appropriate in order that all shares of Common Stock as may be issued pursuant to the exercise of this Warrant shall, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof. 
  

 W-2 

 3. Redemption of Warrants. This Warrant is subject to redemption by the Company, in whole but not
in part, at a redemption price of $0.001, at any time after issuance and prior to the Expiration Date, on not less than 30 days’ prior written notice to the Holder, provided that a public trading market for the Company’s Common Stock then
exists and that the daily trading price per share of Common Stock has been at least $3.00 for a period of at least 20 consecutive trading days ending within 15 days prior to the date upon which the notice of redemption is given. The Holder shall
have the right to exercise the Warrant, in whole or in part, before the date specified in the redemption notice. Upon expiration of such period, all rights of the Holder shall terminate, other than the rights to receive the redemption price, without
interest, and the right to receive the redemption price shall itself expire on the Expiration Date. 
  
 4. Replacement of Warrants. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense shall execute and deliver to the Holder, in lieu thereof, a new Warrant of like tenor. 
  
 5. Investment Intent. Unless a current registration statement under the Securities Act of 1933, as amended, shall be in effect with respect to the
securities to be issued upon exercise of this Warrant, the Holder, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of any securities acquired upon exercise hereof, the
Holder shall deliver to the Company a written statement that the securities acquired by the Holder upon exercise hereof are for the own account of the Holder for investment and are not acquired with a view to, or for sale in connection with, any
distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering or distributing such securities (or any portion thereof). 
  
 6. No Rights or Liability as a Stockholder. This Warrant does not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company. No provisions hereof, in the absence of affirmative action by the Holder to purchase Common Stock, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of
the Holder as a stockholder of the Company. 
  
 7.
Miscellaneous. 
  
 7.1 Titles and Subtitles. The
titles and subtitles used in this Warrant are for convenience only and are not to be considered in construing or interpreting this Warrant. 
  
 7.2 Notices. Any notice required or permitted under this Warrant shall be given in writing to the respective addresses of the Holder and the
Company set forth on the signature page hereof, or to such other address as either party shall designate in a written notice given to the other as provided herein. 
  
 7.3 Attorneys’ Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this
Warrant, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and disbursements in addition to any other relief to which such party may be entitled. 
  

 W-3 

 7.4 Amendments and Waivers. Any term of this Warrant may be amended and the observance of any term
of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), as provided in the Purchase Agreement. 
  

7.5 Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant and the balance of the Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 
  
 7.6 Governing Law. This Warrant shall be governed by and construed and enforced in accordance with the laws of the
State of California, without giving effect to its conflicts of laws principles. 
  
 7.7 Counterparts. This Warrant may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 
  
 Date:
                     
  

			
	 	 	                 “The Company”

		
	 	 	ARROWHEAD RESEARCH, CORPORATION
	 	 	1118 East Green Street
	 	 	Pasadena, CA 91106
		
	By:	 	  

	 	 	[Company Officer]

  

			
	             “Holder”

	
	ACKNOWLEDGED AND AGREED:
	  
  

	                                    (Signature) 
               
	  
  

	                                  (Print
Name)                
	  
  
 Address:
	 	  
  
  

	 	 	  

	 	 	  

  

 W-4 

 SCHEDULE 1 
  

SUBSCRIPTION NOTICE 
 (To be signed
only on exercise of Warrant for cash) 
  

	To:	 	Arrowhead Research Corporation. 

  
 The undersigned, the holder of the Warrant attached hereto, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and
to purchase thereunder,                      shares of the Common Stock of Arrowhead Research Corporation, a Delaware corporation, and
herewith makes payment of $             therefor, and requests that the certificates for such shares be issued in the name of, and delivered to
                    , whose address is
                    . 
  

	
	  

	 (Signature must conform in all respects to name of
 the
Holder as specified on the face of the Warrant)

	  
  

	(Print Name)
	  
  

	(Address)

  
 Dated:
                     
  

 Schedule 1-1

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