Document:

exv4w1

 

Exhibit 4.1

Execution Version

CONNETICS CORPORATION

ISSUER

TO

J.P. MORGAN TRUST COMPANY,

NATIONAL ASSOCIATION

TRUSTEE

INDENTURE

Dated as of March 23, 2005

2.00% CONVERTIBLE SENIOR NOTES DUE MARCH 30, 2015

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I          DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
	 	 	1	 
	 
	 	 	 	 
	SECTION
1.1    Definitions
	 	 	1	 
	SECTION 1.2    Compliance Certificates and Opinions
	 	 	13	 
	SECTION 1.3    Form of Documents Delivered to the Trustee
	 	 	14	 
	SECTION 1.4    Acts of Holders of Securities
	 	 	14	 
	SECTION 1.5    Notices, Etc. to the Trustee and Company
	 	 	16	 
	SECTION 1.6    Notice to Holders of Securities; Waiver
	 	 	17	 
	SECTION 1.7    Effect of Headings and Table of Contents
	 	 	17	 
	SECTION 1.8    Successors and Assigns
	 	 	17	 
	SECTION 1.9    Separability Clause
	 	 	17	 
	SECTION 1.10
 Benefits of Indenture
	 	 	18	 
	SECTION 1.11
 Governing Law
	 	 	18	 
	SECTION 1.12
 Legal Holidays
	 	 	18	 
	SECTION 1.13
 Conflict with Trust Indenture Act
	 	 	18	 
	 
	 	 	 	 
	ARTICLE II          SECURITY FORMS
	 	 	19	 
	 
	 	 	 	 
	SECTION 2.1    Form Generally
	 	 	19	 
	SECTION 2.2    Form of Security
	 	 	19	 
	SECTION 2.3    Form of Certificate of Authentication
	 	 	31	 
	SECTION 2.4    Form of Conversion Notice
	 	 	31	 
	SECTION 2.5    Form of Assignment
	 	 	33	 
	 
	 	 	 	 
	ARTICLE
III          THE
SECURITIES
	 	 	34	 
	 
	 	 	 	 
	SECTION 3.1    Title and Terms
	 	 	34	 
	SECTION 3.2    Maturity, Interest and Principal Payments Generally
	 	 	34	 
	SECTION 3.3    Denominations
	 	 	35	 
	SECTION 3.4    Execution, Authentication, Delivery and Dating
	 	 	36	 
	SECTION 3.5    Global Securities; Non-global Securities; Book-entry Provisions
	 	 	36	 
	SECTION 3.6    Registration; Registration of Transfer and Exchange; Restrictions on Transfer
	38	 
	SECTION 3.7    Mutilated, Destroyed, Lost or Stolen Securities
	 	 	41	 
	SECTION 3.8    Regular Interest
	 	 	42	 
	SECTION 3.9    Contingent Interest
	 	 	42	 
	SECTION 3.10
 Accretion
	 	 	43	 
	SECTION 3.11
 Payment of Interest; Interest Rights Preserved
	 	 	43	 
	SECTION 3.12
 Persons Deemed Owners
	 	 	44	 
	SECTION 3.13
 Cancellation
	 	 	44	 
	SECTION 3.14
 Computation of Interest
	 	 	44	 
	SECTION 3.15
 CUSIP Numbers
	 	 	45	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page	 
	ARTICLE IV          SATISFACTION AND DISCHARGE
	 	 	45	 
	 
	 	 	 	 
	SECTION 4.1    Satisfaction and Discharge of Indenture
	 	 	45	 
	SECTION 4.2    Application of Trust Money
	 	 	46	 
	 
	 	 	 	 
	ARTICLE V          DEFAULT AND REMEDIES
	 	 	46	 
	 
	 	 	 	 
	SECTION 5.1    Events of Default
	 	 	46	 
	SECTION 5.2    Covenant of Company to Pay to Trustee Whole Amount Due on
Securities on Default in  
	 	 	 
	Payment of Interest or Principal; Suits
for Enforcement by Trustee
	 	48	 
	SECTION 5.3    Trustee May File Proof of Claim
	 	 	49	 
	SECTION 5.4    Trustee May Enforce Claims Without Possession of Securities
	 	 	50	 
	SECTION 5.5    Application of Money Collected
	 	 	50	 
	SECTION 5.6    Limitation on Suits
	 	 	51	 
	SECTION 5.7    Notice of Defaults
	 	 	51	 
	SECTION 5.8    Unconditional Right of Holders to Receive Principal and Interest
	 	 	52	 
	SECTION 5.9    Restoration of Rights and Remedies
	 	 	52	 
	SECTION 5.10
 Rights and Remedies Cumulative
	 	 	52	 
	SECTION 5.11
 Delay or Omission not Waiver
	 	 	52	 
	SECTION 5.12
 Control by Holders of Securities
	 	 	53	 
	SECTION 5.13
 Waiver of Past Defaults
	 	 	53	 
	SECTION 5.14
 Undertaking for Costs
	 	 	53	 
	SECTION 5.15
 Waiver of Stay, Usury or Extension Laws
	 	 	54	 
	 
	 	 	 	 
	ARTICLE VI        THE TRUSTEE
	 	 	54	 
	 
	 	 	 	 
	SECTION 6.1    Certain Duties and Responsibilities
	 	 	54	 
	SECTION 6.2    Notice of Defaults
	 	 	55	 
	SECTION 6.3    Certain Rights of Trustee
	 	 	55	 
	SECTION 6.4    Not Responsible for Recitals or Issuance of Securities
	 	 	56	 
	SECTION 6.5    May Hold Securities, Act as Trustee Under Other Indentures
	 	 	56	 
	SECTION 6.6    Money Held in Trust
	 	 	57	 
	SECTION 6.7    Compensation and Reimbursement
	 	 	57	 
	SECTION 6.8    Corporate Trustee Required; Eligibility
	 	 	58	 
	SECTION 6.9    Resignation and Removal; Appointment of Successor
	 	 	58	 
	SECTION 6.10  Acceptance of Appointment by Successor
	 	 	59	 
	SECTION 6.11
 Merger, Conversion, Consolidation or Succession to Business
	 	 	59	 
	SECTION 6.12
 Authenticating Agents
	 	 	60	 
	SECTION 6.13
 Disqualification; Conflicting Interests
	 	 	62	 
	SECTION 6.14
 Preferential Collection of Claims Against Company
	 	 	62	 
	 
	 	 	 	 
	ARTICLE VII      CONSOLIDATION, MERGER, SALE OR TRANSFER
	 	 	62	 
	 
	 	 	 	 
	SECTION 7.1    Company May Consolidate, Etc. Only on Certain Terms
	 	 	62	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page	 
	SECTION 7.2
    Successor Substituted
	 	 	64	 
	 
	 	 	 	 
	ARTICLE VIII        SUPPLEMENTAL INDENTURES
	 	 	64	 
	 
	 	 	 	 
	SECTION 8.1     Supplemental Indentures Without Consent of Holders of Securities
	 	 	64	 
	SECTION 8.2     Supplemental Indentures with Consent of Holders of Securities
	 	 	65	 
	SECTION 8.3     Execution of Supplemental Indentures
	 	 	66	 
	SECTION 8.4     Effect of Supplemental Indentures
	 	 	67	 
	SECTION 8.5     Reference in Securities to Supplemental Indentures
	 	 	67	 
	SECTION 8.6     Notice of Supplemental Indentures
	 	 	67	 
	 
	 	 	 	 
	ARTICLE IX          MEETINGS OF HOLDERS OF SECURITIES
	 	 	67	 
	 
	 	 	 	 
	SECTION 9.1     Purposes for Which Meetings May Be Called
	 	 	67	 
	SECTION 9.2     Call, Notice and Place of Meetings
	 	 	67	 
	SECTION 9.3     Persons Entitled to Vote at Meetings
	 	 	68	 
	SECTION 9.4     Quorum; Action
	 	 	68	 
	SECTION 9.5     Determination of Voting Rights; Conduct and Adjournment of
Meetings
	 	 	69	 
	SECTION 9.6     Counting Votes and Recording Action of Meetings
	 	 	70	 
	 
	 	 	 	 
	ARTICLE X           COVENANTS
	 	 	70	 
	 
	 	 	 	 
	SECTION 10.1
  Payment of Principal and Interest
	 	 	70	 
	SECTION 10.2
  Maintenance of Offices or Agencies
	 	 	70	 
	SECTION 10.3
  Money for Security Payments to Be Held in Trust
	 	 	71	 
	SECTION 10.4
  Existence
	 	 	72	 
	SECTION 10.5
  Maintenance of Properties
	 	 	72	 
	SECTION 10.6
  Payment of Taxes and Other Claims
	 	 	73	 
	SECTION 10.7
  Registration and Listing
	 	 	73	 
	SECTION 10.8
  Statement by Officers as to Default
	 	 	73	 
	SECTION 10.9
  Delivery of Certain Information
	 	 	74	 
	SECTION 10.10 Tax Treatment of Securities
	 	 	74	 
	SECTION 10.11 Resale of Certain Securities
	 	 	75	 
	SECTION 10.12 Registration Rights
	 	 	75	 
	SECTION 10.13 Waiver of Certain Covenants
	 	 	76	 
	 
	 	 	 	 
	ARTICLE XI         REDEMPTION OF SECURITIES
	 	 	77	 
	 
	 	 	 	 
	SECTION 11.1
  Right of Redemption
	 	 	77	 
	SECTION 11.2
  Applicability of Article
	 	 	77	 
	SECTION 11.3
  Election to Redeem; Notice to Trustee
	 	 	77	 
	SECTION 11.4
  Notice of Redemption
	 	 	78	 
	SECTION 11.5
  Deposit of Redemption Price
	 	 	78	 
	SECTION 11.6
  Securities Payable on Redemption Date
	 	 	79	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page	 
	SECTION 11.7
  Securities Redeemed in Part
	 	 	79	 
	 
	 	 	 	 
	ARTICLE XII         CONVERSION OF SECURITIES
	 	 	80	 
	 
	 	 	 	 
	SECTION 12.1
  Right to Convert
	 	 	80	 
	SECTION 12.2
  Certain Corporate Transactions
	 	 	80	 
	SECTION 12.3
  Determination of Satisfaction of Certain Conversion Triggers
	 	 	81	 
	SECTION 12.4
  Notice of Conversion
	 	 	81	 
	SECTION 12.5
  Conversion Consideration
	 	 	81	 
	SECTION 12.6
  Exercise of Conversion Privilege
	 	 	82	 
	SECTION 12.7
  Exchange in Lieu of Conversion
	 	 	84	 
	SECTION 12.8
  Fractions of Shares
	 	 	84	 
	SECTION 12.9
  Anti-Dilution Adjustments
	 	 	85	 
	SECTION 12.10 Adjustment to Applicable Conversion Rate Upon a Fundamental
Change
	 	 	90	 
	SECTION 12.11 Notice of Adjustments of Conversion Rate
	 	 	92	 
	SECTION 12.12 Notice of Certain Corporate Action
	 	 	92	 
	SECTION 12.13 Company to Provide Common Stock and Series C Preferred Stock
	 	 	93	 
	SECTION 12.14 Taxes on Conversions
	 	 	95	 
	SECTION 12.15 Covenant as to Common Stock and Series C Preferred Stock
	 	 	95	 
	SECTION 12.16 Cancellation of Converted Securities
	 	 	96	 
	SECTION 12.17 Rights Issued in Respect of Common Stock and Series C Preferred Stock
	 	 	96	 
	SECTION 12.18 Responsibility of Trustee for Conversion Provisions
	 	 	97	 
	 
	 	 	 	 
	ARTICLE XIII          REPURCHASE OF SECURITIES
	 	 	97	 
	 
	 	 	 	 
	SECTION 13.1
  Repurchase Rights
	 	 	97	 
	SECTION 13.2
  Exchange in Lieu of Repurchase
	 	 	99	 
	SECTION 13.3
  Repurchase at Option of the Holder Upon a Fundamental Change
	 	 	99	 
	 
	 	 	 	 
	ARTICLE XIV         Public Acquirer Change of Control
	 	 	101	 
	 
	 	 	 	 
	SECTION 14.1
  Public Acquirer Change of Control
	 	 	101	 
	 
	 	 	 	 
	ARTICLE XV          HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE
	 	 	102	 
	 
	 	 	 	 
	SECTION 15.1
  Company to Furnish Trustee Names and Addresses of Holders
	 	 	102	 
	SECTION 15.2
  Preservation of Information
	 	 	103	 
	SECTION 15.3
  Reports by Trustee
	 	 	103	 
	SECTION 15.4
  Reports by Company
	 	 	103	 
	SECTION 15.5
  Calculations in Respect of Securities
	 	 	103	 

-iv-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE XVI         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
	 	 	104	 
	 
	 	 	 	 
	SECTION 16.1
  Indenture and Securities Solely Corporate Obligations
	 	 	104	 

-v-

 

     INDENTURE, dated as of March 23, 2005, between CONNETICS CORPORATION, a corporation
duly organized and existing under the laws of the State of Delaware, having its principal office at
3160 Porter Drive, Palo Alto, California 94304 (herein called the “Company”), and J.P. MORGAN TRUST
COMPANY, NATIONAL ASSOCIATION, as Trustee hereunder (herein called the “Trustee”).

RECITALS OF THE COMPANY

     The Company has duly authorized the creation of an issue of its 2.00% Convertible Senior Notes
due March 30, 2015 (herein called the “Securities”) of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.

     All things necessary to make the Securities, when the Securities are executed by the Company
and authenticated and delivered hereunder, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with their and its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the Securities by the Holders
thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities, as follows:

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 1.1 Definitions.

     For all purposes of this Indenture, except as otherwise expressly provided or unless the
context otherwise requires:

          (a) the terms defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular;

          (b) all accounting terms not otherwise defined herein have the meanings assigned to them in
accordance with generally accepted accounting principles in the United States, and, except as
otherwise herein expressly provided, the term “generally accepted accounting principles” with
respect to any computation required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and

          (c) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other subdivision.

 

 

     “Accredited Investor” has the meaning ascribed to it in Section 2.2.

     “Accreted Principal Amount” has the meaning specified in Section 3.10.

     “Act,” when used with respect to any Holder of a Security, has the meaning specified in
Section 1.4.

     “Additional Shares” has the meaning specified in Section 12.10(a).

     “Affiliate” of any specified Person means any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified Person. For the
purposes of this definition, “control,” when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

     “Agent Member” means any member of, or participant in, the Depositary.

     “Applicable Conversion Price” means, at any time any determination thereof is to be made, the
principal amount of a Security divided by the Applicable Conversion Rate.

     “Applicable Conversion Rate” means, at the time any determination thereof is to be made, the
Initial Conversion Rate as adjusted pursuant to, or otherwise subject to, Sections 7.1, 12.9, 12.10
and 12.11 hereof, as applicable; provided that, the conversion rate will not be adjusted for
accrued Interest.

     “Applicable Conversion Reference Period” means:

(a)   for Securities that are converted after the Company has specified a Redemption
Date, the ten consecutive Trading Days beginning on the third Trading Day following the
Redemption Date (in the case of a partial redemption, this clause only applies to those
Securities which would be actually redeemed);

(b)   in all other cases, the ten consecutive Trading Days beginning on the third
Trading Day following the Conversion Date.

     “Applicable Procedures” means, with respect to any transfer or transaction involving a Global
Security or beneficial interest therein, the rules and procedures of DTC or any successor
Depository, in each case to the extent applicable to such transaction and as in effect from time to
time.

     “Authenticating Agent” means any Person authorized pursuant to Section 6.12 to act on behalf
of the Trustee to authenticate Securities.

     “beneficial owner” and “beneficial ownership” have the meaning set forth in Rule 13d-3 (or any
successor provision) of the Exchange Act.

2

 

     “Board of Directors” means either the board of directors of the Company or any duly authorized
committee of that board.

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

     “Business Day” when used with respect to any Place of Payment, Place of Conversion or any
other place, as the case may be, means any day other than a Saturday or Sunday or a day on which
banking institutions in the City of New York or Houston, Texas, are authorized or required by law
or executive order to close.

     “capital stock” of any Person means any and all shares, interests, participations or other
equivalents however designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such Person and any rights (other than debt
securities convertible or exchangeable into an equity interest), warrants or options to acquire an
equity interest in such Person, and American Depositary Receipts.

     “Certificate of Designation” has the meaning specified in Section 12.13.

     “Closing Sale Price” with respect to the Common Stock, for any day, means the closing sale
price per share (or, if no closing sale price is reported, the average of the bid and asked prices
or, if more than one in either case, the average of the average bid and the average asked prices)
on that date as reported in composite transactions by The Nasdaq National Market or, if the Common
Stock is not then quoted on The Nasdaq National Market, as reported by the principal U.S.
securities exchange on which the Common Stock is traded. The Closing Sale Price will be determined
without reference to after-hours or extended market trading. If the Common Stock is not listed for
trading on a U.S. national or regional securities exchange and not reported by The Nasdaq National
Market on the relevant date, the Closing Sale Price will be the last quoted bid for the Common
Stock in the over-the-counter market on the relevant date as reported by the National Quotation
Bureau or similar organization. If the Common Stock is not so quoted, the Closing Sale Price will
be the average of the midpoint of the last bid and asked prices for the Common Stock on the
relevant date from each of at least three nationally recognized independent investment banking
firms selected by the Company for this purpose.

     “Code” has the meaning specified in Section 2.l.

     “Commission” means the U.S. Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act, or, if at any time after the execution of this
Indenture such Commission is not existing and performing the duties now assigned to it under the
Trust Indenture Act, then the body performing such duties at such time.

     “Common Stock” means the Common Stock, par value $0.001 per share, of the Company authorized
at the date of this Indenture as originally executed or as such stock may be constituted from time
to time (including upon a change in the par value of such securities) listed on The Nasdaq National
Market under the trading symbol “CNCT.” Subject to the provisions of Section 7.1, shares issuable
on conversion of Securities shall include only shares of Common

3

 

Stock, Series C Preferred Stock or shares of any class or classes of common stock resulting
from any reclassification or reclassifications thereof; provided, however, that if at any time
there shall be more than one such resulting class, the shares so issuable on conversion of
Securities shall include shares of all such classes, and the shares of each such class then so
issuable shall be substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications and further provided that all references to “Common
Stock” payable in connection with the purchase or other acquisition of Securities upon a
Fundamental Change in accordance with the terms of Section 12.10 shall be deemed to include common
stock of any entity, including the parent company of any such entity, that the Company may
consolidate or merge with or into, that is merged into the Company, or to which the Company may
sell or transfer all or substantially all of its assets.

     “common stock” includes any stock of any class of capital stock which has no preference in
respect of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the issuer thereof, which has unrestricted voting rights
and which is not subject to redemption by the issuer thereof.

     “Company” means the Person named as the “Company” in the first paragraph of this Indenture
until a successor Person shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter “Company” shall mean such successor Person.

     “Company Request” or “Company Order” means a written request or order signed in the name of
the Company by (a) its Chairman of the Board, its President, Chief Executive Officer, an Executive
Vice President or a Vice President, and by (b) its principal financial officer, Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

     “Comparable Yield” has the meaning specified in Section 2.2.

     “Constituent Person” has the meaning specified in Section 7.1.

     “Contingent Interest” means the interest amounts payable pursuant to Section 3.9.

     “Contingent Payment Debt Regulations” has the meaning specified in Section 10.10.

     “Continuing Directors” means, as of any date of determination, any member of the Board of
Directors who (a) was a member of the Board of Directors on the date of this Indenture or (b)
becomes a member of the Board of Directors subsequent to that date and was appointed, nominated for
election or elected to the Board of Directors with the approval of a majority of the Continuing
Directors who were members of the Board of Directors at the time of such appointment, nomination or
election.

     “Conversion Agent” means any Person authorized by the Company to convert Securities in
accordance with Article XII. The Company has initially appointed the Trustee as its Conversion
Agent pursuant to Section 10.2 hereof.

     “Conversion Consideration” has the meaning specified in Section 12.5.

4

 

     “Conversion Date” has the meaning specified in Section 12.6.

     “Conversion Period” means the period from and including the eleventh Trading Day in a fiscal
quarter of the Company up to but not including the eleventh Trading Day in the following fiscal
quarter of the Company.

     “Conversion Value” means, as of any Conversion Date, the product of (a) the Applicable
Conversion Rate on that Conversion Date multiplied by (b) the average of the Closing Sale Prices of
the Common Stock on each of the ten consecutive Trading Days in the Applicable Conversion Reference
Period.

     “Corporate Trust Office” means the office of the Trustee at which at any particular time the
trust created by this Indenture shall be principally administered (which at the date of this
Indenture is located at 600 Travis St., Suite 1150, Houston, Texas 77002, Attention: Institutional
Trust Services, and for purposes of Section 10.2 shall mean Institutional Trust Services Window,
c/o J.P. Morgan Chase Bank, 4 New York Plaza, 1st Floor, New York, New York 10004-2413).

     “corporation” means a corporation, company, association, joint-stock company or business
trust.

     “current market price” has the meaning specified in Section 12.9.

     “Daily Share Amount” means, for any Trading Day, the greater of (a) zero and (b) a number of
shares determined by the following formula:

(Closing Sale Price on That Trading Day * Applicable Conversion Rate) – Accreted Principal Amount

10 * Closing Sale Price
on That Trading Day

     “default” means any event which is, or after notice or lapse of time would become, an
Event of Default.

     “Defaulted Interest” has the meaning specified in Section 3.11.

     “Depositary” means, with respect to any Securities (including any Global Securities), a
clearing agency that is registered as such under the Exchange Act and is designated by the Company
to act as Depositary for such Securities (or any successor securities clearing agency so
registered).

     “Documents” has the meaning specified in Section 6.3.

     “Dollar” or “U.S. $” means a dollar or other equivalent unit in such coin or currency of the
United States as at the time shall be legal tender for the payment of public and private debts.

     “DTC” means The Depository Trust Company, a New York corporation.

     “Effective Failure” has the meaning specified in Section 2.2.

5

 

     “Effectiveness Period” has the meaning specified in Section 2.2.

     “Event of Default” has the meaning specified in Section 5.1.

     “Exchange Act” means the U.S. Securities Exchange Act of 1934 (or any successor statute), as
amended from time to time.

     “ex-date” or “ex-dividend date” has the meaning set forth in Section 12.2.

     “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).

     “Fundamental Change” means the occurrence of any of the following at a time after the
Securities are originally issued:

          (a) the Common Stock or other common stock into which the Securities are convertible is
neither quoted on The Nasdaq Stock Market or another established automated over-the-counter trading
market in the United States or approved for trading on the New York Stock Exchange or another
United States national securities exchange; or

          (b) any Person, including any syndicate or group deemed to be a “person” under Section
13(d)(3) of the Exchange Act, acquires beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of shares of the
Company’s capital stock entitling the Person to exercise 50% or more of the total voting power of
all shares of the Company’s capital stock entitled to vote generally in elections of directors,
other than an acquisition by the Company, any of its Subsidiaries or any of its employee benefit
plans and other than any transaction contemplated by clause (c)(ii) below; or

          (c) the Company merges or consolidates with or into any other Person (other than a
Subsidiary), another Person merges with or into the Company, or the Company conveys, sells,
transfers or leases all or substantially all of its assets to another Person, other than any
transaction: (i) that does not result in a reclassification, conversion, exchange or cancellation
of the outstanding Common Stock; (ii) pursuant to which the holders of Common 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 the election of
directors of the continuing or surviving corporation immediately after the transaction; (iii) where
the Continuing Directors constitute a majority of the board of directors of the continuing or
surviving corporation immediately after the transaction; or (iv) which is effected solely to change
the Company’s jurisdiction of incorporation and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving
entity; or

          (d) at any time the Continuing Directors do not constitute a majority of the Board of
Directors (or, if applicable, a successor Person to the Company).

     For purposes of this definition, whether a Person is a “beneficial owner” will be determined
in accordance with Rule 13d-3 under the Exchange Act and “Person” includes any

6

 

syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the
Exchange Act.

     “Fundamental Change Effective Date” has the meaning specified in Section 12.10.

     “Fundamental Change Repurchase Date” means any date selected by the Company in connection with
a Fundamental Change Effective Date on which the Holder may require the Company to repurchase
Securities in accordance with Section 13.3.

     “Fundamental Change Repurchase Price” has the meaning assigned to it in Section 13.3.

     “Global Security” means a Security that is registered in the Security Register in the name of
a Depositary or a nominee thereof.

     “Holder” means the Person in whose name the Security is registered in the Security Register.

     “Indenture” means this Indenture as originally executed or as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of this Indenture and any such
supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of
and govern this Indenture and any such supplemental indenture, respectively.

     “Initial Conversion Rate” means the conversion rate of 28.1972 shares of Common Stock per each
$1,000 Original Principal Amount of Securities applicable on the date of this Indenture.

     “Initial Purchasers” means Goldman, Sachs & Co., CIBC World Markets Corp., Lazard Frères & Co.
LLC, Piper Jaffray & Co. and Roth Capital Partners LLC.

     “Initial Purchasers’ Option” has the meaning specified in Section 3.1.

     “Interest” means Regular Interest, Contingent Interest, Liquidated Damages and Reserve
Interest.

     “Interest Payment Date” when used with respect to any Security means the Stated Maturity of an
installment of Interest on such Security.

     “Interest Period” has the meaning specified in Section 3.9.

     “Issue Date” means March 23, 2005 and, if Goldman, Sachs & Co. exercises the Initial
Purchasers’ Option, the date on which such additional Securities are issued.

     “Liquidated Damages” has the meaning specified in Section 2.2.

     “Maturity,” when used with respect to any Security, means the date on which the principal
amount of such Security becomes due and payable as therein or herein provided, whether at the
Stated Maturity or by declaration of acceleration, call for redemption, exercise of the repurchase
right set forth in Article XIII or otherwise.

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     “Measurement Period” has the meaning specified in Section 3.9.

     “Non-electing Share” has the meaning specified in Section 7.1.

     “Officers’ Certificate” means a certificate signed by (a) the Chairman of the Board, the
President, Chief Executive Officer, or any Vice President and by (b) the principal financial
officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the
Company, and delivered to the Trustee. One of the officers signing an Officers’ Certificate given
pursuant to Section 10.8 shall be the principal executive, financial or accounting officer of the
Company.

     “Opinion of Counsel” means a written opinion of counsel, in form and substance reasonably
satisfactory to the Trustee, who may be counsel for the Company and who shall be reasonably
acceptable to the Trustee.

     “Original Principal Amount” with respect to the Securities means $150 million in the aggregate
for all Securities ($200 million in the aggregate if the Initial Purchasers’ Option is exercised in
full) in authorized denominations of $1,000 and any integral multiple thereof.

     “Outstanding,” when used with respect to Securities, means, as of the date of determination,
all Securities theretofore authenticated and delivered under this Indenture, except:

          (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for
cancellation;

          (b) Securities for which money in the necessary amount to pay or redeem such Securities has
been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or provision therefor
reasonably satisfactory to the Trustee has been made;

          (c) Securities which have been paid pursuant to Section 3.7 or in exchange for or in lieu of
which other Securities have been authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;

          (d) Securities converted into Common Stock or Series C Preferred Stock pursuant to Article
XII; and

          (e) Securities
that cease to be Outstanding in accordance with Section 13.1 or Section 13.3;

provided, however, that in determining whether the Holders of the requisite principal amount of
Outstanding Securities are present at a meeting of Holders of Securities for quorum purposes or
have given any request, demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the

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Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that,
in determining whether the Trustee shall be protected in relying upon any such determination as to
the presence of a quorum or upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee has been notified in
writing to be so owned shall be so disregarded. Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee is not the Company or any other obligor upon
the Securities or any Affiliate of the Company or such other obligor, and the Trustee shall be
protected in relying upon an Officer’s Certificate to such effect.

     “Paying Agent” means any Person authorized by the Company to pay the principal of or Interest
on any Securities on behalf of the Company and, except as otherwise specifically set forth herein,
such term shall include the Company if it shall act as its own Paying Agent. The Company has
initially appointed the Trustee as its Paying Agent pursuant to Section 10.2 hereof.

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

     “Place of Conversion” has the meaning specified in Section 3.1.

     “Place of Payment” has the meaning specified in Section 3.1.

     “Predecessor Security” of any particular Security means every previous Security evidencing all
or a portion of the same debt as that evidenced by such particular Security; and, for the purposes
of this definition, any Security authenticated and delivered under Section 3.7 in exchange for or
in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Security.

     “Press Release” means any press release issued by the Company and disseminated to Reuters
Business News Services and Bloomberg News Services.

     “principal amount” means the Original Principal Amount prior to March 30, 2010 and the
Accreted Principal Amount thereafter.

     “Public Acquirer Change of Control” means any event constituting a Fundamental Change that
would otherwise give Holders the repurchase rights described in Section 13.3 where the acquirer has
a class of common stock (or American Depositary Receipts representing such common stock) traded on
a United States national securities exchange or quoted on The Nasdaq National Market (or that will
be so traded or quoted when issued or exchanged in connection with such Fundamental Change) (the
“Public Acquirer Common Stock”). If an acquirer does not itself have a class of common stock
satisfying the foregoing requirement, it will be deemed to have “Public Acquirer Common Stock” if
either (a) a direct or indirect majority-owned subsidiary of acquirer or (b) a corporation that
directly or indirectly owns at least a majority of the acquirer, has a class of common stock
satisfying the foregoing requirement; in such case, all references to Public Acquirer Common Stock
shall refer to such class of common stock. Majority-owned for these purposes means having
“beneficial ownership” of more than 50% of the total voting power of all shares of the respective
entity’s capital stock that are entitled to vote generally in the election of directors.

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     “Public Acquirer Change of Control Effective Date” has the meaning specified in Section 14.1.

     “Public Acquirer Common Stock” has the meaning specified in the definition of Public Acquirer
Change of Control.

     “Purchase Agreement” means the Purchase Agreement, dated as of March 17, 2005, between the
Company and the Initial Purchasers, as such agreement may be amended from time to time.

     “Qualified Institutional Buyer” shall mean a “qualified institutional buyer” as defined in
Rule 144A.

     “Record Date” means any Regular Record Date or Special Record Date.

     “Record Date Period” means the period from the close of business of any Regular Record Date
next preceding any Interest Payment Date to the opening of business on such Interest Payment Date.

     “Redemption Date,” when used with respect to any Security to be redeemed, means the date fixed
for such redemption by or pursuant to this Indenture.

     “Redemption Price,” when used with respect to any Security to be redeemed, means the price at
which it is to be redeemed pursuant to this Indenture.

     “Registrable Securities” means all or any portion of the Securities issued from time to time
under this Indenture in registered form and the shares of Common Stock or Series C Preferred Stock
issuable upon conversion, repurchase or redemption of such Securities; provided, however, that a
security ceases to be a Registrable Security when it is no longer a Restricted Security.

     “Registration Default” has the meaning specified in Section 2.2.

     “Registration Rights Agreement” means the Registration Rights Agreement, dated as of March 23,
2005, between the Company and the Initial Purchasers, as such agreement may be amended from time to
time in accordance with its terms.

     “Regular Interest” has the meaning specified in Section 3.8.

     “Regular Record Date” for Interest payable in respect of any Security on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date.

     “Repurchase Date” has the meaning specified in Section 13.1.

     “Repurchase Notice” has the meaning set forth in Section 13.1.

     “Repurchase Premium” has the meaning set forth in Section 12.9(g).

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     “Repurchase Price” has the meaning specified in Section 13.1.

     “Reserve Interest” has the meaning specified in Section 12.13(d).

     “Reserve Sufficient Date” has the meaning specified in Section 12.13(d).

     “Responsible Officer,” when used with respect to the Trustee, means any officer within the
Corporate Trust Office of the Trustee with direct responsibility for the administration of this
Indenture and also means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge and familiarity with the particular subject.

     “Restricted Global Security” has the meaning specified in Section 2.1(f).

     “Restricted Securities” means all Securities required pursuant to Section 3.6(h) to bear any
Restricted Securities Legend. Such term includes the Restricted Global Security.

     “Restricted Securities Legend” means, collectively, the legends substantially in the forms of
the legends required in the form of Security set forth in Section 2.2 to be placed upon each
Restricted Security.

     “Rule 144” means Rule 144 under the Securities Act (or any successor provision), as it may be
amended from time to time.

     “Rule 144A” means Rule 144A under the Securities Act (or any successor provision), as it may
be amended from time to time.

     “Rule 144A Information” has the meaning specified in Section 10.9(b).

     “Securities” has the meaning ascribed to it in the first paragraph under the caption “Recitals
of the Company.”

     “Securities Act” means the U.S. Securities Act of 1933 (or any successor statute), as amended
from time to time.

     “Security Register” and “Security Registrar” have the respective meanings specified in Section
3.6.

     “Series C Preferred Stock” means the series C preferred stock, par value $0.001 per share, of
the Company duly authorized at the date of this Indenture as originally executed or as such stock
may be constituted from time to time (including upon a change in the par value of such security).

     “Shelf Registration Statement” has the meaning specified in Section 2.2.

     “Significant Subsidiary” means, with respect to any Person, a Subsidiary of such Person that
would constitute a “significant subsidiary” as such term is defined under Rule 1-02 of Regulation
S-X under the Securities Act and the Exchange Act.

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     “Special Record Date” for the payment of any Defaulted Interest means a date fixed by the
Company pursuant to Section 3.11.

     “Stated Maturity,” when used with respect to any Security or any installment of Interest
thereon, means the date specified in such Security as the fixed date on which the principal of such
Security or such installment of Interest is due and payable.

     “Stock Price” has the meaning specified in Section 12.10(b).

     “Subsidiary” means a corporation more than 50% of the outstanding voting stock of which is
owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition, “voting stock”
means stock or other similar interests in the corporation which ordinarily has or have voting power
for the election of directors, or persons performing similar functions, whether at all times or
only so long as no senior class of stock or other interests has or have such voting power by reason
of any contingency.

     “Successor Security” of any particular Security means every Security issued after, and
evidencing all or a portion of the same debt as that evidenced by, such particular Security; and,
for the purposes of this definition, any Security authenticated and delivered under Section 3.7 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.

     “Sufficient Common Stock Reserve” has the meaning specified in Section 12.13.

     “Sufficient Preferred Stock Reserve” has the meaning specified in Section 12.13.

     “Surrender Certificate” means a certificate substantially in the form set forth in Annex B.

     “Trading Day” means a day during which trading in securities generally occurs on The Nasdaq
National Market or, if the Common Stock is not then quoted on The Nasdaq National Market, on
another national or regional securities exchange on which the Common Stock is then listed or quoted
or, if the Common Stock is not listed on The Nasdaq National Market or a national or regional
securities exchange, on the principal other market on which the Common Stock is then traded or
quoted.

     “Trading Price,” with respect to the Securities as of any date of determination, means:

          (a) the average of the secondary market bid quotations per share obtained by the Company or
its agent for $5 million aggregate principal amount of Securities at approximately 3:30 p.m., New
York City time, on such determination date from two independent nationally recognized securities
dealers, which may include the Initial Purchasers, selected by the Company;

          (b) provided that, if at least two such bids cannot reasonably be obtained by the Company or
its agent, but one such bid can reasonably be obtained by the Company or its agent, this one bid
shall be used; or

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          (c) provided further that, if the Company or its agent cannot reasonably obtain at least one
bid for $5 million aggregate principal amount of Securities from a nationally recognized securities
dealer or, in the Company’s reasonable judgment, the bid quotations are not indicative of the
secondary market value of the Securities, then the trading price of the Securities will equal 98%
of (x) the then-Applicable Conversion Rate of the Securities multiplied by (y) the Closing Sale
Price of the Common Stock on such determination date.

     “Trigger Event” has the meaning specified in Section 12.17.

     “Trust Indenture Act” means the Trust Indenture Act of 1939, and the rules and regulations
thereunder, as in force at the date as of which this Indenture was executed, provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act”
means, to the extent required by any such amendment, the Trust Indenture Act of 1939, and the rules
and regulations thereunder, as so amended.

     “Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture
until a successor Trustee shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter “Trustee” shall mean such successor Trustee.

     “United States” means the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its jurisdiction (its
“possessions” including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and
the Northern Mariana Islands).

     “Unrestricted Securities Certificate” means a certificate substantially in the form set forth
in Annex A.

SECTION 1.2 Compliance Certificates and Opinions.

     Upon any application or request by the Company to the Trustee to take any action under any
provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate
stating that all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with, except that in the
case of any such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.

     Every certificate or opinion with respect to compliance with a condition or covenant provided
for in this Indenture (including certificates provided for in Section 10.8) shall include:

          (a) a statement that each individual signing such certificate or opinion has read such
covenant or condition and the definitions herein relating thereto;

          (b) a brief statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are based;

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          (c) a statement that, in the opinion of each such individual, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to whether or not
such covenant or condition has been complied with; and

          (d) a statement as to whether, in the opinion of each such individual, such condition or
covenant has been complied with.

SECTION 1.3 Form of Documents Delivered to the Trustee.

     In any case where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so certified or covered by only one document,
but one such Person may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.

     Any certificate or opinion of an officer of the Company may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to the matters upon which such certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an officer or officers of
the Company or any other Person stating that the information with respect to such factual matters
is in the possession of the Company or such other Person, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or representations with
respect to such matters are erroneous.

     Where any Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this Indenture, they may,
but need not, be consolidated and form one instrument.

SECTION 1.4 Acts of Holders of Securities.

          (a) Any request, demand, authorization, direction, notice, consent, waiver or other action
provided or permitted by this Indenture to be given or taken by Holders of Securities may be
embodied in and evidenced by (i) one or more instruments of substantially similar tenor signed by
such Holders in person or by an agent or proxy duly appointed in writing by such Holders or (ii)
the record of Holders of Securities voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders of Securities duly called and held in accordance
with the provisions of Article IX. Such action shall become effective when such instrument or
instruments or record is delivered to the Trustee and, where it is hereby expressly required, to
the Company. The Trustee shall promptly deliver to the Company copies of all such instruments and
records delivered to the Trustee. Such instrument or instruments and records (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the
Holders of Securities signing such instrument or instruments and so voting at such meeting. Proof
of execution of any such instrument or of a writing appointing any such agent or proxy, or of the
holding by any Person of a Security, shall be sufficient for any purpose of this

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Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the
Company if made in the manner provided in this Section. The record of any meeting of Holders of
Securities shall be proved in the manner provided in Section 9.6.

          (b) The fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by a certificate of a notary public or
other officer authorized by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof. Where such execution
is by a signer acting in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority.

          (c) The principal amount and serial number of any Security held by any Person, and the date of
his holding the same, shall be proved by the Security Register.

          (d) The fact and date of execution of any such instrument or writing and the authority of the
Person executing the same may also be proved in any other manner which the Trustee deems
sufficient; and the Trustee may in any instance require further proof with respect to any of the
matters referred to in this Section.

          (e) The Company may set any day as the record date for the purpose of determining the Holders
entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or
other action, or to vote on any action, authorized or permitted by this Indenture to be given or
taken by Holders. Promptly and in any case not later than ten days after setting a record date, the
Company shall notify the Trustee and the Holders of such record date. If not set by the Company
prior to the first solicitation of a Holder made by any Person in respect of any such action, or,
in the case of any such vote, prior to such vote, the record date for any such action or vote shall
be the 30th day (or, if later, the date of the most recent list of Holders required to be provided
pursuant to Section 15.1) prior to such first solicitation or vote, as the case may be. With regard
to any record date, the Holders on such date (or their duly appointed agents or proxies), and only
such Persons, shall be entitled to give or take, or vote on, the relevant action, whether or not
such Holders remain Holders after such record date. Notwithstanding the foregoing, the Company
shall not set a record date for, and the provisions of this paragraph shall not apply with respect
to, any notice, declaration or direction referred to in the next paragraph.

     Upon receipt by the Trustee from any Holder of (i) any notice of default or breach referred to
in Section 5.1(a)(vii), if such default or breach has occurred and is continuing and the Trustee
shall not have given such a notice to the Company, (ii) any declaration of acceleration referred to
in Section 5.1(c), if an Event of Default has occurred and is continuing and the Trustee shall not
have given such a declaration to the Company, or (iii) any direction referred to in Section 5.12,
if the Trustee shall not have taken the action specified in such direction, then, with respect to
clauses (ii) and (iii), a record date shall automatically and without any action by the Company or
the Trustee be set for determining the Holders entitled to join in such declaration or direction,
which record date shall be the close of business on the tenth day (or, if such day is not a
Business Day, the first Business Day thereafter) following the day on which the Trustee receives
such declaration or direction, and, with respect to clause (i), the Trustee may set any day as a
record date for the purpose of determining the Holders entitled to join in such notice of

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default. Promptly after such receipt by the Trustee of any such declaration or direction
referred to in clause (ii) or (iii), and promptly after setting any record date with respect to
clause (i), and as soon as practicable thereafter, the Trustee shall notify the Company and the
Holders of any such record date so fixed. The Holders on such record date (or their duly appointed
agents or proxies), and only such Persons, shall be entitled to join in such notice, declaration or
direction, whether or not such Holders remain Holders after such record date; provided that, unless
such notice, declaration or direction shall have become effective by virtue of Holders of the
requisite principal amounts of Securities on such record date (or their duly appointed agents or
proxies) having joined therein on or prior to the 90th day after such record date, such notice,
declaration or direction shall automatically and without any action by any Person be canceled and
of no further effect. Nothing in this paragraph shall be construed to prevent a Holder (or a duly
appointed agent or proxy thereof) from giving, before or after the expiration of such 90-day
period, a notice, declaration or direction contrary to or different from, or, after the expiration
of such period, identical to, the notice, declaration or direction to which such record date
relates, in which event a new record date in respect thereof shall be set pursuant to this
paragraph. In addition, nothing in this paragraph shall be construed to render ineffective any
notice, declaration or direction of the type referred to in this paragraph given at any time to the
Trustee and the Company by Holders (or their duly appointed agents or proxies) of the requisite
principal amounts of Securities on the date such notice, declaration or direction is so given.

          (f) Except as provided in Sections 5.12 and 5.13, any request, demand, authorization,
direction, notice, consent, election, waiver or other Act of the Holder of any Security shall bind
every future Holder of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or
not notation of such action is made upon such Security.

          (g) The provisions of this Section are subject to the provisions of Section 9.5.

SECTION 1.5 Notices, Etc. to the Trustee and Company.

     Any request, demand, authorization, direction, notice, consent, election, waiver or other Act
of Holders of Securities or other document provided or permitted by this Indenture to be made upon,
given or furnished to, or filed with,

          (a) the Trustee by any Holder of Securities or by the Company shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing to or with a Responsible Officer of
the Trustee and received at its Corporate Trust Office, Attention: Institutional Trust Services.

          (b) the Company by the Trustee or by any Holder of Securities shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in writing, mailed, first-class
postage prepaid, or telecopied and confirmed by mail, first-class postage prepaid, or delivered by
hand or overnight courier, addressed to the Company at 3160 Porter Drive, Palo Alto, California
94304, Attention: Katrina Church, Executive Vice President, General Counsel and Secretary, or at
any other address previously furnished in writing to the Trustee by the Company.

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SECTION 1.6 Notice to Holders of Securities; Waiver.

          (a) Except as otherwise expressly provided herein, where this Indenture provides for notice to
Holders of Securities of any event, such notice shall be sufficiently given to Holders if in
writing and mailed, first-class postage prepaid or delivered by an overnight delivery service, or
transmitted by telecopy or other electronic means, with written confirmation of transmission, to
each Holder of a Security affected by such event, at the address of such Holder as it appears in
the Security Register, not earlier than the earliest date and not later than the latest date
prescribed for the giving of such notice.

          (b) Neither the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder of a Security shall affect the sufficiency of such notice with respect to other
Holders of Securities. In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such notification to
Holders of Securities as shall be made with the approval of the Trustee, which approval shall not
be unreasonably withheld, shall constitute a sufficient notification to such Holders for every
purpose hereunder.

          (c) Such notice shall be deemed to have been given three days after mailing, if by mail, one
day after mailing if by overnight courier, and on the date the notice is furnished if by telecopy
or other electronic means or by hand.

          (d) Where this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders of Securities shall be
filed with the Trustee, but such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.

SECTION 1.7 Effect of Headings and Table of Contents.

     The Article and Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.

SECTION 1.8 Successors and Assigns.

     All covenants and agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.

SECTION 1.9 Separability Clause.

     In case any provision in this Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

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SECTION 1.10 Benefits of Indenture.

     Nothing in this Indenture or in the Securities, express or implied, shall give to any Person,
other than the parties hereto and their successors and assigns hereunder and the Holders of
Securities, any benefit or legal or equitable right, remedy or claim under this Indenture.

SECTION 1.11 Governing Law.

     THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA.

SECTION 1.12 Legal Holidays.

     In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated
Maturity of any Security or the last day on which a Holder of a Security has a right to convert his
Security shall not be a Business Day at a Place of Payment or Place of Conversion, as the case may
be, then (notwithstanding any other provision of this Indenture or of the Securities) payment of
principal amount of or Interest on, or the payment of the Redemption Price or Repurchase Price
(whether the same is payable in cash or in shares of Common Stock or Series C Preferred Stock or a
combination of cash and stock in the case of the Repurchase Price) with respect to, or delivery for
conversion of, such Security need not be made at such Place of Payment or Place of Conversion, as
the case may be, on or by such day, but may be made on or by the next succeeding Business Day at
such Place of Payment or Place of Conversion, as the case may be, with the same force and effect as
if made on the Interest Payment Date, Redemption Date or Repurchase Date, or at the Stated Maturity
or by such last day for conversion; provided, however, that in the case that payment is made on
such succeeding Business Day, no Interest shall accrue on the amount so payable for the period from
and after such Interest Payment Date, Redemption Date, Repurchase Date, Stated Maturity or last day
for conversion, as the case may be.

SECTION 1.13 Conflict with Trust Indenture Act.

     If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture
Act that is required under such Act to be a part of and govern this Indenture, the latter provision
shall control. If any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be. Until such time as this
Indenture shall be qualified under the Trust Indenture Act, this Indenture, the Company and the
Trustee shall be deemed for all purposes hereof to be subject to and governed by the Trust
Indenture Act to the same extent as would be the case if this Indenture were so qualified on the
date hereof.

18

 

ARTICLE II

SECURITY FORMS

SECTION 2.1 Form Generally.

          (a) The Securities shall be in substantially the form set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are required or permitted
by this Indenture, and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with the rules of any
securities exchange, the Internal Revenue Code of 1986, as amended, and regulations thereunder (the
“Code”), or as may, consistent herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof. All Securities shall be in fully registered form.

          (b) The Trustee’s certificates of authentication shall be in substantially the form set forth
in Section 2.3.

          (c) Conversion notices shall be in substantially the form set forth in Section 2.4.

          (d) Repurchase notices shall be substantially in the form set forth in Section 2.2.

          (e) The Securities shall be printed, lithographed, typewritten or engraved or produced by any
combination of these methods or may be produced in any other manner permitted by the rules of any
automated quotation system or securities exchange (including on steel engraved borders if so
required by any securities exchange upon which the Securities may be listed) on which the
Securities may be quoted or listed, as the case may be, all as determined by the officers executing
such Securities, as evidenced by their execution thereof.

          (f) Upon their original issuance, Securities issued as contemplated by the Purchase Agreement
to Qualified Institutional Buyers in reliance on Rule 144A shall be issued in the form of one or
more Global Securities in definitive, fully registered form without interest coupons and bearing
the Restricted Securities Legend. Such Global Security shall be registered in the name of DTC, as
Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC
to the respective accounts of beneficial owners of the Securities represented thereby (or such
other accounts as they may direct). Such Global Security, together with its Successor Securities
which are Global Securities, are collectively herein called the “Restricted Global Security.”

SECTION 2.2 Form of Security.

[FORM OF FACE]

     [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED SECURITY:

19

 

THIS SECURITY HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT, FOR PURPOSES OF SECTIONS 1272, 1273,
AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.

THIS SECURITY IS SUBJECT TO THE RULES FOR DEBT INSTRUMENTS WITH CONTINGENT PAYMENTS UNDER TREASURY
REGULATIONS SECTION 1.1275-4(b). FOR INFORMATION REGARDING THE ISSUE PRICE, ISSUE DATE, THE
“COMPARABLE YIELD” AND PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY, YOU SHOULD SUBMIT A WRITTEN
REQUEST TO THE COMPANY AT THE FOLLOWING ADDRESS: CONNETICS CORPORATION, 3160 PORTER DRIVE, PALO
ALTO, CALIFORNIA 94304, ATTENTION: INVESTOR RELATIONS.

THIS SECURITY AND ANY COMMON STOCK OR SERIES C PREFERRED STOCK ISSUABLE UPON THE CONVERSION OF THIS
SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER (“RULE 144A”).

THIS SECURITY AND ANY COMMON STOCK OR SERIES C PREFERRED STOCK ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO
THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF
RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT OR (4) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THIS SECURITY OR AN INTEREST IN THE
SECURITIES EVIDENCED HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING
RESTRICTIONS AND THAT NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION
PROVIDED BY RULE 144 FOR RESALES OF THE SECURITIES, COMMON STOCK AND/OR SERIES C PREFERRED STOCK.
EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING
ON AN EXEMPTION FROM THE

20

 

PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.

THIS SECURITY, ANY SHARES OF COMMON STOCK OR SERIES C PREFERRED STOCK ISSUABLE UPON ITS CONVERSION
AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE
RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY
CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY AND ANY
SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE AGREED
TO ANY SUCH AMENDMENT OR SUPPLEMENT.]

     [THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY
THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL
PURPOSES.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM
IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE INDENTURE, THIS GLOBAL SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]

21

 

CONNETICS CORPORATION

2.00% CONVERTIBLE SENIOR NOTE DUE MARCH 30, 2015

			
	 	 	 
	N0.                     
	 	$                    

CUSIP NO. 208192AC8

     Connetics Corporation, a corporation duly organized and existing under the laws of the State
of Delaware (herein called the “Company,” which term includes any successor Person under the
Indenture referred to on the reverse hereof), for value received, hereby promises to pay to
                                        , or registered assigns, the principal sum of                      United States Dollars
(U.S.$                     ) [if this Security is a Global Security, then insert – (which principal amount may
from time to time be increased or decreased to such other principal amounts (which, taken together
with the principal amounts of all other Outstanding Securities, shall not exceed $150,000,000 (or
$200,000,000 if the Initial Purchasers’ Option is exercised in full)) by adjustments made on the
records of the Trustee hereinafter referred to in accordance with the Indenture)] on March 30, 2015
and to pay Interest (including Contingent Interest and Liquidated Damages) thereon as described
below.

     Regular Interest will accrue on this Security at the rate of 2.00% per annum, from March 23,
2005, or from the most recent Interest Payment Date (as defined below) to which Regular Interest
has been paid or duly provided for, semi-annually in arrears on March 30 and September 30 in each
year (each, an “Interest Payment Date”), commencing September 30, 2005. This Security will cease
to accrue Regular Interest as of March 29, 2010.

     The Company will generally not pay Regular Interest accrued and unpaid on this Security upon
conversion into Common Stock or Series C Preferred Stock.

     On and after March 30, 2010, Contingent Interest will accrue on this Security during any
six-month period from March 30 to September 29 or from September 30 to March 29 (“Interest Period”)
beginning with the six-month Interest Period commencing on or after March 30, 2010, if the average
Trading Price of the Securities for the five Trading Day measurement period ending on the second
Trading Day immediately preceding the first day of the applicable Interest Period (the “Measurement
Period”) equals 120% or more of the principal amount of the Securities as of the last day of the
Measurement Period.

     The amount of Contingent Interest payable in any Interest Period pursuant to this Section
shall equal .30% of the average Trading Price of the Securities for the applicable Measurement
Period.

     The Company will generally not pay Contingent Interest accrued and unpaid on this Security
upon conversion into Common Stock or Series C Preferred Stock.

     Until March 29, 2010, the accreted principal amount (the “Accreted Principal Amount”) of a
Security will be equal to the Original Principal Amount of that Security. Beginning on March 30,
2010, the Original Principal Amount shall commence increasing at a rate that provides holders with
an aggregate annual yield to maturity of 2.00% (computed on a semi-annual bond

22

 

equivalent yield basis). References to the principal amount of this Security include the
Accreted Principal Amount after March 29, 2010.

     Payments on the Securities will be made in U.S. dollars at the office of the Trustee; provided
that, the Company may elect to make payments by check mailed to the Holder’s registered address or,
with respect to Global Securities, by wire transfer.

     In the event any Holder surrenders any Security for conversion during the period between the
close of business on a Record Date but prior to the corresponding Interest Payment Date, the
Company shall pay accrued Interest on such Security on that Interest Payment Date to the Holder of
such Security as of such Record Date. The Holder surrendering the Security for conversion shall be
required to pay to the Company an amount equal to the Interest that has accrued as of such Interest
Payment Date and that amount will be paid to the Holder of such Security as of the Record Date
pursuant to the preceding sentence. The preceding sentence does not apply to Securities that are
surrendered for conversion after the Company has specified a Redemption Date that is after a Record
Date but on or prior to the corresponding Interest Payment Date.

     The Company agrees, and by acceptance of a beneficial ownership in the Securities each Holder
of the Securities has agreed, for United States federal income tax purposes, (a) to treat the
Securities as “contingent payment debt instruments” as defined in Treasury Regulations Section
1.1275-4 (the “Contingent Payment Debt Regulations”) and, for purposes of the Contingent Debt
Payment Regulations, to treat delivery of Common Stock or Series C Preferred Stock or cash
(including cash delivered in lieu of a fractional share) to a Holder of a Security upon conversion
of such Security, or upon a purchase of such Security by the Company at the option of the Holder of
a Security where the Company makes a payment in cash (including cash paid in lieu of a fractional
share) as a contingent payment (in an amount equal to the sum of the Fair Market Value of such
Common Stock and any cash received) under Treasury Regulation section 1.1275-4(b); and (b) to be
bound by the Company’s application of the Contingent Payment Debt Regulations to the Securities,
including the Company’s determination of the comparable yield and projected payment schedule,
within the meaning of the Contingent Payment Debt Regulations, with respect to the Securities. A
Holder of Securities may obtain the issue price, issue date, comparable yield and projected payment
schedule by submitting a written request to the Company at the following address: Connetics
Corporation, 3160 Porter Drive, Palo Alto, California 94304, Attention: Investor Relations.

     Except as specifically provided herein and in the Indenture, the Company shall not be required
to make any payment with respect to any tax, assessment or other governmental charge imposed by any
government or any political subdivision or taxing authority thereof or therein.

     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.

     Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof or an Authenticating Agent by the manual signature of one of their respective
authorized signatories, this Security shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.

23

 

     IN WITNESS WHEREOF, the Company has caused this Security to be duly executed.

	 	 	 	 	 
	 	CONNETICS CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

24

 

	 	 	 	 	 

[FORM OF REVERSE]

     This Security is one of a duly authorized issue of securities of the Company designated as its
“2.00% Convertible Senior Notes due March 30, 2015” (herein called the “Securities”), limited in
aggregate principal amount to U.S. $150,000,000 (or $200,000,000 if the Initial Purchasers’ Option
is exercised in full), issued and to be issued under an Indenture, dated as of March 23, 2005
(herein called the “Indenture”), between the Company and J.P. Morgan Trust Company, National
Association, as Trustee (herein called 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, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture
and subject to certain limitations therein set forth, Securities are exchangeable into cash or cash
and shares of Common Stock or Series C Preferred Stock of Connetics Corporation, in each case
having a combined aggregate value equal to the Conversion Consideration, as set forth in the
Indenture. The initial conversion rate is 28.1972 shares of Common Stock per each $1,000 principal
amount of Securities, adjusted in certain circumstances as provided in the Indenture.

     No sinking fund is provided for the Securities.

     The Securities are subject to redemption at the option of the Company at any time on or after
April 4, 2010 and prior to March 30, 2015, in whole or in part, upon not less than 30 nor more than
60 days’ notice to the Holders prior to the Redemption Date at a Redemption Price equal to 100% of
the Accreted Principal Amount, together with accrued and unpaid interest (including Regular
Interest, Contingent Interest, Liquidated Damages and Reserve Interest, as applicable, together
“Interest”) to, but excluding, the Redemption Date.

     In the event of a redemption of the Securities, the Company will not be required (a) to
register the transfer or exchange of Securities for a period of 15 days immediately preceding the
date notice is given identifying the serial numbers of the Securities called for such redemption or
(b) to register the transfer or exchange of any Security, or portion thereof, called for
redemption.

     Subject to and upon compliance with the provisions of the Indenture, the Holder of this
Security is entitled to require the Company to repurchase this Security on March 30, 2010, and as a
result of a Fundamental Change. The repurchase price payable will be equal to 100% of the Original
Principal Amount of the Securities to be repurchased, plus accrued and unpaid Interest to, but not
including, the repurchase date; provided that, if repurchase is required by virtue of a Fundamental
Change occurring after March 30, 2010, the repurchase price will be based on the Accreted Principal
Amount of the Securities to be repurchased.

     A Holder may withdraw any repurchase notice by delivering a written notice of withdrawal to
the Paying Agent prior to the close of business on the Business Day immediately preceding the
repurchase date. The notice of withdrawal must state: (i) the principal amount of the Securities
being withdrawn; (ii) if certificated, the certificate numbers of the Securities being withdrawn;
and (iii) principal amount of the Securities that remain subject to the Repurchase Notice.

25

 

     If this Security is a Registrable Security (as defined in the Indenture), then the Holder of
this Security [if this security is a global security, then insert (including any Person that has a
beneficial interest in this Security)] and the Common Stock and Series C Preferred Stock of the
Company issuable upon conversion hereof is entitled to the benefits of a Registration Rights
Agreement, dated as of March 23, 2005 (the “Registration Rights Agreement”), between the Company
and the Initial Purchasers. Pursuant to the Registration Rights Agreement, the Company has agreed
for the benefit of the Holders from time to time of the Registrable Securities that it will, at its
expense, among other things, and as more fully provided in such agreement, file a shelf
registration statement (the “Shelf Registration Statement”) with the Commission with respect to
resales of the Registrable Securities and maintain such Shelf Registration Statement effective
under the Securities Act for a specified period (the “Effectiveness Period”). The Company will be
permitted to suspend the use of the prospectus which is part of the Shelf Registration Statement
during certain periods of time as provided in the Registration Rights Agreement.

     If (a) on or prior to the 90th day following March 23, 2005, a Shelf Registration Statement
has not been filed with the Commission, or (b) on or prior to the 180th day following March 23,
2005, such Shelf Registration Statement is not declared effective (each, a “Registration Default”),
additional interest (“Liquidated Damages”) will accrue on this Restricted Security from and
including the day following such Registration Default to but excluding the day on which such
Registration Default has been cured. Liquidated Damages will be paid semi-annually in arrears, with
the first semi-annual payment due on the first Interest Payment Date, as applicable, in respect of
the Restricted Securities following the date on which such Liquidated Damages begin to accrue, and
will accrue at a rate per annum equal to one-quarter of one percent (0.25%) of the principal amount
of the Restricted Securities to and including the 90th day following such Registration Default and
at a rate per annum equal to one-half of one percent (0.50%) thereof from and after the 91st day
following such Registration Default. Pursuant to the Registration Rights Agreement, in the event
that the Shelf Registration Statement ceases to be effective (or the Holders of Registrable
Securities are otherwise prevented or restricted by the Company from effecting sales pursuant
thereto) (an “Effective Failure”) during the Effectiveness Period for more than 30 days, whether or
not consecutive, during any 90-day period or for more than 90 days, whether or not consecutive,
during any 12-month period, then the Liquidated Damages will accrue at a rate per annum equal to an
additional one-half of one percent (0.50%) of the principal amount of the Restricted Securities
from the 31st day of the applicable 90-day period or the 91st day of the applicable 12-month period
until the earlier of (i) such time as the Effective Failure is cured or (ii) the Effectiveness
Period expires.

     Whenever in this Security there is a reference, in any context, to the payment of the
principal amount of or Interest on, or in respect of, any Security, such mention shall be deemed to
include mention of the payment of Liquidated Damages payable as described in the immediately
preceding paragraph to the extent that, in such context, Liquidated Damages are, were or would be
payable in respect of such Security and express mention of the payment of Liquidated Damages (if
applicable) in any provisions of this Security shall not be construed as excluding Liquidated
Damages in those provisions of this Security where such express mention is not made.

26

 

     If this Security is a Registrable Security and the Holder of this Security [if this security
is a global security, then insert (including any Person that has a beneficial interest in this
security)] elects to sell this Security pursuant to the Shelf Registration Statement then, by its
acceptance hereof, such Holder of this Security agrees to be bound by the terms of the Registration
Rights Agreement relating to the Registrable Securities which are the subject of such election.

     [The following paragraph shall appear in each Global Security:

     In the event of a deposit or withdrawal of an interest in this Security, including an
exchange, transfer, redemption, repurchase or conversion of this Security in part only, the
Trustee, as custodian of the Depositary, shall make an adjustment on its records to reflect such
deposit or withdrawal in accordance with the Applicable Procedures.]

     [The following paragraph shall appear in each Security that is not a Global Security:

     In the event of redemption, repurchase or conversion of this Security in part only, a new
Security or Securities for the unredeemed, unrepurchased or unconverted portion hereof will be
issued in the name of the Holder hereof.]

     If an Event of Default shall occur and be continuing, the principal amounts of all the
Securities, together with accrued Interest to the date of declaration, may be declared due and
payable in the manner and with the effect provided in the Indenture. Upon payment (a) of the
principal amounts so declared due and payable, together with accrued Interest to the date of
declaration, and (b) of Interest on any overdue principal and, to the extent permitted by
applicable law, overdue interest, all of the Company’s obligations in respect of the payment of the
principal of and Interest on the Securities shall terminate.

     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 under the Indenture at any time by the Company and the Trustee with either (a) the
written consent of the Holders of not less than a majority in principal amount of the Securities at
the time Outstanding, or (b) by the adoption of a resolution, at a meeting of Holders of the
Outstanding Securities at which a quorum is present, by the Holders of at least a majority in
aggregate principal amount of the Outstanding Securities represented and entitled to vote at such
meeting. The Indenture also contains provisions permitting the Holders of specified percentages in
principal amounts of the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, 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 in exchange therefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Security or such other Security.

     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

27

 

have previously given the Trustee written notice of a continuing Event of Default, the Holders
of not less than 25% in principal amount of the Outstanding Securities 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 the Securities Outstanding a direction inconsistent with such
request, and shall have failed to institute any such proceeding, for 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 amount hereof or Interest
hereon on or after the respective due dates expressed herein or for the enforcement of the right to
convert this Security as provided in the Indenture.

     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 amount of and Interest on this Security at the times, places and rate, and in the
coin or currency, herein prescribed or to convert this Security as provided in the Indenture.

     As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable on the Security Register upon surrender of this Security
for registration of transfer at the Corporate Trust Office of the Trustee or at such other office
or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan,
The City of New York (which shall initially be an office or agency of the Trustee), or at such
other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder thereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees by the Registrar. 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 recover any tax or other governmental charge payable in connection therewith.

     Prior to due presentation of a 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 such Security is
registered, as the owner thereof for all purposes, whether or not such Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

     No recourse for the payment of the principal amount of or Interest on this Security and no
recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any
indenture supplemental thereto or in any Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer
or director or subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of consideration for the
issue hereof, expressly waived and released.

28

 

     THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

     All terms used in this Security which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.

ABBREVIATIONS

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

	 	 	 	 	 	 	 
	TEN COM

	 	as tenant in common
	 	UNIF GIFT MIN ACT
	 	___Custodian ___
	TEN ENT

	 	as tenants by the entireties (Cust)
	 	 	 	(Cust)          (Minor)
	JT TEN

	 	as joint tenants with right of
	 	 	 	under Uniform Gifts to
	

	 	survivorship and not as tenants in
	 	 	 	Minors Act ___
	

	 	common
	 	 	 	(State)

     Additional abbreviations may also be used though not in the above list.

	 	 	 
	Accretion Schedule
	 	 	Accreted Principal
	Date	 	Amount $
	3/30/2010
	 	1000.00
	9/30/2010
	 	1010.00
	3/30/2011
	 	1020.10
	9/30/2011
	 	1030.30
	3/30/2012
	 	1040.60
	9/30/2012
	 	1051.01
	3/30/2013
	 	1061.52
	9/30/2013
	 	1072.14
	3/30/2014
	 	1082.86
	9/30/2014
	 	1093.69
	3/30/2015
	 	1104.62

29

 

ELECTION OF HOLDER TO REQUIRE REPURCHASE

     (1) Pursuant to Article XIII of the Indenture, the undersigned hereby elects to have this
Security repurchased by the Company.

     (2) The undersigned hereby directs the Trustee or the Company to pay it or ___the
repurchase price as set forth in the Indenture.

	 	 	 
	Dated:

	 	 
	 
	 	 
	

	 	 
	 
	 	 
	

	 	 
	Signature(s)
	 	 

Signature(s) must be guaranteed by an Eligible

Guarantor Institution with membership in an

approved signature guarantee program pursuant

to Rule 17Ad-15 under the Securities Exchange

Act of 1934.

	 	 	 
	

Signature Guaranteed

	 	 

Principal amount to be repurchased (at least

U.S. $1,000 or an integral multiple of $1,000

in excess thereof):

Remaining principal amount following such

repurchase (not less than U.S. $1,000):

	 	 	 
	

	 	 

NOTICE: The signature to the foregoing Election must correspond to the Name as written upon the
face of this Security in every particular, without alteration or any change whatsoever.

30

 

SECTION 2.3 Form of Certificate of Authentication.

     The Trustee’s certificate of authentication shall be in substantially the following form:

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

Dated:________

	 	 	 	 	 
	 	 	J.P. Morgan Trust Company, National
	 	 	Association, as Trustee
	 
	 	 	 	 
	

	 	By:	 	 
	 

	 	 	 	
 Authorized
Signatory

SECTION 2.4 Form of Conversion Notice.

CONVERSION NOTICE

     The undersigned Holder of this Security hereby irrevocably exercises the option to convert
this Security, or any portion of the principal amount hereof (which is U.S.$1,000 or an integral
multiple of U.S.$1,000 in excess thereof; provided that, the unconverted portion of such principal
amount is equal to or in excess of U.S. $1,000) below designated, into the Conversion Consideration
in accordance with the terms of the Indenture referred to in this Security, and directs that such
Conversion Consideration, be delivered to and be registered in the name of the undersigned unless a
different name has been indicated below. If shares of Common Stock, Series C Preferred Stock or
Securities are to be registered in the name of a Person other than the undersigned, (a) the
undersigned will pay all transfer taxes payable with respect thereto and (b) signature(s) must be
guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee
program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. Any amount required to
be paid by the undersigned on account of Interest accompanies this Security.

	 	 	 	 	 
	Dated:
	 	 	 	 
	

	 	 
	 	 
	

	 	 	 	Signature(s)

If shares or Securities are to be registered in the

name of a Person other than the Holder, please

print such Person’s name and address:

	 	 	 
	

(Name)

	 	 

31

 

	 	 	 
	

	 	 
	 
	 	 
	

	 	 
	(Address)
	 	 

	 	 	 
	

	 	 
	Social Security or other Identification
	 	 
	Number, if any
	 	 

Signature(s) must be guaranteed by an

Eligible Guarantor Institution with

membership in an approved signature

guarantee program pursuant to Rule 17Ad –

15 under the Securities Exchange Act of

1934.

	 	 	 
	

	 	 
	[Signature Guaranteed]
	 	 

If only a portion of the Securities is to be converted, please indicate:

	1.  	Principal amount to be converted: U.S. $ ___
	 
	2.  	Principal amount and denomination of Securities
representing unconverted principal amount to be issued:

          Amount: U.S. $___Denominations: U.S. $___

(U.S.$1,000 or any integral multiple of U.S.$1,000 in excess thereof; provided that, the
unconverted portion of such principal amount is equal to or in excess of U.S. $1,000)

32

 

SECTION 2.5 Form of Assignment.

     For value received ___hereby sell(s), assign(s) and transfer(s) unto
___(Please insert social security or other identifying number of assignee) the within
Security, and hereby irrevocably constitutes and appoints ___as attorney to
transfer the said Security on the books of the Company, with full power of substitution in the
premises.

	 	 	 	 	 
	Dated:
	 	 	 	 
	

	 	 
	 	 
	

	 	 	 	Signature(s)
	 
	 	 	 	 

	 	 	 
	 

	 	Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant
to Rule 17Ad-15 under the Securities
Exchange Act of 1934.
	 
	 	 
	

	 	 
	

	 	Signature Guaranteed

33

 

ARTICLE III

THE SECURITIES

SECTION 3.1 Title and Terms.

          (a) The aggregate principal amounts of Securities which may be authenticated and delivered
under this Indenture is limited to U.S. $150 million (or $200 million if the option of Goldman,
Sachs & Co. set forth in Section 2 of the Purchase Agreement is exercised in full (the “Initial
Purchasers’ Option”)), except for Securities authenticated and delivered pursuant to Section 3.5,
3.6, 3.7, 8.5 or 12.6 in exchange for, or in lieu of, other Securities previously authenticated and
delivered under this Indenture.

          (b) The Securities shall be known and designated as the “2.00% Convertible Senior Notes due
March 30, 2015” of the Company. Their Stated Maturity shall be March 30, 2015 and they shall bear
Regular Interest on their principal amount from March 23, 2005 through March 29, 2010; provided
that the Securities will cease to accrue Regular Interest as of March 30, 2010.

          (c) Commencing on or after March 30, 2010, Contingent Interest shall be paid, if applicable,
in accordance with Section 3.9 below.

          (d) Commencing March 30, 2010, the Original Principal Amount shall increase in accordance with
Section 3.10 below.

          (e) The principal amount of and Interest on the Securities shall be payable as provided in
Sections 3.2, 3.8, 3.9, 3.10, 3.11 and Articles XI and XIII of this Indenture and the Repurchase
Price shall be payable at such places as are identified in the notice of the Company given pursuant
to Section 13.1 (any city in which any Paying Agent is located being herein called a “Place of
Payment”).

          (f) The Registrable Securities are entitled to the benefits of a Registration Rights Agreement
as provided by Section 10.12 and in the form of Security set forth in Section 2.2. The Securities
are entitled to the payment of Liquidated Damages as provided by Section 3.11.

          (g) The Securities shall be convertible as provided in Article XII (any city in which any
Conversion Agent is located being herein called a “Place of Conversion”).

          (h) The Securities shall be subject to repurchase by the Company at the option of the Holders
as provided in Article XIII.

SECTION 3.2 Maturity, Interest and Principal Payments Generally.

          (a) The Securities will mature on March 30, 2015 and Holders will be entitled to receive the
Accreted Principal Amount of their Securities on that date, unless the Securities

34

 

were earlier redeemed, repurchased, converted or exchanged pursuant to the terms of this
Indenture.

          (b) In the event that any Interest becomes payable on the Securities, a Holder of any Security
at the close of business on a Record Date shall be entitled to receive such Interest on the
corresponding Interest Payment Date; provided, however, that:

               (i) Subject to Section 12.6, the Company will not pay accrued Interest on Securities
surrendered for conversion into Common Stock or Series C Preferred Stock and upon payment by or on
behalf of the Company of the Conversion Consideration with respect thereto the Company shall
satisfy its obligations with respect to the Securities, including the payment of any such accrued
Interest; provided that, Liquidated Damages will be payable as specified in the Registration Rights
Agreement and this Indenture and Reserve Interest shall continue to be payable if the Company fails
to timely establish a Sufficient Common Stock Reserve as set forth in Section 12.13; and

               (ii) all Interest will be paid to a Person other than the Holder of a Security on a Record
Date if the Company redeems, or such Holder elects to require the Company to repurchase, the
Security on a date that is after such Record Date and on or prior to the corresponding Interest
Payment Date, in which case accrued and unpaid Interest on the Security being redeemed to, but
excluding, the Redemption Date will be paid to the same Person to whom the principal amount of such
Security is paid.

          (c) Except as provided below, the Company will pay Interest on:

               (i) any Global Security to the Depositary therefor in immediately available funds; and

               (ii) any certificated Securities by check mailed to the Holders of those Securities.

          (d) At maturity, Interest on any certificated Securities will be payable at the office of the
Trustee.

          (e) Payments on the Securities will be made in U.S. dollars at the office of the Trustee;
provided that, the Company may elect to make payments by check mailed to the Holder’s registered
address or, with respect to Global Securities, by wire transfer in immediately available funds.

SECTION 3.3 Denominations.

     The Securities shall be issuable only in registered form, without coupons, in denominations of
U.S. $1,000 Original Principal Amount and integral multiples of U.S. $1,000 in excess thereof until
March 29, 2010 and thereafter may be issued in any denomination equal to or in excess of $1,000.

35

 

SECTION 3.4 Execution, Authentication, Delivery and Dating.

          (a) The Securities shall be executed on behalf of the Company by its Chairman of the Board,
its President or Chief Executive Officer, or one of its Vice Presidents, and attested by its Chief
Financial Officer, Secretary or one of its Assistant Secretaries. Any such signature may be manual
or facsimile.

          (b) Securities bearing the manual or facsimile signature of individuals who were at any time
the proper officers of the Company shall bind the Company, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.

          (c) At any time and from time to time after the execution and delivery of this Indenture, the
Company may deliver Securities executed by the Company to the Trustee or to its order for
authentication, together with a Company Order for the authentication and delivery of such
Securities, and the Trustee in accordance with such Company Order shall authenticate and make
available for delivery such Securities as in this Indenture provided.

          (d) Each Security shall be dated the date of its authentication.

          (e) No Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the Trustee by manual signature of an
authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered hereunder.

SECTION 3.5 Global Securities; Non-global Securities; Book-entry Provisions.

Global Securities

          (a) Each Global Security authenticated under this Indenture shall be registered in the name of
the Depositary designated by the Company for such Global Security or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global
Security shall constitute a single Security for all purposes of this Indenture.

          (b) Except for exchanges of Global Securities for definitive, non-Global Securities at the
sole discretion of the Company, no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security in whole or in part may be registered,
in the name of any Person other than the Depositary for such Global Security or a nominee thereof
unless (i) such Depositary (A) has notified the Company that it is unwilling, unable or no longer
qualified to continue as Depositary for such Global Security or (B) has ceased to be a clearing
agency registered as such under the Exchange Act or announces an intention permanently to cease
business or does in fact do so or (ii) there shall have occurred and be continuing an Event of
Default with respect to such Global Security. In the event clause (i)(A) of the immediately
preceding sentence is applicable, if a successor Depositary for such Global Security is not
appointed by the Company within 90 days after the Company receives such notice or becomes aware of
such ineligibility, the Company will execute, and the Trustee, upon receipt of an Officers’
Certificate directing the authentication and delivery of

36

 

Securities, will authenticate and deliver, Securities, in any authorized denominations in an
aggregate principal amount equal to the principal amount of such Global Security in exchange for
such Global Security.

          (c) If any Global Security is to be exchanged for other Securities or canceled in whole, it
shall be surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Security
Registrar, for exchange or cancellation, as provided in this Article III. If any Global Security is
to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, in each case, as provided in
Section 3.6, then either (i) such Global Security shall be so surrendered for exchange or
cancellation, as provided in this Article III, or (ii) the principal amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or
equal to the principal amount of such other Security to be so exchanged for a beneficial interest
therein, as the case may be, by means of an appropriate adjustment made on the records of the
Trustee, as Security Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Global Security, the Trustee
shall authenticate and deliver any Securities issuable in exchange for such Global Security (or any
portion thereof) to or upon the order of, and registered in such names as may be directed by, the
Depositary or its authorized representative. Upon the request of the Trustee in connection with the
occurrence of any of the events specified in the preceding paragraph, the Company shall promptly
make available to the Trustee a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall, subject to Section 3.6(h), be entitled to rely upon any order,
direction or request of the Depositary or its authorized representative which is given or made
pursuant to this Article III if such order, direction or request is given or made in accordance
with the Applicable Procedures.

          (d) Every Security authenticated and delivered upon registration of transfer of, or in
exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this
Article III or otherwise, shall be authenticated and delivered in the form of, and shall be, a
registered Global Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof, in which case such Security shall be
authenticated and delivered in definitive, fully registered form, without interest coupons.

          (e) The Depositary or its nominee, as registered owner of a Global Security, shall be the
Holder of such Global Security for all purposes under the Indenture and the Securities, and owners
of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable
Procedures. Accordingly, any such owner’s beneficial interest in a Global Security will be shown
only on, and the transfer of such interest shall be effected only through, records maintained by
the Depositary or its nominee or its Agent Members and such owners of beneficial interests in a
Global Security will not be considered the owners or holders thereof.

37

 

Non-global Securities

     Securities issued upon the events described in Section 3.5(b) shall be in definitive, fully
registered form, without interest coupons, and shall bear the Restricted Securities Legend if and
as required by this Indenture.

SECTION 3.6 Registration; Registration of Transfer and Exchange; Restrictions on Transfer.

          (a) The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register
(the register maintained in such office referred to as the “Security Register”) in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed “Security Registrar”
for the purpose of registering Securities and transfers and exchanges of Securities as herein
provided.

          (b) Upon surrender for registration of transfer of any Security at an office or agency of the
Company designated pursuant to Section 10.2 for such purpose, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee or transferees,
one or more new Securities of any authorized denominations and of a like aggregate principal amount
and bearing such restrictive legends as may be required by this Indenture.

          (c) At the option of the Holder, and subject to the other provisions of this Section,
Securities may be exchanged for other Securities of any authorized denomination and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at any such office or
agency. Whenever any Securities are so surrendered for exchange, and subject to the other
provisions of this Section, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities that the Holder making the exchange is entitled to receive. Every Security
presented or surrendered for registration of transfer or for exchange shall (if so required by the
Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company, the Trustee and the Security Registrar duly executed,
by the Holder thereof or his attorney duly authorized in writing.

          (d) All Securities issued upon any registration of transfer or exchange of Securities shall be
the valid obligations of the Company, evidencing the same debt and entitled to the same benefits
under this Indenture as the Securities surrendered upon such registration of transfer or exchange.

          (e) No service charge shall be charged to a Holder for any registration of transfer or
exchange of Securities except as provided in Section 3.7, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed in connection with
any registration of transfer or exchange of Securities, other than exchanges pursuant to Section
3.5, 3.6, 3.7, 8.5 or 12.6 (other than where the shares of Common Stock or Series C Preferred Stock
are to be issued or delivered in a name other than that of the Holder of the Security) not
involving any transfer and other than any stamp and other duties, if

38

 

any, which may be imposed in connection with any such transfer or exchange by the United
States or any political subdivision thereof or therein, which shall be paid by the Company.

          (f) In the event of a redemption of the Securities, neither the Company nor the Securities
Registrar will be required (i) to register the transfer of or exchange Securities for a period of
15 days immediately preceding the date notice is given identifying the serial numbers of the
Securities called for such redemption or (ii) to register the transfer of or exchange any Security,
or portion thereof, called for redemption.

          (g) Certain Transfers and Exchanges. Notwithstanding any other provision of this
Indenture or the Securities, transfers and exchanges of Securities and beneficial interests in a
Global Security of the kinds specified in this Section shall be made only in accordance with this
Section.

               (i) Restricted Global Security to Restricted Non-Global Security. In the event that
non-Global Securities are to be issued pursuant to Section 3.5(b) in connection with any transfer
of Securities, such transfer may be effected only in accordance with the provisions of this clause
and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of
(A) a Company Order from the Company directing the Trustee, as Security Registrar, to (x)
authenticate and deliver one or more Securities of the same aggregate principal amount as the
beneficial interest in the Restricted Global Security to be transferred, such instructions to
contain the name or names of the designated transferee or transferees, the authorized denomination
or denominations of the Securities to be so issued and appropriate delivery instructions and (y)
decrease the beneficial interest of a specified Agent Member’s account in a Restricted Global
Security by a specified principal amount not greater than the principal amount of such Restricted
Global Security, and (B) such other certifications, legal opinions or other information as the
Company or the Trustee may reasonably require to confirm that such transfer is being made pursuant
to an exemption from, or in a transaction not subject to, the registration requirements of the
Securities Act, then the Trustee, as Security Registrar, shall decrease the principal amount of the
Restricted Global Security by the specified amount and authenticate and deliver Securities in
accordance with such instructions from the Company as provided in Section 3.5(c).

               (ii) Restricted Non-Global Security to Restricted Global Security. If the Holder of a
Restricted Security (other than a Global Security) wishes at any time to transfer all or any
portion of such Restricted Security to a Person who wishes to take delivery thereof in the form of
a beneficial interest in the Restricted Global Security, such transfer may be effected only in
accordance with the provisions of this clause and subject to the Applicable Procedures. Upon
receipt by the Trustee, as Security Registrar, of such Restricted Security as provided in this
Section and instructions from the Company directing that a beneficial interest in the Restricted
Global Security in a specified principal amount not greater than the principal amount of such
Security be credited to a specified Agent Member’s account, then the Trustee, as Security
Registrar, shall cancel such Restricted Security (and issue a new Restricted Security in respect of
any untransferred portion thereof) as provided in this Section and increase the principal amount of
the Restricted Global Security by the specified principal amount as provided in Section 3.5(c).

39

 

               (iii) Exchanges Between Global Security and Non-global Security. A beneficial
interest in a Global Security may be exchanged for a Security that is not a Global Security only as
provided in Section 3.5(b); provided that, if such interest is a beneficial interest in the
Restricted Global Security, then such interest shall be exchanged for a Restricted Security
(subject in each case to clause (h) below. A Security that is not a Global Security may be
exchanged for a beneficial interest in a Global Security only if such exchange occurs in connection
with a transfer effected in accordance with clause (g)(ii) above.

          (h) Securities Act Legends. All Securities issued pursuant to this Indenture, and all
Successor Securities, shall bear the Restricted Securities Legend and shall be subject to the
restrictions on transfer specified therein, subject to the following:

               (i) subject to the following clauses of this Section, a Security or any portion thereof which
is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear
the Restricted Securities Legend borne by such Global Security for which the Security was
exchanged;

               (ii) subject to the following clauses of this Section, a new Security that is not a Global
Security and is issued in exchange for another Security (including a Global Security) or any
portion thereof, upon transfer or otherwise, shall bear the Restricted Securities Legend borne by
the Security for which the new Security was exchanged;

               (iii) any Securities that are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act (including the Shelf Registration Statement),
together with their Successor Securities shall not bear a Restricted Securities Legend; the Company
shall inform the Trustee in writing of the effective date of any such registration statement
registering the Securities under the Securities Act and shall notify the Trustee, in writing, at
any time when prospectuses must be delivered with respect to Securities to be sold pursuant to such
registration statement. The Trustee shall not be liable for any action taken or omitted to be taken
by it in good faith in accordance with the aforementioned registration statement;

               (iv) at any time after the Securities may be freely transferred without registration under the
Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, a
new Security that does not bear a Restricted Securities Legend may be issued in exchange for or in
lieu of a Security (other than a Global Security) or any portion thereof that bears such a legend
if the Trustee has received an Unrestricted Securities Certificate, satisfactory to the Trustee and
duly executed by the Holder of such Security bearing a Restricted Securities Legend or his attorney
duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall
authenticate and deliver such new Security in exchange for or in lieu of such other Security as
provided in this Article III;

               (v) a new Security that does not bear a Restricted Securities Legend may be issued in exchange
for or in lieu of a Security or any portion thereof that bears such a legend if, in the Company’s
judgment, placing such a legend upon such new Security is not necessary to ensure compliance with
the registration requirements of the Securities Act, and the

40

 

Trustee, at the direction of the Company, shall authenticate and deliver such a new Security
as provided in this Article III; and

               (vi) notwithstanding the foregoing provisions of this Section, a Successor Security of a
Security that does not bear a Restricted Securities Legend shall not bear such legend unless the
Company has reasonable cause to believe that such Successor Security is a “restricted security”
within the meaning of Rule 144, in which case the Trustee, at the direction of the Company, shall
authenticate and deliver a new Security bearing a Restricted Securities Legend in exchange for such
Successor Security as provided in this Article III.

          (i) Any stock certificate representing shares of Common Stock or Series C Preferred Stock
issued upon conversion of the Securities shall bear the Restricted Securities Legend borne by such
Securities, to the extent required by this Indenture, unless such shares of Common Stock or Series
C Preferred Stock have been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and that continues to be effective at the time of such
transfer) or sold pursuant to Rule 144(k) of the Securities Act, or unless otherwise agreed by the
Company in writing with written notice thereof to the transfer agent for the Common Stock or Series
C Preferred Stock. With respect to the transfer of shares of Common Stock or Series C Preferred
Stock issued upon conversion of the Securities that are restricted hereunder, any deliveries of
certificates, legal opinions or other instruments that would be required to be made to the Security
Registrar in the case of a transfer of Securities, as described above, shall instead be made to the
transfer agent for the Common Stock or Series C Preferred Stock.

          (j) Neither the Trustee, the Paying Agent nor any of their agents shall (i) have any duty to
monitor compliance with or with respect to any Federal or state or other securities or tax laws or
(ii) have any duty to obtain documentation on any transfers or exchanges other than as specifically
required hereunder.

SECTION 3.7 Mutilated, Destroyed, Lost or Stolen Securities.

          (a) If any mutilated Security is surrendered to the Trustee, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding. If the Holder of such
lost, stolen or destroyed Security delivers to the Company and the Trustee:

               (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and

               (ii) such security or indemnity as may be satisfactory to the Company and the Trustee to save
each of them and any agent of either of them harmless, then, in the absence of actual notice to the
Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company
shall execute and the Trustee shall authenticate and deliver, in lieu of any such lost, stolen or
destroyed Security, a new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.

          (b) In case any such mutilated, destroyed, lost or stolen Security has become or is about to
become due and payable, the Company in its discretion, but subject to any

41

 

conversion rights, may, instead of issuing a new Security, pay such Security, upon
satisfaction of the conditions set forth in the preceding paragraph.

          (c) Upon the issuance of any new Security under this Section, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto (other than any stamp and other duties, if any, which may be imposed in connection
therewith by the United States or any political subdivision thereof or therein, which shall be paid
by the Company) and any other expenses (including the fees and expenses of the Trustee) connected
therewith.

          (d) Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed,
lost or stolen Security shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and such new Security shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities duly issued hereunder.

          (e) The provisions of this Section are exclusive and shall preclude (to the extent lawful) all
other rights and remedies of any Holder with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.

SECTION 3.8 Regular Interest

     Subject to the last paragraph of Section 3.11, “Regular Interest” will accrue on the
Securities at the rate of 2.00% per year during any six-month period from and including March 30 to
but excluding September 30 and from and including September 30 to but excluding March 30,
commencing September 30, 2005 (provided that the initial Interest Period shall commence on March
23, 2005 and run to but excluding September 30, 2005). Regular Interest will be payable in arrears
on September 30 and March 30 of each year (provided, however, that if such date is not a Business
Day, interest will be payable on the next succeeding Business Day, and no additional interest will
accrue therefor), beginning September 30, 2005, to the Holder of record at the close of business on
the Regular Record Date preceding such Interest Payment Date, provided that the Securities will
cease to accrue Regular Interest as of March 30, 2010.

SECTION 3.9 Contingent Interest

          (a) The Company will pay Contingent Interest to Holders during any six-month period from and
including March 30 to but excluding September 30 or from and including September 30 to but
excluding March 30 (each, an “Interest Period”) beginning with the six-month Interest Period
commencing on March 30, 2010, if the average Trading Price of the Securities for the five Trading
Day measurement period ending on the second Trading Day immediately preceding the first day of the
applicable Interest Period (the “Measurement Period”) equals 120% or more of the principal amount
of the Securities as of the last day of the Measurement Period.

42

 

          (b) The amount of “Contingent Interest” payable in any Interest Period pursuant to this
Section shall equal .30% of the average Trading Price of the Securities for the applicable
Measurement Period.

          (c) The Company shall pay Contingent Interest owed pursuant to this Section for any Interest
Period on the Interest Payment Date immediately succeeding the applicable Interest Period, to
Holders of Securities as of the Regular Record Date related to such Interest Payment Date.

          (d) Upon determination that the Holders of the Securities are entitled to receive Contingent
Interest which may become payable during a relevant six-month period, the Company will notify such
Holders and the Trustee, will issue a Press Release containing information regarding the Contingent
Interest determination and will publish the information through a public medium customary for such
Press Releases.

SECTION 3.10 Accretion.

     Beginning on March 30, 2010, the Original Principal Amount shall commence increasing at a rate
that provides holders with an aggregate annual yield to maturity of 2.00% (computed on a
semi-annual bond equivalent yield basis). References in this Indenture to the “principal amount”
shall mean the Original Principal Amount at any time prior to March 30, 2010 and the principal
amount as adjusted upwards for accretion at any time on or after March 30, 2010 (the “Accreted
Principal Amount”); provided that, references to the Accreted Principal Amount shall mean the
Original Principal Amount prior to March 30, 2010.

SECTION 3.11 Payment of Interest; Interest Rights Preserved.

          (a) Any Interest (including Liquidated Damages) on any Security that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted
Interest”) shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by
virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (i) or (ii) below:

               (i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose
names the Securities (or their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security, the date of the proposed payment and the
Special Record Date, and at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements reasonably satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided. The Special Record Date for
the payment of such Defaulted Interest shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee, in the name and at the expense of the
Company, shall cause notice of the proposed

43

 

payment of such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at such Holder’s address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (ii).

               (ii) The Company may make payment of any Defaulted Interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee.

          (b) Subject to the foregoing and following provisions of this Section and Section 3.6, each
Security delivered under this Indenture upon registration of transfer of or in exchange for or in
lieu of any other Security shall carry the rights to Interest accrued and unpaid, and to accrue,
which were carried by such other Security.

          (c) Interest on any Security that is converted in accordance with Section 12.1 during a Record
Date Period shall be payable in accordance with the provisions of Section 12.1.

SECTION 3.12 Persons Deemed Owners.

     Prior to due presentment of a Security for registration of transfer, the Company, the Trustee,
any Paying Agent and any agent of the Company, the Trustee or any Paying Agent may treat the Person
in whose name such Security is registered as the owner of such Security for the purpose of
receiving payment of the principal amount of and (subject to Section 3.11) Interest on such
Security and for all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee, any Paying Agent nor any agent of the Company, the Trustee or any
Paying Agent shall be affected by notice to the contrary.

SECTION 3.13 Cancellation.

     All Securities surrendered for payment, redemption, repurchase, registration of transfer or
exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to
the Trustee. All Securities so delivered to the Trustee shall be canceled promptly by the Trustee
(or its agent). No Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section. The Trustee shall dispose of all canceled Securities in
accordance with applicable law and its customary practices in effect from time to time.

SECTION 3.14 Computation of Interest.

     Interest on the Securities (including any Liquidated Damages) shall be computed on the basis
of a 360-day year of twelve 30-day months.

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SECTION 3.15 CUSIP Numbers.

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

ARTICLE IV

SATISFACTION AND DISCHARGE

SECTION 4.1 Satisfaction and Discharge of Indenture.

     This Indenture shall upon Company Request cease to be of further effect (except as to any
surviving rights of conversion, or registration of transfer or exchange, or replacement of
Securities herein expressly provided for and any right to receive Liquidated Damages as provided in
the Registration Rights Agreement and in the form of Security set forth in Section 2.2 and the
Company’s obligations to the Trustee pursuant to Section 6.7), and the Trustee, at the expense of
the Company, shall execute proper instruments in form and substance reasonably satisfactory to the
Trustee acknowledging satisfaction and discharge of this Indenture, when

          (a) Either

               (i) all Securities theretofore authenticated and delivered (other than (A) Securities which
have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.7
and (B) Securities for whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Trustee or the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation;
or

               (ii) all such Securities not theretofore delivered to the Trustee or its agent for
cancellation (other than Securities referred to in clauses (A) and (B) of clause (a)(i) above): (A)
have become due and payable, or (B) will have become due and payable at their Stated Maturity
within one year, or (C) are to be called for redemption within one year under arrangements
reasonably satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company; and

               (iii) the Company has deposited or caused to be deposited with the Trustee as trust funds
(immediately available to the Holders in the case of clause (ii)(A) above or held in trust for such
purpose, in the case of clause (ii)(B) or (ii)(C) above) an amount in cash sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for the principal amount of and Interest (including any

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Liquidated Damages) to the date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as the case may be;

          (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company;
and

          (c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with.

     Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the
Company to the Trustee under Section 6.7, the obligations of the Company to any Authenticating
Agent under Section 6.12, the obligation of the Company to pay Liquidated Damages, if money shall
have been deposited with the Trustee pursuant to clause (a)(ii) of this Section, the obligations of
the Trustee under Section 4.2 and the last paragraph of Section 10.3 and the obligations of the
Company and the Trustee under Section 3.6 and Article XII shall survive.

SECTION 4.2 Application of Trust Money.

          (a) Subject to the provisions of the last paragraph of Section 10.3, all money deposited with
the Trustee pursuant to Section 4.1 shall be held in trust for the sole benefit of the Holders, and
such monies shall be applied by the Trustee, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent, to the Persons
entitled thereto, of the principal amount and Interest (including any Liquidated Damages) for whose
payment such money has been deposited with the Trustee.

          (b) All moneys deposited with the Trustee pursuant to Section 4.1 (and held by it or any
Paying Agent) for the payment of Securities subsequently converted shall be returned to the
Company.

          (c) The Company shall pay and indemnify the Trustee against any tax, fee or other charge
imposed or assessed against all money deposited with the Trustee pursuant to Section 4.1 (other
than income taxes and franchise taxes incurred or payable by the Trustee and such other taxes, fees
or charges incurred or payable by the Trustee that are not directly the result of the deposit of
such money with the Trustee).

ARTICLE V

DEFAULT AND REMEDIES

SECTION 5.1 Events of Default.

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

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               (i) default in the payment of any Interest on the Securities when it becomes due and payable,
and continuance of such default for a period of 30 calendar days;

               (ii) default in the payment of the principal amounts of the Securities at Maturity, upon
redemption, upon repurchase or following a Fundamental Change, in each case when it becomes due and
payable;

               (iii) default by the Company or any of its Subsidiaries in the payment of principal, interest
or premium when due under any agreement or instrument relating to any other indebtedness of the
Company or any Subsidiary having an aggregate outstanding principal amount of $10.0 million (or its
equivalent in any other currency or currencies) or more, and such default continues in effect for
more than 30 calendar days after the expiration of any grace period or extension of time for
payment applicable thereto;

               (iv) default by the Company of its conversion obligations upon exercise of a Holder’s
conversion right pursuant to Article XII hereof, unless such default is cured within five calendar
days after written notice of the default is given to the Company by the Trustee or such Holder;

               (v) default by the Company of its obligations to give notice to the Holders of the right of
the Holders to require the Company to repurchase Securities following the occurrence of a
Fundamental Change within the time required to give such notice;

               (vi) acceleration of any indebtedness under any agreement or instrument evidencing any
indebtedness of the Company or any of its Subsidiaries (other than the Securities) having an
aggregate outstanding principal amount of at least $10.0 million (or its equivalent in any other
currency or currencies) or more, unless such acceleration has been rescinded or annulled within 30
days after written notice of such acceleration has been received by the Company;

               (vii) default in the Company’s performance of any other covenants or agreements contained in
the Indenture or the Securities if such default exists and is continuing for 60 calendar days after
written notice to the Company from the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities;

               (viii) the entry by a court having jurisdiction in the premises of (A) a decree or order for
relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization, or other similar law
or (B) a decree or order adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of or in respect of the Company or any Significant Subsidiary under any
applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator, or other similar official of the Company or any Significant Subsidiary or of
any substantial part of the property of either or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive calendar days;

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               (ix) the commencement by the Company or any Significant Subsidiary of a voluntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization, or other
similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by either to the entry of a decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against either, or the filing by either of a petition
or answer or consent seeking reorganization or relief with respect to the Company or any
Significant Subsidiary under any applicable Federal or state bankruptcy, insolvency,
reorganization, or other similar law, or the consent by either to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of the Company or any Significant Subsidiary or of any
substantial part of the property of either pursuant to any such law, or the making by either of an
assignment for the benefit of creditors, or the admission by either in writing of its inability to
pay its debts generally as they become due, or the taking of corporate action by the Company in
furtherance of any such action;

          (b) If an Event of Default (other than an Event of Default arising under Section 5.1(a)(viii)
or (ix)) with respect to Securities at the time Outstanding occurs and is continuing, then in every
case the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding
Securities may declare the principal amount of plus accrued and unpaid Interest on all of the
Securities to be due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal amount plus accrued and
unpaid Interest (including, to the extent permitted by applicable law, interest on any unpaid
Interest) will become immediately due and payable. If an Event of Default under Section
5.1(a)(viii) or (ix) occurs, then the principal amount of and accrued and unpaid Interest on the
Securities shall become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.

          (c) At any time after a declaration of acceleration with respect to Securities has been made
and before a judgment or decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, if (i) all Events of Default with respect to the Securities
have been cured (other than the nonpayment of principal amounts or Interest that has become due
solely by reason of the declaration of acceleration) and (ii) a rescission and annulment would not
conflict with any judgment or decree issued in appropriate judicial proceedings regarding the
payment by the Trustee to the Holders of the amounts referred to in Section 5.1(b), then the
declaration of acceleration shall be automatically annulled and rescinded. No such rescission will
affect any subsequent default or impair any right consequent thereon.

SECTION 5.2 Covenant of Company to Pay to Trustee Whole Amount Due on Securities on Default in
Payment of Interest or Principal; Suits for Enforcement by Trustee.

          (a) The Company covenants that if (i) default is made in the payment of any Interest on any
Security when such Interest becomes due and payable and such default continues for a period of 30
calendar days or (ii) default is made in the payment of the principal amount of any Security when
it becomes due and payable, the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities and, to the extent that payment of such

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interest will be legally enforceable, interest on any overdue principal amount and, to the
extent permitted by applicable law, on any overdue Interest, at the rate or rates prescribed
therefor in such Securities, and, in addition thereto, such further amount as will be sufficient to
cover the reasonable costs and expenses of collection, including the reasonable compensation,
expenses, disbursements, and advances of the Trustee and its agents and counsel.

          (b) If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its
own name and as trustee of an express trust, may institute a judicial proceeding for the collection
of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of the property of the
Company or any other obligor upon the Securities, wherever situated.

          (c) If an Event of Default with respect to any Security occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights of the Holders of
Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.

          (d) In case of any judicial proceeding relative to the Company (or any other obligor upon the
Securities), its property or its creditors, the Trustee will be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions authorized under the
Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee will be authorized to collect and receive any money or
other property payable or deliverable on any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator, or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee
and, in the event that the Trustee consents to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements,
and advances of the Trustee and its agents and counsel, and any other amounts due the Trustee under
Section 6.7.

SECTION 5.3 Trustee May File Proof of Claim.

          (a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the
Company or any other obligor upon the Securities or the property of the Company or of such other
obligor or the creditors of either, the Trustee (irrespective of whether the principal of, and any
Interest on, the Securities shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the
payment of overdue principal or Interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,

               (i) to file and prove a claim for the whole amount of the principal amount and Interest owing
and unpaid in respect of the Securities and take such other actions,

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including participating as a member, voting or otherwise, of any official committee of
creditors appointed in such matter, and to file such other papers or documents, in each of the
foregoing cases, as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders of Securities allowed in such judicial
proceeding, and

               (ii) to collect and receive any moneys or other property payable or deliverable on any such
claim and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby authorized by each
Holder of Securities to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders of Securities to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and any other amounts due the Trustee under Section 6.7.

          (b) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent
to or accept or adopt on behalf of any Holder of a Security any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof
or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such
proceeding; provided, however, that the Trustee may, on behalf of such Holders, vote for the
election of a trustee in bankruptcy or similar official.

SECTION 5.4 Trustee May Enforce Claims Without Possession of Securities.

          All rights of action and claims under this Indenture or the Securities may be prosecuted and
enforced by the Trustee without the possession of any of the Securities or the production thereof
in any proceeding relating thereto, and any such proceeding instituted by the Trustee will be
brought in its own name as trustee of an express trust, and any recovery of judgment will, after
provision for the payment of the reasonable compensation, expenses, disbursements, and advances of
the Trustee and its agents and counsel, be for the ratable benefit of the Holders of the Securities
in respect of which such judgment has been recovered.

SECTION 5.5 Application of Money Collected.

     Any money collected by the Trustee pursuant to this Article will be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on
account of the principal amount or Interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if fully paid:

          FIRST: To the payment of all amounts due the Trustee under Section 6.7;

          SECOND: To the payment of the amounts then due and unpaid for principal of and Interest
(including Liquidated Damages) on the Securities in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority of any kind, according to
the amounts due and payable on such Securities for principal amount and Interest, respectively; and

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          THIRD: To such other Person or Persons, if any, to the extent entitled thereto; and

          FOURTH:To the Company.

SECTION 5.6 Limitation on
Suits.

     No Holder of any Security shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless:

          (a) such Holder has previously given written notice to the Trustee of a continuing Event of
Default with respect to the Securities;

          (b) the Holders of at least 25% in aggregate principal amount of the Outstanding Securities
shall have made written request to the Trustee to institute proceedings in respect of such Event of
Default, appoint a receiver or pursue any other remedy hereunder, as applicable, in its own name as
Trustee hereunder;

          (c) such Holder or Holders have offered to the Trustee and, if requested, shall have provided,
reasonable indemnity against the costs, expenses, and liabilities to be incurred in compliance with
such request;

          (d) the Trustee for 60 calendar days after its receipt of such notice, request and offer of
indemnity (or if requested, receipt of indemnity) has failed to institute any such proceeding; and

          (e) no direction inconsistent with such written request has been given to the Trustee during
such 60 calendar day period by the Holders of a majority in aggregate principal amount of the
Outstanding Securities, it being understood and intended that no one or more of such Holders will
have any right in any manner whatever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb, or prejudice the rights of any other of such Holders, or to obtain or
to seek to obtain priority or preference over any other of such Holders or to enforce any right
under this Indenture, except in the manner herein provided and for the equal and ratable benefit of
all of such Holders.

     This Section does not affect the right of a Holder to sue for enforcement of the payment of
the principal of or Interest on its Security on or after the respective due dates in the Security
or the Holder’s right to convert its Securities in accordance with this Indenture.

          (f) the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.

SECTION 5.7 Notice of Defaults.

     If a default occurs hereunder with respect to Securities, the Trustee will give the Holders
notice of such Event of Default of which it has actual notice within 90 calendar days of
occurrence; provided, however, to the extent consistent with the Trust Indenture Act, the Trustee

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may withhold notice of any Event of Default (except a default of the character specified in
Section 5.1(a)(i) or Section 5.1(a)(ii) if the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders. The Company will give the Trustee
written notice of any default that could mature into an Event of Default of the character described
in Section 5.1(a)(vii) within 30 calendar days of such default and of any uncured Event of Default
within 10 days after any Responsible Officer of the Company becomes aware of or receives actual
notice of such Event of Default.

SECTION 5.8 Unconditional Right of Holders to Receive Principal and Interest.

     Notwithstanding any other provision in this Indenture, the Holder of any Security will have
the right, which is absolute and unconditional, to receive payment of the principal amount of and
Interest on such Security on the respective Stated Maturities expressed in such Security (or, in
the case of redemption or repurchase, on the Redemption Date or Repurchase Date, as the case may
be) and, as contemplated by Article XII, to convert such Security in accordance with its terms and
to institute suit for the enforcement of any such payment, and any such right to convert and such
rights may not be impaired without the consent of such Holder.

SECTION 5.9 Restoration of Rights and Remedies.

     If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee or to such Holder, then and in every such case, subject to
any determination in such proceeding, the Company, the Trustee, and the Holders will be restored
severally and respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders will continue as though no such proceeding had been
instituted.

SECTION 5.10 Rights and Remedies Cumulative.

     Except as otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost, or stolen Securities in the last paragraph of Section 3.7, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy will, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

SECTION 5.11 Delay or Omission not Waiver.

     No delay or omission of the Trustee or of any Holder of any Securities to exercise any right
or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

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SECTION 5.12 Control by Holders of Securities.

     The Holders of a majority in principal amount of the Outstanding Securities will have the
right to direct the time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the
Securities; provided that, the Trustee may refuse to follow any direction that conflicts with any
rule of law or with this Indenture, that is prejudicial to the rights of other Holders or that
would involve the Trustee in personal liability.

SECTION 5.13 Waiver of Past Defaults.

     The Holders, either

          (a) through the written consent of not less than a majority in principal amount of the
Outstanding Securities; or

          (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at
which a quorum is present, by the Holders of at least a majority in aggregate principal amount of
the Outstanding Securities represented at such meeting, may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except a default (i) in the
payment of the principal amount of or Interest (including Liquidated Damages) on any Security, or
(ii) in respect of a covenant or provision hereof which under Article VIII cannot be modified or
amended without the consent of the Holder of each Outstanding Security affected.

     Upon any such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair any right consequent thereon.

SECTION 5.14 Undertaking for Costs.

     All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit
of an undertaking to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder of any Security for the enforcement of the payment of the
principal amount of or Interest on any Security on or after the respective Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption or repurchase, on or after the
Redemption Date or Repurchase Date, as the case may be) or for the enforcement of the right to
convert any Security in accordance with Article XII.

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SECTION 5.15 Waiver of Stay, Usury or Extension Laws.

     The Company covenants (to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any
stay, usury or extension law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede by reason of such law the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such power as though no
such law had been enacted.

ARTICLE VI

THE TRUSTEE

SECTION 6.1 Certain Duties and Responsibilities.

          (a) Except during the continuance of an Event of Default, (i) the Trustee undertakes to
perform such duties and only such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in
the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture, but in the case of
any such certificates or opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture, but not to verify the contents
thereof.

          (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.

          (c) No provision of this Indenture shall be construed to relieve the Trustee from liability
for its own negligent action, its own negligent failure to act, or its own willful misconduct,
except that (i) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of
this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by
a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; (iii) the Trustee shall not be liable with respect to any action taken or omitted
to be taken by it in good faith in accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; and (iv) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its rights or powers.

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          (d) Whether or not therein expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.

          (e) The Trustee may refuse to perform any duty or exercise any right or power unless it
receives indemnity reasonably satisfactory to it against any loss, liability or expense.

          (f) If the Trustee becomes one of the Company’s creditors, it may become subject to
limitations in the indenture on its rights to obtain payment of claims or to realize on some
property received for any such claim, as security or otherwise. The Trustee is permitted to engage
in other transactions with us. If, however, it acquires any conflicting interest, it must
eliminate that conflict or resign as Trustee under this Indenture.

SECTION 6.2 Notice of Defaults.

     Within 90 days after the occurrence of any default hereunder as to which the Trustee has
received written notice, the Trustee shall give to all Holders of Securities, in the manner
provided in Section 1.6, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment of the principal
amount of or Interest on any Security the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust committee of directors or
Responsible Officers of the Trustee in good faith determines that the withholding of such notice is
in the interest of the Holders; and provided, further, that in the case of any default of the
character specified in Section 5.1(ix), no such notice to Holders of Securities shall be given
until at least 60 days after the occurrence thereof or, if applicable, the expiration of the cure
period specified therein.

SECTION 6.3 Certain Rights of Trustee.

     Subject to the provisions of Section 6.1:

          (a) the Trustee may rely, and shall be protected in acting or refraining from acting, upon any
resolution, Officers’ Certificate, other certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of
indebtedness or other paper or document (collectively, the “Documents”) believed by it to be
genuine and to have been signed or presented by the proper party or parties, and the Trustee need
not investigate any fact or matter stated in such Documents;

          (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced
by a Company Request or Company Order and any resolution of the Board of Directors shall be
sufficiently evidenced by a Board Resolution;

          (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that
a matter be proved or established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be the one specifically prescribed) may, in the absence of bad faith
on its part, request and rely upon an Officers’ Certificate or Opinion of Counsel;

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

          (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request or direction of any of the Holders of Securities pursuant to
this Indenture, unless such Holders shall have offered, and, if requested by the Trustee, delivered
to the Trustee, reasonable security against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;

          (f) the Trustee shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or
document, but the Trustee may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and

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

SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.

     The recitals contained herein and in the Securities (except the Trustee’s certificates of
authentication) shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to the validity,
sufficiency or priority of this Indenture, of the Securities or of the Common Stock or Series C
Preferred Stock issuable upon the conversion of the Securities. The Trustee shall not be
accountable for the use or application by the Company of Securities or the proceeds thereof.

SECTION 6.5 May Hold Securities, Act as Trustee Under Other Indentures.

     The Trustee, any Authenticating Agent, any Paying Agent, any Conversion Agent or any other
agent of the Company or the Trustee, in its individual or any other capacity, may become the owner
or pledgee of Securities and may otherwise deal with the Company with the same rights it would have
if it were not Trustee, Authenticating Agent, Paying Agent, Conversion Agent or such other agent.

     The Trustee may become and act as trustee under other indentures under which other securities,
or certificates of interest or participation in other securities, of the Company are outstanding in
the same manner as if it were not Trustee hereunder.

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SECTION 6.6 Money Held in Trust.

     Money held by the Trustee in trust hereunder need not be segregated from other funds except to
the extent required by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.

SECTION 6.7 Compensation and Reimbursement.

          (a) The Company agrees:

               (i) to pay to the Trustee from time to time such reasonable compensation as the Company and
the Trustee shall from time to time agree in writing for its acceptance of this Indenture and for
all services rendered by it hereunder (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust);

               (ii) except as otherwise expressly provided herein, to reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances incurred or made by the Trustee (including
costs and expenses of enforcing this Indenture and defending itself against any claim (whether
asserted by the Company, any Holder of Securities or any other Person) or liability in connection
with the exercise of any of its powers or duties hereunder) in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and

               (iii) to indemnify the Trustee (and its directors, officers, employees and agents) for, and to
hold it harmless against, any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or administration of this trust,
including the reasonable costs, expenses and reasonable attorneys’ fees of defending itself against
any claim or liability in connection with the exercise or performance of any of its powers or
duties hereunder.

          (b) The Trustee shall have a lien prior to the Securities on all money or property held or
controlled by the Trustee to secure the Company’s payment obligations in this Section, except that
held in trust to pay principal and Interest (including Liquidated Damages) on the Securities.

          (c) When the Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 5.1(a)(viii) or (ix), the expenses (including the reasonable charges
of its counsel) and the compensation for the services are intended to constitute expenses of the
administration under any applicable Federal or state bankruptcy, insolvency or other similar law.

          (d) The provisions of this Section shall survive the termination of this Indenture or the
earlier resignation or removal of the Trustee.

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SECTION 6.8 Corporate Trustee Required; Eligibility.

     There shall at all times be a Trustee hereunder which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such, and the Trustee and its parent corporation
shall have (or be part of a holding company group with) a combined capital and surplus of at least
U.S. $50 million, subject to supervision or examination by Federal or state authority, and in good
standing. The Trustee or an Affiliate of the Trustee shall maintain an established place of
business in the Borough of Manhattan, The City of New York. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article and a successor shall be appointed pursuant to
Section 6.9.

SECTION 6.9 Resignation and Removal; Appointment of Successor.

          (a) No resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements of Section 6.10.

          (b) The Trustee may resign at any time by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.10 shall not have been
delivered to the Trustee within 30 calendar days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

          (c) The Trustee may be removed at any time by an Act of the Holders of a majority in principal
amount of the Outstanding Securities, delivered to the Trustee and the Company. If the instrument
of acceptance by a successor Trustee required by Section 6.10 shall not have been delivered to the
Trustee within 30 calendar days after the giving of such notice of removal, the removed Trustee may
petition any court of competent jurisdiction for the appointment of a successor Trustee.

          (d) The Trustee may be removed at any time by the Company and the Company may appoint a
successor Trustee pursuant to this Article; provided that, (i) there is not an Event of Default
that is continuing at the time of removal, (ii) the successor Trustee appointed by the Company
meets the eligibility requirements of Section 6.8, and (iii) such removal and resignation shall not
become effective until the acceptance of appointment by the successor Trustee in accordance with
the applicable requirements of Section 6.10.

          (e) If at any time: (i) the Trustee shall cease to be eligible under Section 6.8 and shall
fail to resign after written request therefor by the Company or by any Holder of a Security who has
been a bona fide Holder of a Security for at least six months, or (ii) the Trustee shall become
incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the

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Trustee or of its property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case (i) the Company by a Board Resolution may
remove the Trustee, or (ii) subject to Section 5.14, any Holder of a Security who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

          (f) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee and shall comply with the applicable requirements of this
Section and Section 6.10. If no successor Trustee shall have been so appointed by the Company or
the Holders of Securities and accepted appointment in the manner required by this Section and
Section 6.10, any Holder of a Security who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.

          (g) The Company shall give notice of each resignation and each removal of the Trustee and each
appointment of a successor Trustee to all Holders of Securities in the manner provided in Section
1.6. Each notice shall include the name of the successor Trustee and the address of its Corporate
Trust Office.

SECTION 6.10 Acceptance of Appointment by Successor.

     Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on the request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.

     No successor Trustee shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be eligible under this Article.

SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business.

     Any corporation into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee (including the trust created by this Indenture), by sale or
otherwise, shall be the successor of the Trustee hereunder, provided such corporation shall be
otherwise eligible under this Article, without the execution or filing of any paper or any further

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act on the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such successor Trustee had
itself authenticated such Securities.

SECTION 6.12 Authenticating Agents.

          (a) The Trustee may, with the consent of the Company, appoint an Authenticating Agent or
Agents acceptable to the Company with respect to the Securities, which Authenticating Agent shall
be authorized to act on behalf of the Trustee to authenticate Securities issued upon exchange or
substitution pursuant to this Indenture.

          (b) Securities authenticated by an Authenticating Agent shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder, and every reference in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee’s certificate of authentication shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating
Agent shall be subject to acceptance by the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to act as Authenticating Agent and subject to
supervision or examination by government or other fiscal authority. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the effect specified in
this Section.

          (c) Any corporation into which an Authenticating Agent may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to
the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be
an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of the Trustee or the
Authenticating Agent.

          (d) An Authenticating Agent may resign at any time by giving written notice thereof to the
Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section,
the Trustee may appoint a successor Authenticating Agent which shall be subject to acceptance by
the Company. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers and duties of its predecessor hereunder, with like effect
as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.

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          (e) The Company agrees to pay to each Authenticating Agent from time to time reasonable
compensation for its services under this Section.

          (f) If an Authenticating Agent is appointed with respect to the Securities pursuant to this
Section, the Securities may have endorsed thereon, in addition to or in lieu of the Trustee’s
certification of authentication, an alternative certificate of authentication in the following
form:

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

	 	 	 	 	 
	 	J.P. MORGAN TRUST COMPANY, NATIONAL

ASSOCIATION,
as Trustee

 	 
	 	By:  	
 	 
	 	As Authenticating Agent 	 
	 
	 	By:  	
 	
	 	Authorized Signatory 	 
	 	 	 	 

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SECTION 6.13 Disqualification; Conflicting Interests.

     If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.

SECTION 6.14 Preferential Collection of Claims Against Company.

     If and when the Trustee shall be or become a creditor of the Company (or any other obligor
upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Company (or any such other obligor).

ARTICLE VII

CONSOLIDATION, MERGER, SALE OR TRANSFER

SECTION 7.1 Company May Consolidate, Etc. Only on Certain Terms.

     The Company shall not:

          (a) consolidate with or merge with or into any other Person, or convey, sell, transfer or
lease or otherwise dispose of all or substantially all of its assets to any other Person in any one
transaction or a series of related transactions, or

          (b) permit any Person to consolidate with or merge into the Company or convey, transfer, sell
or lease all or substantially all of such Person’s properties or assets to the Company unless:

               (i) in the case of a merger or consolidation, either the Company is the surviving Person or,
if the Company is not the surviving Person, the surviving Person formed by such merger or
consolidation or into which the Company is merged or consolidated or in the case of a conveyance,
sale, transfer, lease or other disposition of all or substantially all of the Company’s assets, the
Person to which the Company’s properties and assets are so transferred shall be a corporation
organized and existing under the laws of the United States, any state thereof, or the District of
Columbia, and shall execute and deliver to the Trustee a supplemental indenture expressly assuming
the payment when due of the principal amount of and Interest, if any, on the Securities and the
performance of each of the Company’s other covenants under the Securities and this Indenture;

               (ii) in the case of (a) or (b), immediately after giving effect to such transaction, no
default or Event of Default shall have occurred and be continuing; and

               (iii) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that such merger, consolidation, conveyance, transfer or lease and, if a
supplemental indenture is required, such supplemental indenture comply with this Article and that
all conditions precedent herein provided for relating to such transaction have been complied with.

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     In the case of a merger or consolidation pursuant to which all or substantially all of the
Common Stock would be converted into cash, securities or other property, or any sale, transfer or
lease of all or substantially all of the Company’s assets, the right to convert Securities into
Common Stock and/or Series C Preferred Stock, as the case may be, will be changed into a right to
convert such Securities into the kind and amount of cash, securities or other property that the
Holder would have received had the Holder converted such Securities immediately prior to the
transaction, assuming such holder of Common Stock of the Company:

               (i) is not (A) a Person with which the Company consolidated or merged with or into or which
merged into or with the Company or to which such conveyance, sale, transfer or lease (other than a
mere grant of security interest) was made, as the case may be (a “Constituent Person”), or (B) an
Affiliate of a Constituent Person and

               (ii) failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger, conveyance, sale,
transfer or lease (other than a mere grant of security interest) (provided that if the kind or
amount of securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease (other than a mere grant of security interest) is not the same
for each share of Common Stock of the Company held immediately prior to such consolidation, merger,
conveyance, sale, transfer or lease (other than a mere grant of security interest) by holders other
than a Constituent Person or an Affiliate thereof and in respect of which such rights of election
shall not have been exercised (“Non-electing Share”), then for the purpose of this Section the kind
and amount of securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease (other than a mere grant of security interest) by the holders
of 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
that, for events subsequent to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive consolidations, mergers,
conveyances, sales, transfers or leases (other than a mere grant of security interest). Notice of
the execution of such a supplemental indenture shall be given by the Company to the Holder of each
Security as provided in Section 1.6 promptly upon such execution.

     Neither the Trustee nor any Conversion Agent shall be under any responsibility to determine
the correctness of any provisions contained in any such supplemental indenture relating either to
the kind or amount of shares of stock or other securities or property or cash receivable by Holders
of Securities upon the conversion of their Securities after any such consolidation, merger,
conveyance, transfer, sale or lease (other than a mere grant of security interest) or to any such
adjustment, but may accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, an Officers’ Certificate or an Opinion of Counsel with respect
thereto, which the Company shall cause to be furnished to the Trustee upon request.

     In the event of any conflict between the provisions of this Section 7.1 and of Article XIV,
the provisions of Article XIV shall control.

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SECTION 7.2 Successor Substituted.

     Upon any consolidation of the Company with, or merger of the Company into, any other Person or
any sale, transfer or lease (other than a mere grant of security interest) of all or substantially
all the properties and assets of the Company in accordance with Section 7.1, the successor Person
formed by such consolidation or into which the Company is merged or to which such sale, transfer or
lease (other than a mere Security Interest) is made shall succeed to and be substituted for, and
may exercise every right and power of the Company under this Indenture with the same effect as if
such successor or Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and covenants under this
Indenture and the Securities. There shall be an adjustment to the Applicable Conversion Rate.

ARTICLE VIII

SUPPLEMENTAL INDENTURES

SECTION 8.1 Supplemental Indentures Without Consent of Holders of Securities.

     Without the consent of any Holders of Securities the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto for any of the following purposes:

          (a) to cure any ambiguity or omission, or to correct or supplement any provision herein which
may be defective or inconsistent with any other provision herein; provided that, such action
pursuant to this clause (a) will not adversely affect the interests of the Holders of the
Securities in any material respect;

          (b) to provide for the succession of another Person to the Company and the assumption by any
such successor of the obligations of the Company herein and in the Securities, upon any merger,
consolidation or asset transfer permitted hereunder;

          (c) to provide for exchange rights of Holders of Securities in certain events such as the
Company’s consolidation or merger, or upon sale, lease or transfer of all or substantially all of
its assets;

          (d) to provide for uncertificated Securities in addition to or in place of certificated
Securities;

          (e) to provide Holders with a security interest for, or a guarantee of, the Securities;

          (f) to comply with any requirement to effect or maintain the qualification of the Indenture
under the Trust Indenture Act;

          (g) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee
with respect to the Securities and to add to or change any of the provisions of

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this Indenture as may be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee;

          (h) to add to the covenants of the Company for the benefit of the Holders of the Securities or
to surrender any right or power herein conferred upon the Company;

          (i) to add any Events of Default;

          (j) to add to, change or eliminate any of the provisions of the Indenture; provided that, any
such addition, change or elimination does not adversely affect the interests of the Holders of any
Outstanding Securities in any material respect.

     Upon Company Request, accompanied by a Board Resolution authorizing the execution of any such
supplemental indenture, and subject to and upon receipt by the Trustee of the documents described
in Section 8.3, the Trustee shall join with the Company in the execution of any supplemental
indenture authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained.

     Notwithstanding any other provision of the Indenture or the Securities, the Registration
Rights Agreement and the obligation to pay Liquidated Damages thereunder may be amended, modified
or waived in accordance with the provisions of the Registration Rights Agreement.

SECTION 8.2 Supplemental Indentures with Consent of Holders of Securities.

     Except as set forth in Section 8.1, with either:

          (a) the written consent of the Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities, by the Act of said Holders delivered to the Company and the
Trustee, or

          (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at
which a quorum is present, by the Holders of at least a majority in aggregate principal amount of
the Outstanding Securities represented at such meeting, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or of modifying in any manner the rights of the Holders of Securities under this
Indenture; provided, however, that no such supplemental indenture shall, without the consent or
affirmative vote of the Holder of each Outstanding Security affected thereby:

               (i) reduce the percentage in principal amount of the Outstanding Securities whose Holders must
consent to an amendment, supplement or waiver of the Indenture or the Securities;

               (ii) reduce the rate of accrual of Interest or modify the method for calculating Interest or
change the time for payment of Interest on the Securities;

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               (iii) modify the provisions with respect to Holders’ rights upon a Fundamental Change in a
manner adverse to the Holders of the Securities, including the Company’s obligations to repurchase
the Securities following a Fundamental Change;

               (iv) reduce the principal amount of the Securities or change the Stated Maturity of the
Securities;

               (v) reduce the Redemption Price, the Repurchase Price or the Fundamental Change Repurchase
Price of the Securities or change the time at which the Securities may or must be redeemed or
repurchased;

               (vi) make payments on the Securities payable in currency other than in U.S. dollars;

               (vii) impair any Holder’s right to institute suit for the enforcement of any payment on the
Securities;

               (viii) make any change in the percentage of principal amount of Securities necessary to waive
compliance with provisions of this Indenture or to make any change in this provision for
modification;

               (ix) waive a continuing default or Event of Default regarding any payment on the Securities
(except a rescission of acceleration of the Securities as provided in Section 5.1(c) and a waiver
of the payment default that has resulted from such acceleration); or

               (x) adversely affect the conversion or repurchase provisions of the Securities.

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

SECTION 8.3 Execution of Supplemental Indentures.

     In executing, or accepting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture, and that such supplemental indenture has
been duly authorized, executed and delivered by the Company and constitutes a valid and legally
binding obligation of the Company enforceable against the Company in accordance with its terms. The
Trustee may, but shall not be obligated to, enter into any such supplemental indenture which
adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

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SECTION 8.4 Effect of Supplemental Indentures.

     Upon the execution of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated
and delivered hereunder appertaining thereto shall be bound thereby.

SECTION 8.5 Reference in Securities to Supplemental Indentures.

     Securities authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities so modified as to conform, in the opinion of the Company
and the Trustee, to any such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Securities.

SECTION 8.6 Notice of Supplemental Indentures.

     Promptly after the execution by the Company and the Trustee of any supplemental indenture
pursuant to the provisions of Section 8.1 or Section 8.2, the Company shall give notice to all
Holders of Securities of such fact, setting forth in general terms the substance of such
supplemental indenture, in the manner provided in Section 1.6. Any failure of the Company to give
such notice, or any defect therein, shall not in any way impair or affect the validity of any such
supplemental indenture.

ARTICLE IX

MEETINGS OF HOLDERS OF SECURITIES

SECTION 9.1 Purposes for Which Meetings May Be Called.

     A meeting of Holders of Securities may be called at any time and from time to time pursuant to
this Article to make, give or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be made, given or taken by Holders of
Securities.

SECTION 9.2 Call, Notice and Place of Meetings.

          (a) The Trustee may at any time call a meeting of Holders of Securities for any purpose
specified in Section 9.1, to be held at such time and at such place in the Borough of Manhattan,
The City of New York, as the Trustee shall determine. Notice of every meeting of Holders of
Securities, setting forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be given, in the manner provided in Section 1.6, not
less than 21 nor more than 180 days prior to the date fixed for the meeting.

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          (b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at
least 10% in principal amount of the Outstanding Securities shall have requested the Trustee to
call a meeting of the Holders of Securities for any purpose specified in Section 9.1, by written
request setting forth in reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 21 days after receipt of such
request or shall not thereafter proceed to cause the meeting to be held as provided herein, then
the Company or the Holders of Securities in the amount specified, as the case may be, may determine
the time and the place in the Borough of Manhattan, The City of New York, for such meeting and may
call such meeting for such purposes by giving notice thereof as provided in paragraph (a) of this
Section.

SECTION 9.3 Persons Entitled to Vote at Meetings.

     To be entitled to vote at any meeting of Holders of Securities, a Person shall be:

          (a) a Holder of one or more Outstanding Securities, or

          (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of
Securities of one or more Outstanding Securities by such Holder or Holders.

     The only Persons who shall be entitled to be present or to speak at any meeting of Holders of
Securities shall be the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the Company and its
counsel.

SECTION 9.4 Quorum; Action.

          (a) The Persons entitled to vote a majority in aggregate principal amount of the Outstanding
Securities shall constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of Holders, be
dissolved. In any other case, the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence
of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a
period not less than 10 days as determined by the chairman of the meeting prior to the adjournment
of such adjourned meeting (subject to repeated applications of this sentence). Notice of the
reconvening of any adjourned meeting shall be given as provided in Section 9.2(a), except that such
notice need be given only once not less than five days prior to the date on which the meeting is
scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the percentage of the principal amount of the Outstanding Securities that shall
constitute a quorum.

          (b) Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a
quorum, the Persons entitled to vote 25% in aggregate principal amount of the Outstanding
Securities at the time shall constitute a quorum for the taking of any action set forth in the
notice of the original meeting.

          (c) At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as
aforesaid, any resolution and all matters (except as limited by the proviso to

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Section 8.2 and except to the extent Section 10.13 requires a different vote) shall be
effectively passed and decided if passed or decided by the lesser of: (i) the Holders of not less
than a majority in aggregate principal amount of Outstanding Securities and (ii) the Persons
entitled to vote not less than a majority in aggregate principal amount of Outstanding Securities
represented and entitled to vote at such meeting.

          (d) Any resolution passed or decisions taken at any meeting of Holders of Securities duly held
in accordance with this Section shall be binding on all the Holders of Securities whether or not
present or represented at the meeting. The Trustee shall, in the name and at the expense of the
Company, notify all the Holders of Securities of any such resolutions or decisions pursuant to
Section 1.6.

SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment of Meetings.

          (a) Notwithstanding any other provisions of this Indenture, the Trustee may make such
reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard
to proof of the holding of Securities and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters concerning the conduct
of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such
regulations, the holding of Securities shall be proved in the manner specified in Section 1.4 and
the appointment of any proxy shall be proved in the manner specified in Section 1.4 or by having
the signature of the Person executing the proxy guaranteed by any bank, broker or other eligible
institution participating in a recognized medallion signature guarantee program.

          (b) The Trustee shall, by an instrument in writing, appoint a temporary chairman (which may be
the Trustee) of the meeting, unless the meeting shall have been called by the Company or by Holders
of Securities as provided in Section 9.2(a), in which case the Company or the Holders of Securities
calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons
entitled to vote a majority in principal amount of the Outstanding Securities represented at the
meeting.

          (c) At any meeting, each Holder of a Security or proxy shall be entitled to one vote for each
U.S. $1,000 principal amount of Securities held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder or proxy.

          (d) Any meeting of Holders of Securities duly called pursuant to Section 9.2 at which a quorum
is present may be adjourned from time to time by Persons entitled to vote a majority in principal
amount of the Outstanding Securities represented at the meeting, and the meeting may be held as so
adjourned without further notice.

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SECTION 9.6 Counting Votes and Recording Action of Meetings.

     The vote upon any resolution submitted to any meeting of Holders of Securities shall be by
written ballots on which shall be subscribed the signatures of the Holders of Securities or of
their representatives by proxy and the principal amounts at Stated Maturity and serial numbers of
the Outstanding Securities held or represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the
proceedings of each meeting of Holders of Securities shall be prepared by the secretary of the
meeting and there shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said notice was given as
provided in Section 9.2(a) and, if applicable, Section 9.4(a). Each copy shall be signed and
verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy
shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.

ARTICLE X

COVENANTS

SECTION 10.1 Payment of Principal and Interest.

     The Company covenants and agrees that it will duly and punctually pay the principal amount of
and Interest (including Liquidated Damages, if any) on the Securities in accordance with the terms
of the Securities and this Indenture. The Company will deposit or cause to be deposited with the
Trustee or its nominee, no later than the opening of business on the date of the Stated Maturity of
any Security or no later than the opening of business on the due date for any installment of
Interest, all payments so due, which payments shall be in immediately available funds on the date
of such Stated Maturity or due date, as the case may be.

SECTION 10.2 Maintenance of Offices or Agencies.

     The Company will maintain in the Borough of Manhattan, The City of New York, an office or
agency where the Securities may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion, redemption or repurchase and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be served. The Company
will give prompt written notice to the Trustee of the location, and any change in the location, of
such office or agency not designated or appointed by the Trustee. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office or the office or agency of the Trustee in the Borough of Manhattan, The City
of New York.

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     The Company may at any time and from time to time vary or terminate the appointment of any
such agent or appoint any additional agents for any or all of such purposes; provided, however,
that until all of the Securities have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal amount of and Interest on the Securities have been made available
for payment and either paid or returned to the Company pursuant to the provisions of Section 10.3,
the Company will maintain in the Borough of Manhattan, The City of New York, an office or agency
where Securities may be presented or surrendered for payment and conversion, which shall initially
be the Corporate Trust Office of the Trustee, where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will give prompt written notice to the
Trustee, and notice to the Holders in accordance with Section 1.6, of the appointment or
termination of any such agents and of the location and any change in the location of any such
office or agency.

     The Company hereby initially designates the Trustee as Paying Agent, Security Registrar and
Conversion Agent, and the Corporate Trust Office of the Trustee as one such office or agency of the
Company for each of the aforesaid purposes.

SECTION 10.3 Money for Security Payments to Be Held in Trust.

          (a) If the Company shall act as its own Paying Agent, it will, on or before each due date of
the principal amount of or Interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal amount of or Interest
so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and the Company will promptly notify the Trustee, in writing, of its action or failure so
to act.

          (b) Whenever the Company shall have one or more Paying Agents, it will, no later than the
opening of business on each due date of the principal amount or Interest on any Securities, deposit
with the Trustee a sum in funds immediately payable on the payment date sufficient to pay the
principal amount or Interest so becoming due, such sum to be held for the benefit of the Persons
entitled to such principal amount or Interest and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee, in writing, of any failure so to act.

          (c) The Company will cause each Paying Agent other than the Trustee to execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section that such Paying Agent will:

               (i) hold all sums held by it for the payment of the principal amount of or Interest on
Securities for the benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;

               (ii) give the Trustee written notice of any default by the Company (or any other obligor upon
the Securities) in the making of any payment of principal amount or Interest; and

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               (iii) at any time during the continuance of any such default, upon the written request of the
Trustee, forthwith pay to the Trustee all sums so held by such Paying Agent.

          (d) The Company may at any time, for the purpose of obtaining the satisfaction and discharge
of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to
pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be
held by the Trustee upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such money.

          (e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal amount of or Interest on any Security and remaining
unclaimed for two years after such principal amount or Interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent
with respect to such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease.

          (f) In the absence of a written request from the Company to return unclaimed funds to the
Company, the Trustee shall from time to time deliver all unclaimed funds to or as directed by
applicable escheat authorities, as determined by the Trustee in its sole discretion, in accordance
with the customary practices and procedures of the Trustee. Any unclaimed funds held by the
Trustee pursuant to this Section shall be held uninvested and without any liability of interest.

SECTION 10.4 Existence.

     Subject to Article VII, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Company shall not be required to preserve any such right or
franchise if the Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and that the loss thereof is not disadvantageous in any
material respect to the Holders.

SECTION 10.5 Maintenance of Properties.

     The Company will cause all properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair and working order
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 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 judgment of the Company, desirable in the

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conduct of its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.

SECTION 10.6 Payment of Taxes and Other Claims.

     The Company will pay or discharge, or cause to be paid or discharged, before the same may
become delinquent,

          (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any
Subsidiary or upon the income, profits or property of the Company or any Significant Subsidiary,

          (b) all claims for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon the property of the Company or any Significant Subsidiary, and

          (c) subject to Section 12.14, all stamps and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or therein in connection with the issuance,
transfer, exchange or conversion of any Securities or with respect to this Indenture;

provided, however, that, in the case of clauses (a) and (b), the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (i) if
the failure to do so will not, in the aggregate, have a material adverse impact on the Company and
its Subsidiaries taken as a whole, or (ii) if the amount, applicability or validity is being
contested in good faith by appropriate proceedings.

SECTION 10.7 Registration and Listing.

     The Company will effect all registrations with, and obtain all approvals by, all governmental
authorities that may be necessary under any United States federal or state law (including the
Securities Act, the Exchange Act and state securities and Blue Sky laws) before the shares of
Common Stock or Series C Preferred Stock issuable upon conversion of Securities are issued and
delivered, and qualified or listed as contemplated under the Registration Rights Agreement.

     Nothing in this Section will limit the application of Section 10.12.

SECTION 10.8 Statement by Officers as to Default.

          (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year
of the Company ending after the date hereof, an Officers’ Certificate, stating whether or not to
the best knowledge of the signer thereof the Company is in default in the performance and
observance of any of the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and status thereof of which they may have
knowledge.

          (b) The Company will deliver to the Trustee, forthwith upon becoming aware of any default or
any Event of Default under the Indenture, an Officers’ Certificate specifying

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with particularity such default or Event of Default and further stating what action the
Company has taken, is taking or proposes to take with respect thereto.

          (c) Any notice required to be given under this Section shall be delivered to the Trustee at
its Corporate Trust Office.

SECTION 10.9 Delivery of Certain Information.

     At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon
the request of a Holder of a Restricted Security or the holder of shares of Common Stock or Series
C Preferred Stock issued upon conversion thereof, the Company will promptly furnish or cause to be
furnished Rule 144A Information to such Holder of Restricted Securities or such holder of shares of
Common Stock or Series C Preferred Stock issued upon conversion of Restricted Securities, or to a
prospective purchaser of any such security designated by any such Holder or holder, as the case may
be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the
Securities Act (or any successor provision thereto) in connection with the resale of any such
security; provided, however, that the Company shall not be required to furnish such information in
connection with any request made on or after the date that is two years from the later of:

          (a) the date such a Security (or any such predecessor security) was last acquired from the
Company or

          (b) the date such a Security (or any such predecessor security) was last acquired from an
“affiliate” of the Company within the meaning of Rule 144 under the Securities Act (or any
successor provision thereto). “Rule 144A Information” shall be such information as is specified
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto).

SECTION 10.10 Tax Treatment of Securities.

     The Company agrees, and by acceptance of a beneficial ownership interest in the Securities
each Holder of Securities has agreed, for United States federal income tax purposes,

          (a) to treat the Securities as contingent payment debt instruments as defined in Treasury
Regulation Section 1.1275-4 (the “Contingent Payment Debt Regulations”) and, for purposes of the
Contingent Payment Debt Regulations, to treat the delivery of Common Stock or Series C Preferred
Stock or cash (including cash delivered in lieu of a fractional share) to a Holder of a Security
upon conversion of such Security, or upon a purchase of such Security by the Company at the option
of the Holder of a Security where the Company makes a payment in cash (including cash paid in lieu
of a fractional share) as a contingent payment (in an amount equal to the sum of the Fair Market
Value of such Common Stock and any cash received) under Treasury Regulation section 1.1275-4(b);

          (b) to be bound by the Company’s application of the Contingent Payment Debt Regulations to the
Securities including the Company’s determination of the comparable yield and projected payment
schedule, within the meaning of the Contingent Payment Debt Regulations, with respect to the
Securities. A Holder of Securities may obtain the Issue Price,

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Issue Date, comparable yield and projected payment schedule by submitting a written request to
the Company at the following address: Connetics Corporation, 3160 Porter Drive, Palo Alto,
California 94304, Attention: Investor Relations;

          (c) the comparable yield and the projected payment schedule are determined on the basis of an
assumption of a fixed growth of stock price and the comparable yield and the projected payment
schedule are not determined for any purpose other than for the purpose of applying Treasury
Regulation section 1.1275-4(b)(4) to the Security, and the comparable yield and the projected
payment schedule do not constitute a projection or representation regarding the actual amounts
payable on the Securities;

          (d) each Holder shall use the projected payment schedule with respect to the Securities
described in Section 10.10(b) above, as required by Treasury Regulations Section
1.1275-4(b)(4)(iv), to determine its interest accruals and adjustments as provided in Treasury
Regulation Section 1.1275-4(b); and

          (e) the Company and each Holder shall not take any position on a tax return inconsistent with
(a), (b), (c) or (d), unless otherwise required by applicable law.

SECTION 10.11 Resale of Certain Securities.

     During the period beginning on the last date of original issuance of the Securities and ending
on the date that is two years from such date (or such shortened period under Rule 144(k) under the
Securities Act or any successor rule), the Company will not, and will not permit any of its
subsidiaries or other “affiliates” (as defined under Rule 144 under the Securities Act or any
successor provision thereto) to, resell:

          (a) any Securities that constitute “restricted securities” under Rule 144 or

          (b) any securities into which the Securities have been converted under this Indenture that
constitute “restricted securities” under Rule 144 that in either case have been reacquired by any
of them.

     The Trustee shall have no responsibility in respect of the Company’s performance of its
agreement in the preceding sentence.

SECTION 10.12 Registration Rights.

          (a) The Company agrees that the Holders from time to time of Registrable Securities are
entitled to the benefits of the Registration Rights Agreement.

          (b) Whenever in this Indenture there is mentioned, in any context, the payment of the
principal amount of or Interest on, or in respect of, any Security, such mention shall be deemed to
include mention of the payment of Liquidated Damages provided for in this Section and the
Registration Rights Agreement to the extent that, in such context, Liquidated Damages are, were or
would be payable in respect thereof pursuant to the provisions of this Section and the Registration
Rights Agreement and express mention of the payment of

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Liquidated Damages (if applicable) in any provisions hereof shall not be construed as
excluding Liquidated Damages in those provisions hereof where such express mention is not made.

          (c) If a Security, or the shares of Common Stock or Series C Preferred Stock issuable upon
conversion of a Security, is a Registrable Security, and the Holder thereof elects to sell such
Registrable Security pursuant to the Shelf Registration Statement then, by its acceptance thereof,
the Holder of such Registrable Security will have agreed to be bound by the terms of the
Registration Rights Agreement relating to the Registrable Securities which are the subject of such
election.

          (d) For the purposes of the Registration Rights Agreement, the term “Holder” means any Person
that is the record owner of Registrable Securities (and includes any Person that has a beneficial
interest in any Registrable Security in book entry form).

          (e) If Liquidated Damages are payable under the Registration Rights Agreement, the Company
shall deliver to the Trustee a certificate to that effect stating:

               (i) the amount of Liquidated Damages that is payable and

               (ii) the date on which Liquidated Damages are payable.

          (f) Unless and until a Responsible Officer of the Trustee receives at the Corporate Trust
Office such a certificate, the Trustee may assume without inquiry that no Liquidated Damages are
payable. If Liquidated Damages have been paid by the Company directly to the Persons entitled to
them, the Company shall deliver to the Trustee a certificate setting forth the particulars of such
payment.

SECTION 10.13 Waiver of Certain Covenants.

     The Company may omit in any particular instance to comply with any covenant or condition set
forth in Sections 10.4 (other than with respect to the existence of the Company (subject to Article
VII)), 10.5 and 10.6, inclusive (other than a covenant or condition which under Article VII cannot
be modified or amended without the consent of the Holder of each Outstanding Security affected), if
before the time for such compliance the Holders shall, through:

          (a) the written consent of not less than a majority in aggregate principal amount of the
Outstanding Securities or

          (b) the adoption of a resolution at a meeting of Holders of the Outstanding Securities at
which a quorum is present by the Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities represented at such meeting,

either waive such compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee or any Paying or Conversion Agent in respect of any such
covenant or condition shall remain in full force and effect.

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ARTICLE XI

REDEMPTION OF SECURITIES

SECTION 11.1 Right of Redemption.

     The Company will have the right to redeem the Securities, in whole or in part, for cash at any
time or from time to time on or after April 4, 2010 at a Redemption Price equal to 100% of the
Accreted Principal Amount of the Securities selected for redemption, plus accrued and unpaid
Interest, if any, to, but not including, the Redemption Date.

SECTION 11.2 Applicability of Article.

     Redemption of Securities at the election of the Company or otherwise, as permitted or required
by any provision of the Securities or this Indenture, shall be made in accordance with such
provision and this Article XI.

SECTION 11.3 Election to Redeem; Notice to Trustee.

          (a) The election of the Company to redeem any Securities will be evidenced by a Board
Resolution. In case of any redemption, the Company will, at least 60 calendar days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee in writing of such Redemption Date and of the Accreted Principal
Amount of Securities of such series to be redeemed. In the case of any redemption of Securities
prior to the expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, the Company will furnish the Trustee with an Officers’
Certificate evidencing compliance with such restriction.

          (b) If less than all the Securities are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 60 calendar days prior to the Redemption Date by the
Trustee, from the Outstanding Securities not previously called for redemption, on a pro rata basis
or by such other method as the Trustee may deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized denomination for Securities
or any integral multiple thereof) of the Accreted Principal Amount of Securities of a denomination
larger than the minimum authorized denomination for Securities. If any Security selected for
partial redemption is converted in part before termination of the conversion right with respect to
the portion of the Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption by the Trustee in accordance with the
preceding sentence. Securities which have been converted during a selection of Securities to be
redeemed may be treated by the Trustee as Outstanding for the purpose of such selection. The
Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial redemption, the
Accreted Principal Amount thereof to be redeemed. The Trustee will promptly notify the Company and
the Security Registrar in writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the Accreted Principal Amount thereof to be redeemed.

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          (c) For all purposes of this Indenture, unless the context otherwise requires, all provisions
relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to
be redeemed only in part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.

SECTION 11.4 Notice of Redemption.

     Notice of redemption of Securities to be redeemed will be given by the Company or, at the
Company’s written request (which request shall be delivered to the Trustee simultaneously with
notification of the Redemption Date pursuant to Section 11.3), by the Trustee in the name and at
the expense of the Company and will be irrevocable. Notice of redemption will be given by mail,
first class postage prepaid, not less than 30 or more than 60 calendar days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in the Security
Register. All notices of redemption will include the CUSIP number and will state (i) the
Redemption Date, (ii) the Redemption Price and accrued Interest (including Liquidated Damages, if
any), (iii) if less than all the Outstanding Securities of any series are to be redeemed, the
identification (and, in the case of partial redemption of any Securities, the Accreted Principal
Amounts) of the particular Securities to be redeemed, (iv) that on the Redemption Date the
Redemption Price will become due and payable upon each such Security to be redeemed and, if
applicable, that Interest thereon will cease to accrue on and after said date, (v) the Conversion
Rate, (vi) the place or places where such Securities are to be surrendered for payment of the
Redemption Price, and (vii) the specific provision of this Indenture pursuant to which such
Securities are to be redeemed.

     Notice of redemption of Securities to be redeemed shall be given by the Trustee to each Paying
Agent in the name of and at the expense of the Company.

     If the Company exercises its right to redeem the Securities, in whole or in part, it will
disseminate a Press Release containing information regarding the redemption and publish the
information through a public medium that is customary for such Press Release.

SECTION 11.5 Deposit of Redemption Price.

     Prior to 10:00 a.m. (local time at the Place of Payment) on the Redemption Date specified in
the notice of redemption given as provided in Section 11.4, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 10.3) an amount of money (which shall be in immediate
available funds on such Redemption Date) sufficient to pay the Redemption Price of, and (except if
the Redemption Date shall be an Interest Payment Date) any accrued Interest (including Liquidated
Damages, if any) to, but not including, the Redemption Date on, all of the Securities that are to
be redeemed on that date other than any Securities called for redemption on the date which have
been converted prior to the date of such deposit.

     If any Security called for redemption is converted, any money deposited with the Trustee or so
segregated and held in trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as provided in the

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last paragraph of Section 3.11) be paid to the Company or, if then held by the Company, shall
be discharged from such trust.

SECTION 11.6 Securities Payable on Redemption Date.

          (a) Notice of redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price therein specified,
and from and after such date (unless the Company shall default in the payment of the Redemption
Price, including accrued Interest) such Securities shall cease to accrue Interest. Upon surrender
of any such Security for redemption in accordance with said notice, such Security shall be paid by
the Company at the Redemption Price, together with accrued and unpaid Interest (including
Liquidated Damages, if any) to, but not including, the Redemption Date; provided, however, that
unless otherwise specified, installments of Interest on Securities whose Stated Maturity is on or
prior to the Redemption Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the relevant Record Dates in
accordance with their terms and the provisions of Section 3.11.

          (b) If any Security called for redemption shall not be so paid upon surrender thereof for
redemption, the Accreted Principal Amount and, to the extent permitted by applicable law, accrued
Interest shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor
in the Security and such Security shall remain convertible until the Redemption Price of such
Security (or portion thereof, as the case may be) has been paid in full.

SECTION 11.7 Securities Redeemed in Part.

          (a) Any Security that is to be redeemed only in part shall be surrendered at a Place of
Payment therefor (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 his attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new
Security or Securities of like tenor, of any authorized denomination as requested by such Holder,
in aggregate Accreted Principal Amount equal to and in exchange for the unredeemed portion of the
Accreted Principal Amount of the Security so surrendered.

          (b) In the event of any redemption in part, the Company and the Trustee will not be required

               (i) to issue, register the transfer of, or exchange any Securities during a period beginning
at the opening of business 15 calendar days before the mailing of a notice of redemption of
Securities selected for redemption under Section 11.3 and ending at the close of business on the
day of such mailing or

               (ii) to register the transfer of or exchange any Security so selected for redemption in whole
or in part, except, in the case of any Securities to be redeemed in part, the portion thereof not
being redeemed.

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ARTICLE XII

CONVERSION OF SECURITIES

SECTION 12.1 Right to Convert.

     Subject to and upon compliance with the provisions of this Article, at the option of the
Holder, any Securities or any portion of the principal amount thereof which is an integral multiple
of $1,000 (but for purposes of such denominations based on the Original Principal amount of such
Securities) may be converted into cash and, under certain circumstances, duly authorized, fully
paid and nonassessable shares of Common Stock or Series C Preferred Stock at the Applicable
Conversion Rate (determined as hereinafter provided):

          (a) prior to March 30, 2009, during a given Conversion Period, if the Closing Sale Price of
the Common Stock for at least 20 Trading Days in the 30 consecutive Trading Days period ending on
the first day of such Conversion Period is greater than 120% of the Applicable Conversion Price on
the first day of such Conversion Period;

          (b) prior to March 30, 2009, during the five consecutive Business Day period following any
five consecutive Trading Day period in which the Trading Price for each day of that five Trading
Day period was less than 98% of the Closing Sale Price of the Common Stock on such corresponding
Trading Day multiplied by the Applicable Conversion Rate;

          (c) at any time on or after March 30, 2009; or

          (d) upon the occurrence of a corporate transaction described in Section 12.2.

     The rate at which shares of Common Stock shall be delivered upon conversion shall be initially
28.1972 shares of Common Stock for each U.S.$1,000 principal amount of Securities. The Conversion
Rate shall be adjusted in certain instances as provided in this Article. The number of shares of
Series C Preferred Stock, if any, issuable upon conversion of a Security shall be determined in
accordance with Section 12.13.

SECTION 12.2 Certain Corporate Transactions.

     If the Company elects to:

          (a) distribute to all holders of Common Stock assets, debt securities or rights or warrants to
purchase securities of the Company, which distribution has a per share fair market value
(determined in the manner specified in Section 12.9(d)) exceeding 10% of the Closing Sale Price of
the Common Stock on the Trading Day immediately preceding the declaration date for such
distribution, or

          (b) distribute to all holders of Common Stock rights, options or warrants entitling them to
purchase, for a period expiring within 60 days of the declaration date for such distribution,
shares of Common Stock at less than the current market price,

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then in the case of the foregoing clauses (a) and (b), the Company shall notify the Holders at
least 20 days prior to the ex-dividend date for such distribution. Once the Company has given such
notice, even if the Securities are not otherwise convertible at such time, Holders may surrender
their Securities for conversion at any time thereafter until the earlier of the close of business
on the Business Day immediately prior to the ex-dividend date and the Company’s announcement that
such distribution will not take place; provided, however, that a Holder may not exercise this right
to convert if the Holder is otherwise entitled to participate in the distribution without
conversion. As used herein, the term “ex-dividend date” or “ex-date” when used with respect to any
issuance or distribution, shall mean the first date upon which a sale of shares of Common Stock
does not automatically transfer the right to receive the relevant dividend or distribution from the
seller of such Common Stock to its buyer.

          (c) If a Fundamental Change (including a Public Acquirer Change of Control, Subject to Section
14.1) occurs, Holders may surrender their Securities for conversion during the period starting on
the date announced by the Company as the anticipated effective date of the Fundamental Change and
ending at the close of business on the second Business Day preceding the Fundamental Change
Repurchase Date.

SECTION 12.3 Determination of Satisfaction of Certain Conversion Triggers.

          (a) Prior to March 30, 2009 the Company or its agent shall determine if the Securities are
convertible in accordance with Section 12.1(a) and shall notify the Trustee if the Securities
become convertible. The Company or its Agent shall make such determination during the last 30
consecutive Trading Days of each Conversion Period.

          (b) The Company shall determine if the Securities are convertible in accordance with Section
12.1(b) and notify the Trustee if the Securities become convertible; provided that, the Company
shall have no obligation to make such determination unless requested in writing to do so by a
Holder. Upon such request, the Company or its agent shall determine the Trading Price of the
Securities beginning on the next succeeding Trading Day and on each successive Trading Day until
the Trading Price of the Securities is greater than or equal to 98% of the product of the Closing
Sale Price of the Common Stock multiplied by the Applicable Conversion Rate.

SECTION 12.4 Notice of Conversion.

     Upon the determination by or on behalf of the Company that Holders are or will be entitled to
convert the Securities in accordance with the provisions of Section 12.1, the Company will issue a
Press Release containing information about the right of conversion, publish the information through
a public medium that is customary for such Press Release and publish the information on the
Company’s website.

SECTION 12.5 Conversion Consideration.

     If a Holder surrenders Securities for conversion, it will receive in respect of each $1,000
principal amount of Securities, (a) cash in an amount equal to the lesser of (i) the principal
amount of the Securities or (ii) the Conversion Value; and (b) a number of fully paid and

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nonassessable shares of Common Stock equal to the sum of the Daily Share Amounts for each
Trading Day during the Applicable Conversion Reference Period; provided, however, that the Company
may pay cash in lieu of fractional shares otherwise issuable upon conversion of the Securities in
accordance with Section 12.8; provided further that if the Company does not have a Sufficient
Common Stock Reserve, the Company will issue shares of Series C Preferred Stock (together, the
“Conversion Consideration”).

     Notwithstanding the foregoing, in no event will (a) the Applicable Conversion Rate exceed
38.0662 per $1,000 Original Principal Amount of Securities or (b) the total number of shares
issuable upon conversion of the Securities exceed 35.9100 per $1,000 Original Principal Amount of
the Securities (or the total number of shares of Series C Preferred Stock issuable exceed the
equivalent number of such shares based on the Common Stock to Series C Preferred Stock exchange
ratio), in each case, after giving effect to the adjustment described in Section 12.10 and any
related increase in the Applicable Conversion Rate, subject to anti-dilution adjustments.

     If more than one Security is surrendered by a Holder, the Conversion Consideration shall be
computed based on the aggregate principal amounts of Securities surrendered.

     The Company shall calculate the Conversion Consideration in accordance with Section 15.5.

SECTION 12.6 Exercise of Conversion Privilege.

          (a) In order to exercise the conversion privilege, the Holder of any Security to be converted
must deliver an irrevocable conversion notice substantially in the form set forth in Section 2.4
together with the Security (if the Security is in certificated form), duly endorsed in blank, by
the time required by Section 12.1 or 12.2, as the case may be, to the Conversion Agent at any
office or agency of the Company maintained for that purpose pursuant to Section 10.2 (the date of
such delivery of notice and satisfaction of all other requirements for conversion, the “Conversion
Date”). Any Holder may obtain copies of the required form of the conversion notice from the
Conversion Agent. Upon conversion, the Company will satisfy its conversion obligations with respect
to the principal amount of the Securities to be converted in cash, with any remaining amount, if
applicable, to be satisfied in shares of Common Stock or Series C Preferred Stock as described in
Section 12.5.

          (b) The Conversion Agent will convert the Securities and the Company will remit the Conversion
Consideration as soon as practicable, but in no event later than the third Business Day following
the Applicable Conversion Reference Period.

          (c) In the event any Holder surrenders any Security for conversion during the period between
the close of business on a Record Date but prior to the corresponding Interest Payment Date, the
Company shall pay accrued Interest on such Security on that Interest Payment Date to the Holder of
such Security as of such Record Date. The Holder surrendering the Security for conversion shall be
required to pay to the Company an amount equal to the Interest that has accrued as of such Interest
Payment Date and that amount will be paid to the Holder of such Security as of the Record Date
pursuant to the preceding sentence. The preceding sentence

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does not apply to Securities that are surrendered for conversion after the Company has
specified a Redemption Date that is after a Record Date but on or prior to the corresponding
Interest Payment Date.

          (d) Securities shall be deemed to have been converted immediately prior to the close of
business on the day of surrender of such Securities for conversion in accordance with the foregoing
provisions, and at such time the rights of the Holders of such Securities as Holders shall cease,
and the Person or Persons entitled to receive any Common Stock or Series C Preferred Stock issuable
upon conversion shall be treated for all purposes as the record holder or holders of such Common
Stock or Series C Preferred Stock, as the case may be, at such time. As promptly as practicable on
or after the Conversion Date, the Company shall issue and deliver to the Trustee, for delivery to
the Holder (unless a different Person is indicated on the Conversion Notice), a certificate or
certificates for the number of full shares of Common Stock or Series C Preferred Stock issuable
upon conversion as provided in clause (b) above, together with payment in lieu of any fraction of a
share, as provided in Section 12.8.

          (e) All shares of Common Stock or Series C Preferred Stock delivered upon conversion of
Restricted Securities shall bear restrictive legends substantially in the form of the legends
required to be set forth on the Restricted Securities pursuant to Section 3.6(h) and shall be
subject to the restrictions on transfer provided in such legends. Neither the Trustee nor any agent
maintained for the purpose of such conversion shall have any responsibility for the inclusion or
content of any such restrictive legends on such Common Stock or Series C Preferred Stock; provided,
however, that the Trustee or any agent maintained for the purpose of such conversion shall have
provided, to the Company or to the Company’s transfer agent for such Common Stock or Series C
Preferred Stock, prior to or concurrently with a request to the Company to deliver such Common
Stock or Series C Preferred Stock, written notice that the Securities delivered for conversion are
Restricted Securities.

          (f) In the case of any Security which is converted in part only, upon such conversion the
Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the
expense of the Company, a new Security or Securities of authorized denominations in an aggregate
principal amount equal to the unconverted portion of the principal amount of such Security. A
Security may be converted in part, but only if the principal amount of such Security to be
converted is any integral multiple of U.S. $1,000 (but for purposes of such denominations based on
the Original Principal Amount of such Securities) and the principal amount of such security to
remain Outstanding after such conversion is equal to or in excess of U.S. $1,000.

          (g) If shares of Common Stock or Series C Preferred Stock to be issued upon conversion of a
Restricted Security, or Securities to be issued upon conversion of a Restricted Security in part
only, are to be registered in a name other than that of the beneficial owner of such Restricted
Security, then such Holder must deliver to the Conversion Agent a Surrender Certificate, dated the
date of surrender of such Restricted Security and signed by such beneficial owner, as to compliance
with the restrictions on transfer applicable to such Restricted Security. Neither the Trustee nor
any Conversion Agent, Registrar or Transfer Agent shall be required to register in a name other
than that of the beneficial owner, shares of Common Stock or Series C

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Preferred Stock issued upon conversion of any such Restricted Security not so accompanied by a
properly completed Surrender Certificate.

SECTION 12.7 Exchange in Lieu of Conversion.

     When a Holder surrenders Securities for conversion, the Conversion Agent may direct the Holder
to surrender the Securities to a financial institution designated by the Company for exchange in
lieu of conversion. In order to accept any Securities surrendered for conversion, the designated
institution must agree to deliver, in exchange for the Securities, the Conversion Consideration.
If the designated institution accepts any such Securities, it will deliver the Conversion
Consideration to the Conversion Agent and the Conversion Agent will deliver that consideration to
the Holder. Any Securities exchanged by the designated institution will remain Outstanding. If
the designated institution agrees to accept any Securities for exchange but does not timely deliver
the related Conversion Consideration, the Company will, as promptly as practical thereafter, but
not later than the third Business Day following the Applicable Conversion Response Period, convert
the Securities and deliver the Conversion Consideration owed upon such conversion.

     The Company’s designation of an institution to which the Securities may be submitted for
exchange does not require the institution to accept any Securities. If the designated institution
declines to accept any Securities surrendered for exchange, the Company will convert those
Securities into the cash payment and the number of shares of Common Stock or Series C Preferred
Stock, as the case may be, issuable upon conversion, as described above. The Company will not pay
any consideration to, or otherwise enter into any arrangement with, the designated institution for
or with respect to such designation.

SECTION 12.8 Fractions of Shares.

          (a) No fractional shares of Common Stock shall be issued upon conversion of any Security or
Securities. Instead of any fractional shares of Common Stock that would otherwise be issued upon
conversion of the Securities, the Company will pay a cash amount (calculated to the nearest cent)
equal to such fraction multiplied by the Closing Sale Price of the Common Stock on the last Trading
Day prior to the Conversion Date.

          (b) The Company will issue fractional shares of Series C Preferred Stock down to 1/1000th of a
share of Series C Preferred Stock. Instead of any fractional share of Series C Preferred Stock
that is less than 1/1000th of a share, the Company will pay a cash amount (calculated to the
nearest cent) equal to the product of: (i) such excess fractional share of Series C Preferred Stock
multiplied by 1,000; and (ii) the Closing Sale Price of the Common Stock on the last Trading Day
prior to the Conversion Date.

          (c) For purposes of paragraphs (a) and (b) above, if more than one Security shall be
surrendered for conversion at one time by a Holder, the number of full shares of Common Stock or
Series C Preferred Stock, as the case may be, which shall be issuable upon conversion thereof shall
be computed on the basis of the aggregate principal amount of the Securities (or specified portions
thereof) so surrendered.

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SECTION 12.9 Anti-Dilution Adjustments.

     The Applicable Conversion Rate will be subject to adjustment, without duplication, as follows
upon the occurrence of any of the following events:

          (a) In the event that the Company pays a dividend or makes a distribution on the Common Stock,
payable exclusively in shares of Common Stock or other capital stock of the Company, the Applicable
Conversion Rate in effect at the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such dividend or other distribution shall be
increased by dividing the Applicable Conversion Rate in effect immediately prior to such date by a
fraction of which the numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination and the denominator shall be the sum of
such number of shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the opening of business on the
day following the date fixed for such determination. If, after any such date fixed for
determination, any dividend or distribution is not in fact paid, the Applicable Conversion Rate
shall be immediately readjusted, effective as of the date the Board of Directors determines not to
pay such dividend or distribution, to the Applicable Conversion Rate that would have been in effect
if such determination date had not been fixed. For the purposes of this paragraph (a), the number
of shares of Common Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution
on shares of Common Stock held in the treasury of the Company.

          (b) In the event that the Company issues to all or substantially all holders of Common Stock
rights or warrants that allow such holders to purchase shares of Common Stock for a period expiring
within 60 days from the date of issuance of the rights or warrants at less than the current market
price per share of the Common Stock on the date fixed for the determination of shareholders
entitled to receive such rights, options or warrants (other than any rights, options or warrants
that by their terms will also be issued to any Holder upon conversion of a Security into shares of
Common Stock without any action required by the Company or any other Person), the Applicable
Conversion Rate in effect at the opening of business on the day following the date fixed for such
determination shall be increased by dividing the Applicable Conversion Rate in effect immediately
prior to such date by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such determination plus the number
of shares of Common Stock that the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such current market price
and the denominator shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of Common Stock so
offered for subscription or purchase, such increase to become effective immediately after the
opening of business on the day following the date fixed for such determination. If, after any such
date fixed for determination, any such rights or warrants are not in fact issued, or are not
exercised prior to the expiration thereof, the Applicable Conversion Rate shall be immediately
readjusted, effective as of the date such rights or warrants expire, or the date the Board of
Directors determines not to issue such rights or warrants, to the Applicable Conversion Rate that
would have been in effect if the

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unexercised rights or warrants had never been granted or such determination date had not been
fixed, as the case may be. For the purposes of this paragraph (b), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not issue any rights or warrants in respect of shares of
Common Stock held in the treasury of the Company.

     For purposes of this clause (b) (unless otherwise stated), the “current market price” of the
Common Stock means the average of the Closing Sale Prices of the Common Stock for the five
consecutive Trading Days ending on the Trading Day prior to the ex-dividend Trading Day for such
distribution, and the new Applicable Conversion Rate shall take effect immediately after the record
date fixed for determination of the stockholders entitled to receive such distribution.

     (c) In the event that the outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Applicable Conversion Rate in effect at the opening
of business on the day following the day upon which such subdivision becomes effective shall be
proportionately increased, and, conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Applicable Conversion Rate in effect
at the opening of business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, and in case of any reclassification of shares of Common
Stock into shares of another capital stock of the Company, similar adjustments as to the numbers of
shares shall be made (the definition of Common Stock being intended to include such other capital
stock), such increase or reduction, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or combination becomes
effective.

          (d) the Company distributes to all or substantially all holders of Common Stock evidences of
indebtedness, securities or assets or certain rights to purchase its securities, but excluding: (i)
dividends or distributions described in paragraph (a) above; (ii) rights or warrants described in
paragraph (b) above; (iii) dividends or distributions paid exclusively in cash described in
paragraph (e), (f) or (g) below (the “distributed assets”), in which event (other than in the case
of a “spin-off” as described below), the Applicable Conversion Rate in effect immediately before
the close of business on the record date fixed for determination of stockholders entitled to
receive that distribution will be increased by multiplying the then-Applicable Applicable
Conversion Rate by a fraction, (A) the numerator of which is the current market price of the Common
Stock and (B) the denominator of which is the current market price of the Common Stock minus the
fair market value, as determined by the Board of Directors, whose determination in good faith will
be conclusive, of the portion of those distributed assets applicable to one share of Common Stock.

     For purposes of this clause (d), (unless otherwise stated), the “current market price” of the
Common Stock means the average of the Closing Sale Prices of the Common Stock for the five
consecutive Trading Days ending on the Trading Day prior to the ex-dividend Trading Day for such
distribution, and the new Applicable Conversion Rate shall take effect immediately after the record
date fixed for determination of the stockholders entitled to receive such distribution.

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     Notwithstanding the foregoing, in cases where (x) the fair market value per share of Common
Stock of the distributed assets equals or exceeds the current market price of the Common Stock, or
(y) the current market price of the Common Stock exceeds the fair market value per share of Common
Stock of the distributed assets by less than $1.00, in lieu of the foregoing adjustment, the Holder
will have the right to receive upon conversion, in addition to cash and shares of Common Stock or
Series C Preferred Stock, if any, the distributed assets the Holder would have received if the
Holder had converted the Securities immediately prior to the record date for such distribution of
assets.

     In respect of a dividend or other distribution of shares of capital stock of any class or
series, or similar equity interests, of or relating to a Subsidiary of the Company or other
business unit, referred to herein as a “spin-off,” the Applicable Conversion Rate in effect
immediately before the close of business on the record date fixed for determination of stockholders
entitled to receive that distribution will be increased by multiplying the then Applicable
Conversion Rate by a fraction, (1) the numerator of which is (A) the current market price of the
Common Stock plus (B) the fair market value of the Common Stock, determined as described below, of
the portion of those shares of capital stock or similar equity interests so distributed applicable
to one share of Common Stock, and (2) the denominator of which is the current market price of the
Common Stock.

     The adjustment to the then-Applicable Conversion Rate in the event of a spin-off will occur at
the earlier of: (x) the tenth Trading Day from, and including, the effective date of the spin-off;
and (y) the date of the initial public offering of the securities being distributed in the
spin-off, if that initial public offering is effected simultaneously with the spin-off.

     For purposes of this paragraph (d), “initial public offering” means the first time securities
of the same class or type as the securities being distributed in the spin-off are bona fide offered
to the public for cash.

     In the event of a spin-off that is not effected simultaneously with an initial public offering
of the securities being distributed in the spin-off, the fair market value of the securities to be
distributed to holders of Common Stock means the average of the Closing Sale Prices of those
securities over the ten consecutive Trading Days following the effective date of the spin-off. For
the purpose of this paragraph (d), in the event of a spin-off the current market price of the
Common Stock means the average of the Closing Sale Prices of the Common Stock over the ten
consecutive Trading Days following the effective date of the spin-off.

     If, however, an initial public offering of the securities being distributed in the spin-off is
to be effected simultaneously with the spin-off, the fair market value of the securities being
distributed in the spin-off means the initial public offering price, while the current market price
of the Common Stock means the Closing Sale Price of the Common Stock on the Trading Day on which
the initial public offering price of the securities being distributed in the spin-off is
determined.

          (e) the Company makes a distribution consisting exclusively of cash to all or substantially
all holders of outstanding shares of Common Stock, in which event the then-Applicable Conversion
Rate will be adjusted by multiplying: (i) the then-Applicable Conversion

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Rate by (ii) a fraction, (A) the numerator of which is the current market price of the Common
Stock and (B) the denominator of which is the current market price of the Common Stock, minus the
amount per share of such distribution.

     Notwithstanding the foregoing, in cases where (i) the amount per share of Common Stock of such
distribution equals or exceeds the current market price of the Common Stock or (ii) the current
market price of the Common Stock exceeds the amount per share of Common Stock of such distribution
by less than $1.00, in lieu of the foregoing adjustment, the Holder will have the right to receive
upon conversion, in addition to cash and shares of Common Stock or Series C Preferred Stock, if
any, such distribution the Holder would have received if the Holder had converted the Securities
immediately prior to the record date for such distribution. For purposes of this paragraph (e),
the “current market price” of the Common Stock means the average of the Closing Sale Prices of the
Common Stock for the five consecutive Trading Days ending on the Trading Day prior to the
ex-dividend Trading Day for such cash distribution, and the new Applicable Conversion Rate shall
take effect immediately after the record date fixed for determination of the stockholders entitled
to receive such distribution.

          (f) the Company or one of its Subsidiaries makes a payment in respect of a tender offer or
exchange offer for the Common Stock, in which event, to the extent the cash and value of any other
consideration included in the payment per share of the Common Stock exceeds the Closing Sale Price
of the Common stock on the Trading Day next succeeding the last date on which tenders or exchanges
may be made pursuant to such tender offer or exchange offer, as the case may be, the
then-Applicable Conversion Rate will be adjusted by multiplying: (i) the then-Applicable
Conversion Rate; by (ii) a fraction, (A) the numerator of which will be the sum of (1) the fair
market value, as determined by the Board of Directors, whose determination in good faith will be
conclusive, of the aggregate consideration payable for all shares of Common Stock the Company or
any such Subsidiary purchases in the tender or exchange offer and (2) the product of (x) the number
of shares of Common Stock outstanding less any such purchased shares and (y) the Closing Sale Price
of the Common Stock on the Trading Day next succeeding the date of the expiration of the tender or
exchange offer, and (B) the denominator of which will be the product of (1) the number of shares of
Common Stock outstanding, including any such purchased shares, and (2) the Closing Sale Price of
the Common Stock on the Trading Day next succeeding the date of expiration of the tender or
exchange offer;

          (g) the Company or one of its Subsidiaries makes a payment in respect of a repurchase of the
Common Stock, the consideration for which exceeds the then-prevailing market price of the Common
Stock (such amount being the “Repurchase Premium”), and that repurchase, together with any other
repurchases of Common Stock by the Company or a Subsidiary involving a Repurchase Premium concluded
within the preceding 12 months, resulted in the payment by the Company and its Subsidiaries of an
aggregate consideration exceeding an amount equal to 10% of the market capitalization of the Common
Stock, the then-Applicable Conversion Rate will be adjusted by multiplying: (i) the
then-Applicable Conversion Rate by (ii) a fraction, (A) the numerator of which is the current
market price of the Common Stock and (B) the denominator of which is (1) the current market price
of the Common Stock, minus (2) the quotient of (x) the aggregate amount of all of the Repurchase
Premiums paid in connection with such repurchases and (y) the number of shares of Common Stock
outstanding on the day next

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succeeding the date of the repurchase triggering the adjustment, as determined by the Board of
Directors;

provided that no adjustment to the then-Applicable Conversion Rate shall be made to the extent the
then-Applicable Conversion Rate is not increased as a result of the above calculation; and provided
further that the repurchases of Common Stock effected by the Company, any of its Subsidiaries or
their respective agents in conformity with Rule 10b-18 under the Exchange Act will not be included
in any adjustment to the then-Applicable Conversion Rate made under this paragraph (g). For
purposes of this paragraph (g), (i) the market capitalization will be calculated by multiplying (A)
the current market price of the Common Stock by (B) the number of shares of Common Stock then
outstanding on the date of the repurchase triggering the adjustment, (ii) the current market price
will be the average of the Closing Sale Prices of the Common Stock for the five consecutive Trading
Days beginning on the Trading Day next succeeding the date of the repurchase triggering the
adjustment and (iii) in determining the Repurchase Premium, the “then-prevailing market price” of
the Common Stock will be the average of the Closing Sale Prices of the Common Stock for the five
consecutive Trading Days ending on the relevant repurchase date.

          (h) In addition to the adjustments set forth above, the Company may increase the
then-Applicable Conversion Rate as the Board of Directors considers advisable to avoid or diminish
any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of capital stock (or rights to acquire capital stock) or from any event
treated as such for income tax purposes. The Company may also, from time to time, to the extent
permitted by applicable law, increase the then-Applicable Conversion Rate by any amount for any
period of at least 20 days if the Board of Directors has determined that such increase would be in
the Company’s best interests. If the Board of Directors makes such a determination, it will be
conclusive. The Company will give Holders at least 15 days’ notice of such an increase in the
then-Applicable Conversion Rate. Notwithstanding the foregoing, in no event will (i) the
Applicable Conversion Rate exceed 38.0662 per $1,000 Original Principal Amount of the Securities or
(ii) the total number of shares of Common Stock issuable upon conversion of a Security exceed
35.9100 per $1,000 Original Principal Amount of the Securities (or the total number of shares of
Series C Preferred Stock issuable exceed the equivalent number of such shares based on the Common
Stock to Series C Preferred Stock Exchange ratio), in each case giving effect to the make whole
adjustment described below and any related increase in the Applicable Conversion Rate, subject to
anti-dilution adjustments.

     No adjustment to the then-Applicable Conversion Rate or a Holder’s ability to convert its
Securities will be made if the Holder otherwise participated in the distribution without
conversion.

     The Applicable Conversion Rate will not be adjusted:

	 	(i)  	upon the issuance of any shares of Common Stock pursuant to any
present or future plan providing for the reinvestment of dividends or interest
payable on the Company’s securities and the investment of additional optional
amounts in shares of Common Stock under any plan;

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	 	(ii)  	upon the issuance of any shares of Common Stock or options or
rights to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of or assumed by the Company or
any of its Subsidiaries;
	 
	 	(iii)  	upon the issuance of any shares of Common Stock pursuant to
any option, warrant, right or exercisable, exchangeable or convertible security
not described in the preceding clause and outstanding as of the date the
Securities were first issued;
	 
	 	(iv)  	for a change in the par value of the Common Stock; or
	 
	 	(v)  	for accrued and unpaid Interest, if any.

     Holders will receive, upon conversion of their Securities, in addition to cash and Common
Stock or Series C Preferred Stock, as the case may be, the rights under any stockholder rights plan
the Company may adopt, whether or not the rights have separated from the Common Stock at the time
of conversion unless, prior to conversion, the rights have expired, terminated or been redeemed or
exchanged.

     Simultaneously with an adjustment of the then-Applicable Conversion Rate, the Company will
disseminate a Press Release detailing the new conversion rate and other relevant information.

SECTION 12.10 Adjustment to Applicable Conversion Rate Upon a Fundamental Change.

          (a) If and only to the extent that a Holder converts Securities in connection with a
Fundamental Change pursuant to Section 12.2 (and subject to Section 14.1), the Company will
increase the Applicable Conversion Rate for the Securities surrendered for conversion such that the
Holders shall receive upon conversion a number of additional shares (the “Additional Shares”) as
described in this Section; provided, however, that no increase will be made in the case of a
Fundamental Change if at least 95% of the consideration paid for the outstanding shares of Common
Stock (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’
appraisal rights) in such Fundamental Change transaction consists of shares of capital stock quoted
on The Nasdaq Stock Market or another established automated over-the-counter trading market in the
United States or traded on the New York Stock Exchange or another U.S. national securities exchange
(or that will be so traded or quoted immediately following the transaction).

          (b) The number of Additional Shares will be determined by reference to the table below, based
on the date on which such Fundamental Change transaction becomes effective (the “Fundamental Change
Effective Date”) and the price (the “Stock Price”) paid per share of Common Stock in such
Fundamental Change transaction. If holders of Common Stock receive only cash in such Fundamental
Change transaction, the Stock Price will be the cash amount paid per share of Common Stock.
Otherwise, the Stock Price will be the average of the last Closing Sale Prices of the Common Stock
on each of the five consecutive Trading Days prior to but not including the Fundamental Change
Effective Date.

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          (c) A conversion of Securities by a Holder will be deemed for these purposes to be “in
connection with” a Fundamental Change if the conversion notice is received by the Conversion Agent
subsequent to the Fundamental Change Effective Date but before the close of business on the second
Business Day immediately preceding the Fundamental Change Repurchase Date. Holders will not
receive the Conversion Consideration for the Securities surrendered for conversion in connection
with such Fundamental Change prior to the date on which the Company sends to Holders the
Fundamental Change repurchase notice described in Section 13.3.

          (d) The Stock Prices set forth in the first row of the first following table (i.e., the column
headers) will be adjusted as of any date on which the Applicable Conversion Rate of the Securities
is adjusted. The adjusted Stock Prices will equal (i) the Stock Prices applicable immediately prior
to such adjustment, multiplied by (ii) a fraction (A) the numerator of which is the Applicable
Conversion Rate immediately prior to the adjustment giving rise to the Stock Price adjustment and
(B) the denominator of which is the Applicable Conversion Rate as so adjusted. The number of
Additional Shares will be adjusted in the same manner as the Applicable Conversion Rate as set
forth in Section 12.9.

          (e) The following table sets forth the hypothetical Stock Price and number of Additional
Shares of Common Stock issuable per $1,000 Original Principal Amount of Securities:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Effective date	 	 	 	 	 
	 	of Fundamental	 	 	Stock Price (in dollars)	 	 
	 	Change	 	 	26.27	 	 	 	27.00	 	 	 	28.00	 	 	 	29.00	 	 	 	30.00	 	 	 	32.50	 	 	 	35.00	 	 	 	40.00	 	 	 	50.00	 	 	 	75.00	 	 	 	100.00	 	 	 	150.00	 	 
	 	March 23, 2005
	 	 	 	9.8709	 	 	 	 	9.3732	 	 	 	 	8.7601	 	 	 	 	8.1824	 	 	 	 	7.6542	 	 	 	 	6.5102	 	 	 	 	5.6219	 	 	 	 	4.2457	 	 	 	 	2.6194	 	 	 	 	1.0121	 	 	 	 	0.4762	 	 	 	 	0.1300	 	 
	 	March 30, 2006
	 	 	 	9.6338	 	 	 	 	9.1601	 	 	 	 	8.5532	 	 	 	 	7.9821	 	 	 	 	7.4669	 	 	 	 	6.3585	 	 	 	 	5.4782	 	 	 	 	4.1429	 	 	 	 	2.5524	 	 	 	 	0.9843	 	 	 	 	0.4625	 	 	 	 	0.1255	 	 
	 	March 30, 2007
	 	 	 	9.4396	 	 	 	 	8.9737	 	 	 	 	8.3703	 	 	 	 	7.8124	 	 	 	 	7.3029	 	 	 	 	6.2258	 	 	 	 	5.3562	 	 	 	 	4.0530	 	 	 	 	2.4925	 	 	 	 	0.9600	 	 	 	 	0.4508	 	 	 	 	0.1208	 	 
	 	March 30, 2008
	 	 	 	9.0283	 	 	 	 	8.7481	 	 	 	 	8.1492	 	 	 	 	7.6071	 	 	 	 	7.1046	 	 	 	 	6.0656	 	 	 	 	5.2111	 	 	 	 	3.9441	 	 	 	 	2.4201	 	 	 	 	0.9317	 	 	 	 	0.4368	 	 	 	 	0.1180	 	 
	 	March 30, 2009
	 	 	 	8.8681	 	 	 	 	8.4114	 	 	 	 	7.8328	 	 	 	 	7.3050	 	 	 	 	6.8228	 	 	 	 	5.8267	 	 	 	 	4.9975	 	 	 	 	3.7801	 	 	 	 	2.3171	 	 	 	 	0.8917	 	 	 	 	0.4196	 	 	 	 	0.1124	 	 
	 	April 4, 2010
	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 	 	 	0.0000	 	 
	 

     The Stock Prices and Additional Share amounts set forth in the table above are based upon
a Common Stock price of $26.27 at March 17, 2005 and an initial conversion price of $35.46.

          (f) The exact Stock Price and Conversion Dates may not be set forth in the table; in which
case, if the Stock Price is: (i) between two Stock Price amounts in the table or the Conversion
Date is between two dates on the table, the number of Additional Shares will be determined by
straight-line interpolation between the number of Additional Shares set forth for the higher and
lower Stock Price amounts and the two dates, as applicable, based on a 365-day year; (ii) more than
$150.00 per share (subject to adjustment as described in (d) above), no Additional Shares will be
issued upon conversion; and (iii) less than $26.27 per share (subject to adjustment as described in
(d) above), no Additional Shares will be issued upon conversion.

     Notwithstanding the foregoing, in no event will (i) the Applicable Conversion Rate exceed
38.0662 per $1,000 Original Principal Amount or (ii) the total number of shares issuable upon
conversion of a Security (after giving effect to adjustment to the Applicable Conversion Rate for a
Fundamental Change) exceed 35.9100 per $1,000 Original Principal Amount of the Securities (or the
total number of shares of Series C Preferred Stock issuable exceed the

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equivalent number of such shares based on the Common Stock to Series C Preferred Stock
exchange ratio), in each case, after giving effect to the make whole adjustment described in clause
(a) and subject to anti-dilution adjustments.

SECTION 12.11 Notice of Adjustments of Conversion Rate.

     Whenever the Conversion Rate is adjusted as herein provided:

     (a) the Company shall compute the adjusted Applicable Conversion Rate in accordance with
Section 12.9 and 12.10 and shall prepare a certificate signed by its principal financial officer,
Comptroller or Treasurer of the Company setting forth the adjusted Applicable Conversion Rate and
showing in reasonable detail the facts upon which such adjustment is based, and such certificate
shall promptly be filed with the Trustee and with each Conversion Agent; and

     (b) upon each such adjustment, a notice stating that the Applicable Conversion Rate has been
adjusted and setting forth the adjusted Applicable Conversion Rate shall be required, and as soon
as practicable after it is required, such notice shall be provided by the Company to all Holders in
accordance with Section 1.6.

     Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with
respect to any such certificate or the information and calculations contained therein, except to
exhibit the same to any Holder of Securities desiring inspection thereof at its office during
normal business hours, and shall not be deemed to have knowledge of any adjustment in the
Conversion Rate unless and until a Responsible Officer of the Trustee shall have received such a
certificate. Until a Responsible Officer of the Trustee receives such a certificate, the Trustee
and each Conversion Agent may assume without inquiry that the last Conversion Rate of which the
Trustee has knowledge remains in effect.

SECTION 12.12 Notice of Certain Corporate Action.

     In case:

          (a) the Company shall declare a dividend (or any other distribution) on its Common Stock
payable (i) otherwise than exclusively in cash or (ii) exclusively in cash in an amount that would
require any adjustment pursuant to Section 12.9; or

          (b) the Company shall authorize the granting to all or substantially all of the holders of its
Common Stock of rights, options or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or

          (c) of any reclassification of the Common Stock, or of any consolidation, merger or share
exchange to which the Company is a party and for which approval of any stockholders of the Company
is required, or of the conveyance, sale, transfer or lease (other than a mere grant of security
interest) of all or substantially all of the assets of the Company; or

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

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then the Company shall cause to be filed at each office or agency maintained for the purpose of
conversion of Securities pursuant to Section 10.2, and shall cause to be provided to all Holders in
accordance with Section 1.6, at least 20 days (or 10 days in any case specified in clause (a) or
(b) above and 30 days for clause (c) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, rights, options or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights, options or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, conveyance, transfer, sale, lease (other than a mere grant
of security interest), dissolution, liquidation or winding up is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up. Neither the failure to give such notice or the notice referred to in the
following paragraph nor any defect therein shall affect the legality or validity of the proceedings
described in clauses (a) through (d) of this Section. If at the time the Trustee shall not be the
Conversion Agent, a copy of such notice shall also forthwith be filed by the Company with the
Trustee.

     The Company shall cause to be filed at the Corporate Trust Office and each office or agency
maintained for the purpose of conversion of Securities pursuant to Section 10.2, and shall cause to
be provided to all Holders in accordance with Section 1.6, notice of any tender offer by the
Company or any Subsidiary for all or any portion of the Common Stock at or about the time that such
notice of tender offer is provided to the public generally.

SECTION 12.13 Company to Provide Common Stock and Series C Preferred Stock.

          (a) As soon as practicable, the Company shall reserve for issuance upon conversion of
Securities 4.230 million shares of Common Stock for the purpose of effecting the conversion of all
of the Outstanding Securities (or 5.640 million shares of Common Stock if Goldman, Sachs & Co.
exercises the Initial Purchasers’ Option) (the “Sufficient Common Stock Reserve”). The Company has
2.627 million shares of Common Stock (the “Initial Conversion Shares”) issuable upon conversion of
the Securities pursuant to Section 12.1 that have been duly authorized by all necessary corporate
action and, when issued in accordance with the terms of the Securities and this Indenture, will be
validly issued, fully paid and nonassessable. There are 3.013 million additional shares of Common
Stock issuable upon conversion of the Securities that have been duly authorized by the Company’s
Board of Directors, but are not yet authorized by the Company’s shareholders.

          (b) If there are not sufficient shares of authorized Common Stock prior to April 22, 2005 or
as the result of the shareholders’ failure to approve an increase in authorized shares as set forth
in Section 12.13(d), the Company shall reserve for issuance upon conversion of Securities a
sufficient number of shares of Series C Preferred Stock for the purpose of effecting the conversion
of all of the Outstanding Securities (the “Sufficient Preferred Stock Reserve”).

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          (c) The Company agrees that the Series C Preferred Stock shall be available solely for
conversion of the Securities until such time as a Sufficient Common Stock Reserve is achieved. The
Company is initially authorizing 10,000 shares of the Series C Preferred Stock pursuant to a
certificate of designation therefor (the “Certificate of Designation”). In case a Sufficient
Common Stock Reserve is not achieved and, as a result of anti-dilution adjustments as set forth in
Section 12.9 or other events as described in Section 12.2, the Company shall increase the number of
authorized Series C Preferred Stock that may be needed upon conversion of the Securities.

          (d) The Company shall (i) reserve the Initial Conversion Shares; (ii) reserve any shares of
Common Stock that may become available for reservation (before or after April 22, 2005) until a
Sufficient Common Stock Reserve is obtained; and (iii) use reasonable efforts to obtain the
approval of its shareholders of an increase in its authorized Common Stock to obtain a Sufficient
Common Stock Reserve. In the event the Company has not established a Sufficient Common Stock
Reserve by the date 90 days after the latest date of original issuance of the Securities, the
Securities will accrue additional interest (the “Reserve Interest”) at the rate of 1.0% per annum
from and after such date to, but excluding, the date on which a Sufficient Common Stock Reserve has
been established (the “Reserve Sufficient Date”). The Reserve Interest shall be paid on the
relevant Interest Payment Dates to Holders as of the applicable Record Dates.

          (e) The Company will provide Notice to the Trustee, the Paying Agent and the Holders in
accordance with Section 1.6 as promptly as practicable after (i) determining that Reserve Interest
will be payable and (ii) the Reserve Sufficient Date; in each case setting forth the current number
of shares of Common Stock reserved for conversion of the Securities.

          (f) In the event that the Company has not established a Sufficient Common Stock Reserve on any
Conversion Date, is unable to satisfy its conversion obligations in shares of Common Stock and the
financial institution designated to exchange Securities surrendered for conversion declines to
exchange such Securities or does not timely deliver such shares of Common Stock, the Company may
issue Series C Preferred Stock in lieu of shares of Common Stock based on a ratio of 1.1 shares of
Series C Preferred Stock for each 1,000 shares of Common Stock. Each 1.1 shares of Series C
Preferred Stock will be convertible into 1,000 shares of Common Stock. The Company agrees that it
will only issue Series C Preferred Stock if necessary due to the lack of available authorized
Common Stock. In addition, if and when the Company achieves a Sufficient Common Stock Reserve, the
Company will no longer have the option to issue shares of Series C Preferred Stock in lieu of
shares of Common Stock.

          (g) Prior to the Reserve Sufficient Date, the Company shall not amend or modify the
Certificate of Designation of Series C Preferred Stock in a manner that would adversely affect (1)
the interests of the holders of such Series C Preferred Stock or (2) the conversion rights of
Holders of the Securities in any material respect without the consent of the Holders of the
Securities given in the same manner as provided in Section 8.2 of this Indenture (and, if required
pursuant to such Certificate of Designation and applicable Delaware Law, approval by the holders of
any outstanding Series C Preferred Stock).

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          (h) On and after the Reserve Sufficient Date, the Company shall at all times maintain and keep
available a Sufficient Common Stock Reserve. For this purpose, and notwithstanding the share
amounts specified in subsection (a) above, the Company agrees that whenever there is an
anti-dilution adjustment or other event that would result in an increase in the amount of Common
Stock issuable upon conversion of the Securities (and assuming for this purpose that all
Outstanding Securities were to be converted and no portion of the Conversion Consideration were to
consist of cash), then the Company shall make an increase to the Sufficient Common Stock Reserve,
as may be needed from time to time, in order that no Security may be converted and the Holder
receive, upon such conversion, less than the full amount of the Conversion Consideration provided
for in this Indenture. This provision shall apply equally to any Common Stock that may be issuable
upon conversion of any Series C Preferred Stock that may have been issued prior to the achievement
of the Reserve Sufficient Date. Nothing in this subsection, however, shall require the limitation
in the final paragraph of Section 12.10(f) to be exceeded.

     Unless the context is clear otherwise, references to shares of Common Stock issuable upon
conversion the Securities in this Indenture should be read to include shares of Series C Preferred
Stock issuable upon conversion of the Securities and that the same terms apply to the Series C
Preferred Stock as apply to the Common Stock, except that information regarding the number of
shares of Common Stock issuable upon conversion of the Securities and the formulas for determining
such number will be adjusted proportionately on the basis of the ratio of 1.1 shares of Series C
Preferred Stock to 1,000 shares of Common Stock.

SECTION 12.14 Taxes on Conversions.

     Except as provided in the next sentence, the Company will pay all stamp taxes and other duties
that may be payable in respect of the issue or delivery of shares of Common Stock or Series C
Preferred Stock on conversion of Securities pursuant hereto. The Company shall not, however, be
required to pay any tax or duty in respect of (i) income of the Holder or (ii) because the Holder
requests the shares of Common Stock or Series C Preferred Stock, as the case may be, be issued in a
name other than its own. Certificates representing shares of Common Stock or Series C Preferred
Stock, as the case may be, will be issued only after all applicable taxes and duties payable by the
Holder, if any, are paid.

     The Company agrees, and each Holder is deemed to agree, that delivery to such Holder of the
full number of shares of Common Stock or Series C Preferred Stock into which each Security is
convertible, together with any cash payment of such Holder’s fractional shares in accordance with
Section 12.14, will be treated as a contingent payment (in an amount equal to the sum of the then
Fair Market Value of such Common Stock or Series C Preferred Stock and such cash payment, if any)
on the Securities for purposes of the Contingent Payment Debt Regulations governing contingent
payment debt obligations.

SECTION 12.15 Covenant as to Common Stock and Series C Preferred Stock.

     The Company agrees that all shares of Common Stock and Series C Preferred Stock that may be
delivered upon conversion of Securities, upon such delivery, will be newly issued shares

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and will have been duly authorized and validly issued and will be fully paid and nonassessable
and, except as provided in Section 12.14, the Company will pay all taxes, liens and charges with
respect to the issue thereof.

SECTION 12.16 Cancellation of Converted Securities.

     All Securities delivered for conversion shall be delivered to the Trustee or its agent to be
canceled by or at the direction of the Trustee, which shall dispose of the same as provided in
Section 3.13.

SECTION 12.17 Rights Issued in Respect of Common Stock and Series C Preferred Stock.

     Rights or warrants distributed by the Company to all holders of Common Stock entitling the
holders thereof 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 identified in the instruments governing such rights or warrants (“Trigger
Event”):

          (a) are deemed to be transferred with such shares of Common Stock,

          (b) are not exercisable, and

          (c) are also issued in respect of future issuances of Common Stock

shall not be deemed distributed for purposes of Section 12.9(d) until the occurrence of the
earliest Trigger Event. In addition, in the event of any distribution of rights or warrants, or
any Trigger Event with respect thereto, that shall have resulted in an adjustment to the Applicable
Conversion Rate under Section 12.9(d), (1) in the case of any such rights or warrants that shall
all have been redeemed or repurchased without exercise by any holders thereof, the Applicable
Conversion Rate 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 Common Stock with respect to
such rights or warrants (assuming such holder had retained such rights or warrants), made to all
holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of any
such rights or warrants all of which shall have expired without exercise by any holder thereof, the
Applicable Conversion Rate shall be readjusted as if such issuance had not occurred.

     The Company agrees that within ten Business Days after its April 22, 2005 shareholders meeting
if the shareholders fail to approve the proposed increase in authorized Common Stock, it will amend
its existing rights plan, and will include similar provisions in any future rights plan, in order
that any Series C Preferred Stock that may be issued upon conversion of the Securities will
include, proportionately, the same rights as accompany shares of Common Stock pursuant to such
rights plan. The Company further agrees, in case of any failure to effect such amendment, or to
include such provisions in any future rights plan, and in case rights granted to holders of Common
Stock become exercisable, which are not available to Holders of Series C Preferred Stock, an
adjustment under Section 12.9(d), as equitably as may be practicable, shall be made in the case of
any issuance of Series C Preferred Stock not accompanied by such rights. However,

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if shareholders approve the proposed increase in authorized Common Stock at the April 22, 2005
shareholders meeting, then the foregoing paragraph will be inapplicable.

SECTION 12.18 Responsibility of Trustee for Conversion Provisions.

     The Trustee, subject to the provisions of Section 6.1, and any Conversion Agent shall not at
any time be under any duty or responsibility to any Holder of Securities to determine whether any
facts exist which may require any adjustment of the Conversion Rate, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method employed, herein or in
any supplemental indenture provided to be employed, in making the same, or whether a supplemental
indenture need be entered into. Neither the Trustee, subject to the provisions of Section 6.1, nor
any Conversion Agent shall be accountable with respect to the validity or value (or the kind or
amount) of any Common Stock, or of any other securities or property or cash, which may at any time
be issued or delivered upon the conversion of any Security; and it or they do not make any
representation with respect thereto. Neither the Trustee, subject to the provisions of Section 6.1,
nor any Conversion Agent shall be responsible for any failure of the Company to make or calculate
any cash payment or to issue, transfer or deliver any shares of Common Stock or share certificates
or other securities or property or cash upon the surrender of any Security for the purpose of
conversion; and the Trustee, subject to the provisions of Section 6.1, and any Conversion Agent
shall not be responsible for any failure of the Company to comply with any of the covenants of the
Company contained in this Article.

ARTICLE XIII

REPURCHASE OF SECURITIES

SECTION 13.1 Repurchase Rights.

          (a) Holders will have the right to require the Company to repurchase the Securities on March
30, 2010, (the “Repurchase Date”). The repurchase price payable will be equal to 100% of the
Original Principal Amount of the Securities to be repurchased, plus accrued and unpaid Interest, if
any, to, but not including, the Repurchase Date (the “Repurchase Price”). The Company will be
required to repurchase any outstanding Securities for which a Holder delivers a written repurchase
notice to the Paying Agent substantially in the form in Section 2.2 (the “Repurchase Notice”).
Such notice must be delivered by a Holder during the period beginning at any time from the opening
of business on the date that is 21 Business Days prior to the Repurchase Date until the close of
business on the last Business Day prior to the Repurchase Date. If the Repurchase Notice is given
and withdrawn during such period, the Company will not be obligated to repurchase the related
Securities. The Company will pay the Repurchase Price for any Securities submitted for repurchase
on the Repurchase Date solely in cash.

          (b) The Company will give notice to each Holder in accordance with Section 1.6 at least 20
Business Days prior to the Repurchase Date as required by applicable law, stating, among other
things, the procedures that Holders must follow to require the Company to repurchase the
Securities.

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          (c) The Repurchase Notice given by each Holder electing to require the Company to repurchase
Securities on the Repurchase Date must be given so as to be received by the Paying Agent no later
than the close of business on the Business Day immediately preceding the Repurchase Date and must
state: (i) if certificated, the certificate numbers of the Securities to be delivered for
repurchase; (ii) the portion of the Original Principal Amount of Securities to be repurchased,
which must be $1,000 or an integral multiple thereof; and (iii) that the Securities are to be
repurchased by the Company pursuant to the applicable provisions of the Securities and the
Indenture.

     If the Securities are Global Securities, the withdrawal notice must comply with the
appropriate procedures of the Depositary.

          (d) A Holder may withdraw any Repurchase Notice by delivering a written notice of withdrawal
to the Paying Agent prior to the close of business on the Business Day immediately preceding the
Repurchase Date. The notice of withdrawal must state: (i) the Original Principal Amount of
Securities being withdrawn; (ii) if certificated, the certificate numbers of the Securities being
withdrawn; and (iii) the Original Principal Amount, if any, of the Securities that remain subject
to the Repurchase Notice.

     If the Securities are Global Securities, the withdrawal notice must comply with the
appropriate procedures of the Depositary.

          (e) In connection with any repurchase, the Company will, to the extent applicable: (i) comply
with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange
Act which may then be applicable; and (ii) file Schedule TO or any other required schedule under
the Exchange Act.

          (f) The Company’s obligation to pay the Repurchase Price for Securities for which a Repurchase
Notice has been delivered and not validly withdrawn is conditioned upon the following: A Holder
must either effect book-entry transfer or deliver the Securities (if they are in certificated
form), together with necessary endorsements, to the office of the Paying Agent after delivery of
the Repurchase Notice to receive payment of the Repurchase Price. The Company will cause the
Repurchase Price for the Securities to be paid promptly following the later of the Repurchase Date
or the time of book-entry transfer or delivery of the Securities, together with such endorsements.

          (g) The Company shall deposit cash, at the time and in the manner contemplated by Section
11.5, sufficient to pay the Repurchase Price of all Securities to be repurchased hereunder. If the
Paying Agent holds money sufficient to pay the Repurchase Price of the Securities for which a
Repurchase Notice has been given on the Business Day immediately following the Repurchase Date in
accordance with the terms of the Indenture, then, immediately after the Repurchase Date, the
Securities will cease to be Outstanding and Interest, if any, on the Securities will cease to
accrue, whether or not the Securities are delivered to the Paying Agent, and all other rights of
the Holder shall terminate, other than the right to receive the Repurchase Price upon delivery of
the Securities.

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SECTION 13.2 Exchange in Lieu of Repurchase.

     If a Holder exercises its right to require the Company to repurchase any of such Holder’s
Securities, the Company may cause the Securities first to be offered to a financial institution
chosen by it for exchange in lieu of repurchase. In order to accept any Securities surrendered for
repurchase, the designated institution must agree to deliver, in exchange for such Securities, the
Repurchase Price for such Securities the Holder otherwise would receive upon repurchase by the
Company. If the designated institution accepts any such Securities for repurchase, it will deliver
the Repurchase Price to the Paying Agent. Any Securities purchased by the designated institution
will remain Outstanding. If the designated institution agrees to accept any Securities for
repurchase but does not timely deliver the related Repurchase Price payment, the Company will, as
promptly as practical thereafter, but not later than one Business Day following the Repurchase
Date, cause the Repurchase Price for the Securities to be paid.

     The Company’s designation of an institution to which the Securities may be submitted for
repurchase does not require such institution to accept any Securities. If the designated
institution declines to accept any Securities surrendered for repurchase, the Company will
repurchase the Securities on the terms described in Section 13.1.

     The Company will not pay any consideration to, or otherwise enter into any arrangement with,
the designated institution for or with respect to such designation.

SECTION 13.3 Repurchase at Option of the Holder Upon a Fundamental Change.

          (a) If a Fundamental Change occurs at any time prior to Maturity, each Holder will have the
right (subject to Section 14.1) to require the Company to repurchase any or all of such Holder’s
Securities for cash, or any portion of the principal amount thereof that is equal to $1,000 or an
integral multiple of $1,000. The cash price the Company is required to pay is equal to 100% of the
principal amount of the Securities to be purchased plus accrued and unpaid Interest to (but not
including) the Fundamental Change Repurchase Date (the “Fundamental Change Repurchase Price”),
unless such Fundamental Change Repurchase Date falls after a Record Date and on or prior to the
corresponding Interest Payment Date, in which case the Company will pay the full amount of accrued
and unpaid Interest payable on such Interest Payment Date to the Holder of record at the close of
business on the corresponding Record Date.

          (b) Notwithstanding the foregoing, Holders will not have the right to require the Company to
repurchase any Securities if a Fundamental Change described in clause (b) or (c) in the definition
of Fundamental Change occurs (and the Company will not be required to deliver the notice incidental
thereto), if either: (i) the Closing Sale Price of the Common Stock for any five Trading Days
within the period of 10 consecutive Trading Days ending immediately after the later of the date of
the Fundamental Change or the date of the public announcement of the Fundamental Change, in the
case of a Fundamental Change relating to an acquisition of capital stock under clause (b) of the
definition of Fundamental Change, or within the period of ten consecutive Trading Days ending
immediately before the date of the Fundamental Change, in the case of a Fundamental Change relating
to a merger, consolidation, asset sale or otherwise under clause (c) of the definition of
Fundamental Change, equals or exceeds 105% of the Applicable

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Conversion Price of the Securities in effect on each of those five Trading Days; or (ii) at
least 95% of the consideration paid for the Common Stock (excluding cash payments for fractional
shares and cash payments made pursuant to dissenters’ appraisal rights) in a merger or
consolidation or a conveyance, sale, transfer or lease otherwise constituting a Fundamental Change
under clause (b) and/or (c) of the definition of Fundamental Change consists of shares of capital
stock quoted on The Nasdaq Stock Market or another established automated over-the-counter trading
market in the United States or traded on the New York Stock Exchange or another United States or
national securities exchange (or will be so traded or quoted immediately following the merger or
consolidation) and as a result of the merger or consolidation the Securities become convertible
into shares of such capital stock.

          (c) On or before the 30th day after the occurrence of a Fundamental Change, the Company will
provide to all Holders, the Trustee and the Paying Agent a notice of the occurrence of the
Fundamental Change and of the resulting repurchase right. Such notice shall state, among other
things: (i) the events causing the Fundamental Change; (ii) the date of the Fundamental Change;
(iii) the last date on which a Holder may exercise its repurchase right; (iv) the Fundamental
Change Repurchase Price; (v) the Fundamental Change Repurchase Date, which shall be a date selected
by the Company no less than 20 days or more than 35 days after the date of such notice; (vi) the
name and address of the Paying Agent and the Conversion Agent; (vii) the Initial Conversion Rate
and any adjustments to the Initial Conversion Rate; (viii) that the Securities with respect to
which a Fundamental Change repurchase notice has been given by the Holder may be converted only if
the Holder withdraws the Fundamental Change repurchase notice as described in clause (e) below; and
(ix) the procedures that Holders must follow to require the Company to repurchase their Securities.

          (d) Simultaneously with providing such notice, the Company will issue a Press Release and
publish the information through a public medium customary for such Press Releases.

          (e) To exercise the repurchase right in connection with a Fundamental Change, a Holder must
deliver, before the close of business on the second Business Day immediately preceding the
Fundamental Change Repurchase Date, the Securities to be purchased, duly endorsed for transfer,
together with the Fundamental Change repurchase notice duly completed, to the Paying Agent. The
Fundamental Change repurchase notice must state: (i) if certificated, the certificate numbers of
the Securities to be delivered for repurchase; (ii) the portion of the principal amount of the
Securities to be repurchased, which must be equal to $1,000 or an integral multiple thereof; and
(iii) that the Securities are to be repurchased by the Company pursuant to the applicable
provisions of the Securities and this Indenture.

     If the Securities are Global Securities, the Fundamental Change repurchase notice must comply
with the appropriate procedures of the Depositary.

     A Holder may withdraw any Fundamental Change repurchase notice (in whole or in part) by a
written notice of withdrawal delivered to the Paying Agent prior to the close of business on the
Business Day prior to the Fundamental Change Repurchase Date. The notice of withdrawal must state:
(i) the principal amount of the withdrawn Securities; (ii) if certificated Securities have

100

 

been issued, the certificate numbers of the withdrawn Securities; and (iii) the principal
amount, if any, that remains subject to the Fundamental Change repurchase notice.

     If the Securities are Global Securities, the withdrawal notice must comply with the
appropriate procedures of the Depositary.

          (f) The Company will be required to repurchase the Securities no less than 20 and no more than
35 days after the date of the Company’s notice of the occurrence of the relevant Fundamental
Change, subject to extension to comply with applicable law. A Holder must either effect book-entry
transfer or deliver the Securities, together with necessary endorsements, to the office of the
Paying Agent after delivery of the Fundamental Change repurchase notice to receive payment of the
Fundamental Change Repurchase Price. Holders will receive payment of the Fundamental Change
Repurchase Price promptly following the later of the Fundamental Change Repurchase Date or the time
of book-entry transfer or the delivery of the Securities. If the Paying Agent holds money or
securities sufficient to pay the Fundamental Change Repurchase Price of the Securities on the
Business Day following the Fundamental Change Repurchase Date, then: (i) the Securities will cease
to be Outstanding and Interest, if any, will cease to accrue or principal to accrete (whether or
not book-entry transfer of the Securities is made or whether or not the Security is delivered to
the Paying Agent); and (ii) all other rights of the Holder will terminate (other than the right to
receive the Fundamental Change Repurchase Price upon delivery or transfer of the Securities).

ARTICLE XIV

PUBLIC ACQUIRER CHANGE OF CONTROL

SECTION 14.1 Public Acquirer Change of Control

          (a) In the case of a Public Acquirer Change of Control, in lieu of permitting a repurchase at
the Holder’s option as described in Section 13.3 or adjusting the Applicable Conversion Rate as
described in Section 12.10, the Company may elect to adjust the Applicable Conversion Rate and the
related conversion obligation such that from and after the date on which the Public Acquirer Change
of Control becomes effective (the “Public Acquirer Change of Control Effective Date”), Holders of
the Securities will be entitled to convert their Securities into a number of shares of Public
Acquirer Common Stock at an adjusted conversion rate equal to the Applicable Conversion Rate in
effect immediately before the Public Acquirer Change of Control Effective Date multiplied by a
fraction:

               (i) the numerator of which will be (A) in the case of a share exchange, consolidation, merger
or binding share exchange, pursuant to which the Common Stock is converted into cash, securities or
other property, the average value of all cash and any other consideration (as determined by the
Company’s Board of Directors) paid or payable per share of Common Stock or (B) in the case of any
other Public Acquirer Change of Control, the average of the Closing Sale Price of the Common Stock
for the five consecutive Trading Days prior to but excluding the Public Acquirer Change of Control
Effective Date; and

101

 

               (ii) the denominator of which will be the average of the Closing Sale Price of the Public
Acquirer Common Stock for the five consecutive Trading Days commencing on the Trading Day next
succeeding the Public Acquirer Change of Control Effective Date.

          (b) If the Company elects to adjust the Applicable Conversion Rate and conversion obligations
as described in this Section in connection with a Public Acquirer Change of Control, it will, at
least 15 Trading Days prior to the anticipated Public Acquirer Change of Control Effective Date and
again upon the Public Acquirer Change of Control Effective Date, (1) provide to all Holders and the
Trustee and Paying Agent notice by mail of such election, including in the notice the information
on the adjustment, and (2) disseminate a Press Release containing information regarding the
adjustment and publish the information through a public medium that is customary for such Press
Release.

          (c) If the Company elects to adjust the Applicable Conversion Rate and conversion obligations
as described in this Section in connection with a Public Acquirer Change of Control, Holders of the
Securities will not have the right to require the Company to repurchase their Securities as
described in Section 13.3 or to convert at an adjusted Applicable Conversion Rate as described in
Section 12.10 in connection with the Fundamental Change that is also the Public Acquirer Change of
Control.

          (d) For purposes of any election by the Company to adjust the Applicable Conversion Rate and
conversion obligations as set forth in this Section, the definitions of Trading Day and Closing
Sale Price shall be deemed modified as necessary to take into account the Public Acquirer Common
Stock, including the principal place of listing or quotation of any such Public Acquirer Common
Stock.

ARTICLE XV

HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE

SECTION 15.1 Company to Furnish Trustee Names and Addresses of Holders.

     The Company will furnish or cause to be furnished to the Trustee:

          (a) semi-annually, not more than 15 days after the Regular Record Date, a list, in such form
as the Trustee may reasonably require, of the names and addresses of the Holders of Securities as
of such Regular Record Date, and

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

     provided, however, that no such list need be furnished so long as the Trustee is acting as
Security Registrar.

102

 

SECTION 15.2 Preservation of Information.

          (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names
and addresses of Holders contained in the most recent list furnished to the Trustee as provided in
Section 15.1 and the names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list, if any, furnished to it as provided in
Section 15.1 upon receipt of a new list so furnished.

          (b) After this Indenture has been qualified under the Trust Indenture Act, the rights of
Holders to communicate with other Holders with respect to their rights under this Indenture or
under the Securities, and the corresponding rights, and duties of the Trustee, shall be as provided
by the Trust Indenture Act.

          (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and
the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held
accountable by reason of any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.

SECTION 15.3 Reports by Trustee.

          (a) After this Indenture has been qualified under the Trust Indenture Act, the Trustee shall
transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may
be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant
thereto.

          (b) After this Indenture has been qualified under the Trust Indenture Act, a copy of each such
report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock
exchange upon which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock exchange.

SECTION 15.4 Reports by Company.

     After this Indenture has been qualified under the Trust Indenture Act, the Company shall file
with the Trustee and the Commission, and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same
is so required to be filed with the Commission.

SECTION 15.5 Calculations in Respect of Securities.

     The Company will be responsible for making any calculations called for under the Securities.
These calculations include, but are not limited to, determinations of the Trading Price of the
Securities and the Closing Sale Price of the Common Stock, any accrued Interest payable on the
Securities and the Applicable Conversion Rate of the Securities. The Company will make these
calculations in good faith and, absent manifest error, its calculations will be final and

103

 

binding on the Holders of Securities. The Company will provide a schedule of its calculations
to the Trustee, and the Trustee is entitled to rely upon the accuracy of the Company’s calculations
without independent verification. The Trustee will forward the Company’s calculations to any
Holder of Securities upon a written request by such Holder.

ARTICLE XVI

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND

DIRECTORS

SECTION 16.1 Indenture and Securities Solely Corporate Obligations.

     No recourse for the payment of the principal amount of or Interest (including Liquidated
Damages, if any) on any Security and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture or in any Security, or
because of the creation of any indebtedness represented thereby, shall be had against any past,
present or future incorporator, stockholder, employee, agent, officer, or director or subsidiary,
as such, of the Company or of any successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby waived and released as a condition of, and
as a consideration for, the execution of this Indenture and the issue of the Securities.

     This Indenture may be executed in any number of counterparts, each of which so executed shall
be deemed to be an original, but all such counterparts shall together constitute but one and the
same instrument.

104

 

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

	 	 	 	 	 
	 	 	CONNETICS CORPORATION
	 
	 	 	 	 
	

	 	By:	 	/s/ John L. Higgins
	

	 	 	 	 
	

	 	 	 	Name: John L. Higgins
	

	 	 	 	Title: CFO
	 
	 	 	 	 
	 	 	J.P. MORGAN TRUST COMPANY,
	 	 	NATIONAL ASSOCIATION,
	 	 	as Trustee
	 
	 	 	 	 
	

	 	By:	 	/s/ Mary Jane Henson
	

	 	 	 	 
	

	 	 	 	Name: Mary Jane Henson
	

	 	 	 	Title: Vice President

105

 

ANNEX A — Form of Unrestricted Securities Certificate

UNRESTRICTED SECURITIES CERTIFICATE

(For removal of Restricted Securities Legend pursuant to Section 3.6)

J.P. MORGAN TRUST COMPANY,

NATIONAL ASSOCIATION

600 Travis St., Suite 1150

Houston, Texas 77002

INSTITUTIONAL TRUST SERVICES WINDOW

c/o J.P. Morgan Chase Bank

4 New York Plaza, 1st Floor

New York, New York 10004-2413

     RE: 2.00% CONVERTIBLE SENIOR NOTES DUE MARCH 30, 2015 OF CONNETICS CORPORATION (THE
“SECURITIES”)

     Reference is made to the Indenture, dated as of [___], 2005 (the “Indenture”), from
Connetics Corporation (the “Company”) to J.P. Morgan Trust Company, National Association, as
Trustee. Terms used herein and defined in the Indenture or in Rule 144 under the U.S. Securities
Act of 1933 (the “Securities Act”) are used herein as so defined.

     This certificate relates to U.S.$___principal amounts of Securities, which are
evidenced by the following certificate(s) (the “Specified Securities”):

     CUSIP No. [_________]

     CERTIFICATE No(s). _________________

     The person in whose name this certificate is executed below (the “Undersigned”) hereby
certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is
acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by
them to do so. Such beneficial owner or owners are referred to herein collectively as the “Owner”.
If the Specified Securities are represented by a Global Security, they are held through the
Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the
Specified Securities are not represented by a Global Security, they are registered in the name of
the Undersigned, as or on behalf of the Owner.

     The Owner has requested that the Specified Securities be exchanged for Securities bearing no
Restricted Securities Legend pursuant to Section 3.6 of the Indenture. In connection with such
exchange, the Owner hereby certifies that the exchange is occurring after a period of at least two
years has elapsed since the Issue Date, and the Owner is not, and during the preceding three months
has not been, an affiliate of the Company. The Owner also acknowledges that any future transfers
of the Specified Securities must comply with all applicable securities laws of the States of the
United States and other jurisdictions.

A-1

 

     This certificate and the statements contained herein are made for your benefit and the benefit
of the Company and the Initial Purchasers.

Dated: ________________________

(Print the name of the Undersigned, as such term is defined in the third paragraph of this
certificate.)

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	 	 	 
	Name:
	 	 	 	 
	

	 	 	 	 
	Title:
	 	 	 	 
	

	 	 	 	 

(If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)

A-2

 

ANNEX B — Form of Surrender Certificate

     In connection with the certification contemplated by Section 12.6 relating to compliance with
certain restrictions relating to transfers of Restricted Securities, such certification shall be
provided substantially in the form of the following certificate, with only such changes thereto as
shall be approved by the Company and the Initial Purchasers.

CERTIFICATE

CONNETICS CORPORATION

2.00% CONVERTIBLE SENIOR NOTES DUE MARCH 30, 2015

     This is to certify that as of the date hereof with respect to U.S. $___principal amount of
the above-captioned securities surrendered on the date hereof (the “Surrendered Securities”) for
registration of transfer, or for conversion or repurchase where the securities issuable upon such
conversion or repurchase are to be registered in a name other than that of the undersigned Holder
(each such transaction being a “transfer”), the undersigned Holder (as defined in the Indenture)
certifies that the transfer of Surrendered Securities associated with such transfer complies with
the restrictive legend set forth on the face of the Surrendered Securities for the reason checked
below:

______   The transfer of the Surrendered Securities complies with Rule 144A under the Securities
Act; or

______   The transfer of the Surrendered Securities complies with Rule 144 under the United States
Securities Act of 1933, as amended (the “Securities Act”); or

______   The transfer of the Surrendered Securities has been made to an institution that is an
“accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities
Act in a transaction exempt from the registration requirements of the Securities Act and a signed
letter containing certain representations and agreements relating to restrictions on transfer of
the Securities has been delivered (and if such transfer is for an aggregate principal amount less
than $250 thousand an opinion of counsel acceptable to the Company if requested by the Company,
that such transfer is exempt from registration); or

______   The transfer of the Surrendered Securities has been made pursuant to an exemption from
registration under the Securities Act and an opinion of counsel has been delivered to the Company
with respect to such transfer.

[Name of Holder]

Dated: _______________

*To be dated the date of surrender

B-1exv4w2

 

Exhibit 4.2

Execution Copy

Connetics Corporation

2.00% Convertible Senior Notes due March 30, 2015

Registration Rights Agreement

March 23 , 2005

Goldman, Sachs & Co.,

CIBC World Markets Corp.,

Lazard Freres & Co. LLC,

Piper Jaffray & Co.,

Roth Capital Partners, LLC,

As representatives of the several Purchasers

      named in Schedule I to the Purchase Agreement,

c/o Goldman, Sachs & Co.,

85 Broad Street,

New York, New York 10004.

Ladies and Gentlemen:

     Connetics Corporation, a Delaware corporation (the “Company”), proposes to issue and sell to
the Purchasers (as defined herein) upon the terms set forth in the Purchase Agreement (as defined
herein) its 2.00% Convertible Senior Notes due March 30, 2015 (the “Securities”). As an inducement
to the Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchasers thereunder, the Company agrees with the Purchasers for the benefit of
Holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as
follows:

     1. Definitions.

     (a) Capitalized terms used herein without definition shall have the meanings ascribed to them
in the Purchase Agreement. As used in this Agreement, the following defined terms shall have the
following meanings:

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

     “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.

 

 

     “Closing Date” means the First Time of Delivery as defined in the Purchase Agreement.

     “Commission” means the United States Securities and Exchange Commission, or any other federal
agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant
statute for the particular purpose.

     “Common Stock” means the Company’s common stock, par value $0.001 per share, together with any
associated preferred share purchase rights.

     “DTC” means The Depository Trust Company.

     “Effective Date” has the meaning assigned thereto in Section 2(b)(i) hereof.

     “Effective Failure” has the meaning assigned thereto in Section 7(b) hereof.

     “Effectiveness Period” has the meaning assigned thereto in Section 2(b)(i) hereof.

     “Effective Time” means the time at which the Commission declares the Shelf Registration
Statement effective or at which the Shelf Registration Statement otherwise becomes effective.

     “Electing Holder” has the meaning assigned thereto in Section 3(a)(iii) hereof.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

     “Holder” means any person that is the record owner of Registrable Securities (and includes any
person that has a beneficial interest in any Registrable Security in book-entry form).

     “Indenture” means the Indenture, dated as of March 23, 2005, between the Company and J.P.
Morgan Trust Company, National Association, as amended and supplemented from time to time in
accordance with its terms.

     “Liquidated Damages” has the meaning assigned thereto in Section 7(a) hereof.

     “Managing Underwriters” means the investment banker or investment bankers and manager or
managers that shall administer an underwritten offering, if any, conducted pursuant to Section 6
hereof.

     “NASD Rules” means the Rules of the National Association of Securities Dealers, Inc., as
amended from time to time.

     “Notice and Questionnaire” means a Notice of Registration Statement and Selling Securityholder
Questionnaire substantially in the form of Appendix A hereto.

     The term “person” means an individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.

2

 

     “Prospectus” means the prospectus (including, without limitation, any preliminary prospectus,
any final prospectus and any prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon Rule 430A under
the Act) included in the Shelf Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the Registrable Securities
covered by the Shelf Registration Statement and by all other amendments and supplements to such
prospectus, including all documents incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the Exchange Act and incorporated by
reference therein.

     “Purchase Agreement” means the purchase agreement, dated as of March 17, 2005, between the
Purchasers and the Company relating to the Securities.

     “Purchasers” means the Purchasers named in Schedule I to the Purchase Agreement.

     “Registrable Securities” means all or any portion of the Securities issued from time to time
under the Indenture in registered form, the shares of Common Stock and Series C Preferred Stock
issuable upon conversion, repurchase or redemption of such Securities and the shares of Common
Stock issuable upon conversion of the Series C Preferred Stock; provided, however,
that a security ceases to be a Registrable Security when it is no longer a Restricted Security;
provided further, however, that if the Company’s ability to issue shares of Series
C Preferred Stock in lieu of shares of Common Stock is eliminated prior to the filing of a Shelf
Registration Statement pursuant to Section 2 hereof, then it is understood that the term
Registrable Securities shall no longer include any of the Series C Preferred Stock.

     “Registration Default” has the meaning assigned thereto in Section 7(a) hereof.

     “Restricted Security” means any Security, any share of Common Stock or Series C Preferred
Stock issuable upon conversion of a Security or any share of Common Stock issuable upon conversion
of Series C Preferred Stock except any such Security or share of Common Stock or Series C Preferred
Stock that (i) has been effectively sold pursuant to the Shelf Registration Statement, (ii) has
been transferred in compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision
thereto), or (iii) has otherwise been transferred and a new Security or share of Common Stock or
Series C Preferred Stock not subject to transfer restrictions under the Securities Act has been
delivered by or on behalf of the Company in accordance with the Indenture.

     “Rules and Regulations” means the published rules and regulations of the Commission
promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time.

     “Security Holder” means any person that is the record owner of Securities (and includes any
person that has a beneficial interest in any Security in book-entry form).

3

 

     “Series C Preferred Stock” means shares of the Company’s Series C Preferred Stock, par value
$0.001 per share, which the Company may issue in lieu of shares of Common Stock upon conversion of
the Securities under certain circumstances pursuant to the Indenture.

     “Shelf Registration” means a registration effected pursuant to Section 2 hereof.

     “Shelf Registration Statement” means a “shelf” registration statement filed under the
Securities Act providing for the registration of, and the sale on a continuous or delayed basis by
the Holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act
and/or any similar rule that may be adopted by the Commission, filed by the Company pursuant to the
provisions of Section 2 of this Agreement, including the Prospectus contained therein, any
amendments and supplements to such registration statement, including post-effective amendments, and
all exhibits and all material incorporated by reference in such registration statement.

     “Trust Indenture Act” means the Trust Indenture Act of 1939, or any successor thereto, and the
rules, regulations and forms promulgated thereunder, as the same shall be amended from time to
time.

     The term “underwriter” means any underwriter of Registrable Securities in connection with an
offering thereof under a Shelf Registration Statement.

     (b) Wherever there is a reference in this Agreement to a percentage of the “principal amount”
of Registrable Securities or to a percentage of Registrable Securities, Common Stock or Series C
Preferred Stock shall be treated as representing the principal amount of Securities that was
surrendered for conversion or exchange in order to receive such number of shares of Common Stock or
Series C Preferred Stock.

     2. Shelf Registration.

     (a) The Company shall, no later than 90 calendar days following the Closing Date, use its best
efforts to file with the Commission a Shelf Registration Statement relating to the offer and sale
of the Registrable Securities by the Holders from time to time in accordance with the methods of
distribution elected by such Holders and set forth in such Shelf Registration Statement and,
thereafter, shall use its commercially reasonable best efforts to cause such Shelf Registration
Statement to be declared effective under the Act no later than 180 calendar days following the
Closing Date; provided, however, that the Company may, upon written notice to all
Holders, postpone having the Shelf Registration Statement declared effective for a reasonable
period not to exceed 90 days if the Company possesses material non-public information, the
disclosure of which would have a material adverse effect on the Company and its subsidiaries taken
as a whole; provided, further, however, that no Holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the Prospectus forming a part thereof
for resales of Registrable Securities unless such Holder is an Electing Holder.

     (b) The Company shall use its reasonable best efforts:

4

 

     (i) to keep the Shelf Registration Statement continuously effective in order to permit
the Prospectus forming a part thereof to be usable by Holders until the earliest of (1) the
earliest date upon which no Registrable Securities are outstanding; (2) the expiration of
the period referred to in Rule 144(k) under the Act with respect to all Registrable
Securities held by Persons that are not Affiliates of the Company; and (3) two years from
the date (the “Effective Date”) such Shelf Registration Statement is declared effective
(such period being referred to herein as the “Effectiveness Period”);

     (ii) after the Effective Time of the Shelf Registration Statement, promptly upon the
request of any Holder of Registrable Securities that is not then an Electing Holder, to take
any action reasonably required to provide a Notice and Questionnaire to such Holder and,
upon receipt by the Company of a duly completed and executed Notice and Questionnaire, to
consider such Holder an Electing Holder (within the meaning of this Agreement); and

     (iii) if at any time the Securities, pursuant to the Indenture, are convertible into
securities other than Common Stock or Series C Preferred Stock, to cause, or to cause any
successor under the Indenture to cause, such securities to be included in the Shelf
Registration Statement no later than the date on which the Securities may then be
convertible into such securities.

The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if the Company voluntarily takes any
action that would result in Holders of Registrable Securities covered thereby not being able to
offer and sell any of such Registrable Securities during that period, unless such action is (A)
required by applicable law and the Company thereafter promptly complies with the requirements of
paragraph 3(j) below or (B) permitted pursuant to Section 2(c) below.

     (c) The Company may suspend the use of the Prospectus for a period not to exceed 30 days in
any 90-day period or an aggregate of 90 days in any 12-month period if the Board of Directors of
the Company shall have determined in good faith that because of valid business reasons (not
including avoidance of the Company’s obligations hereunder), including the acquisition or
divestiture of assets, pending corporate developments and similar events, it is in the best
interests of the Company to suspend such use, and prior to suspending such use the Company provides
the Electing Holders with written notice of such suspension, which notice need not specify the
nature of the event giving rise to such suspension.

     3. Registration Procedures. In connection with the Shelf Registration Statement, until the
termination of the Effectiveness Period, the following provisions shall apply:

     (a) (i) Not less than 30 calendar days prior to the Effective Time of the Shelf Registration
Statement, the Company shall mail the Notice and Questionnaire to the Holders of Registrable
Securities. A Holder shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement as of the Effective Time if, and only if, such Holder has returned a
completed and signed Notice and Questionnaire to the Company by the deadline for response set forth
therein; provided, however, Holders of Registrable Securities shall have at least 28

5

 

calendar days from the date on which the Notice and Questionnaire is first mailed to such Holders to return a
completed and signed Notice and Questionnaire to the Company.

     (ii) After the Effective Time of the Shelf Registration Statement, the Company shall,
upon the request of any Holder of Registrable Securities that is not then an Electing
Holder, promptly send a Notice and Questionnaire to such Holder. Following receipt of a
completed and signed Notice and Questionnaire after the Effective Time of the Shelf
Registration Statement, the Company shall promptly take any action necessary to name such
Holder as a selling securityholder in the Shelf Registration Statement (including, to the
extent permitted by law, filing with the Commission a supplement to the Prospectus that
names such Holder as a selling securityholder).

     (iii) The term “Electing Holder” shall mean any Holder of Registrable Securities that
has returned a completed and signed Notice and Questionnaire to the Company in accordance
with Section 3(a)(i) or 3(a)(ii) hereof.

     (b) The Company shall furnish to each Electing Holder upon request, prior to the Effective
Time, a copy of the Shelf Registration Statement initially filed with the Commission, and shall
furnish to Electing Holders upon request copies of each amendment thereto and each amendment or
supplement, if any, to the Prospectus included therein, and shall use its reasonable best efforts
to reflect in each such document, at the Effective Time or when so filed with the Commission, as
the case may be, such comments as such Holders and their respective counsel reasonably may propose.

     (c) The Company shall promptly take such action as may be necessary so that (i) each of the
Shelf Registration Statement and any amendment thereto and the Prospectus forming a part thereof
and any amendment or supplement thereto (and each report or other document incorporated therein by
reference in each case) complies in all material respects with the Securities Act and the Exchange
Act and the respective rules and regulations thereunder, (ii) each of the Shelf Registration
Statement and any amendment thereto does not, when it becomes effective, 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 (iii) subject to Section 2(c) hereof,
each of the Prospectus forming a part of the Shelf Registration Statement, and any amendment or
supplement to such Prospectus, does not at any time during the Effectiveness Period include an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading.

     (d) The Company shall promptly advise each Electing Holder, and shall confirm such advice in
writing if so requested by any such Electing Holder:

     (i) when a Shelf Registration Statement and any amendment thereto has been filed with
the Commission and when a Shelf Registration Statement or any post-effective amendment
thereto has become effective, in each case making a public announcement thereof by release
made to Reuters Economic Services and Bloomberg Business News;

6

 

     (ii) of any request by the Commission for amendments or supplements to the Shelf
Registration Statement or the Prospectus included therein or for additional information;

     (iii) of the issuance by the Commission of any stop order suspending the effectiveness
of the Shelf Registration Statement or the initiation of any proceedings for such purpose;

     (iv) of the receipt by the Company of any notification with respect to the suspension
of the qualification of the securities included in the Shelf Registration Statement for sale
in any jurisdiction or the initiation of any proceeding for such purpose; and

     (v) of the happening of any event or the existence of any state of facts that requires
the making of any changes in the Shelf Registration Statement or the Prospectus included
therein so that, as of such date, such Shelf Registration Statement and Prospectus do not
contain an untrue statement of a material fact and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to such Holders to suspend the use of
the Prospectus until the requisite changes have been made).

     (e) The Company shall use its reasonable best efforts to prevent the issuance, and if issued
to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness
of the Shelf Registration Statement.

     (f) The Company shall furnish to each Electing Holder upon request, without charge, at least
one copy of the Shelf Registration Statement and all post-effective amendments thereto, including
financial statements and schedules, and, if such Electing Holder so requests in writing, all
reports, other documents and exhibits that are filed with or incorporated by reference in the Shelf
Registration Statement as of the date of the request.

     (g) The Company shall, during the Effectiveness Period, deliver to each Electing Holder,
without charge, as many copies of the Prospectus (including each preliminary Prospectus) included
in the Shelf Registration Statement and any amendment or supplement thereto as such Electing Holder
may reasonably request; and the Company consents (except during the periods specified in Section
2(c) above or during the continuance of any event described in Section 3(d)(v) above) to the use of the Prospectus and any amendment or supplement
thereto by each of the Electing Holders in connection with the offering and sale of the Registrable
Securities covered by the Prospectus and any amendment or supplement thereto during the
Effectiveness Period.

     (h) Prior to any offering of Registrable Securities pursuant to the Shelf Registration
Statement, the Company shall (i) register or qualify or cooperate with the Electing Holders and
their respective counsel in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within

7

 

the United States as any Electing Holder may reasonably request, (ii) keep such registrations or
qualifications in effect and comply with such laws so as to permit the continuance of offers and
sales in such jurisdictions for so long as may be necessary to enable any Electing Holder or
underwriter, if any, to complete its distribution of Registrable Securities pursuant to the Shelf
Registration Statement, and (iii) take any and all other actions necessary or advisable to enable
the disposition in such jurisdictions of such Registrable Securities; provided, however, that in
no event shall the Company be obligated to (A) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to so qualify but for this
Section 3(h) or (B) file any general consent to service of process in any jurisdiction where it is
not as of the date hereof so subject.

     (i) Unless any Registrable Securities shall be in book-entry only form, the Company shall
cooperate with the Electing Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to the Shelf Registration
Statement, which certificates, if so required by any securities exchange upon which any Registrable
Securities are listed, shall be penned, lithographed or engraved, or produced by any combination of
such methods, on steel engraved borders, and which certificates shall be free of any restrictive
legends and in such permitted denominations and registered in such names as Electing Holders may
request in connection with the sale of Registrable Securities pursuant to the Shelf Registration
Statement.

     (j) Upon the occurrence of any fact or event contemplated by paragraph 3(d)(v) above, the
Company shall promptly, but in no event more than 5 days, prepare a post-effective amendment to any
Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter delivered to purchasers of the Registrable
Securities included therein, the Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If the Company notifies the Electing
Holders of the occurrence of any fact or event contemplated by paragraph 3(d)(v) above, the
Electing Holder shall suspend the use of the Prospectus until the requisite changes to the
Prospectus have been made.

     (k) Not later than the Effective Time of the Shelf Registration Statement, the Company shall
make available a CUSIP number for the Registrable Securities that are debt securities.

     (l) The Company shall use its reasonable best efforts to comply with all applicable Rules and
Regulations, and to make generally available to its securityholders as soon as practicable, but in
any event not later than eighteen months after (i) the effective date (as defined in Rule 158(c)
under the Securities Act) of the Shelf Registration Statement, (ii) the effective date of each
post-effective amendment to the Shelf Registration Statement, and (iii) the date of each filing by
the Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference
in the Shelf Registration Statement, an earning statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158).

8

 

     (m) Not later than the Effective Time of the Shelf Registration Statement, the Company shall
cause the Indenture to be qualified under the Trust Indenture Act; in connection with such
qualification, the Company shall cooperate with the Trustee under the Indenture and the Holders (as
defined in the Indenture) 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 Trust Indenture Act; and the
Company shall execute, and shall use all reasonable efforts to cause the Trustee 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. In
the event that any such amendment or modification referred to in this Section 3(m) involves the
appointment of a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.

     (n) In the event of an underwritten offering conducted pursuant to Section 6 hereof, the
Company shall, if requested, promptly include or incorporate in a Prospectus supplement or
post-effective amendment to the Shelf Registration Statement such information as the Managing
Underwriters reasonably agree should be included therein and to which the Company does not
reasonably object and shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the matters to be included
or incorporated in such Prospectus supplement or post-effective amendment.

     (o) The Company shall enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering conducted pursuant to Section
6 hereof) and take all other appropriate action in order to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain indemnification provisions and
procedures substantially identical to those set forth in Section 5 hereof with respect to all
parties to be indemnified pursuant to Section 5 hereof.

     (p) The Company shall:

     (i)(A)
make reasonably available for inspection by the Electing Holders, any
underwriter participating in any disposition pursuant to the Shelf Registration Statement,
and any attorney, accountant or other agent retained by such Electing Holders or any
such underwriter all relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and (B) cause the Company’s officers,
directors and employees to supply all information reasonably requested by such Electing
Holders or any such underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as is customary for similar due diligence
examinations; provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential shall be kept
confidential by such Electing Holders and any such underwriter, attorney, accountant or
agent, unless such disclosure is made in connection with a court proceeding or required by
law, or such records, information or documents become available to the public generally or
through a third party without an accompanying obligation of confidentiality; and provided
further that, if the foregoing inspection and

9

 

information gathering would otherwise disrupt the Company’s conduct of its business, such inspection and information gathering shall, to
the greatest extent possible, be coordinated on behalf of the Electing Holders and the other
parties entitled thereto by one counsel designated by and on behalf of the Electing Holders
and other parties;

     (ii) in connection with any underwritten offering conducted pursuant to Section 6
hereof, make such representations and warranties to the Electing Holders participating in
such underwritten offering and to the Managing Underwriters, in form, substance and scope as
are customarily made by issuers to underwriters in primary underwritten offerings of equity
and convertible debt securities and covering matters including, but not limited to, those
set forth in the Purchase Agreement;

     (iii) in connection with any underwritten offering conducted pursuant to Section 6
hereof, obtain opinions of counsel to the Company (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the Managing Underwriters)
addressed to each Electing Holder participating in such underwritten offering and the
underwriters, covering such matters as are customarily covered in opinions requested in
primary underwritten offerings of equity and convertible debt securities and such other
matters as may be reasonably requested by such Electing Holders and underwriters (it being
agreed that the matters to be covered by such opinions shall include, without limitation, as
of the date of the opinion and as of the Effective Time of the Shelf Registration Statement
or most recent post-effective amendment thereto, as the case may be, the absence from the
Shelf Registration Statement and the Prospectus, including the documents incorporated by
reference therein, of an untrue statement of a material fact or the omission of a material
fact required to be stated therein or necessary to make the statements therein not
misleading);

     (iv) in connection with any underwritten offering conducted pursuant to Section 6
hereof, obtain “cold comfort” letters and updates thereof from the independent auditors of
the Company (and, if necessary, from the independent auditors of any subsidiary of the
Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be, included in the
Shelf Registration Statement), addressed to each Electing Holder participating in such
underwritten offering (if such Electing Holder has provided such letter, representations or
documentation, if any, required for such cold comfort letter to be so addressed) and the
underwriters, in customary form and covering matters of the type customarily covered in
“cold comfort” letters in connection with primary underwritten offerings;

     (v) in connection with any underwritten offering conducted pursuant to Section 6
hereof, deliver such documents and certificates as may be reasonably requested by any
Electing Holders participating in such underwritten offering and the Managing Underwriters,
if any, including, without limitation, certificates to evidence compliance with Section 3(j)
hereof and with any conditions contained in the underwriting agreement or other agreements
entered into by the Company.

10

 

     (q) The Company will use its reasonable best efforts to cause the Common Stock issuable
upon conversion of the Securities to be listed for quotation on the Nasdaq National Market System
or other stock exchange or trading system on which the Common Stock primarily trades on or prior to
the Effective Time of the Shelf Registration Statement hereunder.

     (r) In the event that any broker-dealer registered under the Exchange Act shall be an
“affiliate” (as defined in Rule 2720(b)(1) of the NASD Rules (or any successor provision thereto))
of the Company or has a “conflict of interest” (as defined in Rule 2720(b)(7) of the NASD Rules (or
any successor provision thereto)) and such broker-dealer shall underwrite, participate as a member
of an underwriting syndicate or selling group or assist in the distribution of any Registrable
Securities covered by the Shelf Registration Statement, whether as a Holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying with the
requirements of the NASD Rules, including, without limitation, by (A) engaging a “qualified
independent underwriter” (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor
provision thereto)) to participate in the preparation of the registration statement relating to
such Registrable Securities, to exercise usual standards of due diligence in respect thereto and to
recommend the public offering price of such Registrable Securities, (B) indemnifying such qualified
independent underwriter to the extent of the indemnification of underwriters provided in Section 5
hereof, and (C) providing such information to such broker-dealer as may be required in order for
such broker-dealer to comply with the requirements of the NASD Rules.

     (s) The Company shall use its reasonable best efforts to take all other steps necessary to
effect the registration, offering and sale of the Registrable Securities covered by the Shelf
Registration Statement contemplated hereby.

     4. Registration Expenses. Except as otherwise provided in Section 3, the Company shall bear
all fees and expenses incurred by it in connection with its performance of its obligations under
Sections 2, 3 and 6 hereof and shall bear or reimburse the Electing Holders for the reasonable fees
and disbursements of a single counsel selected by a plurality of all Electing Holders who own an
aggregate of not less than 25% of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefor in connection therewith. Each Electing Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Electing Holder’s Registrable Securities pursuant to the Shelf Registration
Statement.

     5. Indemnification and Contribution.

     (a) Indemnification by the Company. Upon the registration of the Registrable Securities
pursuant to Section 2 hereof, the Company shall indemnify and hold harmless each Electing Holder
and each underwriter, dealer or selling agent, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and each person who
controls such Electing Holder, underwriter, dealer or selling agent within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes
referred to as an “Indemnified Person”) against any losses, claims,
damages or liabilities, joint or several, to which such Indemnified Person may become subject

11

 

under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Shelf Registration Statement under which such Registrable
Securities are to be registered under the Securities Act, or any Prospectus contained therein or
furnished by the Company to any Indemnified Person, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, and the
Company hereby agrees to reimburse such Indemnified Person for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any such action or claim as
such expenses are incurred; provided, however, that the Company shall not be liable to any such
Indemnified Person in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Shelf Registration Statement or Prospectus, or amendment or
supplement, in reliance upon and in conformity with written information furnished to the Company by
such Indemnified Person expressly for use therein; and provided, further, that with respect to any
untrue statement or alleged statement in or omission or alleged omission from the preliminary
prospectus, the indemnity agreement contained in this Section 5(a) shall not inure to the benefit
of any such Indemnified Person to the extent that the sale to the person asserting any such loss,
claim, damage or liability was a sale by such Indemnified Person and any such loss, claim, damage
or liability of or with respect to such Indemnified Person results from the fact that both (i) a
copy of the final Prospectus, as amended or supplemented, was not sent or given to such person at
or prior to the written confirmation of the sale of such Registrable Securities to such person
(provided that the Company has previously furnished a copy of such final Prospectus, as amended or
supplemented, to such Indemnified Person) and (ii) the untrue statement or alleged untrue statement
in or omission or alleged omission from the preliminary prospectus was corrected in the final
Prospectus, as amended or supplemented.

     (b) Indemnification by the Electing Holders and any Agents and Underwriters. Each Electing
Holder agrees, as a consequence of the inclusion of any of such Electing Holder’s Registrable
Securities in such Shelf Registration Statement, and each underwriter, dealer or selling agent, if
any, which facilitates the disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not jointly, to (i)
indemnify and hold harmless the Company, its directors, officers who sign any Shelf Registration
Statement and each person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Company or such other persons may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in such Shelf Registration Statement or Prospectus, or any amendment or
supplement, or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information furnished to the
Company by such Electing Holder, underwriter, dealer or selling agent expressly for use therein,
and (ii)

12

 

reimburse the Company for any legal or other expenses reasonably incurred by the Company
in connection with investigating or defending any such action or claim as such expenses are
incurred.

     (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under this Section 5, notify
such indemnifying party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to any indemnified
party otherwise than under the indemnification provisions of or contemplated by subsection (a) or
(b) above. In case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled
to participate therein and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and, after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, such indemnifying party shall not be liable to such
indemnified party under this Section 5 for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or claim in respect of
which indemnification or contribution may be sought hereunder (whether or not the indemnified party
is an actual or potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all liability arising
out of such action or claim and (ii) 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.

     (d) Contribution. If the indemnification provided for in this Section 5 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of
any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and indemnified party
shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata
allocation (even if the Electing Holders or any underwriters, dealers or selling agents or all of
them were treated as one entity for such purpose) or by any other method of allocation which does
not take account

13

 

of the equitable considerations referred to in this Section 5(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with investigating or
defending any such action or claim. 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 obligations of the Electing Holders
and any underwriters, dealers or selling agents in this Section 5(d) to contribute shall be several
in proportion to the percentage of principal amount of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.

     (e) Notwithstanding any other provision of this Section 5, in no event will any (i) Electing
Holder be required to undertake liability to any person under this Section 5 for any amounts in
excess of the dollar amount of the proceeds to be received by such Holder from the sale of such
Holder’s Registrable Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Shelf Registration Statement under which such Registrable Securities are
to be registered under the Securities Act and (ii) underwriter, dealer or selling agent be required
to undertake liability to any person hereunder for any amounts in excess of the discount,
commission or other compensation payable to such underwriter, dealer or selling agent with respect
to the Registrable Securities underwritten by it and distributed to the public.

     (f) The obligations of the Company under this Section 5 shall be in addition to any liability
which the Company may otherwise have to any Indemnified Person and the obligations of any
Indemnified Person under this Section 5 shall be in addition to any liability which such
Indemnified Person may otherwise have to the Company. The remedies provided in this Section 5 are
not exclusive and shall not limit any rights or remedies which may otherwise be available to an
indemnified party at law or in equity.

     6. Underwritten Offering. Any Holder of Registrable Securities who desires to do so may sell
Registrable Securities (in whole or in part) in an underwritten offering; provided that (i) the
Electing Holders of at least 33-1/3% in aggregate principal amount of the Registrable Securities
then covered by the Shelf Registration Statement shall request such an offering and (ii) at least
such aggregate principal amount of such Registrable Securities shall be included in such offering;
and provided further that the Company shall not be obligated to cooperate with more than one
underwritten offering during the Effectiveness Period. Upon receipt of such a request, the Company
shall provide all Holders of Registrable Securities written notice of the request, which notice
shall inform such Holders that they have the opportunity to participate in the offering. In any
such underwritten offering, the investment banker or bankers and manager or managers that will
administer the offering will be selected by, and the underwriting arrangements with respect thereto
(including the size of the offering) will be approved by, the holders of a majority of the
Registrable Securities to be included in such offering; provided,
however, that such investment bankers and managers and underwriting arrangements must be reasonably
satisfactory to the Company. No Holder may participate in any underwritten offering contemplated
hereby unless (a) such Holder agrees to sell such Holder’s Registrable Securities to be included in
the underwritten offering in accordance with any approved underwriting

14

 

arrangements, (b) such
Holder completes and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the terms of such
approved underwriting arrangements, and (c) if such Holder is not then an Electing Holder, such
Holder returns a completed and signed Notice and Questionnaire to the Company in accordance with
Section 3(a)(ii) hereof within a reasonable amount of time before such underwritten offering. The
Holders participating in any underwritten offering shall be responsible for any underwriting
discounts and commissions and fees and, subject to Section 4 hereof, expenses of their own counsel.
The Company shall pay all expenses customarily borne by issuers in an underwritten offering,
including but not limited to filing fees, the fees and disbursements of its counsel and independent
public accountants and any printing expenses incurred in connection with such underwritten
offering. Notwithstanding the foregoing or the provisions of Section 3(n) hereof, upon receipt of
a request from the Managing Underwriter or a representative of holders of a majority of the
Registrable Securities to be included in an underwritten offering to prepare and file an amendment
or supplement to the Shelf Registration Statement and Prospectus in connection with an underwritten
offering, the Company may delay the filing of any such amendment or supplement for up to 90 days if
the Board of Directors of the Company shall have determined in good faith that the Company has a
bona fide business reason for such delay.

     7. Liquidated Damages.

     (a) Pursuant to Section 2(a) hereof, the Company may, upon written notice to all the Holders,
postpone having the Shelf Registration Statement declared effective for a reasonable period not to
exceed 90 days if the Company possesses material non-public information, the disclosure of which
would have a material adverse effect on the Company and its subsidiaries taken as a whole.
Notwithstanding any such postponement, if (i) on or prior to the 90th day following the Closing
Date, a Shelf Registration Statement has not been filed with the Commission or (ii) on or prior to
the 180th day following the Closing Date, such Shelf Registration Statement is not declared
effective by the Commission (each, a “Registration Default”), the Company shall be required to pay
to Security Holders liquidated damages (“Liquidated Damages”), from and including the day following
such Registration Default until such Shelf Registration Statement is either so filed or so filed
and subsequently declared effective, as applicable, at a rate per annum equal to an additional
one-quarter of one percent (0.25%) of the principal amount of the outstanding Securities, to and
including the 90th day following such Registration Default and one-half of one percent (0.50%)
thereof from and after the 91st day following such Registration Default.

     (b) In the event that the Shelf Registration Statement ceases to be effective (or the Security
Holders are otherwise prevented or restricted by the Company from effecting sales pursuant thereto)
(an “Effective Failure”) for more than 30 days, whether or not consecutive, in any 90-day period,
or for more than 90 days, whether or not consecutive, during any 12-month
period, then the Company shall pay Liquidated Damages at a rate per annum equal to an additional
one-half of one percent (0.5%) of the principal amount of Registrable Securities from the 31st day
upon which an Effective Failure occurs in any 90-day period or the 91st day upon which an Effective
Failure occurs in any 12-month period, as the case may be, until the earlier of (i) the time the
Shelf Registration Statement again becomes effective or the Security Holders

15

 

are again able to make
sales under the Shelf Registration Statement or (ii) the time the Effectiveness Period expires. For
the purpose of determining an Effective Failure, days on which the Company has been obligated to
pay Liquidated Damages in accordance with the foregoing in respect of a prior Effective Failure
within the applicable 90-day or 12-month period, as the case may be, shall not be included.

     (c) In the event the Company fails to file a post-effective amendment to the Shelf
Registration Statement, or the post-effective amendment is not declared effective, within the
periods required by Section 3, the Company shall pay Liquidated Damages at a rate per annum equal
to an additional one-half of one percent (0.5%) of the principal amount of Securities from and
including the date of such Registration Default until such time as such Registration Default is
cured.

     (d) Any amounts to be paid as Liquidated Damages pursuant to paragraphs (a), (b) or (c) of
this Section 7 shall be paid semi-annually in arrears, with the first semi-annual payment due on
the first Interest Payment Date (as defined in the Indenture), as applicable, following (i) in the
case of said paragraphs (a) and (c), the date of such Registration Default or (ii) in the case of
said paragraph (b), the 31st day upon which an Effective Failure occurs in any 90-day period or the
91st day upon which an Effective Failure occurs in any 12-month period, as the case may be. Such
Liquidated Damages will accrue in respect of the Securities at the rates set forth in paragraphs
(a), (b) or (c) of this Section 7, as applicable, on the principal amount of the Securities.

     (e) Except as provided in Section 8(b) hereof, the Liquidated Damages as set forth in this
Section 7 shall be the exclusive monetary remedy available to the Security Holders for such
Registration Default or Effective Failure. In no event shall the Company be required to pay
Liquidated Damages in excess of the applicable maximum amount of one-half of one percent (0.50%)
set forth above, regardless of whether one or multiple Registration Defaults exist.

     8. Miscellaneous.

     (a) Other Registration Rights. The Company may grant registration rights that would permit
any person that is a third party the right to piggy-back on any Shelf Registration Statement,
provided that if the Managing Underwriter of any underwritten offering conducted pursuant to
Section 6 hereof notifies the Company and the Electing Holders that the total amount of securities
which the Electing Holders and the holders of such piggy-back rights intend to include in any Shelf
Registration Statement is so large as to materially threaten the success of such offering
(including the price at which such securities can be sold), then the amount, number or kind of
securities to be offered for the account of holders of such piggy-back rights will be reduced to
the extent necessary to reduce the total amount of
securities to be included in such offering to the amount, number and kind recommended by the
Managing Underwriter prior to any reduction in the amount of Registrable Securities to be included
in such Shelf Registration Statement.

     (b) Specific Performance. The parties hereto acknowledge that there would be no adequate
remedy at law if the Company fails to perform any of its obligations hereunder and that the
Purchasers and the Holders from time to time may be irreparably harmed by any such

16

 

failure, and
accordingly agree that the Purchasers and such Holders, in addition to any other remedy to which
they may be entitled at law or in equity and without limiting the remedies available to the
Electing Holders under Section 7 hereof, shall be entitled to compel specific performance of the
obligations of the Company under this Registration Rights Agreement in accordance with the terms
and conditions of this Registration Rights Agreement, in any court of the United States or any
State thereof having jurisdiction.

     (c) Amendments and Waivers. This Agreement, including this Section 8(c), may be amended, and
waivers or consents to departures from the provisions hereof may be given, only by a written
instrument duly executed by the Company and the holders of a majority in aggregate principal amount
of Registrable Securities then outstanding. Each Holder of Registrable Securities outstanding at
the time of any such amendment, waiver or consent or thereafter shall be bound by any amendment,
waiver or consent effected pursuant to this Section 8(c), whether or not any notice, writing or
marking indicating such amendment, waiver or consent appears on the Registrable Securities or is
delivered to such Holder.

     (d) Notices. All notices and other communications provided for or permitted hereunder shall
be given as provided in the Indenture.

     (e) Parties in Interest. The parties to this Agreement intend that all Holders of Registrable
Securities shall be entitled to receive the benefits of this Agreement and that any Electing Holder
shall be bound by the terms and provisions of this Agreement by reason of such election with
respect to the Registrable Securities which are included in a Shelf Registration Statement. All
the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and
shall be enforceable by the respective successors and assigns of the parties hereto and any Holder
from time to time of the Registrable Securities to the aforesaid extent. In the event that any
transferee of any Holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall,
without any further writing or action of any kind, be entitled to receive the benefits of and, if
an Electing Holder, be conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement to the aforesaid extent.

     (f) 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.

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

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

     (i) Severability. In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any way impaired or

17

 

affected
thereby, it being intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.

     (j) Survival. The respective indemnities, agreements, representations, warranties and other
provisions set forth in this Agreement or made pursuant hereto shall remain in full force and
effect, regardless of any investigation (or any statement as to the results thereof) made by or on
behalf of any Electing Holder, any director, officer or partner of such Holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or any controlling
person of any of the foregoing, and shall survive the transfer and registration of the Registrable
Securities of such Holder.

[Signature Page Follows]

18

 

     Please confirm that the foregoing correctly sets forth the agreement between the Company and
you.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	Connetics Corporation
	 
	 	 	 	 
	

	 	By:	 	/s/ John L. Higgins
	

	 	 	 	 
	

	 	 	 	Name: John L. Higgins
	

	 	 	 	Title: CFO
	 
	 	 	 	 
	Accepted as of the date hereof:
	 	 	 	 
	 
	 	 	 	 
	Goldman, Sachs & Co.
	 	 	 	 
	CIBC World Markets Corp.
	 	 	 	 
	Lazard Freres & Co. LLC
	 	 	 	 
	Piper Jaffray & Co.
	 	 	 	 
	Roth Capital Partners, LLC
	 	 	 	 

	 	 	 	 	 	 	 
	By:
	 	/s/ Goldman, Sachs & Co.	 	 	 	 
	 	 	 	 	 
	

	 	 	 	(Goldman, Sachs & Co.)	 	 
	 
	 	 	 	 	 	 
	 	 	On behalf of each of the Purchasers.	 	 

[Signature page to Registration Rights Agreement, dated March 23, 2005

19

 

Appendix A

Connetics Corporation

INSTRUCTION TO DTC PARTICIPANTS

(Date of Mailing)

URGENT - IMMEDIATE ATTENTION REQUESTED

DEADLINE FOR RESPONSE:                

     The Depository Trust Company (“DTC”) has identified you as a DTC Participant through which
beneficial interests in the Connetics Corporation (the “Company”) 2.00% Convertible Senior Notes
due March 30, 2015 (the “Securities”) are held.

     The Company is in the process of registering the Securities under the Securities Act of 1933
for resale by the beneficial owners thereof. In order to have their Securities included in the
registration statement, beneficial owners must complete and return the enclosed Notice of
Registration Statement and Selling Securityholder Questionnaire.

     It is important that beneficial owners of the Securities receive a copy of the enclosed
materials as soon as possible as their rights to have the Securities included in the
registration statement depend upon their returning the Notice and Questionnaire by
                                        . Please forward a copy of the enclosed documents to each beneficial owner
that holds interests in the Securities through you. If you require more copies of the enclosed
materials or have any questions pertaining to this matter, please contact Connetics Corporation,
3160 Porter Drive, Palo Alto, California 94304, (650) 843-2800, attention: Corporate Secretary.

 

 

Connetics Corporation

Notice of Registration Statement

and

Selling Securityholder Questionnaire

[Date]

          Connetics Corporation (the “Company”) has filed with the United States Securities and Exchange
Commission (the “Commission”) a registration statement on Form S-3 (the “Shelf Registration
Statement”) for the registration and resale under Rule 415 of the United States Securities Act of
1933, as amended (the “Securities Act”), of the Company’s 2.00% Senior Convertible Notes due March
30 , 2015 (the “Securities”) and the shares of common stock, par value $0.001 per share
(the “Common Stock”), and Series C Preferred Stock, par value $0.001 per share (the “Series C
Preferred Stock”), issuable upon conversion thereof, in accordance with the Registration Rights
Agreement, dated as of the date of original issuance of the Securities (the “Registration Rights
Agreement”), between the Company and the purchasers named therein. A copy of the Registration
Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Registration Rights Agreement.

          In order to have Registrable Securities included in the Shelf Registration Statement (or a
supplement or amendment thereto), this Notice of Registration Statement and Selling Securityholder
Questionnaire (“Notice and Questionnaire”) must be completed, executed and delivered to the Company
at the address set forth herein for receipt ON OR BEFORE                .
Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and
Questionnaire by such date (i) will not be named as selling securityholders in the Shelf
Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of
Registrable Securities.

          Certain legal consequences arise from being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.

A-2

 

          The term “Registrable Securities” is defined in the Registration Rights Agreement to
mean all or any portion of the Securities issued from time to time under the Indenture in
registered form, the shares of Common Stock and Series C Preferred Stock issuable upon conversion
of such Securities and the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock; provided, however, that a security ceases to be a Registrable
Security when it is no longer a Restricted Security.

          The term “Restricted Security” is defined in the Registration Rights Agreement to mean
any Security, any share of Common Stock or Series C Preferred Stock issuable upon conversion of a
Security or any share of Common Stock issuable upon conversion of Series C Preferred Stock except
any such Security or share of Common Stock or Series C Preferred Stock which (i) has been
effectively registered under the Securities Act and sold in a manner contemplated by the Shelf
Registration Statement, (ii) has been transferred in compliance with Rule 144 under the Securities
Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule
144 (or any successor provision thereto), or (iii) has otherwise been transferred and a new
Security or share of Common Stock or Series C Preferred Stock not subject to transfer restrictions
under the Securities Act has been delivered by or on behalf of the Company in accordance with the
Indenture.

ELECTION

          The undersigned holder (the “Selling Securityholder”) of Registrable Securities hereby elects
to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it
and listed below in Item (3). The undersigned, by signing and returning this Notice and
Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Registration Rights Agreement, including,
without limitation, Section 5 of the Registration Rights Agreement, as if the undersigned Selling
Securityholder were an original party thereto.

          Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the
Selling Securityholder will be required to deliver to the Company and the Trustee the Notice of
Transfer (completed and signed) set forth in Exhibit 1 to this Notice and Questionnaire.

          The Selling Securityholder hereby provides the following information to the Company and
represents and warrants that such information is accurate and complete:

A-3

 

QUESTIONNAIRE

	 	 	 	 	 	 	 	 	 
	(1)	 	(a)	 	Full Legal Name of Selling Securityholder:

	 	 	 	 	 
	 	 	(b)	 	Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable
Securities Listed in Item (3) Below:

	 	 	 	 	 
	 	 	(c)	 	Full Legal Name of DTC Participant (if applicable and if not the same as (b) above)
Through Which Registrable Securities Listed in Item (3) Below are Held:

	 	 	 	 	 
	 
	(2)	 	 	 	Address for Notices to Selling Securityholder:
	

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	

	 	 	 	Telephone:	 	 	 	 
	

	 	 	 	Fax:	 	 	 	 
	

	 	 	 	Contact Person:
	 	 	 	 
	 
	(3)	 	 	 	Beneficial Ownership of Securities:
	 
	 	 	 	 	Except as set forth below in this Item (3), the undersigned Selling Securityholder does
not beneficially own any Securities, any shares of Common Stock or Series A Preferred
Stock issued upon conversion, repurchase or redemption of any Securities or any
shares of Common Stock issued upon conversion of any shares of Series C Preferred
Stock.
	 
	 	 	(a)	 	Principal amount of Registrable Securities (as defined in the Registration Rights
Agreement) beneficially

 owned:
	 	 	 	 	 

	 
	 	 	 	 	CUSIP No(s). of such Registrable Securities:
	 	 	 	 	 

	 
	 	 	 	 	Number of shares of Common Stock (if any) issued upon conversion, repurchase or redemption
of Registrable

 Securities:
	 	 	 	 	 

	 
	 	 	(b)	 	Principal amount of Securities other than Registrable Securities beneficially owned:
	 	 	 	 	 

	

	 	 	 	 	 	 	 	 
	 	 	 	 	CUSIP No(s). of such other Securities:
	 	 	 	 	 

	 
	 	 	 	 	Number of shares of Common Stock (if any) issued upon conversion of such other Securities:
	 	 	 	 	 

	 
	 	 	(c)	 	Principal amount of Registrable Securities which the undersigned wishes to be included
in the Shelf Registration 

Statement:
	 	 	 	 	 

A-4

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration
Statement:
	 	 	 	 	 

	 
	 	 	 	 	Number of shares of Common Stock and Series C Preferred Stock (if any) issued upon
conversion of Registrable Securities which are to be included in the Shelf
Registration Statement:
	 	 	 	 	 

	 
	(4)	 	 	 	Beneficial Ownership of Other Securities of the Company:
	 
	 	 	 	 	Except as set forth below in this Item (4), the undersigned Selling Securityholder is not
the beneficial or registered owner of any shares of Common Stock or Series C
Preferred Stock or any other securities of the Company, other than the Securities and
shares of Common Stock or Series C Preferred Stock listed above in Item (3).
	 
	 	 	 	 	State any exceptions here:
	 
	(5)	 	 	 	Relationships with the Company:
	 
	 	 	 	 	Except as set forth below, neither the Selling Securityholder nor any of its affiliates,
officers, directors or principal equity holders (5% or more) has held any position or
office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.
	 
	 	 	 	 	State any exceptions here:
	 
	(6)	 	 	 	Plan of Distribution:
	 
	 	 	 	 	Except as set forth below, the undersigned Selling Securityholder intends to distribute
the Registrable Securities listed above in Item (3) only as follows (if at all):
Such Registrable Securities may be sold from time to time directly by the undersigned
Selling Securityholder or, alternatively, through underwriters, broker-dealers or
agents. Such Registrable Securities may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at varying prices determined
at the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Registrable Securities may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or services or in the over-the-counter
market, or (iv) through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may enter into
hedging transactions with broker-dealers, which may in turn engage in short sales of
the Registrable Securities in the course of hedging the positions they assume. The
Selling Securityholder may also sell Registrable Securities short and deliver
Registrable Securities to close out such short positions, or loan or pledge
Registrable Securities to broker-dealers that in turn may sell such securities.

A-5

 

	 	 	 	 	 	 	 	 	 
	     State any exceptions here:

          Note: In no event may such method(s) of distribution take the form of an underwritten
offering of the Registrable Securities without the prior agreement of the Company.

          By signing below, the Selling Securityholder acknowledges that it understands its obligation
to comply, and agrees that it will comply, with the prospectus delivery and other provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.

          In the event that the Selling Securityholder transfers all or any portion of the Registrable
Securities listed in Item (3) above after the date on which such information is provided to the
Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer
of its rights and obligations under this Notice and Questionnaire and the Registration Rights
Agreement.

          By signing below, the Selling Securityholder consents to the disclosure of the information
contained herein in its answers to Items (1) through (6) above and the inclusion of such
information in the Shelf Registration Statement and related Prospectus. The Selling Securityholder
understands that such information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.

          In accordance with the Selling Securityholder’s obligation under Section 3(a) of the
Registration Rights Agreement to provide such information as may be required by law for inclusion
in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the
Company of any inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect.
All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing,
by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows:

	 	 	 	 	 	 	 
	 

	 	(i) To the Company:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Connetics Corporation
	 	 	 	 	3160 Porter Drive
	 	 	 	 	Palo Alto, CA 94304
	 
	 	 	 	 	 	 
	 	 	 	 	Attention: Corporate Secretary
	 
	 	 	 	 	 	 
	

	 	(ii) With a copy to:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Skadden, Arps, Slate, Meagher & Flom LLP
	 	 	 	 	525 University Avenue, Suite 1100
	 	 	 	 	Palo Alto, CA 94301
	 
	 	 	 	 	 	 
	

	 	 	 	Attention:
	 	Kenton J. King, Esq.
	

	 	 	 	 	 	Celeste E. Greene, Esq.

A-6

 

          Once this Notice and Questionnaire is executed by the Selling Securityholder and received by
the Company, the terms of this Notice and Questionnaire, and the
representations and warranties contained herein, shall be binding on, shall inure to the benefit of
and shall be enforceable by the respective successors, heirs, personal representatives, and assigns
of the Company and the Selling Securityholder (with respect to the Registrable Securities
beneficially owned by such Selling Securityholder and listed in Item (3) above). This Agreement
shall be governed in all respects by the laws of the State of New York.

A-7

 

          IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

Dated:                                        

	 	 	 	 	 
	 	Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable Securities)

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE
                                         TO THE COMPANY AT:

	 	   	Connetics Corporation
3160 Porter Drive

Palo Alto, CA 94304

Attention: Corporate Secretary

A-8

 

Exhibit 1

to Appendix A

NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT

Connetics Corporation

3160 Porter Drive

Palo Alto, CA 94304

Attention: Katrina J. Church, General Counsel

J.P. Morgan Trust Company, National Association

560 Mission Street, 13th Floor

San Francisco, California 94105

Attention: Institutional Trust Services

	 	 	 
	Re:

	 	Connetics Corporation (the “Company”)
	

	 	2.00% Senior Convertible Notes due March 30, 2015 (the “Notes”)

Dear Sirs:

          Please be advised that
____________has transferred $_______________aggregate principal
amount of the above-referenced Notes, shares of the Company’s common stock or series C Preferred
Stock, issued upon conversion, repurchase or redemption of Notes or shares of the Company’s common
stock, issued upon conversion of series C Preferred Stock, pursuant to an effective Registration
Statement on Form S-3 (File No. 333-___) filed by the Company.

          We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of
1933, as amended, have been satisfied with respect to the transfer described above and that the
above-named beneficial owner of the Notes or common stock is named as a selling securityholder in
the Prospectus dated [date], or in amendments or supplements thereto, and that the aggregate
principal amount of the Notes or number of shares of common stock or series C Preferred Stock
transferred are [a portion of] the Notes or shares of common stock or series C Preferred Stock
listed in such Prospectus as amended or supplemented opposite such owner’s name.

Dated:

	 	 	 	 	 
	 	 	Very truly yours,

 	 
	 	 	
(Name)

 	 
	 	By:  	
 	 
	 	 	(Authorized Signature) 	 
	 	 	 	 
	 

A-9

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