Document:

exv4w2

Exhibit 4.2

WATSON PHARMACEUTICALS, INC.,

as Issuer

and

Wells Fargo Bank, National Association,

as Trustee

FIRST SUPPLEMENTAL INDENTURE

Dated as of August 24, 2009

to the Indenture dated as of August 24, 2009

5.000% Senior Notes due 2014

6.125% Senior Notes due 2019

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE 1

	 
	 	 	 	 	 	 
	APPLICATION OF SUPPLEMENTAL INDENTURE

	 
	 	 	 	 	 	 
	Section 1.01.
	 	Application of First Supplemental Indenture	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE 2

	DEFINITIONS

	 
	 	 	 	 	 	 
	Section 2.01.
	 	Certain Terms Defined in the Indenture	 	 	2	 
	Section 2.02.
	 	Definitions	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE 3

	FORM AND TERMS OF THE NOTES

	 
	 	 	 	 	 	 
	Section 3.01.
	 	Form and Dating	 	 	5	 
	Section 3.02.
	 	Terms of the Notes	 	 	6	 
	Section 3.03.
	 	Optional Redemption	 	 	7	 
	Section 3.04.
	 	Repurchase of Notes upon a Change of Control	 	 	8	 
	Section 3.05.
	 	Amendment of Limitations on Liens	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE 4

	MISCELLANEOUS

	 
	 	 	 	 	 	 
	Section 4.01.
	 	Conflict with Trust Indenture Act	 	 	10	 
	Section 4.02.
	 	New York Law to Govern	 	 	10	 
	Section 4.03.
	 	Counterparts	 	 	10	 
	Section 4.04.
	 	Separability Clause	 	 	10	 
	Section 4.05.
	 	Ratification	 	 	10	 
	Section 4.06.
	 	Effectiveness	 	 	10	 
	 
	 	 	 	 	 	 
	EXHIBIT A-1 — Form of 5.000% Senior Notes due 2014	 	 	A-1	 
	 
	 	 	 	 	 	 
	EXHIBIT B-2 — Form of 6.125% Senior Notes due 2019 	 	 	B-1	 

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FIRST SUPPLEMENTAL INDENTURE

          SUPPLEMENTAL INDENTURE (this “First Supplemental Indenture”), dated as of August 24, 2009,
between WATSON PHARMACEUTICALS, INC., a Nevada corporation (the “Company”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION, as Trustee (the “Trustee”).

RECITALS OF THE COMPANY

          WHEREAS, the Company and the Trustee executed and delivered an Indenture, dated as of August
24, 2009 (the “Base Indenture,” and together with the First Supplemental Indenture, the
“Indenture”), to provide for the issuance by the Company from time to time of Securities to be
issued in one or mores series as provided in the Indenture;

          WHEREAS, Section 901 of the Base Indenture provides, among other things, that the Company and
the Trustee may enter into indentures supplemental to the Base Indenture, without the consent of
any Holders of Securities, to establish the form of any Security, as permitted by Section 201 of
the Base Indenture, and to provide for the issuance of the Notes (as defined below), as permitted
by Section 301 of the Base Indenture, and to set forth the terms thereof;

          WHEREAS, the Company desires to execute this First Supplemental Indenture pursuant to Section
201 of the Base Indenture to establish the form, and pursuant to Section 301 of the Base Indenture
to provide for the issuance, of a series of its senior notes designated as its 5.000% Senior Notes
due August 15, 2014 (the “2014 Notes”) and a series of its senior notes designated as its 6.125%
Senior Notes due August 15, 2019 (the “2019 Notes,” and together with the 2014 Notes, the “Notes”),
in an initial aggregate principal amount of $450,000,000 in the case of the 2014 Notes and
$400,000,000 in the case of the 2019 Notes. The 2014 Notes and the 2019 Notes are each a series of
Securities as referred to in Section 301 of the Base Indenture.

          WHEREAS, the Company has delivered to the Trustee an Opinion of Counsel and an Officers’
Certificate pursuant to Sections 102 and 903 of the Base Indenture to the effect that the execution
and delivery of the First Supplemental Indenture is authorized or permitted under the Base
Indenture and that all conditions precedent provided for in the Base Indenture to the execution and
delivery of this First Supplemental Indenture to be complied with by the Company have been complied
with;

          WHEREAS, the Company has requested that the Trustee execute and deliver this First
Supplemental Indenture;

          WHEREAS, all things necessary have been done by the Company to make this First Supplemental
Indenture, when executed and delivered by the Company, a valid and legally binding instrument; and

          WHEREAS, all things necessary have been done by the Company to make the Notes, when executed
by the Company and authenticated and delivered in accordance with the provisions of this Indenture,
the valid obligations of the Company;

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          NOW, THEREFORE:

          In consideration of the premises stated herein and the purchase of the Notes by the Holders
thereof, the Company and the Trustee mutually covenant and agree for the equal and proportionate
benefit of the respective Holders from time to time of the Notes as follows:

ARTICLE 1

APPLICATION OF SUPPLEMENTAL INDENTURE

          Section 1.01. Application of First Supplemental Indenture. Notwithstanding any other provision of this First Supplemental Indenture, all provisions of
this First Supplemental Indenture are expressly and solely for the benefit of the Holders of the
Notes and any such provisions shall not be deemed to apply to any other securities issued under the
Base Indenture and shall not be deemed to amend, modify or supplement the Base Indenture for any
purpose other than with respect to the Notes. Unless otherwise expressly specified, references in
this Supplemental Indenture to specific Article numbers or Section numbers refer to Articles and
Sections contained in this Supplemental Indenture as they amend or supplement the Base Indenture,
and not the Base Indenture or any other document. All Initial 2014 Notes and Additional 2014
Notes, if any, and all Initial 2019 Notes and Additional 2019 Notes, if any, will each be treated
as a single class for all purposes of this Indenture, including waivers, amendments, redemptions
and offers to purchase.

ARTICLE 2

DEFINITIONS

          Section 2.01. Certain Terms Defined in the Indenture. For purposes of this First Supplemental Indenture, all capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Base Indenture, as amended
hereby.

          Section 2.02. Definitions. For the benefit of the Holders of the Notes, Section 101 of the Base Indenture shall be
amended by adding the following new definitions:

          “Additional Notes” has the meaning specified in Section 3.02(b) hereto.

          “Below Investment Grade Rating Event” means the Notes are rated below Investment Grade Rating
by both of the Rating Agencies on any date commencing upon the first public notice by the Company
of the occurrence of a Change of Control or the Company’s intention to effect a Change of Control
and ending 60 days following consummation of such Change of Control (which period shall be extended
so long as the rating of the Notes is under publicly announced consideration for possible downgrade
by either of the Rating Agencies).

          “Change of Control” means the occurrence of any of the following: (1) direct or indirect
sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the
properties or assets of the Company and its subsidiaries taken as a whole to any “person” (as that
term is used in Section 13(d)(3) of the Exchange Act) other than the Company or one of its
subsidiaries; (2) the consummation of any transaction (including, without limitation, any merger or
consolidation) as a result of which any “person” (as that term is used in Section 13(d)(3) of the

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Exchange Act) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of more than 50% of the Company’s outstanding voting stock
or other voting stock into which the Company’s voting stock is reclassified, consolidated,
exchanged or changed, measured by voting power rather than number of shares; provided, however,
that a transaction will not be deemed to involve a Change of Control if (a) the Company becomes a
direct or indirect wholly owned subsidiary of a holding company and (b)(i) the holders of the
voting stock of such holding company immediately following that transaction are substantially the
same as the holders of the Company’s voting stock immediately prior to that transaction or (ii) no
“person” (as that term is used in Section 13(d)(3) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
more than 50% of the voting power of the voting stock of such holding company immediately following
such transaction; (3) the Company consolidates with, or merges with or into, any “person” or
“group” (as that term is used in Section 13(d)(3) of the Exchange Act), or any “person” or “group”
consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction
in which any of the Company’s voting stock or the voting stock of such other person is converted
into or exchanged for cash, securities or other property, other than any such transaction where the
shares of the Company’s voting stock outstanding immediately prior to such transaction constitute,
or are converted into or exchanged for, a majority of the voting stock of the surviving person or
any direct or indirect parent company of the surviving person immediately after giving effect to
such transaction; (4) the first day on which a majority of the members of the Company’s board of
directors are not Continuing Directors; or (5) the adoption of a plan relating to the Company’s
liquidation or dissolution.

          “Change of Control Triggering Event” means the occurrence of both a Change of Control and a
Below Investment Grade Rating Event.

          “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the Notes to
be redeemed that would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of such Notes to be redeemed.

          “Comparable Treasury Price” means, with respect to any Redemption Date, (1) the average of the
bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of
its principal amount, on the third Business Day preceding such Redemption Date, as contained in the
daily statistical release, or any successor release, published by the Federal Reserve Bank of New
York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (2) if the
release, or any successor release, is not published or does not contain these prices on that
Business Day, (a) the average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest of the Reference Treasury Dealer Quotations, or (b) if the
Company obtains fewer than four Reference Treasury Dealer Quotations, the average of all of these
quotations.

          “Continuing Directors” means, as of any date of determination, any member of the board of
directors of the Company who (1) was a member of the board of directors of the Company on the date
hereof; or (2) was nominated for election or elected to the board of directors of the Company with
the approval of a majority of the Continuing Directors who were

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members of such board of directors of the Company at the time of such nomination or election
(either by specific vote or by approval of the Company’s proxy statement in which such member was
named as a nominee for election as a director, without objection to such nomination).

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

          “Global Note” means, individually and collectively, each of the Notes in the form of Global
Securities issued to the Depositary or its nominee, substantially in the form of Exhibit A.

          “Independent Investment Banker” means the Reference Treasury Dealer appointed by the Company.

          “Initial Notes” has the meaning specified in Section 3.02(b) hereto.

          “Investment Grade Rating” means a rating by Moody’s equal to or higher than Baa3 (or the
equivalent under a successor rating category of Moody’s) or a rating by S&P equal to or higher than
BBB- (or the equivalent under any successor rating category of S&P).

          “Moody’s” means Moody’s Investors Service, Inc.

          “Notes” has the meaning specified in the recitals hereto.

          “Principal Amount” means the aggregate principal amount of all Outstanding Initial Notes and
Additional Notes.

          “Rating Agencies” means (1) Moody’s and S&P; and (2) if either or both of Moody’s or S&P
ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons
outside of the Company’s control, a “nationally recognized statistical rating organization” within
the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company (as
certified by a resolution of the Company’s board of directors) as a replacement agency for either
Moody’s, S&P, or both of them, as the case may be.

          “Redemption Date” when used with respect to the Notes to be redeemed, means the date fixed for
such redemption pursuant to the Indenture.

          “Reference Treasury Dealer” means the four primary U.S. government securities dealers
consisting of (i) Banc of America Securities LLC and Barclays Capital Inc., and their respective
successors and (ii) two other nationally recognized investment banking firms (or their affiliates)
that the Company selects in connection with the particular redemption, and their respective
successors, provided that if at any time any of the above is not a primary U.S. Government
securities dealer, the Company shall substitute that entity with another nationally recognized
investment banking firm that the Company selects that is a primary U.S. Government securities
dealer.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a

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percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 3:30 p.m., New York City time, on the third Business Day preceding such Redemption Date.

          “Remaining Scheduled Payments” means, with respect to each Note to be redeemed, the remaining
scheduled payments of the principal thereof and interest thereon that would be due after the
related Redemption Date for such redemption; provided, however, that, if such Redemption Date is
not an Interest Payment Date with respect to such Note, the amount of the next succeeding scheduled
interest payment thereon will be reduced by the amount of interest accrued thereon to such
Redemption Date.

          “S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC
business and any successor to its rating agency business.

          “Transactions” means the issuance of the 2014 Notes or the 2019 Notes, any redemption of the
Company’s contingent senior debentures due 2023, the repayment of the Company’s term loan
borrowings under its credit agreement, dated as of November 3, 2006 among the Company and the
lenders named therein, as amended by an Amendment No. 1, dated as of July 1, 2009, the acquisition
of Robin Hood Holdings Limited, a limited liability company organized under the laws of Malta, that
owns a group of privately-held generic pharmaceutical companies referred to as the Arrow Group.

          “Treasury Rate” means, for any Redemption Date, the rate per annum equal to the semi-annual
equivalent yield to Maturity, computed as the second Business Day immediately preceding that
Redemption Date, of the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price
for that Redemption Date.

          “Trustee” has the meaning specified in the first paragraph hereto.

          “Voting Stock” means with respect to any specified person (as that term is used in Section
13(d)(3) of the Exchange Act) capital stock of any class or kind the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such person, even if the right to vote has been suspended
by the happening of such a contingency.

ARTICLE 3

FORM AND TERMS OF THE NOTES

          Section 3.01. Form and Dating. The Notes and the Trustee’s certificate of authentication shall be substantially in the
form of Exhibit A and Exhibit B attached hereto. The Notes shall be executed on
behalf of the Company by two Officers of the Company. The Notes may have notations, legends or
endorsements required by law, stock exchange rules or usage. Each Note shall be dated the date of
its authentication. The Notes and any beneficial interest in the Notes shall be in minimum
denominations of $2,000 and integral multiples of $1,000 in excess thereof.

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          The terms and notations contained in the Notes shall constitute, and are hereby expressly
made, a part of the Indenture, and the Company and the Trustee, by their execution and delivery of
this First Supplemental Indenture, expressly agree to such terms and provisions and to be bound
thereby.

          (a) Global Note. The Notes shall be issued initially in permanent global form (the “Global
Note”), which shall be deposited with the Trustee as custodian for the Depositary and registered in
the name of Cede & Co., the Depositary’s nominee, duly executed on behalf of the Company by two
Officers of the Company, and authenticated by the Trustee in accordance with Section 202 of the
Base Indenture.

          (b) Book-Entry Provisions. This Section 3.01(b) shall apply only to the Global Notes
deposited with the Trustee as custodian for the Depositary.

          The Company shall execute and the Trustee shall, in accordance with Section 202 of the Base
Indenture, authenticate, and hold each Global Note as custodian for the Depositary.

          Section 3.02. Terms of the Notes. The following terms relating to the Notes are hereby established pursuant to Section 301 of
the Base Indenture:

          (a) Title. The 2014 Notes shall constitute a series of Securities having the title “5.000%
Senior Notes due 2014” and the 2019 Notes shall constitute a separate series of Securities having
the title “6.125% Senior Notes due 2019”.

          (b) Principal Amount. The aggregate principal amount of the 2014 Notes (the “Initial 2014
Notes”) and the 2019 Notes (the “Initial 2019 Notes” and together with the Initial 2014 Notes, the
“Initial Notes”) that may be initially authenticated and delivered under the Indenture shall be
$450,000,000 and $400,000,000, respectively. The Company may from time to time, without the
consent of the Holders of Notes, issue additional 2014 Notes (in any such case “Additional 2014
Notes”) or additional 2019 Notes (in any such case, “Additional 2019 Notes”) having the same
ranking and the same interest rate, Maturity and other terms as the Initial 2014 Notes or the
Initial 2019 Notes, as the case may be. Any Additional 2014 Notes and the Initial 2014 Notes, and
any Additional 2019 Notes and the Initial 2019 Notes, as the case may be, shall each constitute a
single series under the Indenture and all references to the 2014 Notes shall include the Initial
2014 Notes and any Additional 2014 Notes and all references to the 2019 Notes shall include the
Initial 2019 Notes and any Additional 2019 Notes, unless the context otherwise requires. The
aggregate principal amount of each of the Additional 2014 Notes and Additional 2019 Notes shall be
unlimited.

          (c) Maturity Date. The entire Outstanding principal of the 2014 Notes and 2019 Notes shall be
payable on August 15, 2014 and August 15, 2019, respectively.

          (d) Interest Rate. The rate at which the 2014 Notes shall bear interest shall be 5.000% per
annum and the rate at which the 2019 Notes shall bear interest shall be 6.125% per annum; the date
from which interest shall accrue on the Notes shall be August 24, 2009, or the most recent Interest
Payment Date to which interest has been paid or provided for; the Interest Payment Dates for the Notes shall be February 15 and August 15 of each year, beginning
February 15, 2010; the interest so payable, and punctually paid or duly provided for, on any

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Interest Payment Date, will be paid, in immediately available funds, to the Persons in whose names
the Notes are registered at the close of business on the Regular Record Date for such interest,
which shall be the February 1 or August 1, as the case may be, immediately preceding such Interest
Payment Date.

          (e) Payment. The Trustee shall be the initial Paying Agent and Security Registrar. Payment of
the principal and interest shall be at the corporate office of the Trustee in the Borough of
Manhattan, The City of New York; provided, however, that each installment of interest and principal
on the 2014 Notes or the 2019 Notes may at the Company’s option be paid by check to the Holders at
the Holder’s address in the Security Register. The 2014 Notes and the 2019 Notes shall initially
be issued as Global Securities. Payments with respect to Notes represented by one or more Global
Securities shall be made by wire transfer of immediately available funds to the account specified
by the Depositary. Payments with respect to Notes represented by one or more Definitive Securities
held by a Holder of at least U.S.$1,000,000 aggregate principal amount of Notes shall be made by
wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if
such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying
Agent to such effect designating such account no later than 10 days immediately preceding the
relevant due date for payment (or such other date as the Trustee or Paying Agent may accept in its
discretion).

          (f) Currency. The currency of denomination of the Notes is United States Dollars. Payment of
principal of and interest and premium, if any, on the Notes shall be made in United States Dollars.

          Section 3.03. Optional Redemption.

          (a) The provisions of Article Eleven of the Base Indenture, as amended by the provisions of
this First Supplemental Indenture, shall apply to the Notes.

          (b) The 2014 Notes and the 2019 Notes shall be redeemable, in each case, in whole at any time
or in part from time to time, at the Company’s option. Upon redemption of the Notes, the Company
shall pay a Redemption Price equal to the greater of:

     (i) 100% of the principal amount of the 2014 Notes or the 2019 Notes to be
redeemed, as the case may be, and

     (ii) the sum of the present values of the Remaining Scheduled Payments of the
2014 Notes or the 2019 Notes to be redeemed, as the case may be, discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Rate plus 40 basis points in the case of the 2014
Notes and 40 basis points in the case of the 2019 Notes,

plus, in each case, accrued and unpaid interest thereon to the Redemption Date. Notwithstanding the
foregoing, installments of interest on the applicable series of Notes that are due and payable on
Interest Payment Dates falling on or prior to a Redemption Date shall be payable on the Interest Payment Date to the registered holders as of the close of business on the relevant record
date according to the Notes and the Indenture.

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          (c) On and after the Redemption Date for the Notes, interest shall cease to accrue on the
Notes or any portion thereof called for redemption, unless the Company defaults in the payment of
the Redemption Price and accrued interest, if any. On or before the Redemption Date for the Notes,
the Company shall deposit with the Trustee or a Paying Agent, funds sufficient to pay the
Redemption Price of the Notes to be redeemed on the Redemption Date, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest, if any. If less than all of the Notes
are to be redeemed, the Notes shall be redeemed in accordance with Section 1103 of the Base
Indenture.

          (d) Notice of any redemption shall be mailed at least 15 days but not more than 60 days before
the Redemption Date to each holder of the Notes to be redeemed; provided, however, that the Company
shall notify the Trustee of the Redemption Date at least 15 days prior to the date of the giving of
such notice (unless a shorter notice shall be satisfactory to the Trustee). Such notice shall be
provided in accordance with Section 1104 of the Base Indenture. If the Redemption Price cannot be
determined at the time such notice is to be given, the actual Redemption Price, calculated as
described above in clause (b), shall be set forth in an Officers’ Certificate of the Company
delivered to the Trustee no later than two Business Days prior to the Redemption Date. Notice of
redemption having been given as provided in the Indenture, the Notes called for redemption shall,
on the Redemption Date, become due and payable at the Redemption Price, and accrued and unpaid
interest, if any, to the Redemption Date, and from and after such Redemption Date (unless the
Company shall default in the payment of the Redemption Price and accrued interest, if any) such
Notes shall cease to bear interest. Installments of interest on the Notes to be redeemed that are
due and payable on Interest Payment Dates falling on or prior to the Redemption Date shall be
payable on the Interest Payment Date in accordance with the Indenture.

          Section 3.04. Repurchase of Notes upon a Change of Control.

          (a) If a Change of Control Triggering Event occurs with respect to the Notes, unless the
Company shall have exercised its option to redeem the 2014 Notes and 2019 Notes in full, as set
forth in Section 3.03 of this First Supplemental Indenture, the Company shall make an offer (the
“Change of Control Offer”) to each holder of the 2014 Notes and 2019 Notes to repurchase any and
all (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000) of such holder’s 2014
Notes and 2019 Notes at a repurchase price set forth in this Section 3.04. In the Change of
Control Offer, the Company shall be required to offer payment in cash equal to 101% of the
aggregate principal amount of 2014 Notes and 2019 Notes to be repurchased, plus accrued and unpaid
interest, if any, on the 2014 Notes and 2019 Notes to be repurchased up to, but not including, the
date of repurchase (the “Change of Control Payment”). With respect to the Notes, within 30 days
following any Change of Control Triggering Event, the Company shall mail a notice to Holders of
Notes with a copy to the Trustee describing the transaction or transactions that constitute or may
constitute the Change of Control Triggering Event and offering to repurchase the Notes on the date
specified in the notice, which date shall be no earlier than 15 days and no later than 60 days from
the date such notice is mailed (the “Change of Control Payment Date”).

          (b) On the Change of Control Payment Date, the Company shall, to the extent lawful:

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     (i) accept for payment all Notes or portions of Notes properly tendered
pursuant to the Change of Control Offer;

     (ii) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions of Notes properly tendered; and

     (iii) deliver or cause to be delivered to the Trustee the Notes properly
accepted, together with an Officers’ Certificate stating (1) the aggregate Principal
Amount of Notes or portions of Notes being repurchased, (2) that all conditions
precedent contained herein to make a Change of Control Offer have been complied with
and (3) that the Change of Control Offer has been made in compliance with the
Indenture.

          The Company shall publicly announce the results of the Change of Control Offer on or as soon
as possible after the date of purchase.

          (c) The Company shall comply in all material respects with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the Notes as a result of a
Change of Control Triggering Event. To the extent that the provisions of any such securities laws
or regulations conflict with the Change of Control Offer provisions of this Section 3.04, the
Company shall comply with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 3.04 by virtue of any such conflict.

          Section 3.05. Amendment of Limitations on Liens. Section 1010 of the Base Indenture is hereby amended, in connection with this First
Supplemental Indenture, by inserting the following clause (8):

          (8) any
Lien to be incurred in connection with the Transactions; and

and by deleting clause (8) in its entirety and inserting the following clause (9):

     (9) any Lien that would not otherwise be permitted by clauses (1) through (8) above,
inclusive, securing indebtedness which, together with:

          (A) the aggregate outstanding principal amount of all other indebtedness of the
Company and its Subsidiaries owning property which would otherwise be subject to the
foregoing restrictions, and

          (B) the aggregate Value of existing Sale and Leaseback Transactions which would
be subject to the foregoing restrictions absent this clause,

does not exceed 15% of the Consolidated Net Worth of the Company.

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ARTICLE 4

MISCELLANEOUS

          Section 4.01. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act which is required under such Act or deemed to be a part of and govern this First
Supplemental Indenture, such required or deemed provision shall control. If any provision of this
First Supplemental Indenture modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to this First
Supplemental Indenture as so modified or to be excluded, as the case may be.

          Section 4.02. New York Law to Govern. This indenture and the Notes shall be governed by and construed in accordance with the laws
of the State of New York (including without limitation Section 5-1401 of the New York General
Obligations Law or any successor to such statute). The Trustee and the Company agree to submit to
the non-exclusive jurisdiction of any United States federal or state court located in the borough
of Manhattan, in the city of New York in any action or proceeding arising out of or relating to
this First Supplemental Indenture or the Notes. This First Supplemental Indenture is subject to the
provisions of the Trust Indenture Act that are required to be part of the Indenture and shall, to
the extent applicable, be governed by such provisions.

               The Trustee and the Company hereby knowingly, voluntarily and intentionally waive any rights
they may have to a trial by jury in respect of any litigation based hereon, or arising out of,
under or in connection with this First Supplemental Indenture or any course of conduct, course of
dealing, statements (whether oral or written) or actions of the Trustee or the Company relating
thereto. The Company acknowledges and agrees that it has received full and sufficient consideration
for this provision and that this provision is a material inducement for the Trustee and the Holders
entering into this First Supplemental Indenture.

          Section 4.03. Counterparts. This First Supplemental Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.

          Section 4.04. Separability Clause. In case any provision in this First Supplemental Indenture or in the Notes 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.

          Section 4.05. Ratification. The Base Indenture, as supplemented and amended by this First Supplemental Indenture, is in
all respects ratified and confirmed. The Indenture shall be read, taken and construed as one and
the same instrument. All provisions included in this First Supplemental Indenture supersede any conflicting provisions included in the Base Indenture unless not
permitted by law. The Trustee accepts the trusts created by the Indenture, and agrees to perform
the same upon the terms and conditions of the Indenture.

          Section 4.06. Effectiveness. The provisions of this First Supplemental Indenture shall become effective as of the date
hereof.

10

 

[Remainder of page intentionally left blank.]

11

 

          IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be
duly executed as of the date first above written.

	 	 	 	 	 
	 	WATSON PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ Paul M. Bisaro 	 
	 	 	Name: 	Paul M. Bisaro 	 
	 	 	Title: 	President, Chief Executive Officer 	 
	 
	 	WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee

 	 
	 	By:  	/s/ Maddy Hall	 
	 	 	Name: 	Maddy Hall 	 
	 	 	Title: 	Vice President 	 
	 

 

 

EXHIBIT A

[FACE OF NOTE]

WATSON PHARMACEUTICALS, INC.

[Global Securities Legend]

THIS GLOBAL SECURITY IS HELD BY AND REGISTERED IN THE NAME OF THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS SECURITY), IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THIS
GLOBAL SECURITY MAY BE EXCHANGED PURSUANT TO SECTION 203(a) OF THE INDENTURE, (II) THIS GLOBAL
SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 309 OF THE INDENTURE
AND (III) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.

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.

					
	REGISTERED
	 	 	 	REGISTERED
	 
	 	WATSON
PHARMACEUTICALS, INC.
	 	 
	 
	 	5.000%
Senior Notes due 2014
	 	 
	 	 	 	 	 
	CUSIP NO. [__________]
	 	 	 	 
	ISIN NO. [____________]
	 	 	 	 
	No. R-[___]
	 	 	 	US$[__________]

          Watson Pharmaceuticals, Inc., a corporation duly organized and existing under the laws of the
State of Nevada (herein called the “Company”, which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or
its registered assigns, the principal sum of

 

 

[_____________] Dollars ($__________) on August 15, 2014, and to pay interest thereon from
August 24, 2009 or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually on February 15 and August 15 in each year, commencing February 15,
2010, to the Persons in whose names the Notes are registered at the close of business on the
immediately preceding February 1 or August 1, as the case may be, at the rate of 5.000% per annum,
until the principal hereof is paid or made available for payment, provided, however that any
principal and premium, and any such installment of interest, which is overdue shall bear interest
at the rate of 5.000% per annum (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand). The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest, which shall be
the February 1 or August 1 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holder of Securities of this series not less than
10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.

          Payment of the principal of (and premium, if any) and any such interest on this Security will
be made at the office or agency of the Company maintained for that purpose in The City of New York,
New York, in such coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.

          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 by manual signature, this Security shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

 

 

          In Witness Whereof, the Company has caused this instrument to be duly executed.

	 	 	 	 	 
	 	WATSON PHARMACEUTICALS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	Attest:

 	 	 
	 	 	 
	Name:  	 	 	 
	Title:  	 	 	 
	 

 

 

	 	 	 	 	 

CERTIFICATE OF AUTHENTICATION

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

Dated:                     , 2009

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL
ASSOCIATION,
 as Trustee

 	 
	 	By:  	 	 
	 	 	Authorized Signatory 	 
	 	 	 	 

 

 

	 	 	 	 	 

[Form of Reverse of Security]

          This Security is one of a duly authorized issue of securities of the Company (herein called
the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of
August 24, 2009 (herein called the “Indenture”, which term shall have the meaning assigned to it in
such instrument), between the Company and Wells Fargo Bank, National Association, as Trustee
(herein called the ‘“Trustee”, which term includes any successor trustee under the Indenture), and
reference is hereby made to the Indenture 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. This Security is one of the series designated on the face hereof, limited in aggregate
principal amount to $[__________].

          The Securities of this series are subject to redemption at any time, upon not less than 15
days’ and not more than 60 days’ notice by mail, as a whole or from time to time in part, at the
election of the Company, on any date prior to their Stated Maturity at a Redemption Price equal to
the greater of (i) 100% of the principal amount of such Securities to be redeemed, and (ii) the sum
of the present values of the Remaining Scheduled Payments (as defined below) of the Securities to
be redeemed, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 40 basis points,
plus, accrued and unpaid interest thereon to the Redemption Date. Notwithstanding the foregoing,
installments of interest on the Securities that are due and payable on interest payment dates
falling on or prior to a Redemption Date will be payable on the interest payment date to the
registered holders as of the close of business on the relevant record date according to the
Securities and the Indenture.

          “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the Notes to
be redeemed that would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of such Notes to be redeemed.

          “Comparable Treasury Price” means, with respect to any Redemption Date, (1) the average of the
bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of
its principal amount, on the third Business Day preceding such Redemption Date, as contained in the
daily statistical release, or any successor release, published by the Federal Reserve Bank of New
York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (2) if the
release, or any successor release, is not published or does not contain these prices on that
Business Day, (a) the average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest of the Reference Treasury Dealer Quotations, or (b) if the
Company obtains fewer than four Reference Treasury Dealer Quotations, the average of all of these
quotations.

          “Independent Investment Banker” means the Reference Treasury Dealer appointed by the Company.

 

 

          “Reference Treasury Dealer” means the four primary U.S. government securities dealers
consisting of (i) Banc of America Securities LLC and Barclays Capital Inc., and their respective
successors and (ii) two other nationally recognized investment banking firms (or their affiliates)
that the Company selects in connection with the particular redemption, and their respective
successors, provided that if at any time any of the above is not a primary U.S. Government
securities dealer, the Company shall substitute that entity with another nationally recognized
investment banking firm that the Company selects that is a primary U.S. Government securities
dealer.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m., New York City
time, on the third Business Day preceding such Redemption Date.

          “Remaining Scheduled Payments” means, with respect to each Note to be redeemed, the remaining
scheduled payments of the principal thereof and interest thereon that would be due after the
related Redemption Date for such redemption; provided, however, that, if such Redemption Date is
not an Interest Payment Date with respect to such Note, the amount of the next succeeding scheduled
interest payment thereon will be reduced by the amount of interest accrued thereon to such
Redemption Date.

          “Treasury Rate” means, for any Redemption Date, the rate per annum equal to the semi-annual
equivalent yield to Maturity, computed as the second Business Day immediately preceding that
Redemption Date, of the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price
for that Redemption Date.

          In the event of redemption of this Security in part only, a new Security or Securities of this
series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder
hereof upon the cancellation hereof.

          The Indenture contains provisions for defeasance at any time of the entire indebtedness of
this Security or certain restrictive covenants and Events of Default with respect to this Security,
in each case upon compliance with certain conditions set forth in the Indenture.

          If an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.

          The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains provisions permitting
the Holders of specified percentages in principal amount of the Securities of each series at the
time Outstanding, on behalf of the Holders of all Securities of

 

 

such series, to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such consent or waiver by
the Holder of this Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon
this 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
have previously given the Trustee written notice of a continuing Event of Default with respect to
the Securities of this series, the Holders of not less than 25% in principal amount of the
Securities of this series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered the Trustee
indemnity or security reasonably satisfactory to it, and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at the time 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 hereof or any premium or interest hereon on or after the respective due dates expressed
herein.

          No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and any premium and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.

          As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security may be registered and this Security may be exchanged as provided in the
Indenture.

          The Securities of this series are issuable only in registered form without coupons in
denominations of $2,000 and integral multiples of $1,000 in excess thereof.

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

          Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

          The Securities of this series shall be governed by and construed in accordance with the laws
of the State of New York (including without limitation Section 5-1401 of the New York General
Obligations Law or any successor to such statute). The Trustee and the Company

 

 

agree to submit to the non-exclusive jurisdiction of any United States federal or state court
located in the borough of Manhattan, in the city of New York in any action or proceeding arising
out of or relating to the Securities.

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

 

 

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to:

 
(Insert assignee’s social security or tax I.D. no.)

 

 

 

 
(Print or type assignee’s name, address and zip code)

and irrevocably appoint ___________________________ as agent to
transfer this Security on the books of the Company. The agent may substitute another to act for
him.

 

	 	 	 
	Your Signature:
	 	 
	 

	 	 
	 

	 	(Sign exactly as your name appears on the other side of this Security)

	 	 	 
	Your Name:
	 	 
	 

	 	 

	 	 	 	 
	Date:
	 	 
	 

	 	 

	 	 	 
	Signature Guarantee:

	 *
	 

	 

 

			
	*	 	NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the
following recognized signature Guarantee Programs: (i) The Securities Transfer Agent Medallion
Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Trustee.

 

 

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY

The following exchanges of an interest in this Global Security for an interest in another Global
Security or for a Definitive Security, or exchanges of an interest in another Global Security or a
Definitive Security for an interest in this Global Security have been made:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Signature of	 
	 	 	 	 	 	 	 	 	 	 	Principal Amount of	 	 	authorized	 
	 	 	Amount of decrease	 	 	Amount of increase	 	 	this Global	 	 	signatory of	 
	 	 	in Principal Amount	 	 	in Principal Amount	 	 	Security following	 	 	Trustee or	 
	 	 	of this Global	 	 	of this Global	 	 	such decrease or	 	 	Securities	 
	Date of Exchange	 	Security	 	 	Security	 	 	increase	 	 	Custodian	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT B

[FACE OF NOTE]

WATSON PHARMACEUTICALS, INC.

[Global Securities Legend]

THIS GLOBAL SECURITY IS HELD BY AND REGISTERED IN THE NAME OF THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS SECURITY), IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THIS
GLOBAL SECURITY MAY BE EXCHANGED PURSUANT TO SECTION 203(a) OF THE INDENTURE, (II) THIS GLOBAL
SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 309 OF THE INDENTURE
AND (III) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.

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.

			
	 	 	 
	REGISTERED
	 	REGISTERED

WATSON PHARMACEUTICALS, INC.

6.125% Senior Notes due 2019

	 	 	 
	CUSIP NO. [                    ]
	 	 
	ISIN NO. [                    ]
	 	 
	No. R-[     ]

	 	US$[                    ]

          Watson Pharmaceuticals, Inc., a corporation duly organized and existing under the laws of the
State of Nevada (herein called the “Company”, which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or
its registered assigns, the principal sum of

 

 

[                    ] Dollars ($                    ) on August 15, 2019, and to pay interest thereon from August
24, 2009 or from the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on February 15 and August 15 in each year, commencing February 15,
2010, to the Persons in whose names the Notes are registered at the close of business on the
immediately preceding February 1 or August 1, as the case may be, at the rate of 6.125% per annum,
until the principal hereof is paid or made available for payment, provided, however that any
principal and premium, and any such installment of interest, which is overdue shall bear interest
at the rate of 6.125% per annum (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand). The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest, which shall be
the February 1 or August 1 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holder of Securities of this series not less than
10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.

          Payment of the principal of (and premium, if any) and any such interest on this Security will
be made at the office or agency of the Company maintained for that purpose in The City of New York,
New York, in such coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.

          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 by manual signature, this Security shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

 

 

          In Witness Whereof, the Company has caused this instrument to be duly executed.

	 	 	 	 	 
	 	WATSON PHARMACEUTICALS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	Attest: 	 	 
	 	 	 	 	 
	
 	 	 	 	 
	Name:  	 	 	 
	Title:  	 	 	 

 

 

	 	 	 	 	 

CERTIFICATE OF AUTHENTICATION

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

Dated:                    , 2009

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL
ASSOCIATION, 
as Trustee

 	 
	 	By:  	
 	 
	 	 	Authorized Signatory 	 
	 	 	 	 

 

 

	 	 	 	 	 

[Form
of Reverse of Security]

          This Security is one of a duly authorized issue of securities of
the Company (herein called the “Securities”), issued and to be issued in one or more series under
an Indenture, dated as of August 24, 2009 (herein called the “Indenture”, which term shall have the
meaning assigned to it in such instrument), between the Company and Wells Fargo Bank, National
Association, as Trustee (herein called the ‘“Trustee”, which term includes any successor trustee
under the Indenture), and reference is hereby made to the Indenture 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. This Security is one of the series designated on the face
hereof, limited in aggregate principal amount to $[                    ].

          The Securities of this series are subject to redemption at any time, upon not less than 15
days’ and not more than 60 days’ notice by mail, as a whole or from time to time in part, at the
election of the Company, on any date prior to their Stated Maturity at a Redemption Price equal to
the greater of (i) 100% of the principal amount of such Securities to be redeemed, and (ii) the sum
of the present values of the Remaining Scheduled Payments (as defined below) of the Securities to
be redeemed, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 40 basis points,
plus, accrued and unpaid interest thereon to the Redemption Date. Notwithstanding the foregoing,
installments of interest on the Securities that are due and payable on interest payment dates
falling on or prior to a Redemption Date will be payable on the interest payment date to the
registered holders as of the close of business on the relevant record date according to the
Securities and the Indenture.

          “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the Notes to
be redeemed that would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of such Notes to be redeemed.

          “Comparable Treasury Price” means, with respect to any Redemption Date, (1) the average of the
bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of
its principal amount, on the third Business Day preceding such Redemption Date, as contained in the
daily statistical release, or any successor release, published by the Federal Reserve Bank of New
York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (2) if the
release, or any successor release, is not published or does not contain these prices on that
Business Day, (a) the average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest of the Reference Treasury Dealer Quotations, or (b) if the
Company obtains fewer than four Reference Treasury Dealer Quotations, the average of all of these
quotations.

          “Independent Investment Banker” means the Reference Treasury Dealer appointed by the Company.

 

 

          “Reference Treasury Dealer” means the four primary U.S. government securities dealers
consisting of (i) Banc of America Securities LLC and Barclays Capital Inc., and their respective
successors and (ii) two other nationally recognized investment banking firms (or their affiliates)
that the Company selects in connection with the particular redemption, and their respective
successors, provided that if at any time any of the above is not a primary U.S. Government
securities dealer, the Company shall substitute that entity with another nationally recognized
investment banking firm that the Company selects that is a primary U.S. Government securities
dealer.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m., New York City
time, on the third Business Day preceding such Redemption Date.

          “Remaining Scheduled Payments” means, with respect to each Note to be redeemed, the remaining
scheduled payments of the principal thereof and interest thereon that would be due after the
related Redemption Date for such redemption; provided, however, that, if such Redemption Date is
not an Interest Payment Date with respect to such Note, the amount of the next succeeding scheduled
interest payment thereon will be reduced by the amount of interest accrued thereon to such
Redemption Date.

          “Treasury Rate” means, for any Redemption Date, the rate per annum equal to the semi-annual
equivalent yield to Maturity, computed as the second Business Day immediately preceding that
Redemption Date, of the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price
for that Redemption Date.

          In the event of redemption of this Security in part only, a new Security or Securities of this
series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder
hereof upon the cancellation hereof.

          The Indenture contains provisions for defeasance at any time of the entire indebtedness of
this Security or certain restrictive covenants and Events of Default with respect to this Security,
in each case upon compliance with certain conditions set forth in the Indenture.

          If an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.

          The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains provisions permitting
the Holders of specified percentages in principal amount of the Securities of each series at the
time Outstanding, on behalf of the Holders of all Securities of

 

 

such series, to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such consent or waiver by
the Holder of this Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon
this 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
have previously given the Trustee written notice of a continuing Event of Default with respect to
the Securities of this series, the Holders of not less than 25% in principal amount of the
Securities of this series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered the Trustee
indemnity or security reasonably satisfactory to it, and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at the time 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 hereof or any premium or interest hereon on or after the respective due dates expressed
herein.

          No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and any premium and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.

          As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security may be registered and this Security may be exchanged as provided in the
Indenture.

          The Securities of this series are issuable only in registered form without coupons in
denominations of $2,000 and integral multiples of $1,000 in excess thereof.

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

          Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

          The Securities of this series shall be governed by and construed in accordance with the laws
of the State of New York (including without limitation Section 5-1401 of the New York General
Obligations Law or any successor to such statute). The Trustee and the Company

 

 

agree to submit to the non-exclusive jurisdiction of any United States federal or state court located in the borough
of Manhattan, in the city of New York in any action or proceeding arising out of or relating to the
Securities.

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

 

 

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to:

 
(Insert assignee’s social security or tax I.D. no.)

 

 

 

 
(Print or type assignee’s name, address and zip code)

and
irrevocably appoint                                                              as agent to
transfer this Security on the books of the Company. The agent may substitute another to act for
him.

 

	 	 	 
	Your Signature:
	 	 
	 

	 	 
	 

	 	(Sign exactly as your name appears on the other side of this Security)

	 	 	 
	Your Name:

	 	 
	 

	 	 

	 	 	 	 
	Date:

	 	 	 
	 

	 	 	 

	 	 	 
	Signature Guarantee:

	 	*
	 

	 	 

 

			
	*	 	NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the
following recognized signature Guarantee Programs: (i) The Securities Transfer Agent Medallion
Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Trustee.

 

 

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY

The following exchanges of an interest in this Global Security for an interest in another Global
Security or for a Definitive Security, or exchanges of an interest in another Global Security or a
Definitive Security for an interest in this Global Security have been made:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Signature of	 
	 	 	 	 	 	 	 	 	 	 	Principal Amount of	 	 	authorized	 
	 	 	Amount of decrease	 	 	Amount of increase	 	 	this Global	 	 	signatory of	 
	 	 	in Principal Amount	 	 	in Principal Amount	 	 	Security following	 	 	Trustee or	 
	 	 	of this Global	 	 	of this Global	 	 	such decrease or	 	 	Securities	 
	Date of Exchange	 	Security	 	 	Security	 	 	increase	 	 	Custodian	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT A

[FORM OF FACE OF SECURITY]

WATSON PHARMACEUTICALS, INC.

[Global Securities Legend]

THIS GLOBAL SECURITY IS HELD BY AND REGISTERED IN THE NAME OF THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS SECURITY), IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THIS
GLOBAL SECURITY MAY BE EXCHANGED PURSUANT TO SECTION 203(a) OF THE INDENTURE, (II) THIS GLOBAL
SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 309 OF THE INDENTURE
AND (III) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.

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.

A- 1

 

[Form of Face of Security]

WATSON PHARMACEUTICALS, INC.

[Designation of Series]

CUSIP No.                    

[Other No.                    ]

No.                           $                     

          Watson Pharmaceuticals, Inc., a corporation duly organized and existing under the laws of the
State of Nevada (herein called the “Company”, which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay to                    , or registered
assigns, the principal sum of           Dollars on          [if the Security is to bear interest prior to Maturity,
insert ?, and to pay interest thereon from                    or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, semi-annually on                    
and                    in each year, commencing                    , to the Persons in whose names the Securities are registered at the close of business on
the immediately preceding          or          , as the case may be, at the rate of     % per
annum, until the principal hereof is paid or made available for payment [if applicable, insert
? , provided, however that any principal and premium, and any such installment of interest,
which is overdue shall bear interest at the rate of     % per annum (to the extent that the
payment of such interest shall be legally enforceable), from the dates such amounts are due until
they are paid or made available for payment, and such interest shall be payable on demand). The
interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will,
as provided in such Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular Record Date for such
interest, which shall be the                    or                    (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holder of Securities of this series not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided in said
Indenture.][if the Security is not to bear interest prior to Maturity, insert ?. The
principal of this Security shall not bear interest except in the case of a default in payment of
principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue
principal and any overdue premium shall bear interest at the rate of     % per annum (to the
extent that the payment of such interest shall be legally enforceable), from the dates such amounts
are due until they are paid or made available for payment. Interest on any overdue principal or
premium shall be payable on demand. [Any such interest on overdue principal or premium which is
not paid on demand shall bear interest at the rate of     % per annum (to the extent that the
payment of such interest on interest shall be legally enforceable), from the date of

A- 2

 

such demand
until the amount so demanded is paid or made available for payment. Interest on any overdue interest shall be
payable on demand.]]

          Payment of the principal of (and premium, if any) and [if applicable, insert ? any such]
interest on this Security will be made at the office or agency of the Company maintained for that
purpose in The City of New York, New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private debts [if applicable,
insert ?; provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such address shall appear in
the Security Register].

          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 by manual signature, this Security shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

A- 3

 

          In Witness Whereof, the Company has caused this instrument to be duly executed.

	 	 	 	 	 
	 	WATSON PHARMACEUTICALS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Attest:

	 	 	 	 	 
	 	 	 
	
 	 	 
	Name:  	 	 	 
	Title:  	 	 	 

A- 4

 

	 	 	 	 	 

CERTIFICATE OF AUTHENTICATION

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

Dated:

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL 
ASSOCIATION, as Trustee

 	 
	 	By:  	
 	 
	 	 	Authorized Signatory 	 
	 	 	 	 

A- 5

 

	 	 	 	 	 

[Form of Reverse of Security]

          This Security is one of a duly authorized issue of securities of the Company (herein called
the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of          
        ,     
(herein called the “Indenture”, which term shall have the meaning assigned to it in such
instrument), between the Company and Wells Fargo Bank, National Association, as Trustee (herein
called the ‘“Trustee”, which term includes any successor trustee under the Indenture), and
reference is hereby made to the Indenture 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. This Security is one of the series designated on the face hereof [if applicable,
insert?, limited in aggregate principal amount to $          ].

          [If applicable, insert ? The Securities of this series are subject to redemption at any
time, upon not less than 15 days’ and not more than 60 days’ notice by mail, as a whole or from
time to time in part, at the election of the Company [if applicable, insert ? (provided,
however, that, if the Company shall have elected pursuant to the Indenture to defease [the entire
indebtedness of this Security] [or] [certain restrictive covenants and Events of Defaults with
respect to this Security], prior to making such election to redeem the Securities it shall have
deposited in trust amounts sufficient to pay the Redemption Price)], on any date prior to their
Stated Maturity at a Redemption Price equal to the greater of (i) 100% of the principal amount of
such Securities to be redeemed, and (ii) the sum of the present values of the Remaining Scheduled
Payments (as defined below) of the Securities to be redeemed, discounted to the Redemption Date on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate (as defined below) plus [     ] basis points, plus, accrued and unpaid interest thereon to the
Redemption Date. Notwithstanding the foregoing, installments of interest on the Securities that
are due and payable on interest payment dates falling on or prior to a Redemption Date will be
payable on the interest payment date to the registered holders as of the close of business on the
relevant record date according to the Securities and the Indenture.

          “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the
Securities to be redeemed that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Securities to be redeemed.

          “Comparable Treasury Price” means, with respect to any Redemption Date, (1) the average of the
bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of
its principal amount, on the third Business Day preceding such Redemption Date, as contained in the
daily statistical release, or any successor release, published by the Federal Reserve Bank of New
York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (2) if the
release, or any successor release, is not published or does not contain these prices on that
Business Day, (a) the average of the Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and lowest of the Reference

A- 6

 

Treasury Dealer Quotations, or (b) if the Company obtains fewer than four Reference Treasury Dealer
Quotations, the average of all of these quotations.

          “Independent Investment Banker” means the Reference Treasury Dealer appointed by the Company.

          “Reference Treasury Dealer” means the four primary U.S. government securities dealers
consisting of [ ] and their respective successors that the Company selects in connection with
the particular redemption, and their respective successors, provided that if at any time any of the
above is not a primary U.S. Government securities dealer, the Company will substitute that entity
with another nationally recognized investment banking firm that the Company selects that is a
primary U.S. Government securities dealer.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the trustee by such Reference Treasury Dealer at 3:30 p.m., New York City
time, on the third Business Day preceding such redemption date.

          “Remaining Scheduled Payments” means, with respect to each Security to be redeemed, the
remaining scheduled payments of the principal thereof and interest thereon that would be due after
the related Redemption Date for such redemption; provided, however, that, if such Redemption Date
is not an Interest Payment Date with respect to such note, the amount of the next succeeding
scheduled interest payment thereon will be reduced by the amount of interest accrued thereon to
such Redemption Date.

          “Treasury Rate” means, for any Redemption Date, the rate per annum equal to the semi-annual
equivalent yield to maturity, computed as the second business day immediately preceding that
redemption date, of the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price
for that Redemption Date.

          [If applicable, insert ? The Securities of this series are subject to redemption upon
not less than 30 days’ notice by mail, [if applicable, insert ? (1) on     in any year
commencing with the year     and ending with the year          through operation of the
sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)]
at any time [if applicable, insert ? on or after          ], as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed [if applicable, insert ? on or before          and if
redeemed] during the 12-month period beginning          of the years indicated,

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year	 	Redemption Price	 	 	Year	 	 	Redemption Price	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 

and thereafter at a Redemption Price equal to     % of the principal amount, together in the case
of any such redemption [if applicable, insert ? (whether through operation of the sinking
fund or
otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated

A- 7

 

Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the relevant Record
Dates referred to on the face hereof, all as provided in the Indenture.]

          [If applicable, insert ? The Securities of this series are subject to redemption upon
not less than 30 days’ notice by mail, (1) on          in any year commencing with the year
and ending with the year          through operation of the sinking fund for this series at
the Redemption Prices for redemption through operation of the sinking fund (expressed as
percentages of the principal amount) set forth in the table below, and (2) at any time [if
applicable, insert ? on or after          ], as a whole or in part, at the election of the
Company, at the Redemption Prices for redemption otherwise than through operation of the sinking
fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed
during the 12-month period beginning on          of the years indicated,

	 	 	 	 	 
	 	 	Redemption Price for	 	Redemption Price for
	 	 	Redemption through	 	Redemption Otherwise
	 	 	Operation of the	 	than through Operation of
	Year	 	Sinking Fund	 	the Sinking Fund
	 
	 	 	 	 

and thereafter at a Redemption Price equal to     % of the principal amount, together in the case
of any such redemption (whether through operation of the sinking fund or otherwise) with accrued
interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to
such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates referred to on the face
hereof, all as provided in the Indenture.]

          [If applicable, insert ? Notwithstanding the foregoing, the Company may not, prior to
        , redeem any Securities of this series as contemplated by [if applicable, insert ?
Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation
by the application, directly or indirectly, of moneys borrowed having an interest cost to the
Company (calculated in accordance with generally accepted financial practice) of less than     %
per annum.]

          [If applicable, insert ? The sinking fund for this series provides for the redemption on
in each year beginning with the year     and ending with the year     of [if
applicable, insert ? not less than $          (“mandatory sinking fund”) and not more than] $          
aggregate principal amount of Securities of this series. Securities of this series acquired or
redeemed by the Company otherwise than through [if applicable, insert ? mandatory] sinking
fund payments may be credited against subsequent [if applicable, insert ? mandatory] sinking
fund payments otherwise required to be made [if applicable, insert ?, in the inverse order in
which they become due].]

          [If the Security is subject to redemption of any kind, insert ? In the event of
redemption of this Security in part only, a new Security or Securities of this series and of like
tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.]

A- 8

 

          [If applicable, insert ? The Indenture contains provisions for defeasance at any time of
[the entire indebtedness of this Security] [or] [certain restrictive covenants and Events of
Default with respect to this Security] [, in each case] upon compliance with certain conditions set
forth in the Indenture.]

          [If the Security is not an Original Issue Discount Security, insert ? If an Event of
Default with respect to Securities of this series shall occur and be continuing, the principal of
the Securities of this series may be declared due and payable in the manner and with the effect
provided in the Indenture.]

          [If the Security is an Original Issue Discount Security, insert ? If an Event of Default
with respect to Securities of this series shall occur and be continuing, an amount of principal of
the Securities of this series may be declared due and payable in the manner and with the effect
provided in the Indenture. Such amount shall be equal to ? insert formula for determining
the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of
interest on any overdue principal, premium and interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company’s obligations in respect
of the payment of the principal of and premium and interest, if any, on the Securities of this
series 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 of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains provisions permitting
the Holders of specified percentages in principal amount of the Securities of each series at the
time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this 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
have previously given the Trustee written notice of a continuing Event of Default with respect to
the Securities of this series, the Holders of not less than 25% in principal amount of the
Securities of this series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered the Trustee
indemnity or security reasonably satisfactory to it, and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at the time 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

A- 9

 

principal hereof or any premium or interest hereon on or after the respective due dates
expressed herein.

          No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the principal of and any premium and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.

          As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security may be registered and this Security may be exchanged as provided in the
Indenture.

          The Securities of this series are issuable only in registered form without coupons in
denominations of $2,000 and integral multiples of $1,000 in excess thereof.

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

          Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

          The Securities of this series shall be governed by and construed in accordance with the laws
of the State of New York (including without limitation Section 5-1401 of the New York General
Obligations Law or any successor to such statute). The Trustee and the Company agree to submit to
the non-exclusive jurisdiction of any United States federal or state court located in the borough
of Manhattan, in the city of New York in any action or proceeding arising out of or relating to the
Securities.

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

A- 10

 

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to:

 
 (Insert assignee’s social security or tax I.D. no.)

 

 

 

 
 (Print or type assignee’s name, address and zip code)

and irrevocably appoint                                         as agent to
transfer this Security on the books of the Company. The agent may substitute another to act for
him.

	 	 	 
	Your Signature:
	 	 
	 

	 	 
	 

	 	(Sign exactly as your name appears on the other side of this Security)

	 	 	 
	Your Name:
	 	 
	 

	 	 

	 	 	 	 
	Date:
	 	 
	 

	 	 

	 	 	 	 	 
	Signature Guarantee:

	 	*
	 

	 	 

*NOTICE: The Signature must be guaranteed by an Institution which is a member of one of the
following recognized signature Guarantee Programs: (i) The Securities Transfer Agent Medallion
Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Trustee.

A- 11

 

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY

The following exchanges of an interest in this Global Security for an interest in another Global
Security or for a Definitive Security, or exchanges of an interest in another Global Security or a
Definitive Security for an interest in this Global Security have been made:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Signature of	 
	 	 	 	 	 	 	 	 	 	 	Principal Amount of	 	 	authorized	 
	 	 	Amount of decrease	 	 	Amount of increase	 	 	this Global	 	 	signatory of	 
	 	 	in Principal Amount	 	 	in Principal Amount	 	 	Security following	 	 	Trustee or	 
	 	 	of this Global	 	 	of this Global	 	 	such decrease or	 	 	Securities	 
	Date of Exchange	 	Security	 	 	Security	 	 	increase	 	 	Custodian	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

A- 12exv10w3

EXHIBIT 10.3

SECOND AMENDED AND RESTATED ESCROW AGREEMENT

LegacyTexas Bank

100 Throckmorton Suite 1510

Fort Worth, Texas 76102

			
	     Re:	 	United Development Funding IV

Ladies and Gentlemen:

     United Development Funding IV, a Maryland real estate investment trust (the “Trust”),
will issue in a public offering (the “Offering”) common shares of beneficial interest (the
“Shares”) pursuant to a Registration Statement on Form S-11 filed by the Trust with the
Securities and Exchange Commission and a Prospectus included therein, as may be amended or
supplemented from time to time (the “Prospectus”). Realty Capital Securities, LLC, a
Delaware limited liability company (the “Dealer Manager”), will act as the exclusive dealer
manager for the Offering. The Shares will be offered by the Dealer Manager and select members
(each being referred to herein as a “Dealer” and collectively as the “Dealers”) of
the Financial Industry Regulatory Authority (FINRA) on a reasonable best efforts basis. The Trust
and the Dealer Manager are entering into this Second Amended and Restated Escrow Agreement (the
“Agreement”) to set forth the terms on which LegacyTexas Bank (the “Escrow Agent”),
will hold and disburse the proceeds from subscriptions for the purchase of the Shares in the
Offering until such time as (i) in the case of subscriptions received from all nonaffiliates of the
Trust, the Trust has received and accepted subscriptions for Shares resulting in total minimum
capital raised of $1,000,000 (the “Required Capital”) and, thereafter, until otherwise
directed by the Trust; (ii) in the case of subscriptions received from residents of Pennsylvania
(“Pennsylvania Subscribers”), the Trust has received subscriptions for Shares from
nonaffiliates of the Trust resulting in total minimum capital raised of $35,000,000 (the
“Pennsylvania Required Capital”); (iii) in the case of subscriptions received from
residents of Nebraska (“Nebraska Subscribers”), the Trust has received subscriptions for
Shares from nonaffiliates of the Trust resulting in total minimum capital raised of $5,000,000 (the
“Nebraska Required Capital”); and (iv) in the case of subscriptions received from residents
of New York (“New York Subscribers”), the Trust has received subscriptions for Shares from
nonaffiliates of the Trust resulting in total minimum capital raised of $2,500,000 (the “New
York Required Capital”).

     This Agreement amends, restates and replaces in full that certain Amended and Restated Escrow
Agreement, dated as of December 8, 2008, by and between the Trust and the Escrow Agent, which
itself amended, restated and replaced in full that certain Escrow Agreement, dated as of September
9, 2008, by and between the Trust and the Escrow Agent. The Trust hereby appoints LegacyTexas Bank
as Escrow Agent for purposes of holding the proceeds from the subscriptions for the Shares, on the
terms and conditions hereinafter set forth:

     1. Until such time as the Trust has received subscriptions for Shares resulting in total
minimum capital raised equal to the Required Capital and such funds are disbursed from the Escrow
Account, as hereinafter defined, in accordance with paragraph 3(a) hereof, persons subscribing to
purchase the Shares (the “Subscribers”) will be instructed by the Dealer Manager or any
Dealer to remit the purchase price in the form of checks, drafts, wires, Automated Clearing House
(ACH) or money orders (hereinafter referred to as “Instruments of Payment”) payable to the
order of “LegacyTexas Bank, Escrow Agent for United Development Funding IV.” Any Instruments of
Payment made payable to a party other than the Escrow Agent shall be returned to the Dealer Manager
or the Dealer who submitted

 

such Instrument of Payment. By the end of the next business day after receipt of any Instruments
of Payment, the Dealer Manager or the Dealer will send to the Escrow Agent such Instruments of
Payment along with each Subscriber’s name, address, executed IRS Form W-9, number of Shares
purchased and purchase price remitted and any other subscription documentation (the
“Subscription Materials”). The Dealer Manager or the Dealer also will provide in writing
to Escrow Agent, concurrently with the Subscription Materials and the Instruments of Payment,
instructions regarding the escrow account (i.e., the Escrow Account, Pennsylvania Escrow Account,
Nebraska Escrow Account or New York Escrow Account, as such terms are defined below) in which to
deposit the proceeds of each Instrument of Payment (it being understood that absent any written
directions to the contrary, Escrow Agent shall deposit such proceeds in the Escrow Account) and
notification whether the applicable Subscriber is an affiliate of the Trust (it being understood
that absent any written notification to the contrary, Escrow Agent shall presume that each
Subscriber is not an affiliate of the Trust). The Escrow Agent shall notify the Trust and the
Dealer Manager from time to time during the term of this Agreement of the names of any Subscribers
for whom the Escrow Agent has not received a properly executed IRS Form W-9, to the extent Escrow
Agent is able to make such determination. The Escrow Agent will keep and maintain the Subscription
Materials and will deposit the Instruments of Payment from such Subscribers into an
interest-bearing deposit account entitled “Escrow Account for the Benefit of Subscribers for Shares
of United Development Funding IV” or such similar designation as the parties may agree (the
“Escrow Account”) until such Escrow Account has closed pursuant to paragraph 3(a) hereof.
Instruments of Payment received from Pennsylvania Subscribers (as identified as such by the Trust
or the Dealer Manager) shall be accounted for separately in a subaccount entitled “Escrow Account
for the Benefit of Pennsylvania Subscribers” (the “Pennsylvania Escrow Account”), until
such Pennsylvania Escrow Account has closed pursuant to paragraph 3(a) hereof. Instruments of
Payment received from Nebraska Subscribers (as identified as such by the Trust or the Dealer
Manager) shall be accounted for separately in a subaccount entitled “Escrow Account for the Benefit
of Nebraska Subscribers” (the “Nebraska Escrow Account”), until such Nebraska Escrow
Account has closed pursuant to paragraph 3(a) hereof. Instruments of Payment received from New
York Subscribers (as identified as such by the Trust or the Dealer Manager) shall be accounted for
separately in a subaccount entitled “Escrow Account for the Benefit of New York Subscribers” (the
“New York Escrow Account”), until such New York Escrow Account has closed pursuant to
paragraph 3(a) hereof. Each of the Escrow Account, the Pennsylvania Escrow Account, the Nebraska
Escrow Account and the New York Escrow Account will be established and maintained in such a way as
to permit the interest income calculations described in paragraph 6. The Escrow Agent will send
copies of all Subscription Materials and copies of all Instruments of Payment to DST Systems, Inc.,
430 West 7th Street, Kansas City, Missouri 64105 promptly after receipt.

     2. The Escrow Agent will promptly process for collection the Instruments of Payment upon
deposit into the Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account or New York
Escrow Account, as applicable. Deposits will be held in the Escrow Account, the Pennsylvania
Escrow Account, the Nebraska Escrow Account and the New York Escrow Account, as applicable, until
such funds are disbursed in accordance with paragraph 3 hereof. It is the intention of the Trust
and the Escrow Agent that, except as set forth herein, prior to disbursement of the funds deposited
in the Escrow Account, the Pennsylvania Escrow Account, the Nebraska Escrow Account or the New York
Escrow Account, such funds will not be subject to claims by creditors of the Trust, the Dealer
Manager, any Dealer or any of their affiliates; provided however, that such intention does not
constitute any representation by either the Trust or the Escrow Agent that the funds will not be
subject to such claims. If any of the Instruments of Payment are returned to the Escrow Agent for
nonpayment prior to Escrow Agent’s receipt of collected funds from Instruments of Payment in an
aggregate amount which is less than the Required Capital or, in connection with subscriptions from
Pennsylvania Subscribers, the Pennsylvania Required Capital or, in connection with subscriptions
from Nebraska Subscribers, the Nebraska Required Capital or, in connection with subscriptions from
New York Subscribers, the New York Required Capital, the Escrow Agent shall promptly notify the
Trust and the Dealer Manager of such nonpayment, and is authorized to debit the Escrow Account, the
Pennsylvania Escrow Account, the Nebraska Escrow Account or the New

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York Escrow Account, as applicable, in the amount of such returned payment as well as any interest
earned on the amount of such payment.

     3. (a) Subject to the provisions of paragraphs 3(b)-3(i) below:

          (i) Once collected funds from Instruments of Payment in the Escrow Account are an
amount equal to or greater than the Required Capital, the Escrow Agent shall promptly notify
the Trust and the Dealer Manager and, upon receiving written instruction from both the Trust
and the Dealer Manager, (A) disburse to the Trust, by check, ACH or wire transfer, the funds
in the Escrow Account representing the gross purchase price for the Shares in an amount
directed by the Trust in such written notice, and (B) disburse to the Subscribers or the
Trust, as applicable, any interest thereon pursuant to the provisions of paragraph 3(f).
For purposes of this Agreement, the term “collected funds” shall mean all funds received by
the Escrow Agent that have cleared normal banking channels and are in the form of cash or a
cash equivalent. After such time, the Escrow Account shall remain open and the Trust and
the Dealer Manager shall continue to cause subscriptions for the Shares that are not to be
deposited in the Pennsylvania Escrow Account, the Nebraska Escrow Account or the New York
Escrow Account to be deposited therein until the Trust informs the Escrow Agent in writing
to close the Escrow Account (prior to providing such notice to the Escrow Agent, the Trust
shall provide the Dealer Manager at least 5 days written notice of its intent to close the
Escrow Account), and thereafter any Subscription Materials and Instruments of Payment
received by the Escrow Agent from Subscribers other than Pennsylvania Subscribers, Nebraska
Subscribers and New York Subscribers shall be forwarded directly to the Trust; provided
that, if the Escrow Account remains open, until the Escrow Account is closed as set forth
herein, the funds and interest held therein shall be disbursed as set forth above at any
time upon written instruction from both the Trust and the Dealer Manager.

          (ii) Regardless of any release of funds from the Escrow Account, the Dealer Manager or
the Dealer shall continue to forward to the Escrow Agent Subscription Materials and
Instruments of Payment received from New York Subscribers and such Subscription Materials
will be kept and maintained by the Escrow Agent and such Instruments of Payment will be
deposited into the New York Escrow Account by the Escrow Agent until such time as both the
Trust and the Dealer Manager notify the Escrow Agent in writing that total subscription
proceeds (including the amount then in the New York Escrow Account) equal or exceed the New
York Required Capital. Upon the receipt of such written instruction from both the Trust and
the Dealer Manager, the Escrow Agent shall (A) disburse to the Trust, by check, ACH or wire
transfer, the funds then in the New York Escrow Account representing the gross purchase
price for the Shares in an amount directed by the Trust in such written notice, and (B)
disburse to the New York Subscribers or the Trust, as applicable, any interest thereon
pursuant to the provisions of paragraph 3(f). Following such disbursements, the Escrow
Agent shall close the New York Escrow Account, and thereafter any Subscription Materials and
Instruments of Payment received by the Escrow Agent from New York Subscribers shall be, in
the case of Subscription Materials received from New York Subscribers, kept and maintained
by the Escrow Agent and, in the case of Instruments of Payment received from New York
Subscribers, deposited directly to the Escrow Account (or to the Trust, if it has closed the
Escrow Account, as instructed in writing by the Trust).

          (iii) Regardless of any release of funds from the Escrow Account or the New York Escrow
Account, the Dealer Manager or the Dealer shall continue to forward to the Escrow Agent
Subscription Materials and Instruments of Payment received from Nebraska Subscribers and
such Subscription Materials will be kept and maintained by the Escrow Agent and such
Instruments of Payment will be deposited into the Nebraska Escrow Account until such time as
both the Trust and the Dealer Manager notify the Escrow Agent in writing that total
subscription

-3-

 

proceeds (including the amount then in the Nebraska Escrow Account) equal or exceed the
Nebraska Required Capital. Upon the receipt of such written instruction from both the Trust
and the Dealer Manager, the Escrow Agent shall (A) provide to the Trust for delivery to the
Director of Banking and Finance of the State of Nebraska an affidavit in substantially the
form attached hereto as Exhibit A which states that all of the conditions of this Agreement
relating to the Escrow Account which are capable of being satisfied as of the date of such
affidavit have been met (it being understood that Escrow Agent shall provide such affidavit
only in the event that in Escrow Agent’s sole discretion all such conditions of this
Agreement have been met), (B) disburse to the Trust, by check, ACH or wire transfer, the
funds then in the Nebraska Escrow Account representing the gross purchase price for the
Shares in an amount directed by the Trust in such written notice, and (C) disburse to the
Nebraska Subscribers or the Trust, as applicable, any interest thereon pursuant to the
provisions of paragraph 3(f). Following such disbursements, the Escrow Agent shall close
the Nebraska Escrow Account, and thereafter any Subscription Materials and Instruments of
Payment received by the Escrow Agent from Nebraska Subscribers shall be, in the case of
Subscription Materials received from Nebraska Subscribers, kept and maintained by the Escrow
Agent and, in the case of Instruments of Payment received from Nebraska Subscribers,
deposited directly to the Escrow Account (or to the Trust, if it has closed the Escrow
Account, as instructed in writing by the Trust).

          (iv) Regardless of any release of funds from the Escrow Account, the New York Escrow
Account or the Nebraska Escrow Account, the Dealer Manager or the Dealer shall continue to
forward to the Escrow Agent Subscription Materials and Instruments of Payment received from
Pennsylvania Subscribers and such Subscription Materials will be kept and maintained by the
Escrow Agent and such Instruments of Payment will be deposited into the Pennsylvania Escrow
Account until such time as both the Trust and the Dealer Manager notify the Escrow Agent in
writing that total subscription proceeds (including the amount then in the Pennsylvania
Escrow Account) equal or exceed the Pennsylvania Required Capital. Upon the receipt of such
written instruction from both the Trust and the Dealer Manager, the Escrow Agent shall (A)
disburse to the Trust, by check, ACH or wire transfer, the funds then in the Pennsylvania
Escrow Account representing the gross purchase price for the Shares in an amount directed by
the Trust in such written notice, and (B) disburse to the Pennsylvania Subscribers or the
Trust, as applicable, any interest thereon pursuant to the provisions of paragraph 3(f).
Following such disbursements, the Escrow Agent shall close the Pennsylvania Escrow Account,
and thereafter any Subscription Materials and Instruments of Payment received by the Escrow
Agent from Pennsylvania Subscribers shall be, in the case of Subscription Materials received
from Pennsylvania Subscribers, kept and maintained by the Escrow Agent and, in the case of
Instruments of Payment received from Pennsylvania Subscribers, deposited directly to the
Escrow Account (or to the Trust, if it has closed the Escrow Account, as instructed in
writing by the Trust).

          (b) At the close of business on the date that is one year following commencement of the
Offering (the “Expiration Date”) (such commencement date shall be promptly provided to the
Escrow Agent by the Trust after the commencement of the Offering), the Escrow Agent shall promptly
notify the Trust and the Dealer Manager (the “Expiration Notice”) if it is not in receipt
of Subscription Materials received on or before the Expiration Date and Instruments of Payment
dated not later than the Expiration Date in the aggregate amount that equals or exceeds the
Required Capital (from all sources but exclusive of any funds received from subscriptions for
Shares from entities that are affiliated with the Trust). Following the tenth calendar day after
the date of the Expiration Notice, the Escrow Agent shall promptly return directly to each
Subscriber the collected funds deposited in the Escrow Account, the Pennsylvania Escrow Account,
the Nebraska Escrow Account and the New York Escrow Account on behalf of such Subscriber, or shall
return the Instruments of Payment delivered but not yet processed for collection prior to such
time, together with interest in the amounts calculated pursuant to paragraph 6 for each Subscriber,

-4-

 

at the address provided in the Subscription Materials. However, the Escrow Agent shall not be
required to remit any payments until funds represented by such payments have been collected.

          (c) Notwithstanding subparagraphs 3(a) and 3(b) above, if on or before the close of business
on such date that is 120 days after commencement of the Offering (the “Initial Escrow
Period”) (such commencement date shall be promptly provided to the Escrow Agent by the Trust
after the commencement of the Offering), Escrow Agent is not in receipt of Instruments of Payment
dated not later than that date from nonaffiliated sources in an amount that equals or exceeds the
Pennsylvania Required Capital, the Escrow Agent shall promptly notify the Trust and the Dealer
Manager. Thereafter, the Trust shall send to each Pennsylvania Subscriber by certified mail within
ten (10) calendar days after the end of the Initial Escrow period a notification in the form of
Exhibit B. If, pursuant to such notification, a Pennsylvania Subscriber requests the return of his
or her subscription funds within ten (10) calendar days after receipt of the notification (the
“Request Period”), the Escrow Agent shall, within fifteen (15) calendar days after receipt
of such request from the Investor, deliver directly to each such Pennsylvania Subscriber the
collected funds from Instruments of Payment deposited in the Pennsylvania Escrow Account on behalf
of such Pennsylvania Subscriber or shall return the Instruments of Payment delivered but not yet
processed for collection prior to such time to the address provided by the Trust, together with
interest income in the amounts calculated pursuant to paragraph 6. However, the Escrow Agent shall
not be required to remit such payments until the Escrow Agent has collected funds represented by
such payments.

          (d) The subscription funds of Pennsylvania Subscribers who do not request the return of their
subscription funds within the Request Period shall remain in the Pennsylvania Escrow Account for
successive 120-day escrow periods (a “Successive Escrow Period”), each commencing
automatically upon the termination of the Initial Escrow Period or prior Successive Escrow Period,
as applicable, and the Trust and Escrow Agent shall follow the notification and payment procedure
set forth in paragraph 3(c) above with respect to the Initial Escrow Period for each Successive
Escrow Period until the occurrence of the earliest of (i) the Expiration Date, (ii) such time as
the Trust notifies the Escrow Agent in writing pursuant to paragraph 3(a)(iv) that total
subscription proceeds (including the amount then in the Pennsylvania Escrow Account) equal or
exceed the Pennsylvania Required Capital and the disbursement of the Pennsylvania Escrow Account on
the terms specified herein, or (iii) all funds held in the Pennsylvania Escrow Account having been
returned to the Pennsylvania Subscribers in accordance with the provisions hereof.

          (e) If the Trust notifies the Escrow Agent in writing that it rejects any subscription for
which the Escrow Agent has collected funds, the Escrow Agent shall promptly disburse out of the
Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account or New York Escrow Account, as
applicable, the amount set forth in such notification to the Subscriber also set forth in such
notification. If the Trust rejects any subscription for which the Escrow Agent has not yet
collected funds but has submitted the Subscriber’s Instrument of Payment for collection, the Escrow
Agent shall promptly return the funds in the amount of the Subscriber’s Instrument of Payment to
the rejected Subscriber after such funds have been collected. If the Escrow Agent has not yet
submitted a rejected Subscriber’s Instrument of Payment for collection, the Escrow Agent shall
promptly remit the Subscriber’s Instrument of Payment directly to the Subscriber. The Trust
acknowledges and agrees that Escrow Agent has no responsibility for accepting, rejecting or
approving subscriptions. If the Offering is terminated prior to the receipt of Subscription
Materials and Instruments of Payment from nonaffiliated sources in an amount that equals or exceeds
the Pennsylvania Required Capital, Nebraska Required Capital or New York Required Capital, any
subscriptions held in the Pennsylvania Escrow Account, the Nebraska Escrow Account or the New York
Escrow Account, respectively, will be deemed rejected by the Trust, and the subscription funds held
in such escrow accounts, if any, will be remitted to the respective Subscribers in accordance with
this paragraph 3(e), together with interest income in the amounts calculated pursuant to paragraph
6.

-5-

 

          (f) At any time after funds are disbursed upon the Trust’s and the Dealer Manager’s
instructions pursuant to paragraph 3(a) above, on the tenth day following the date of receipt of
such instruction, the Escrow Agent shall promptly disburse directly to each Subscriber out of the
Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account or New York Escrow Account, as
applicable, the amount of the interest payable to such Subscriber. However, the Escrow Agent shall
not be required to remit any payments until the Escrow Agent has collected funds represented by
such payments. The forgoing notwithstanding, interest, if any, earned on accepted subscription
proceeds will be payable to a Subscriber only if the Subscriber’s funds have been held in escrow by
the Escrow Agent for at least 35 days. Interest, if any, earned on accepted subscription proceeds
of Subscribers’ funds held less than 35 days will be paid to the Trust. The Escrow Agent may use
such reasonable allocation methods as it determines to be equitable in allocating interest income
among Subscribers and as between the Subscribers and the Trust if the funds bear interest at
multiple rates during the escrow period. The Trust agrees to accept Escrow Agent’s calculation of
any interest hereunder absent manifest mathematical error. As used in this Agreement,
“subscription proceeds” shall mean the proceeds from the applicable Instruments of Payment.

          (h) Any disbursement of funds by the Escrow Agent to Subscribers shall be made to the persons
named in the Subscription Materials at the address stated therein by cashiers’ check mailed by
United States mail.

          (i) If at the time of any required disbursement of interest to a Subscriber, the Escrow Agent
has not received a properly executed IRS Form W-9, the Escrow Agent shall withhold from any
interest distribution such amount as may be required to be withheld by law and remit such withheld
amounts to the Internal Revenue Service in timely fashion.

     4. Prior to the disbursement of funds deposited in the Escrow Account, the Pennsylvania Escrow
Account, the Nebraska Escrow Account, or the New York Escrow Account in accordance with the
provisions of paragraph 3 hereof, the Escrow Agent shall invest all of the funds deposited as well
as earnings and interest derived therefrom in the Escrow Account, the Pennsylvania Escrow Account,
the Nebraska Escrow Account, or the New York Escrow Account, as applicable, in bank money market
accounts maintained with the Escrow Agent.

     It is hereby expressly agreed and stipulated by the parties hereto that the Escrow Agent shall
not be required to exercise any discretion hereunder and shall have no investment or management
responsibility and, accordingly, shall have no duty to, or liability for its failure to, provide
investment recommendations or investment advice to the parties hereto. It is the intention of the
parties hereto that the Escrow Agent will never be required to use, advance or risk its own funds
or otherwise incur financial liability in the performance of any of its duties or the exercise of
any of its rights and powers hereunder.

     5. The Escrow Agent is entitled to rely upon written instructions received from the Trust or
the Dealer Manager, unless the Escrow Agent has actual knowledge that such instructions are not
valid or genuine; provided that, if in the Escrow Agent’s opinion, any instructions from the Trust
or the Dealer Manager are unclear, the Escrow Agent may request clarification from the Trust or the
Dealer Manager, as the case may be, prior to taking any action, and if such instructions continue
to be unclear, the Escrow Agent may rely upon written instructions from the Trust’s or the Dealer
Manager’s legal counsel, as the case may be, in distributing or continuing to hold any funds or may
take any other action authorized hereunder. However, the Escrow Agent shall not be required to
disburse any funds attributable to Instruments of Payment that have not been processed for
collection, until such funds are collected, and then shall disburse such funds in compliance with
the disbursement instructions from both the Trust and the Dealer Manager.

     6. If the Offering terminates prior to receipt of the Required Capital (such termination date
shall be promptly provided to the Escrow Agent by the Trust), or one or more Pennsylvania
Subscribers

-6-

 

elects to have his or her subscription proceeds returned in accordance with paragraph 3, interest
income earned on subscription proceeds deposited in the Escrow Account (the “Escrow
Income”), the Pennsylvania Escrow Account (the “Pennsylvania Escrow Income”), the
Nebraska Escrow Account (the “Nebraska Escrow Income”) and the New York Escrow Account (the
“New York Escrow Income”), as applicable, shall be remitted to Subscribers, or to the Trust
if the applicable Subscriber’s funds have been held in escrow by the Escrow Agent for less than 35
days in accordance with paragraph 3 and without any deductions for escrow expenses. For each
Subscriber who has deposited funds that have been held in escrow by the Escrow Agent for at least
35 days, such Subscriber’s pro rata portion of Escrow Income shall be determined as follows: the
total amount of Escrow Income minus interest earned on accepted subscription proceeds held by the
Escrow Agent for less than 35 days shall be multiplied by a fraction, (a) the numerator of which is
determined by multiplying the number of Shares that were subscribed for by the Subscriber times the
number of days the Subscriber’s proceeds were held in the Escrow Account prior to the date of
disbursement, and (b) the denominator of which is the total of the numerators for all Subscribers
in such account who have deposited funds that have been held in escrow by the Escrow Agent for at
least 35 days. The Escrow Agent shall remit all such Escrow Income, Pennsylvania Escrow Income,
Nebraska Escrow Income and New York Escrow Income in accordance with paragraph 3. If the Trust
chooses to leave the Escrow Account open after receiving the Required Capital, then it shall make
regular acceptances of subscriptions therein, but no less frequently than monthly, and the Escrow
Income from the last such acceptance shall be calculated and remitted to the Subscribers or the
Trust, as applicable, pursuant to the provisions of paragraph 3(f). The Trust agrees to accept
Escrow Agent’s calculation of the Escrow Income, Pennsylvania Escrow Income, Nebraska Escrow
Income, New York Escrow Income, and any pro rata portion thereof, absent manifest mathematical
error.

     7. Escrow Agent shall be paid by the Trust for its services to be rendered hereunder in
accordance with Exhibit C attached hereto. Escrow Agent acknowledges that the Dealer Manager has
no obligation to pay the Escrow Agent in accordance with Exhibit C attached hereto or otherwise.

     8. The Escrow Agent will be liable as a depository only and will not be responsible for the
sufficiency or accuracy of the form, execution or validity of any check or any other document
delivered to the Escrow Agent hereunder or any description of the property or other thing contained
therein or the identity, authority or rights of the persons executing or delivering or purporting
to execute or deliver any such document. The Escrow Agent’s duties hereunder are limited to the
safekeeping of the assets, instruments or other documents received and the delivery of the same in
accordance with this Agreement. The Escrow Agent will not be liable for any act or omission done
in good faith, or for any claim, demand, loss or damage made or suffered by any party to this
Agreement, excepting such as may arise through or be caused by the Escrow Agent’s misconduct or
negligence. The Escrow Agent is authorized to rely on any document believed by the Escrow Agent to
be authentic in making any delivery of funds or property hereunder. Escrow Agent shall not be
required to comply with any direction or instruction other than those specifically described
herein.

     9. In accepting any funds or documents delivered hereunder, it is agreed and understood by the
undersigned that the Escrow Agent will not be called on to construe any contract or instrument
deposited herewith, and in the event of a dispute will be required to act in respect to the deposit
herein made only on the consent in writing of the undersigned. In the failure of such consent, the
Escrow Agent reserves the right to hold any money in its possession, and all papers in connection
with or concerning this escrow, until a mutual agreement in writing has been reached between all of
said parties and delivered to the Escrow Agent or until delivery is legally authorized and ordered
by final judgment or decree of a court of competent jurisdiction. If the Escrow Agent obeys or
complies with any judgment, order or decree of a court of competent jurisdiction, the Escrow Agent
will not be liable to any of the parties hereto nor to any other person, firm or corporation by
reason of such compliance, notwithstanding any such judgment, order or decree being subsequently
reversed, modified, annulled, set aside or vacated.

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     10. In addition to Escrow Agent’s other rights herein, in the event any contest, dispute,
conflicting claim or litigation arises or exists in connection with this Agreement or Escrow Agent
is otherwise in doubt as to what action to take hereunder, then in such event, Escrow Agent may, in
its sole discretion, (i) continue to retain the funds as Escrow Agent during the pendency of any
such contest, dispute, conflicting claim or litigation or resolution of such matter creating doubt
as to what action Escrow Agent is to take hereunder, provided that both the Trust and the Dealer
Manager consent to Escrow Agent retaining such funds or (ii) interplead the funds held in the
Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account and New York Escrow Account
into the office of the court clerk of Dallas County, State of Texas, in which event, Escrow Agent
shall be entitled to be repaid its expenses, including court costs and attorneys’ fees that it
incurs as a result thereof, and in which event this Agreement shall be deemed terminated. Each of
the Trust and the Dealer Manager consents and agrees to the jurisdiction of the District Court of
Dallas County, Texas for such purpose.

     11. If at any time Escrow Agent is served with any judicial or administrative order, judgment,
decree, writ or other form of final judicial or administrative process which in any way affects the
property held in escrow hereunder (the “Escrow Property”) (including but not limited to
orders of attachment or garnishment or other forms of levies or injunctions or stays relating to
the transfer of Escrow Property), Escrow Agent is authorized to comply therewith in any manner as
it or its legal counsel of its own choosing deems appropriate; and if Escrow Agent complies with
any such judicial or administrative order, judgment, decree, writ or other form of judicial or
administrative process, Escrow Agent shall not be liable to any of the parties hereto or to any
other person or entity even though such order, judgment, decree, writ or process may be
subsequently modified or vacated or otherwise determined to have been without legal force or
effect.

     12. (a) Escrow Agent shall not be liable for any action taken or omitted or for any loss or
injury resulting from its actions or its performance or lack of performance of its duties hereunder
in the absence of negligence or misconduct on its part. In no event shall Escrow Agent be liable
(i) for acting in accordance with or relying upon any instruction, notice, demand, certificate or
document from the Trust pursuant to paragraph 5 hereof (ii) for any consequential, punitive or
special damages, (iii) for the acts or omissions of its nominees, correspondents, designees,
subagents or custodians, provided that the same have been selected by the Escrow Agent with
reasonable care, or (iv) for an amount in excess of the value of the collected funds in the Escrow
Account, the New York Escrow Account, the Nebraska Escrow Account and the Pennsylvania Escrow
Account, valued as of the date of deposit.

          (b) Escrow Agent shall not incur any liability for not performing any act or fulfilling any
duty, obligation or responsibility hereunder by reason of any occurrence beyond the reasonable
control of Escrow Agent (including but not limited to any act or provision of any present or future
law or regulation or governmental authority, any act of God or war, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication facility).

     13. Escrow Agent shall not be responsible in any respect for the form, execution, validity,
value or genuineness of documents or securities deposited hereunder, or for any description
therein, or for the identity, authority or rights of persons executing or delivering or purporting
to execute or deliver any such document, security or endorsement.

     14. THE TRUST SHALL BE LIABLE FOR AND SHALL REIMBURSE AND INDEMNIFY ESCROW AGENT, ITS
OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES AND AGENTS (EACH HEREIN CALLED AN “INDEMNIFIED
PARTY”) AND HOLD THE INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
LIABILITIES, COSTS, DAMAGES OR EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES)
(COLLECTIVELY, “LOSSES”) ARISING FROM OR IN CONNECTION WITH OR RELATED TO THIS AGREEMENT OR
BEING ESCROW AGENT HEREUNDER (INCLUDING BUT NOT LIMITED TO LOSSES INCURRED BY THE INDEMNIFIED
PARTIES IN CONNECTION

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WITH THE SUBMISSION OF THE AFFIDAVIT ATTACHED HERETO AS EXHIBIT A TO THE DIRECTOR OF BANKING AND
FINANCE OF THE STATE OF NEBRASKA); PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL REQUIRE
THE INDEMNIFIED PARTIES TO BE INDEMNIFIED FOR LOSSES CAUSED BY THE INDEMNIFIED PARTIES’ NEGLIGENCE
OR MISCONDUCT.

     15. All communications and notices (each a “Notice”) required or permitted by this
Agreement shall be in writing and shall be delivered personally or by messenger or sent by
overnight delivery service or via telecopy or other electronic transmission, in all cases addressed
to the person for whom it is intended at such person’s address set forth below or to such other
address as a party shall have designated by notice in writing to the other party in the manner
provided by this paragraph:

(a) if to the Trust:

United Development Funding IV

The United Development Funding Building

Suite 100

1301 Municipal Way

Grapevine, Texas 76051

Attention: Cara Obert

(b) if to the Dealer Manager:

Realty Capital Securities, LLC

Three Copley Place, Suite 3300B

Boston, Massachusetts 02116

Attention:      Louisa Quarto

                      Managing Director

(c) if to the Escrow Agent:

LegacyTexas Bank

5000 Legacy Drive

Suite 200 (Second Floor)

Plano, Texas 75086

Attention: Dawn Velekei

Each party hereto may, from time to time, change the address to which Notices to it are to be
delivered or mailed hereunder by Notice in accordance herewith to the other parties. Each Notice
shall be deemed given and effective upon actual receipt (or refusal of receipt).

     16. This Agreement shall be governed by the laws of the State of Texas as to both
interpretation and performance without regard to the conflict of laws rules thereof.

     17. The provisions of this Agreement shall be binding upon the legal representatives,
successors, and assigns of the parties hereto.

     18. Each of the Trust and the Dealer Manager hereby acknowledges that LegacyTexas Bank is
serving as Escrow Agent only for the limited purposes herein set forth, and hereby agrees that it
will not represent or imply that, by serving as Escrow Agent hereunder or otherwise, it has
investigated the desirability or advisability of investment in the Trust or has approved, endorsed
or passed upon the merits of the Shares or the Trust or has in any way reviewed or endorsed any
disclosures made by the Trust relating thereto, nor shall the Trust use the name of the Escrow
Agent in any manner whatsoever in

-9-

 

connection with the offer or sale of the Shares other than by acknowledgment that it has agreed to
serve as Escrow Agent for the limited purposes herein set forth.

     19. This Agreement and any amendment hereto may be executed (including by facsimile
transmission) by the parties hereto with counterpart signature pages or in one or more
counterparts, each of which shall be deemed to be an original.

     20. The Escrow Agent shall be bound only by the terms of this Agreement with respect to the
subject matter of this Agreement and shall not be bound by or incur any liability in connection
with the subject matter of this Agreement with respect to any other agreements or understanding
between any other parties, whether or not the Escrow Agent has knowledge of any such agreements or
understandings.

     21. The Escrow Agent represents and warrants that it is a “bank,” as such term is defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as amended.

     22. The provisions set forth in paragraphs 7-20 and 23 herein shall survive the termination of
this Agreement and/or the resignation or removal of the Escrow Agent.

     23. In the event that any part of this Agreement is declared by any court or other judicial or
administrative body to be null, void, or unenforceable, said provision shall survive to the extent
it is not so declared, and all of the other provisions of this Agreement shall remain in full force
and effect.

     24. Unless otherwise provided in this Agreement, final termination of this Agreement shall
occur on the date that all funds held in the Escrow Account, the Pennsylvania Escrow Account, the
Nebraska Escrow Account and the New York Escrow Account are distributed either (a) to the Trust or
to Subscribers and the Trust has informed the Escrow Agent in writing to close the Escrow Account,
the Pennsylvania Escrow Account, the Nebraska Escrow Account and the New York Escrow Account
pursuant to paragraph 3 hereof or (b) to a successor escrow agent upon written instructions from
both the Trust and the Dealer Manager.

     25. This Agreement shall not be modified, waived, revoked, released or terminated unless
reduced to writing and signed by all parties hereto, unless otherwise provided herein.

     26. The Escrow Agent may resign at any time from its obligations under this Agreement by
providing written notice to the Trust and the Dealer Manager. Such resignation shall be effective
on the date specified in such notice, which shall be not less than thirty days after such written
notice has been given. The Escrow Agent shall have no responsibility for the appointment of a
successor escrow agent.

     27. The Escrow Agent may be removed for cause by the Trust by written notice to the Escrow
Agent and the Dealer Manager effective on the date specified in such written notice.

     28. The appointment of any successor escrow agent may occur only upon the acceptance of both
the Trust and the Dealer Manager, which acceptance shall not be unreasonably withheld, and upon the
written acceptance by the successor escrow agent of substantially all of the terms and conditions
of this Agreement.

     29. The Trust will provide the Escrow Agent a copy of the final Prospectus and any amendments
or supplements thereto, in each case within 5 days of first use by the Trust.

[Signature page follows]

-10-

 

     Agreed to as of the 20th day of August, 2009.

	 	 	 	 	 	 	 
	 	 	UNITED DEVELOPMENT FUNDING IV	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Hollis M. Greenlaw
 

	 	 
	 

	 	Name:
	 	Hollis M. Greenlaw	 	 
	 

	 	Title:
	 	Chairman and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	REALTY CAPITAL SECURITIES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Louisa H. Quarto
 

	 	 
	 

	 	Name:
	 	Louisa H. Quarto	 	 
	 

	 	Title:
	 	Co-President	 	 

The terms and conditions contained above are hereby accepted and agreed to by:

LEGACYTEXAS BANK, as Escrow Agent

	 	 	 	 	 
	By:

	 	/s/ Lea Ann Capel
 

	 	 
	Name:

	 	Lea Ann Capel	 	 
	Title:

	 	Executive Vice President – Chief Operations Officer	 	 

[Signature Page to Escrow Agreement]

 

EXHIBIT A

FORM OF ESCROW AGENT AFFIDAVIT FOR NEBRASKA

	 	 	 	 	 
	STATE OF
	 	 	 	 
	COUNTY OF

	 	 

	 	 
	 

	 	 

	 	 

ESCROW AGENT AFFIDAVIT

                                              (the “Affiant”), being duly sworn, deposes and says:

     That the Affiant is a duly appointed and authorized representative of LegacyTexas Bank (the
“Escrow Agent”);

     That the Escrow Agent is the duly appointed and authorized escrow agent for the public
offering of the securities (the “Offering”) of United Development Funding IV (the “Trust”);

     That all of the conditions of that certain Second Amended and Restated Escrow Agreement
entered into by and between the Escrow Agent, the Trust, and Realty Capital Securities, LLC in
connection with the Offering and effective as of the 20th day of August, 2009 (the
“Agreement”) which are capable of being satisfied as of the date hereof have been met.

     Affiant makes this Affidavit to the State of Nebraska Department of Banking and Finance
pursuant to Nebraska regulations Chapter 25, Section 003.01C1 promulgated under §8-1120(3) of the
Securities Act of Nebraska.

     IN WITNESS WHEREOF, the undersigned has duly executed this document this ___ day of
                    , 20___.

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

Sworn to and subscribed before me

this ____ day of                     , 20__.

                                                            

Notary Public

My commission expires:                    

     (NOTARIAL SEAL)

A-1

 

EXHIBIT B

FORM OF NOTICE TO PENNSYLVANIA SUBSCRIBERS

     You have tendered a subscription to purchase common shares of beneficial interest of United
Development Funding IV (the “Trust”). Your subscription is currently being held in escrow. The
guidelines of the Pennsylvania Securities Commission do not permit the Trust to accept
subscriptions from Pennsylvania residents until an aggregate of $35,000,000 of gross offering
proceeds have been received by the Trust. The Pennsylvania guidelines provide that until this
minimum amount of offering proceeds is received by the Trust, every 120 days during the offering
period Pennsylvania Subscribers may request that their subscription be returned.

     If you wish to continue your subscription in escrow until the Pennsylvania minimum
subscription amount is received, nothing further is required.

     If you wish to terminate your subscription for the Trust’s shares and have your subscription
returned, please so indicate below, sign, date, and return to the Escrow Agent at LegacyTexas Bank,
                                        , Attn:                     .

     I hereby terminate my prior subscription to purchase common shares of beneficial interest of
United Development Funding IV and request the return of my subscription funds. I certify to United
Development Funding IV that I am a resident of Pennsylvania.

	 	 	 	 	 	 	 
	 

	 	Signature:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

(please print)
	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 

Please send the subscription refund to:

	 	 	 
	 

	 	 
	 

	 	 
	 

	 	 
	 

	 	 

B-1

 

EXHIBIT C

ESCROW AGENT COMPENSATION

None.

C-1

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