Exhibit 10.1
SECURED SUBORDINATED CONVERTIBLE DEBENTURE INDENTURE
AMONG
TETON ENERGY CORPORATION
as Company
TETON NORTH AMERICA LLC
TETON PICEANCE LLC
TETON DJ LLC
TETON WILLISTON LLC
TETON BIG HORN LLC
TETON DJCO LLC
as Guarantors
and
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.
as Trustee
Indenture
dated as of September 19, 2008
$30,000,000
10.75% Secured Subordinated Convertible Debentures due June 18, 2013
The indebtedness and other obligations of the Company and its subsidiaries
evidenced by this Agreement (or by this Indenture, as applicable) and the
Debentures issued hereunder owed to the Purchasers and Holders party to this
Agreement (or Indenture, as applicable) are junior and subordinate to the
indebtedness and other obligations of the Company and its subsidiaries in
accordance with the provisions of the Amended and Restated Intercreditor and
Subordination Agreement dated as of September 19, 2008, among JPMorgan Chase
Bank, N.A., as Senior Agent, The Bank of New York Mellon Trust Company, N.A., as
Subordinated Holder Representative and collateral agent, the Company and certain
of its affiliates, as amended from time to time.

 

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TABLE OF CONTENTS

                      Page  
 
            ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE     2  
 
           
Section 1.01
  Definitions     2  
Section 1.02
  Other Definitions     12  
Section 1.03
  Incorporation by Reference of Trust Indenture Act     12  
Section 1.04
  Rules of Construction     13  
Section 1.05
  Acts of Holders     13  
 
            ARTICLE 2. THE DEBENTURES     14  
 
           
Section 2.01
  Form, Dating and Denominations; Legends     14  
Section 2.02
  Execution and Authentication     15  
Section 2.03
  Registrar, Paying Agent and Conversion Agent     16  
Section 2.04
  Paying Agent to Hold Money in Trust     16  
Section 2.05
  Lists of Holders     17  
Section 2.06
  Transfer and Exchange     17  
Section 2.07
  Replacement Debentures     18  
Section 2.08
  Outstanding Debentures     18  
Section 2.09
  Reserved     19  
Section 2.10
  Temporary Debentures     19  
Section 2.11
  Cancellation     19  
Section 2.12
  CUSIP Numbers     19  
Section 2.13
  Book-entry Provisions For Global Debentures     19  
Section 2.14
  Special Transfer Provisions     20  
 
            ARTICLE 3. REDEMPTION     22  
 
           
Section 3.01
  Optional Redemption at the Election of the Company     22  
Section 3.02
  Optional Redemption at the Election of Holder     23  
Section 3.03
  Redemption Procedure     23  
Section 3.04
  Debentures Redeemed In Part     23  
Section 3.05
  Covenant to Comply with Securities Laws upon Redemption of Debentures     24  

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                      Page  
 
            ARTICLE 4. COVENANTS     24  
 
           
Section 4.01
  Payment of Debentures     24  
Section 4.02
  Maintenance of Office or Agency     25  
Section 4.03
  Rule 144A Information and Exchange Act Reports     25  
Section 4.04
  Reports to Trustee     26  
Section 4.05
  Negative Covenants     26  
Section 4.06
  Further Instruments and Acts     27  
 
            ARTICLE 5. CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS     27  
 
           
Section 5.01
  Consolidation, Merger, Sale or Lease of Assets by the Company     28  
 
            ARTICLE 6. DEFAULT AND REMEDIES     29  
 
           
Section 6.01
  Events of Default     29  
Section 6.02
  Remedies Upon Event of Default     31  
Section 6.03
  Other Remedies     31  
Section 6.04
  Control by Holders of at least 67%     31  
Section 6.05
  Limitation on Suits     32  
Section 6.06
  Rights of Holders to Receive Payment     32  
Section 6.07
  Collection Suit by Trustee     32  
Section 6.08
  Trustee May File Proofs of Claim     33  
Section 6.09
  Trustee May Enforce Claims Without Possession of Debentures     33  
Section 6.10
  Priorities     33  
Section 6.11
  Restoration of Rights and Remedies     34  
Section 6.12
  Undertaking for Costs     34  
Section 6.13
  Rights and Remedies Cumulative     34  
Section 6.14
  Delay or Omission Not Waiver     34  
Section 6.15
  Failure to File     34  
 
            ARTICLE 7. THE TRUSTEE     35  
 
           
Section 7.01
  General     35  
Section 7.02
  Certain Rights of Trustee     35  
Section 7.03
  Individual Rights of Trustee     37  
Section 7.04
  Trustee’s Disclaimer     37  

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                      Page  
 
           
Section 7.05
  Notice of Default     37  
Section 7.06
  Reports by Trustee to Holders     38  
Section 7.07
  Compensation and Indemnity     38  
Section 7.08
  Replacement of Trustee     38  
Section 7.09
  Successor Trustee by Merger     39  
Section 7.10
  Eligibility     40  
Section 7.11
  Money Held in Trust     40  
 
            ARTICLE 8. DISCHARGE     40  
 
           
Section 8.01
  Satisfaction and Discharge of this Indenture     40  
Section 8.02
  Application of Trust Money     41  
Section 8.03
  Repayment to Company     41  
Section 8.04
  Reinstatement     41  
 
            ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS     41  
 
           
Section 9.01
  Amendments without Consent of Holders     42  
Section 9.02
  Amendments with Consent of Holders     43  
Section 9.03
  Effect of Consent     44  
Section 9.04
  Trustee’s Rights and Obligations     45  
Section 9.05
  Conformity with Trust Indenture Act     45  
Section 9.06
  Payments for Consents     45  
 
            ARTICLE 10. CONVERSION     45  
 
           
Section 10.01
  Conversion Privilege and Conversion Price     45  
Section 10.02
  Conversion Procedure     46  
Section 10.03
  Fractional Shares     50  
Section 10.04
  Taxes on Conversion     50  
Section 10.05
  Company to Provide Stock     50  
Section 10.06
  Certain Adjustments of Conversion Price     51  
Section 10.07
  Notice of Adjustment     55  
Section 10.08
  Notice to Allow Conversion by Holder     56  
Section 10.09
  Trustee’s Disclaimer     56  
 
            ARTICLE 11. PAYMENT OF INTEREST     57  
 
           

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                      Page  
 
           
Section 11.01
  Interest Payments     57  
Section 11.02
  Calculation of Interest Make-Whole Shares     57  
Section 11.03
  Late Fee     58  
Section 11.04
  Increase in Interest Rate for Failure of Debenture or Exchanged Debenture to
be DTC Eligible     58  
Section 11.05
  Prepayment     58  
Section 11.06
  Interest Rights Preserved     58  
 
            ARTICLE 12. SUBORDINATION     59  
 
           
Section 12.01
  Subordination     59  
 
            ARTICLE 13. COLLATERAL AND GUARANTEES     59  
 
           
Section 13.01
  Collateral for the Debentures     59  
Section 13.02
  Release of Collateral     60  
Section 13.03
  Certificates of the Company     60  
Section 13.04
  Authorization of Receipt of Funds by the Trustee Under the Security Documents
    60  
Section 13.05
  Termination of Security Interest     60  
Section 13.06
  Guarantees     61  
 
            ARTICLE 14. MISCELLANEOUS     61  
 
           
Section 14.01
  Trust Indenture Act of 1939     61  
Section 14.02
  Holder Communications; Holder Actions     61  
Section 14.03
  Notices     62  
Section 14.04
  Communication by Holders with Other Holders     63  
Section 14.05
  Certificate and Opinion as to Conditions Precedent     63  
Section 14.06
  Statements Required in Certificate or Opinion     63  
Section 14.07
  Certificates of Fair Value     64  
Section 14.08
  Legal Holiday     64  
Section 14.09
  Rules by Trustee, Paying Agent, Conversion Agent and Registrar     64  
Section 14.10
  Governing Law     64  
Section 14.11
  No Adverse Interpretation of Other Agreements     64  
Section 14.12
  Successors     64  
Section 14.13
  Duplicate Originals     64  

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                      Page  
 
           
Section 14.14
  Separability     65  
Section 14.15
  Table of Contents and Headings     65  
Section 14.16
  No Liability of Directors, Officers, Employees, Incorporators, Members and
Stockholders     65  
Section 14.17
  Waiver of Jury Trial     65  
Section 14.18
  Force Majeure     65  

EXHIBIT A: Form of Debenture
EXHIBIT B: Form of Global Debenture
EXHIBIT C: Legends
EXHIBIT D: Assignment Form

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CROSS REFERENCE TABLE*†

          TIA Section   Indenture Section  
 
       
310(a)(1)
    7.10  
(a)(2)
    7.10  
(a)(3)
    N.A.  
(a)(4)
    N.A.  
(b)
    7.08; 7.10  
(c)
    N.A.  
311(a)
    N.A.  
(b)
    7.03.  
(c)
    N.A.  
312(a)
    2.05  
(b)
    14.04  
(c)
    14.04  
313(a)
    7.06  
(b)
    7.06; 13.02  
(c)
    14.03  
(d)
    7.06  
314(a)
    4.03; 4.04; 14.03  
(b)(1)
    13.01  
(b)(2)
    13.01.  
(c)(1)
    14.05  
(c)(2)
    14.05  
(c)(3)
    N.A.  
(d)
    13.01; 13.02; 13.03  
(e)
    14.06  
(f)
    N.A.  
315(a)
    7.01; 7.02  
(b)
    7.05; 14.02  
(c)
    7.01  
(d)
    7.01  
(e)
    6.11  
316(a) (last sentence)
    2.08  
(a)(1)(A)
    6.04  
(a)(1)(B)
    N.A.  
(a)(2)
    N.A.  
(b)
    6.06  
317(a)(1)
    6.07  
(a)(2)
    6.08  
(b)
    2.04  
318(a)
    14.01  

 

*   Note: This Cross Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.   †   N.A. means not applicable.

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     INDENTURE, dated as of September 19, 2008, among Teton Energy Corporation,
a Delaware corporation, as the “Company,” Teton North America LLC, Teton
Piceance LLC, Teton DJ LLC, Teton Williston LLC, Teton Big Horn LLC, Teton DJCO
LLC, (each, a “Guarantor” and together, the “Guarantors”) and The Bank of New
York Mellon Trust Company, N.A., a national banking association, as Trustee.
RECITALS
     On June 18, 2008, the Company issued $40,000,000 aggregate principal amount
of the Company’s 10.75% Secured Convertible Debentures due June 18, 2013 (the
“Original Debentures”) to the purchasers thereof. All of the purchasers, in
accordance with the terms of the Purchase Agreement (herein defined) have
exercised their respective Holder Optional Redemption rights and, in light of
such exercises, the aggregate principal amount of the Original Debentures has
been reduced to $30,000,000. The obligations of the Company under the Original
Debentures were fully and unconditionally guaranteed by each of the Guarantors
to the extent set forth in the Subordinated Guaranty and Pledge Agreement, dated
as of June 18, 2008, as amended and restated as of the date hereof (as further
amended, supplemented or restated from time to time, the “Subordinated
Guaranty”). Pursuant to an Intercreditor and Subordination Agreement entered
into as of June 9, 2008 among the Company, certain of its Subsidiaries, JPMorgan
Chase Bank, N.A., as Senior Agent (“JPMorgan”), and Whitebox Teton, Ltd., as
collateral agent, as amended and restated by that certain Amended and Restated
Intercreditor and Subordination Agreement of even date herewith among the
Company, certain of its Subsidiaries, JPMorgan and The Bank of New York Mellon
Trust Company, N.A., as subordinated holder representative and collateral agent
(as further amended, supplemented or restated from time to time, the
“Intercreditor and Subordination Agreement”),. liens of the holders of the
Debentures on the Company’s assets were subordinated to the liens of JPMorgan on
the Company’s assets. Pursuant to Section 4.17(b) of the Securities Purchase
Agreement dated as of June 9, 2008 among the Company and the original holders,
as amended, modified or supplemented from time to time in accordance with its
terms (the “Purchase Agreement”), the parties agreed to exchange the Original
Debentures for Exchanged Debentures (as defined in the Purchase Agreement). The
Company has duly authorized the execution and delivery of this Indenture to
provide for the issuance of $30,000,000 aggregate principal amount of the
Exchanged Debentures (herein referred to as the “Debentures”). The Debentures
will be fully and unconditionally guaranteed on a subordinated basis by each of
the Guarantors (each a “Guarantee”) (each Debenture, together with the related
Guarantee, (which is a separate security), are sometimes hereinafter
collectively referred to as the “Securities”) to the extent set forth herein.
Each Debenture, with its related Guarantee and the Common Stock underlying each
Debenture shall be subject to a Registration Statement as required by the
Registration Rights Agreement.
     All actions necessary to make the Securities, when duly issued and executed
by the Company and the Guarantors, as applicable, and the Debentures, when
authenticated and delivered hereunder, the valid obligations of the Company and
the Guarantors and to make this Indenture a valid and binding agreement of the
Company and the Guarantors have been taken. This Indenture is subject to, and
will be governed by, the provisions of the Trust Indenture Act that are required
to be a part of and govern indentures qualified under the Trust Indenture Act.
THIS INDENTURE WITNESSETH

 

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     For and in consideration of the premises and the exchange for the
Debentures by the Holders of the Original Debentures, the parties hereto
covenant and agree, for the equal and proportionate benefit of all Holders, as
follows:
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
     Section 1.01 Definitions.
     For the purposes hereof, in addition to the terms defined elsewhere in this
Indenture, (a) capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement and (b) the following terms shall
have the following meanings:
     “Affiliates” shall have the meaning given such term in the Purchase
Agreement.
     “Additional Shares” shall have the meaning set forth in Section 10.06(h).
     “Alternate Consideration” shall have the meaning set forth in
Section 10.06(e).
     “Agent” means any Registrar, Paying Agent or Conversion Agent.
     “Agent Member” means a member of, or a participant in, the Depository.
     “Applicable Procedures” means, with respect to any transfer or exchange of
beneficial ownership interests in a Global Debenture, the rules and procedures
of the Depository, in each case to the extent applicable to such transfer or
exchange.
     “Bankruptcy Code” means title 11, United States Code, as amended from time
to time.
     “Bankruptcy Event” means any of the following events: (a) the Company or
any Significant Subsidiary thereof commences a case or other proceeding under
any bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company or any Significant Subsidiary thereof,
(b) there is commenced against the Company or any Significant Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after
commencement, (c) the Company or any Significant Subsidiary thereof is
adjudicated insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered, (d) the Company or any
Significant Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not discharged or
stayed within 60 calendar days after such appointment, (e) the Company or any
Significant Subsidiary thereof makes a general assignment for the benefit of
creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts or (g) the Company or any Significant Subsidiary
thereof, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.
     “Beneficial Ownership Limitation” shall have the meaning set forth in
Section 10.02(c).

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     “Borrower Obligations” shall have the meaning set forth in the Subordinated
Guaranty.
     “Business Day” means any day except any Saturday, any Sunday, any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.
     “Buy-In” shall have the meaning set forth in Section 10.02(f).
     “Board of Directors” means the board of directors or comparable governing
body of the Company, or any committee thereof duly authorized to act on its
behalf.
     “Capital Stock” means, with respect to any Person, any and all shares of
stock of a corporation, partnership interests or other equivalent interests
(however designated, whether voting or non-voting) in such Person’s equity,
entitling the holder to receive a share of the profits and losses, and a
distribution of assets, after liabilities, of such Person.
     “Cash” means such coin or currency of the United States as at any time of
payment is legal tender for the payment of public and private debts.
     “Certificated Debenture” means a Debenture in registered individual form
without interest coupons.
     “Change of Control Date” shall have the meaning set forth in
Section 10.06(f).
     “Change of Control Notice” shall have the meaning set forth in
Section 10.06(f).
     “Change of Control Notice Date” shall have the meaning set forth in
Section 10.06(f).
     “Change of Control Period” shall have the meaning set forth in
Section 10.06(g).
     “Change of Control Redemption” shall have the meaning set forth in
Section 10.06(g).
     “Change of Control Redemption Date” shall have the meaning set forth in
Section 10.06(g).
     “Change of Control Redemption Notice” shall have the meaning set forth in
Section 10.06(g).
     “Change of Control Redemption Price” shall have the meaning set forth in
Section 10.06(g).
     “Change of Control Transaction” means the occurrence after the date hereof
of any of (a) an acquisition after the date hereof by an individual or legal
entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of Capital Stock of the Company, by contract or otherwise) of in
excess of 40% of the voting securities of the Company (other than by means of
conversion or exercise of the Debentures and the securities issued together with
the Debentures), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or

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consolidates with the Company and, after giving effect to such transaction, the
stockholders of the Company immediately prior to such transaction own less than
60% of the aggregate voting power of the Company or the successor entity of such
transaction, (c) the Company sells or transfers all or substantially all of its
assets to another Person and the stockholders of the Company immediately prior
to such transaction own less than 60% of the aggregate voting power of the
acquiring entity immediately after the transaction, (d) a replacement at one
time or within a three year period of more than one-half of the members of the
Board of Directors which is not approved by a majority of those individuals who
are members of the Board of Directors on the date hereof (or by those
individuals who are serving as members of the Board of Directors on any date
whose nomination to the Board of Directors was approved by a majority of the
members of the Board of Directors who are members on the date hereof), or
(e) the execution by the Company of an agreement to which the Company is a party
or by which it is bound, providing for any of the events set forth in clauses
(a) through (d) above.
     “Close of Business” means 5:00 p.m. (New York City time).
     “Collateral” comprises the property identified as Collateral in the
Subordinated Guaranty and the property subject to the Mortgages, as defined
below.
     “Common Stock” shall have the meaning set forth in the Purchase Agreement.
     “Common Stock Equivalents” shall have the meaning set forth in the Purchase
Agreement.
     “Company” means the party named as such in the first paragraph of this
Indenture or any successor obligor under this Indenture and the Debentures.
     “Company Optional Redemption” shall have the meaning set forth in
Section 3.01.
     “Company Optional Redemption Amount” means the sum of (a) 100% of the then
outstanding principal amount of the Debentures, (b) accrued but unpaid interest
in respect of the Debentures, (c) all liquidated damages and other amounts due,
if any, in respect of the Debentures, and (d) any Interest Make-Whole.
     “Company Optional Redemption Date” shall have the meaning set forth in
Section 3.01.
     “Company Optional Redemption Notice” shall have the meaning set forth in
Section 3.01.
     “Company Optional Redemption Notice Date” shall have the meaning set forth
in Section 3.01.
     “Company Optional Redemption Period” shall have the meaning set forth in
Section 3.01.
     “Conforming Borrowing Base” means at any time an amount determined in
accordance with Section 2.07 of the Credit Agreement based on the Administrative
Agent’s application of

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the credit standards and other criteria customarily applied by the
Administrative Agent in the determination of the credit limitations for
companies similar to the Company.
     “Conversion Date” shall have the meaning set forth in Section 10.01(a).
     “Conversion Price” shall have the meaning set forth in Section 10.01(b).
     “Conversion Schedule” means the Conversion Schedule in the form of
Schedule 1 attached to the Debentures.
     “Conversion Shares” means, collectively, the shares of Common Stock issued
or issuable upon conversion of the Debentures in accordance with the terms
hereof, including without limitation shares of Common Stock issued or issuable,
if any, as Interest Make-Whole and any Additional Shares.
     “Corporate Trust Office” means, solely for purposes of presenting
Debentures, The Bank of New York Mellon located at 101 Barclay Street, 7 East,
New York, New York 10014 and, for all other purposes the office of the Trustee
at which any time its corporate trust business shall be administered, which at
the date hereof is located at 601 Travis Street, 18th floor, Houston, Texas
77002, Attention: Corporate Trust Services, re: Teton Energy Corporation, or
such other address as the Trustee may designate from time to time by notice to
the Holders and the Company, or the principal corporate trust office of any
successor Trustee (or such other address as such successor Trustee may designate
from time to time by notice to the Holders and the Company).
     “Credit Agreement” means the $150,000,000 credit facility pursuant to that
certain Second Amended and Restated Credit Agreement dated as of April 2, 2008
among the Company, JPMorgan Chase Bank, N.A., as administrative agent
(“JPMorgan” or the “Administrative Agent’), and the lenders party thereto.
     “Debenture” shall have the meaning assigned to such term in the Recitals.
     “Default” means any event that is, or after notice or passage of time or
both would be, an Event of Default.
     “Depository” means DTC or the nominee thereof, or any successor thereto.
     “DTC” means The Depository Trust Company, a New York Corporation, and its
successors.
     “DTC Eligible” means eligibility for trading and settlement in accordance
with the Applicable Procedures.
     “Effective Date” shall have the meaning set forth in the Purchase
Agreement.
     “Equity Conditions” means, during the period in question, (a) the Company
shall have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of a beneficial owner
of interests in the Debentures, if any, (b) the Company shall have paid all
liquidated damages and other amounts owing to the Holder in

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respect of the Debentures, (c) there is an effective Registration Statement
pursuant to which beneficial owners of interests in the Debentures are permitted
to utilize the prospectus thereunder to resell all of the shares of Common Stock
issuable pursuant to the Transaction Documents (and the Company believes, in
good faith, that such effectiveness will continue uninterrupted for the
foreseeable future), as determined by outside counsel to the Company pursuant to
a written opinion letter to such effect, addressed and acceptable to the
Transfer Agent and such beneficial owners, (d) the Common Stock is trading on a
Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed or quoted for trading on such Trading Market (and the
Company believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (e) there is a
sufficient number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the shares issuable pursuant to the
Transaction Documents (disregarding any limitation on issuance or conversion
under such documents), (f) there is no existing Event of Default and no existing
event which, with the passage of time or the giving of notice, would constitute
an Event of Default, (g) the issuance of the shares in question (or, in the case
of a Company Optional Redemption or a Holder Optional Redemption, the shares
issuable upon conversion in full of the applicable Optional Redemption Amount)
to such beneficial owners would comply with the limitations set forth in Section
10.02(c), (h) there has been no public announcement of a pending or proposed
Fundamental Transaction or Change of Control Transaction that has not been
consummated, (i) the Holder is not in possession of any information provided by
the Company that constitutes, or may constitute, material non-public information
and (j) for each Trading Day in a period of 20 consecutive Trading Days prior to
the applicable date in question, the daily trading volume for the Common Stock
on the principal Trading Market exceeds 50,000 shares (subject to adjustment for
forward and reverse stock splits and the like) per Trading Day.
     “Event of Default” has the meaning assigned to such term in Section 6.01.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder.
     “Fundamental Transaction” shall have the meaning set forth in
Section 10.06(e).
     “Global Debenture” means a Debenture in registered global form without
interest coupons that is deposited with the Depository or its custodian and
registered in the name of the Depository or its nominee.
     “Global Debenture Legend” means the legend set forth in Exhibit C.
     “Guarantee” means any obligation, contingent or otherwise, of any Person
guaranteeing in any manner any indebtedness of any other Person. The term
“Guarantee” used as a verb has a corresponding meaning. The term “Guarantor”
shall mean any Person guaranteeing any obligation.
     “Guaranteed Documents” means the Purchase Agreement, the Security
Documents, and other Transaction Documents.
     “Guarantor Obligations” means with respect to any Guarantor, the collective
reference to (a) the Borrower Obligations and (b) all obligations and
liabilities of such Guarantor which may

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arise under or in connection with any Transaction Document to which such
Guarantor is a party, in each case, whether on account of principal, interest,
guarantee obligations, reimbursement obligations, payments in respect of an
early termination date, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all reasonable fees and disbursements of counsel
to any Holder under any Transaction Document).
     “Holder” means the registered holder of any Debenture.
     “Holder Optional Redemption” shall have the meaning set forth in
Section 3.02.
     “Holder Optional Redemption Amount” means the sum of (a) 100% of the
then-outstanding principal amount of the Debentures, (b) accrued but unpaid
interest in respect of the Debentures and (c) all liquidated damages and other
amounts due, if any, in respect of the Debentures.
     “Holder Optional Redemption Date” shall have the meaning set forth in
Section 3.02.
     “Holder Optional Redemption Notice” shall have the meaning set forth in
Section 3.02.
     “Holder Optional Redemption Notice Date” shall have the meaning set forth
in Section 3.02.
     “Holder Optional Redemption Period” shall have the meaning set forth in
Section 3.02.
     “Indenture” means this indenture, as amended or supplemented from time to
time.
     “Intercreditor and Subordination Agreement” shall have the meaning set
forth in the Recitals.
     “Interest Payment Date” means each January 1 and July 1, beginning on
January 1, 2009, on each Conversion Date (as to that principal amount then being
converted), on each Company Optional Redemption Date or Holder Optional
Redemption Date (as to that principal amount then being redeemed) and on the
Maturity Date, and each other date that interest is due and payable.
     “Indebtedness” means (x) any liabilities for borrowed money or amounts owed
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments due under leases required to be capitalized in accordance
with GAAP
     “Interest Make-Whole” means the payment in cash upon any conversion or
redemption (other than pursuant to a Holder Optional Redemption) of all or any
portion of the Debentures prior to the third anniversary of the Original Issue
Date, of the present value of all interest which would have accrued on the
principal amount of the Debentures being converted or redeemed after such date
of conversion or redemption if no payment of such principal amount were made

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prior to the third anniversary of the Original Issue Date. The present value of
such future-accrued interest shall be calculated by discounting in accordance
with accepted financial practice all such future-accruing interest on the
principal amount being converted or redeemed from their respective scheduled due
dates to the date on which payment on such principal is to be made by the
yield-to-maturity interest rate for United States Treasury bills of comparable
maturity to the third anniversary of the Original Issue Date as of the
applicable conversion date or redemption date, as applicable, as reported in The
Wall Street Journal.
     “Late Fees” shall have the meaning set forth in Section 11.03.
     “Letter of Credit” means any letter of credit issued pursuant to the Credit
Agreement.
     “Lien” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
     “Make-Whole Measurement Period” shall have the meaning set forth in
Section 11.02.
     “Mandatory Default Amount” means the sum of (a) the greater of (i) the
outstanding principal amount of the Debenture, plus all accrued and unpaid
interest hereon, divided by the Conversion Price on the date the Mandatory
Default Amount is either (A) demanded (if demand or notice is required to create
an Event of Default) or otherwise due or (B) paid in full, whichever results in
a lower Conversion Price, multiplied by the VWAP on the date the Mandatory
Default Amount is either (x) demanded or otherwise due or (y) paid in full,
whichever has a higher VWAP, or (ii) 100% of the outstanding principal amount of
the Debentures plus 100% of accrued and unpaid interest hereon, (b) all other
amounts, costs, expenses and liquidated damages due in respect of the Debentures
and (c) any Interest Make-Whole.
     “Maturity Date” means, with respect to any Indebtedness, the date on which
any principal of such indebtedness becomes due and payable as therein or herein
provided, whether at the stated maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
     “Mortgages” means all security filings, whether denominated as mortgages,
deeds of trust, assignments of rents, pledges or otherwise, which perfect a lien
on the interests of the Company and its Guarantors in real property.
     “Notice of Conversion” shall have the meaning set forth in
Section 10.01(a).
     “Obligations” means: (i) in the case of the Company, the obligations of the
Company under each of the Security Documents and the other Transaction
Documents; and (ii) in the case of each Guarantor, its Guarantor Obligations.
     “Obligor” means the Company and each of the Guarantors signatory hereto,
together with any other Subsidiary or holding company of the Company that
becomes a party hereto from time to time after the date hereof.

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     “Officer” means the chairman of the Board of Directors, the president or
chief executive officer, any vice president, the chief financial officer, the
treasurer or any assistant treasurer, or the secretary or any assistant
secretary, of the Company.
     “Officers’ Certificate” means a certificate signed in the name of the
Company or a Guarantor (i) by its chairman of the Board of Directors, the
president or chief executive officer or a vice president and (ii) by its chief
financial officer, the chief accounting officer, the treasurer or any assistant
treasurer or the secretary or any assistant secretary.
     “Opinion of Counsel” means a written opinion signed by legal counsel, who,
except as otherwise expressly provided in this Indenture, may be an employee of
or counsel to the Company.
     “Optional Redemption Amount” means either the Company Optional Redemption
Amount or the Holder Optional Redemption Amount, as the context requires.
     “Original Issue Date” means the date the Original Debentures were issued.
     “Paying Agent” shall have the meaning set forth in Section 2.03.
     “Person” means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity, including a
government or political subdivision or an agency or instrumentality thereof.
     “Permitted Indebtedness” means (a) the debt evidenced by the Credit
Agreement, as the same may be amended, transferred to other institutional
lenders or otherwise refinanced or restated, from time to time, except that no
such restatement, refinancing, or amendment shall (i) result in the size of the
credit facility being greater than $150,000,000 aggregate principal amount
(which amount shall include all fees and other amounts paid or payable in
connection with such restatement, refinancing, or amendment) or (ii) without the
consent of Holders of at least 67% in principal amount of the then-outstanding
Debentures, change the other terms of such Indebtedness from such terms existing
on the Original Issue Date so as to adversely affect in any material respect the
Holders of the Debentures; (b) the indebtedness evidenced by the Debentures;
(c) the Indebtedness existing on the Original Issue Date and set forth on
Schedule 2 attached hereto, as the same may be amended, transferred to other
institutional lenders or otherwise refinanced or restated, from time to time,
except that no such restatement, refinancing, or amendment shall (i) result in
the principal amount of any such Indebtedness (which amount shall include all
fees and other amounts paid or payable in connection with such restatement,
refinancing, or amendment) being greater than the principal amount thereof on
the Original Issue Date or (ii) without the consent of Holders of at least 67%
in principal amount of the then outstanding Debentures, change the other terms
of such Indebtedness (including without limitation with respect to liens,
collateral, subordination, average life, stated maturity and obligors) from the
terms existing on the Original Issue Date so as to adversely affect in any
material respect the holders of the Debentures; and (d) up to $30,000,000 of
additional indebtedness that is expressly subordinated to the Debentures
pursuant to a written Intercreditor and Subordination Agreement with the
Purchasers that is reasonably acceptable to the holders of at least 67% in
principal amount of the then-outstanding Debentures.

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     “Permitted Lien” means the individual and collective reference to the
following: (a) Liens in connection with Permitted Indebtedness referred to in
clauses (a) and (c) of the definition of Permitted Indebtedness; (b) Liens for
taxes, assessments and other governmental charges or levies not yet due or Liens
for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; and (c) Liens imposed by law which were incurred in the
ordinary course of the Company’s or any Subsidiary’s business, such as
carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and
other similar Liens arising in the ordinary course of the Company’s or any
Subsidiary’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing for the
foreseeable future the forfeiture or sale of the property or asset subject to
such Lien.
     “Prospectus” means the prospectus contained in the Registration Statement
at the time this Registration Statement is declared effective by the Commission.
     “Public Information Failure” has the meaning assigned to such term in
Section 11.03.
     “Purchase Agreement” shall have the meaning set forth in the Recitals.
     “Purchasers” mean the Purchasers who are the signatories to the Purchase
Agreement.
     “Register” has the meaning assigned to such term in Section 2.03.
     “Registrar” has the meaning assigned to such term in Section 2.03.
     “Registration Rights Agreement” means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, among the Company and the
Purchasers, or their permitted successors and assigns, as the case may be, as
amended, modified or supplemented from time to time in accordance with its
terms.
     “Registration Statement” means any registration statement required to be
filed under the Registration Rights Agreement, and any additional registration
statements contemplated thereunder, including (in each case) the Prospectus,
amendments and supplements to any such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
any such registration statement.
     “Regular Record Date” for the interest payable on any Interest Payment Date
means the December 15 or June 15 (whether or not a Trading Day) next preceding
such Interest Payment Date.
     “Responsible Officer” means, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee

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who customarily performs functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such person’s knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Indenture.
     “Restricted Certificated Debenture” means a Certificated Debenture that
bears the Restricted Debenture Legend.
     “Restricted Common Stock Legend” means the legend set forth in Exhibit C.
     “Restricted Global Debenture” means a Global Debenture that bears the
Restricted Debenture Legend representing Debentures transferred pursuant to
Rule 144A or otherwise and in accordance with the Purchase Agreement.
     “Restricted Debenture” shall have the meaning set forth in Section 2.14(b).
     “Restricted Debenture Legend” means the legend set forth in Exhibit C.
     “Rule 144” means Rule 144 under the Securities Act.
     “Rule 144A” means Rule 144A under the Securities Act.
     “Securities” shall have the meaning set forth in the Recitals.
     “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
     “Security Documents” shall have the meaning given such term in the Purchase
Agreement.
     “Share Delivery Date” shall have the meaning set forth in Section 10.02(b).
     “Significant Subsidiary” means, in respect of any Person, a Subsidiary of
such Person that would constitute a “significant subsidiary” as such term is
defined under Rule 1-02 of Regulation S-X under the Securities Act and the
Exchange Act. The definition of Significant Subsidiary shall include each
Guarantor.
     “Stock Price” shall have the meaning set forth in Section 10.06(h).
     “Subordinated Guaranty” shall have the meaning assigned to such term in the
Recitals.
     “Subsidiary” means any subsidiary of the Company as set forth on Schedule 1
and shall, where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.
     “Trading Day” means any day on which the principal Trading Market is open
for business.

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     “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
     “Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.
     “Trustee” means the party named as such in the first paragraph of this
Indenture or any successor trustee under this Indenture pursuant to Article 7.
     “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended,
and the rules and regulations of the Commission thereunder.
     “VWAP” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted for trading as reported by Bloomberg L.P.
(utilizing a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)); (b) if the Common Stock is not then listed or quoted on the
Trading Market, and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holders and reasonably acceptable to the
Company.
     Section 1.02 Other Definitions.

          Term   Defined in Section
“Act”
    1.05  
“Company Order”
    2.02  
“Conversion Agent”
    2.03  
“Extension Fee”
    6.14  
“Legal Holiday”
    14.08  
“Primary Registrar”
    2.03  
“Restricted Debentures”
    2.14  

     Section 1.03 Incorporation by Reference of Trust Indenture Act.
     Whenever this Indenture refers to a provision of the Trust Indenture Act,
the provision is incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms used in this Indenture have the
following meanings:
     “Commission” means the Securities and Exchange Commission.
     “Indenture securities” mean the Securities.

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     “Indenture security holder” means a Holder.
     “Indenture to be qualified” means this Indenture.
     “Indenture trustee” or “institutional trustee” means the Trustee.
     “Obligor” on the indenture securities means the Company.
     All other Trust Indenture Act terms used in this Indenture that are defined
by the Trust Indenture Act, defined by Trust Indenture Act reference to another
statute or defined by Commission rule have the meanings assigned to them by such
definitions.
     Section 1.04 Rules of Construction.
     Unless the context otherwise requires or except as otherwise expressly
provided,
     (a) a term has the meaning assigned to it;
     (b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
     (c) “herein,” “hereof” and other words of similar import refer to this
Indenture as a whole and not to any particular Section, Article or other
subdivision;
     (d) all references to Sections or Articles or Exhibits refer to Sections or
Articles or Exhibits of or to this Indenture unless otherwise indicated;
     (e) references to agreements or instruments, or to statutes or regulations,
are to such agreements or instruments, or statutes or regulations, as amended
from time to time (or to successor statutes and regulations);
     (f) in the event that a transaction meets the criteria of more than one
category of permitted transactions or listed exceptions the Company may classify
such transaction as it, in its sole discretion, determines;
     (g) “or” is not exclusive;
     (h) “including” means including, without limitation; and
     (i) words in the singular include the plural, and words in the plural
include the singular.
     Section 1.05 Acts of Holders.
     Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments (which may take the form of
an electronic writing or messaging or otherwise be in accordance with customary
procedures of the Depository or the Trustee) of substantially similar tenor
signed by such Holders in person or by agent duly appointed in

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writing (which may be in electronic form); and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
“Act” of Holders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent (either of which
may be in electronic form) shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
ARTICLE 2.
THE DEBENTURES
     Section 2.01 Form, Dating and Denominations; Legends.
     (a) The Debentures and the Trustee’s certificate of authentication will be
substantially in the form attached as Exhibits A and B, respectively. The terms
and provisions contained in the form of the Debenture annexed as Exhibit A
constitute and are hereby expressly made a part of this Indenture. The
Debentures may have notations, legends or endorsements required by law, rules of
or agreements with national securities exchanges to which the Company is
subject, or usage. Each Debenture will be dated the date of its authentication.
The Debentures will be issuable only in denominations of $1,000 in principal
amount and any integral multiple thereof.
     (b) Restricted Debenture. All of the Debentures are initially being
exchanged pursuant to the Purchase Agreement with the original Holders, all of
which are either (i) an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such
Purchasers are not required to be registered as broker-dealers under Section 15
of the Exchange Act and are initially being issued in the form of one or more
Global Debentures substantially in the form of Exhibit B hereto and containing
the Restricted Debenture Legend, which Debentures shall be duly executed by the
Company and authenticated by the Trustee as hereinafter provided. After an
Original Debenture has been exchanged by an original Holder pursuant to this
Indenture, a Holder’s interest in such Original Debenture may be represented by
a beneficial interest in a Debenture issued in global form substantially in the
form of Exhibit B hereto and containing the Global Debenture Legend, which
Debenture shall be deposited on behalf of the beneficial owners of the interests
represented thereby with the Trustee, at its Corporate Trust Office, as
custodian for the Depository, and registered in the name of its nominee, Cede &
Co., duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of each of the Global
Debenture may from time to time be increased or decreased by adjustments made on
the records of the Trustee as hereinafter provided, subject in each case to
compliance with the Applicable Procedures.
     (c) Global Debenture in General. Each Global Debenture shall represent such
of the outstanding Debentures as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Debentures
from time to time endorsed thereon and that the aggregate amount of outstanding
Debentures represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, purchases or conversions of such Debentures.
Any adjustment of the aggregate principal amount of a Global Debenture to
reflect

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the amount of any increase or decrease in the amount of outstanding Debentures
represented thereby shall be made by the Trustee in accordance with instructions
given by the Holder thereof as required by Section 2.06 and shall be made on the
records of the Trustee and the Depository.
     Agent Members shall have no rights under this Indenture with respect to any
Global Debenture held on their behalf by the Depository or under the Global
Debenture, and the Depository (including, for this purpose, its nominee) may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner and Holder of such Global Debenture for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall (A) prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or (B) impair, as between the Depository and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
Holder of any Debenture or the rights of a beneficial owner of any Debenture.
     (d) Book Entry Provisions. Prior to the time the Registration Statement is
declared effective by the Commission, the Company shall use its reasonable
efforts to execute and the Trustee shall, in accordance with this
Section 2.01(d), authenticate and deliver one or more Global Debentures with
respect to Debentures that are transferred to Holders pursuant to this Indenture
and that (i) shall be registered in the name of the Depository, (ii) shall be
delivered by the Trustee to the Depository or pursuant to the Depository’s
instructions and (iii) shall bear the Global Debenture Legend substantially to
the effect set forth in Exhibit C. This Section 2.01(d) shall only apply to
Global Debentures deposited with or on behalf of the Depository.
     (e) Restriction on Affiliate Transfers. No transfer of Securities to
Affiliates of the Company will be permitted.
     Section 2.02 Execution and Authentication.
     An Officer shall sign the Debentures for the Company by manual or facsimile
signature attested by the manual or facsimile signature of the Secretary or an
Assistant Secretary of the Company. Typographic and other minor errors or
defects in any such facsimile signature shall not affect the validity or
enforceability of any Debenture which has been authenticated and delivered by
the Trustee.
     If an Officer whose signature is on a Debenture no longer holds that office
at the time the Trustee authenticates the Debenture, the Debenture shall be
valid nevertheless.
     A Debenture shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Debenture. The signature
shall be conclusive evidence that the Debenture has been authenticated under
this Indenture.
     The Trustee shall authenticate and make available for delivery Debentures
for original issue in the aggregate principal amount of $30,000,000 upon receipt
of a written order or orders of the Company signed by an Officer of the Company
(a “Company Order”). The Company Order shall specify the amount of Debentures to
be authenticated, shall provide that all such Debentures will be represented
initially by one or more Global Debentures and the date on which

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the Debentures are to be authenticated. The initial aggregate principal amount
of Debentures outstanding at any time may not exceed $30,000,000 except as
provided in Section 2.07.
     The Trustee shall act as the initial authenticating agent. Thereafter, the
Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Debentures. An authenticating agent may authenticate Debentures
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent shall have the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
     The Debentures shall be issuable only in registered form without coupons
and only in denominations of $1,000 principal amount and any integral multiple
thereof.
     Section 2.03 Registrar, Paying Agent and Conversion Agent.
     The Company shall maintain one or more offices or agencies where Securities
may be presented for registration of transfer or for exchange (each, a
“Registrar”), one or more offices or agencies where Debentures may be presented
for payment (each, a “Paying Agent”), one or more offices or agencies where
Debentures may be presented for conversion (each, a “Conversion Agent”) and one
or more offices or agencies where notices and demands to or upon the Company in
respect of the Debentures and this Indenture may be served. The Company will at
all times maintain a Paying Agent, Conversion Agent, Registrar and an office or
agency where notices and demands, to or upon, the Company in respect of the
Securities and this Indenture may be served in the United States. One of the
Registrars (the “Primary Registrar”) shall keep a register of the Securities and
of their transfer and exchange (the “Register”).
     The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any Agent not a party to this Indenture. If the
Company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent
for service of notices and demands in any place required by this Indenture, or
fails to give the foregoing notice, the Trustee shall act as such.
     The Company hereby initially designates the Trustee as Paying Agent,
Registrar, and Conversion Agent, and the Corporate Trust Office of the Trustee
as such office or agency of the Company for each of the aforesaid purposes.
     Section 2.04 Paying Agent to Hold Money in Trust.
     At least one Business Day prior to each date on which the principal amount
of or interest, if any, on any Debenture is due and payable, the Company shall
deposit with a Paying Agent a sum sufficient to pay such principal amount or
interest, if any, so becoming due. A Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal amount of or interest, if any, on the Debentures, and shall
notify the Trustee of any default by the Company (or any other obligor on the
Debentures) in making any such payment. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee, and the Trustee may at
any time during the continuance of any default, upon written request to a Paying
Agent, require such Paying Agent to pay forthwith to

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the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the
Paying Agent (other than the Company) shall have no further liability for the
money.
     Section 2.05 Lists of Holders.
     The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with Trust Indenture Act Section 312(a). If
the Trustee is not the Primary Registrar, the Company shall furnish to the
Trustee on or before each semiannual Interest Payment Date, and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Holders.
     Section 2.06 Transfer and Exchange.
     Subject to compliance with any applicable additional requirements contained
in Section 2.14, when a Security comprised of a Debenture with the related
Guarantee is presented to a Registrar with a request to register a transfer
thereof or to exchange such Debenture for an equal principal amount of
Debentures of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided, however, that every Debenture presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by an assignment form in the applicable form included in Exhibit D,
and in form satisfactory to the Registrar duly executed by the Holder thereof or
its attorney duly authorized in writing. To permit registration of transfers and
exchanges, upon surrender of any Debenture for registration of transfer or
exchange at an office or agency maintained pursuant to Section 2.03, the Company
shall execute and the Trustee shall authenticate Debentures of a like aggregate
principal amount at the Registrar’s request. Any exchange or transfer shall be
without charge, except that the Company or the Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto, and provided, that this sentence shall not apply to
any exchange pursuant to Section 2.10, Section 3.04, Section 9.03(b) or
Section 10.02(g) not involving any transfer.
     All Debentures issued upon any transfer or exchange of Debentures shall be
valid obligations of the Company, evidencing the same debt and entitled to the
same benefits under this Indenture, as the Debentures surrendered upon such
transfer or exchange.
     Any Registrar appointed pursuant to Section 2.03 shall provide to the
Trustee such information as the Trustee may reasonably require in connection
with the delivery by such Registrar of Debentures upon transfer or exchange of
Debentures.
     The registered holder of a Global Debenture may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that hold interests
through Agent Members, to take action which a Holder is entitled to take under
this Indenture or the Debentures.

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     The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Agent Members or other
beneficial owners of interests in any Global Debenture) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
     Section 2.07 Replacement Debentures.
     If any mutilated Debenture is surrendered to the Company, a Registrar or
the Trustee, or the Company, a Registrar and the Trustee receive evidence to
their satisfaction of the destruction, loss or theft of any Debenture, and there
is delivered to the Company, the applicable Registrar and the Trustee such
security or indemnity as will be required by them to save each of them harmless,
then, in the absence of notice to the Company, such Registrar or the Trustee
that such Debenture has been acquired by a protected purchaser, the Company
shall execute, and upon its written request the Trustee shall authenticate and
deliver, in exchange for any such mutilated Debenture or in lieu of any such
destroyed, lost or stolen Debenture, a new Debenture of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
     In case any such mutilated, destroyed, lost or stolen Debenture has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article 3, the Company in its discretion may, instead of
issuing a new Debenture, pay or purchase such Debenture, as the case may be.
     Upon the issuance of any new Debenture under this Section 2.07, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the reasonable fees and expenses of the Trustee
or the Registrar) in connection therewith.
     Every new Debenture issued pursuant to this Section 2.07 in lieu of any
mutilated, destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Debenture shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder.
     The provisions of this Section 2.07 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debentures.
     Section 2.08 Outstanding Debentures.
     Debentures outstanding at any time are all Debentures authenticated by the
Trustee, except for those canceled by it, those converted pursuant to
Article 10, those delivered to it for cancellation or surrendered for transfer
or exchange and those described in this Section 2.08 as not outstanding.

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     If a Debenture is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Company receives proof satisfactory to it that the
replaced Debenture is held by a bona-fide purchaser.
     If a Paying Agent holds at noon, New York City time, on the Maturity Date
Cash sufficient to pay the principal amount of the Debentures payable on that
date together with any accrued but unpaid interest and liquidated damages, if
any, then on and after the Maturity Date, such Debenture shall cease to be
outstanding and the principal amount thereof shall cease to bear interest.
     Section 2.09 Reserved
     Section 2.10 Temporary Debentures.
     Until definitive Debentures are ready for delivery, the Company may prepare
and execute, and, upon receipt of a Company Order, the Trustee shall
authenticate and deliver, temporary Debentures. Temporary Debentures shall be
substantially in the form of definitive Debentures but may have variations that
the Company with the consent of the Trustee considers appropriate for temporary
Debentures. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate and deliver definitive Debentures in exchange for
temporary Debentures.
     Section 2.11 Cancellation.
     The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee or its agent any Debentures surrendered to them for
transfer, exchange, payment or conversion. The Trustee, and no one else, shall
cancel in accordance with its standard procedures all Debentures surrendered for
transfer, exchange, payment, conversion or cancellation and upon written request
of the Company shall deliver the canceled Debentures to the Company.
     Section 2.12 CUSIP Numbers.
     The Company in issuing any Global Debentures may use one or more “CUSIP”
numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP”
numbers in notices of redemption or exchange as a convenience to Holders;
provided, that any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Debentures or as
contained in any notice of a redemption or exchange and that reliance may be
placed only on the other identification numbers printed on the Debentures, and
any such redemption or exchange shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the “CUSIP” numbers.
     Section 2.13 Book-entry Provisions For Global Debentures.
     (a) Transfers of Global Debentures shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective nominees.
Agent Members shall have

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no rights under this Indenture with respect to any Global Debenture held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Debenture, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Debenture for all purposes whatsoever. Notwithstanding the foregoing, the
Company, the Trustee or any agent of the Company or the Trustee, shall give
effect to any written certification, proxy or other authorization furnished by
the Depository (or its nominee) and will not impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of the beneficial owners of the interests represented by
such Global Debenture.
     (b) In addition, after Debentures are issued in substitution for the Global
Debentures, Certificated Debentures shall be transferred to all beneficial
owners, as identified by the Depository, in exchange for their beneficial
interests in Global Debentures if (i) the Depository notifies the Company that
the Depository is unwilling or unable to continue as depository for any Global
Debenture (or it ceases to be a “clearing agency” registered under Section 17A
of the Exchange Act) and a successor Depository is not appointed by the Company
within 90 days of such notice or cessation or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a written request from
the Depository to issue Certificated Debentures.
     (c) In connection with the transfer of a Global Debenture in its entirety
to beneficial owners pursuant to Section 2.13(b), such Global Debenture shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall upon written instructions from the Company
authenticate and deliver, to each beneficial owner identified by the Depository
in exchange for its beneficial interest in such Global Debenture, an equal
aggregate principal amount of Certificated Debentures of authorized
denominations.
     (d) Any Certificated Debenture constituting a Restricted Certificated
Debenture delivered in exchange for an interest in a Global Debenture pursuant
to Section 2.13(b) shall, except as otherwise provided by Section 2.14, bear the
Restricted Debenture Legend.
     (e) The Holder of a Global Debenture may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture, the Debentures or any Security Document.
     Section 2.14 Special Transfer Provisions.
     (a) Notwithstanding any other provisions of this Indenture, but except as
provided in Section 2.14(b), a Global Debenture may not be transferred except as
a whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository.
     (b) Every Debenture that bears or is required under this Section 2.14(b) to
bear the Restricted Debenture Legend, and any Common Stock that bears or is
required under this Section 2.14(b) to bear the Restricted Common Stock Legend
(each, a “Restricted Security”, and, collectively, the “Restricted Securities”)
shall be subject to the restrictions on transfer set

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forth in the Restricted Debenture Legend or the Restricted Common Stock Legend,
as the case may be, unless such restrictions on transfer shall be waived by
written consent of the Company or as otherwise permitted by Section 4.1(b) of
the Purchase Agreement, and the holder of each such Restricted Security, by such
Holder’s acceptance thereof, agrees to be bound by all such restrictions on
transfer. As used in this Section 2.14(b), the term “transfer” encompasses any
sale, pledge, loan, transfer or other disposition whatsoever of any Restricted
Security or any interest therein.
     Any certificate evidencing such Debenture (and all securities issued in
exchange therefor or substitution thereof), and any stock certificate
representing shares of Common Stock issued upon conversion of any Debenture,
shall bear a Restricted Debenture Legend or Restricted Common Stock Legend, as
the case may be, unless such Debenture has, or such shares of Common Stock have,
been sold pursuant to a registration statement that has been declared effective
under the Securities Act (and which continues to be effective at the time of
such transfer) or pursuant to Rule 144 or Rule 144A or any similar provision
then in force, or such shares of Common Stock have been issued upon conversion
of Debentures that have been transferred pursuant to a registration statement
that has been declared effective under the Securities Act or pursuant to
Rule 144 or Rule 144A under the Securities Act, or unless otherwise agreed by
the Company in writing, with written notice thereof to the Trustee.
     Any Debenture (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the Restricted Debenture Legend
set forth therein have been satisfied may, upon surrender of such Debenture for
exchange to the Registrar in accordance with the provisions of Section 2.06, be
exchanged for a new Debenture or Debentures, of like tenor and aggregate
principal amount, which shall not bear the Restricted Debenture Legend. If the
Restricted Debenture surrendered for exchange is represented by a Global
Debenture bearing the Restricted Debenture Legend, the principal amount of the
legended Global Debenture shall be reduced by the appropriate principal amount
and the principal amount of a Global Debenture without the Restricted Debenture
Legend shall be increased by an equal principal amount. If a Global Debenture
without the Restricted Debenture Legend is not then outstanding, the Company
shall execute and the Trustee shall authenticate and deliver an unlegended
Global Debenture to the Depository.
     Any such shares of Common Stock as to which such restrictions on transfer
shall have expired in accordance with their terms or as to which the conditions
for removal of the Restricted Common Stock Legend set forth therein have been
satisfied may, upon surrender of the certificates representing such shares of
Common Stock for exchange in accordance with the procedures of the transfer
agent for the Common Stock, be exchanged for a new certificate or certificates
for a like number of shares of Common Stock, which shall not bear the Restricted
Common Stock Legend required by this Section 2.14.
     (c) By its acceptance of any beneficial interest in a Restricted Security
bearing a Restricted Security legend, each beneficial owner of such an interest
shall be deemed to have acknowledged the restrictions on transfer of such
Restricted Security set forth in this Indenture and in the Restricted Security
legend, and agreed that it will transfer such beneficial interest only as
provided in this Indenture and as permitted by applicable law.

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     (d) The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.13 or this Section 2.14.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during normal
hours of operation of the Registrar upon the giving of reasonable notice to the
Registrar.
ARTICLE 3.
REDEMPTION
     Section 3.01 Optional Redemption at the Election of the Company.
     Subject to the provisions of this Section 3.01, at any time after the
2-year anniversary of the Original Issue Date, provided that the VWAP of the
Common Stock has been at least 150% of the Conversion Price for any 20 out of 30
consecutive Trading Days, such 30 consecutive Trading Day period beginning only
after the 2-year anniversary of the Original Issue Date, then, within 1 Trading
Day of the end of such period, the Company may deliver a notice to the
beneficial owners through the Holder (a “Company Optional Redemption Notice” and
the date such notice is deemed delivered hereunder, the “Company Optional
Redemption Notice Date”) of its irrevocable election to redeem some or all of
the then outstanding principal amount of the Debentures for cash in an amount
equal to the Company Optional Redemption Amount on the 20th Trading Day
following the Company Optional Redemption Notice Date (such date, the “Company
Optional Redemption Date”, such 20 Trading Day period, the “Company Optional
Redemption Period” and such redemption, the “Company Optional Redemption”). The
Company Optional Redemption Amount is payable in full on the Company Optional
Redemption Date. The Company may only effect a Company Optional Redemption if
each of the Equity Conditions shall have been met (unless waived in writing by
the beneficial owners, acting through the Holder) on each Trading Day during the
period commencing on the Company Optional Redemption Notice Date through to the
Company Optional Redemption Date and through and including the date payment of
the Company Optional Redemption Amount is actually made in full. If any of the
Equity Conditions shall cease to be satisfied at any time during the Company
Optional Redemption Period through to the Company Optional Redemption Date and
through and including the date payment of the Company Optional Redemption Amount
is actually made in full, the Company shall notify the Trustee and the Holders
of such fact (and the Holders shall notify the beneficial owner of any
Debenture). After receiving such notice each beneficial owner, as to its
interest, acting through the Holder, may elect to nullify the Company Optional
Redemption Notice by notice to the Company within 3 Trading Days after it
receives written notice from the Company that any such Equity Condition has not
been met, in which case the Company Optional Redemption Notice shall be null and
void, ab initio. The Company covenants and agrees that it will honor all Notices
of Conversion tendered from the time of delivery of the Company Optional
Redemption Notice through the date all amounts owing thereon are due and paid in
full. The Company’s determination to effect a Company Optional Redemption shall
be applied ratably to all of the holders of the then outstanding Debentures.

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     Section 3.02 Optional Redemption at the Election of Holder.
     Subject to the provisions of this Section 3.02, at any time prior to the
three-month anniversary of the Original Issue Date, each beneficial owner,
acting through the Holder, may deliver a notice to the Company (an “Holder
Optional Redemption Notice” and the date such notice is deemed delivered
hereunder, the “Holder Optional Redemption Notice Date”) of its election to
require the Company redeem for cash the product of up to (a) 25% of the original
face principal amount of the Debentures and (b) an amount equal to the Holder
Optional Redemption Amount, on the 20th Trading Day following such Holder
Optional Redemption Notice Date (such date, the “Holder Optional Redemption
Date”, such 20 Trading Day period, the “Holder Optional Redemption Period” and
such redemption, the “Holder Optional Redemption”). The Holder Optional
Redemption Amount is payable in full on the Holder Optional Redemption Date. The
Company covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Holder Optional Redemption Notice
through the date all amounts owing thereon are due and paid in full.
     Section 3.03 Redemption Procedure.
     The payment of cash or issuance of Common Stock, as applicable, pursuant to
a Company Optional Redemption or a Holder Optional Redemption shall be payable
on the Company Optional Redemption Date or the Holder Optional Redemption Date,
as applicable. If any portion of the payment pursuant to a Holder Optional
Redemption shall not be paid by the Company by the applicable due date, interest
shall accrue thereon at an interest rate equal to the lesser of 18% per annum or
the maximum rate permitted by applicable law until such amount is paid in full.
Notwithstanding anything herein contained to the contrary, if any portion of the
Company Optional Redemption Amount or a Holder Optional Redemption Amount
remains unpaid after such date, each Holder may elect, by written notice to the
Company given at any time thereafter, to invalidate such Optional Redemption, ab
initio, and, with respect to the Company’s failure to honor the Optional
Redemption, the Company shall have no further right to exercise such Optional
Redemption. Holders may elect to convert the outstanding principal amount of the
Debentures pursuant to Article 10 prior to actual payment in cash for any
redemption under this Article 3 by the delivery of a Notice of Conversion to the
Conversion Agent. Upon completion of any redemption provided for under this
Article 3, the Company will promptly and in no event later than four
(4) Business Days file a Current Report on Form 8-K disclosing the material
details of such redemption.
     Section 3.04 Debentures Redeemed In Part.
     Any Debenture which is to be redeemed only in part shall be surrendered at
the office of the Paying Agent (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder’s attorney duly authorized in writing) and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Debenture,
without service charge, a new Debenture or Debentures, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the portion of the principal amount of the Debenture so
surrendered that is not redeemed.

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     Section 3.05 Covenant to Comply with Securities Laws upon Redemption of
Debentures.
     When complying with the provisions of Sections 3.01 or 3.02, as applicable
(provided, that such offer or purchase constitutes an “issuer tender offer” for
purposes of Rule 13e-4 (which term, as used herein, includes any successor
provision thereto) under the Exchange Act at the time of such offer or
purchase), and subject to any exemptions available under applicable law, the
Company shall:
     (a) comply with Rule 13e-4 and Rule 14e-1 (or any successor provision)
under the Exchange Act, as applicable;
     (b) file the related Schedule TO (or any successor schedule, form or
report) if required under the Exchange Act, as applicable;
     (c) otherwise comply with all federal and state securities laws so as to
permit the rights and obligations under Section 3.01 to be exercised in the time
and in the manner specified therein.
     To the extent that the provisions of any securities laws, rules or
regulations conflict with the provisions of Sections 3.01 or 3.02, as
applicable, the Company’s compliance with such laws, rules and regulations shall
not in and of itself cause a breach of its obligations under Sections 3.01 or
3.02, as applicable.
ARTICLE 4.
COVENANTS
     Section 4.01 Payment of Debentures.
     (a) The Company agrees to pay the principal of, liquidated damages, if any,
and interest on the Debentures on the dates and in the manner provided in the
Debentures and this Indenture (including post-petition interest if the Company
becomes subject to any Bankruptcy Event). Not later than noon (New York City
time) on the Business Day immediately preceding the due date of any principal of
or interest on any Debenture, or any redemption price of the Debentures, the
Company will deposit with the Trustee (or Paying Agent) money in immediately
available funds sufficient to pay such amounts, provided that if the Company or
any Affiliate of the Company is acting as Paying Agent, it will, on or before
each due date, segregate and hold in a separate trust fund for the benefit of
the Holders a sum of money sufficient to pay such amounts until paid to such
Holders or otherwise disposed of as provided in this Indenture. In each case the
Company will promptly notify the Trustee of its compliance with this paragraph.
     (b) An installment of principal or interest will be considered paid on the
date due if the Trustee (or Paying Agent) has received from the Company or any
Guarantor and holds on that date money designated for and sufficient to pay the
installment.
     (c) The Company agrees to pay interest on overdue principal, and, to the
extent lawful, overdue installments of interest at the rate per annum specified
in the Debentures.

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     (d) Payments by the Trustee in respect of the Debentures represented by the
Global Debenture are to be made by wire transfer of immediately available funds
to the accounts specified by the Holder of the Global Debenture. With respect to
Certificated Debentures, the Company will make all payments by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each Holder’s registered
address.
     Section 4.02 Maintenance of Office or Agency.
     The Company will maintain in the United States, an office or agency where
Debentures may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company in
respect of the Debentures and this Indenture may be served. The Company hereby
initially designates the Corporate Trust Office of the Trustee as such office of
the Company. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company fails to maintain any such required office or agency or fails
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served to the Trustee at its Corporate Trust
Office.
     The Company may also from time to time designate one or more other offices
or agencies where the Securities may be surrendered or presented for any of such
purposes and may from time to time rescind such designations. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
     Section 4.03 Rule 144A Information and Exchange Act Reports.
     (a) At any time the Company is not subject to Sections 13 or 15(d) of the
Exchange Act, the Company shall, so long as any of the Debentures or any shares
of Common Stock issuable upon conversion thereof shall, at such time, constitute
“restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, promptly provide to the Trustee and shall, upon written request,
provide to any Holder, beneficial owner or prospective purchaser of Debentures
or any shares of Common Stock issued upon conversion of any Debentures, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act to facilitate the resale of such Debentures or shares of Common
Stock pursuant to Rule 144A under the Securities Act.
     (b) The Company shall deliver to the Trustee, such annual, quarterly and
current reports or other information and documents that are required to be filed
with the Commission, copies of the Company’s annual reports (which shall contain
audited financial statements of the Company), and quarterly and current reports
and of the other information and documents (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) that the
Company is required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act at the time the Company is required to file
such annual, quarterly and current reports and other information and documents;
provided that any such annual, quarterly and current reports, other information
or documents required to be filed with the Commission shall be deemed delivered
to the Trustee at the same time the same is filed with

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the Commission. The Company shall be deemed to have complied with the previous
sentence to the extent that the Company shall have filed or furnished such
annual, quarterly and current reports or other information and documents to the
Commission via EDGAR (or any successor electronic delivery procedure). In the
event the Company is at any time no longer subject to the reporting requirements
of Section 13 or Section 15(d) of the Exchange Act, the Company shall continue
to provide the Trustee and, upon written request, to each Holder, annual,
quarterly and current reports or other information and documents containing
substantially the same information as would have been required to be filed with
the SEC had the Company continued to have been subject to such reporting
requirements. In such event, such annual, quarterly and current reports shall be
provided at the times the Company would have been required to provide the
applicable report had it continued to have been subject to such reporting
requirements.
     Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee’s receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company’s
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers’ Certificates).
     Section 4.04 Reports to Trustee.
     (a) The Company will deliver to the Trustee within 120 days after the end
of each fiscal year a certificate from the principal executive, financial or
accounting officer of the Company stating that the officer has conducted or
supervised a review of the activities of the Company and its Subsidiaries and
their performance under this Indenture and that, based upon such review, the
Company has fulfilled its obligations hereunder or, if there has been a Default,
specifying the Default and its nature and status.
     (b) The Company will deliver to the Trustee, as soon as possible and in any
event within 30 days after the Company becomes aware or should reasonably become
aware of the occurrence of a Default, an Officers’ Certificate setting forth the
details of the Default, and the action which the Company proposes to take with
respect thereto.
     Section 4.05 Negative Covenants.
     As long as any portion of the Debentures remain outstanding, unless the
Holders of at least 67% in principal amount of the then-outstanding Debentures
shall have otherwise given prior written consent, the Company shall not, and
shall not permit any of its Subsidiaries (whether or not a Subsidiary on the
Original Issue Date) to, directly or indirectly:
     (a) other than Permitted Indebtedness and except as provided in the Credit
Agreement, enter into, create, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money of any kind, including, but not limited to, a
guarantee, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;
provided, that, any such additional Indebtedness effected through the Credit
Agreement, when combined with other existing Indebtedness of the Credit
Agreement, shall not exceed $150,000,000 in aggregate principal amount;

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     (b) other than Permitted Liens and except as provided in the Credit
Agreement, enter into, create, incur, assume or suffer to exist any Liens of any
kind, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom; provided,
that, any such additional Liens effected through the Credit Agreement, when
combined with other existing Liens under the Credit Agreement, shall not secure
Indebtedness with an aggregate principal amount in excess of $150,000,000;
     (c) amend its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of any Holder;
     (d) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than an amount of shares of its Common Stock or Common Stock Equivalents
equal to $200,000, other than as to (i) the Conversion Shares as permitted or
required under the Transaction Documents and (ii) repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the Company,
provided that such repurchases shall not exceed an aggregate of $100,000 for all
officers and directors during the term of the Debentures;
     (e) repay, repurchase or offer to repay, repurchase or otherwise acquire
any Indebtedness, other than (i) the Debentures if on a pro-rata basis or
(ii) regularly scheduled principal and interest payments as such terms are in
effect as of the Original Issue Date, provided that such payments shall not be
permitted if, at such time, or after giving effect to such payment, any Event of
Default exists or occurs (unless such payments are required to be made under the
Credit Agreement and are permitted to be made under the Intercreditor and
Subordination Agreement);
     (f) pay cash dividends or distributions on any equity securities of the
Company;
     (g) enter into any transaction with any Affiliate of the Company which
would be required to be disclosed in any public filing with the Commission,
unless such transaction is otherwise permitted under the Transaction Documents
and are upon fair and reasonable terms no less favorable to it than it would
obtain in a comparable arm’s-length transaction with a Person not an Affiliate;
or
     (h) enter into any agreement with respect to any of the foregoing.
     Section 4.06 Further Instruments and Acts.
     Upon request of the Trustee, the Company and the Guarantors shall execute
and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture.
ARTICLE 5.
CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS

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     Section 5.01 Consolidation, Merger, Sale or Lease of Assets by the Company.
     (a) The Company, without the consent of the Holders of any of the
outstanding Debentures, may
     (i) consolidate with or merge with or into any Person, or
     (ii) sell, convey, transfer, or otherwise dispose of or lease all or
substantially all of its assets as an entirety or substantially an entirety, in
one transaction or a series of related transactions, to any Person;
     provided, that
     (A) either (x) the Company is the continuing Person or (y) the resulting,
surviving or transferee Person is a corporation, partnership, limited liability
company or trust organized and validly existing under the laws of the United
States of America, any State thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company under
this Indenture and the Debentures and the Registration Rights Agreement;
     (B) immediately after giving effect to the transaction, no Event of Default
and no Default has occurred and is continuing;
     (C) the Company delivers to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that the consolidation, merger, sale,
conveyance, transfer, other disposition or lease and the supplemental indenture
(if any) comply with this Indenture; and
     (D) any Guarantor, unless it is the other party to the transactions
described above, will have by supplemental indenture confirmed that its
Guarantee will apply to such Person’s obligations under this Indenture and the
Securities;
     (b) Upon the consummation of any transaction effected in accordance with
these provisions, if the Company is not the continuing Person, the resulting,
surviving or transferee Person will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Securities with the same effect as if such successor Person had been named as
the Company in this Indenture. Upon such substitution, except in the case of a
lease, unless the successor is one or more of the Company’s Subsidiaries, the
Company will be released from its obligations under this Indenture and the
Securities.
     (c) Each Guarantor shall not, and the Company shall not cause or permit any
Guarantor to, consolidate with or merge with or into any Person other than the
Company or any other Guarantor or sell, convey, transfer or otherwise dispose
of, or lease all or substantially all of its assets as an entirety or
substantially an entirety, in one transaction, or a series of related
transactions, unless;

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     (i) the entity formed by or surviving any such consolidation or merger (if
other than the Guarantor) or to which such sale, lease, transfer, conveyance or
other disposition shall have been made will be a corporation duly incorporated
and validly existing under the laws of the United States of America, any State
thereof or the District of Columbia;
     (ii) the entity expressly assumes by a supplemental indenture or other
agreement in form satisfactory to the Trustee all of the obligations of the
Guarantor under the Subordinated Guaranty and this Indenture and the
Subordinated Guaranty, any Transaction Document or Security Document to which
such Guarantor was a party, and this Indenture will remain in full force and
effect as so supplemented; and
     (iii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing.
     (d) Nothing in this Indenture will prevent any Guarantor from merging into
or transferring all or part of its properties and assets to the Company or
another Guarantor.
ARTICLE 6.
DEFAULT AND REMEDIES
     Section 6.01 Events of Default.
     “Event of Default” with respect to the Securities means, wherever used
herein, any of the following events (whatever the reason for such event and
whether such event shall be voluntary or involuntary or effected by operation of
law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):
     (a) Any default in the payment of (A) the principal amount of any Debenture
or (B) interest, liquidated damages or other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on a
Conversion Date, any redemption date or the Maturity Date or by acceleration or
otherwise);
     (b) the Company or any Guarantor shall fail to observe or perform any other
covenant or agreement contained in the Securities (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the Holder upon
conversion, which breach is addressed in clause (j) below) which failure is not
cured, if possible to cure, within 10 Trading Days after the earlier of (A) the
Company’s becoming aware of such failure and (B) notice of such failure sent by
any Holder to the Company;
     (c) the Company shall fail to observe or perform any covenants or
agreements contained in Section 4.6, 4.7, 4.9, 4.10, 4.12, 4.13 and 4.17 of the
Purchase Agreement, which failure is not cured, if possible to cure, within 10
Trading Days after the earlier of (A) the Company’s becoming aware of such
failure and (B) notice of such failure sent by any Holder to the Company;

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     (d) any representation or warranty made by the Company in the Debentures or
in Section 3.1(c), (d), (f), or (g) in the Purchase Agreement shall be untrue or
incorrect in any material respect as of the date when made or deemed made;
     (e) a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents (other than another Debenture) or any of
the Security Documents, or (B) under the documents governing any Permitted
Indebtedness or any other material agreement, lease, document or instrument to
which the Company or any Subsidiary is obligated;
     (f) the Company or any Significant Subsidiary shall be subject to a
Bankruptcy Event;
     (g) the Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement that (a) involves
an obligation the greater of $1,000,000 or five percent (5%) of the then
effective Conforming Borrowing Base, whether such indebtedness now exists or
shall hereafter be created, and (b) results in such indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise
become due and payable;
     (h) the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within 10 Trading Days;
     (i) if the Company does not meet the current public information
requirements as in effect under Rule 144 as they may exist from time to time in
respect of the Conversion Shares and the Holder cannot freely resell the
Conversion Shares on a Trading Market pursuant to Rule 144 for a period of
3 months;
     (j) the Company shall fail for any reason to deliver certificates to a
Holder prior to the seventh Trading Day after a Conversion Date pursuant to
Section 10.02 or the Company shall provide at any time notice to the Holder,
including by way of public announcement, of the Company’s intention to not honor
requests for conversions of any Debentures in accordance with the terms hereof;
     (k) any monetary judgment, writ or similar final process shall be entered
or filed against the Company, any Subsidiary or any of their respective property
or other assets for more than the greater of $1,000,000 or five percent (5%) of
the then effective Conforming Borrowing Base, , and such judgment, writ or
similar final process shall remain unvacated, unbonded or unstayed for a period
of 60 calendar days;
     (l) if any of the Security Documents ceases to be in full force and effect
(including failure to create a valid and perfected second priority lien on and
security interest in all the Collateral (as defined in the Security Documents)
at any time for any reason; and

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     (m) any Guarantee ceases to be, or shall be asserted in writing by any
Guarantor, or any Person acting on behalf of any Guarantor, not to be, in full
force and effect or enforceable in accordance with its terms (other than in
accordance with the terms of this Indenture or any such Guarantee).
     Section 6.02 Remedies Upon Event of Default.
     If any Event of Default occurs (other than an Event of Default specified in
Section 6.01(f)), the outstanding principal amount of the Debentures, plus
accrued but unpaid interest, liquidated damages and other amounts owing in
respect thereof through the date of acceleration, shall become, at the election
of Holders of at least 51% in aggregate principal amount of the Debentures,
immediately due and payable in cash at the Mandatory Default Amount. Such
declaration may be made by the Holders of at least 51% in aggregate principal
amount of the Debentures by written notice to the Company (and to the Trustee,
if the Notice is given by the Holders), or by the Trustee at the request of the
Holders, in each case subject to Article 12. If an Event of Default specified in
Section 6.01(f) occurs and is continuing, the principal of and interest on all
the Debentures shall ipso facto become immediately due and payable without any
other act on the part of the Trustee or any Holder. Commencing upon the
occurrence of any Event of Default the interest rate on the Debentures shall
accrue at an interest rate equal to the lesser of 18% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holders shall promptly surrender the Debentures to or as
directed by the Trustee or the Company. In connection with such acceleration
described herein, the Holders need not provide, and the Company hereby waives,
any presentment, demand, protest or other notice of any kind, and the Holders
may immediately and without expiration of any grace period enforce any and all
of its rights and remedies hereunder and all other remedies available to it
under applicable law. Such acceleration may be rescinded and annulled by the
Holders at any time prior to payment hereunder and the Holders shall have all
rights as a holder of the Debentures until such time, if any, as the Holders
receive full payment pursuant to this Section 6.02. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
     Section 6.03 Other Remedies.
     If an Event of Default occurs and is continuing, the Trustee may pursue,
subject to the provisions of Article 12, in its own name or as trustee of an
express trust, any available remedy by proceeding at law or in equity to collect
the payment of principal of and interest on the Debentures or to enforce the
performance of any provision of the Securities or this Indenture. The Trustee
may maintain a proceeding even if it does not possess any of the Debentures or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
     Section 6.04 Control by Holders of at least 67%.
     The Holders of at least 67% of aggregate principal amount of the
outstanding Debentures may direct the time, method and place of conducting any
proceeding for any remedy available to

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the Trustee or exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Debentures not joining in the giving of such direction, and may take
any other action it deems proper that is not inconsistent with any such
direction received from Holders of Debentures.
     Section 6.05 Limitation on Suits.
     Except to enforce the right to receive payment of principal, liquidated
damages, if any, or interest on the Debentures on or after the Maturity Date, a
Holder may not institute any proceeding, judicial or otherwise, with respect to
this Indenture or the Securities, or for the appointment of a receiver or
trustee, or for any other remedy under this Indenture or the Securities, unless:
     (a) the Holder has previously given to the Trustee written notice of a
continuing Event of Default;
     (b) Holders of at least 67% in aggregate principal amount of outstanding
Debentures have made written request to the Trustee to institute proceedings in
respect of the Event of Default in its own name as Trustee under this Indenture;
     (c) Holders have offered to the Trustee indemnity reasonably satisfactory
to the Trustee against any costs, liabilities or expenses to be incurred in
compliance with such request;
     (d) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
     (e) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Debentures have not given the Trustee a
direction that is inconsistent with such written request.
     Section 6.06 Rights of Holders to Receive Payment.
     Notwithstanding anything to the contrary, the right of a Holder of a
Debenture to receive payment of principal of, liquidated damages, if any, or
interest on its Debenture on or after the stated maturity thereof, or to bring
suit for the enforcement of any such payment on or after such respective dates,
may not be impaired or affected without the consent of that Holder.
     Section 6.07 Collection Suit by Trustee.
     If an Event of Default in payment of principal or interest specified in
clause (a) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust for the whole amount
of principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent lawful, overdue installments of interest,
in each case at the rate specified in the Debentures, and such further amount as
is sufficient to cover the costs and expenses of collection, including the
reasonable compensation,

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expenses, disbursements and advances of the Trustee, its agents and counsel and
any other amounts due the Trustee hereunder.
     Section 6.08 Trustee May File Proofs of Claim.
     The Trustee may file proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for the compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee
hereunder) and the Holders allowed in any judicial proceedings relating to the
Company or any Guarantor or their creditors or property, and is entitled and
empowered to collect, receive and distribute any money, securities or other
property payable or deliverable upon conversion or exchange of the Debentures or
upon any such claims. Any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, if the
Trustee consents to the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee hereunder. Nothing in this Indenture will be deemed to
empower the Trustee to authorize or consent to, or accept or adopt on behalf of
any Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Debentures or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
     Section 6.09 Trustee May Enforce Claims Without Possession of Debentures.
     All rights of action and claims under this Indenture or the Debentures may
be prosecuted and enforced by the Trustee without the possession of any of the
Debentures or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders in respect of which such judgment has been recovered.
     Section 6.10 Priorities.
     If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and counsel for amounts due under Section 7.07
hereof, including payment of all compensation, expenses and liabilities
incurred, and all advances made, by the Trustee and the Trustee’s costs and
expenses of collection;
Second: to Holders for amounts then due and unpaid for principal of and interest
on the Debentures, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Debentures for principal and
interest; and
Third: to the Company or as a court of competent jurisdiction may direct.

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     The Trustee, upon written notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section. At least
15 days before such record date, the Trustee shall mail to each Holder and the
Company a notice that states the record date, the payment date and the amount to
be paid.
     Section 6.11 Restoration of Rights and Remedies.
     If the Trustee or any Holder has instituted a proceeding to enforce any
right or remedy under this Indenture, any Security Document or under any other
Transaction Document and the proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to the Holder,
then, subject to any determination in the proceeding, the Company, the Trustee
and the Holders will be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Company, the
Trustee and the Holders will continue as though no such proceeding had been
instituted.
     Section 6.12 Undertaking for Costs.
     In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court may require any party litigant in such suit (other than the
Trustee) to file an undertaking to pay the costs of the suit, and the court may
assess reasonable costs, including reasonable attorneys fees and expenses,
against any party litigant (other than the Trustee) in the suit having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder to enforce payment of principal of or interest on any Debenture on the
respective due dates, or a suit by Holders of more than 10% in principal amount
of the outstanding Debentures.
     Section 6.13 Rights and Remedies Cumulative.
     No right or remedy conferred or reserved to the Trustee or to the Holders
under this Indenture is intended to be exclusive of any other right or remedy,
and all such rights and remedies are, to the extent permitted by law, cumulative
and in addition to every other right and remedy hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or exercise of any
right or remedy hereunder, or otherwise, will not prevent the concurrent
assertion or exercise of any other right or remedy.
     Section 6.14 Delay or Omission Not Waiver.
     No delay or omission of the Trustee or of any Holder to exercise any right
or remedy accruing upon any Event of Default will impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
     Section 6.15 Failure to File.
     Notwithstanding anything in this Article 6, the Company may, at its option,
elect that the sole remedy for an Event of Default relating to its failure to
comply with its obligations

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described under Section 4.03(b) or its failure to comply with the requirements
of Section 314(a)(1) of the Trust Indenture Act will for the first 180 days
after the occurrence of such an Event of Default consist exclusively of the
right to receive an extension fee on the Debentures in an amount equal to 2.0%
of the principal amount of the Debentures (the “Extension Fee”). The Company
shall pay the Extension Fee on all outstanding Debentures on the date on which
such Event of Default first occurs. On the 181st day after such Event of Default
(if the Event of Default relating to the reporting obligations is not cured or
waived prior to such 181st day), the Debentures shall be subject to acceleration
as provided in Section 6.02. This Section 6.15 shall not affect the rights of
Holders of Debentures if any other Event of Default occurs under this Indenture.
If the Company does not pay the Extension Fee within five (5) Business Days in
accordance with this Section 6.15, the Debentures shall be subject to
acceleration as provided in Section 6.02.
ARTICLE 7.
THE TRUSTEE
     Section 7.01 General.
     (a) The duties and responsibilities of the Trustee are as provided by the
Trust Indenture Act and as set forth herein. Whether or not expressly so
provided, every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee is subject to this
Article.
     (b) Except during the continuance of an Event of Default, the Trustee need
perform only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations will be read into this
Indenture against the Trustee. In case an Event of Default has occurred and is
continuing, the Trustee shall exercise those rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
     (c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that this provision does not limit
the effect of Sections 7.01(b), (d) and (e) or Section 7.02(a).
     (d) The Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts.
     (e) The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of at least 67% of principal amount of the Debentures relating to the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture with respect to the Securities.
     Section 7.02 Certain Rights of Trustee.
     Subject to Trust Indenture Act Sections 315(a) through (d):

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     (a) The Trustee may conclusively rely, and will be fully protected in
acting or refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
Debenture, note, other evidence of indebtedness or other paper or document
(“Paper”) believed by it to be genuine and to have been signed or presented by
the proper Person. The Trustee need not investigate any fact or matter stated in
the Paper, but, in the case of any Paper which is specifically required to be
furnished to the Trustee pursuant to any provision hereof, the Trustee shall
examine the Paper to determine whether it conforms to the requirements of this
Indenture (but need not confirm or investigate the accuracy of mathematical
calculations or other facts stated therein). The Trustee, in its discretion, may
make further inquiry or investigation into such facts or matters as it sees fit.
     (b) Before the Trustee acts or refrains from acting, it may require an
Officers’ Certificate or an Opinion of Counsel conforming to Section 14.06 and
the Trustee will not be liable for any action it takes or omits to take in good
faith in reliance on such Officers’ Certificate or Opinion of Counsel.
     (c) The Trustee may act through its attorneys and agents and will not be
responsible for the misconduct or negligence of any agent appointed with due
care.
     (d) The Trustee will be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders, unless such Holders have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
might be incurred by it in compliance with such request or direction.
     (e) The Trustee will not be liable for any action it takes or omits to take
in good faith that it believes to be authorized or within its rights or powers
or for any action it takes or omits to take in accordance with the direction of
the Holders in accordance with Section 6.04 relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture,
any Transaction Document or any Security Document provided, however, that the
Trustee’s conduct does not constitute willful misconduct, bad faith or
negligence.
     (f) The Trustee may consult with counsel, and the advice of such counsel or
any Opinion of Counsel will be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
     (g) No provision of this Indenture will require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of its duties hereunder, or in the exercise of its rights or powers, unless it
receives indemnity satisfactory to it against any loss, liability or expense.
     (h) In no event shall the Trustee be responsible or liable for special,
indirect or consequential loss or damage of any kind whatsoever (including, but
not limited to, loss of profit) irrespective of whether the Trustee has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
     (i) The Trustee shall not be deemed to have notice of any Default or Event
of Default unless a Responsible Officer of the Trustee has actual conscious (as
opposed to constructive)

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knowledge thereof or unless written notice of any event which is in fact such a
Default or Event of Default is received by the Trustee at the Corporate Trust
Office of the Trustee, and such notice references the Debentures and this
Indenture.
     (j) The rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and each agent, custodian and other Person employed to act hereunder.
     Section 7.03 Individual Rights of Trustee.
     The Trustee, in its individual or any other capacity, may become the owner
or pledgee of Debentures and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not the Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to Trust
Indenture Act Sections 310(b) and 311. For purposes of Trust Indenture Act
Section 311(b)(4) and (6):
     (a) “cash transaction” means any transaction in which full payment for
goods or securities sold is made within seven days after delivery of the goods
or securities in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and
     (b) “self-liquidating paper” means any draft, bill of exchange, acceptance
or obligation which is made, drawn, negotiated or incurred for the purpose of
financing the purchase, processing, manufacturing, shipment, storage or sale of
goods, wares or merchandise and which is secured by documents evidencing title
to, possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or merchandise
previously constituting the security, provided the security is received by the
Trustee simultaneously with the creation of the creditor relationship arising
from the making, drawing, negotiating or incurring of the draft, bill of
exchange, acceptance or obligation.
     Section 7.04 Trustee’s Disclaimer.
     The Trustee (i) shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Securities, (ii) is not
accountable for the Company’s use or application of the proceeds from the
Debentures, (iii) is not responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and (iv) is not responsible
for any statement or recital herein, in any Transaction Document or in any
Security Document or in the Debentures, other than its certificate of
authentication.
     Section 7.05 Notice of Default.
     If any Default occurs and is continuing and is known to the Trustee
pursuant to a written notice thereof, the Trustee will send notice of the
Default to each Holder within 15 Business Days after it occurs, unless the
Default has been cured; provided that, except in the case of a default in the
payment of the principal of or interest on any Debenture, the Trustee may
withhold the notice if and so long as the board of directors, the executive
committee or a trust committee of Responsible Officers of the Trustee in good
faith determines that withholding the notice is in

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the interest of the Holders. Notice to Holders under this Section will be given
in the manner and to the extent provided in Trust Indenture Act Section 313(c).
     Section 7.06 Reports by Trustee to Holders.
     Within 60 days after each May 15 beginning with May 15, 2009, the Trustee
will mail to each Holder, as provided in Trust Indenture Act Section 313(c), a
brief report dated as of such May 15, if required by Trust Indenture Act
Section 313(a), and file such reports with each stock exchange upon which the
Debentures are listed and with the Commission as required by Trust Indenture Act
Section 313(d).
     Section 7.07 Compensation and Indemnity.
     (a) The Company will pay the Trustee compensation as agreed upon in writing
for its services. The compensation of the Trustee is not limited by any law on
compensation of a Trustee of an express trust. The Company will reimburse the
Trustee upon request for all reasonable out-of-pocket expenses, disbursements
and advances incurred or made by the Trustee, including the reasonable
compensation and expenses of the Trustee’s agents and counsel.
     (b) The Company and the Guarantors will indemnify the Trustee for, and hold
it harmless against, any loss, claim, damage, cost or liability or expense
incurred by it without negligence or willful misconduct on its part arising out
of or in connection with the acceptance or administration of this Indenture and
its duties under this Indenture, the Debentures, the Transaction Documents and
the Security Documents, including the costs and expenses of defending itself
against any claim or liability and of complying with any process served upon it
or any of its officers in connection with the exercise or performance of any of
its powers or duties under this Indenture, the Debentures, the Transaction
Documents and the Security Documents.
     (c) To secure the Company’s and Guarantors’ payment obligations in this
Section, the Trustee will have a lien prior to the Debentures in accordance with
the Intercreditor and Subordination Agreement on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, and interest on particular Debentures.
     The provisions of this Section will survive the satisfaction and discharge
of this Indenture or the resignation or removal of the Trustee.
     The Trustee shall comply with the provisions of the Trust Indenture Act
Section 313(b)(2) to the extent applicable.
     Section 7.08 Replacement of Trustee.
     (a) (i) The Trustee may resign at any time by written notice to the
Company.
     (ii) The Holders of at least 67% in principal amount of the outstanding
Debentures may remove the Trustee by written notice to the Trustee.

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     (iii) If the Trustee is no longer eligible under Section 7.10 or in the
circumstances described in Trust Indenture Act Section 310(b), any Holder that
satisfies the requirements of Trust Indenture Act Section 310(b) may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
     (iv) The Company may remove the Trustee if: (A) the Trustee is no longer
eligible under Section 7.10; (B) the Trustee is adjudged a bankrupt or an
insolvent; (C) a receiver or other public officer takes charge of the Trustee or
its property; or (D) the Trustee becomes incapable of acting.
A resignation or removal of the Trustee and appointment of a successor Trustee
will become effective only upon the successor Trustee’s acceptance of
appointment as provided in this Section.
     (b) If the Trustee has been removed by the Holders, Holders of at least 67%
in principal amount of the Debentures may appoint a successor Trustee with the
consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a
vacancy exists in the office of Trustee for any reason, the Company will
promptly appoint a successor Trustee. If the successor Trustee does not deliver
its written acceptance within 30 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company or the Holders of at least 67% in
principal amount of the outstanding Debentures may petition at the expense of
the Company any court of competent jurisdiction for the appointment of a
successor Trustee.
     (c) Upon delivery by the successor Trustee of a written acceptance of its
appointment to the retiring Trustee and to the Company, (i) the retiring Trustee
will transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.07(c), (ii) the resignation or
removal of the retiring Trustee will become effective, and (iii) the successor
Trustee will have all the rights, powers and duties of the Trustee under this
Indenture, the Transaction Documents and the Security Documents. Upon request of
any successor Trustee, the Company will execute any and all reasonable
instruments for fully and vesting in and confirming to the successor Trustee all
such rights, powers and trusts. The Company will give notice of any resignation
and any removal of the Trustee and each appointment of a successor Trustee to
all Holders, and include in the notice the name of the successor Trustee and the
address of its Corporate Trust Office.
     (d) Notwithstanding replacement of the Trustee pursuant to this Section,
the Company’s obligations under Section 7.07 will continue for the benefit of
the retiring Trustee.
     (e) The Trustee agrees to give the notices provided for in, and otherwise
comply with, Trust Indenture Act Section 310(b).
     Section 7.09 Successor Trustee by Merger.
     If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business (including the
administration of this Indenture) to, another corporation or national banking
association, the resulting, surviving or transferee corporation or

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national banking association without any further act will be the successor
Trustee with the same effect as if the successor Trustee had been named as the
Trustee in this Indenture.
     Section 7.10 Eligibility.
     This Indenture must always have a Trustee that satisfies the requirements
of Trust Indenture Act Section 310(a) and has a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual report of
condition.
     Section 7.11 Money Held in Trust.
     The Trustee will not be liable for interest on any money received by it
except as it may agree in writing with the Company. Money held in trust by the
Trustee need not be segregated from other funds except to the extent required by
law and except for money held in trust under Article 8.
ARTICLE 8.
DISCHARGE
     Section 8.01 Satisfaction and Discharge of this Indenture.
     (a) This Indenture shall cease to be of further effect if either: (i) all
outstanding Debentures (other than Debentures replaced pursuant to Section 2.07)
have been delivered to the Trustee for cancellation or (ii) all outstanding
Debentures have become due and payable on the Maturity Date or upon redemption
pursuant to Article 3, and the Company has irrevocably deposited with the
Trustee or the Paying Agent (if the Paying Agent is not the Company or any of
its Affiliates) Cash, and, if applicable as herein provided and in accordance
herewith, such other consideration, sufficient to pay all amounts due and owing
on all outstanding Debentures (other than Debentures replaced pursuant to
Section 2.07) on the Maturity Date or the Change of Control Redemption Date, as
the case may be; provided that, in either case, the Company pays to the Trustee
all other sums payable hereunder by the Company.
     (b) The Company may exercise its satisfaction and discharge option with
respect to the Debentures only if:
     (i) no Default or Event of Default with respect to the Debentures shall
exist on the date of such deposit;
     (ii) such deposit shall not result in a breach or violation of, or
constitute a Default or Event of Default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which it is bound;
and
     (iii) the Company has delivered to the Trustee an Officers’ Certificate and
an Opinion of Counsel (which may rely upon such Officers’ Certificate as to the
absence of Defaults and Events of Default and as to any factual matters), each
stating that all conditions precedent provided for herein relating to the
satisfaction and discharge of this Indenture have been complied with.

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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 7.07 shall survive and,
if money shall have been deposited with the Trustee pursuant to clause (a) of
this Section, the provisions of Section 2.03, Section 2.04, Section 2.05,
Section 2.06, Section 2.07, Section 2.14, Section 3.02, Article 5, Article 10
and this Article 8, shall survive and the Company shall be required to make all
payments and deliveries required by such Sections or Articles, as the case may
be, irrespective of any prior satisfaction and discharge until the Debentures
have been paid in full.
     Section 8.02 Application of Trust Money.
     Subject to the provisions of Section 8.03, the Trustee or a Paying Agent
shall hold in trust, for the benefit of the Holders, all money deposited with it
pursuant to Section 8.01 and shall apply the deposited money in accordance with
this Indenture and the Debentures to the payment of the principal amount of and
interest on the Debentures.
     Section 8.03 Repayment to Company.
     The Trustee and each Paying Agent shall promptly pay to the Company upon
request any excess money (x) deposited with them pursuant to Section 8.01 and
(y) held by them at any time.
     The Trustee and each Paying Agent shall also pay to the Company upon
request any money held by them for the payment of the principal amount of
Debentures or interest thereon that remains unclaimed for two years after a
right to such money has matured (which maturity shall occur, for the avoidance
of doubt, on the Maturity Date or the Change of Control Redemption Date (with
respect to any Debentures repurchased pursuant to Article 3)). After payment to
the Company, Holders entitled to money must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
Person.
     Section 8.04 Reinstatement.
     If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 8.02 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, or any amount previously
paid is required to be returned to the Company’s bankruptcy estate as a
preferential transfer, then the Company’s and each Guarantor’s obligations under
this Indenture, the Debentures, the Security Documents and any other Transaction
Document (and any liens arising thereunder) shall be revived and reinstated as
though no deposit had occurred pursuant to Section 8.01 until such time as the
Trustee or such Paying Agent is permitted to apply all such money in accordance
with Section 8.02; provided, however, if the Company has made any payment of the
principal amount of or interest on any Debenture because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Debentures to receive any such payment from the money held by the Trustee
or such Paying Agent.
ARTICLE 9.
AMENDMENTS, SUPPLEMENTS AND WAIVERS

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     Section 9.01 Amendments without Consent of Holders.
     The Company, the Guarantors and the Trustee may amend or supplement this
Indenture, the Securities, the Transaction Documents or the Security Documents
without notice to or the consent of any Holder:
     (a) to cure any ambiguity, omission, defect or inconsistency in this
Indenture, the Securities, the Transaction Documents or the Security Documents;
     (b) to comply with Article 5;
     (c) to comply with the Trust Indenture Act or any amendment thereto, or to
comply with any requirements of the Commission in connection with the
qualification of this Indenture under the Trust Indenture Act;
     (d) to evidence and provide for the acceptance of an appointment hereunder
by a successor Trustee;
     (e) to provide for uncertificated Debentures in addition to or in place of
Certificated Debentures;
     (f) to further secure the Debentures;
     (g) to add guarantees of additional Guarantors with respect to the
Debentures or to release any Guarantor in accordance with and if permitted by
the terms of any limitation set forth in this Indenture;
     (h) to add Collateral;
     (i) to release Collateral to the extent permitted by the terms of this
Indenture, any Transaction Document or any Security Document;
     (j) to add to the covenants of the Company and any Guarantor for the
benefit of the Holders or to surrender any right or power herein conferred upon
the Company or any Guarantor in this Indenture or in the Securities;
     (k) to add any additional Events of Default;
     (l) to comply with the rules of any applicable securities Depository;
     (k) to effectuate the penultimate sentence in 10.02(c);
     (m) to provide for the assumption of the Company’s obligations to the
Holders of the Debentures in the case of a merger or consolidation pursuant to
Article 5 hereof;
     (n) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act; or
     (o) to make any other change that does not adversely affect the rights of
any Holder.

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     Upon the request of the Company and the Guarantors accompanied by
resolutions of the boards of directors of the Company and the Guarantors
authorizing the execution of any such amendment or supplement to this Indenture,
the Securities, the Transaction Documents or the Security Documents, and upon
receipt by the Trustee of the documents described in Section 7.02(b) hereof, the
Trustee shall join with the Company and the Guarantors in the execution of any
amendment or supplement to this Indenture, the Securities, the Transaction
Documents or the Security Documents authorized or permitted by the terms hereof
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into any such
amendment or supplement that affects its own rights, duties or immunities under
this Indenture, the Securities, the Transaction Documents or the Security
Documents or otherwise.
     Section 9.02 Amendments with Consent of Holders.
     (a) Except as provided in Section 9.01, no provision of this Indenture, the
Securities, the Transaction Documents or the Security Documents may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company, the Guarantors and the Holders, except
that Section 4.05 of this Indenture may be waived or amended with the prior
written consent of the Holders of at least 67% of the principal amount of
Debentures then outstanding (provided that no consideration shall be offered or
paid to any Holder of Debentures to consent to any such amendment or waiver
unless the same consideration is offered to all Holders of the Debentures).
After an amendment under this Section 9.02 becomes effective, the Company shall
mail to Holders a notice briefly describing such amendment. The failure to give
such notice to all Holders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section 9.02. Any waiver by the Company,
the Guarantors or the Holders of a breach of any provision of this Indenture,
the Securities, the Transaction Documents or the Security Documents shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Indenture, the Securities, the
Transaction Documents or the Security Documents. The failure of the Company, the
Guarantors or the Holder to insist upon strict adherence to any term of this
Indenture, the Securities, the Transaction Documents or the Security Documents
on one or more occasions shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Indenture, the Securities, the Transaction Documents or the
Security Documents. Any waiver by the Company, the Guarantors or the Holders
must be in writing.
     (b) Notwithstanding the provisions of paragraph (a), without the consent of
each Holder affected, an amendment or waiver may not
     (i) reduce the principal amount of, Change of Control Redemption Price with
respect to, or any liquidated damages or interest payment on, any Debenture,
     (ii) make any Debenture payable in currency or securities other than that
stated in the Debentures,
     (iii) change the stated maturities of any installment of principal of any
Debenture,

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     (iv) make any change that adversely affects the Holders’ right to convert
any Debenture,
     (v) make any change that adversely affects the Holders’ right to require
the Company to purchase the Debentures in accordance with the terms thereof and
this Indenture,
     (vi) impair the right to convert or receive any principal or interest
payment with respect to, a Debenture, or right to institute suit for the
enforcement of any payment with respect to, or conversion of, the Debentures, or
     (vii) make any change in the percentage of the principal amount of the
Debentures required for amendments or waivers.
     (c) It is not necessary for Holders to approve the particular form of any
proposed amendment, supplement or waiver, but is sufficient if their consent
approves the substance thereof.
     (d) An amendment, supplement or waiver under this Section will become
effective on receipt by the Trustee of written consents from the Holders of the
requisite percentage in principal amount of the outstanding Debentures. After an
amendment, supplement or waiver under this Section becomes effective, the
Company will send to the Holders affected thereby a notice briefly describing
the amendment, supplement or waiver. The Company will send supplemental
indentures to Holders upon request. Any failure of the Company to send such
notice, or any defect therein, will not, however, in any way impair or affect
the validity of any such supplemental indenture or waiver.
     (e) With respect to the amendments set forth in Section 9.01 and this
Section 9.02, no such amendment to cure any ambiguity, defect or inconsistency
made solely to conform this Indenture to the provisions of the description of
the Securities, as set forth in the final Prospectus, will be deemed to
adversely affect the interests of the Holders.
     Section 9.03 Effect of Consent.
     (a) After an amendment, supplement or waiver becomes effective, it will
bind every Holder unless it is of the type requiring the consent of each Holder
affected. If the amendment, supplement or waiver is of the type requiring the
consent of each Holder affected, the amendment, supplement or waiver shall bind
each Holder that has consented to it and every subsequent Holder of a Debenture
that evidences the same debt as the Debenture of the consenting Holder.
     (b) If an amendment, supplement or waiver changes the terms of a Debenture,
the Trustee may require the Holder to deliver it to the Trustee so that the
Trustee may place an appropriate notation of the changed terms on the Debenture
and return it to the Holder, or exchange it for a new Debenture that reflects
the changed terms. The Trustee may also place an appropriate notation on any
Debenture thereafter authenticated. However, the effectiveness of the amendment,
supplement or waiver is not affected by any failure to annotate or exchange
Debentures in this fashion.

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     Section 9.04 Trustee’s Rights and Obligations.
     The Trustee shall be provided with, and will be fully protected in relying
upon, an Opinion of Counsel and Officers’ Certificate stating that the execution
of any amendment, supplement or waiver authorized pursuant to this Article is
authorized or permitted by this Indenture. If the Trustee has received such an
Opinion of Counsel and Officers’ Certificate, it shall sign the amendment,
supplement or waiver so long as the same does not adversely affect the rights of
the Trustee. The Trustee may, but is not obligated to, execute any amendment,
supplement or waiver that affects the Trustee’s own rights, duties or immunities
under this Indenture.
     Section 9.05 Conformity with Trust Indenture Act.
     Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
     Section 9.06 Payments for Consents.
     Neither the Company nor any of its Subsidiaries or Affiliates may, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid or agreed to
be paid to all Holders of the Securities that consent, waive or agree to amend
such term or provision within the time period set forth in the solicitation
documents relating to the consent, waiver or amendment.
ARTICLE 10.
CONVERSION
     Section 10.01 Conversion Privilege and Conversion Price.
     (a) Voluntary Conversion. At any time after the Original Issue Date until
the Debentures are no longer outstanding, the principal amount of the Debentures
shall be convertible, in whole or in part, into shares of Common Stock at the
option of the Holders, at any time and from time to time (subject to the
conversion limitations set forth in Section 10.02(c) hereof) (the “Conversion”).
A beneficial owner, acting through the Holder, shall effect conversions by
delivering to the Conversion Agent a Notice of Conversion, the form of which is
attached to the Debenture (each, a “Notice of Conversion”), specifying therein
the principal amount of the Debenture to be converted and the date on which such
conversion shall be effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder.
To effect conversions hereunder, the Holder shall not be required to physically
surrender the Debenture to the Conversion Agent unless the entire principal
amount of the Debenture has been so converted, and all accrued and unpaid
interest thereon has been paid. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of the Debenture in an amount equal to
the applicable conversion. The Conversion Agent and the Company shall maintain
records showing the principal amount(s) converted and the date of such
conversion(s). The Company may deliver a valid objection to any Notice of
Conversion

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promptly but in any event within 3 Business Days of delivery of such Notice of
Conversion. Absent manifest error, the Holder’s records showing the principal
amount(s) converted and the date of such conversion(s) shall be determinative.
     (b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $6.50, subject to adjustment herein (the “Conversion Price”).
The Conversion Price shall be adjusted in certain instances as provided in
Section 10.06.
     (c) Provisions of this Indenture that apply to conversion of all of a
Debenture also apply to conversion of a portion of a Debenture.
     (d) A Holder of Debentures is not entitled to any rights of a holder of
Common Stock until such Holder has converted its Debenture into Common Stock,
and only to the extent such Debentures are deemed to have been converted into
Common Stock pursuant to this Article 10.
     (e) By delivering the number of shares of Common Stock issuable on
conversion to the Trustee, or to the Conversion Agent, if the Conversion Agent
is other than the Trustee, the Company will be deemed to have satisfied its
obligation to pay the principal amount of the Debentures so converted; provided,
however, that the Company shall retain its obligation to pay accrued and unpaid
interest, attributable to the period from the most recent Interest Payment Date
through the Conversion Date on the Conversion Date.
     (f) The Trustee may conclusively rely on the Company’s calculations of the
Interest Make-Whole.
     Section 10.02 Conversion Procedure.
     (a) Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion hereunder shall be
calculated by the Company and such calculation will be provided to the Trustee
and Holders and shall be equal to the quotient obtained by dividing (x) the
outstanding principal amount of a Debenture to be converted by (y) the
Conversion Price.
     (b) Delivery of Certificate Upon Conversion. Not later than three Trading
Days after each Conversion Date (the “Share Delivery Date”), the Company shall
issue and deliver to the Trustee, for delivery to the Holder (unless a different
Person is indicated on the Notice of Conversion), (A) a certificate or
certificates representing the Conversion Shares which, on or after the earlier
of (i) the six month anniversary of the Original Issue Date (unless the Holder
is then an Affiliate of the Company) and (ii) the Effective Date, shall be free
of restrictive legends and trading restrictions (other than those which may then
be required by the Purchase Agreement) representing the number of Conversion
Shares being acquired upon the conversion of a Debenture, (B) a bank check or
wire of immediately available funds, at the Company’s option, in the amount of
accrued and unpaid interest, and (C) as to Conversion Dates that occur prior to
the three year anniversary of the Original Issue Date, a bank check or wire
transfer in the amount equal to the Interest Make-Whole, or a certificate or
certificates representing shares of the Company’s Common Stock calculated in
accordance with Section 11.02 hereof with respect to the Interest Make-Whole. On
or after the earlier of (i) the six month anniversary of the Original Issue Date
and (ii) the Effective Date, the Company shall use its commercially

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reasonable efforts to deliver any certificate or certificates required to be
delivered by the Company under this Section 10.02(b) electronically through the
Depository Trust Company or another established clearing corporation performing
similar functions. Anything herein to the contrary notwithstanding, in the case
of Global Debenture, Notices of Conversion may be delivered and such Debentures
may be surrendered for conversion in accordance with the Applicable Procedures
as in effect from time to time.
     (c) Conversion Limitations. The Company shall not effect any conversion of
a Debenture, and a beneficial owner of an interest in a Global Debenture shall
not have the right to convert any portion of a Debenture, to the extent that
after giving effect to the conversion set forth on the applicable Notice of
Conversion, the beneficial owner (together with the beneficial owner’s
Affiliates, and any other person or entity acting as a group together with the
beneficial owner or any of the beneficial owner’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the beneficial owner and its Affiliates shall include the
number of shares of Common Stock issuable upon conversion of a Debenture with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which are issuable upon (A) conversion of the
remaining, unconverted principal amount of such Debenture beneficially owned by
the beneficial owner or any of its Affiliates and (B) exercise or conversion of
the unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, any other Debentures)
beneficially owned by the beneficial owner or any of its Affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 10.02(c),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. To the extent
that the limitation contained in this Section 10.02(c) applies, the
determination of whether the Debenture is convertible (in relation to other
securities owned by a beneficial owner together with any Affiliates) and of
which principal amount of the Debenture is convertible shall be in the sole
discretion of the beneficial owner , and the submission of a Notice of
Conversion shall be deemed to be the beneficial owner ‘s determination of
whether the Debenture may be converted (in relation to other securities owned by
the beneficial owner together with any Affiliates) and which principal amount of
the Debenture is convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, the beneficial owner
will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 10.02(c), in determining the number of
outstanding shares of Common Stock, the beneficial owner may rely on the number
of outstanding shares of Common Stock as stated in the most recent of the
following: (A) the Company’s most recent periodic or annual report, as the case
may be; (B) a more recent public announcement by the Company; or (C) a more
recent notice by the Company or the Company’s transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request
of a beneficial owner, the Company shall within two Trading Days confirm orally
and in writing to the beneficial owner the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be

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determined after giving effect to the conversion or exercise of securities of
the Company, including a Debenture, by the beneficial owner or its Affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of the Debenture
held by the beneficial owner. Each Holder, upon not less than 61 days’ prior
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 10.02(c), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of the Debenture held by the beneficial
owner and the Beneficial Ownership Limitation provisions of this
Section 10.02(c), shall continue to apply. Any such increase or decrease will
not be effective until the 61st day after such notice is delivered to the
Company. The Beneficial Ownership Limitation provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 10.02(c), to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation contained herein or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
the Debentures.
     (d) Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to the Trustee,
for delivery to the Holder, or as directed by the applicable Holder by the third
Trading Day after the Conversion Date, the Holder shall be entitled to elect by
written notice to the Conversion Agent at any time on or before its receipt of
such certificate or certificates, to rescind such Notice of Conversion, in which
event the Conversion Agent shall promptly return to the Holder any Debenture
delivered to the Conversion Agent and the Holder shall promptly return to the
Trustee the Common Stock certificates representing the principal amount of the
Debenture unsuccessfully tendered for conversion to the Company.
     (e) Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of the
Debentures in accordance with the terms hereof and thereof are absolute and
unconditional, irrespective of any action or inaction by a beneficial owner to
enforce the same, any waiver or consent with respect to any provision hereof or
thereof, the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by a beneficial owner or any other
Person of any obligation to the Company or any violation or alleged violation of
law by a beneficial owner or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to a
beneficial owner in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a waiver by the
Company of any such action the Company may have against a beneficial owner. In
the event a beneficial owner of a Debenture shall elect to convert any or all of
the outstanding principal amount hereof, the Company may not refuse conversion
based on any claim that a beneficial owner or anyone associated or affiliated
with a beneficial owner has been engaged in any violation of law, agreement or
for any other reason, unless an injunction from a court, on notice to a
beneficial owner, restraining and or enjoining conversion of all or part of a
Debenture shall have been

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sought and obtained and the Company posts a surety bond for the benefit of a
beneficial owner in the amount of 150% of the outstanding principal amount of
the Debenture, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the underlying dispute
and the proceeds of which shall be payable to such beneficial owner to the
extent it obtains judgment. In the absence of such injunction, the Company shall
issue Conversion Shares or, if applicable, cash, upon a properly noticed
conversion. If the Company fails for any reason to deliver to the Trustee such
certificate or certificates pursuant to Section 10.02(b) by the third Trading
Day after the Conversion Date, the Company shall pay to such beneficial owner,
in cash, as liquidated damages and not as a penalty, for each $1,000 of
principal amount being converted, $10 per Trading Day (increasing to $20 per
Trading Day on the fifth Trading Day after such liquidated damages begin to
accrue) for each Trading Day after such third Trading Day until such
certificates are delivered. Nothing herein shall limit a beneficial owner’s
right to pursue actual damages or declare an Event of Default pursuant to
Article 6 hereof for the Company’s failure to deliver Conversion Shares within
the period specified herein and a beneficial owner shall have the right to
pursue all remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit a beneficial owner from
seeking to enforce damages pursuant to any other Section hereof, under the
Securities or under applicable law.
     (f) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to a beneficial owner, if
the Company fails for any reason to deliver to the Trustee for delivery to the
beneficial owner, on behalf of such beneficial owner, such certificate or
certificates by the Share Delivery Date pursuant to Section 10.02(b), the
Company shall notify the Trustee within five (5) Business Days of its failure to
deliver to the Trustee such certificate or certificates by the Share Delivery
Date, and, if after such Share Delivery Date the beneficial owner is required by
its brokerage firm to purchase (in an open market transaction or otherwise), or
the beneficial owner or its brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the beneficial owner of the
Conversion Shares which the beneficial owner was entitled to receive upon the
conversion relating to such Share Delivery Date (a “Buy-In”), then the Company
shall (A) pay in cash to the Conversion Agent for delivery to the Holder, on
behalf of such beneficial owner (in addition to any other remedies available to
or elected by the beneficial owner, on behalf of such beneficial owner), the
amount by which (x) the beneficial owner’s total purchase price (including any
brokerage commissions) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that the beneficial owner
was entitled to receive from the conversion at issue multiplied by (2) the
actual sale price at which the sell order giving rise to such purchase
obligation was executed (including any brokerage commissions) and (B) at the
option of the beneficial owner, either reissue (if surrendered) the Debenture in
a principal amount equal to the principal amount of the attempted conversion or
deliver to the Trustee for delivery to the Holder, on behalf of such beneficial
owner, the number of shares of Common Stock that would have been issued if the
Company had timely complied with its delivery requirements under
Section 10.02(b). For example, if a beneficial owner purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of a Debenture with respect to which the actual sale price
of the Conversion Shares (including any brokerage commissions) giving rise to
such purchase obligation was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Company shall be required

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to pay the beneficial owner $1,000. The beneficial owner shall provide the
Conversion Agent written notice indicating the amounts payable to the beneficial
owner in respect of the Buy-In and, upon request of the Company, evidence of the
amount of such loss. Nothing herein shall limit a beneficial owner’s right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of a Debenture
as required pursuant to the terms hereof and thereof.
     (g) In the case of any Debenture which is converted in part only and
surrendered to the Conversion Agent, upon such conversion the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof,
without service charge, a new Debenture or Debentures of authorized
denominations in an aggregate principal amount equal to the, and in exchange
for, unconverted portion of the principal amount of such Debenture. A Debenture
may be converted in part, but only if the principal amount of such part is an
integral multiple of $1,000 and the principal amount of such Debenture to remain
outstanding after such conversion is equal to $1,000 or any integral multiple of
$1,000 in excess thereof.
     Section 10.03 Fractional Shares.
     No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of a Debenture. As to any fraction of a share which a
beneficial owner would otherwise be entitled to purchase upon such conversion,
the Company shall at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.
     Section 10.04 Taxes on Conversion.
     The issuance of certificates for shares of the Common Stock on conversion
of a Debenture shall be made without charge to the beneficial owner thereof for
any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificates, provided that, the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the beneficial owner of a Debenture so converted and the
Conversion Agent shall not be required to issue or deliver such certificates
unless or until the Person or Persons requesting the issuance thereof shall have
paid to the Conversion Agent the amount of such tax or shall have established to
the satisfaction of the Conversion Agent that such tax has been paid.
     Section 10.05 Company to Provide Stock.
     The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock for the sole purpose
of issuance upon conversion of the Debentures, as herein provided, free from
preemptive rights or any other actual contingent purchase rights of Persons
other than the Holder (and the other holders of the Debentures), not less than
such aggregate number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking
into

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account the adjustments and restrictions of Section 10.06) upon the conversion
of the outstanding principal amount of the Debentures. The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be
duly authorized, validly issued, fully paid and nonassessable and, if the
Registration Statement is then effective under the Securities Act, shall be
registered for public sale in accordance with such Registration Statement.
     Section 10.06 Certain Adjustments of Conversion Price.
     (a) Stock Dividends and Stock Splits. If the Company, at any time while the
Debentures are outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company upon
conversion of the Debentures), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of a
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction the numerator of which shall be the
number of shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
     (b) [RESERVED]
     (c) Subsequent Rights Offerings. If the Company, at any time while the
Debentures are outstanding, shall issue rights, options or warrants to all
holders of Common Stock (and not to Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share that is lower than the VWAP
on the record date referenced below, then the Conversion Price shall be
multiplied by a fraction the denominator of which shall be the number of shares
of the Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase underlying such rights or warrants, and the numerator
of which shall be the number of shares of the Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered (assuming
delivery to the Company in full of all consideration payable upon exercise of
such rights, options or warrants) would purchase at such VWAP. Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
     (d) Pro Rata Distributions. If the Company, at any time while the
Debentures are outstanding, distributes to all holders of Common Stock (and not
to the Holders) evidences of its indebtedness or assets (including cash and
periodic or extraordinary cash dividends) or rights or warrants to subscribe for
or purchase any security, then in each such case the Conversion Price shall be
adjusted by multiplying such Conversion Price in effect immediately prior to the
record

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date fixed for determination of stockholders entitled to receive such
distribution by a fraction the denominator of which shall be the VWAP determined
as of the record date mentioned above, and the numerator of which shall be such
VWAP on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to 1 outstanding share of the Common Stock as determined by the Board of
Directors of the Company in good faith. In either case the adjustments shall be
described in a statement delivered to the Holder describing the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to 1 share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
     (e) Fundamental Transaction. If, at any time while the Debentures are
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then, upon any subsequent
conversion of a Debenture, each beneficial owner of an interest in the
Debentures shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of 1 share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one (1) share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any choice
as to securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any conversion of a Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new debenture consistent with the foregoing
provisions and evidencing the Holder’s right to convert such debenture into
Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this
Section 10.06(e) and insuring that the Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
     (f) Change of Control Transaction. If the Fundamental Transaction is also a
Change of Control Transaction, then each beneficial owner of an interest in the
Debentures, acting through the Holder, shall have the right to cause the Company
to redeem the Debentures or to have an adjustment of the Conversion Price and/or
Conversion Shares, as set forth below. No

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later than 20 Trading Days prior to the consummation of a Change of Control
(such date of consummation of a Change of Control, the “Change of Control
Date”), but not prior to the public announcement of such Change of Control, the
Company (or at the Company’s request, the Trustee, in the Company’s name and at
the Company’s expense) shall deliver written notice thereof (the text of which
shall be prepared by the Company) to the Holders (a “Change of Control Notice”
and the date of such Change of Control Notice, the “Change of Control Notice
Date”), and shall post such Notice on the systems of the Depository. Such Change
of Control Notice shall state:
     (i) the events causing the Change of Control;
     (ii) the Change of Control Date or anticipated Change of Control Date of
such Change of Control;
     (iii) the purchase price and whether that price will be paid in cash,
shares of common stock, or a combination of cash and shares of common stock;
     (iv) the name and address of the Paying Agent and Conversion Agent;
     (v) that the Debentures must be surrendered to the Paying Agent to collect
payment of the Change of Control Redemption Price, if applicable; and
     (vi) if applicable, the expected determination of the adjustment to the
Conversion Price as set forth pursuant to Section 10.06(h) below.
     Simultaneously with the Change of Control Notice, the Company shall issue a
press release and provide to the Trustee written notice of receipt of the Change
of Control Notice and timely file a Form 8-K containing the information
contained in the Change of Control Notice.
     (g) Change in Control Redemption. At any time during the period (the
“Change of Control Period”) beginning after a Holder’s receipt of a Change of
Control Notice and ending on the date that is five (5) Trading Days subsequent
to the Change of Control Date as set forth in the Change of Control Notice, such
Holder may require the Company to redeem (a “Change of Control Redemption”) all
or any portion of such Holder’s Debenture by delivering written notice thereof
(“Change of Control Redemption Notice”) to the Trustee, which Change of Control
Redemption Notice shall indicate the principal amount the Holder is electing to
redeem, the certificate number of the Debenture which the Holder will deliver to
be redeemed, if Certificated Debentures have been issued, or notice compliant
with the relevant Applicable Procedures if the Debentures are not certificated.
Any principal amount of the Debenture subject to redemption pursuant to this
Section 10.06(g) shall be redeemed by the Company in cash at a price equal to
the sum of 103% of the principal amount being redeemed together with 100% of any
accrued but unpaid interest thereon and the Interest Make-Whole, if any (the
“Change of Control Redemption Price”). The Company shall make payment of the
Change of Control Redemption Price concurrently with the consummation of such
Change of Control if such a Change of Control Redemption Notice is received
prior to the consummation of such Change of Control and within 5 Trading Days
after the Company’s receipt of such notice otherwise (the “Change of Control
Redemption Date”). Notwithstanding anything to the contrary in this
Section 10.06(g), until the Change of Control Redemption Price (together with
any interest thereon) is paid in full, the

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principal amount submitted for redemption under this Section 10.06(g) may be
converted, in whole or in part, by the Holder into Conversion Shares, or in the
event the Conversion Date is after the consummation of the Change of Control,
shares or equity interests of the successor entity substantially equivalent to
the Company’s Common Stock. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Debentures under this
Section 10.06(g), the Holder’s damages would be uncertain and difficult to
estimate because of the parties’ inability to predict future interest rates and
the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due under this
Section 10.06(g) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder’s actual loss of its investment opportunity
and not as a penalty.
     (h) Adjustment to Conversion Shares Upon a Change of Control. In connection
with a Change of Control, the Company will increase the number of Conversion
Shares issuable upon conversion of the Debenture by a number of additional
shares (the “Additional Shares”) for each $1,000 principal amount of Debenture
when converted as described in this Section 10.06(h) provided that (A) such
increase in Conversion Shares shall not take place if such Change of Control is
not consummated and (B) the Company shall issue Conversion Shares (without such
increase) on or prior to the fifth (5th) Trading Day following the Conversion
Date and the Additional Shares described in this Section 10.06(h) will be issued
after the later to occur of (x) the fifth (5th) Trading Day following the Change
of Control Date and (y) the fifth (5th) Trading Day following the relevant
Conversion Date. On and after the Change of Control Date, Holders entitled to
receive Additional Shares pursuant to this Section 10.06(h) shall receive the
kind and amount of securities (of the Company or another issuer), cash and other
property receivable upon such Change of Control by a holder of the number of
shares of Common Stock into which the Debenture was convertible immediately
prior to such Change of Control, after giving effect to any adjustment event,
based on the number of Additional Shares set forth above.
     The number of Additional Shares will be determined by reference to the
table below, based on the Change of Control Date and the price of the Common
Stock (the “Stock Price”). If the consideration for the Common Stock consists
solely of cash, then the Stock Price will be the cash amount paid per share of
the Common Stock. Otherwise, the Stock Price will be the average of the VWAPs
for the 5 consecutive Trading Days immediately preceding the Change of Control
Date.
     The following table sets forth the number of Additional Shares per $1,000
principal amount of Debenture to be added to the Conversion Shares issuable in
connection with the Change of Control referred to in this Section 10.06(h):
Number of Additional Shares

                                                                               
      Stock Price     $5.47   $6.00   $6.50   $7.00   $7.50   $8.00   $8.50  
$9.00   $9.50   $10.00
Additional Shares
                                                                               
Pricing Date
    28.9710       24.3770       21.0950       18.3340       15.9470      
13.8590       12.0170       10.3810       8.9190       7.6070  
Pricing Date + 1 Year
    28.9710       18.2100       15.6260       13.6360       11.9350      
10.4480       9.1360       7.9690       6.9260       5.9870  
Pricing Date + 2 Years
    28.9710       15.5710       8.7830       7.6080       6.6950       5.8990  
    5.1960       4.5720       4.0140       3.5110  
Pricing Date + 3 Years
    28.9710       12.8210       4.3915       3.8040       3.3475       2.9495  
    2.5980       2.2860       2.0070       1.7555  

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     The Stock Prices set forth in the table will be adjusted as of any date on
which the Conversion Price is adjusted. The adjusted Stock Prices will equal the
Stock Prices applicable immediately prior to the adjustment divided by a
fraction, the numerator of which is the Conversion Price immediately prior to
the adjustment to the Conversion Price and the denominator of which is the
Conversion Price as so adjusted.
     The exact Stock Price and Change of Control Date may not be set forth in
the table, in which case:
     (A) if the Stock Price is between two Stock Prices in the table or the
Change of Control Date is between two Change of Control Dates in the table, the
number of Additional Shares will be determined by straight-line interpolation
between the Additional Share amounts set forth for the higher and lower Stock
Prices and the two Change of Control Dates, as applicable, based on a 365-day
year;
     (B) if the Stock Price is in excess of $10.00 per share (subject to
adjustment in the same manner as the Stock Price), no Additional Shares will be
added to the Conversion Shares; and
     (C) if the Stock Price is less than or equal to $5.47 per share (subject to
adjustment in the same manner as the Stock Price), no Additional Shares will be
added to the Conversion Shares.
     (i) Calculations. All calculations under this Section 10.06 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 10.06, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding any treasury shares of the Company) issued and
outstanding.
     Section 10.07 Notice of Adjustment.
     Whenever the Conversion Price is adjusted pursuant to any provision of this
Section 10.06, the Company shall promptly deliver to the Trustee and each Holder
a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment, and file with
the Trustee an Officers’ Certificate briefly stating the facts requiring the
adjustment and the manner of computing it. Failure to mail such notice or any
defect therein shall not affect the validity of any such adjustment. Unless and
until the Trustee shall receive an Officers’ Certificate setting forth an
adjustment of the Conversion Price, the Trustee may assume without inquiry that
the Conversion Price has not been adjusted and that the last Conversion Price of
which it has knowledge remains in effect.

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     Section 10.08 Notice to Allow Conversion by Holder.
     If (A) the Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock, (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock of
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights, (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, (E) the Company shall be subject to a Fundamental
Transaction or a Change in Control Transaction, or (F) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office of the Conversion Agent and the Corporate Trust Office, and
shall cause to be delivered to the Holder at its last address as it shall appear
upon the Register, at least twenty (20) calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange, provided that the failure to deliver such
notice or any defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such notice. A
Holder is entitled to convert a Debenture during the 20-day period commencing on
the date of such notice through the effective date of the event triggering such
notice.
     Failure to mail such notice or any defect therein shall not affect the
validity of any transaction referred to in this Section 10.08.
     Section 10.09 Trustee’s Disclaimer.
     (a) The Trustee shall have no duty to determine when an adjustment under
this Article 10 should be made, how it should be made or what such adjustment
should be, but may accept as conclusive evidence of that fact or the correctness
of any such adjustment, and shall be protected in relying upon receipt of an
Officers Certificate and/or an Opinion of Counsel, including the Officers’
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 10.07. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon conversion of
Debentures, and the Trustee shall not be responsible for the Company’s failure
to comply with any provisions of this Article 10.
     (b) The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to this Indenture, but

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may accept as conclusive evidence of the correctness thereof, and shall be fully
protected in relying upon, the Officers’ Certificate and Opinion of Counsel,
with respect thereto which the Company is obligated to file with the Trustee
pursuant to this Indenture.
ARTICLE 11.
PAYMENT OF INTEREST
     Section 11.01 Interest Payments.
     Interest on any Debenture that is payable, and is punctually paid or duly
provided for, on any applicable Interest Payment Date shall be paid to the
Person in whose name that Debenture is registered at the Close of Business on
the Regular Record Date for such interest at the office or agency of the Company
maintained for such purpose. Each installment of interest payable in Cash on any
Debenture shall be paid in same-day funds by transfer to an account maintained
by the payee located inside the United States, if the Trustee shall have
received proper wire transfer instructions from such payee not later than the
related Regular Record Date or, if no such instructions have been received by
check drawn on a bank in the United States mailed to the payee at its address
set forth on the Registrar’s books.
     In the case of a Global Debenture, interest payable on any applicable
payment date will be paid by wire transfer of same-day funds to the Depository,
with respect to that portion of such Global Debenture held for its account by
Cede & Co. or any other nominee of DTC for the purpose of permitting such party
to credit the interest received by it in respect of such Global Debenture to the
accounts of the beneficial owners thereof.
     Section 11.02 Calculation of Interest Make-Whole Shares.
     Amounts due in respect of any Interest Make-Whole payment (other than in
connection with the payment of any Change of Control Redemption Price and any
Mandatory Default Amount) may, at the option of the Company, be made in
registered shares of Common Stock of the Company upon irrevocable notice to
holders no less than two (2) Trading Days prior to the start of the Make-Whole
Measurement Period, subject to satisfaction of the conditions in the immediately
following sentence. Payment in shares of Common Stock pursuant to this
Section 11.02 may only occur if each of the Equity Conditions shall have been
met (unless waived in writing by the beneficial owner of an interest in the
Debentures, acting through the Holder) on each Trading Day during the Make-Whole
Measurement Period and through and including the date such shares are issued to
the Holder. When making any payment under Section 11.02 using common stock of
the Company, the value of each such share of stock shall be determined based on
ninety percent (90%) of the lower of the (i) VWAP for such stock for the ten
(10) Trading Days immediately prior to the date such payment is due pursuant to
Section 11.02 (“Make-Whole Measurement Period”), and (ii) the closing price of
the stock on the day immediately preceding the conversion date or redemption
date, as applicable, provided, that until and unless the Company has received
any approval of its stockholders required under AMEX Rule 713 or any equivalent
rule of any other applicable Trading Market, the value of such shares used in
such determination may not be less than the closing price of the Common Stock on
AMEX or such other applicable Trading Market on the execution date of the
Purchase Agreement. In the event

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that the Company has not received the necessary approval under AMEX Rule 713 or
any equivalent rule of any other applicable Trading Market, then such payment
will be made in cash.
     Section 11.03 Late Fee.
     All overdue accrued and unpaid interest to be paid hereunder shall entail a
late fee on such unpaid interest (and not on the entire principal amount) at an
interest rate equal to the lesser of 18% per annum or the maximum rate permitted
by applicable law (the “Late Fees”) which shall accrue daily from the date such
interest is due hereunder through and including the date of actual payment in
full. The Company shall provide written notice to the Trustee and Holders
whenever Late Fees begin to accrue. In addition, subject to Article 6, if the
Company does not meet the current public information requirements as in effect
under Rule 144 as they may exist from time to time in respect of the Conversion
Shares and a beneficial owner cannot freely resell the Conversion Shares on a
Trading Market pursuant to Rule 144 for a period of 3 months (a “Public
Information Failure”), then, as of the first day following such Public
Information Failure, interest on the Debentures shall accrue at an interest rate
equal to 12% per annum until such date as the Company satisfies the current
public information requirements under Rule 144 such that a beneficial owner is
able to freely resell all the Conversion Shares on a Trading Market.
     Section 11.04 Increase in Interest Rate for Failure of Debenture or
Exchanged Debenture to be DTC Eligible.
     In the event the Company fails to exchange an Original Debenture for a
Debenture that is DTC Eligible within 120 days from the Original Issue Date,
then on the 121st day, the Company shall so notify the Trustee and Holders of
such failure to meet such requirements and the rate of interest payable to the
Holder shall increase to 11.75% per annum until such time as the Holder has
received a Debenture that is DTC Eligible, at which time the rate of interest
payable on the Debentures shall return to 10.75% per annum.
     Section 11.05 Prepayment.
     Except as otherwise set forth in this Indenture or the Debentures, the
Company may not prepay any portion of the principal amount of the Debentures
without the prior written consent of the beneficial owner of an interest in the
Debentures, acting through the Holder.
     Section 11.06 Interest Rights Preserved.
     Subject to the foregoing provisions of this Article 11 and Section 2.06,
each Debenture delivered under this Indenture upon registration of transfer of
or in exchange for or in lieu of any other Debenture shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Debenture.

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ARTICLE 12.
SUBORDINATION
     Section 12.01 Subordination.
     The Trustee acknowledges and the Company and the Guarantors acknowledge and
agree, and each Holder and beneficial owner by accepting a beneficial interest
in the Securities shall be deemed to acknowledge and agree, that all right,
duties and obligations under this Indenture and the Securities shall be issued
subject to the provisions of the Intercreditor and Subordination Agreement and
the Security Documents. Therefore, subject to the terms of the Intercreditor and
Subordination Agreement and the Security Documents, payment of principal of,
liquidated damages, if any, and interest on the Debentures is subject to the
prior payment of all Senior Indebtedness (as defined in the Intercreditor and
Subordination Agreement) and all Liens securing the obligations of the Company
and Guarantors under this Indenture, the Debentures, the Transaction Documents
and the Security Documents are subordinate and junior in priority to all Liens
securing the Senior Indebtedness. Reference is hereby made to each of the
Intercreditor and Subordination Agreement, each Transaction Document and each
Security Document for all details regarding such payment and lien subordination.
ARTICLE 13.
COLLATERAL AND GUARANTEES
     Section 13.01 Collateral for the Debentures.
     (a) The Company and each Guarantor has previously entered into the
Subordinated Guaranty and the Mortgages with Whitebox Advisors, LLC, as
“Subordinated Noteholder Representative” pursuant to which the Company and each
of the Guarantors granted to Whitebox Advisors, LLC, for the ratable benefit of
the holders of the Original Debentures (i) a second priority security interest
(subject only to Permitted Liens entitled to priority under applicable law) in
all of the Collateral owned by the Company or such Guarantor, whether then owned
or thereafter acquired, junior only to liens securing the obligations under the
Credit Agreement, to secure the Company’s and the Guarantors’ obligations to pay
the principal of (and premium, if any) and interest, if any, on the Debentures
in accordance with the terms of the Debentures and this Indenture and all other
obligations of the Company thereunder. Pursuant to an amendment and restatement
to the Subordinated Guaranty and an amendment to the Mortgages of even date
herewith, the Trustee is substituted as the “Subordinated Noteholder
Representative”.
     (b) The Company shall furnish to the Trustee Opinions of Counsel as
required by the Trust Indenture Act with respect to indentures that are secured
by the mortgage or pledge of property, including Opinions of Counsel required
pursuant to Sections 314(b)(1) and 314(b)(2) of the Trust Indenture Act.
     (c) The Company and the Guarantors shall otherwise comply with the
provisions of Section 314(d) of the Trust Indenture Act.
     (e) Each Holder, by its acceptance of the Debentures, and each beneficial
owner by its acceptance of beneficial ownership of the Debentures and the
execution of the Amended and Restated Intercreditor and Subordination Agreement
on its behalf, agrees to all of the terms and

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conditions of the Security Documents, and authorizes and directs the Trustee to
enter into and perform its obligations, and exercise its rights under, the
Security Documents in connection therewith.
     Section 13.02 Release of Collateral.
     (a) Each Holder, by its acceptance of the Debentures, and each beneficial
owner by its acceptance of beneficial ownership of the Debentures and its
execution of the Amended and Restated Intercreditor and Subordination Agreement,
agrees that the Trustee may release Collateral from the Lien and security
interest created by the Security Documents at any time or from time to time in
accordance with the provisions of the Security Documents.
     (b) To the extent applicable, the Company shall cause Section 313(b) of the
Trust Indenture Act relating to reports and Section 314(d) of the Trust
Indenture Act relating to the release of property or securities from the Lien
and security interest created by the Security Documents and relating to the
substitution therefor of any property or securities to be subject to the Lien
and security interest created by the Security Documents, to be complied with.
Any certificate or opinion required by Section 314(d) of the Trust Indenture Act
may be made by an Officer of the Company except in cases where Section 314(d) of
the Trust Indenture Act requires that such certificate or opinion be made by an
independent engineer, appraiser or other expert selected or approved by the
Trustee in the exercise of reasonable care.
     Section 13.03 Certificates of the Company.
          If the Company or any Guarantor desires release of any Collateral, the
Company shall furnish to the Trustee, prior to such proposed release of
Collateral pursuant to the Security Documents, (i) all documents required by
Section 314(d) of the Trust Indenture Act, and (ii) an Opinion of Counsel to the
effect that such accompanying documents constitute all documents required by
Section 314(d) of the Trust Indenture Act. The Trustee may, to the extent
permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of
compliance with the foregoing provisions the appropriate statements contained in
such documents and such Opinions of Counsel.
     Section 13.04 Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
     The Trustee is authorized to receive any funds for the benefit of the
Holders and to make further distributions of such funds to the Holders according
to the provisions of this Indenture.
     Section 13.05 Termination of Security Interest.
          Upon the cash payment in full of all obligations of the Company and
the Guarantors under this Indenture, the Debentures, the Subordinated Guaranty,
or upon defeasance in accordance with this Indenture, the Trustee shall, at the
request of the Company, release the Liens securing the obligations of the
Company hereunder pursuant to this Indenture and the Security Documents.

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     Section 13.06 Guarantees.
     (a) Upon the terms and subject to the conditions of this Indenture and the
Subordinated Guaranty, each of the Guarantors has jointly and severally,
unconditionally and irrevocably, guaranteed to the Holders and each of their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment in cash and performance by the Company when due (whether at the
stated maturity, by acceleration or otherwise) of the Borrower Obligations to
the extent provided herein and in Subordinated Guaranty.
ARTICLE 14.
MISCELLANEOUS
     Section 14.01 Trust Indenture Act of 1939.
     The Indenture shall incorporate and be governed by the provisions of the
Trust Indenture Act that are required to be part of and to govern indentures
qualified under the Trust Indenture Act.
     Section 14.02 Holder Communications; Holder Actions.
     (a) The rights of Holders to communicate with other Holders with respect to
this Indenture or the Securities are as provided by the Trust Indenture Act, and
the Company and the Trustee shall comply with the requirements of Trust
Indenture Act Sections 312(a) and 312(b). Neither the Company nor the Trustee
will be held accountable by reason of any disclosure of information as to names
and addresses of Holders made pursuant to the Trust Indenture Act.
     (b) (i) Any request, demand, authorization, direction, notice, consent to
amendment, supplement or waiver or other action provided by this Indenture to be
given or taken by a Holder (an “act”) may be evidenced by an instrument signed
by the Holder delivered to the Trustee. The fact and date of the execution of
the instrument, or the authority of the person executing it, may be proved in
any manner that the Trustee deems sufficient.
     (ii) The Trustee may make reasonable rules for action by or at a meeting of
Holders, which will be binding on all the Holders.
     (c) Any act by the Holder of any Debenture binds that Holder and every
subsequent Holder of a Debenture that evidences the same debt as the Debenture
of the acting Holder, even if no notation thereof appears on the Debenture.
Subject to paragraph (d), a Holder may revoke an act as to its Debenture, but
only if the Trustee receives the notice of revocation before the date the
amendment or waiver or other consequence of the act becomes effective.
     (d) The Company may, but is not obligated to, fix a record date (which need
not be within the time limits otherwise prescribed by Trust Indenture Act
Section 316(c)) for the purpose of determining the Holders entitled to act with
respect to any amendment or waiver or in any other regard, except that during
the continuance of an Event of Default, only the Trustee may set a record date
as to notices of default, any declaration or acceleration or any other remedies
or other consequences of the Event of Default. If a record date is fixed, those
Persons that were

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Holders at such record date and only those Persons will be entitled to act, or
to revoke any previous act, whether or not those Persons continue to be Holders
after the record date.
     Section 14.03 Notices.
     (a) Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to the Company
or any Guarantor, at the address set forth below, or such other facsimile number
or address as the Company may specify for such purpose by notice to the Holder
delivered in accordance with this Section 14.03. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of the Holder appearing on the Register, or, as to any Global
Debenture registered in the name of the Depository or its nominee, as agreed by
the Company, the Trustee and the Depository. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified on the signature page prior to 5:30
p.m. (New York City time), (ii) the date immediately following the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified on the signature page between 5:30 p.m. (New York
City time) and 11:59 p.m. (New York City time) on any date, (iii) the second
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) upon actual receipt by the party to whom such
notice is required to be given.
Any notice to the Trustee will be effective only upon receipt. Notices to the
Trustee should be addressed to:
The Bank of New York Mellon Trust Company, N.A.
601 Travis Street, 18th floor
Houston, Texas 77002
Attention: Brian Echausse
The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
     (b) Copies of any notice or communication to a Holder, if given by the
Company or any Guarantor, will be mailed to the Trustee at the same time. Any
defect in mailing a notice or communication to any particular Holder will not
affect its sufficiency with respect to other Holders.
     (c) Where this Indenture provides for notice, the notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and the waiver will be the equivalent of the notice. Waivers of
notice by Holders must be filed with the Trustee, but such filing is not a
condition precedent to the validity of any action taken in reliance upon such
waivers.

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     (d) The Trustee agrees to accept and act upon facsimile transmission of
written instructions and/or direction pursuant to this Indenture given by the
Company; provided, however, (i) that the Company, subsequent to such facsimile
transmission of written instructions and/or directions, shall provide the
originally executed instructions and/or directions to the Trustee in a timely
manner and (ii) such originally executed instructions and/or directions shall be
signed by an authorized officer of the Company.
     Section 14.04 Communication by Holders with Other Holders.
     Holders may communicate pursuant to Section 312(b) of the Trust Indenture
Act with other Holders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantors, the Trustee, the Registrar, the Paying
Agent, the Conversion Agent and anyone else shall have the protection of Section
312(c) of the Trust Indenture Act.
     Section 14.05 Certificate and Opinion as to Conditions Precedent.
     Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company will furnish to the Trustee:

  (1)   an Officers’ Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 14.06
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants , if any, provided for in this Indenture relating to the proposed
action have been complied with; and     (2)   an Opinion of Counsel in form and
substance reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 14.06 hereof) stating that all such conditions
precedent and covenants have been complied with.

     Section 14.06 Statements Required in Certificate or Opinion.
     Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to Trust Indenture Act Section 314(a)(4)) shall comply with the
provisions of Trust Indenture Act Section 314(e) and must include:

  (1)   a statement that each Person signing the certificate or opinion has read
the covenant or condition and the related definitions;     (2)   a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in the certificate or opinion is based;
    (3)   a statement that, in the opinion of each such Person, he or she has
made such examination or investigation as is necessary to enable the Person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and

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  (4)   a statement as to whether or not, in the opinion of each such person,
such condition or covenant has been complied with, provided that an Opinion of
Counsel may rely on an Officers’ Certificate or certificates of public officials
with respect to matters of fact.

     Section 14.07 Certificates of Fair Value.
          The Company covenants to provide the certificate(s) or opinion(s) as
to fair value as required in accordance with Section 314(d) of the Trust
Indenture Act.
     Section 14.08 Legal Holiday.
     A “Legal Holiday” is any day other than a Business Day. If any specified
date (including a date for giving notice) is a Legal Holiday, the action shall
be taken on the next succeeding day that is not a Legal Holiday, and, if the
action to be taken on such date is a payment in respect of the Debenture,
interest shall accrue for the intervening period.
     Section 14.09 Rules by Trustee, Paying Agent, Conversion Agent and
Registrar.
     The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.
     Section 14.10 Governing Law.
     All questions concerning the construction, validity, enforcement and
interpretation of this Indenture and the Securities shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof.
     Section 14.11 No Adverse Interpretation of Other Agreements.
     The Indenture may not be used to interpret another indenture or loan or
debt agreement of the Company or any Subsidiary of the Company, and no such
indenture or loan or debt agreement may be used to interpret this Indenture.
     Section 14.12 Successors.
     All agreements of the Company in this Indenture and the Securities will
bind its successors. All agreements of the Trustee in this Indenture will bind
its successors.
     Section 14.13 Duplicate Originals.
     The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.

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     Section 14.14 Separability.
     In case any provision in this Indenture or in the Securities is invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
     Section 14.15 Table of Contents and Headings.
     The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and in no way modify or
restrict any of the terms and provisions of this Indenture.
     Section 14.16 No Liability of Directors, Officers, Employees,
Incorporators, Members and Stockholders.
     No director, officer, employee, incorporator, member or stockholder of the
Company and no director, officer, employee, incorporator or member of any
Guarantor, as such, will have any liability for any obligations of the Company
or any Guarantor under the Securities or this Indenture or for any claim based
on, in respect of, or by reason of, such obligations. Each Holder of Securities
by accepting the Securities and each beneficial owner by accepting beneficial
ownership of the Securities waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Securities.
     Section 14.17 Waiver of Jury Trial.
     EACH OF THE COMPANY, THE GUARANTORS AND THE TRUSTEE HEREBY IRREVOCABLE
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE, THE SECURITIES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
     Section 14.18 Force Majeure.
     In no event shall the Trustee be responsible or liable for any failure or
delay in the performance of its obligations hereunder arising out of or caused
by, directly or indirectly, forces beyond its control, including, without
limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil
or military disturbances, nuclear or natural catastrophes or acts of God, and
interruptions, loss or malfunctions of utilities, communications or computer
(software and hardware) services; it being understood that the Trustee shall use
reasonable efforts which are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.

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

            TETON ENERGY CORPORATION
as Company
      By:   /s/ Lonnie R. Brock       Name:   Lonnie R. Brock       Title:   EVP
and CFO       TETON NORTH AMERICA LLC
as Guarantor
By: Teton Energy Corporation, its sole member
      By:   /s/ Lonnie R. Brock       Name:   Lonnie R. Brock       Title:   EVP
and CFO       TETON PICEANCE LLC
as Guarantor
By: Teton North America LLC, its sole member
      By:   /s/ Lonnie R. Brock       Name:   Lonnie R. Brock       Title:   EVP
and CFO       TETON DJ LLC
as Guarantor
By: Teton North America LLC, its sole member
      By:   /s/ Lonnie R. Brock       Name:   Lonnie R. Brock       Title:   EVP
and CFO  

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            TETON WILLISTON LLC
as Guarantor
By: Teton North America LLC, its sole member
      By:   /s/ Lonnie R. Brock       Name:   Lonnie R. Brock       Title:   EVP
and CFO       TETON BIG HORN LLC
as Guarantor
By: Teton North America LLC, its sole member
      By:   /s/ Lonnie R. Brock       Name:   Lonnie R. Brock       Title:   EVP
and CFO       TETON DJCO LLC
as Guarantor
By: Teton Energy Corporation, its sole member
      By:   /s/ Lonnie R. Brock       Name:   Lonnie R. Brock       Title:   EVP
and CFO       THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.
as Trustee, Registrar, Paying Agent Conversion Agent,
and Subordinated Noteholder Representative
      By:   /s/ Van K. Brown       Name:   Van K. Brown       Title:   Vice
President  

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SCHEDULE 1
Names and Addresses of Subsidiaries
Teton Energy Corporation
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton North America LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton Piceance LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton DJ LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton Williston LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton Big Horn LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton DJCO LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock

Schedule 1-1

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SCHEDULE 2
Indebtedness
The Company has outstanding borrowings of $50.0 million from its Second Amended
and Restated Credit Agreement dated April 2, 2008 with JPMorgan Chase Bank, N.A.

Schedule 2-1

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EXHIBIT A
FORM OF EXCHANGED DEBENTURE
     The indebtedness and other obligations of Borrower and its subsidiaries
evidenced by this Agreement (or by this Indenture, as applicable) and the
Debentures issued hereunder owed to the Purchasers and Holders party to this
Agreement (or Indenture, as applicable) are junior and subordinate to the
indebtedness and other obligations of Borrower and its subsidiaries in
accordance with the provisions of the Amended and Restated Intercreditor and
Subordination Agreement dated as of                     , 2008, among JPMorgan
Chase Bank, N.A., as Senior Agent, The Bank of New York Mellon Trust Company,
N.A., as Subordinated Holder Representative and collateral agent, Borrower and
certain of its affiliates, as amended from time to time.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
Original Issue Date: June 18, 2008
Original Conversion Price (subject to adjustment herein): $6.50
$                    
10.75% SECURED SUBORDINATED CONVERTIBLE DEBENTURE
DUE JUNE 18, 2013
     THIS 10.75% SECURED SUBORDINATED CONVERTIBLE DEBENTURE is one of a series
of duly authorized and validly issued 10.75% Secured Subordinated Convertible
Debentures of Teton Energy Corporation, a Delaware corporation (the “Company”),
having its principal place of business at 410 17th Street, Suite 1850, Denver,
Colorado, 80202, designated as its 10.75% Secured Subordinated Convertible
Debenture due June 2013 (this debenture, the “Debenture” and, collectively with
the other debentures of such series, the “Debentures”).

A-1

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     FOR VALUE RECEIVED, the Company promises to pay to
                                                              or its registered
assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the
principal sum of $                     on June 18, 2013 (the “Maturity Date”) or
such earlier date as this Debenture is required or permitted to be repaid as
provided hereunder, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof. This Debenture is subject to the
following additional provisions:
     Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings:
     “Additional Shares” shall have the meaning set forth in Section 5(f).
     “Alternate Consideration” shall have the meaning set forth in Section 5(e).
     “Bankruptcy Event” means any of the following events: (a) the Company or
any Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Company or any Significant Subsidiary thereof, (b) there is
commenced against the Company or any Significant Subsidiary thereof any such
case or proceeding that is not dismissed within 60 days after commencement,
(c) the Company or any Significant Subsidiary thereof is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered, (d) the Company or any Significant Subsidiary thereof
suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 calendar days
after such appointment, (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors, (f) the Company or any
Significant Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts or (g) the
Company or any Significant Subsidiary thereof, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of effecting
any of the foregoing.
     “Beneficial Ownership Limitation” shall have the meaning set forth in
Section 4(c).
     “Business Day” means any day except any Saturday, any Sunday, any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.

A-2

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     “Buy-In” shall have the meaning set forth in Section 4(d)(v).
     “Change of Control Date” shall have the meaning set forth in Section 5(f).
     “Change of Control Notice” shall have the meaning set forth in
Section 5(f).
     “Change of Control Notice Date” shall have the meaning set forth in Section
5(f).
     “Change of Control Period” shall have the meaning set forth in
Section 5(f).
     “Change of Control Redemption” shall have the meaning set forth in Section
5(f).
     “Change of Control Redemption Date” shall have the meaning set forth in
Section 5(f).
     “Change of Control Redemption Notice” shall have the meaning set forth in
Section 5(f).
     “Change of Control Redemption Price” shall have the meaning set forth in
Section 5(f).
     “Change of Control Transaction” means the occurrence after the date hereof
of any of (a) an acquisition after the date hereof by an individual or legal
entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of 40% of the voting securities of the Company (other than by means of
conversion or exercise of the Debentures and the Securities issued together with
the Debentures), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or consolidates with the Company and, after
giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 60% of the aggregate voting power of the
Company or the successor entity of such transaction, (c) the Company sells or
transfers all or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction own less than
60% of the aggregate voting power of the acquiring entity immediately after the
transaction, (d) a replacement at one time or within a three year period of more
than one-half of the members of the Board of Directors which is not approved by
a majority of those individuals who are members of the Board of Directors on the
Original Issue Date (or by those individuals who are serving as members of the
Board of Directors on any date whose nomination to the Board of Directors was
approved by a majority of the members of the Board of Directors who are members
on the Original Issue Date), or (e) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for any of
the events set forth in clauses (a) through (d) above.

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     “Company Optional Redemption” shall have the meaning set forth in
Section 6(a).
     “Company Optional Redemption Amount” means the sum of (a) 100% of the then
outstanding principal amount of the Debenture, (b) accrued but unpaid interest
in respect of the Debenture, (c) all liquidated damages and other amounts due,
if any, in respect of the Debenture, and (d) any Interest Make-Whole.
     “Company Optional Redemption Date” shall have the meaning set forth in
Section 6(a).
     “Company Optional Redemption Notice” shall have the meaning set forth in
Section 6(a).
     “Company Optional Redemption Notice Date” shall have the meaning set forth
in Section 6(a).
     “Company Optional Redemption Period” shall have the meaning set forth in
Section 6(a).
     “Conversion Date” shall have the meaning set forth in Section 4(a).
     “Conversion Price” shall have the meaning set forth in Section 4(b).
     “Conversion Schedule” means the Conversion Schedule in the form of Schedule
1 attached hereto.
     “Conversion Shares” means, collectively, the shares of Common Stock issued
or issuable upon conversion of this Debenture in accordance with the terms
hereof, including without limitation shares of Common Stock issued or issuable,
if any, as Interest Make Whole and any Additional Shares.
     “Debenture Register” shall have the meaning set forth in Section 2(b).
     “Equity Conditions” means, during the period in question, (a) the Company
shall have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of the Holder, if any,
(b) the Company shall have paid all liquidated damages and other amounts owing
to the Holder in respect of this Debenture, (c) there is an effective
Registration Statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the shares of Common Stock issuable
pursuant to the Transaction Documents (and the Company believes, in good faith,
that such effectiveness will continue uninterrupted for the foreseeable future),
as determined by outside counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the Transfer Agent and the
Holder, (d) the Common Stock is trading on a Trading Market and all of the
shares issuable pursuant to

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the Transaction Documents are listed or quoted for trading on such Trading
Market (and the Company believes, in good faith, that trading of the Common
Stock on a Trading Market will continue uninterrupted for the foreseeable
future), (e) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the
shares issuable pursuant to the Transaction Documents (disregarding any
limitation on issuance or conversion under such documents), (f) there is no
existing Event of Default and no existing event which, with the passage of time
or the giving of notice, would constitute an Event of Default, (g) the issuance
of the shares in question (or, in the case of a Company Optional Redemption or a
Holder Optional Redemption, the shares issuable upon conversion in full of the
applicable Optional Redemption Amount) to the Holder would comply with the
limitations set forth in Section 4(c), (h) there has been no public announcement
of a pending or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, (i) the Holder is not in possession
of any information provided by the Company that constitutes, or may constitute,
material non-public information and (j) for each Trading Day in a period of 20
consecutive Trading Days prior to the applicable date in question, the daily
trading volume for the Common Stock on the principal Trading Market exceeds
50,000 shares (subject to adjustment for forward and reverse stock splits and
the like) per Trading Day.
     “Event of Default” shall have the meaning set forth in Section 8(a).
     “Fundamental Transaction” shall have the meaning set forth in Section 5(e).
     “Holder Optional Redemption” shall have the meaning set forth in
Section 6(b).
     “Holder Optional Redemption Amount” means the sum of (a) 100% of the then
outstanding principal amount of the Debenture, (b) accrued but unpaid interest
in respect of the Debenture and (c) all liquidated damages and other amounts
due, if any, in respect of the Debenture.
     “Holder Optional Redemption Date” shall have the meaning set forth in
Section 6(b).
     “Holder Optional Redemption Notice” shall have the meaning set forth in
Section 6(b).
     “Holder Optional Redemption Notice Date” shall have the meaning set forth
in Section 6(b).
     “Holder Optional Redemption Period” shall have the meaning set forth in
Section 6(b).
     “Interest Make-Whole” shall have the meaning set forth in Section 2(c).

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     “Interest Payment Date” shall have the meaning set forth in Section 2(a).
     “Late Fees” shall have the meaning set forth in Section 2(e).
     “Make-Whole Measurement Period” shall have the meaning set forth in Section
2(d).
     “Mandatory Default Amount” means the sum of (a) the greater of (i) the
outstanding principal amount of this Debenture, plus all accrued and unpaid
interest hereon, divided by the Conversion Price on the date the Mandatory
Default Amount is either (A) demanded (if demand or notice is required to create
an Event of Default) or otherwise due or (B) paid in full, whichever results in
a lower Conversion Price, multiplied by the VWAP on the date the Mandatory
Default Amount is either (x) demanded or otherwise due or (y) paid in full,
whichever has a higher VWAP, or (ii) 100% of the outstanding principal amount of
this Debenture, plus 100% of accrued and unpaid interest hereon, (b) all other
amounts, costs, expenses and liquidated damages due in respect of this Debenture
and (c) any Interest Make-Whole.
     “New York Courts” shall have the meaning set forth in Section 9(c).
     “Notice of Conversion” shall have the meaning set forth in Section 4(a).
     “Original Issue Date” means June 18, 2008.
     “Permitted Indebtedness” means (a) the debt evidenced by the $150,000,000
Credit Facility pursuant to that certain Second Amended and Restated Credit
Agreement dated as of April 2, 2008 among the Company, JPMorgan Chase Bank,
N.A., as administrative agent (“JPMorgan”), and the lenders party thereto (the
“Credit Agreement”), as the same may be amended, transferred to other
institutional lenders or otherwise refinanced or restated, from time to time,
except that no such restatement, refinancing, or amendment shall (i) result in
the size of the Credit Facility being greater than $150,000,000 aggregate
principal amount (which amount shall include all fees and other amounts paid or
payable in connection with such restatement, refinancing, or amendment) or
(ii) without the consent of holders of at least 67% in principal amount of the
then outstanding Debentures, change the other terms of such Indebtedness from
such terms existing on the Original Issue Date so as to adversely affect in any
material respect the holders of the Debentures; (b) the indebtedness evidenced
by the Debentures; (c) the Indebtedness existing on the Original Issue Date and
set forth on Schedule 3.1(aa) attached to the Purchase Agreement, as the same
may be amended, transferred to other institutional lenders or otherwise
refinanced or restated, from time to time, except that no such restatement,
refinancing, or amendment shall (i) result in the principal amount of any such
Indebtedness (which amount shall include all fees and other amounts paid or
payable in connection with such restatement, refinancing, or amendment) being
greater

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than the principal amount thereof on the Original Issue Date or (ii) without the
consent of holders of at least 67% in principal amount of the then-outstanding
Debentures, change the other terms of such Indebtedness (including without
limitation with respect to liens, collateral, subordination, average life,
stated maturity and obligors) from the terms existing on the Original Issue Date
so as to adversely affect in any material respect the holders of the Debentures;
and (d) up to $30,000,000 of additional indebtedness that is expressly
subordinated to the Debentures pursuant to a written Intercreditor Agreement
with the Purchasers that is reasonably acceptable to the holders of at least 67%
in principal amount of the then-outstanding Debentures.
     “Permitted Lien” means the individual and collective reference to the
following: (a) Liens in connection with Permitted Indebtedness referred to in
clauses (a) and (c) of the definition of Permitted Indebtedness; (b) Liens for
taxes, assessments and other governmental charges or levies not yet due or Liens
for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; and (c) Liens imposed by law which were incurred in the
ordinary course of the Company’s or any Subsidiary’s business, such as
carriers,’ warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and
other similar Liens arising in the ordinary course of the Company’s or any
Subsidiary’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing for the
foreseeable future the forfeiture or sale of the property or asset subject to
such Lien.
     “Public Information Failure” shall have the meaning set forth in
Section 2(e).
     “Purchase Agreement” means the Securities Purchase Agreement, dated as of
June 9, 2008 among the Company and the original holders, as amended, modified or
supplemented from time to time in accordance with its terms.
     “Registration Rights Agreement” means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, among the Company and the
original Holders, as amended, modified or supplemented from time to time in
accordance with its terms.
     “Registration Statement” means a registration statement under the
Securities Act that registers the resale of all Conversion Shares of the Holder,
names the Holder as a “selling stockholder” therein, contains a prospectus not
subject to any blackout, suspension or stop order, and otherwise meets the
requirements of the Registration Rights Agreement.
     “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

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     “Share Delivery Date” shall have the meaning set forth in Section 4(d)(ii).
     “Subsidiary” shall have the meaning set forth in the Purchase Agreement.
     “Stock Price” shall have the meaning set forth in Section 5(f).
     “Trading Day” means any day on which the principal Trading Market is open
for business.
     “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
     “Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.
     “VWAP” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted for trading as reported by Bloomberg L.P.
(utilizing a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)); (b) if the Common Stock is not then listed or quoted on the
Trading Market, and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Company.
     Section 2. Interest.
     a) Payment. The Company shall pay interest to the Holder on the aggregate
unconverted and then-outstanding principal amount of this Debenture at the rate
of 10.75% per annum, payable semiannually on January 1 and July 1, in arrears,
beginning on January 1, 2009, on each Conversion Date (as to that principal
amount then being converted), on each Company Optional Redemption Date or Holder
Optional Redemption Date (as to that principal amount then being redeemed) and
on the Maturity Date (each such date, an “Interest Payment Date”) (if any
Interest Payment Date is not a Business Day, then the applicable payment shall
be due on the next succeeding Business Day), in cash.
     b) Interest Calculations. Interest shall be calculated on the basis of a
360-day year, consisting of twelve 30 calendar-day periods and shall accrue
daily commencing on

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the Original Issue Date until payment in full of the outstanding principal,
together with all accrued and unpaid interest, liquidated damages and other
amounts which may become due hereunder, has been made. Interest hereunder will
be paid to the Person in whose name this Debenture is registered on the records
of the Company regarding registration and transfers of this Debenture (the
“Debenture Register”).
     c) Interest Make-Whole. Upon any conversion or redemption (other than
pursuant to a Holder Optional Redemption) of all or any portion of this
Debenture prior to the third anniversary of the Original Issue Date, the Holder
shall be entitled to receive the present value of all interest which would have
accrued on the principal amount being converted or redeemed after the date of
such conversion or redemption if no payment of such principal amount were made
prior to such third anniversary of the Original Issue Date, in cash (the
“Interest Make-Whole”). The present value of such future-accrued interest shall
be calculated by discounting in accordance with accepted financial practice all
such future-accruing interest on the principal amount being converted or
redeemed from their respective scheduled due dates to the date on which payment
on such principal is to be made by the yield-to-maturity interest rate for
United States Treasury bills of comparable maturity to the third anniversary of
the Original Issue Date as of the applicable conversion date or redemption date,
as applicable, as reported in The Wall Street Journal.
     d) Calculation of Interest Make-Whole Shares. Amounts due under Section
2(c) (other than in connection with the payment of any Change of Control
Redemption Price and any Mandatory Default Amount) may, at the option of the
Company, be made in registered shares of Common Stock of the Company upon
irrevocable notice to holders no less than two (2) trading days prior to the
start of the Make-Whole Measurement Period, subject to satisfaction of the
conditions in the immediately following sentence. Payment in shares of Common
Stock pursuant to this Section 2(d) may only occur if each of the Equity
Conditions shall have been met (unless waived in writing by the Holder) on each
Trading Day during the Make-Whole Measurement Period and through and including
the date such shares are issued to the Holder. When making any payment under
Section 2(c) using common stock of the Company, the value of each such share of
stock shall be determined based on ninety percent (90%) of the lower of the
(i) VWAP for such stock for the ten (10) Trading Days immediately prior to the
date such payment is due pursuant to Section 2(c) (“Make-Whole Measurement
Period”), and (ii) the closing price of the stock on the day immediately
preceding the conversion date or redemption date, as applicable; provided, that
until and unless the Company has received any approval of its stockholders
required under Amex Rule 713 or any equivalent rule of any other applicable
Trading Market, the value of such shares used in such determination may not be
less than the closing price of the Common Stock on AMEX or such other applicable
Trading Market on the execution date of the Purchase Agreement. In the event
that the Company has not received the necessary approval under AMEX Rule 713 or
any equivalent rule of any other applicable Trading Market, then such payment
will be made in cash pursuant to Section 2(c).

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     e) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee on such unpaid interest (and not on the entire principal
amount) at an interest rate equal to the lesser of 18% per annum or the maximum
rate permitted by applicable law (the “Late Fees”) which shall accrue daily from
the date such interest is due hereunder through and including the date of actual
payment in full. In addition, subject to Section 8, if the Company does not meet
the current public information requirements as in effect under Rule 144 as they
may exist from time to time in respect of the Conversion Shares and the Holder
cannot freely resell the Conversion Shares on a Trading Market pursuant to
Rule 144 for a period of 3 months (a “Public Information Failure”), then, as of
the first day following such Public Information Failure, interest on this
Debenture shall accrue at an interest rate equal to 12% per annum until such
date as the Company satisfies the current public information requirements under
Rule 144 such that the Holder is able to freely resell all the Conversion Shares
on a Trading Market.
     f) Prepayment. Except as otherwise set forth in this Debenture, the Company
may not prepay any portion of the principal amount of this Debenture without the
prior written consent of the Holder.
     Section 3. Registration of Transfers and Exchanges; Other Exchanges.
     a) Different Denominations. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be
payable for such registration of transfer or exchange.
     b) Investment Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the
Purchase Agreement and may be transferred or exchanged only in compliance with
the Purchase Agreement and applicable federal and state securities laws and
regulations.
     c) Reliance on Debenture Register. Prior to due presentment for transfer to
the Company of this Debenture, the Company and any agent of the Company may
treat the Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
     Section 4. Conversion.
     a) Voluntary Conversion. At any time after the Original Issue Date until
this Debenture is no longer outstanding, the principal amount of this Debenture
shall be convertible, in whole or in part, into shares of Common Stock at the
option of the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(c) hereof). The Holder shall
effect conversions by delivering to the Company a Notice of Conversion, the form
of which is attached hereto as Annex A (each, a “Notice

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of Conversion”), specifying therein the principal amount of this Debenture to be
converted and the date on which such conversion shall be effected (such date,
the “Conversion Date”). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder. To effect conversions hereunder, the Holder shall
not be required to physically surrender this Debenture to the Company unless the
entire principal amount of this Debenture has been so converted, and all accrued
and unpaid interest thereon has been paid. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Debenture in an
amount equal to the applicable conversion. The Holder and the Company shall
maintain records showing the principal amount(s) converted and the date of such
conversion(s). The Company may deliver a valid objection to any Notice of
Conversion promptly but in any event within 3 Business Days of delivery of such
Notice of Conversion. Absent manifest error, the Holder’s records showing the
principal amount(s) converted and the date of such conversion(s) shall be
determinative. The Holder, and any assignee by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture may be less than the amount stated on the
face hereof.
     b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $6.50, subject to adjustment herein (the “Conversion Price”).
     c) Conversion Limitations. The Company shall not effect any conversion of
this Debenture, and a Holder shall not have the right to convert any portion of
this Debenture, to the extent that after giving effect to the conversion set
forth on the applicable Notice of Conversion, the Holder (together with the
Holder’s Affiliates, and any other person or entity acting as a group together
with the Holder or any of the Holder’s Affiliates) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates shall include the number of shares of
Common Stock issuable upon conversion of this Debenture with respect to which
such determination is being made, but shall exclude the number of shares of
Common Stock which are issuable upon (A) conversion of the remaining,
unconverted principal amount of this Debenture beneficially owned by the Holder
or any of its Affiliates and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, any other Debentures) beneficially owned
by the Holder or any of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 4(c), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. To the extent that the limitation
contained in this Section 4(c) applies, the determination of whether this
Debenture is convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this Debenture is
convertible shall be in the sole discretion of

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the Holder, and the submission of a Notice of Conversion shall be deemed to be
the Holder’s determination of whether this Debenture may be converted (in
relation to other securities owned by the Holder together with any Affiliates)
and which principal amount of this Debenture is convertible, in each case
subject to the Beneficial Ownership Limitation. To ensure compliance with this
restriction, the Holder will be deemed to represent to the Company each time it
delivers a Notice of Conversion that such Notice of Conversion has not violated
the restrictions set forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 4(c), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (A) the Company’s most recent periodic or annual
report, as the case may be; (B) a more recent public announcement by the
Company; or (C) a more recent notice by the Company or the Company’s transfer
agent setting forth the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Debenture, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99%
of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon conversion of
this Debenture held by the Holder. The Holder, upon not less than 61 days’ prior
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 4(c), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Debenture held by the Holder and
the Beneficial Ownership Limitation provisions of this Section 4(c) shall
continue to apply. Any such increase or decrease will not be effective until the
61st day after such notice is delivered to the Company. The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this Section 4(c)
to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Debenture.
     d) Mechanics of Conversion.
     i. Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion

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hereunder shall be equal to the quotient obtained by dividing (x) the
outstanding principal amount of this Debenture to be converted by (y) the
Conversion Price.
     ii. Delivery of Certificate Upon Conversion. Not later than three Trading
Days after each Conversion Date (the “Share Delivery Date”), the Company shall
deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the earlier
of (i) the six month anniversary of the Original Issue Date (unless the Holder
is then an Affiliate of the Company) and (ii) the Effective Date, shall be free
of restrictive legends and trading restrictions (other than those which may then
be required by the Purchase Agreement) representing the number of Conversion
Shares being acquired upon the conversion of this Debenture, (B) a bank check or
wire of immediately available funds, at the Company’s option, in the amount of
accrued and unpaid interest, and (C) as to Conversion Dates that occur prior to
the three year anniversary of the Original Issue Date, a bank check or wire
transfer in the amount equal to the Interest Make-Whole or a certificate or
certificates representing shares of the Company’s common stock calculated in
accordance with Section 2(d) with respect to the Interest Make-Whole. On or
after the earlier of (i) the six month anniversary of the Original Issue Date
and (ii) the Effective Date, the Company shall use its commercially reasonable
efforts to deliver any certificate or certificates required to be delivered by
the Company under this Section 4(d) electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.
     iii. Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed
by the applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled to elect by written notice to the Company at any time
on or before its receipt of such certificate or certificates, to rescind such
Notice of Conversion, in which event the Company shall promptly return to the
Holder any original Debenture delivered to the Company and the Holder shall
promptly return to the Company the Common Stock certificates representing the
principal amount of this Debenture unsuccessfully tendered for conversion to the
Company.
     iv. Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such

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Conversion Shares; provided, however, that such delivery shall not operate as a
waiver by the Company of any such action the Company may have against the
Holder. In the event the Holder of this Debenture shall elect to convert any or
all of the outstanding principal amount hereof, the Company may not refuse
conversion based on any claim that the Holder or anyone associated or affiliated
with the Holder has been engaged in any violation of law, agreement or for any
other reason, unless an injunction from a court, on notice to Holder,
restraining and or enjoining conversion of all or part of this Debenture shall
have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the outstanding principal amount
of this Debenture, which is subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the underlying
dispute and the proceeds of which shall be payable to such Holder to the extent
it obtains judgment. In the absence of such injunction, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
If the Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being
converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such third Trading Day until such certificates are delivered. Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an Event
of Default pursuant to Section 8 hereof for the Company’s failure to deliver
Conversion Shares within the period specified herein and the Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
     v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(d)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder or its
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which the Holder
was entitled to receive upon the conversion relating to such Share Delivery Date
(a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition
to any other remedies available to or elected by the Holder) the amount by which
(x) the Holder’s total purchase price (including any brokerage commissions) for
the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that the Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at which the
sell order giving rise to

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such purchase obligation was executed (including any brokerage commissions) and
(B) at the option of the Holder, either reissue (if surrendered) this Debenture
in a principal amount equal to the principal amount of the attempted conversion
or deliver to the Holder the number of shares of Common Stock that would have
been issued if the Company had timely complied with its delivery requirements
under Section 4(d)(ii). For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of this Debenture with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of this
Debenture as required pursuant to the terms hereof.
     vi. Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Debenture, as herein provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other than the Holder (and the
other holders of the Debentures), not less than such aggregate number of shares
of the Common Stock as shall (subject to the terms and conditions set forth in
the Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5) upon the conversion of the outstanding principal
amount of this Debenture. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid and nonassessable and, if the Registration Statement is then
effective under the Securities Act, shall be registered for public sale in
accordance with such Registration Statement.
     vii. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Debenture. As to
any fraction of a share which Holder would otherwise be entitled to purchase
upon such conversion, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.
     viii. Transfer Taxes. The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable

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in respect of the issue or delivery of such certificates, provided that, the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Debenture so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
     Section 5. Certain Adjustments.
     a) Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company upon
conversion of the Debentures), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of a
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
     b) [RESERVED]
     c) Subsequent Rights Offerings. If the Company, at any time while the
Debenture is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share that is lower than the VWAP on the
record date referenced below, then the Conversion Price shall be multiplied by a
fraction the denominator of which shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or purchase
underlying such rights or warrants, and the numerator of which shall be the
number of shares of the Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of shares which the aggregate offering price
of the total number of shares so offered (assuming delivery to the Company in
full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made whenever
such

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rights or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights, options or warrants.
     d) Pro Rata Distributions. If the Company, at any time while this Debenture
is outstanding, distributes to all holders of Common Stock (and not to the
Holders) evidences of its indebtedness or assets (including cash and periodic or
extraordinary cash dividends) or rights or warrants to subscribe for or purchase
any security, then in each such case the Conversion Price shall be adjusted by
multiplying such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction the denominator of which shall be the VWAP determined as of the
record date mentioned above, and the numerator of which shall be such VWAP on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
1 outstanding share of the Common Stock as determined by the Board of Directors
of the Company in good faith. In either case the adjustments shall be described
in a statement delivered to the Holder describing the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to 1 share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
     e) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of 1 share of
Common Stock (the “Alternate Consideration”). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one (1) share of Common Stock in
such Fundamental Transaction, and the Company shall apportion the Conversion
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction.

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To the extent necessary to effectuate the foregoing provisions, any successor to
the Company or surviving entity in such Fundamental Transaction shall issue to
the Holder a new debenture consistent with the foregoing provisions and
evidencing the Holder’s right to convert such debenture into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 5(e) and insuring
that this Debenture (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
     f) Change of Control Transaction. If the Fundamental Transaction is also a
Change of Control Transaction, then the Holder shall have the right to cause the
Company to redeem this Debenture or to have an adjustment of the Conversion
Price and/or Conversion Shares, as set forth below. No later than 20 Trading
Days prior to the consummation of a Change of Control (such date of consummation
of a Change of Control, the “Change of Control Date”), but not prior to the
public announcement of such Change of Control, the Company shall deliver written
notice thereof to the Holders (a “Change of Control Notice” and the date of such
Change of Control Notice, the “Change of Control Notice Date”). Such Change of
Control Notice shall state:
          (A) the events causing the Change of Control;
          (B) the Change of Control Date or anticipated Change of Control Date
of such Change of Control;
          (C) the purchase price and whether that price will be paid in cash,
shares of common stock, or a combination of cash and shares of common stock; and
          (D) if applicable, the expected determination of the adjustment to the
Conversion Price as set forth pursuant to Section 5(f)(ii) below.
          Simultaneously with the Change of Control Notice, the Company shall
issue a press release and timely file a Form 8-K containing the information
contained in the Change of Control Notice.
          (i) Change of Control Redemption. At any time during the period (the
“Change of Control Period”) beginning after a Holder’s receipt of a Change of
Control Notice and ending on the date that is five (5) Trading Days subsequent
to the Change of Control Date as set forth in the Change of Control Notice, such
Holder may require the Company to redeem (a “Change of Control Redemption”) all
or any portion of such Holder’s Debenture by delivering written notice thereof
(“Change of Control Redemption Notice”) to the Company, which Change of Control
Redemption Notice shall indicate the principal amount the Holder is electing to
redeem. Any principal amount of the Debenture subject to redemption pursuant to
this Section 5(f) shall be redeemed by the Company in cash at a price

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equal to the sum of 103% of the principal amount being redeemed together with
100% of any accrued but unpaid interest thereon and the Interest Make-Whole, if
any (the “Change of Control Redemption Price”). The Company shall make payment
of the Change of Control Redemption Price concurrently with the consummation of
such Change of Control if such a Change of Control Redemption Notice is received
prior to the consummation of such Change of Control and within 5 Trading Days
after the Company’s receipt of such notice otherwise (the “Change of Control
Redemption Date”). Notwithstanding anything to the contrary in this
Section 5(f), until the Change of Control Redemption Price (together with any
interest thereon) is paid in full, the principal amount submitted for redemption
under this Section 5(f) may be converted, in whole or in part, by the Holder
into Conversion Shares, or in the event the Conversion Date is after the
consummation of the Change of Control, shares or equity interests of the
successor entity substantially equivalent to the Company’s Common Stock. The
parties hereto agree that in the event of the Company’s redemption of any
portion of the Debenture under this Section 5(f), the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 5(f) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty.
          (ii) Adjustment to Conversion Shares Upon a Change of Control.
          In connection with a Change of Control, the Company will increase the
number of Conversion Shares issuable upon conversion of the Debenture by a
number of additional shares (the “Additional Shares”) for each $1,000 principal
amount of Debenture when converted as described in this Section 5(f)(ii);
provided that (A) such increase in Conversion Shares shall not take place if
such Change of Control is not consummated and (B) the Company shall issue
Conversion Shares (without such increase) on or prior to the fifth (5th) Trading
Day following the Conversion Date and the Additional Shares described in
Section 5(f)(iii) hereof will be issued after the later to occur of (x) the
fifth (5th) Trading Day following the Change of Control Date and (y) the fifth
(5th) Trading Day following the relevant Conversion Date. On and after the
Change of Control Date, Holders entitled to receive Additional Shares pursuant
to this Section 5(f)(ii) shall receive the kind and amount of securities (of the
Company or another issuer), cash and other property receivable upon such Change
of Control by a holder of the number of shares of Common Stock into which this
Debenture was convertible immediately prior to such Change of Control, after
giving effect to any adjustment event, based on the number of Additional Shares
set forth above.
          The number of Additional Shares will be determined by reference to the
table below, based on the Change of Control Date and the price of the

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Common Stock (the “Stock Price”). If the consideration for the Common Stock
consists solely of cash, then the Stock Price will be the cash amount paid per
share of the Common Stock. Otherwise, the Stock Price will be the average of the
VWAPs for the 5 consecutive Trading Days immediately preceding the Change of
Control Date.
          The following table sets forth the number of Additional Shares per
$1,000 principal amount of Debenture to be added to the Conversion Shares
issuable in connection with the Change of Control referred to in
Section 5(f)(i):

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Number of Additional Shares

                                                                               
      Stock Price     $5.47   $6.00   $6.50   $7.00   $7.50   $8.00   $8.50  
$9.00   $9.50   $10.00 Additional Shares                                        
                                         
Pricing Date
    28.9710       24.3770       21.0950       18.3340       15.9470      
13.8590       12.0170       10.3810       8.9190       7.6070  
Pricing Date + 1 Year
    28.9710       18.2100       15.6260       13.6360       11.9350      
10.4480       9.1360       7.9690       6.9260       5.9870  
Pricing Date + 2 Years
    28.9710       15.5710       8.7830       7.6080       6.6950       5.8990  
    5.1960       4.5720       4.0140       3.5110  
Pricing Date + 3 Years
    28.9710       12.8210       4.3915       3.8040       3.3475       2.9495  
    2.5980       2.2860       2.0070       1.7555  

          The Stock Prices set forth in the table will be adjusted as of any
date on which the Conversion Price is adjusted. The adjusted Stock Prices will
equal the Stock Prices applicable immediately prior to the adjustment divided by
a fraction, the numerator of which is the Conversion Price immediately prior to
the adjustment to the Conversion Price and the denominator of which is the
Conversion Price as so adjusted.
          The exact Stock Price and Change of Control Date may not be set forth
in the table, in which case:
     (A) if the Stock Price is between two Stock Prices in the table or the
Change of Control Date is between two Change of Control Dates in the table, the
number of Additional Shares will be determined by straight-line interpolation
between the Additional Share amounts set forth for the higher and lower Stock
Prices and the two Change of Control Dates, as applicable, based on a 365-day
year;
     (B) if the Stock Price is in excess of $10.00 per share (subject to
adjustment in the same manner as the Stock Price), no Additional Shares will be
added to the Conversion Shares; and
     (C) if the Stock Price is less than or equal to $5.47 per share (subject to
adjustment in the same manner as the Stock Price), no Additional Shares will be
added to the Conversion Shares.
     g) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding

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as of a given date shall be the sum of the number of shares of Common Stock
(excluding any treasury shares of the Company) issued and outstanding.
     h) Notice to the Holder.
     i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
     ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare
a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, (E) the Company shall be
subject to a Fundamental Transaction or a Change of Control Transaction, or
(F) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the
Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of this Debenture, and shall cause to be delivered to the
Holder at its last address as it shall appear upon the Debenture Register, at
least twenty (20) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. The Holder is entitled
to convert this Debenture during the 20-day period commencing on the date of
such notice through the effective date of the event triggering such notice.
     Section 6. Redemption.

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     a) Optional Redemption at Election of Company. Subject to the provisions of
this Section 6(a), at any time after the 2-year anniversary of the Original
Issue Date, provided that the VWAP of the Common Stock has been at least 150% of
the Conversion Price for any 20 out of 30 consecutive Trading Days, such 30
consecutive Trading Day period beginning only after the 2-year anniversary of
the Original Issue Date, then, within 1 Trading Day of the end of such period,
the Company may deliver a notice to the Holder (a “Company Optional Redemption
Notice” and the date such notice is deemed delivered hereunder, the “Company
Optional Redemption Notice Date”) of its irrevocable election to redeem some or
all of the then-outstanding principal amount of this Debenture for cash in an
amount equal to the Company Optional Redemption Amount on the 20th Trading Day
following the Company Optional Redemption Notice Date (such date, the “Company
Optional Redemption Date”, such 20 Trading Day period, the “Company Optional
Redemption Period” and such redemption, the “Company Optional Redemption”). The
Company Optional Redemption Amount is payable in full on the Company Optional
Redemption Date. The Company may only effect a Company Optional Redemption if
each of the Equity Conditions shall have been met (unless waived in writing by
the Holder) on each Trading Day during the period commencing on the Company
Optional Redemption Notice Date through to the Company Optional Redemption Date
and through and including the date payment of the Company Optional Redemption
Amount is actually made in full. If any of the Equity Conditions shall cease to
be satisfied at any time during the Company Optional Redemption Period through
to the Company Optional Redemption Date and through and including the date
payment of the Company Optional Redemption Amount is actually made in full, then
the Holder may elect to nullify the Company Optional Redemption Notice by notice
to the Company within 3 Trading Days after it receives written notice from the
Company that any such Equity Condition has not been met, in which case the
Company Optional Redemption Notice shall be null and void, ab initio. The
Company covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Company Optional Redemption Notice
through the date all amounts owing thereon are due and paid in full. The
Company’s determination to effect a Company Optional Redemption shall be applied
ratably to all of the holders of the then-outstanding Debentures.
     b) Optional Redemption at Election of Holder. Subject to the provisions of
this Section 6(b), at any time prior to the three month anniversary of the
Original Issue Date, the Holder may deliver a notice to the Company (a “Holder
Optional Redemption Notice” and the date such notice is deemed delivered
hereunder, the “Holder Optional Redemption Notice Date”) of its election to
require the Company redeem for cash the product of (a) up to 25% of the original
face principal amount of this Debenture and (b) an amount equal to the Holder
Optional Redemption Amount on the 20th Trading Day following the Holder Optional
Redemption Notice Date (such date, the “Holder Optional Redemption Date”, such
20 Trading Day period, the “Holder Optional Redemption Period” and such
redemption, the “Holder Optional Redemption”). The Holder Optional Redemption
Amount is payable in full on the Holder Optional Redemption Date. The

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Company covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Holder Optional Redemption Notice
through the date all amounts owing thereon are due and paid in full.
     c) Redemption Procedure. The payment of cash or issuance of Common Stock,
as applicable, pursuant to a Company Optional Redemption or a Holder Optional
Redemption shall be payable on the Company Optional Redemption Date or the
Holder Optional Redemption Date, as applicable. If any portion of the payment
pursuant to an Optional Redemption shall not be paid by the Company by the
applicable due date, interest shall accrue thereon at an interest rate equal to
the lesser of 18% per annum or the maximum rate permitted by applicable law
until such amount is paid in full. Notwithstanding anything herein contained to
the contrary, if any portion of the Company Optional Redemption Amount or the
Holder Optional Redemption Amount remains unpaid after such date, the Holder may
elect, by written notice to the Company given at any time thereafter, to
invalidate such Optional Redemption, ab initio, and, with respect to the
Company’s failure to honor the Optional Redemption, the Company shall have no
further right to exercise such Optional Redemption. The Holder may elect to
convert the outstanding principal amount of the Debenture pursuant to Section 4
prior to actual payment in cash for any redemption under this Section 6 by the
delivery of a Notice of Conversion to the Company. Upon completion of any
redemption provided for under this Section 6, the Company will promptly and in
no event later than four (4) Business Days file a Current Report on Form 8-K
disclosing the material details of such redemption.
     Section 7. Negative Covenants. As long as any portion of this Debenture
remains outstanding, unless the holders of at least 67% in principal amount of
the then-outstanding Debentures shall have otherwise given prior written
consent, the Company shall not, and shall not permit any of its subsidiaries
(whether or not a Subsidiary on the Original Issue Date) to, directly or
indirectly:
     a) other than Permitted Indebtedness and except as provided in the Credit
Agreement, enter into, create, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money of any kind, including, but not limited to, a
guarantee, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;
provided, that, any such additional Indebtedness effected through the Credit
Agreement, when combined with other existing Indebtedness of the Credit
Agreement, shall not exceed $150,000,000 in aggregate principal amount;
     b) other than Permitted Liens and except as provided in the Credit
Agreement, enter into, create, incur, assume or suffer to exist any Liens of any
kind, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom; provided,
that, any such additional Liens effected through the Credit Agreement, when
combined with other existing Liens

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under the Credit Agreement, shall not secure Indebtedness with an aggregate
principal amount in excess of $150,000,000;
     c) amend its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;
     d) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than an amount of shares of its Common Stock or Common Stock Equivalents
equal to $200,000, other than as to (i) the Conversion Shares as permitted or
required under the Transaction Documents and (ii) repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the Company,
provided that such repurchases shall not exceed an aggregate of $100,000 for all
officers and directors during the term of this Debenture;
     e) repay, repurchase or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than (i) the Debentures if on a pro-rata basis or
(ii) regularly scheduled principal and interest payments as such terms are in
effect as of the Original Issue Date, provided that such payments shall not be
permitted if, at such time, or after giving effect to such payment, any Event of
Default exists or occurs (unless such payments are required to be made under the
Credit Agreement and are permitted to be made under the Intercreditor and
Subordination Agreement);
     f) pay cash dividends or distributions on any equity securities of the
Company;
     g) enter into any transaction with any Affiliate of the Company which would
be required to be disclosed in any public filing with the Commission, unless
such transaction is otherwise permitted under the Transaction Documents and are
upon fair and reasonable terms no less favorable to it than it would obtain in a
comparable arm’s-length transaction with a Person not an Affiliate; or
     h) enter into any agreement with respect to any of the foregoing.
     Section 8. Events of Default.
     a) “Event of Default” means, wherever used herein, any of the following
events (whatever the reason for such event and whether such event shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
     i. any default in the payment of (A) the principal amount of any Debenture
or (B) interest, liquidated damages other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on

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a Conversion Date, any redemption date or the Maturity Date or by acceleration
or otherwise);
     ii. the Company or any Guarantor shall fail to observe or perform any other
covenant or agreement contained in the Debentures (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the Holder upon
conversion, which breach is addressed in clause (x) below) which failure is not
cured, if possible to cure, within 10 Trading Days after the earlier of (A) the
Company’s becoming aware of such failure and (B) notice of such failure sent by
the Holder or by any other Holder to the Company;
     iii. the Company shall fail to observe or perform any covenants or
agreements contained in Section 4.6, 4.7, 4.9, 4.10, 4.12, 4.13 and 4.17 of the
Purchase Agreement, which failure is not cured, if possible to cure, within 10
Trading Days after the earlier of (A) the Company’s becoming aware of such
failure and (B) notice of such failure sent by the Holder or by any other Holder
to the Company;
     iv. any representation or warranty made by the Company in the Debenture or
in Section 3.1(c), (d), (f), or (g) in the Purchase Agreement shall be untrue or
incorrect in any material respect as of the date when made or deemed made;
     v. a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents (other than another Debenture) or any of
the Security Documents, or (B) under the documents governing any Permitted
Indebtedness or any other material agreement, lease, document or instrument to
which the Company or any Subsidiary is obligated;
     vi. the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
     vii. the Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement that (a) involves
an obligation the greater of $1,000,000 or five percent (5%) of the
then-effective Conforming Borrowing Base, as defined in the Credit Agreement,
whether such indebtedness now exists or shall hereafter be

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created, and (b) results in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;
     viii. the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within 10 Trading Days;
     ix. if the Company does not meet the current public information
requirements as in effect under Rule 144 as they may exist from time to time in
respect of the Conversion Shares and the Holder cannot freely resell the
Conversion Shares on a Trading Market pursuant to Rule 144 for a period of
3 months;
     x. the Company shall fail for any reason to deliver certificates to a
Holder prior to the seventh Trading Day after a Conversion Date pursuant to
Section 4(d) or the Company shall provide at any time notice to the Holder,
including by way of public announcement, of the Company’s intention to not honor
requests for conversions of any Debentures in accordance with the terms hereof;
     xi. any monetary judgment, writ or similar final process shall be entered
or filed against the Company, any Subsidiary or any of their respective property
or other assets for more than the greater of $1,000,000 or five percent (5%) of
the then-effective Conforming Borrowing Base as defined in the Credit Agreement,
and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 60 calendar days;
     xii. if any of the Security Documents ceases to be in full force and effect
(including failure to create a valid and perfected second priority lien on and
security interest in all the Collateral (as defined in the Security Documents)
at any time for any reason; and
     xiii. any Guarantee (as such term is defined in the Indenture) ceases to
be, or shall be asserted in writing by any Guarantor (as such term is defined in
the Security Agreement), or any Person acting on behalf of any Guarantor, not to
be, in full force and effect or enforceable in accordance with its terms (other
than in accordance with the terms of the Indenture or any such Guarantee).
     b) Remedies Upon Event of Default. If any Event of Default occurs (other
than an Event of Default specified in Section 8(a)(vi)), the outstanding
principal amount of the Debentures, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of
acceleration, shall become, at the

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election of Holders of at least 51% in aggregate principal amount of the
Debentures, immediately due and payable in cash at the Mandatory Default Amount.
Such declaration may be made by the Holders of at least 51% in aggregate
principal amount of the Debentures by written notice to the Company. If an Event
of Default specified in Section 8(a)(vi) occurs and is continuing, the principal
of and interest on all the Debentures shall ipso facto become immediately due
and payable without any other act on the part of any Holder. Commencing upon the
occurrence of any Event of Default the interest rate on the Debentures shall
accrue at an interest rate equal to the lesser of 18% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holders shall promptly surrender the Debentures to or as
directed by the Company. In connection with such acceleration described herein,
the Holders need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holders may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by the Holders at any time prior
to payment hereunder and the Holders shall have all rights as a holder of the
Debentures until such time, if any, as the Holders receive full payment pursuant
to this Section 8(b). No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
     Section 9. Miscellaneous.
     a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to the Company,
at the address set forth above, or such other facsimile number or address as the
Company may specify for such purpose by notice to the Holder delivered in
accordance with this Section 9(a). Any and all notices or other communications
or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
the Holder appearing on the books of the Company, or if no such facsimile number
or address appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified on
the signature page prior to 5:30 p.m. (New York City time), (ii) the date
immediately following the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified on the signature
page between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time)
on any date, (iii) the second Business Day following the date of mailing, if
sent by nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given.

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     b) Absolute Obligation. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other
Debentures now or hereafter issued under the terms set forth herein.
     c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, reasonably satisfactory to the
Company.
     d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof. Each party
agrees that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by applicable
law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Debenture or the transactions
contemplated hereby. If either party shall commence an action or proceeding to
enforce any provisions of this Debenture, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.

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     e) Waiver and Amendment. No provision of this Debenture may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Holder, except that Section 7
hereof may be waived or amended with the prior written consent of the holders of
at least 67% of the principal amount of Debentures then outstanding (provided
that any Debentures held by the Company and its Affiliates shall be deemed not
to be outstanding for this purpose and no consideration shall be offered or paid
to any holder of Debentures to consent to any such amendment or waiver unless
the same consideration is offered to all holders of the Debentures). Any waiver
by the Company or the Holder of a breach of any provision of this Debenture
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Debenture. The failure
of the Company or the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Debenture. Any waiver by the Company or the Holder
must be in writing.
     f) Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
     g) Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.
     h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect
any of the provisions hereof.
     i) Assumption. Any successor to the Company or any surviving entity in a
Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction,
all of the obligations of the Company under this Debenture and the other
Transaction

A-30

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Documents pursuant to written agreements in form and substance satisfactory to
the Holder (such approval not to be unreasonably withheld or delayed) and
(ii) issue to the Holder a new debenture of such successor entity evidenced by a
written instrument substantially similar in form and substance to this
Debenture, including, without limitation, having a principal amount and interest
rate equal to the principal amount and the interest rate of this Debenture and
having similar ranking to this Debenture, which shall be satisfactory to the
Holder (any such approval not to be unreasonably withheld or delayed). The
provisions of this Section 9(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.
     j) Secured Obligation. The obligations of the Company under this Debenture
are secured pursuant to the Security Agreement and the Mortgages between the
Company, the Subsidiaries and the Secured Parties (as defined therein) granting
a second lien on all those assets of the Company and each Subsidiary, with
respect to which JP Morgan has a first lien pursuant to the Credit Agreement.
*********************
(Signature Pages Follow)

A-31

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     IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.

            TETON ENERGY CORPORATION
      By:           Name:   Lonnie R. Brock       Title:   Executive Vice
President and Chief Financial Officer
Facsimile No. for delivery of Notices: (303) 565-4606   

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ANNEX A
NOTICE OF CONVERSION
     The undersigned hereby elects to convert principal under the 10.75% Secured
Subordinated Convertible Debenture due June 18, 2013 of Teton Energy
Corporation, a Delaware corporation (the “Company”), into shares of common stock
(the “Common Stock”), of the Company according to the conditions hereof, as of
the date written below. If shares of Common Stock are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates
and opinions as reasonably requested by the Company in accordance therewith. No
fee will be charged to the holder for any conversion, except for such transfer
taxes, if any.
     By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4 of this Debenture, as determined in
accordance with Section 13(d) of the Exchange Act.
     The undersigned agrees to comply with the prospectus delivery requirements
under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debenture to be Converted:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address for Delivery of Common Stock Certificates:
Or
DWAC Instructions:
Broker No:                                         
Account No:                                         

A-33

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Schedule 1
CONVERSION SCHEDULE
The 10.75% Secured Subordinated Convertible Debentures due on June 18, 2013 in
the aggregate principal amount of $40,000,000 are issued by Teton Energy
Corporation, a Delaware corporation. This Conversion Schedule reflects
conversions made under Section 4 of the above-referenced Debenture.
Dated:

                      Aggregate             Principal             Amount        
    Remaining     Date of Conversion       Subsequent to     (or for first      
Conversion     entry, Original       (or original     Issue Date)   Amount of
Conversion   Principal Amount)   Company Attest
 
           

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EXHIBIT B
FORM OF GLOBAL DEBENTURE
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS DEBENTURE FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY THE AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED DEBENTURES
IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL DEBENTURE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OR SUCH SUCCESSOR
DEPOSITORY.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN

B-1

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CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

B-2

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TETON ENERGY CORPORATION
10.75% Secured Subordinated Convertible Debenture Due June 18, 2013
CUSIP No. 881628 AA9
ISIN No. US881628AA94
$                                        
No. [                    ]
Teton Energy Corporation, a Delaware corporation (the “Company,” which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to                                         , or its
registered assigns, the principal sum of FORTY MILLION DOLLARS ($40,000,000) on
June 18, 2013, which principal amount may from time to time be increased or
decreased to such other principal amount (which, taken together with the
principal amounts of all other outstanding Debentures, shall not exceed
$40,000,000) by adjustments on the Schedule of Exchanges of Debentures on the
other side of this Debenture in accordance with the Indenture.
Capitalized terms used herein shall have the meanings assigned to them in the
Debenture.
     Initial Interest Rate: 10.75% per annum.
     Interest Payment Dates: January 1 and July 1, commencing January 1, 2009;
each Conversion Date (as to that principal amount then being converted); each
Company Optional Redemption Date or Holder Optional Redemption Date (as to that
principal amount then being redeemed) and on the Maturity Date.
     Reference is hereby made to the further provisions of this Debenture set
forth on the reverse hereof, which will for all purposes have the same effect as
if set forth at this place.

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IN WITNESS WHEREOF, the Company has caused this Debenture to be signed manually
or by facsimile by its duly authorized officers.

          Date:                                           TETON ENERGY
CORPORATION
      By:           Name:   Lonnie R. Brock       Title:   Executive Vice
President and Chief Financial Officer    

          Attest:
      By:           Name:           Title:        

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Trustee’s Certificate of Authentication
This is one of the 10.75% Secured Subordinated Convertible Debentures Due
June 18, 2013 described in the Indenture referred to in this Debenture.
The Bank of New York Mellon Trust Company, N.A.,
as Trustee
By:
                                                                      
Authorized Signatory

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[REVERSE SIDE OF DEBENTURE]
TETON ENERGY CORPORATION
Secured Subordinated Convertible Debenture Due June 18, 2013
     The indebtedness and other obligations of Borrower and its subsidiaries
evidenced by this Agreement (or by this Indenture, as applicable) and the
Debentures issued hereunder owed to the Purchasers and Holders party to this
Agreement (or Indenture, as applicable) are junior and subordinate to the
indebtedness and other obligations of Borrower and its subsidiaries in
accordance with the provisions of the Amended and Restated Intercreditor and
Subordination Agreement dated as of                     , 2008, among JPMorgan
Chase Bank, N.A., as Senior Agent, The Bank of New York Mellon Trust Company,
N.A., as Subordinated Holder Representative and collateral agent, Borrower and
certain of its affiliates, as amended from time to time.
     Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings:
     “Additional Shares” shall have the meaning set forth in Section 5(f).
     “Alternate Consideration” shall have the meaning set forth in Section 5(e).
     “Bankruptcy Event” means any of the following events: (a) the Company or
any Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Company or any Significant Subsidiary thereof, (b) there is
commenced against the Company or any Significant Subsidiary thereof any such
case or proceeding that is not dismissed within 60 days after commencement,
(c) the Company or any Significant Subsidiary thereof is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered, (d) the Company or any Significant Subsidiary thereof
suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 calendar days
after such appointment, (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors, (f) the Company or any
Significant Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts or (g) the
Company or any Significant Subsidiary thereof, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of effecting
any of the foregoing.

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     “Beneficial Ownership Limitation” shall have the meaning set forth in
Section 4(c).
     “Business Day” means any day except any Saturday, any Sunday, any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.
     “Buy-In” shall have the meaning set forth in Section 4(d)(v).
     “Change of Control Date” shall have the meaning set forth in Section 5(f).
     “Change of Control Notice” shall have the meaning set forth in
Section 5(f).
     “Change of Control Notice Date” shall have the meaning set forth in Section
5(f).
     “Change of Control Period” shall have the meaning set forth in
Section 5(f).
     “Change of Control Redemption” shall have the meaning set forth in Section
5(f).
     “Change of Control Redemption Date” shall have the meaning set forth in
Section 5(f).
     “Change of Control Redemption Notice” shall have the meaning set forth in
Section 5(f).
     “Change of Control Redemption Price” shall have the meaning set forth in
Section 5(f).
     “Change of Control Transaction” means the occurrence after the date hereof
of any of (a) an acquisition after the date hereof by an individual or legal
entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of 40% of the voting securities of the Company (other than by means of
conversion or exercise of the Debentures and the Securities issued together with
the Debentures), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or consolidates with the Company and, after
giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 60% of the aggregate voting power of the
Company or the successor entity of such transaction, (c) the Company sells or
transfers all or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction own less than
60% of the aggregate voting power of the acquiring entity immediately after the
transaction, (d) a replacement at one time or within a three year period of more
than one-half of the members of the Board of Directors which is not approved by
a majority of those individuals who are members of the Board of Directors

B-7

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on the Original Issue Date (or by those individuals who are serving as members
of the Board of Directors on any date whose nomination to the Board of Directors
was approved by a majority of the members of the Board of Directors who are
members on the Original Issue Date), or (e) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for
any of the events set forth in clauses (a) through (d) above.
     “Company Optional Redemption” shall have the meaning set forth in
Section 6(a).
     “Company Optional Redemption Amount” means the sum of (a) 100% of the then
outstanding principal amount of the Debenture, (b) accrued but unpaid interest
in respect of the Debenture, (c) all liquidated damages and other amounts due,
if any, in respect of the Debenture, and (d) any Interest Make-Whole.
     “Company Optional Redemption Date” shall have the meaning set forth in
Section 6(a).
     “Company Optional Redemption Notice” shall have the meaning set forth in
Section 6(a).
     “Company Optional Redemption Notice Date” shall have the meaning set forth
in Section 6(a).
     “Company Optional Redemption Period” shall have the meaning set forth in
Section 6(a).
     “Conversion Date” shall have the meaning set forth in Section 4(a).
     “Conversion Price” shall have the meaning set forth in Section 4(b).
     “Conversion Schedule” means the Conversion Schedule in the form of Schedule
1 attached hereto.
     “Conversion Shares” means, collectively, the shares of Common Stock issued
or issuable upon conversion of this Debenture in accordance with the terms
hereof, including without limitation shares of Common Stock issued or issuable,
if any, as Interest Make Whole and any Additional Shares.
     “Debenture Register” shall have the meaning set forth in Section 2(b).
     “Equity Conditions” means, during the period in question, (a) the Company
shall have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of the Holder, if any,
(b) the Company shall have paid all liquidated damages and other amounts owing
to the Holder in respect of this

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Debenture, (c) there is an effective Registration Statement pursuant to which
the Holder is permitted to utilize the prospectus thereunder to resell all of
the shares of Common Stock issuable pursuant to the Transaction Documents (and
the Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), as determined by outside counsel to
the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Transfer Agent and the Holder, (d) the Common Stock is trading
on a Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed or quoted for trading on such Trading Market (and the
Company believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (e) there is a
sufficient number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the shares issuable pursuant to the
Transaction Documents (disregarding any limitation on issuance or conversion
under such documents), (f) there is no existing Event of Default and no existing
event which, with the passage of time or the giving of notice, would constitute
an Event of Default, (g) the issuance of the shares in question (or, in the case
of a Company Optional Redemption or a Holder Optional Redemption, the shares
issuable upon conversion in full of the applicable Optional Redemption Amount)
to the Holder would comply with the limitations set forth in Section 4(c),
(h) there has been no public announcement of a pending or proposed Fundamental
Transaction or Change of Control Transaction that has not been consummated,
(i) the Holder is not in possession of any information provided by the Company
that constitutes, or may constitute, material non-public information and (j) for
each Trading Day in a period of 20 consecutive Trading Days prior to the
applicable date in question, the daily trading volume for the Common Stock on
the principal Trading Market exceeds 50,000 shares (subject to adjustment for
forward and reverse stock splits and the like) per Trading Day.
     “Event of Default” shall have the meaning set forth in Section 8(a).
     “Fundamental Transaction” shall have the meaning set forth in Section 5(e).
     “Holder Optional Redemption” shall have the meaning set forth in
Section 6(b).
     “Holder Optional Redemption Amount” means the sum of (a) 100% of the then
outstanding principal amount of the Debenture, (b) accrued but unpaid interest
in respect of the Debenture and (c) all liquidated damages and other amounts
due, if any, in respect of the Debenture.
     “Holder Optional Redemption Date” shall have the meaning set forth in
Section 6(b).
     “Holder Optional Redemption Notice” shall have the meaning set forth in
Section 6(b).

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     “Holder Optional Redemption Notice Date” shall have the meaning set forth
in Section 6(b).
     “Holder Optional Redemption Period” shall have the meaning set forth in
Section 6(b).
     “Interest Make-Whole” shall have the meaning set forth in Section 2(c).
     “Interest Payment Date” shall have the meaning set forth in Section 2(a).
     “Late Fees” shall have the meaning set forth in Section 2(e).
     “Make-Whole Measurement Period” shall have the meaning set forth in Section
2(d).
     “Mandatory Default Amount” means the sum of (a) the greater of (i) the
outstanding principal amount of this Debenture, plus all accrued and unpaid
interest hereon, divided by the Conversion Price on the date the Mandatory
Default Amount is either (A) demanded (if demand or notice is required to create
an Event of Default) or otherwise due or (B) paid in full, whichever results in
a lower Conversion Price, multiplied by the VWAP on the date the Mandatory
Default Amount is either (x) demanded or otherwise due or (y) paid in full,
whichever has a higher VWAP, or (ii) 100% of the outstanding principal amount of
this Debenture, plus 100% of accrued and unpaid interest hereon, (b) all other
amounts, costs, expenses and liquidated damages due in respect of this Debenture
and (c) any Interest Make-Whole.
     “New York Courts” shall have the meaning set forth in Section 9(c).
     “Notice of Conversion” shall have the meaning set forth in Section 4(a).
     “Original Issue Date” means June 18, 2008.
     “Permitted Indebtedness” means (a) the debt evidenced by the $150,000,000
Credit Facility pursuant to that certain Second Amended and Restated Credit
Agreement dated as of April 2, 2008 among the Company, JPMorgan Chase Bank,
N.A., as administrative agent (“JPMorgan”), and the lenders party thereto (the
“Credit Agreement”), as the same may be amended, transferred to other
institutional lenders or otherwise refinanced or restated, from time to time,
except that no such restatement, refinancing, or amendment shall (i) result in
the size of the Credit Facility being greater than $150,000,000 aggregate
principal amount (which amount shall include all fees and other amounts paid or
payable in connection with such restatement, refinancing, or amendment) or
(ii) without the consent of holders of at least 67% in principal amount of the
then outstanding Debentures, change the other terms of such Indebtedness from
such

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terms existing on the Original Issue Date so as to adversely affect in any
material respect the holders of the Debentures; (b) the indebtedness evidenced
by the Debentures; (c) the Indebtedness existing on the Original Issue Date and
set forth on Schedule 3.1(aa) attached to the Purchase Agreement, as the same
may be amended, transferred to other institutional lenders or otherwise
refinanced or restated, from time to time, except that no such restatement,
refinancing, or amendment shall (i) result in the principal amount of any such
Indebtedness (which amount shall include all fees and other amounts paid or
payable in connection with such restatement, refinancing, or amendment) being
greater than the principal amount thereof on the Original Issue Date or
(ii) without the consent of holders of at least 67% in principal amount of the
then-outstanding Debentures, change the other terms of such Indebtedness
(including without limitation with respect to liens, collateral, subordination,
average life, stated maturity and obligors) from the terms existing on the
Original Issue Date so as to adversely affect in any material respect the
holders of the Debentures; and (d) up to $30,000,000 of additional indebtedness
that is expressly subordinated to the Debentures pursuant to a written
Intercreditor Agreement with the Purchasers that is reasonably acceptable to the
holders of at least 67% in principal amount of the then-outstanding Debentures.
     “Permitted Lien” means the individual and collective reference to the
following: (a) Liens in connection with Permitted Indebtedness referred to in
clauses (a) and (c) of the definition of Permitted Indebtedness; (b) Liens for
taxes, assessments and other governmental charges or levies not yet due or Liens
for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; and (c) Liens imposed by law which were incurred in the
ordinary course of the Company’s or any Subsidiary’s business, such as
carriers,’ warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and
other similar Liens arising in the ordinary course of the Company’s or any
Subsidiary’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing for the
foreseeable future the forfeiture or sale of the property or asset subject to
such Lien.
     “Public Information Failure” shall have the meaning set forth in
Section 2(e).
     “Purchase Agreement” means the Securities Purchase Agreement, dated as of
June 9, 2008 among the Company and the original holders, as amended, modified or
supplemented from time to time in accordance with its terms.
     “Registration Rights Agreement” means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, among the Company and the
original Holders, as amended, modified or supplemented from time to time in
accordance with its terms.

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     “Registration Statement” means a registration statement under the
Securities Act that registers the resale of all Conversion Shares of the Holder,
names the Holder as a “selling stockholder” therein, contains a prospectus not
subject to any blackout, suspension or stop order, and otherwise meets the
requirements of the Registration Rights Agreement.
     “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
     “Share Delivery Date” shall have the meaning set forth in Section 4(d)(ii).
     “Subsidiary” shall have the meaning set forth in the Purchase Agreement.
     “Stock Price” shall have the meaning set forth in Section 5(f).
     “Trading Day” means any day on which the principal Trading Market is open
for business.
     “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
     “Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.
     “VWAP” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted for trading as reported by Bloomberg L.P.
(utilizing a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)); (b) if the Common Stock is not then listed or quoted on the
Trading Market, and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Company.
     Section 2. Interest.
     a) Payment. The Company shall pay interest to the Holder on the aggregate
unconverted and then-outstanding principal amount of this Debenture at the rate
of 10.75% per annum, payable semiannually on January 1 and July 1, in arrears,
beginning on January 1, 2009, on each Conversion Date (as to that principal
amount then being

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converted), on each Company Optional Redemption Date or Holder Optional
Redemption Date (as to that principal amount then being redeemed) and on the
Maturity Date (each such date, an “Interest Payment Date”) (if any Interest
Payment Date is not a Business Day, then the applicable payment shall be due on
the next succeeding Business Day), in cash. The regular record date for the
interest payable on any Interest Payment Date means the December 15 or June 15
(whether or not a trading day) next preceding such Interest Payment Date.
     b) Interest Calculations. Interest shall be calculated on the basis of a
360-day year, consisting of twelve 30 calendar-day periods and shall accrue
daily commencing on the Original Issue Date until payment in full of the
outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made.
Interest hereunder will be paid to the Person in whose name this Debenture is
registered on the records of the Company regarding registration and transfers of
this Debenture (the “Debenture Register”).
     c) Interest Make-Whole. Upon any conversion or redemption (other than
pursuant to a Holder Optional Redemption) of all or any portion of this
Debenture prior to the third anniversary of the Original Issue Date, the Holder
shall be entitled to receive the present value of all interest which would have
accrued on the principal amount being converted or redeemed after the date of
such conversion or redemption if no payment of such principal amount were made
prior to such third anniversary of the Original Issue Date, in cash (the
“Interest Make-Whole”). The present value of such future-accrued interest shall
be calculated by discounting in accordance with accepted financial practice all
such future-accruing interest on the principal amount being converted or
redeemed from their respective scheduled due dates to the date on which payment
on such principal is to be made by the yield-to-maturity interest rate for
United States Treasury bills of comparable maturity to the third anniversary of
the Original Issue Date as of the applicable conversion date or redemption date,
as applicable, as reported in The Wall Street Journal.
     d) Calculation of Interest Make-Whole Shares. Amounts due under Section
2(c) (other than in connection with the payment of any Change of Control
Redemption Price and any Mandatory Default Amount) may, at the option of the
Company, be made in registered shares of Common Stock of the Company upon
irrevocable notice to holders no less than two (2) trading days prior to the
start of the Make-Whole Measurement Period, subject to satisfaction of the
conditions in the immediately following sentence. Payment in shares of Common
Stock pursuant to this Section 2(d) may only occur if each of the Equity
Conditions shall have been met (unless waived in writing by the Holder) on each
Trading Day during the Make-Whole Measurement Period and through and including
the date such shares are issued to the Holder. When making any payment under
Section 2(c) using common stock of the Company, the value of each such share of
stock shall be determined based on ninety percent (90%) of the lower of the
(i) VWAP for such stock for the ten (10) Trading Days immediately prior to the
date such payment is due pursuant to Section 2(c) (“Make-Whole Measurement
Period”), and (ii) the closing price of the stock on the day immediately
preceding the conversion date or redemption date, as applicable; provided, that
until and unless the Company has received any

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approval of its stockholders required under Amex Rule 713 or any equivalent rule
of any other applicable Trading Market, the value of such shares used in such
determination may not be less than the closing price of the Common Stock on AMEX
or such other applicable Trading Market on the execution date of the Purchase
Agreement. In the event that the Company has not received the necessary approval
under AMEX Rule 713 or any equivalent rule of any other applicable Trading
Market, then such payment will be made in cash pursuant to Section 2(c).
     e) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee on such unpaid interest (and not on the entire principal
amount) at an interest rate equal to the lesser of 18% per annum or the maximum
rate permitted by applicable law (the “Late Fees”) which shall accrue daily from
the date such interest is due hereunder through and including the date of actual
payment in full. In addition, subject to Section 8, if the Company does not meet
the current public information requirements as in effect under Rule 144 as they
may exist from time to time in respect of the Conversion Shares and the Holder
cannot freely resell the Conversion Shares on a Trading Market pursuant to
Rule 144 for a period of 3 months (a “Public Information Failure”), then, as of
the first day following such Public Information Failure, interest on this
Debenture shall accrue at an interest rate equal to 12% per annum until such
date as the Company satisfies the current public information requirements under
Rule 144 such that the Holder is able to freely resell all the Conversion Shares
on a Trading Market.
     f) Prepayment. Except as otherwise set forth in this Debenture, the Company
may not prepay any portion of the principal amount of this Debenture without the
prior written consent of the Holder.
     Section 3. Registration of Transfers and Exchanges; Other Exchanges.
     a) Denominations. This Debenture will be issuable only in denominations of
$1,000 in principal amount and any integral multiple thereof. This Debenture is
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the same. No
service charge will be payable for such registration of transfer or exchange.
     b) Investment Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the
Purchase Agreement and may be transferred or exchanged only in compliance with
the Purchase Agreement and applicable federal and state securities laws and
regulations.
     c) Reliance on Debenture Register. Prior to due presentment for transfer to
the Company of this Debenture, the Company and any agent of the Company may
treat the Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.

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     Section 4. Conversion.
     a) Voluntary Conversion. At any time after the Original Issue Date until
this Debenture is no longer outstanding, the principal amount of this Debenture
shall be convertible, in whole or in part, into shares of Common Stock at the
option of the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(c) hereof). The Holder shall
effect conversions by delivering to the Company a Notice of Conversion, the form
of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and
the date on which such conversion shall be effected (such date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is deemed
delivered hereunder. To effect conversions hereunder, the Holder shall not be
required to physically surrender this Debenture to the Company unless the entire
principal amount of this Debenture has been so converted, and all accrued and
unpaid interest thereon has been paid. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Debenture in an
amount equal to the applicable conversion. The Holder and the Company shall
maintain records showing the principal amount(s) converted and the date of such
conversion(s). The Company may deliver a valid objection to any Notice of
Conversion promptly but in any event within 3 Business Days of delivery of such
Notice of Conversion. Absent manifest error, the Holder’s records showing the
principal amount(s) converted and the date of such conversion(s) shall be
determinative. The Holder, and any assignee by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture may be less than the amount stated on the
face hereof.
     b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $6.50, subject to adjustment herein (the “Conversion Price”).
     c) Conversion Limitations. The Company shall not effect any conversion of
this Debenture, and a Holder shall not have the right to convert any portion of
this Debenture, to the extent that after giving effect to the conversion set
forth on the applicable Notice of Conversion, the Holder (together with the
Holder’s Affiliates, and any other person or entity acting as a group together
with the Holder or any of the Holder’s Affiliates) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates shall include the number of shares of
Common Stock issuable upon conversion of this Debenture with respect to which
such determination is being made, but shall exclude the number of shares of
Common Stock which are issuable upon (A) conversion of the remaining,
unconverted principal amount of this Debenture beneficially owned by the Holder
or any of its Affiliates and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise

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analogous to the limitation contained herein (including, without limitation, any
other Debentures) beneficially owned by the Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this
Section 4(c), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this Section 4(c)
applies, the determination of whether this Debenture is convertible (in relation
to other securities owned by the Holder together with any Affiliates) and of
which principal amount of this Debenture is convertible shall be in the sole
discretion of the Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this Debenture may be
converted (in relation to other securities owned by the Holder together with any
Affiliates) and which principal amount of this Debenture is convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure compliance with
this restriction, the Holder will be deemed to represent to the Company each
time it delivers a Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 4(c), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (A) the Company’s most recent periodic or annual
report, as the case may be; (B) a more recent public announcement by the
Company; or (C) a more recent notice by the Company or the Company’s transfer
agent setting forth the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Debenture, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99%
of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon conversion of
this Debenture held by the Holder. The Holder, upon not less than 61 days’ prior
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 4(c), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Debenture held by the Holder and
the Beneficial Ownership Limitation provisions of this Section 4(c) shall
continue to apply. Any such increase or decrease will not be effective until the
61st day after such notice is delivered to the Company. The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this Section 4(c)
to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein
or to make changes or supplements necessary or desirable to

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properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Debenture.
     d) Mechanics of Conversion.
     i. Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion hereunder shall be equal
to the quotient obtained by dividing (x) the outstanding principal amount of
this Debenture to be converted by (y) the Conversion Price.
     ii. Delivery of Certificate Upon Conversion. Not later than three Trading
Days after each Conversion Date (the “Share Delivery Date”), the Company shall
deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the earlier
of (i) the six month anniversary of the Original Issue Date (unless the Holder
is then an Affiliate of the Company) and (ii) the Effective Date, shall be free
of restrictive legends and trading restrictions (other than those which may then
be required by the Purchase Agreement) representing the number of Conversion
Shares being acquired upon the conversion of this Debenture, (B) a bank check or
wire of immediately available funds, at the Company’s option, in the amount of
accrued and unpaid interest, and (C) as to Conversion Dates that occur prior to
the three year anniversary of the Original Issue Date, a bank check or wire
transfer in the amount equal to the Interest Make-Whole or a certificate or
certificates representing shares of the Company’s common stock calculated in
accordance with Section 2(d) with respect to the Interest Make-Whole. On or
after the earlier of (i) the six month anniversary of the Original Issue Date
and (ii) the Effective Date, the Company shall use its commercially reasonable
efforts to deliver any certificate or certificates required to be delivered by
the Company under this Section 4(d) electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.
     iii. Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed
by the applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled to elect by written notice to the Company at any time
on or before its receipt of such certificate or certificates, to rescind such
Notice of Conversion, in which event the Company shall promptly return to the
Holder any original Debenture delivered to the Company and the Holder shall
promptly return to the Company the Common Stock certificates representing the
principal amount of this Debenture unsuccessfully tendered for conversion to the
Company.
     iv. Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any

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waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery shall not operate as a
waiver by the Company of any such action the Company may have against the
Holder. In the event the Holder of this Debenture shall elect to convert any or
all of the outstanding principal amount hereof, the Company may not refuse
conversion based on any claim that the Holder or anyone associated or affiliated
with the Holder has been engaged in any violation of law, agreement or for any
other reason, unless an injunction from a court, on notice to Holder,
restraining and or enjoining conversion of all or part of this Debenture shall
have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the outstanding principal amount
of this Debenture, which is subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the underlying
dispute and the proceeds of which shall be payable to such Holder to the extent
it obtains judgment. In the absence of such injunction, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
If the Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being
converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such third Trading Day until such certificates are delivered. Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an Event
of Default pursuant to Section 8 hereof for the Company’s failure to deliver
Conversion Shares within the period specified herein and the Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
     v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(d)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder or its
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which the Holder
was entitled to receive

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upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any other remedies
available to or elected by the Holder) the amount by which (x) the Holder’s
total purchase price (including any brokerage commissions) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that the Holder was entitled to receive from the conversion at
issue multiplied by (2) the actual sale price at which the sell order giving
rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Debenture in a principal amount equal to the principal amount
of the attempted conversion or deliver to the Holder the number of shares of
Common Stock that would have been issued if the Company had timely complied with
its delivery requirements under Section 4(d)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of this Debenture with respect to
which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000
under clause (A) of the immediately preceding sentence, the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In
and, upon request of the Company, evidence of the amount of such loss. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
conversion of this Debenture as required pursuant to the terms hereof.
     vi. Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Debenture, as herein provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other than the Holder (and the
other holders of the Debentures), not less than such aggregate number of shares
of the Common Stock as shall (subject to the terms and conditions set forth in
the Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5) upon the conversion of the outstanding principal
amount of this Debenture. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid and nonassessable and, if the Registration Statement is then
effective under the Securities Act, shall be registered for public sale in
accordance with such Registration Statement.
     vii. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Debenture. As to
any fraction of a share which Holder would otherwise be entitled to purchase
upon

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such conversion, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Conversion Price or round up to the next whole share.
     viii. Transfer Taxes. The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that, the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder of this Debenture so converted and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
     Section 5. Certain Adjustments.
     a) Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company upon
conversion of the Debentures), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of a
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
     b) [RESERVED]
     c) Subsequent Rights Offerings. If the Company, at any time while the
Debenture is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share that is lower than the VWAP on the
record date referenced below, then the Conversion Price shall be multiplied by a
fraction the denominator of which shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common

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Stock offered for subscription or purchase underlying such rights or warrants,
and the numerator of which shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming delivery to the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such VWAP.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights, options or warrants.
     d) Pro Rata Distributions. If the Company, at any time while this Debenture
is outstanding, distributes to all holders of Common Stock (and not to the
Holders) evidences of its indebtedness or assets (including cash and periodic or
extraordinary cash dividends) or rights or warrants to subscribe for or purchase
any security, then in each such case the Conversion Price shall be adjusted by
multiplying such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction the denominator of which shall be the VWAP determined as of the
record date mentioned above, and the numerator of which shall be such VWAP on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
1 outstanding share of the Common Stock as determined by the Board of Directors
of the Company in good faith. In either case the adjustments shall be described
in a statement delivered to the Holder describing the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to 1 share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
     e) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of 1 share of
Common Stock (the “Alternate Consideration”). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one (1) share of Common Stock in
such Fundamental Transaction,

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and the Company shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this Debenture
following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new debenture
consistent with the foregoing provisions and evidencing the Holder’s right to
convert such debenture into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this Section 5(e) and insuring that this Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
     f) Change of Control Transaction. If the Fundamental Transaction is also a
Change of Control Transaction, then the Holder shall have the right to cause the
Company to redeem this Debenture or to have an adjustment of the Conversion
Price and/or Conversion Shares, as set forth below. No later than 20 Trading
Days prior to the consummation of a Change of Control (such date of consummation
of a Change of Control, the “Change of Control Date”), but not prior to the
public announcement of such Change of Control, the Company shall deliver written
notice thereof to the Holders (a “Change of Control Notice” and the date of such
Change of Control Notice, the “Change of Control Notice Date”). Such Change of
Control Notice shall state:
          (A) the events causing the Change of Control;
          (B) the Change of Control Date or anticipated Change of Control Date
of such Change of Control;
          (C) the purchase price and whether that price will be paid in cash,
shares of common stock, or a combination of cash and shares of common stock; and
          (D) if applicable, the expected determination of the adjustment to the
Conversion Price as set forth pursuant to Section 5(f)(ii) below.
          Simultaneously with the Change of Control Notice, the Company shall
issue a press release and timely file a Form 8-K containing the information
contained in the Change of Control Notice.
          (i) Change of Control Redemption. At any time during the period (the
“Change of Control Period”) beginning after a Holder’s receipt of a Change of
Control Notice and ending on the date that is five (5) Trading Days subsequent
to the Change of Control Date as set forth in the Change of Control Notice, such

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Holder may require the Company to redeem (a “Change of Control Redemption”) all
or any portion of such Holder’s Debenture by delivering written notice thereof
(“Change of Control Redemption Notice”) to the Company, which Change of Control
Redemption Notice shall indicate the principal amount the Holder is electing to
redeem. Any principal amount of the Debenture subject to redemption pursuant to
this Section 5(f) shall be redeemed by the Company in cash at a price equal to
the sum of 103% of the principal amount being redeemed together with 100% of any
accrued but unpaid interest thereon and the Interest Make-Whole, if any (the
“Change of Control Redemption Price”). The Company shall make payment of the
Change of Control Redemption Price concurrently with the consummation of such
Change of Control if such a Change of Control Redemption Notice is received
prior to the consummation of such Change of Control and within 5 Trading Days
after the Company’s receipt of such notice otherwise (the “Change of Control
Redemption Date”). Notwithstanding anything to the contrary in this
Section 5(f), until the Change of Control Redemption Price (together with any
interest thereon) is paid in full, the principal amount submitted for redemption
under this Section 5(f) may be converted, in whole or in part, by the Holder
into Conversion Shares, or in the event the Conversion Date is after the
consummation of the Change of Control, shares or equity interests of the
successor entity substantially equivalent to the Company’s Common Stock. The
parties hereto agree that in the event of the Company’s redemption of any
portion of the Debenture under this Section 5(f), the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 5(f) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty.
          (ii) Adjustment to Conversion Shares Upon a Change of Control.
               In connection with a Change of Control, the Company will increase
the number of Conversion Shares issuable upon conversion of the Debenture by a
number of additional shares (the “Additional Shares”) for each $1,000 principal
amount of Debenture when converted as described in this Section 5(f)(ii);
provided that (A) such increase in Conversion Shares shall not take place if
such Change of Control is not consummated and (B) the Company shall issue
Conversion Shares (without such increase) on or prior to the fifth (5th) Trading
Day following the Conversion Date and the Additional Shares described in
Section 5(f)(iii) hereof will be issued after the later to occur of (x) the
fifth (5th) Trading Day following the Change of Control Date and (y) the fifth
(5th) Trading Day following the relevant Conversion Date. On and after the
Change of Control Date, Holders entitled to receive Additional Shares pursuant
to this Section 5(f)(ii) shall receive the kind and amount of securities (of the
Company or another issuer), cash and other property receivable upon such Change
of Control by a

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holder of the number of shares of Common Stock into which this Debenture was
convertible immediately prior to such Change of Control, after giving effect to
any adjustment event, based on the number of Additional Shares set forth above.
               The number of Additional Shares will be determined by reference
to the table below, based on the Change of Control Date and the price of the
Common Stock (the “Stock Price”). If the consideration for the Common Stock
consists solely of cash, then the Stock Price will be the cash amount paid per
share of the Common Stock. Otherwise, the Stock Price will be the average of the
VWAPs for the 5 consecutive Trading Days immediately preceding the Change of
Control Date.
               The following table sets forth the number of Additional Shares
per $1,000 principal amount of Debenture to be added to the Conversion Shares
issuable in connection with the Change of Control referred to in
Section 5(f)(i):

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Number of Additional Shares

                                                                               
      Stock Price           $5.47   $6.00   $6.50   $7.00   $7.50   $8.00  
$8.50   $9.00   $9.50   $10.00 Additional Shares                                
                                                 
Pricing Date
    28.9710       24.3770       21.0950       18.3340       15.9470      
13.8590       12.0170       10.3810       8.9190       7.6070  
Pricing Date + 1 Year
    28.9710       18.2100       15.6260       13.6360       11.9350      
10.4480       9.1360       7.9690       6.9260       5.9870  
Pricing Date + 2 Years
    28.9710       15.5710       8.7830       7.6080       6.6950       5.8990  
    5.1960       4.5720       4.0140       3.5110  
Pricing Date + 3 Years
    28.9710       12.8210       4.3915       3.8040       3.3475       2.9495  
    2.5980       2.2860       2.0070       1.7555  

          The Stock Prices set forth in the table will be adjusted as of any
date on which the Conversion Price is adjusted. The adjusted Stock Prices will
equal the Stock Prices applicable immediately prior to the adjustment divided by
a fraction, the numerator of which is the Conversion Price immediately prior to
the adjustment to the Conversion Price and the denominator of which is the
Conversion Price as so adjusted.
          The exact Stock Price and Change of Control Date may not be set forth
in the table, in which case:
     (A) if the Stock Price is between two Stock Prices in the table or the
Change of Control Date is between two Change of Control Dates in the table, the
number of Additional Shares will be determined by straight-line interpolation
between the Additional Share amounts set forth for the higher and lower Stock
Prices and the two Change of Control Dates, as applicable, based on a 365-day
year;
     (B) if the Stock Price is in excess of $10.00 per share (subject to
adjustment in the same manner as the Stock Price), no Additional Shares will be
added to the Conversion Shares; and
     (C) if the Stock Price is less than or equal to $5.47 per share (subject to
adjustment in the same manner as the Stock Price), no Additional Shares will be
added to the Conversion Shares.
     g) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding

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as of a given date shall be the sum of the number of shares of Common Stock
(excluding any treasury shares of the Company) issued and outstanding.
     h) Notice to the Holder.
     i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
     ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare
a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, (E) the Company shall be
subject to a Fundamental Transaction or a Change of Control Transaction, or
(F) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the
Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of this Debenture, and shall cause to be delivered to the
Holder at its last address as it shall appear upon the Debenture Register, at
least twenty (20) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. The Holder is entitled
to convert this Debenture during the 20-day period commencing on the date of
such notice through the effective date of the event triggering such notice.
     Section 6. Redemption.

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     a) Optional Redemption at Election of Company. Subject to the provisions of
this Section 6(a), at any time after the 2-year anniversary of the Original
Issue Date, provided that the VWAP of the Common Stock has been at least 150% of
the Conversion Price for any 20 out of 30 consecutive Trading Days, such 30
consecutive Trading Day period beginning only after the 2-year anniversary of
the Original Issue Date, then, within 1 Trading Day of the end of such period,
the Company may deliver a notice to the Holder (a “Company Optional Redemption
Notice” and the date such notice is deemed delivered hereunder, the “Company
Optional Redemption Notice Date”) of its irrevocable election to redeem some or
all of the then-outstanding principal amount of this Debenture for cash in an
amount equal to the Company Optional Redemption Amount on the 20th Trading Day
following the Company Optional Redemption Notice Date (such date, the “Company
Optional Redemption Date”, such 20 Trading Day period, the “Company Optional
Redemption Period” and such redemption, the “Company Optional Redemption”). The
Company Optional Redemption Amount is payable in full on the Company Optional
Redemption Date. The Company may only effect a Company Optional Redemption if
each of the Equity Conditions shall have been met (unless waived in writing by
the Holder) on each Trading Day during the period commencing on the Company
Optional Redemption Notice Date through to the Company Optional Redemption Date
and through and including the date payment of the Company Optional Redemption
Amount is actually made in full. If any of the Equity Conditions shall cease to
be satisfied at any time during the Company Optional Redemption Period through
to the Company Optional Redemption Date and through and including the date
payment of the Company Optional Redemption Amount is actually made in full, then
the Holder may elect to nullify the Company Optional Redemption Notice by notice
to the Company within 3 Trading Days after it receives written notice from the
Company that any such Equity Condition has not been met, in which case the
Company Optional Redemption Notice shall be null and void, ab initio. The
Company covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Company Optional Redemption Notice
through the date all amounts owing thereon are due and paid in full. The
Company’s determination to effect a Company Optional Redemption shall be applied
ratably to all of the holders of the then-outstanding Debentures.
     b) Optional Redemption at Election of Holder. Subject to the provisions of
this Section 6(b), at any time prior to the three month anniversary of the
Original Issue Date, the Holder may deliver a notice to the Company (a “Holder
Optional Redemption Notice” and the date such notice is deemed delivered
hereunder, the “Holder Optional Redemption Notice Date”) of its election to
require the Company redeem for cash the product of (a) up to 25% of the original
face principal amount of this Debenture and (b) an amount equal to the Holder
Optional Redemption Amount on the 20th Trading Day following the Holder Optional
Redemption Notice Date (such date, the “Holder Optional Redemption Date”, such
20 Trading Day period, the “Holder Optional Redemption Period” and such
redemption, the “Holder Optional Redemption”). The Holder Optional Redemption
Amount is payable in full on the Holder Optional Redemption Date. The

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Company covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Holder Optional Redemption Notice
through the date all amounts owing thereon are due and paid in full.
     c) Redemption Procedure. The payment of cash or issuance of Common Stock,
as applicable, pursuant to a Company Optional Redemption or a Holder Optional
Redemption shall be payable on the Company Optional Redemption Date or the
Holder Optional Redemption Date, as applicable. If any portion of the payment
pursuant to an Optional Redemption shall not be paid by the Company by the
applicable due date, interest shall accrue thereon at an interest rate equal to
the lesser of 18% per annum or the maximum rate permitted by applicable law
until such amount is paid in full. Notwithstanding anything herein contained to
the contrary, if any portion of the Company Optional Redemption Amount or the
Holder Optional Redemption Amount remains unpaid after such date, the Holder may
elect, by written notice to the Company given at any time thereafter, to
invalidate such Optional Redemption, ab initio, and, with respect to the
Company’s failure to honor the Optional Redemption, the Company shall have no
further right to exercise such Optional Redemption. The Holder may elect to
convert the outstanding principal amount of the Debenture pursuant to Section 4
prior to actual payment in cash for any redemption under this Section 6 by the
delivery of a Notice of Conversion to the Company. Upon completion of any
redemption provided for under this Section 6, the Company will promptly and in
no event later than four (4) Business Days file a Current Report on Form 8-K
disclosing the material details of such redemption.
     Section 7. Negative Covenants. As long as any portion of this Debenture
remains outstanding, unless the holders of at least 67% in principal amount of
the then-outstanding Debentures shall have otherwise given prior written
consent, the Company shall not, and shall not permit any of its subsidiaries
(whether or not a Subsidiary on the Original Issue Date) to, directly or
indirectly:
     a) other than Permitted Indebtedness and except as provided in the Credit
Agreement, enter into, create, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money of any kind, including, but not limited to, a
guarantee, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;
provided, that, any such additional Indebtedness effected through the Credit
Agreement, when combined with other existing Indebtedness of the Credit
Agreement, shall not exceed $150,000,000 in aggregate principal amount;
     b) other than Permitted Liens and except as provided in the Credit
Agreement, enter into, create, incur, assume or suffer to exist any Liens of any
kind, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom; provided,
that, any such additional Liens effected through the Credit Agreement, when
combined with other existing Liens

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under the Credit Agreement, shall not secure Indebtedness with an aggregate
principal amount in excess of $150,000,000;
     c) amend its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;
     d) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than an amount of shares of its Common Stock or Common Stock Equivalents
equal to $200,000, other than as to (i) the Conversion Shares as permitted or
required under the Transaction Documents and (ii) repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the Company,
provided that such repurchases shall not exceed an aggregate of $100,000 for all
officers and directors during the term of this Debenture;
     e) repay, repurchase or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than (i) the Debentures if on a pro-rata basis or
(ii) regularly scheduled principal and interest payments as such terms are in
effect as of the Original Issue Date, provided that such payments shall not be
permitted if, at such time, or after giving effect to such payment, any Event of
Default exists or occurs (unless such payments are required to be made under the
Credit Agreement and are permitted to be made under the Intercreditor and
Subordination Agreement);
     f) pay cash dividends or distributions on any equity securities of the
Company;
     g) enter into any transaction with any Affiliate of the Company which would
be required to be disclosed in any public filing with the Commission, unless
such transaction is otherwise permitted under the Transaction Documents and are
upon fair and reasonable terms no less favorable to it than it would obtain in a
comparable arm’s-length transaction with a Person not an Affiliate; or
     h) enter into any agreement with respect to any of the foregoing.
     Section 8. Events of Default.
     a) “Event of Default” means, wherever used herein, any of the following
events (whatever the reason for such event and whether such event shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
     i. any default in the payment of (A) the principal amount of any Debenture
or (B) interest, liquidated damages other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on

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a Conversion Date, any redemption date or the Maturity Date or by acceleration
or otherwise);
     ii. the Company or any Guarantor shall fail to observe or perform any other
covenant or agreement contained in the Debentures (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the Holder upon
conversion, which breach is addressed in clause (x) below) which failure is not
cured, if possible to cure, within 10 Trading Days after the earlier of (A) the
Company’s becoming aware of such failure and (B) notice of such failure sent by
the Holder or by any other Holder to the Company;
     iii. the Company shall fail to observe or perform any covenants or
agreements contained in Section 4.6, 4.7, 4.9, 4.10, 4.12, 4.13 and 4.17 of the
Purchase Agreement, which failure is not cured, if possible to cure, within 10
Trading Days after the earlier of (A) the Company’s becoming aware of such
failure and (B) notice of such failure sent by the Holder or by any other Holder
to the Company;
     iv. any representation or warranty made by the Company in the Debenture or
in Section 3.1(c), (d), (f), or (g) in the Purchase Agreement shall be untrue or
incorrect in any material respect as of the date when made or deemed made;
     v. a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents (other than another Debenture) or any of
the Security Documents, or (B) under the documents governing any Permitted
Indebtedness or any other material agreement, lease, document or instrument to
which the Company or any Subsidiary is obligated;
     vi. the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
     vii. the Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement that (a) involves
an obligation the greater of $1,000,000 or five percent (5%) of the
then-effective Conforming Borrowing Base, as defined in the Credit Agreement,
whether such indebtedness now exists or shall hereafter be

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created, and (b) results in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;
     viii. the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within 10 Trading Days;
     ix. if the Company does not meet the current public information
requirements as in effect under Rule 144 as they may exist from time to time in
respect of the Conversion Shares and the Holder cannot freely resell the
Conversion Shares on a Trading Market pursuant to Rule 144 for a period of
3 months;
     x. the Company shall fail for any reason to deliver certificates to a
Holder prior to the seventh Trading Day after a Conversion Date pursuant to
Section 4(d) or the Company shall provide at any time notice to the Holder,
including by way of public announcement, of the Company’s intention to not honor
requests for conversions of any Debentures in accordance with the terms hereof;
     xi. any monetary judgment, writ or similar final process shall be entered
or filed against the Company, any Subsidiary or any of their respective property
or other assets for more than the greater of $1,000,000 or five percent (5%) of
the then-effective Conforming Borrowing Base as defined in the Credit Agreement,
and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 60 calendar days;
     xii. if any of the Security Documents ceases to be in full force and effect
(including failure to create a valid and perfected second priority lien on and
security interest in all the Collateral (as defined in the Security Documents)
at any time for any reason; and
     xiii. any Guarantee (as such term is defined in the Indenture) ceases to
be, or shall be asserted in writing by any Guarantor (as such term is defined in
the Security Agreement), or any Person acting on behalf of any Guarantor, not to
be, in full force and effect or enforceable in accordance with its terms (other
than in accordance with the terms of the Indenture or any such Guarantee).
     b) Remedies Upon Event of Default. If any Event of Default occurs (other
than an Event of Default specified in Section 8(a)(vi)), the outstanding
principal amount of the Debentures, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of
acceleration, shall become, at the

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election of Holders of at least 51% in aggregate principal amount of the
Debentures, immediately due and payable in cash at the Mandatory Default Amount.
Such declaration may be made by the Holders of at least 51% in aggregate
principal amount of the Debentures by written notice to the Company. If an Event
of Default specified in Section 8(a)(vi) occurs and is continuing, the principal
of and interest on all the Debentures shall ipso facto become immediately due
and payable without any other act on the part of any Holder. Commencing upon the
occurrence of any Event of Default the interest rate on the Debentures shall
accrue at an interest rate equal to the lesser of 18% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holders shall promptly surrender the Debentures to or as
directed by the Company. In connection with such acceleration described herein,
the Holders need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holders may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by the Holders at any time prior
to payment hereunder and the Holders shall have all rights as a holder of the
Debentures until such time, if any, as the Holders receive full payment pursuant
to this Section 8(b). No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
     Section 9. Miscellaneous.
     a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to the Company,
at the address set forth above, or such other facsimile number or address as the
Company may specify for such purpose by notice to the Holder delivered in
accordance with this Section 9(a). Any and all notices or other communications
or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
the Holder appearing on the books of the Company, or if no such facsimile number
or address appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified on
the signature page prior to 5:30 p.m. (New York City time), (ii) the date
immediately following the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified on the signature
page between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time)
on any date, (iii) the second Business Day following the date of mailing, if
sent by nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given.

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     b) Absolute Obligation. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other
Debentures now or hereafter issued under the terms set forth herein.
     c) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof. Each party
agrees that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by applicable
law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Debenture or the transactions
contemplated hereby. If either party shall commence an action or proceeding to
enforce any provisions of this Debenture, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.
     d) Waiver and Amendment. No provision of this Debenture may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Holder, except that Section 7
hereof may be waived or amended with the prior written consent of the holders of
at least 67% of the principal amount of Debentures then outstanding (provided
that any Debentures held by the Company and its Affiliates shall be deemed not
to be outstanding for this purpose and no consideration shall be offered or paid
to any holder of Debentures to consent to any such amendment or waiver unless
the same consideration is offered to all holders of the

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Debentures). Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver by
the Company or the Holder must be in writing.
     e) Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
     f) Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.
     g) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect
any of the provisions hereof.
     h) Assumption. Any successor to the Company or any surviving entity in a
Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction,
all of the obligations of the Company under this Debenture and the other
Transaction Documents pursuant to written agreements in form and substance
satisfactory to the Holder (such approval not to be unreasonably withheld or
delayed) and (ii) issue to the Holder a new debenture of such successor entity
evidenced by a written instrument substantially similar in form and substance to
this Debenture, including, without limitation, having a principal amount and
interest rate equal to the principal amount and the interest rate of this
Debenture and having similar ranking to this Debenture, which shall be
satisfactory to the Holder (any such approval not to be unreasonably withheld or
delayed). The provisions of this Section 9(i) shall apply similarly and equally
to

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successive Fundamental Transactions and shall be applied without regard to any
limitations of this Debenture.
     i) Secured Obligation. The obligations of the Company under this Debenture
are secured pursuant to the Security Agreement and the Mortgages between the
Company, the Subsidiaries and the Secured Parties (as defined therein) granting
a second lien on all those assets of the Company and each Subsidiary, with
respect to which JP Morgan has a first lien pursuant to the Credit Agreement.
*********************
(Signature Pages Follow)

B-35

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     IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.

            TETON ENERGY CORPORATION
      By:           Name:   Lonnie R. Brock        Title:   Executive Vice
President and Chief Financial Officer
Facsimile No. for delivery of Notices: (303) 565-4606   

B-36

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ANNEX A
NOTICE OF CONVERSION
     The undersigned hereby elects to convert principal under the 10.75% Secured
Convertible Debenture due June 18, 2013 of Teton Energy Corporation, a Delaware
corporation (the “Company”), into shares of common stock (the “Common Stock”),
of the Company according to the conditions hereof, as of the date written below.
If shares of Common Stock are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
     By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4 of this Debenture, as determined in
accordance with Section 13(d) of the Exchange Act.
     The undersigned agrees to comply with the prospectus delivery requirements
under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.
Conversion calculations:
     Date to Effect Conversion:
                                                            .
     Principal Amount of Debenture to be Converted (must be $1,000 principal
amount or an integral multiple of $1,000 principal amount):
$                                        .
     Number of shares of Common Stock to be issued:
                                        .
     Your Signature:

Sign exactly as your name appears on the other side of this Debenture
     Date:                                         
     Medallion Signature Guarantee*:                                
                                                                          
 

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

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Address for Delivery of Common Stock
Certificates:                                                               
                   
                                                                                
                                           . OR
DWAC Instructions:

     
Broker No:                                                                      
     
  Account No:                                                                   
       

B-38

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Schedule 1
CONVERSION SCHEDULE
     The 10.75% Secured Subordinated Convertible Debentures due on June 18, 2013
in the aggregate principal amount of $40,000,000 are issued by Teton Energy
Corporation, a Delaware corporation. This Conversion Schedule reflects
conversions made under Section 4 of the above-referenced Debenture.
Dated:                                         

                      Aggregate Principal             Amount Remaining     Date
of Conversion       Subsequent to     (or for first       Conversion(or    
entry, Original       original Principal     Issue Date)   Amount of Conversion
  Amount)   Company Attest

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SCHEDULE OF EXCHANGES OF DEBENTURES
The following exchanges of a part of this Global Debenture for an interest in
another Global Debenture or for Debentures in certificated form, have been made:

                  Date of Exchange   Amount of decrease
in Principal Amount
of this Global
Debenture   Amount of Increase
in Principal Amount
of this Global
Debenture   Principal Amount of
this Global
Debenture following
such decrease or
increase   Signature or
authorized
signatory of
Trustee                  

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ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
     (I) or (we) assign and transfer this Debenture to:
                                                                             
                                              
(Insert assignee’s social security or tax I.D. no.)
                                                                          
                                              
                                            
                                                                             
                                       
                                          
                                       
(Print or type assignee’s name, address and zip code)
and irrevocably appoint
                                                                                
agent to transfer this Debenture 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 Debenture
     Date:                                         
     Medallion Signature Guarantee:                                
                                                                          
Other than pursuant to the sale or transfer of the Debenture under an effective
Registration Statement filed in connection with the Registration Rights
Agreement, dated as of June 9, 2008, between the Company and the purchasers
named therein, in connection with any transfer of any of the Debentures
evidenced by this certificate which are “restricted securities” (as defined in
Rule 144 (or any successor thereto) under the Securities Act), the undersigned
confirms that the Debentures are being transferred to a Person that is not an
Affiliate of the Company and:
CHECK ONE BOX BELOW:

  (1) o to the Company; or     (2) o pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or     (3) o pursuant to and in
compliance with Regulation S under the Securities Act of 1933; or     (4) o
pursuant to an exemption from registration under the Securities Act of 1933
provided by Rule 144 thereunder.

Unless one of the boxes is checked, the Registrar will refuse to register any of
the Debentures evidenced by this certificate in the name of any Person other
than the registered holder thereof; provided, however, that if box (3) or (4) is
checked, the Trustee may require, prior to registering

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any such transfer of the Debentures, such certifications and other information,
and if box (4) is checked such legal opinions, as the Company has reasonably
requested in writing, by delivery to the Trustee of a standing letter of
instruction, to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933; provided that this paragraph shall
not be applicable to any Debentures which are not “restricted securities” (as
defined in Rule 144 (or any successor thereto) under the Securities Act).
     Your Signature:

(Sign exactly as your name appears on the other side of this Debenture)
     Date:                                         
     Medallion Signature Guarantee:                                
                                                                          

B-42

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EXHIBIT C
Global Debenture Legend
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS DEBENTURE FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY THE AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OR DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED DEBENTURES
IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL DEBENTURE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OR SUCH SUCCESSOR
DEPOSITORY.
Restricted Debenture Legend
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.

C-1

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Restricted Common Stock Legend
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

C-2

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EXHIBIT D
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
     (I) or (we) assign and transfer this Debenture to:
                                                                               
                                            
(Insert assignee’s social security or tax I.D. no.)
                                                                             
                                            
                                                                                
                                           
                                                                            
                                               
(Print or type assignee’s name, address and zip code)
and irrevocably appoint
                                                             agent to transfer
this Debenture 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 Debenture
     Date:                                         
     Medallion Signature Guarantee:                                
                                                                          
Other than pursuant to the sale or transfer of the Debenture under an effective
Registration Statement filed in connection with the Registration Rights
Agreement, dated as of June 9, 2008, between the Company and the purchasers
named therein, in connection with any transfer of any of the Debentures
evidenced by this certificate which are “restricted securities” (as defined in
Rule 144 (or any successor thereto) under the Securities Act), the undersigned
confirms that the Debentures are being transferred to a Person that is not an
Affiliate of the Company and:
CHECK ONE BOX BELOW:

  (1) o to the Company; or     (2) o pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or     (3) o pursuant to and in
compliance with Regulation S under the Securities Act of 1933; or     (4) o
pursuant to an exemption from registration under the Securities Act of 1933
provided by Rule 144 thereunder.

Unless one of the boxes is checked, the Registrar will refuse to register any of
the Debentures evidenced by this certificate in the name of any Person other
than the registered holder thereof;

D-1

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provided, however, that if box (3) or (4) is checked, the Trustee may require,
prior to registering any such transfer of the Debentures, such certifications
and other information, and if box (4) is checked such legal opinions, as the
Company has reasonably requested in writing, by delivery to the Trustee of a
standing letter of instruction, to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933; provided that this
paragraph shall not be applicable to any Debentures which are not “restricted
securities” (as defined in Rule 144 (or any successor thereto) under the
Securities Act).
     Your Signature:

(Sign exactly as your name appears on the other side of this Debenture)
     Date:                                         
     Medallion Signature Guarantee:                                
                                                                          

D-2