Exhibit 10.02

 

LESLIE’S POOLMART, INC.,

as Issuer,

 

and

 

THE BANK OF NEW YORK TRUST COMPANY, N.A.,

as Trustee

 

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INDENTURE

 

Dated as of January 25, 2005

 

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7 3/4% Senior Notes due 2013

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TABLE OF CONTENTS

 

ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE

   1

Section 1.01

   Definitions.    1

Section 1.02

   Incorporation by Reference of TIA.    20

Section 1.03

   Rules of Construction.    20 ARTICLE TWO THE SECURITIES    21

Section 2.01

   Form and Dating.    21

Section 2.02

   Execution and Authentication.    21

Section 2.03

   Registrar and Paying Agent    22

Section 2.04

   Paying Agent to Hold Assets in Trust.    23

Section 2.05

   Securityholder Lists    23

Section 2.06

   Transfer and Exchange.    23

Section 2.07

   Replacement Securities.    24

Section 2.08

   Outstanding Securities    24

Section 2.09

   Treasury Securities.    25

Section 2.10

   Temporary Securities.    25

Section 2.11

   Cancellation.    25

Section 2.12

   Defaulted Interest.    25

Section 2.13

   CUSIP Number.    26

Section 2.14

   Deposit of Moneys.    26

Section 2.15

   Book-Entry Provisions for Global Securities.    26

Section 2.16

   Obligation of Trustee.    28

Section 2.17

   Registration of Transfers and Exchanges.    28

Section 2.18

   Designation.    33

Section 2.19

   Additional Interest Under Registration Rights Agreements    33 ARTICLE THREE
REDEMPTION    33

Section 3.01

   Notices to Trustee    33

Section 3.02

   Selection of Securities to be Redeemed.    33

Section 3.03

   Notice of Redemption.    34

Section 3.04

   Effect of Notice of Redemption.    35

Section 3.05

   Deposit of Redemption Price.    35

Section 3.06

   Securities Redeemed in Part    35

Section 3.07

   Optional Redemption After Four Years.    35

Section 3.08

   Optional Redemption with Proceeds of Equity Offering    36

Section 3.09

   Optional Redemption with Make-Whole Premium    36 ARTICLE FOUR COVENANTS   
36

Section 4.01

   Payment of Securities.    36

Section 4.02

   Maintenance of Office or Agency.    37

Section 4.03

   Limitation on Restricted Payments.    37

Section 4.04

   Limitation on Incurrence of Additional Indebtedness    39

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Section 4.05

   Corporate Existence.    40

Section 4.06

   Payment of Taxes and Other Claims.    40

Section 4.07

   Maintenance of Properties and Insurance.    40

Section 4.08

   Compliance Certificate; Notice of Default    41

Section 4.09

   Compliance with Laws.    41

Section 4.10

   Commission Reports.    42

Section 4.11

   Waiver of Stay; Extension of Usury Laws.    42

Section 4.12

   Limitation on Transactions with Affiliates.    43

Section 4.13

   Conduct of Business.    43

Section 4.14

   Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries.
   44

Section 4.15

   Limitation on Liens.    44

Section 4.16

   Change of Control.    45

Section 4.17

   Limitation on Asset Sales    47

Section 4.18

   Limitation on Preferred Stock of Subsidiaries.    50

Section 4.19

   Limitation on Guarantees.    50

Section 4.20

   Payments for Consent    50 ARTICLE FIVE SUCCESSOR CORPORATION    50

Section 5.01

   Merger, Consolidation and Sale of Assets.    50

Section 5.02

   Successor Corporation Substituted    51 ARTICLE SIX DEFAULT AND REMEDIES   
52

Section 6.01

   Events of Default.    52

Section 6.02

   Acceleration    53

Section 6.03

   Other Remedies.    54

Section 6.04

   Waiver of Past Defaults    54

Section 6.05

   Control by Majority.    54

Section 6.06

   Limitation on Suits.    55

Section 6.07

   Rights of Holders to Receive Payment.    55

Section 6.08

   Collection Suit by Trustee.    55

Section 6.09

   Trustee May File Proofs of Claim.    56

Section 6.10

   Priorities.    56

Section 6.11

   Undertaking for Costs.    56 ARTICLE SEVEN TRUSTEE    57

Section 7.01

   Duties of Trustee.    57

Section 7.02

   Rights of Trustee.    58

Section 7.03

   Individual Rights of Trustee.    59

Section 7.04

   Trustee’s Disclaimer.    60

Section 7.05

   Notice of Default.    60

Section 7.06

   Request by Trustee to Holders.    60

Section 7.07

   Compensation and Indemnity    60

Section 7.08

   Replacement of Trustee.    61

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Section 7.09

   Successor Trustee by Mergers Etc.    62

Section 7.10

   Eligibility; Disqualification.    63

Section 7.11

   Preferential Collection of Claims Against Company    63

ARTICLE EIGHT SATISFACTION AND DISCHARGE OF INDENTURE

   63

Section 8.01

   Legal Defeasance and Covenant Defeasance.    63

Section 8.02

   Satisfaction and Discharge.    66

Section 8.03

   Survival of Certain Obligations    67

Section 8.04

   Acknowledgment of Discharge by Trustee.    67

Section 8.05

   Application of Trust Assets.    67

Section 8.06

   Repayment to the Company; Unclaimed Money.    67

Section 8.07

   Reinstatement.    68 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS    68

Section 9.01

   Without Consent of Holders.    68

Section 9.02

   With Consent of Holders.    69

Section 9.03

   Compliance with TIA.    70

Section 9.04

   Revocation and Effect of Consents.    70

Section 9.05

   Notation on or Exchange of Securities.    71

Section 9.06

   Trustee To Sign Amendments, Etc.    71 ARTICLE TEN MISCELLANEOUS    72

Section 10.01

   TIA Controls.    72

Section 10.02

   Notices.    72

Section 10.03

   Communications by Holders with Other Holders.    73

Section 10.04

   Certificate and Opinion as to Conditions Precedent.    73

Section 10.05

   Statements Required in Certificate or Opinion.    73

Section 10.06

   Rules by Trustee, Paying Agent, Registrar.    74

Section 10.07

   Legal Holidays.    74

Section 10.08

   Governing Law; Waiver of Jury Trial.    74

Section 10.09

   No Adverse Interpretation of Other Agreements.    74

Section 10.10

   No Recourse Against Others.    75

Section 10.11

   Successors.    75

Section 10.12

   Duplicate Originals.    75

Section 10.13

   Severability    75

 

Exhibit A Form of Series A Security

   A-1

Exhibit B Form of Series B Security

   B-1

Exhibit C Form of Legend for Global Securities

   C-1

Exhibit D Certificate to be Delivered upon Exchange or Registration of Transfer
of Securities

   D-1

 

3

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Exhibit E Form of Certificate to be Delivered in Connection with Transfers to
Institutional Accredited Investors

   E-1

Exhibit F Form of Certificate to be Delivered in Connection with Regulation S
Transfers

   F-1

Exhibit G Form of Certificate to be Delivered in Connection with Certain Rule
144A Transfers

   G-1

 

NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.

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Cross-Reference Table

 

   

TIA Section

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Indenture Section

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310

 

(a)(1)

   7.10    

(a)(2)

   7.10    

(a)(3)

   N.A.    

(a)(4)

   N.A.    

(a)(5)

   7.08; 7.10    

(b)

   7.08; 7.10; 10.02    

(c)

   N.A.

311

 

(a)

   7.11    

(b)

   7.11    

(c)

   N.A.

312

 

(a)

   2.05    

(b)

   10.03    

(c)

   10.03

313

 

(a)

   7.06    

(b)(1)

   7.06    

(b)(2)

   7.06    

(c)

   7.06; 10.02    

(d)

   7.06

314

 

(a)

   4.08; 4.10; 10.02    

(b)

   N.A.    

(c)(1)

   7.02; 10.04; 10.05    

(c)(2)

   7.02; 10.04; 10.05    

(c)(3)

   N.A.    

(d)

   N.A.    

(e)

   10.05    

(f)

   N.A.

315

 

(a)

   7.01(b); 7.02    

(b)

   7.05; 10.02    

(c)

   7.01    

(d)

   6.05; 7.01(c); 7.02    

(e)

   6.11

316

 

(a) (last sentence)

   2.09    

(a)(1)(A)

   6.05    

(a)(1)(B)

   6.04    

(a)(2)

   9.02    

(b)

   6.07

317

 

(a)(1)

   6.08    

(a)(2)

   6.09    

(b)

   2.04

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Cross-Reference Table

(Continued)

 

   

TIA Section

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Indenture Section

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318

 

(a)

   10.01    

(c)

   10.01

 

N.A. means Not Applicable.

 

NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.

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INDENTURE dated as of January 25, 2005 between LESLIE’S POOLMART, INC., a
Delaware corporation (the “Company”), as Issuer and THE BANK OF NEW YORK TRUST
COMPANY, N.A., a national banking association, as Trustee (the “Trustee”).

 

The Company has duly authorized the creation of an issue of 7 3/4% Senior Notes
due 2013 Series A, and an issue of 7 3/4% Senior Notes due 2013, Series B, to be
issued in exchange for the 7 3/4% Senior Notes due 2013, Series A, pursuant to a
Registration Rights Agreement and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary to
make the Securities, when duly issued and executed by the Company and
authenticated and delivered hereunder, the valid and binding obligations of the
Company and to make this Indenture a valid and binding agreement of the Company
have been done.

 

Each party hereto agrees as follows for the benefit of each other party and for
the equal and ratable benefit of the Holders of the Securities:

 

ARTICLE ONE

 

DEFINITIONS AND INCORPORATION BY REFERENCE

 

Section 1.01 Definitions.

 

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

 

“Adjusted Treasury Rate” means, with respect to any Redemption Date, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.

 

“Additional Interest” has the meaning set forth in the Registration Rights
Agreements.

 

“Affiliate” means, with respect to any specified Person, any other Person who
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms “controlling” and “controlled” have meanings correlative of the foregoing.

 

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“Affiliate Transaction” has the meaning set forth in Section 4.12.

 

“Agent” means any Registrar, Paying Agent or Co-Registrar.

 

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

 

“Asset Sale” means: (i) any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Subsidiaries (including any Sale and Leaseback Transaction) to any Person
other than the Company or a Subsidiary of the Company (including a Person that
is or will become a Subsidiary of the Company immediately after such sale,
issuance, conveyance, transfer, lease, assignment or other transfer for value)
of (a) any Capital Stock of any Subsidiary of the Company; or (b) any other
property or assets of the Company or any Subsidiary of the Company other than in
the ordinary course of business; notwithstanding the preceding, Asset Sales
shall not include (i) a transaction or series of related transactions for which
the Company or its Subsidiaries receive aggregate consideration of less than
$1,000,000 and (ii) the sale, lease, conveyance, disposition or other transfer
of all or substantially all of the assets of the Company as permitted under
Article Five.

 

“Bankruptcy Law” means Title 11, U.S. Code or any similar Federal, state or
foreign law for the relief of debtors.

 

“Board of Directors” means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.

 

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

 

“Business Day” means any day other than a Saturday, Sunday or any other day on
which banking institutions in the City of New York are required or authorized by
law or other governmental action to be closed.

 

“Capitalized Lease Obligation” means, as to any Person, the obligations of such
Person under a lease that are required to be classified and accounted for as
capital lease obligations under GAAP and, for purposes of this definition, the
amount of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.

 

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“Capital Stock” means (i) with respect to any Person that is a corporation,
corporate stock, (ii) with respect to any Person that is an association or
business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, (iii) with respect to any
Person that is a partnership or limited liability company, any and all
partnership or membership interest (whether general or limited), and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses or, or distributions of assets of, the issuing
Person.

 

“Cash Equivalents” means (i) United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than six months from the date of acquisition; (iii) certificates of deposit and
Eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers’ acceptances with maturities not exceeding six months and
overnight bank deposits, in each case, with any domestic commercial bank having
capital and surplus of not less than $250.0 million and a Thomson Bank Watch
Rating of “B” or better; (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) of this definition entered into with any financial institution meeting
the qualifications specified in clause (iii) of this definition; (v) commercial
paper having the highest rating obtainable from Moody’s or S&P and in each case
maturing within six months after the date of acquisition; and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i) through (v) of this definition.

 

“Change of Control” means the occurrence of one or more of the following events:
(i) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons (other than to a Permitted
Holder) for purposes of Section 13(d) of the Exchange Act (a “Group”), together
with any Affiliates thereof (whether or not otherwise in compliance with the
provisions of this Indenture); (ii) the approval by the holders of Capital Stock
of the Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Indenture); (iii) any Person or Group (other than the Permitted Holders) shall
become the owner, directly or indirectly, beneficially or of record, of shares
representing more than 50% of the aggregate ordinary voting power represented by
the issued and outstanding Capital Stock of the Company; (iv) the replacement of
a majority of the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as

 

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a member of such Board of Directors was previously so approved; or (v) the
Company consolidates with, or merges with or into, another Person, or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the shares representing the aggregate ordinary voting power represented
by the issued and outstanding Capital Stock of the Company is converted into or
exchanged for cash, securities or other property, other than (A) any such
transaction where (1) the shares representing the issued and outstanding
ordinary voting Capital Stock of the Company are converted into or exchanged for
(I) ordinary voting Capital Stock (other than Disqualified Capital Stock) of the
surviving or transferee corporation and/or (II) cash, securities and other
property in an amount which could be paid by the Company as a Restricted Payment
under this Indenture and (2) the “beneficial owners” of the shares representing
the issued and outstanding ordinary voting Capital Stock of the Company
immediately prior to such transaction own, directly or indirectly, shares of
Capital Stock representing not less than a majority of voting power of all
issued and outstanding shares of Capital Stock of the surviving or transferee
corporation immediately after such transaction or (B) any such transaction as a
result of which the Permitted Holders own shares of Capital Stock representing
more than 50% of the voting power of all issued and outstanding shares of
Capital Stock of the surviving or transferee corporation immediately after such
transaction.

 

“Change of Control Offer” has the meaning set forth in Section 4.16.

 

“Change of Control Payment Date” has the meaning set forth in Section 4.16.

 

“Commission” means the Securities and Exchange Commission, or any successor
agency thereto with respect to the regulation or registration of securities.

 

“Common Stock” of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person’s common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.

 

“Comparable Treasury Issue” means the U.S. Treasury security selected by the
Quotation Agent as having a maturity comparable to the remaining term of the
Securities being redeemed that would be utilized, at the time of selection and
in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity.

 

“Company” means the party named as such in this Indenture until a successor
replaces it pursuant to this Indenture.

 

“Comparable Treasury Price” means, with respect to any Redemption Date: (1) the
average of the bid and ask prices for the Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount) on the third Business Day
preceding

 

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such Redemption Date, as set forth in the daily statistical release (or any
successor release) published by the Federal Reserve Bank of New York and
designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or
(2) if such release (or any successor release) is not published or does not
contain such prices on such Business Day, (A) the average of the Reference
Treasury Dealer Quotations obtained by the Quotation Agent on the third business
day preceding such redemption date, after excluding the highest and lowest of
such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains
fewer than three such Reference Treasury Dealer Quotations, the average of all
such quotations.

 

“Consolidated EBITDA” means, with respect to any Person, for any period, the sum
(without duplication) of (i) Consolidated Net Income and (ii) to the extent
Consolidated Net Income has been reduced thereby, (A) all income taxes of such
Person and its Subsidiaries paid or accrued in accordance with GAAP for such
period, (B) Consolidated Interest Expense and (C) annual fees up to $1,000,000
and other fees and expenses paid pursuant to the Management Services Agreement
and (D) Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Subsidiaries in accordance with GAAP.

 

“Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person,
the ratio of Consolidated EBITDA of such Person during the four full fiscal
quarters (the “Four Quarter Period”) ending on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio (the “Transaction Date”) to Consolidated Fixed Charges of such
Person for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, “Consolidated EBITDA” and
“Consolidated Fixed Charges” shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period; and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and including, without limitation, by giving pro forma effect to
any Consolidated EBITDA (provided that such pro forma Consolidated EBITDA shall
be calculated in a manner consistent with the exclusions in the definition of
“Consolidated Net Income”) attributable to the assets which are the subject of
the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring

 

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during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating “Consolidated Fixed
Charges” for purposes of determining the denominator (but not the numerator) of
this “Consolidated Fixed Charge Coverage Ratio,” (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
Eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.

 

“Consolidated Fixed Charges” means, with respect to any Person for any period,
the sum, without duplication, of (i) Consolidated Interest Expense (excluding
any amortization or write off of deferred financing costs), plus (ii) the
product of (x) the amount of all dividend payments on any series of Preferred
Stock of such Person paid in cash, Indebtedness or Disqualified Capital Stock
during such period times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
federal, state and local tax rate of such Person, expressed as a decimal.

 

“Consolidated Interest Expense” means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP (excluding any accruals of dividends
on Preferred Stock that are not paid in cash in such period, Indebtedness or
Disqualified Capital Stock), including, without limitation, (a) any amortization
of debt discount, (b) the net costs under Interest Swap Obligations, (c) all
capitalized interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.

 

“Consolidated Net Income” means, with respect to any Person, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom (a) after-tax gains from Asset Sales or
abandonments or reserves

 

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relating thereto, (b) after-tax items classified as extraordinary or
nonrecurring gains or losses, (c) the net income (but not loss) of any
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Subsidiary of that income is
restricted by contract, operation of law or otherwise, (d) the net income of any
Person, other than a Subsidiary of the referent Person, except to the extent of
cash dividends or distributions paid to the referent Person or to a Wholly Owned
Subsidiary of the referent Person by such Person, (e) any restoration to income
of any contingency reserve, except to the extent that provision for such reserve
was made out of Consolidated Net Income accrued at any time following the Issue
Date, (f) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued), (g) in the case of a successor
to the referent Person by consolidation or merger or as a transferee of the
referent Person’s assets, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets and (h) accruals of dividends
on Preferred Stock that are not paid in cash in such period, Indebtedness or
Disqualified Capital Stock, to the extent that accrued dividends are classified
as interest expense in accordance with GAAP.

 

“Consolidated Net Tangible Assets” means the aggregate amounts of assets of the
Company (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (other than obligations under
the Indenture or current maturities of long-term Indebtedness) and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the books and records of
the Company and the Subsidiaries on a consolidated basis and in accordance with
GAAP.

 

“Consolidated Net Worth” of any Person means the consolidated stockholders’
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.

 

“Consolidated Non-cash Charges” means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Net Income of such Person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (including, without limitation, any LIFO adjustments, but
excluding any such charge which requires an accrual of or a reserve for cash
charges for any future period).

 

“Corporate Trust Office” means the principal office of the Trustee where it
conducts its corporate trust administrative functions, which office is currently
located at 101 Barclay Street New York, New York 10286.

 

“Covenant Defeasance” has the meaning set forth in Section 8.01.

 

“Credit Agreement” means credit agreement(s) entered into by the Company and one
or more banks or other institutional lenders providing for revolving credit
loans, term loans, receivables financing or letters of credit, and all
amendments thereto, together with

 

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the related documents thereto (including, without limitation, any guarantee
agreements and security documents, in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring all or any
portion of the Indebtedness under such agreement(s) or any successor or
replacement agreement(s) and whether by the same or any other agent, lender or
group of lenders.

 

“Custodian” means any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.

 

“Default” means an event or condition the occurrence of which is, or with the
lapse of time or the giving of notice or both would be, an Event of Default.

 

“Depository” means, with respect to the Securities issued in the form of one or
more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.

 

“Disqualified Capital Stock” means that portion of any Capital Stock which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in any case, on or prior
to the final maturity date of the Securities.

 

“Event of Default” has the meaning set forth in Section 6.01.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.

 

“Fair Market Value” means, with respect to any asset or property, the price
which could be negotiated in an arm’s-length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.

 

“Final Maturity Date” means February 1, 2013.

 

“GAAP” means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and Statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession
of the United States, which are in effect as of the Issue Date.

 

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“Global Security” means a security evidencing all or a portion of the Securities
issued to the Depository or its nominee in accordance with Section 2.01 and
bearing the legend set forth in Exhibit C.

 

“Guarantee” means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, through letters of credit
or reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.

 

“incur” has the meaning set forth in Section 4.04.

 

“Indebtedness” means with respect to any Person, without duplication, (i) all
Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker’s acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the “maximum fixed repurchase price” of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.

 

“Indenture” means this Indenture, as amended or supplemented from time to time
in accordance with the terms hereof.

 

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“Independent Financial Advisor” means an accounting firm, appraisal firm,
investment banking firm or consultant to Persons engaged in a Related Business,
in each case, of nationally recognized standing that is, in the judgment of the
Company’s Board of Directors, qualified to perform the task for which it has
been engaged.

 

“Institutional Accredited Investor” means an institution that is an “accredited
investor” as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.

 

“Interest Payment Date” means the stated due date of an installment of interest
on the Securities.

 

“Interest Swap Obligations” means the obligations of any Person pursuant to any
arrangement with any other Person whereby, directly or indirectly, such Person
is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.

 

“Investment” means, with respect to any Person, any direct or indirect loan or
other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. “Investment” shall exclude extensions of trade credit by the
Company or any Subsidiary on commercially reasonable terms in accordance with
normal trade practices of the Company or such Subsidiary, as the case may be. If
the Company or any Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, 100% of the outstanding Common Stock of such Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Common Stock of such
Subsidiary not sold or disposed of.

 

“Issue Date” means the date of original issuance of the Series A Securities
under this Indenture.

 

“Legal Defeasance” has the meaning set forth in Section 8.01.

 

“Lien” means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest in respect of such asset, whether or not filed, recorded
or otherwise perfected under applicable law).

 

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“Management Services Agreement” means that certain Management Services Agreement
dated as of the Issue Date by and between Leonard Green & Partners, L.P., on the
one hand, and the Company, on the other hand, providing for certain fees,
expenses and reimbursements to be paid to Leonard Green & Partners, L.P., as
such Management Services Agreement may be amended from time to time so long as
such amendments are in compliance with Section 4.12. Payments may not be made
pursuant to the Management Services Agreement if an Event of Default has
occurred and is continuing provided that any fees that have not been paid during
the continuation of such an event of default that is subsequently cured may be
paid promptly following such cure and provided further that in the event of
bankruptcy, liquidation, insolvency or winding-up of the Company, the payment of
all accrued and unpaid fees pursuant to the Management Services Agreement is
subordinated to the prior payment in full of all amounts due and owing under
this Indenture.

 

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

 

“Net Cash Proceeds” means, with respect to any Asset Sale, the proceeds in the
form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Subsidiaries from such Asset Sale net of (a)
reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale, (d) appropriate
amounts to be provided by the Company or any Subsidiary, as the case may be, as
a reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, and (e) that portion of the cash or Cash Equivalents
attributable to the Capital Stock of a Subsidiary which is not a Wholly Owned
Subsidiary of the Company held, directly or indirectly, by any Person which is
not the Company or a Wholly Owned Subsidiary of the Company.

 

“Net Proceeds Offer” has the meaning set forth in Section 4.17.

 

“Net Proceeds Offer Amount” has the meaning set forth in Section 4.17.

 

“Net Proceeds Offer Payment Date” has the meaning set forth in Section 4.17.

 

“Net Proceeds Offer Trigger Date” has the meaning set forth in Section 4.17.

 

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“Obligations” means all obligations for principal, premium, interest, penalties,
fees, indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.

 

“Officer” means, with respect to any Person, the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Controller, the Treasurer or the
Secretary of such Person.

 

“Officers’ Certificate” means a certificate signed by two Officers of the
Company.

 

“Offshore Physical Securities” has the meaning set forth in Section 2.01.

 

“Opinion of Counsel” means a written opinion from legal counsel, which counsel
may be counsel to or an employee of the Company.

 

“Participants” has the meaning set forth in Section 2.15.

 

“Paying Agent” has the meaning set forth in Section 2.03.

 

“Permitted Holders” means Leonard Green & Partners, L.P., GCP California Fund,
L.P. and senior management of the Company as in effect on the Issue Date,
including in each case, their respective Affiliates.

 

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

 

(i) Indebtedness represented by the Securities issued on the date hereof;

 

(ii) Indebtedness incurred by the Company pursuant to a Credit Agreement(s) in
an aggregate principal amount at any time outstanding not to exceed the greater
of (a) $105.0 million less the amount of any prepayments made with the proceeds
of an Asset Sale or assumed in connection with an Asset Sale and (b) the sum of
85% of the total accounts receivable and 60% of the total inventory of the
Company and its Subsidiaries;

 

(iii) other Indebtedness of the Company and its Subsidiaries outstanding on the
Issue Date;

 

(iv) Interest Swap Obligations of the Company covering Indebtedness of the
Company or any of its Subsidiaries and Interest Swap Obligations of any
Subsidiary of the Company covering Indebtedness of such Subsidiary; provided,
however, that such Interest Swap Obligations are entered into to protect the
Company and its Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with this Indenture to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Swap Obligation relates;

 

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(v) Indebtedness of a Subsidiary of the Company to the Company or to a Wholly
Owned Subsidiary of the Company for so long as such Indebtedness is held by the
Company or a Wholly Owned Subsidiary of the Company, in each case subject to no
Lien held by a Person other than the Company or a Wholly Owned Subsidiary of the
Company; provided that if as of any date any Person other than the Company or a
Wholly Owned Subsidiary of the Company owns or holds any such Indebtedness or
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer
of such Indebtedness;

 

(vi) Indebtedness of the Company to a Wholly Owned Subsidiary of the Company for
so long as such Indebtedness is held by a Wholly Owned Subsidiary of the
Company, in each case subject to no Lien held by a Person other than a Wholly
Owned Subsidiary of the Company; provided that if as of any date any Person
other than a Wholly Owned Subsidiary of the Company owns or holds any such
Indebtedness or any Person other than a Wholly Owned Subsidiary of the Company
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;

 

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

 

(viii) Indebtedness of the Company or any of its Subsidiaries represented by
letters of credit for the account of the Company or such Subsidiary, as the case
may be, in order to provide security for workers’ compensation claims, payment
obligations in connection with self-insurance or similar requirements in the
ordinary course of business;

 

(ix) Refinancing Indebtedness;

 

(x) Capitalized Lease Obligations and Purchase Money Indebtedness of the Company
or any of its Subsidiaries in an aggregate principal amount not to exceed $5.0
million at any one time outstanding; and

 

(xi) additional Indebtedness of the Company in an aggregate principal amount not
to exceed $10.0 million at any one time outstanding.

 

(xii) “Permitted Investments” means (i) Investments by the Company or any
Subsidiary of the Company in any Person that is or will become, or Investments
by the Company or any Subsidiary of the Company which result in any Person
becoming, in any case, immediately after such Investment, a Subsidiary of the
Company or that will merge or consolidate into the Company or a Subsidiary of
the Company; (ii) Investments by any Subsidiary of the Company in the Company;
(iii)

 

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Investments in cash and Cash Equivalents; (iv) loans and advances to employees
and officers of the Company and its Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $500,000 at any one
time outstanding; (v) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (vi) Investments
made by the Company or its Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with Section 4.17; and (vii)
other Investments in the aggregate amount outstanding at any one time of up to
$10,000,000.

 

“Permitted Liens” means the following types of Liens:

 

(i) Liens securing Indebtedness incurred by the Company pursuant to any Credit
Agreement;

 

(ii) Liens for taxes, assessments or governmental charges or claims either (a)
not delinquent or (b) contested in good faith by appropriate proceedings and as
to which the Company or its Subsidiaries shall have set aside on their books
such reserves as may be required pursuant to GAAP;

 

(iii) statutory and contractual Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
in respect thereof;

 

(iv) Liens incurred or deposits made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types of
social security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);

 

(v) judgment Liens not giving rise to an Event of Default so long as such Lien
is adequately bonded and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired;

 

(vi) easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the Company or any of its
Subsidiaries;

 

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(vii) any interest or title of a lessor under any Capitalized Lease Obligation;
provided that such Liens do not extend to any property or assets which is not
leased property subject to such Capitalized Lease Obligation;

 

(viii) Liens securing Purchase Money Indebtedness of the Company or any
Subsidiary of the Company acquired in the ordinary course of business; provided,
however, that (A) the Purchase Money Indebtedness shall not exceed the cost of
such property or assets and shall not be secured by any property or assets of
the Company or any Subsidiary of the Company other than the property and assets
so acquired and (B) the Lien securing such Indebtedness shall be created within
90 days of such acquisition;

 

(ix) Liens upon specific items of inventory or other goods and proceeds of any
Person securing such Person’s obligations in respect of bankers’ acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods;

 

(x) Liens securing reimbursement obligations with respect to commercial letters
of credit which encumber documents and other property relating to such letters
of credit and products and proceeds thereof;

 

(xi) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company or
any of its Subsidiaries, including rights of offset and set-off;

 

(xii) Liens securing Interest Swap Obligations which Interest Swap Obligations
relate to Indebtedness that is otherwise permitted under this Indenture;

 

(xiii) Liens securing Acquired Indebtedness incurred in accordance with Section
4.04; provided that (A) such Liens secured such Acquired Indebtedness at the
time of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company or
a Subsidiary of the Company and (B) such Liens do not extend to or cover any
property or assets of the Company or of any of its Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Subsidiary of the
Company and are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by
the Company or a Subsidiary of the Company;

 

(xiv) Liens created under this Indenture; and

 

(xv) Liens securing Indebtedness incurred pursuant to clause (j) of the
definition of Permitted Indebtedness; and

 

(xvi) Liens incurred with respect to obligations that do not exceed 10% of
Consolidated Net Tangible Assets at the time of incurrence thereof.

 

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“Person” means an individual, partnership, corporation, limited liability
company, unincorporated organization, association, joint-stock company, trust or
joint venture, or a governmental agency or political subdivision thereof.

 

“Physical Securities” has the meaning set forth in Section 2.01.

 

“Poolmart” means Poolmart USA Inc., a Delaware corporation.

 

“Preferred Stock” of any Person means any Capital Stock of such Person that has
preferential rights over any other Capital Stock of such Person with respect to
dividends or redemptions or upon liquidation.

 

“Private Placement Legend” means the legend initially set forth on the
Securities in the form set forth on Exhibit A.

 

“pro forma” means, with respect to any calculation made or required to be made
pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act as interpreted by the
Company’s Board of Directors in consultation with its independent certified
public accountants.

 

“Public Equity Offering” means an underwritten public offering of Qualified
Capital Stock of the Company pursuant to a registration statement filed with the
Commission in accordance with the Securities Act or any successor statute.

 

“Purchase Money Indebtedness” means Indebtedness of the Company and its
Subsidiaries incurred in connection with the purchase of businesses (including
Capital Stock of businesses primarily engaged in a Related Business), properties
or assets for the business of the Company and its Subsidiaries and any
Refinancing thereof.

 

“Qualified Capital Stock” means the Series A Preferred Stock and any other
Capital Stock that is not Disqualified Capital Stock.

 

“Qualified Institutional Buyer” or “QIB” means a “qualified institutional buyer”
as that term is defined in Rule 144A under the Securities Act.

 

“Quotation Agent” means the Reference Treasury Dealer appointed by the trustee
to act as the Quotation Agent after consultation with the Company.

 

“Recapitalization” means the merger of LPM Acquisition Corp. with and into the
Company on the date of this Indenture and related transactions.

 

“Record Date” means the applicable Record Date specified in the Securities;
provided that if any such date is not a Business Day, the Record Date shall be
the first day immediately preceding such specified day that is a Business Day.

 

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

 

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“Redemption Price,” when used with respect to any Security to be redeemed, means
the price fixed for such redemption, payable in immediately available funds,
pursuant to this Indenture and the Securities.

 

“Reference Date” has the meaning set forth in Section 4.03.

 

“Reference Treasury Dealer” means one of Banc of America Securities LLC, Lehman
Brothers Inc. or UBS Securities LLC or their successors; provided that if those
firms cease to be primary U.S.Treasury securities dealers in New York City (a
“Primary Treasury Dealer”), the Company shall substitute therefore another
Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotations” means, with respect to any Redemption
Date, the average of the bid and ask prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing by any Reference Treasury Dealer at 5:00 p.m. on the third Business Day
preceding such Redemption Date.

 

“Refinance” means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall have
correlative meanings.

 

“Refinancing Indebtedness” means any Refinancing by the Company or any
Subsidiary of the Company of Indebtedness incurred in accordance with Section
4.04 (other than pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (x) or
(xi) of the definition of Permitted Indebtedness), to the extent that such
Refinancing does not (1) result in an increase in the aggregate principal amount
of the Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company in connection with such Refinancing) or (2)
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (B) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; provided that (x) if such Indebtedness being Refinanced is
Indebtedness solely of the Company, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced
is subordinate or junior to the Securities, then such Refinancing Indebtedness
shall be subordinate to the Securities at least to the same extent and in the
same manner as the Indebtedness being Refinanced.

 

“Registered Exchange Offer” means the offer to exchange the Series B Securities
for all of the outstanding Series A Securities in accordance with the
Registration Rights Agreements.

 

“Registrar” has the meaning set forth in Section 2.03.

 

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“Registration Rights Agreements” means the Registration Rights Agreements dated
as of the Issue Date between the Company and the initial purchasers of the
Securities.

 

“Regulation S” means Regulation S under the Securities Act.

 

“Related Business” means a business whose revenues are derived from the general
business conducted by the Company on the Issue Date or any business or activity
that is reasonably similar thereto or a reasonable extension, development or
expansion thereof or ancillary thereto.

 

“Replacement Assets” has the meaning set forth in Section 4.17.

 

“Responsible Officer” means, when used with respect to the Trustee, any officer
in the Corporate Trust Office of the Trustee including any vice president,
assistant vice president, assistant treasurer, or any other officer of the
Trustee 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 officer’s knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Indenture.

 

“Restricted Payments” has the meaning set forth in Section 4.03.

 

“Restricted Security” has the meaning set forth in Rule 144(a)(3) under the
Securities Act; provided that the Trustee shall be entitled to request and
conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security.

 

“Rule 144A” means Rule 144A under the Securities Act.

 

“Sale and Leaseback Transaction” means any direct or indirect arrangement with
any Person or to which any such Person is a party, providing for the leasing to
the Company or a Subsidiary of any property, whether owned by the Company or any
Subsidiary at the Issue Date or later acquired, which has been or is to be sold
or transferred by the Company or such Subsidiary to such Person or to any other
Person by whom funds have been or are to be advanced on the security of such
Property.

 

“S&P” means Standard & Poor’s Corporation and its successors.

 

“Securities” means the Series A Securities, the Series B Securities, and any
securities issued pursuant to Section 2.02, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor
statute or statutes thereto.

 

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“Securityholder” or “Holder” means the Person in whose name a Security is
registered on the Registrar’s books.

 

“Series A Preferred Stock” means the Series A Preferred Stock of the Company
issued pursuant to the Certificate of Designation, Preferences and Rights of
Series A Redeemable Preferred Stock, as in effect on the Issue Date.

 

“Series A Securities” means the 7 3/4% Senior Notes due 2013, Series A, of the
Company issued pursuant to this Indenture.

 

“Series B Securities” means the 7 3/4% Senior Notes due 2013, Series B, of the
Company to be issued in exchange for the Series A Securities pursuant to the
Registered Exchange Offer and the Registration Rights Agreements.

 

“Significant Subsidiary” shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.

 

“Subsidiary,” with respect to any Person, means (i) any corporation of which the
outstanding Capital Stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such Person; or (ii) any other Person of
which at least a majority of the voting interest under ordinary circumstances is
at the time, directly or indirectly, owned by such Person.

 

“Surviving Entity” has the meaning set forth in Section 5.01.

 

“TIA” means the Trust Indenture act of 1939 (15 U.S.C. Sections 77aaa-77bbbb),
as amended, as in effect on the date of the execution of this Indenture until
such time as this Indenture is qualified under the TIA, and thereafter as in
effect on the date on which this Indenture is qualified under the TIA, except as
otherwise provided in Section 9.03.

 

“Trustee” means the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture and thereafter
means such successor.

 

“U.S. Government Obligations” shall have the meaning set forth in Section 8.01.

 

“U.S. Legal Tender” means such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts.

 

“U.S. Physical Securities” has the meaning set forth in Section 2.01.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund,

 

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serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) which will elapse between such date and the making of
such payment.

 

“Wholly Owned Subsidiary” of any Person means any Subsidiary of such Person of
which all the outstanding voting securities (other than in the case of a foreign
Subsidiary, directors’ qualifying shares or an immaterial amount of shares
required to be owned by other Persons pursuant to applicable law) are owned by
such Person or any Wholly Owned Subsidiary of such Person.

 

Section 1.02 Incorporation by Reference of TIA.

 

Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in, and made a part of, this Indenture. The following
TIA terms used in this Indenture have the following meanings:

 

“indenture securities” means the Securities.

 

“indenture security holder” means a Holder or a Securityholder.

 

“indenture to be qualified” means this Indenture.

 

“indenture trustee” or “institutional trustee” means the Trustee.

 

“obligor” on the indenture securities means the Company or any other obligor on
the Securities.

 

All other TIA terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule and, in each
case, not otherwise defined herein have the meanings assigned to them therein.

 

Section 1.03 Rules of Construction.

 

Unless the context otherwise requires:

 

(a) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

 

(b) “or” is not exclusive;

 

(c) words in the singular include the plural, and words in the plural include
the singular;

 

(d) provisions apply to successive events and transactions; and

 

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

 

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ARTICLE TWO

 

THE SECURITIES

 

Section 2.01 Form and Dating.

 

The Series A Securities and the Trustee’s certificate of authentication thereof
shall be substantially in the form or Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Series B
Securities and the Trustee’s certificate of authentication thereof shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company and the Trustee shall approve the form of the Securities and any
notation, legend or endorsement on them. Each Security shall be dated the date
of its authentication.

 

The terms and provisions contained in the Securities, annexed hereto as Exhibits
A and B, shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company, and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.

 

Securities offered and sold in reliance on Rule 144A shall be issued initially
in the form of one or more permanent Global Securities in registered form,
substantially in the form set forth in Exhibit A (collectively, the “Rule 144A
Global Securities”). Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of one or more
permanent Global Securities in registered form, substantially in the form set
forth in Exhibit A (collectively, the “Regulation S Global Securities” and,
together with the Rule 144A Global Securities, the “Global Securities”)). The
Global Securities will be deposited upon issuance with the Trustee, as custodian
for the Depository, and shall bear the legend set forth on Exhibit C. The
aggregate principal amount of any Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.

 

Securities issued in certificated form in the limited circumstances permitted in
this Indenture, may be issued in the form of certificated Securities in
registered form in substantially the form set forth in Exhibit A (the “Physical
Securities”).

 

Section 2.02 Execution and Authentication.

 

Two Officers, or an Officer and an Assistant Secretary, shall sign, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature. The Company’s seal may also be reproduced on the Securities.

 

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If an Officer whose signature is on a Security was an Officer at the time of
such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.

 

A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.

 

The Trustee shall authenticate (i) Series A Securities for original issue on the
Issue Date in the aggregate principal amount of $170,000,000 and at any time
additional Series A Securities for additional issue permitted by the terms of
this Indenture and (ii) Series B Securities from time to time only in exchange
for a like principal amount of Series A Securities. The Officers’ Certificate
shall specify the amount of Securities to be authenticated, the series of
Securities and the date on which the Securities are to be authenticated. Upon
receipt of a written order of the Company in the form of an Officers’
Certificate, the Trustee shall authenticate Securities in substitution for
Securities originally issued to reflect any name change of the Company.

 

The Trustee may appoint an authenticating agent reasonably acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.

 

The Securities shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.

 

Section 2.03 Registrar and Paying Agent.

 

The Company shall maintain an office or agency in the Borough of Manhattan, The
City of New York, where (a) Securities may be presented or surrendered for
registration of transfer or for exchange (“Registrar”), (b) Securities may be
presented or surrendered for payment (“Paying Agent”) and (c) notices and
demands in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more
Co-Registrars and one or more additional Paying Agents reasonably acceptable to
the Trustee. The term “Paying Agent” includes any additional Paying Agent.

 

The Company shall enter into an appropriate agency agreement with any Agent not
a party to this Indenture, which agreement shall incorporate the provisions of
the TIA and implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee, in advance, of the name and address
of any such Agent. If the Company fails to maintain a Registrar or Paying Agent,
or fails to give the foregoing notice, the Trustee shall act as such.

 

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The Company initially appoints the Trustee as Registrar, Paying Agent and agent
for service of demands and notices in connection with the Securities, until such
time as the Trustee has resigned or the Company has appointed a successor. The
Company may change any Paying Agent or Registrar without prior notice to the
Holders, and the Company or any of its Subsidiaries may act as Paying Agent or
Registrar. The Paying Agent or Registrar may resign upon 30 days notice to the
Company.

 

Section 2.04 Paying Agent to Hold Assets in Trust.

 

The Company shall require each Paying Agent other than the Trustee to agree in
writing that each Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all assets held by the Paying Agent for the payment of principal of,
or interest on, the Securities, and shall notify the Trustee of any Default by
the Company in making any such payment. If either the Company or any of its
Subsidiaries acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent, the
Paying Agent shall have no further liability for such assets.

 

Section 2.05 Securityholder Lists.

 

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. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee before
each Record Date and at such other times as the Trustee may request in writing a
list as of such date and in such form as the Trustee may reasonably require of
the names and addresses of Holders, which list may be conclusively relied upon
by the Trustee.

 

Section 2.06 Transfer and Exchange.

 

Subject to the provisions of Section 2.15 and 2.17, when Securities are
presented to the Registrar or a Co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or Co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or Co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar’s or Co-Registrar’s
written request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum

 

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sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or other governmental
charge payable upon exchanges or transfers pursuant to Section 2.02, Section
2.10, Section 3.06, Section 4.16, Section 4.17 or Section 9.05 in which event
the Company shall be responsible for the payment of such taxes or governmental
charges). The Registrar or Co-Registrar shall not be required to register the
transfer of or exchange of any Security (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Security being redeemed in part.

 

Any Holder of a Global Security shall, by acceptance of such Global Security,
agree that transfers of beneficial interests in such Global Security may be
effected only through a book-entry system maintained by the Depository (or its
agent), and that ownership of a beneficial interest in a Global Security shall
be required to be reflected in a book entry.

 

Section 2.07 Replacement Securities.

 

If a mutilated Security is surrendered to the Trustee or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken,
the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee’s requirements are met. Such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee and any Agent from
any loss which any of them may suffer if a Security is replaced. The Company may
charge such Holder for its reasonable out-of-pocket expenses in replacing a
Security, including reasonable fees and expenses of counsel.

 

Every replacement Security is an additional obligation of the Company.

 

Section 2.08 Outstanding Securities.

 

Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to Section 2.09, a Security does not cease to be outstanding because the Company
or any of its Affiliates holds the Security.

 

If a Security is replaced pursuant to Section 2.07 (other than a mutilated
Security surrendered for replacement) it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Security is held by
a bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.07.

 

If on a Redemption Date or the Final Maturity Date the Paying Agent holds U.S.
Legal Tender sufficient to pay all of the principal and interest due on the
Securities payable on that date, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.

 

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Section 2.09 Treasury Securities.

 

In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities that a Responsible
Officer of the Trustee actually knows are so owned shall be disregarded.

 

The Trustee may require an Officers’ Certificate listing Securities owned by the
Company or its Affiliates.

 

Section 2.10 Temporary Securities.

 

Until definitive Securities are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Securities upon receipt of a written
order of the Company in the form of an Officers’ Certificate. The Officers’
Certificate shall specify the amount of temporary Securities to be authenticated
and the date on which the temporary Securities are to be authenticated.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Securities in exchange for temporary
Securities.

 

Section 2.11 Cancellation.

 

The Company at any time may deliver Securities to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent, and no one else,
shall cancel and, at the written direction of the Company, shall dispose of all
Securities surrendered for transfer, exchange, payment or cancellation, provided
that the Trustee shall not be required to destroy Securities. Subject to Section
2.07, the Company may not issue new Securities to replace Securities that it has
paid or delivered to the Trustee for cancellation. If the Company shall acquire
any of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.

 

Section 2.12 Defaulted Interest.

 

If the Company defaults in a payment of principal or interest on the Securities,
it shall pay, to the extent such payments are lawful, interest on overdue
principal and on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate shown on the
Security.

 

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Section 2.13 CUSIP Number.

 

The Company in issuing the Securities will use one or more “CUSIP” numbers and
the Trustee shall use the CUSIP numbers in notices of redemption or exchange as
a convenience to Holders. The Trustee and the Company shall not be liable for
any defect or inaccuracy in the CUSIP numbers that appear on any Security or in
any redemption notice. The Trustee, in its discretion, may include in any notice
a statement to the effect that the CUSIP numbers on the Securities have been
assigned by an independent service and are included in such notice solely for
the convenience of the holders and that neither the Trustee nor the Company make
any representation as to the correctness or accuracy of the CUSIP numbers
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any change in the CUSIP numbers.

 

In the event that the Company shall issue and the Trustee shall authenticate any
Securities issued under this Indenture subsequent to the Issue Date pursuant to
the fourth paragraph of Section 2.02, the Company shall use its best efforts to
obtain the same “CUSIP” number for such Securities as is printed on the
Securities outstanding at such time; provided, however, that if any series of
Securities issued under this Indenture subsequent to the Issue Date is
determined, pursuant to an Opinion of Counsel of the Company in a form
reasonably satisfactory to the Trustee to be a different class of security than
the Securities outstanding at such time for federal income tax purposes, the
Company may obtain a “CUSIP” number for such Securities that is different than
the “CUSIP” number printed on the Securities then outstanding.

 

Notwithstanding the foregoing, all Securities issued under this Indenture shall
vote and consent together on all matters as one class and no series of
Securities will have the right to vote or consent as a separate class on any
matter.

 

Section 2.14 Deposit of Moneys.

 

Prior to 11:00 a.m. New York City time on each Interest Payment Date and the
Final Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Final Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Final Maturity Date, as the case may be.

 

Section 2.15 Book-Entry Provisions for Global Securities.

 

(a) The Global Securities initially shall (i) be registered in the name of the
Depository or the nominee of such Depository, (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as set forth in Exhibit
C.

 

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Members of, or participants in, the Depository (“Participants”) shall have no
rights under this Indenture with respect to any Global Security held on their
behalf by the Depository, or the Trustee as its custodian, or under the Global
Security, 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 the Global Security
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and
Participants, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.

 

Through and including the 40th day after the Issue Date (such period through and
including such 40th day, the “Restricted Period”), beneficial interests in the
Regulation S Global Securities may be held only through the Euroclear System
(“Euroclear”) and Clearstream Banking, S.A. (“Clearstream”) (as indirect
Participants), unless transferred to a person that takes delivery through a Rule
144A Global Note in accordance with the requirements specified in paragraph (g)
of this Section 2.15 of this Indenture.

 

(b) Transfers of Global Securities shall be limited to transfers in whole, but
not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Securities may be transferred or
exchanged for Physical Securities only in accordance with the rules and
procedures of the Depository and the provisions of Section 2.17 if (i) the
Depository (a) notifies the Company that it is unwilling or unable to continue
as Depository for any Global Security and a successor Depository is not
appointed by the Company within 90 days of such notice or (b) has ceased to be a
clearing agency registered under the Exchange Act; (ii) the Company notifies the
Trustee in writing that it elects to cause the issuance of the Physical
Securities; or (iii) a Default or an Event of Default has occurred and is
continuing.

 

(c) In connection with any transfer or exchange of a portion of the beneficial
interest in a Global Security to beneficial owners pursuant to paragraph (b) of
this Section 2.15, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and make available for delivery, one or more Physical Securities of like tenor
and amount.

 

(d) In connection with the transfer of Global Securities as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global
Securities 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 make available for delivery, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal amount of
Physical Securities of authorized denominations.

 

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(e) Any Physical Security constituting a Restricted Security delivered in
exchange for an interest in a Global Security pursuant to paragraph (b) of this
Section 2.15 shall, except as otherwise provided by Section 2.17, bear the
Private Placement Legend.

 

(f) The Holder of any Global Security may grant proxies and otherwise authorize
any Person, including Participants and Persons that may hold interests through
Participants, to take any action which a Holder is entitled to take under this
Indenture or the Securities.

 

(g) Prior to the expiration of the Restricted Period, beneficial ownership in
the Regulation S Global Securities may be exchanged for beneficial interests in
the Rule 144A Global Securities only if: (i) such exchange occurs in connection
with a transfer of the Securities pursuant to Rule 144A; and (ii) the transferor
delivers to the Trustee a written certificate (substantially in the form of
Exhibit G hereto) to the effect that the Securities are being transferred to a
Person (A) who the transferor reasonably believes to be a qualified
institutional buyer within the meaning of Rule 144A, (B) purchasing for its own
account or the account of a qualified institutional buyer in a transaction
meeting the requirements of Rule 144A and (C) in accordance with all applicable
securities laws of the states of the United States and other jurisdictions.

 

(h) Beneficial interests in a Rule 144A Global Note may be transferred to a
Person who takes delivery in the form of an interest in the Regulation S Global
Securities only if the transferor delivers to the Trustee a written certificate
(substantially in the form of Exhibit F hereto) to the effect that (i) such
transfer is being made in accordance with Rule 903 or 904 of Regulation S or
Rule 144 (if available) and (ii) that, if such transfer occurs prior to the
expiration of the Restricted Period, the interest transferred will be held
immediately thereafter through Euroclear or Clearstream.

 

Section 2.16 Obligation of Trustee.

 

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 Depository Participants or
beneficial owners of interest in any Global Security) 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 2.17 Registration of Transfers and Exchanges.

 

(a) Transfer and Exchange of Physical Securities. When Physical Securities are
presented to the Registrar or Co-Registrar with a request:

 

(i) to register the transfer of the Physical Securities; or

 

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(ii) to exchange such Physical Securities for an equal number of Physical
Securities of other authorized denominations, the Registrar or Co-Registrar
shall register the transfer or make the exchange as requested if the
requirements under this Indenture as set forth in this Section 2.17 for such
transactions are met; provided, however, that the Physical Securities presented
or surrendered for registration of transfer or exchange:

 

(A) shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Registrar or Co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing; and

 

(B) in the case of Physical Securities the offer and sale of which have not been
registered under the Securities Act, such Physical Securities shall be
accompanied, in the sole discretion of the Company, by the following additional
information and documents, as applicable:

 

(1) if such Physical Security is being delivered to the Registrar or
Co-Registrar by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect (substantially in the
form of Exhibit D hereto); or

 

(2) if such Physical Security is being transferred to a Qualified Institutional
Buyer in accordance with Rule 144A, a certification to that effect
(substantially in the form of Exhibit D hereto); or

 

(3) if such Physical Security is being transferred to an Institutional
Accredited Investor, delivery of a certification to that effect (substantially
in the form of Exhibit D hereto) and a Transferee Certificate for Institutional
Accredited Investors substantially in the form of Exhibit E hereto; or

 

(4) if such Physical Security is being transferred in reliance on Regulation S,
delivery of a certification to that effect (substantially in the form of Exhibit
D hereto), a Transferee Certificate for Regulation S Transfers substantially in
the form of Exhibit F hereto and an Opinion of Counsel reasonably satisfactory
to the Company to the effect that such transfer is in compliance with Regulation
S under the Securities Act; or

 

(5) if such Physical Security is being transferred in reliance on Rule 144 under
the Securities Act, delivery of a certification to that effect (substantially in
the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory
to the Company to the effect that such transfer is in compliance with Rule 144
under the Securities Act; or

 

(6) if such Physical Security is being transferred in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect (substantially in the form of Exhibit D hereto)

 

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and an Opinion of Counsel reasonably acceptable to the Company to the effect
that such transfer is in compliance with the rules and regulations under the
Securities Act applicable to such exemption.

 

(b) Restrictions on Transfer of a Physical Security for a Beneficial Interest in
a Global Security. A Physical Security may not be exchanged for a beneficial
interest in a Global Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Registrar or Co-Registrar of a Physical
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Registrar or Co-Registrar, together with:

 

(i) certification, substantially in the form of Exhibit D hereto, that such
Physical Security is being transferred (I) to a Qualified Institutional Buyer,
(II) to an Institutional Accredited Investor or (III) in an offshore transaction
in reliance on Regulation S; and

 

(ii) written instructions directing the Registrar or Co-Registrar to make, or to
direct the Depository to make, an endorsement on the applicable Global Security
to reflect an increase in the aggregate amount of the Securities represented by
the Global Security,

 

then the Registrar or Co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
Co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no Global Security representing
Securities held by Qualified Institutional Buyers, Institutional Accredited
Investors or Persons acquiring Securities in offshore transactions in reliance
on Regulation S, as the case may be, is then outstanding, the Company shall
issue and the Trustee shall, upon written instructions from the Company in
accordance with Section 2.02, authenticate such a Global Security in the
appropriate principal amount.

 

(c) Transfer and Exchange of Global Securities. The transfer and exchange of
Global Securities or beneficial interests therein shall be effected through the
Depository in accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depository therefor. Upon
receipt by the Registrar or Co-Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the registration of transfer of an interest in a Rule 144A
Global Security to a Regulation S Global Security, together with the applicable
Global Securities (or, if the applicable type of Global Security required to
represent the interest as requested to be transferred is not then outstanding,
only the Global Security representing the interest being transferred), the
Registrar or Co-Registrar shall cancel such Global Securities (or Global
Security) and the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.02, authenticate new
Global Securities of the types so cancelled (or the type so cancelled and
applicable type required to represent the interest

 

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as requested to be transferred) reflecting the applicable increase and decrease
of the principal amount of Securities represented by such types of Global
Securities, giving effect to such transfer. If the applicable type of Global
Security required to represent the interest as requested to be transferred is
not outstanding at the time of such request, the Company shall issue and the
Trustee shall, upon written instructions from the Company in accordance with
Section 2.02, authenticate a new Global Security of such type in principal
amount equal to the principal amount of the interest requested to be
transferred.

 

(d) Transfer of a Beneficial Interest in a Global Security for a Physical
Security.

 

(i) In the limited circumstances permitted by Section 2.15(b), any Person having
a beneficial interest in a Global Security may exchange such beneficial interest
for a Physical Security. In those circumstances, upon receipt by the Registrar
or Co-Registrar of written instructions, or such other form of instructions as
is customary for the Depository, from the Depository or its nominee on behalf of
any Person having a beneficial interest in a Global Security and upon receipt by
the Trustee of a written order or such other form of instructions as is
customary for the Depository or the Person designated by the Depository as
having such a beneficial interest containing registration instructions and, in
the case of any such transfer or exchange of a, beneficial interest in
Securities the offer and sale of which have not been registered under the
Securities Act, the following additional information and documents:

 

(A) if such beneficial interest is being transferred to the Person designated by
the Depository as being the beneficial owner, a certification from such Person
to that effect (substantially in the form of Exhibit D hereto); or

 

(B) if such beneficial interest is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a certification to that effect
(substantially in the form of Exhibit D hereto); or

 

(C) if such beneficial interest is being transferred to an Institutional
Accredited Investor, delivery of a certification to that effect (substantially
in the form of Exhibit D hereto) and a Transferee Certificate for Institutional
Accredited Investors substantially in the form of Exhibit E hereto; or

 

(D) if such beneficial interest is being transferred in reliance on Regulation
S, delivery of a certification to that effect (substantially in the form of
Exhibit D hereto), a Transferee Certificate for Regulation S Transfers
substantially in the form of Exhibit F hereto and an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such transfer is in
compliance with Regulation S under the Securities Act; or

 

(E) if such beneficial interest is being transferred in reliance on Rule 144
under the Securities Act, delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such transfer is in
compliance with Rule 144 under the Securities Act; or

 

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(F) if such beneficial interest is being transferred in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect (substantially in the form of Exhibit D hereto) and
an Opinion of Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the rules and regulations under the
Securities Act applicable to such exemption, then the Registrar or Co-Registrar
will cause, in accordance with the standing instructions and procedures existing
between the Depository and the Registrar or Co-Registrar, the aggregate
principal amount of the applicable Global Security to be reduced and, following
such reduction, the Company will execute and, upon receipt of an authentication
order in the form of an Officers’ Certificate in accordance with Section 2.02,
the Trustee will authenticate and make available for delivery to the transferee
a Physical Security.

 

(ii) Securities issued in exchange for a beneficial interest in a Global
Security pursuant to this Section 2.17(d) shall be registered in such names and
in such authorized denominations as the Depository, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Registrar or Co-Registrar in writing. The Registrar or Co-Registrar shall make
available for delivery such Physical Securities to the Persons in whose names
such Physical Securities are so registered.

 

(e) Restrictions on Transfer and Exchange of Global Securities. Notwithstanding
any other provisions of this Indenture, a Global Security may not be transferred
as a whole except 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.

 

(f) Private Placement Legend. Upon the transfer, exchange or replacement of
Securities not bearing the Private Placement Legend, the Registrar or
Co-Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar or Co-Registrar shall deliver only
Securities that bear the Private Placement Legend unless, and the Trustee is
hereby authorized and directed to deliver Securities without the Private
Placement Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act.

 

(g) General. By its acceptance of any Security bearing the Private Placement
Legend, each Holder of such a Security acknowledges the restrictions on transfer
of such Security set forth in this Indenture and in the Private Placement Legend
and agrees that it will transfer such Security only as provided in this
Indenture.

 

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The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.15 or this Section 2.17. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.

 

Section 2.18 Designation.

 

The Indebtedness evidenced by the Securities is hereby irrevocably designated as
“senior indebtedness” or such other term denoting seniority for the purposes of
any future Indebtedness of the Company which the Company makes subordinate to
any senior indebtedness or such other term denoting seniority, including the
Company’s 10% Redeemable Exchangeable Cumulative Preferred Stock or any
debenture issued in respect thereof.

 

Section 2.19 Additional Interest Under Registration Rights Agreements.

 

Under certain circumstances, the Company shall be obligated to pay Additional
Interest to the Holders, all as set forth in Section 5 of the Registration
Rights Agreements. The terms thereof are hereby incorporated herein by
reference.

 

ARTICLE THREE

 

REDEMPTION

 

Section 3.01 Notices to Trustee.

 

If the Company elects to redeem Securities pursuant to Paragraph 5, Paragraph 6
or Paragraph 7 of the Securities, it shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount of Securities to
be redeemed. The Company shall give notice of redemption to the Paying Agent and
Trustee at least 45 days but not more than 60 days before the Redemption Date
(unless a shorter notice shall be agreed to by the Trustee in writing), together
with an Officers’ Certificate stating that such redemption will comply with the
conditions contained herein.

 

Section 3.02 Selection of Securities to be Redeemed.

 

In the event that less than all of the Securities are to be redeemed at any
time, selection of such Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed or, if the Securities are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Securities of a principal amount of $1,000 or less shall be redeemed in part;
and provided, further, that if a partial redemption is made with the proceeds of
a Public Equity Offering, selection of the Securities or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to the procedures of the
Depository), unless such method is otherwise prohibited.

 

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The Trustee shall make the selection from the Securities outstanding and not
previously called for redemption and shall promptly notify the Company in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 or less may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.

 

Section 3.03 Notice of Redemption.

 

At least 30 days but not more than 60 days before a Redemption Date, the Company
shall mail a notice of redemption by first class mail, postage prepaid, to each
Holder whose Securities are to be redeemed at its registered address. At the
Company’s request made at least 45 days before the Redemption Date, the Trustee
shall give the notice of redemption as provided to it in the Company’s name and
at the Company’s expense. Each notice for redemption shall identify the
Securities to be redeemed (including the CUSIP number(s), if any) and shall
state:

 

(a) the Redemption Date;

 

(b) the Redemption Price and the amount of accrued interest, if any, to be paid;

 

(c) the name and address of the Paying Agent;

 

(d) that Securities called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued interest, if any;

 

(e) that, unless the Company defaults in making the redemption payment, interest
on Securities called for redemption ceases to accrue on and after the Redemption
Date, and the only remaining right of the Holders of such Securities is to
receive payment of the Redemption Price upon surrender to the Paying Agent of
the Securities redeemed;

 

(f) if any Security is being redeemed in part, the portion of the principal
amount of such Security to be redeemed and that, after the Redemption Date, and
upon surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;

 

(g) if fewer than all the Securities are to be redeemed, the identification of
the particular Securities (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial redemption;
and

 

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(h) the Paragraph of the Securities and/or the Section of this Indenture
pursuant to which the Securities are to be redeemed.

 

Section 3.04 Effect of Notice of Redemption.

 

Once notice of redemption is mailed in accordance with Section 3.03, Securities
called for redemption become due and payable on the Redemption Date and at the
Redemption Price plus accrued and unpaid interest and Additional Interest, if
any. Upon surrender to the Trustee or Paying Agent, such Securities called for
redemption shall be paid at the Redemption Price (which shall include accrued
interest thereon to the Redemption Date), but installments of interest, the
maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant Record Dates.

 

Section 3.05 Deposit of Redemption Price.

 

On or before 11:00 a.m. New York Time on the Redemption Date, the Company shall
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption
Price plus accrued interest, if any, of all Securities to be redeemed on that
date.

 

If the Company complies with the preceding paragraph, then, unless the Company
defaults in the payment of such Redemption Price plus accrued interest, if any,
interest on the Securities to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or nor such Securities are presented for
payment.

 

Section 3.06 Securities Redeemed in Part.

 

Upon surrender of a Security that is to be redeemed in part only, the Trustee
shall upon written instruction from the Company authenticate for the Holder a
new Security or Securities in a principal amount equal to the unredeemed portion
of the Security surrendered.

 

Section 3.07 Optional Redemption after Four Years.

 

On or after February 1, 2009 the Securities will be redeemable, at the Company’s
option, in whole at any time or in part from time to time, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on February 1 of the year set
forth below, plus, in each case, accrued and unpaid interest, if any, to the
date of redemption:

 

Year

--------------------------------------------------------------------------------

   Percentage

--------------------------------------------------------------------------------

2009

   103.875%

2010

   101.938%

2011 and thereafter

   100.00%

 

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Section 3.08 Optional Redemption with Proceeds of Public Equity Offerings.

 

On or prior to February 1, 2008, the Company may, at its option, use the net
cash proceeds of one or more Public Equity Offerings (as defined below) to
redeem up to 35% of the aggregate principal amount of the Securities at a
redemption price equal to 107.750% of the principal amount thereof, plus accrued
and unpaid interest and Additional Interest, if any, to the date of redemption;
provided that after giving effect to any such redemption at least 65% of
aggregate principal amount of the Securities remains outstanding. In order to
effect the foregoing redemption with the proceeds of any Public Equity Offering,
the Company shall make such redemption not more than 60 days after the
consummation of any such Public Equity Offering.

 

As used in the preceding paragraph, “Public Equity Offering” means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act, or any successor statute.

 

Section 3.09 Optional Redemption with Make-Whole Premium.

 

Prior to February 1, 2009, the Company may, at its option, redeem the
Securities, in whole at any time or in part from time to time, at a redemption
price equal to 100.00% of the principal amount thereof plus the Make-Whole
Premium, plus accrued and unpaid interest and Additional Interest, if any, to,
the date of redemption date.

 

As used in the preceding paragraph, “Make-Whole Premium” means, with respect to
any Securities on any Redemption Date, the excess of (a) the present value on
such Redemption Date of (1) the redemption price of the Securities on February
1, 2009 plus (2) all scheduled interest payments on the Securities through
February 1, 2009 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Adjusted Treasury Rate plus fifty basis points over
(b) the principal amount of the Securities.

 

ARTICLE FOUR

 

COVENANTS

 

Section 4.01 Payment of Securities.

 

The Company will pay or cause to be paid the principal of and interest on the
Securities in the manner provided in the Securities and in this Indenture. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent (other than the
Company or an Affiliate of the Company) holds on that date U.S. Legal Tender
designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders pursuant to the terms of this
Indenture.

 

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The Company will pay, to the extent such payments are lawful, interest on
overdue principal and interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Securities. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.

 

Section 4.02 Maintenance of Office or Agency.

 

The Company will maintain in the Borough of Manhattan, The City of New York, the
office or agency required under Section 2.03. The Company shall give prompt
written notice (in any event no later than forty-eight hours after any change in
location) to the Trustee of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 10.02.

 

The Company hereby initially designates the office of the Trustee at 101 Barclay
Street, Floor 8 West, New York, New York 10286 as its office or agency in the
Borough of Manhattan, the City of New York.

 

Section 4.03 Limitation on Restricted Payments.

 

The Company shall not, and shall not cause or permit any of its Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any distribution
(other than dividends or distributions payable in Qualified Capital Stock of the
Company) on or in respect of shares of the Company’s or its Subsidiaries’
Capital Stock (including, without limitation, any payment in connection with any
merger or consolidation involving the Company or any of its Subsidiaries) to
holders of such Capital Stock in their capacity as such (other than dividends or
distributions payable to the Company or a Subsidiary of the Company or, in the
case of any Subsidiary, pro rata to all holders of Capital Stock of such
Subsidiary), (b) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Capital Stock of the Company or any warrants, rights
or options to purchase or acquire shares of any class of such Capital Stock, (c)
make any principal payment on, purchase, defease, redeem, prepay, decrease or
otherwise acquire or retire for value, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, any Indebtedness of the
Company that is subordinate or junior in right of payment to the Securities or
(d) make any Investment (other than Permitted Investments) (each of the
foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to
as a “Restricted Payment”), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing or would occur as a consequence thereof or
(ii) the Company

 

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is not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.04 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company reported for any period ended subsequent to April 3, 2005 and on or
prior to the date the Restricted Payment occurs (the “Reference Date”) (treating
such period as a single accounting period); plus (x) 100% of the aggregate net
cash proceeds received by the Company from any Person (other than a Subsidiary
of the Company) from the issuance and sale subsequent to the Issue Date and on
or prior to the Reference Date of Qualified Capital Stock of the Company; plus
(y) without duplication of any amounts included in clause (iii)(x) above, 100%
of the aggregate net cash proceeds of any equity contribution received by the
Company from a holder of the Company’s Capital Stock; plus (z) without
duplication, the sum of (1) the aggregate amount returned in cash on or with
respect to Investments (other than Permitted Investments) made subsequent to the
Issue Date whether through interest payments, principal payments, dividends or
other distributions or payments and (2) the Net Cash Proceeds received by the
Company or any Subsidiary from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Company).

 

Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted hereunder on the date of declaration; (2) if no Default or Event
of Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Securities either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or (B)
Refinancing Indebtedness; (4) so long as no Default or Event of Default shall
have occurred and be continuing, repurchases by the Company of Common Stock of
the Company or options, warrants or other securities exercisable or convertible
into Common Stock of the Company from employees and directors of the Company or
any of its Subsidiaries or their authorized representatives upon the death,
disability or termination of employment or directorship of such employees or
directors, in an aggregate amount not to exceed $1,000,000 in any calendar year
and $4.0 million in the aggregate (in each case plus the amount of net cash
proceeds received by the Company from the sale of Qualified Capital Stock to
officers or directors of the Company and its Subsidiaries, provided, that such
amounts did not

 

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provide the basis for any other Restricted Payment); (5) so long as no Default
or Event of Default shall have occurred and be continuing, the payment of
dividends on the shares of Series A Preferred Stock issued on the Issue Date and
on any additional shares of such stock issued in lieu of cash dividends thereon
with (x) the net proceeds of a sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company or (y) the net cash
proceeds of any capital contribution to the Company; and (6) so long as no
Default or Event of Default shall have occurred and be continuing, Restricted
Payments not exceeding $7.5 million in the aggregate. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date in
accordance with clause (iii) of the immediately preceding paragraph, amounts
expended pursuant to clauses (2)(ii), 3(ii)(A), (4) and (5) shall be included in
such calculation.

 

Section 4.04 Limitation on Incurrence of Additional Indebtedness.

 

(a) The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, incur, assume, guarantee, become liable, contingently or
otherwise, with respect to, or otherwise become responsible for payment of
(collectively, “incur”), any Indebtedness (including Acquired Indebtedness but
excluding Permitted Indebtedness); provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company may incur
Indebtedness (including, without limitation, Acquired Indebtedness) if on the
date of the incurrence of such Indebtedness the Consolidated Fixed Charge
Coverage Ratio of the Company is at least 2.0 to 1.0.

 

(b) Indebtedness of a Person which is secured by a Lien on an asset acquired by
the Company or a Subsidiary of the Company (whether or not such Indebtedness is
assumed by the acquiring Person) shall be deemed incurred at the time of the
Asset Acquisition.

 

(c) The Company shall not incur any Indebtedness which by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated in right of
payment to any other Indebtedness of the Company unless such Indebtedness is
also by its terms (or by the terms of any agreement governing such Indebtedness)
made expressly subordinate in right of payment to the Securities, pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are most favorable to
the holders of any other Indebtedness of the Company.

 

(d) For purposes of determining compliance with the limitations in this Section
4.04, in the event that any proposed Indebtedness meets the criteria of more
than one of the categories of Permitted Indebtedness or is entitled to be
incurred pursuant to paragraph (a) of this Section 4.04, the Company will be
permitted to classify such item of Indebtedness on the date of its incurrence in
any manner that complies with this covenant, and later reclassify any such item
of Indebtedness from time to time, so long as such item could have been so
classified on the date of its incurrence or at any time thereafter in a manner
that complies with this Section 4.04.

 

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Section 4.05 Corporate Existence.

 

(a) Except as otherwise permitted by Article Five, the Company shall do or cause
to be done, at its own cost and expense, all things necessary to preserve and
keep in full force and effect its corporate existence and the corporate,
partnership or other existence of each of the Subsidiaries in accordance with
the respective organizational documents of the Company or the Subsidiary, as the
case may be, and the rights (charter and statutory) and material franchises of
the Company and each of the Subsidiaries; provided, however, that the Company
shall not be required to preserve any such right or franchise, or the corporate
existence of any Subsidiary, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and each of the Subsidiaries, taken as a whole, and
that the loss thereof does not, and will not, have a material adverse effect on
the ability of the Company to perform its obligations under the Securities or
this Indenture.

 

Section 4.06 Payment of Taxes and Other Claims.

 

The Company will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any of the Subsidiaries or
upon the income, profits or property of it or any of the Subsidiaries and (b)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a material liability or Lien upon the property of it
or any of the Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings properly instituted and
diligently conducted and for which appropriate provision has been made or where
the failure to pay or discharge the same would not have a material adverse
effect on the ability of the Company to perform its obligations under the
Securities or this Indenture.

 

Section 4.07 Maintenance of Properties and Insurance.

 

(a) The Company shall cause all material properties owned by or leased by it or
any of the Subsidiaries used or useful to the conduct of its business or the
business of any of the Subsidiaries to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals and replacements
thereof, all as in its judgment may be necessary, so that the business carried
on in connection therewith may be properly conducted at all times; provided,
however, that nothing in this Section 4.07 shall prevent the Company or any of
the Subsidiaries from discontinuing the use, operation or maintenance of any of
such properties, or disposing of any of them, if such discontinuance or disposal
is, in the judgment of the Board of Directors of the Company or any Subsidiary
concerned, or of an officer (or other agent employed by the Company or of any of
the Subsidiaries) of the Company or any of the Subsidiaries having managerial
responsibility for any such property, desirable in the conduct of the business
of the Company or any Subsidiary, and if such discontinuance or disposal does
not, and will not, have a material adverse effect on the ability of the Company
to perform its obligations under the Securities or this Indenture.

 

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(b) The Company shall maintain, and shall cause the Subsidiaries to maintain,
insurance with responsible carriers against such risks and in such amounts, and
with such deductibles, retentions, self-insured amounts and co-insurance
provisions, as are customarily carried by similar businesses of similar size,
including property and casualty loss, workers’ compensation and interruption of
business insurance.

 

Section 4.08 Compliance Certificate; Notice of Default.

 

(a) The annual financial statements delivered pursuant to Section 4.10 to the
Trustee shall be accompanied by an Officers’ Certificate, one of the signers of
which shall be the principal executive officer, principal financial officer or
principal accounting officer of the Company, stating that a review of the
activities of the Company has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge the
Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no Default or Event of Default
occurred during such year and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe its status with particularity. The Officers’ Certificate shall also
notify the Trustee should the Company elect to change the manner in which it
fixes its fiscal year end.

 

(b) (i) If any Default or Event of Default has occurred and is continuing or
(ii) if any Holder seeks to exercise any remedy hereunder with respect to a
claimed Default under this Indenture or the Securities, the Company shall
deliver to the Trustee, at its address set forth in Section 10.02 hereof, by
registered or certified mail or by facsimile transmission followed by hard copy
by registered or certified mail an Officers’ Certificate specifying such event,
notice or other action and the status thereof within ten Business Days of its
becoming aware of such occurrence.

 

Section 4.09 Compliance with Laws.

 

The Company will comply, and will cause each of the Subsidiaries to comply, with
all applicable statutes, rules, regulations, orders and restrictions of the
United States, all states and municipalities thereof, and of any governmental
department, commission, board, regulatory authority, bureau, agency and
instrumentality of the foregoing, in respect of the conduct of their respective
businesses and the ownership of their respective properties, except for such
noncompliances as would not in the aggregate have a material adverse effect on
the financial condition or results of operations of the Company and its
Subsidiaries.

 

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Section 4.10 Reports to Holders.

 

(a) Whether or not required by the Commission, so long as any Securities are
outstanding, the Company will furnish to the Holders of Securities, within the
time periods specified in the Commission’s rules and regulations:

 

(i) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and, with respect to
the annual information only, a report on the annual financial statements by the
Company’s certified independent accountants; and

 

(ii) all current reports that would be required to be filed with the Commission
on Form 8-K if the Company were required to file such reports.

 

(b) Whether or not required by the Commission, the Company will file a copy of
all the information and reports referred to in clauses (a) and (b) of this
Section 4.10 with the Commission for public availability within the time periods
specified in the Commission’s rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.

 

(c) For so long as any of the Securities remain outstanding, the Company will
make available to any prospective purchaser of the Securities or Holder of the
Securities and to securities analysts, upon their request, the information
required by Rule 144A(d)(4) under the Securities Act during any period when the
Company is not subject to Section 13 or 15(d) under the Exchange Act.

 

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 4.11 Waiver of Stay; Extension of Usury Laws.

 

The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company from paying all or any portion of
the principal of and/or interest on the Securities 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 (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.

 

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Section 4.12 Limitation on Transactions with Affiliates.

 

(a) The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction or series
of related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with, or for
the benefit of, any of its Affiliates (each, an “Affiliate Transaction”), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable than those that might
reasonably be expected to have been obtained in a comparable transaction at such
time on an arm’s-length basis from a Person that is not an Affiliate of the
Company or such Subsidiary, if such a transaction were to be available to the
Company or such Subsidiary. All Affiliate Transactions (and each series of
related Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a fair market value in
excess of $1.0 million shall be approved by the Board of Directors of the
Company or such Subsidiary, as the case may be, such approval to be evidenced by
a Board Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Subsidiary of the Company enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $7.5 million, the Company or such
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Subsidiary, as the case may be, from
a financial point of view, from an Independent Financial Advisor and file the
same with the Trustee.

 

(b) The restrictions set forth in clause (a) shall not apply to (i) reasonable
fees and compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Subsidiary of the
Company as determined in good faith by the Company’s Board of Directors or
senior management; (ii) transactions exclusively between or among the Company
and any of its Subsidiaries or exclusively between or among such Subsidiaries;
provided such transactions are not otherwise prohibited by this Indenture; (iii)
payments of annual fees and reimbursement of reasonable expenses in accordance
with the provisions of the Management Services Agreement; (iii) any employment
agreement entered into in the ordinary course of business, (iv) payments
pursuant to customary tax sharing agreements that do not exceed the amount
otherwise payable by the company or such Subsidiary; and (v) Restricted Payments
permitted by this Indenture and Permitted Investments.

 

Section 4.13 Conduct of Business.

 

The Company and its Subsidiaries shall not engage in any businesses other than a
Related Business.

 

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Section 4.14 Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries.

 

The Company shall not, and shall not cause or permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or permit to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of the
Company to (a) pay dividends or make any other distributions on or in respect of
its Capital Stock, or with respect to any other interest or participation in, or
measured by, its profits; (b) make loans or advances or to pay any Indebtedness
or other obligation owed to the Company or any other Subsidiary of the Company;
or (c) transfer any of its property or assets to the Company or any other
Subsidiary of the Company, except for such -encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) this Indenture; (3) any
Credit Agreement; (4) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any Subsidiary of the Company, or any
customary restriction on the ability of a Subsidiary of the Company to dividend,
distribute or otherwise transfer any asset which secures Purchase Money
Indebtedness of such Subsidiary; (5) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired; (6) Permitted Liens securing
Indebtedness that limit the right of the debtor to dispose of the assets subject
to such Lien; or (7) an agreement governing Indebtedness incurred to Refinance
the Indebtedness issued, assumed or incurred pursuant to an agreement referred
to in clause (2), (3) or (5) above; provided, however, that the provisions
relating to such encumbrance or restriction contained in any such Indebtedness
are no less favorable to the Company in any material respect as determined by
the Board of Directors of the Company in their reasonable and good faith
judgment than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (3) or (5).

 

Section 4.15 Limitation on Liens.

 

The Company shall not, and shall not cause or permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or permit or suffer to exist any
Liens of any kind against or upon any property or assets of the Company or any
of its Subsidiaries whether owned on the Issue Date or acquired after the Issue
Date, or any proceeds therefrom, or assign or otherwise convey any right to
receive income or profits therefrom unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to the
Securities, the Securities are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Liens and (ii) in all other cases,
the Securities are equally and ratably secured, except for (A) Liens existing as
of the Issue Date to the extent and in the manner such Liens are in effect on
the Issue Date; (B) Liens of the Company or a Wholly Owned Subsidiary of the
Company on assets of any Subsidiary of the Company; (C) Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness which
has been secured by a Lien permitted under this Indenture and which has been
incurred in accordance with the provisions of this Indenture; provided, however,
that such Liens (X) are no less favorable to the Holders and are not more
favorable to the lienholders with respect to such Liens than the

 

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Liens in respect of the Indebtedness being Refinanced and (Y) do not extend to
or cover any property or assets of the Company or any of its Subsidiaries not
securing the Indebtedness so Refinanced; and (D) Permitted Liens.

 

Section 4.16 Change of Control.

 

(a) Upon the occurrence of a Change of Control, the Company shall make an offer
to purchase (the “Change of Control Offer”) all of the then outstanding
Securities pursuant to the offer described in paragraph (b) below at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest and Additional Interest, if any, thereon to the date of purchase.

 

(b) Within 30 days following the date upon which a Change of Control occurred,
the Company shall send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. The notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Change of Control Offer. Such notice shall state:

 

(i) that the Change of Control Offer is being made pursuant to this Section 4.16
and that all Securities tendered and not withdrawn will be accepted for payment;

 

(ii) the purchase price (including the amount of accrued interest) and the
purchase date, which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed, other than as may be required by law (the
“Change of Control Payment Date”);

 

(iii) that any Security not tendered will continue to accrue interest;

 

(iv) that, unless the Company defaults in making payment therefor, any Security
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date;

 

(v) that Holders electing to have a Security purchased pursuant to a Change of
Control Offer will be required to surrender the Security, with the form entitled
“Option of Holder to Elect Purchase” on the reverse of the Security completed,
to the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control Payment Date;

 

(vi) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the second Business Day prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Securities the
Holder delivered for purchase and a statement that such Holder is withdrawing
his election to have such Security purchased;

 

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(vii) that Holders whose Securities are purchased only in part will be issued
new Securities in a principal amount equal to the unpurchased portion of the
Securities surrendered; and

 

(viii) the circumstances and relevant facts regarding such Change of Control.

 

On the Change of Control Payment Date, the Company shall (i) accept for payment
Securities or portions thereof tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price plus accrued and unpaid interest and Additional Interest, if any,
of all Securities so tendered and (iii) deliver to the Trustee Securities so
accepted together with an Officers’ Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall promptly
authenticate and mail (or cause to be transferred by book entry) to the Holders
of Securities so accepted payment in an amount equal to the purchase price plus
accrued and unpaid interest and Additional Interest, if any, thereon and the
Trustee shall promptly authenticate and mail to such Holders new Securities
equal in principal amount to any unpurchased portion of the Securities
surrendered. Any Securities not so accepted shall be promptly mailed by the
Company to the Holder thereof. For purposes of this Section 4.16, the Trustee
shall act as the Paying Agent.

 

Any amounts remaining after the purchase of Securities pursuant to a Change of
Control Offer shall be returned by the Trustee to the Company.

 

The Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.

 

The provisions of this Section 4.16 that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provision of this Indenture is applicable.

 

The Company will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in this
Section 4.16 applicable to a Change of Control Offer made by the Company and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.

 

The Company shall comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of
Securities pursuant to a Change of Control Offer. To the extent the provisions
of any securities laws or regulations conflict with the provisions under this
Section 4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue of such conflict.

 

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Section 4.17 Limitation on Asset Sales.

 

The Company shall not, and shall not permit any of its Subsidiaries to,
consummate an Asset Sale unless (i) the Company or the applicable Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or equity interests sold or
otherwise disposed of (as determined in good faith by the Company’s Board of
Directors), (ii) at least 75% of the consideration received for the assets sold
by the Company or the Subsidiary, as the case may be, from such Asset Sale shall
be in the form of cash or Cash Equivalents and is received at the time of such
disposition; provided, however, that (A) notes received by the Company as
consideration for an Asset Sale that are converted into cash or Cash Equivalents
immediately following the consummation of such Asset Sale, (B) the assumption by
the purchaser of assets pursuant to an Asset Sale of liabilities of the Company
(other than liabilities that are by their terms subordinate to the Securities)
or (C) shall, in each case of the immediately preceding clauses (A) and (B), be
deemed to be cash or Cash Equivalents at the time of such Asset Sale in an
amount equal to, in the case of clause (A), the amount of cash or Cash
Equivalents realized on such conversion and, in the case of clause (B), the
amount of the liabilities so assumed, as reflected on the balance sheet of the
Company, and (iii) following the consummation of an Asset Sale, the Company
shall, or shall cause such Subsidiary, within 365 days of receipt thereof either
(A) to apply the Net Cash Proceeds related to such Asset Sale to prepay any
Indebtedness that by its terms is not subordinate to the Securities, (B) to make
a Permitted Investment or an investment in properties and assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in a Related Business (collectively,
“Replacement Assets”) or (C) a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A) and (iii)(B). On the 365th day after
an Asset Sale, or such earlier date, if any, as the Board of Directors of the
Company or of such Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii)(A), (iii) (B) and
(iii) (C) of the next preceding sentence (each, a “Net Proceeds Offer Trigger
Date”), such aggregate amount of Net Cash Proceeds which have not been applied
on or before the applicable Net Proceeds Offer Trigger Date as permitted in
clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (or, in
the case of a Net Proceeds Offer Trigger Date occurring prior to such 365th day,
the aggregate amount of Net Cash Proceeds that the Board of Directors has
determined not to so apply) (each, a “Net Proceeds Offer Amount”) shall be
applied by the Company or such Subsidiary to make an offer to purchase (the “Net
Proceeds Offer”) on a date (the “Net Proceeds Offer Payment Date”) not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis (and on a pro rata basis with the
holders of Indebtedness of the Company that is not by its terms subordinate to
the Securities), that amount of Securities equal to the Net Proceeds Offer
Amount at a price equal to 100% of the principal amount of the Securities to be
purchased, plus accrued and unpaid interest and Additional Interest, if any,
thereon, if any, to the date of purchase; provided, however, that if at any time
any non-cash consideration received by the Company or any Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed

 

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of for cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this Section 4.17. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5.0 million resulting from one or more Asset Sales (at
which time, the entire unutilized Net Proceeds Offer Amount, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
paragraph).

 

In the event of the transfer of substantially all (but not all) of the property
and assets of the Company and its Subsidiaries as an entirety to a Person in a
transaction permitted under Section 5.01, the successor corporation shall be
deemed to have sold the properties and assets of the Company and its
Subsidiaries not so transferred for purposes of this Section 4.17, and shall
comply with the provisions of this Section 4.17 with respect to such deemed sale
as if it were an Asset Sale. In addition, the fair market value of such
properties and assets of the Company or its Subsidiaries deemed to be sold shall
be deemed to be Net Cash Proceeds for purposes of this Section 4.17.

 

Notwithstanding the two immediately preceding paragraphs, the Company and its
Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraphs to the extent (i) at least 75% of the consideration for
such Asset Sale constitutes Replacement Assets and (ii) such Asset Sale is for
fair market value; provided that any consideration not constituting Replacement
Assets received by the Company or any of its Subsidiaries in connection with any
Asset Sale permitted to be consummated under this paragraph shall constitute Net
Cash Proceeds subject to the provisions of the two preceding paragraphs.

 

Notice of each Net Proceeds Offer pursuant to this Section 4.17 shall be mailed
or caused to be mailed, by first class mail, by the Company within 25 days
following the applicable Net Proceeds Offer Trigger Date to all Holders at their
last registered addresses, with a copy to the Trustee. The notice shall contain
all instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Net Proceeds Offer and shall state the following
terms:

 

(a) that the Net Proceeds Offer is being made pursuant to this Section 4.17 and
that all Securities tendered will be accepted for payment; provided, however,
that if the principal amount of Securities tendered in the Net Proceeds Offer
exceeds the Net Proceeds Offer Amount, the Company shall select the Securities
to be purchased on a pro rata basis;

 

(b) the Net Proceeds Offer price (including the amount of accrued interest, if
any) and the Net Proceeds Offer Payment Date;

 

(c) that any Security not tendered will continue to accrue interest;

 

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(d) that, unless the Company defaults in making payment therefor, any Security
accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue
interest after the Net Proceeds Offer Payment Date;

 

(e) that Holders electing to have a Security purchased pursuant to the Net
Proceeds Offer will be required to surrender the Security, with the form
entitled “Option of Holder to Elect Purchase” on the reverse of the Security
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Net Proceeds Offer Payment Date;

 

(f) that Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the second Business Day prior to the Net Proceeds Offer
Payment Date, a facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Security purchased; and

 

(g) that Holders whose Securities are purchased only in part will be issued new
Securities in a principal amount at maturity equal to the unpurchased portion of
the Securities surrendered.

 

On or before the Net Proceeds Offer Payment Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Net Proceeds
Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the purchase price, plus accrued interest, if any, of all Securities to be
purchased and (iii) deliver to the Trustee Securities so accepted together with
an Officers’ Certificate stating the Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price, plus
accrued interest, if any, thereon and the Trustee shall promptly authenticate
and mail to such Holders new Securities equal in principal amount to any
unpurchased portion of the Securities surrendered. Any Securities not so
accepted shall be promptly mailed by the Company to the Holder thereof. For
purposes of this Section 4.17, the Trustee shall act as the Paying Agent.

 

Any Net Proceeds Offer shall remain open for at least 20 Business Days (or such
longer period as may be required by law) and until the close of business on the
Net Proceeds Offer Payment Date.

 

The Company shall comply with all tender offer rules under state and federal
securities laws, including, but not limited to, Section 14(e) under the Exchange
Act and Rule 14e-l thereunder, to the extent applicable to such offer. To the
extent that the provisions of any securities laws or regulations conflict with
the foregoing provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of this Indenture by
virtue of such conflict.

 

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Upon completion of a Net Proceeds Offer, the amount of Net Cash Proceeds will be
reset at zero. Accordingly, to the extent that the aggregate amount of
Securities tendered pursuant to a Net Proceeds Offer is less than the Net Cash
Proceeds, any remaining Net Cash Proceeds held by the Trustee shall be returned
by the Trustee to the Company and the Company may use any remaining Net Cash
Proceeds for general corporate purposes.

 

Section 4.18 Limitation on Preferred Stock of Subsidiaries.

 

The Company shall not permit any of its Subsidiaries to issue any Preferred
Stock (other than to the Company or to a Wholly Owned Subsidiary of the Company)
or permit any Person (other than the Company or a Wholly Owned Subsidiary of the
Company) to own any Preferred Stock of any Subsidiary of the Company.

 

Section 4.19 Limitation on Guarantees.

 

The Company will not cause or permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or permit or suffer to exist any Guarantee of
any other Indebtedness of the Company unless (i) in the case of Guarantees of
Indebtedness that is expressly subordinate or junior in right of payment of the
Securities, the Securities have a Guarantee that is senior to such Guarantee and
(ii) in all other cases, the Securities are equally and ratably Guaranteed.

 

Section 4.20 Payments for Consent.

 

The Company will not, and will not permit any of its Subsidiaries to, directly
or indirectly, pay or cause to be paid any consideration to or for the benefit
of any Holder of Securities 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 and is paid to all Holders of
the Securities that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.

 

ARTICLE FIVE

 

SUCCESSOR CORPORATION

 

Section 5.01 Merger, Consolidation and Sale of Assets.

 

(a) The Company shall not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of (or cause or permit any Subsidiary of the Company to
sell, assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of the Company’s assets

 

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(determined on a consolidated basis for the Company and the Company’s
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company’s Subsidiaries
substantially as an entirety (the “Surviving Entity”) (x) shall be a corporation
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (y) shall expressly assume, by
supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium and Additional Interest, if any, and interest on all
of the Securities and the performance of every covenant of the Securities and
this Indenture and the Registration Rights Agreement on the part of the Company
to be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, shall be
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.04 unless such transaction is solely to form
a new holding company for the Company; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and (iv) the
Company or the Surviving Entity shall have delivered to the Trustee an Officers’
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to such
transaction have been satisfied.

 

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

 

Section 5.02 Successor Corporation Substituted.

 

Upon any such consolidation, merger, conveyance, lease or transfer of all or
substantially all of the assets of the Company in accordance with the foregoing
provisions of this Article Five, in which the Company is not the surviving
Person, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made will
succeed to, and be substituted for, and

 

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may exercise every right and power of, the Company under this Indenture and the
Securities with the same effect as if such successor had been named as the
Company therein.

 

ARTICLE SIX

 

DEFAULT AND REMEDIES

 

Section 6.01 Events of Default.

 

An “Event of Default” occurs if:

 

(a) the Company fails to pay interest on, or Additional Interest with respect
to, any Securities when the same becomes due and payable and the default
continues for a period of 30 days;

 

(b) the Company fails to pay the principal or premium on any Securities, when
such principal or premium, if any, becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a payment to purchase
Securities tendered pursuant to a Change of Control Offer or a Net Proceeds
Offer);

 

(c) the Company or any Subsidiary of the Company defaults in the observance or
performance of any other covenant or agreement contained in this Indenture,
which default continues for a period of 30 days after the Company receives
written notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the outstanding
principal amount of the Securities (except in the case of a default with respect
to Section 4.16 or Section 5.01, which will constitute an Event of Default with
such notice requirement but without such passage of time requirement);

 

(d) the Company or any Subsidiary of the Company fails to pay at final maturity
(giving effect to any applicable grace periods and any extensions thereof) the
principal amount of any Indebtedness of the Company or any Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness, in any case if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
in default for failure to pay principal at final maturity or which has been
accelerated, aggregates $5.0 million or more at any time;

 

(e) one or more judgments in an aggregate amount in excess of $5.0 million shall
have been rendered against the Company or any of its Subsidiaries and such
judgments remain undischarged, unpaid or unstayed for a period of 60 days after
such judgment or judgments become final and non-appealable;

 

(f) the Company or any of its Significant Subsidiaries (i) admits in writing to
a creditor its inability to pay its debts generally as they become due, (ii)
commences a voluntary case or proceeding under any Bankruptcy Law with respect
to itself, (iii)

 

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consents to the entry of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Law, (iv) consents to the
appointment of a Custodian of it or for substantially all of its property, (v)
consents to or acquiesces in the institution of a bankruptcy or an insolvency
proceeding against it, (vi) makes a general assignment for the benefit of its
creditors or (vii) takes any partnership or corporate action, as the case may
be, to authorize or effect any of the foregoing; or

 

(g) a court of competent jurisdiction enters a judgment, decree or order for
relief in respect of the Company or any of its Significant Subsidiaries in an
involuntary case or proceeding under any Bankruptcy Law, which shall (i) approve
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or any of its Significant Subsidiaries,
(ii) appoint a Custodian of the Company or any of its Significant Subsidiaries
or for substantially all of any of their property or (iii) order the winding-up
or liquidation of its affairs; and such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days.

 

Section 6.02 Acceleration

 

If an Event of Default (other than an Event of Default specified in clause (f)
or (g) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Securities may declare the
principal of, premium, if any, and accrued and unpaid interest and Additional
Interest, if any, on all the Securities to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a “notice of acceleration”, and the same shall become
immediately due and payable. If an Event of Default specified in clause (f) or
(g) above occurs and is continuing, then all unpaid principal of, and premium
and Additional Interest, if any, and accrued and unpaid interest on all of the
outstanding Securities shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.

 

At any time after a declaration of acceleration with respect to the Securities
as described in the preceding paragraph, the Holders of a majority in principal
amount of the Securities may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue, installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its reasonable expenses, disbursements and advances
and (v) in the event of the cure or waiver of an Event of Default of the type
described in clause (f) or (g) of Section 6.01, the Trustee shall have received
an Officers’ Certificate and an Opinion of Counsel that such Event of Default
has been cured or waived. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.

 

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Section 6.03 Other Remedies.

 

If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities, this Indenture or the Guarantees.

 

The Trustee may maintain a proceeding even if it does not possess any of the
Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder 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 to the
extent permitted by law.

 

Section 6.04 Waiver of Past Defaults.

 

Subject to Section 2.09, Section 6.07 and Section 9.02, the Holders of not less
than a majority in aggregate principal amount of the outstanding Securities by
written notice to the Trustee may waive an existing Default or Event of Default
and its consequences, except a Default in the payment of principal of or
interest or Additional Interest on any Security as specified in clauses (a) and
(b) of Section 6.01. The Company shall deliver to the Trustee an Officers’
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. When a Default or Event of
Default is waived, it is cured and ceases and the duties and obligations of the
Trustee shall be those expressly set forth in this Indenture (other than those
duties and obligations that by their terms arise upon the occurrence of a
Default or an Event of Default).

 

Section 6.05 Control by Majority.

 

The Holders of not less than a majority in aggregate principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. Subject to Section 7.01, however, the Trustee may refuse
to follow any direction that conflicts with any law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another Holder, or
that may, in the sole judgment of the Trustee, give rise to or subject the
Trustee to personal liability; provided that the Trustee may take any other
action deemed proper by the Trustee.

 

In the event the Trustee takes any action or follows any direction pursuant to
this Indenture, the Trustee shall be entitled to indemnification satisfactory to
it in its sole discretion against any loss or expense caused by taking such
action or following such direction.

 

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Section 6.06 Limitation on Suits.

 

A Securityholder may not pursue any remedy with respect to this Indenture or the
Securities unless:

 

(a) the Holder gives to the Trustee written notice of a continuing Event of
Default;

 

(b) the Holder or Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue the remedy;

 

(c) such Holder or Holders offer and, if requested, provide to the Trustee
indemnity satisfactory to the Trustee in its sole judgment against any loss,
liability or expense;

 

(d) the Trustee does not comply with the request within 60 days after receipt of
the written request and the offer described in clause (3) above and, if
requested, the provision of indemnity; and

 

(e) during such 60-day period the Holder or Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a written direction
which, in the opinion of the Trustee, is inconsistent with the request.

 

A Securityholder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over such other
Securityholder.

 

Section 6.07 Rights of Holders to Receive Payment.

 

Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on a Security, on or after the
respective due dates expressed in such Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the written consent of the Holder.

 

Section 6.08 Collection Suit by Trustee.

 

If an Event of Default in payment of principal or interest specified in clause
(a) or (b) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest and fees remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection, including the actual, documented
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.

 

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Section 6.09 Trustee May File Proofs of Claim.

 

The Trustee may file such 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 reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings relating to the Company, the Subsidiaries, their creditors or their
property and shall be entitled and empowered to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same, and any Custodian in any such judicial proceedings is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize 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 Securities
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 6.10 Priorities.

 

If the Trustee collects any money or property pursuant to this Article Six, it
shall pay out the money or property in the following order:

 

First: to the Trustee for amounts due under Section 7.07;

 

Second: to Holders for amounts due and unpaid on the Securities for principal
and interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Securities for principal and interest,
respectively; and

 

Third: to the Company.

 

The Trustee, upon prior notice to the Company, may fix a record date and payment
date for any payment to Securityholders pursuant to this Section 6.10.

 

Section 6.11 Undertaking for Costs.

 

Each party to this Indenture agrees and each Holder of any Security by its
acceptance thereof shall be deemed to have agreed that, 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 in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys’ fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not

 

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apply to a suit instituted by the Company, any suit instituted by the Trustee,
any suit instituted by a Holder pursuant to Section 6.07, or any suit instituted
by a Holder or Holders of more than 10% in principal amount of the outstanding
Securities.

 

ARTICLE SEVEN

 

TRUSTEE

 

Section 7.01 Duties of Trustee.

 

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

 

(b) Except during the continuance of an Event of Default actually known to a
Responsible Officer of the Trustee:

 

(i) The Trustee need perform only those duties as are expressly and specifically
set forth herein and no others and no implied covenants, duties or obligations
whatsoever shall be read into this Indenture against the Trustee.

 

(ii) In the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions and such other documents delivered to it
pursuant to Section 10.04 hereof furnished to the Trustee and conforming to the
requirements of this Indenture. However, in the case of any such certificates or
opinions which are specifically required to be furnished to the Trustee by any
provision hereof, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture (but
need not confirm or investigate the accuracy of mathematical calculations or
other facts stated therein).

 

(c) Notwithstanding anything to the contrary herein contained, the Trustee may
not be relieved from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:

 

(i) This paragraph does not limit the effect of paragraph (b) or (e) of this
Section 7.01.

 

(ii) The Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.

 

(iii) The Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05.

 

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(d) No provision of this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or to take or omit to take any action under this
Indenture or take any action at the request or direction of Holders if it shall
reasonably believe that repayment of such funds is not assured to it or it does
not receive an indemnity that is, in its sole discretion, not adequate against
such risk, liability, loss, fee or expense which might be incurred by it in
compliance with such request or direction.

 

(e) Every provision of this Indenture that in any way relates to the Trustee is
subject to this Section 7.01.

 

(f) The Trustee shall not be liable for interest on any money or assets received
by it except as the Trustee may agree in writing with the Company. Assets held
in trust by the Trustee need not be segregated from other assets of the Trustee
except to the extent required by law.

 

(g) The Trustee shall not be accountable for the use of any of the Securities
delivered hereunder or the proceeds thereof.

 

(h) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or willful misconduct as provided
herein.

 

(i) Except for Events of Default relating to the payment of the principal or the
interest with respect to the Securities, the Trustee shall not be required to
take notice, and shall not be deemed to have notice, of any default unless the
Trustee shall be notified specifically and expressly in writing of the default;
such notice being deemed “actual notice.” In the absence of delivery of a
written notice satisfying these requirements, the Trustee may assume
conclusively that there is no default, except as noted above.

 

Section 7.02 Rights of Trustee.

 

Subject to Section 7.01:

 

(a) The Trustee may rely conclusively on any document 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 document.

 

(b) Before the Trustee acts or refrains from acting, it may require an Officers’
Certificate and an Opinion of Counsel, which shall conform to the provisions of
Section 10.04 and Section 10.05. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such certificate or
opinion.

 

(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent (other than an agent
who is an employee of the Trustee) appointed in good faith.

 

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(d) The Trustee shall not be liable for any action it takes or omits to take in
good faith which it reasonably believes to be authorized or within its rights or
powers.

 

(e) The Trustee may consult with counsel of its selection and the advice or
opinion of such counsel as to matters of law which shall be full and complete
authorization and protection from liability in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.

 

(f) The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request, order or direction of any
of the Holders pursuant to the provisions of this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity satisfactory
to the Trustee in its sole judgment against the costs, expenses and liabilities
which may be incurred therein or thereby.

 

(g) The Trustee shall not be deemed to have notice of any Event, of Default
unless a Responsible Officer of the Trustee has actual knowledge thereof or
unless written notice of any event which is in fact such a default is received
by the Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Securities and this Indenture.

 

(h) The rights, privileges, protections, immunities and benefits given to the
Trustee, 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.

 

(i) The Trustee may request that the Company deliver an Officers’ Certificate
setting forth the names of individuals and/or titles of officers authorized at
such time to take specified actions pursuant to this Indenture, which Officers’
Certificate may be signed by any person authorized to sign an Officers’
Certificate, including any person specified as so authorized in any such
certificate previously delivered and not superseded.

 

(j) 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.

 

Section 7.03 Individual Rights of Trustee.

 

The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company, its Subsidiaries,
or their respective Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee must
comply with Section 7.10 and Section 7.11.

 

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Section 7.04 Trustee’s Disclaimer.

 

The Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company’s use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee’s certificate of authentication.

 

Section 7.05 Notice of Default.

 

If a Default or an Event of Default occurs and is continuing and the Trustee
receives actual notice of such event, the Trustee shall mail to each
Securityholder, as their names and addresses appear on the Securityholder list
described in Section 2.05, notice of the uncured Default or Event of Default
within 60 days after the Trustee receives such notice. Except in the case of a
Default or an Event of Default in payment of principal of, or interest on, any
Security, including the failure to make payment on (i) the Change of Control
Payment Date pursuant to a Change of Control Offer or (ii) the Net Proceeds
Offer Payment Date pursuant to a Net Proceeds Offer, the Trustee shall not be
deemed to have actual knowledge or actual notice of a Default or an Event of
Default unless a Responsible Officer of the Trustee received written notice of
such Default or Event of Default or the Trustee may withhold the notice if and
so long as the board of directors, the executive committee, or a trust committee
of directors and/or Responsible Officers, of the Trustee in good faith
determines that withholding the notice is in the interest of the
Security-holders.

 

Section 7.06 Reports by Trustee to Holders.

 

Within 60 days after each May 15, the Trustee shall, to the extent that any of
the events described in TIA Section 313(a) occurred within the previous twelve
months, but not otherwise, mail to each Securityholder a brief report dated as
of such May 15 that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Sections 313(b), 313(c) and 313(d).

 

A copy of each report at the time of its mailing to Securityholders shall be
mailed to the Company and filed with the Commission and each securities
exchange, if any, on which the Securities are listed.

 

The Company shall promptly notify the Trustee if the Securities become listed on
any securities exchange or of any delisting thereof.

 

Section 7.07 Compensation and Indemnity.

 

The Company shall pay to the Trustee from time to time such compensation for its
services hereunder (which shall be agreed to in writing from time to time by the
Company and the Trustee). The Trustee’s compensation shall not be limited by any
law

 

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on compensation of a trustee of an express trust. The Company shall reimburse
the Trustee upon request for all reasonable disbursements, expenses and advances
(including reasonable fees and expenses of counsel) incurred or made by it in
addition to the compensation for its services, except any such disbursements,
expenses and advances as shall be determined to have been caused by the
Trustee’s own negligence or willful misconduct. Such expenses shall include the
compensation, disbursements and expenses of the Trustee’s agents, accountants,
experts and counsel and any taxes or other expenses incurred by a trust created
pursuant to Section 8.01.

 

The Company shall indemnify the Trustee and each predecessor trustee for, and
hold it harmless against, any loss, liability, claim, damage or expense,
including taxes (other than taxes based upon, measured by or determined by the
income of the Trustee) incurred by the Trustee without negligence or willful
misconduct on its part arising out of or in connection with the administration
of this trust and its duties under this Indenture, including the reasonable
expenses and attorneys’ fees of defending itself against any claim (whether
asserted by a Holder, the Company or any other Person) of liability arising
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee of which a Responsible Officer has received written notice
for which it may seek indemnity. However, the failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder
unless and to the extent such failure results in the forfeiture by the Company
of material rights and defenses. The Company shall defend the claim and the
Trustee shall cooperate in the defense (and may employ its own counsel) at the
Company’s expense. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee determined to have been
caused by the Trustee’s own negligence or willful misconduct.

 

To secure the Company’s payment obligations in this Section 7.07, the Trustee
shall have a senior claim prior to the Securities against all money or property
held or collected by the Trustee, in its capacity as Trustee.

 

When the Trustee incurs expenses or renders services after an Event of Default
specified in clause (f) or (g) of Section 6.01 occurs, the expenses (including
the reasonable fees and expenses of its agents and counsel) and the compensation
for the services shall be preferred over the status of the Holders in a
proceeding under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company’s obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Company’s obligations pursuant to
Article Eight and any rejection or termination under any Bankruptcy Law.

 

Section 7.08 Replacement of Trustee.

 

The Trustee may resign at any time by so notifying the Company in writing. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee in writing and
may appoint a successor trustee with the Company’s consent. The Company may
remove the Trustee if:

 

(a) the Trustee fails to comply with Section 7.10;

 

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(b) the Trustee is adjudged bankrupt or insolvent;

 

(c) a receiver or other public officer takes charge of the Trustee or its
property; or

 

(d) the Trustee becomes incapable of acting.

 

If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall notify in writing each Holder of such
event and shall appoint a successor Trustee within 60 days after the effective
date of such resignation, removal or vacancy. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.

 

A successor Trustee shall deliver a written acceptance of its appointment to the
retiring Trustee and to the Company. Immediately after that, the retiring
Trustee shall transfer, after payment of all sums then owing to the Trustee
pursuant to Section 7.07, all property held by it as Trustee to the successor
Trustee, subject to the Lien provided in Section 7.07, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.

 

If a successor Trustee does not take office within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of at least 10% in aggregate principal amount of the outstanding Securities may
petition, at the expense of the Company any court of competent jurisdiction for
the appointment of a successor Trustee.

 

If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

 

Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company’s obligations under Section 7.07 shall continue for the benefit of the
retiring Trustee.

 

Section 7.09 Successor Trustee by Mergers Etc.

 

If the Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
resulting, surviving or transferee corporation without any further act shall, if
such resulting, surviving or transferee corporation is otherwise eligible
hereunder, be the successor Trustee; provided, however, that such corporation
shall be otherwise qualified and eligible under this Article Seven.

 

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Section 7.10 Eligibility; Disqualification.

 

This Indenture shall always have a Trustee who satisfies the requirement of TIA
Sections 310(a)(1) and 310(a)(5). The Trustee shall be a commercial bank with
trust powers or a trust company, which shall have (or, in the case of a
financial institution, commercial bank with trust powers or a trust company
included in a bank holding company system, the related bank holding company
shall have) a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition, and subject to
supervision or examination by federal or state authorities, so long as any of
the Securities are outstanding. The Trustee shall comply with TIA Section
310(b); provided, however, that there shall be excluded from the operation of
TIA Section 310(b)(1) any indenture or indentures under which other securities,
or certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met. The provisions of TIA Section 310 shall apply to the Company,
as obligors of the Securities.

 

Section 7.11 Preferential Collection of Claims Against Company

 

The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated. The
provisions of TIA Section 311 shall apply to the Company, as obligor of the
Securities.

 

ARTICLE EIGHT

 

SATISFACTION AND DISCHARGE OF INDENTURE

 

Section 8.01 Legal Defeasance and Covenant Defeasance.

 

(a) The Company may, at its option, at any time, with respect to the Securities,
elect to have either paragraph (b) or paragraph (c) below be applied to the
outstanding Securities upon compliance with the conditions set forth in
paragraph (d).

 

(b) Upon the Company’s exercise under paragraph (a) of the option applicable to
this paragraph (b), the Company shall be deemed to have been released and
discharged from its obligations with respect to the outstanding Securities on
the date the conditions set forth below are satisfied (hereinafter, “Legal
Defeasance”). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the outstanding Securities, which shall thereafter be deemed to be
“outstanding” only for the purposes of the Sections and matters under this
Indenture referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned, except for the following which shall survive until otherwise
terminated or

 

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discharged hereunder: (i) the rights of Holders of outstanding Securities to
receive solely from the trust fund described in paragraph (d) below and as more
fully set forth in such paragraph, payments in respect of the principal of,
premium, if any, and interest and Additional Interest on such Securities when
such payments are due, and (ii) obligations listed in Section 8.03, subject to
compliance with this Section 8.01. The Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Securities.

 

(c) Upon the Company’s exercise under paragraph (a) of the option applicable to
this paragraph (c), the Company shall be released and discharged from its
obligations under any covenant contained in Article Five and in Sections 4.03
through 4.18 with respect to the outstanding Securities on and after the date
the conditions set forth below are satisfied (hereinafter, “Covenant
Defeasance”), and the Securities shall thereafter be deemed to be not
“outstanding” for the purpose of any direction, waiver, consent or declaration
or act of Holder; (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed “outstanding” for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Company and its Subsidiaries may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01(c), nor shall any event referred to in Section
6.01(d) or (e) thereafter constitute a Default or an Event of Default thereunder
but, except as specified above, the remainder of this Indenture and such
Securities shall be unaffected thereby.

 

(d) The following shall be the conditions to application of either paragraph (b)
or paragraph (c) above to the outstanding Securities:

 

(i) The Company shall have irrevocably deposited in trust with the Trustee,
pursuant to an irrevocable trust and security’ agreement in form and substance
satisfactory to the Trustee, U.S. Legal Tender or direct non-callable
obligations of, or non-callable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged (“U.S. Government
Obligations”) maturing as to principal and interest in such amounts and at such
times as are sufficient, without consideration of the reinvestment of such
interest and after payment of all Federal, state and local taxes or other
charges or assessments in respect thereof payable by the Trustee, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof (in form and substance reasonably satisfactory to
the Trustee) delivered to the Trustee, to pay the principal of, premium and
Additional Interest, if any, and interest on all the outstanding Securities on
the dates on which any such payments are due and payable in accordance with the
terms of this Indenture and of the Securities, and the Company must specify
whether pursuant to paragraph (b) or (c) above the Securities are being defeased
to maturity or to a particular redemption date;

 

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(ii) Such deposit shall not cause the Trustee to have a conflicting interest as
defined in and for purposes of the TIA;

 

(iii) No Default or Event of Default or event which with notice or lapse of time
or both would become a Default or an Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit or,
insofar as Section 6.01(f) or (g) is concerned, at any time during the period
ending on the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of such
period);

 

(iv) Such deposit will not result in a Default under this Indenture or a breach
or violation of, or constitute a default under, any other material instrument or
agreement to which the Company or any of its Subsidiaries is a party or by which
it or its property is bound;

 

(v) (i) In the event the Company elects paragraph (b) hereof, the Company shall
deliver to the Trustee an Opinion of Counsel in the United States, in form and
substance reasonably satisfactory to the Trustee to the effect that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall state that Holders of the Securities will
not recognize income gain or loss for Federal income tax purposes as a result of
such deposit and the defeasance contemplated hereby and will be subject to
Federal income taxes in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred or (ii) in the event
the Company elects paragraph (c) hereof, the Company shall deliver to the
Trustee an Opinion of Counsel in the United States, in form and substance
reasonably satisfactory to the Trustee, to the effect that Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated hereby and
will be subject to Federal income tax in the same amounts and in the same manner
arid at the same times as would have been the case if such deposit and
defeasance had not occurred;

 

(vi) The Trustee shall have received an Opinion of Counsel stating that the
deposit shall not result in the Company, the Trustee or the trust becoming or
being deemed to be an “investment company” under the Investment Company Act of
1940;

 

(vii) The Company shall have delivered to the Trustee an Officers’ Certificate,
in form and substance reasonably satisfactory to the Trustee, stating that the
deposit under clause (1) was not made by the Company or any Subsidiary of the
Company with the intent of preferring the Holders over any other creditors of
the Company defeating, hindering, delaying or defrauding any other creditors of
the Company or any Subsidiary of the Company or others;

 

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(viii) The Company shall have delivered to the Trustee an Opinion of Counsel, in
form and substance reasonably satisfactory to the Trustee, to the effect that
assuming no intervening bankruptcy of the Company between the date of deposit
and the 91st day following the deposit and that no Holder of Securities is an
insider of the Company, after the passage of 90 days following the deposit, the
trust funds will not be subject to any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors’ rights generally; and

 

(ix) The Company has delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that all conditions precedent specified herein
relating to the defeasance contemplated by this Section 8.01 have been complied
with.

 

In the event all or any portion of the Securities are to be redeemed through
such irrevocable trust, the Company must make arrangements satisfactory to the
Trustee, at the time of such deposit, for the giving of the notice of such
redemption or redemptions by the Trustee in the name and at the expense of the
Company.

 

Section 8.02 Satisfaction and Discharge.

 

The Indenture will be discharged and will cease to be of further effect (except
as to surviving rights of registration of transfer or exchange of the
Securities, as expressly provided for in this Indenture) as to all outstanding
Securities when:

 

(a) either (a) all the Securities, theretofore authenticated and delivered
(except lost, stolen or destroyed Securities which have been replaced or paid
and Securities for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Securities not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Securities not
theretofore delivered to the Trustee for cancellation;

 

(b) the Company has paid all other sums payable under this Indenture by the
Company;

 

(c) the Company has delivered to the Trustee an Officers’ Certificate stating
that all conditions precedent under this Indenture relating to the satisfaction
and discharge of this Indenture have been complied with; and

 

(d) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or shall occur as a result of such deposit and such deposit
will not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which the Company is
bound.

 

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Section 8.03 Survival of Certain Obligations.

 

Notwithstanding the satisfaction and discharge of this Indenture and of the
Securities referred to in Section 8.01 or Section 8.02, the respective
obligations of the Company and the Trustee under Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02, 6.07, Article Seven, Sections
8.05, 8.06 and 8.07 shall survive until the Securities are no longer
outstanding, and thereafter the obligations of the Company and the Trustee under
Sections 7.07, 8.05, 8.06 and 8.07 shall survive such satisfaction and
discharge. Nothing contained in this Article Eight shall abrogate any of the
obligations or duties of the Trustee under this Indenture.

 

Section 8.04 Acknowledgment of Discharge by Trustee.

 

Subject to Section 8.07, after (i) the conditions of Section 8.01 or Section
8.02 have been satisfied, (ii) the Company has paid or caused to be paid all
other sums payable hereunder by the Company and (iii) the Company has delivered
to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company’s obligations under this Indenture except for those surviving
obligations specified in Section 8.03.

 

Section 8.05 Application of Trust Assets.

 

The Trustee shall hold any U.S. Legal Tender or U.S. Government Obligations
deposited with it pursuant to this Article Eight in the irrevocable trust
established pursuant to Section 8.01. The Trustee shall apply the deposited U.S.
Legal Tender or the U.S. Government Obligations, together with earnings thereon,
through the Paying Agent, in accordance with this Indenture and the terms of the
irrevocable trust agreement established pursuant to Section 8.01, to the payment
of principal of and interest on the Securities. The U.S. Legal Tender or U.S.
Government Obligations so held in trust and deposited with the Trustee in
compliance with Section 8.01 shall not be part of the trust estate under this
Indenture, but shall constitute a separate trust fund for the benefit of all
Holders entitled thereto.

 

Section 8.06 Repayment to the Company; Unclaimed Money.

 

Subject to Section 7.07 and Section 8.01, the Trustee shall promptly pay to the
Company, upon receipt by the Trustee of an Officers’ Certificate, any excess
money, determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Company upon receipt by the
Trustee or the Paying Agent, as the case may be, of an Officers’ Certificate,
any money held by it for the payment of principal, premium, if any, or interest
that remains unclaimed for one year after payment to the Holders is required;
provided, however, that the Trustee and the Paying Agent before being required
to make any payment shall, at the expense of the Company and within 10 days of
receipt of the Officers’ Certificate described above, cause to be

 

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published once in a newspaper of general circulation in the City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Securityholders entitled to money must look solely to the Company for
payment as general creditors unless an applicable abandoned property law
designates another Person, and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.

 

Section 8.07 Reinstatement.

 

If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding pending before or any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then the Company’s obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had been made pursuant to
this Indenture until such time as the Trustee is permitted to apply all such
U.S. Legal Tender or U.S. Government Obligations in accordance with this
Indenture; provided, however, that if the Company has made any payment of
principal of, premium, if any, or interest on any Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the U.S. Legal
Tender or U.S. Government Obligations held by the Trustee or Paying Agent.

 

ARTICLE NINE

 

AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

Section 9.01 Without Consent of Holders.

 

The Company and the Trustee, together, may amend or supplement this Indenture or
the Securities without notice to or consent of any Securityholder, so long as
such change does not, in the opinion of the Trustee, adversely affect the rights
of any of the holders in any material respect:

 

(a) to cure any ambiguity, defect or inconsistency;

 

(b) to evidence the succession in accordance with Article Five hereof of another
Person to the Company and the assumption by any such successor of the covenants
of the Company herein and in the Securities;

 

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

 

(d) to make any other change that does not, in the opinion of the Trustee,
adversely affect in any material respect the rights of any Securityholders
hereunder;

 

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(e) to comply with any requirements of the Commission in connection with the
qualification of this Indenture under the TIA; or

 

(f) to make any change that would provide any additional benefit or rights to
the Securityholders or that does not adversely affect the rights of any
Securityholder; provided that the Company has delivered to the Trustee an
Opinion of Counsel and an Officers’ Certificate, each stating that such
amendment or supplement complies with the provisions of this Section 9.01.

 

Section 9.02 With Consent of Holders.

 

Subject to Section 6.07, the Company and the Trustee, together, with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the outstanding Securities, may amend or supplement this Indenture or
the Securities, without notice to any other Securityholders.

 

Subject to Section 6.07, the Holder or Holders of a majority in aggregate
principal amount of the outstanding Securities may waive compliance by the
Company with any provision of this Indenture or the Securities without notice to
any other Security-holder. Without the consent of each Securityholder affected,
however, no amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may:

 

(a) reduce the principal amount of Securities whose Holders must consent to an
amendment, supplement or waiver;

 

(b) reduce the rate of or change or have the effect of changing the time for
payment of interest, including defaulted interest, on any Securities;

 

(c) reduce the principal of or change or have the effect of changing the fixed
maturity of any Securities, or change the date on which any Securities may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor;

 

(d) make any Securities payable an money other than that stated in the
Securities;

 

(e) waive a Default or Event of Default in the payment of principal of, or
interest or premium, or Additional Interest, if any, on the Securities (except a
rescission of acceleration of the Securities by the Holders of at least a
majority in aggregate principal amount of the Securities and a waiver of the
payment default that resulted from such acceleration);

 

(f) make any change in provisions of this Indenture protecting the right of each
Holder to receive payment of principal of and interest on such Security on or
after the due date thereof or to bring suit to enforce such payment, or
permitting Holders of a majority in principal amount of the Securities to waive
Defaults or Events of Default;

 

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(g) make any changes in Section 6.04, Section 6.07 or this Section 9.02;

 

(h) modify or change any provision of this Indenture or the related definitions
affecting the ranking of the Securities in a manner which adversely affects the
Holders;

 

(i) amend, modify or change in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto;

 

(j) impair the right to institute suit for the enforcement of any payment on or
with respect to the Securities;

 

(k) except as otherwise permitted by Section 5.01, consent to the assignment or
transfer by the Company of any of its rights or obligations under the Indenture;
or

 

(l) make any change in the provisions of this Section 9.02.

 

It shall not be necessary for the consent of the Holders under this Article Nine
to approve the particular form of any proposed amendment, supplement or waiver,
but it shall be sufficient if such consent approves the substance thereof.

 

After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplement, waiver or
supplemental indenture.

 

Section 9.03 Compliance with TIA.

 

From the date on which this Indenture is qualified under the TIA, every
amendment, waiver or supplement of this Indenture or the Securities shall comply
with the TIA as then in effect.

 

Section 9.04 Revocation and Effect of Consents.

 

Until an amendment, waiver or supplement becomes effective, consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the consenting
Holder’s Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to his
Security or portion of his Security by notice to the Trustee or the Company
received before the date on which the Trustee receives an Officers’ Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.

 

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The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date.

 

After an amendment, supplement or waiver becomes effective, it shall bind every
Securityholder, unless it makes a change described in any of clauses (a) through
(h) of Section 9.02, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder’s Security; provided that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal of and
interest on a Security, on or after the respective due dates expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates without the consent of such Holder.

 

Section 9.05 Notation on or Exchange of Securities.

 

If an amendment, supplement or waiver changes the terms of a Security, the
Company may require the Holder of the Security to deliver it to the Trustee. The
Company may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.

 

Section 9.06 Trustee To Sign Amendments, Etc.

 

The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that the Trustee may, but shall not be
obligated to execute any such amendment, supplement or waiver which affects the
Trustee’s own rights, duties or immunities under this Indenture. The Trustee
shall be provided with, and shall be fully protected in relying upon, an Opinion
of Counsel and an Officers’ Certificate each stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture and constitutes the legal, valid and
binding obligations of the Company enforceable in accordance with its terms.

 

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ARTICLE TEN

 

MISCELLANEOUS

 

Section 10.01 TIA Controls.

 

If any provision of this Indenture limits, qualifies, or conflicts with the
duties imposed by operation of Section 318(c) of the TIA, the imposed duties
shall control.

 

Section 10.02 Notices.

 

Any notices or other communications required or permitted hereunder shall be in
writing, and shall be sufficiently given if made by hand delivery, by telecopier
or registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:

 

if to the Company:

 

Leslie’s Poolmart, Inc.

3925 East Broadway Road, Suite 100

Phoenix, Arizona 85040

Attention: Don Anderson

Facsimile: (602) 366-3944

 

with copies to:

 

GCP California Fund, L.P.

c/o Leonard Green & Partners, L.P.

11111 Santa Monica Boulevard, Suite 2000

Los Angeles, California 90025

Attention: John M. Baumer

Facsimile: (310) 954-0404

 

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California 90071

Attention: Jennifer Bellah Maguire, Esq.

Facsimile: (213) 229-7520

 

if to the Trustee:

 

The Bank of New York Trust Company, N.A.

700 South Flower Street

Los Angeles, California 90017

Attention: Corporate Trust Administration

Facsimile: (213) 630-6298

 

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Each of the Company and the Trustee by written notice to each other such Person
may designate additional or different addresses for notices to such Person. Any
notice or communication to the Company and the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
receipt is acknowledged, if telecopied; and five (5) calendar days after mailing
if sent by registered or certified mail, postage prepaid (except that,
notwithstanding the foregoing, a notice of change of address shall not be deemed
to have been given until actually received by the addressee).

 

Any notice or communication mailed to a Holder shall be mailed to him by first
class mail or other equivalent means at his address as it appears on the
registration books of the Registrar and shall be sufficiently given to him if so
mailed within the time prescribed.

 

Failure to mail a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

 

Section 10.03 Communications by Holders with Other Holders.

 

Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA Section 312(c).

 

Section 10.04 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 shall furnish to the Trustee at the request of
the Trustee:

 

(a) an Officers’ Certificate, in form and substance satisfactory to the Trustee,
stating that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with; and

 

(b) an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.

 

Section 10.05 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 the Officers’ Certificate
required by Section 4.08, shall include:

 

(a) a statement that the Person making such certificate or opinion has read such
covenant or condition and the definitions relating thereto;

 

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

 

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

 

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

 

Section 10.06 Rules by Trustee, Paying Agent, Registrar.

 

The Trustee, Paying Agent or Registrar may make reasonable rules for its
functions.

 

Section 10.07 Legal Holidays.

 

If a payment date is not a Business Day, payment may be made on the next
succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.

 

Section 10.08 Governing Law; Waiver of Jury Trial.

 

THIS INDENTURE, THE SECURITIES AND THE GUARANTEES WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF LAW OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Each of the parties hereto
agrees to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Indenture. EACH OF
THE COMPANY AND THE TRUSTEE 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 INDENTURE, THE NOTES OR THE
TRANSACTION CONTEMPLATED HEREBY.

 

Section 10.09 No Adverse Interpretation of Other Agreements.

 

This Indenture may not be used to interpret another indenture, loan or debt
agreement of any of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.

 

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Section 10.10 No Recourse Against Others.

 

A director, officer, employee, stockholder or incorporator, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.

 

Section 10.11 Successors.

 

All agreements of the Company in this Indenture and the Securities shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successor.

 

Section 10.12 Duplicate Originals.

 

All parties may sign any number of copies of this Indenture. Each signed copy or
counterpart shall be an original, but all of them together shall represent the
same agreement.

 

Section 10.13 Severability.

 

In case any one or more of the provisions in this Indenture or in the Securities
shall be held invalid, illegal or unenforceable, in any respect for any reason,
the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.

 

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SIGNATURES

 

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

 

       

THE COMPANY:

       

LESLIE’S POOLMART, INC.

       

By:

 

/s/ Lawrence Hayward

--------------------------------------------------------------------------------

            Lawrence Hayward             President and             Chief
Executive Officer

Attest:

 

/s/ Donald J. Anderson

--------------------------------------------------------------------------------

            Donald J. Anderson             Executive Vice President,            
Chief Financial Officer and             Secretary                

THE TRUSTEE:

       

THE BANK OF NEW YORK TRUST

COMPANY, N.A.,

       

as Trustee

       

By:

 

/s/ Sandee Parks

--------------------------------------------------------------------------------

            Sandee Parks             Vice President

 

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EXHIBIT A

 

FORM OF SERIES A SECURITY

 

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
“SECURITIES ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

 

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (II) IN THE UNITED STATES TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (III) OUTSIDE THE UNITED STATE IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

 

A-1

--------------------------------------------------------------------------------

LESLIE’S POOLMART, INC.

 

7 3/4% Senior Note

due February 1, 2013, Series A

 

 

No. [    ]

 

CUSIP No.:            

$[            ]

 

LESLIE’S POOLMART, INC., a Delaware corporation (the “Company”, which term
includes any successor corporation), for value received promises to pay to
[            ] or registered assigns, the principal sum of $[            ]
Dollars, on February 1, 2013.

 

    Interest Payment Dates:

 

February 1 and August 1, commencing August 1, 2005

    Record Dates:

 

January 15 and July 15

 

Reference is made to the further provisions of this Security contained herein,
which will for all purposes have the same effect as if set forth at this place.

 

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

 

LESLIE’S POOLMART, INC.

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

A-2

--------------------------------------------------------------------------------

FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the 7¾% Senior Notes due 2013, described in the within-mentioned
Indenture.

 

Dated:                     , 200    

 

THE BANK OF NEW YORK TRUST

COMPANY, N.A.,

as Trustee

By:

 

 

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    Authorized Signatory

 

A-3

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(REVERSE OF SECURITY)

 

LESLIE’S POOLMART, INC.

 

7 3/4% Senior Note

due February 1, 2013, Series A

 

1. Interest.

 

LESLIE’S POOLMART, INC., a Delaware corporation (the “Company”), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above. The Company will pay interest semi-annually in arrears on February 1 and
August 1 of each year (the “Interest Payment Date”), commencing August 1, 2005.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January 25, 2005.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.

 

The Company shall pay interest on overdue principal from time to time on demand
at the rate borne by the Securities and on overdue installments of interest
(without regard to any applicable grace periods) to the extent lawful.

 

2. Method of Payment.

 

The Company will pay principal (and premium, if any) on the Securities at the
Trustee’s corporate office in New York, New York. At the Company’s option, when
due, interest may be paid at the Trustee’s corporate trust office or by check
mailed to the registered addresses of Holders. If a Holder has given wire
transfer instructions to the Company, the Company will pay all principal,
interest and premium and Additional Interest, if any, on that Holder’s
Securities in accordance with those instructions. The Company shall pay interest
on the Securities to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date even
if the Securities are cancelled on registration of transfer or registration of
exchange after such Record Date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts (“U.S. Legal Tender”).

 

3. Paying Agent and Registrar.

 

Initially, The Bank of New York Trust Company, N.A. (the “Trustee”) will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or Co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar or
Co-Registrar.

 

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4. Indenture.

 

The Company issued the Securities under an Indenture, dated as of January 25,
2005 (the “Indenture”), between the Company and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) (the “TIA”), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general obligations of the
Company.

 

5. Optional Redemption after Four Years.

 

On or after February 1, 2009 the Securities will be redeemable, at the Company’s
option, in whole at any time or in part from time to time, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on February 1 of the year set
forth below, plus, in each case, accrued and unpaid interest, if any, to the
date of redemption:

 

Year

--------------------------------------------------------------------------------

   Percentage

--------------------------------------------------------------------------------

 

2009

   103.875 %

2010

   101.938 %

2011 and thereafter

   100.000 %

 

6. Optional Redemption with Proceeds of Public Equity Offerings.

 

On or prior to February 1, 2008, the Company may, at its option, use the net
cash proceeds of one or more Public Equity Offerings (as defined below) to
redeem up to 35% of the aggregate principal amount of the Securities at a
redemption price equal to 107.750% of the principal amount thereof, plus accrued
and unpaid interest and Additional Interest, if any, to the date of redemption;
provided that after giving effect to any such redemption at least 65% of
aggregate principal amount of the Securities remains outstanding. In order to
effect the foregoing redemption with the proceeds of any Public Equity Offering,
the Company shall make such redemption not more than 60 days after the
consummation of any such Public Equity Offering.

 

As used in the preceding paragraph, “Public Equity Offering” means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act, or any successor statute.

 

7. Optional Redemption with Make-Whole Premium.

 

Prior to February 1, 2009, the Company may, at its option, redeem the
Securities, in whole at any time or in part from time to time, at a redemption
price equal to 100.00% of the principal amount thereof plus the Make-Whole
Premium, plus accrued and unpaid interest and Additional Interest, if any, to,
the date of redemption date.

 

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As used in the preceding paragraph, “Make-Whole Premium” means, with respect to
any Securities on any Redemption Date, the excess of (a) the present value on
such Redemption Date of (1) the redemption price of the Securities on February
1, 2009 plus (2) all scheduled interest payments on the Securities through
February 1, 2009 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Adjusted Treasury Rate plus 50 basis points over (b)
the principal amount of the Securities.

 

8. Notice of Redemption.

 

Notice of redemption will be mailed at least 30 days but not more than 60 days
before the Redemption Date to each Holder of Securities to be redeemed at such
Holder’s registered address. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal to
$1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.

 

If any Security is to be redeemed in part only, the notice of redemption that
relates to such Security shall state the portion of the principal amount thereof
to be redeemed. A new Security in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption.

 

9. Change of Control Offer.

 

Upon the occurrence of a Change of Control, the Company will be required to
offer to purchase all of the outstanding Securities at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest and
Additional Interest, if any, thereon to the date of repurchase.

 

10. Limitation on Disposition of Assets.

 

The Company is, subject to certain conditions, obligated to make an offer to
purchase Securities at 100% of their principal amount, plus accrued and unpaid
interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.

 

11. Denominations; Transfer; Exchange.

 

The Securities are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer of
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents

 

A-6

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and to pay certain transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities or portions thereof selected
for redemption, except the unredeemed portion of any Security being redeemed in
part.

 

12. Persons Deemed Owners.

 

The registered Holder of a Security shall be treated as the owner of it for all
purposes.

 

13. Unclaimed Funds.

 

If funds for the payment of principal or interest remain unclaimed for one year,
the Trustee and the Paying Agent will repay the funds to the Company at its
request. After that, all liability of the Trustee and such Paying Agent with
respect to such funds shall cease.

 

14. Legal Defeasance and Covenant Defeasance.

 

The Company may be discharged from its obligations under the Indenture and the
Securities except for certain provisions thereof, and may be discharged from
obligations to comply with certain covenants contained in the Indenture and the
Securities, in each case upon satisfaction of certain conditions specified in
the Indenture.

 

15. Amendment; Supplement; Waiver.

 

Subject to certain exceptions, the Indenture and the Securities may be amended
or supplemented with the written consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the Commission in connection with
the qualification of the Indenture under the TIA, or make any other change that
does not materially adversely affect the rights of any Holder of a Security.

 

16. Restrictive Covenants.

 

The Indenture contains certain covenants that, among other things, limit the
ability of the Company and the Subsidiaries to make restricted payments, to
incur indebtedness, to create liens, to issue preferred or other capital stock
of Subsidiaries to third parties, to sell assets, to permit restrictions on
dividends and other payments by Subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.

 

A-7

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17. Defaults and Remedies.

 

If an Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
is not obligated to enforce the Indenture or the Securities unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of certain continuing Defaults or Events of Default if it determines that
withholding notice is in their interest.

 

18. Trustee Dealing with Company.

 

The Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.

 

19. No Recourse Against Others.

 

No stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.

 

20. Authentication.

 

This Security shall not be valid until the Trustee or authenticating agent signs
the certificate of authentication on this Security.

 

21. Abbreviations and Defined Terms.

 

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

 

A-8

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22. CUSIP Numbers.

 

Pursuant to a recommendation promulgated by the Committee on Uniform Security
Identification Procedures, the Company has caused a CUSIP number to be printed
on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.

 

23. Registration Rights.

 

Pursuant to the Registration Rights Agreements, the Company will be obligated
upon the occurrence of certain events to consummate an exchange offer pursuant
to which the Holder of this Security shall have the right to exchange this
Series A Security for the Company’s 7 3/4% Senior Notes due 2013, Series B,
which will have been registered under the Securities Act, in like principal
amount and having terms identical in all material respects as the Series A
Securities. The Holders shall be entitled to receive certain Additional Interest
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreements.

 

The Company will furnish to any Holder of a Security upon written request and
without charge a copy of the Indenture and the Registration Rights Agreements.
Requests may be made to: Leslie’s Poolmart, Inc., 3925 East Broadway Road, Suite
100, Phoenix, Arizona 85040, Attn: Chief Financial Officer.

 

24. Governing Laws.

 

This Security and the Indenture shall be governed by and construed in accordance
with the laws of the State of New York, as applied to contracts made and
performed within the State of New York, without regard to principles of conflict
of laws. Each of the parties hereto agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Note.

 

A-9

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ASSIGNMENT FORM

 

I or we assign and transfer this Security to:

 

(Print or type name, address and zip code of assignee or transferee)

 

(Insert Social Security or other identifying number of assignee or transferee)

 

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

 

Dated:                    

  Signed:  

 

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(Sign exactly as name appears on the

other side of this Security)

 

Signature Guarantee:

 

 

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Participant in a recognized Signature Guarantee

Medallion Program (or other signature guarantor

program reasonably acceptable to the Trustee)

    

 

A-10

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OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have This Security purchased by the Company pursuant to
Section 4.16 or Section 4.17 of the Indenture, check the appropriate box:

 

Section 4.16 [  ]                                      
                                                                    Section 4.17
[  ]

 

If you want to elect to have only part of this Security purchased by the Company
pursuant to Section 4.16 or Section 4.17 of the Indenture, state the amount:
$                

 

Dated:                     

       Signed:  

 

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

 

Signature Guarantee:

 

 

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Participant in a recognized Signature Guarantee

Medallion Program (or other signature guarantor

program reasonably acceptable to the Trustee)

    

 

Dated:         Your Signature:

 

A-11

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EXHIBIT B

 

FORM OF SERIES B SECURITY

 

LESLIE’S POOLMART, INC.

 

7 3/4% Senior Note

due February 1, 2013, Series B

 

     CUSIP No.:            

No. [  ]

   $[            ]

 

LESLIE’S POOLMART, INC., a Delaware corporation (the “Company”, which term
includes any successor corporation), for value received promises to pay to
[            ] or registered assigns, the principal sum of $[            ]
Dollars, on February 1, 2013.

 

    Interest Payment Dates:

   February 1 and August 1, commencing August 1, 2005

    Record Dates:

   January 15 and July 15     

 

 

Reference is made to the further provisions of this Security contained herein,
which will for all purposes have the same effect as if set forth at this place.

 

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

 

LESLIE’S POOLMART, INC.

By:

 

 

--------------------------------------------------------------------------------

    Name:     Title:

By:

 

 

--------------------------------------------------------------------------------

    Name:     Title:

 

B-1

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FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the 7¾% Senior Notes due 2013, Series B, described in the
within-mentioned Indenture.

 

THE BANK OF NEW YORK TRUST

COMPANY, N.A.,

as Trustee

By:

 

 

--------------------------------------------------------------------------------

    Authorized Signatory

 

B-2

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(REVERSE OF SECURITY)

 

LESLIE’S POOLMART, INC.

 

7¾% Senior Note

due February 1, 2013 Series B

 

1. Interest.

 

LESLIE’S POOLMART, INC., a Delaware corporation (the “Company”), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above. The Company will pay interest semi-annually in arrears on February 1 and
August 1 of each year (the “Interest Payment Date”), commencing August 1, 2005.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January 25, 2005.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.

 

The Company shall pay interest on overdue principal from time to time on demand
at the rate borne by the Securities and on overdue installments of interest
(without regard to any applicable grace periods) to the extent lawful.

 

2. Method of Payment.

 

The Company will pay principal (and premium, if any) on the Securities at the
Trustee’s corporate office in New York, New York. At the Company’s option, when
due, interest may be paid at the Trustee’s corporate trust office or by check
mailed to the registered addresses of Holders. If a Holder has given wire
transfer instructions to the Company, the Company will pay all principal,
interest and premium and Additional Interest, if any, on that Holder’s
Securities in accordance with those instructions. The Company shall pay interest
on the Securities to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date even
if the Securities are cancelled on registration of transfer or registration of
exchange after such Record Date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts (“U.S. Legal Tender”).

 

3. Paying Agent and Registrar.

 

Initially, The Bank of New York Trust Company, N.A. (the “Trustee”) will act-as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or Co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar or
Co-Registrar.

 

B-3

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4. Indenture.

 

The Company issued the Securities under an Indenture, dated as of January 25,
2005 (the “Indenture”), between the Company and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) (the “TIA”), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general obligations of the
Company.

 

5. Optional Redemption after Four Years.

 

On or after February 1, 2009 the Securities will be redeemable, at the Company’s
option, in whole at any time or in part from time to time, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on February of the year set
forth below, plus, in each case, accrued and unpaid interest, if any, to the
date of redemption:

 

Year

--------------------------------------------------------------------------------

   Percentage

--------------------------------------------------------------------------------

 

2009

   103.875 %

2010

   101.938 %

2011 and thereafter

   100.000 %

 

6. Optional Redemption with Proceeds of Public Equity Offerings.

 

On or prior to February 1, 2008, the Company may, at its option, use the net
cash proceeds of one or more Public Equity Offerings (as defined below) to
redeem up to 35% of the aggregate principal amount of the Securities at a
redemption price equal to 107.750% of the principal amount thereof, plus accrued
and unpaid interest and Additional Interest, if any, to the date of redemption;
provided that after giving effect to any such redemption at least 65% of
aggregate principal amount of the Securities remains outstanding. In order to
effect the foregoing redemption with the proceeds of any Public Equity Offering,
the Company shall make such redemption not more than 60 days after the
consummation of any such Public Equity Offering.

 

As used in the preceding paragraph, “Public Equity Offering” means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act, or any successor statute.

 

7. Optional Redemption with Make-Whole Premium.

 

Prior to February 1, 2009, the Company may, at its option, redeem the
Securities, in whole at any time or in part from time to time, at a redemption
price equal to 100.00% of the principal amount thereof plus the Make-Whole
Premium, plus accrued and unpaid interest and Additional Interest, if any, to,
the date of redemption date.

 

B-4

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As used in the preceding paragraph, “Make-Whole Premium” means, with respect to
any Securities on any Redemption Date, the excess of (a) the present value on
such Redemption Date of (1) the redemption price of the Securities on February
1, 2009 plus (2) all scheduled interest payments on the Securities through
February 1, 2009 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Adjusted Treasury Rate plus 50 basis points over (b)
the principal amount of the Securities.

 

8. Notice of Redemption.

 

Notice of redemption will be mailed at least 30 days but not more than 60 days
before the Redemption Date to each Holder of Securities to be redeemed at such
Holder’s registered address. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal to
$1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.

 

If any Security is to be redeemed in part only, the notice of redemption that
relates to such Security shall state the portion of the principal amount thereof
to be redeemed. A new Security in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption.

 

9. Change of Control Offer.

 

Upon the occurrence of a Change of Control, the Company will be required to
offer to purchase all of the outstanding Securities at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon to the date of repurchase.

 

10. Limitation on Disposition of Assets.

 

The Company is, subject to certain conditions, obligated to make an offer to
purchase Securities at 100% of their principal amount, plus accrued and unpaid
interest, if any, thereon to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.

 

11. Denominations; Transfer; Exchange.

 

The Securities are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer of
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents

 

B-5

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and to pay certain transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities or portions thereof selected
for redemption, except the unredeemed portion of any Security being redeemed in
part.

 

12. Persons Deemed Owners.

 

The registered Holder of a Security shall be treated as the owner of it for all
purposes.

 

13. Unclaimed Funds.

 

If funds for the payment of principal or interest remain unclaimed for one year,
the Trustee and the Paying Agent will repay the funds to the Company at its
request. After that, all liability of the Trustee and such Paying Agent with
respect to such funds shall cease.

 

14. Legal Defeasance and Covenant Defeasance.

 

The Company may be discharged from their obligations under the Indenture and the
Securities except for certain provisions thereof, and may be discharged from
their obligations to comply with certain covenants contained in the Indenture
and the Securities, in each case upon satisfaction of certain conditions
specified in the Indenture.

 

15. Amendment; Supplement; Waiver.

 

Subject to certain exceptions, the Indenture and the Securities may be amended
or supplemented with the written consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the Commission in connection with
the qualification of the Indenture under the TIA, or make any other change that
does not materially adversely affect the rights of any Holder of a Security.

 

16. Restrictive Covenants.

 

The Indenture contains certain covenants that, among other things, limit the
ability of the Company and the Subsidiaries to make restricted payments, to
incur indebtedness, to create liens, to issue preferred or other capital stock
of Subsidiaries to third parties, to sell assets, to permit restrictions on
dividends and other payments by Subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.

 

B-6

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17. Defaults and Remedies.

 

If an Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
is not obligated to enforce the Indenture or the Securities unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of certain continuing Defaults or Events of Default if it determines that
withholding notice is in their interest.

 

18. Trustee Dealings with Company.

 

The Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.

 

19. No Recourse Against Others.

 

No stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.

 

20. Authentication.

 

This Security shall not be valid until the Trustee or authenticating agent signs
the certificate of authentication on this Security.

 

21. Abbreviations and Defined Terms.

 

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

 

B-7

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22. CUSIP Numbers.

 

Pursuant to a recommendation promulgated by the Committee on Uniform Security
Identification Procedures, the Company has caused a CUSIP number to be printed
on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.

 

The Company will furnish to any Holder of a Security upon written request and
without charge a copy of the Indenture. Requests may be made to Leslie’s
Poolmart, Inc., 3925 East Broadway Road, Suite 100, Phoenix, Arizona 85040,
Attn: Chief Financial Officer.

 

23. Governing Law.

 

This Security and the Indenture shall be governed by and construed in accordance
with the laws of the State of New York, as applied to contracts made and
performed within the State of New York, without regard to principles of conflict
of laws. Each of the parties hereto agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Note.

 

B-8

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ASSIGNMENT FORM

 

I or we assign and transfer this Security to:

 

(Print or type name, address and zip code of assignee or transferee)

 

(Insert Social Security or other identifying number of assignee or transferee)

 

and irrevocably appoint

 

                                                                               
                                      , agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.

 

Dated:                     

 

Signed:

 

 

--------------------------------------------------------------------------------

           

(Sign exactly as name appears on the

other side of this Security)

Signature Guarantee:

 

 

--------------------------------------------------------------------------------

   

Participant in a recognized Signature Guarantee

Medallion Program (or other signature guarantor

program reasonably acceptable to the Trustee)

 

B-9

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OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have This Security purchased by the Company pursuant to
Section 4.16 or Section 4.17 of the Indenture, check the appropriate box:

 

Section 4.16  ¨

  

Section 4.17  ¨

 

If you want to elect to have only part of this Security purchased by the Company
pursuant to Section 4.16 or Section 4.17 of the Indenture, state the amount:
$                    

 

Dated:                    

 

Signed:

 

 

--------------------------------------------------------------------------------

           

(Sign exactly as name appears on the

other side of this Security)

Signature Guarantee:

 

 

--------------------------------------------------------------------------------

   

Participant in a recognized Signature Guarantee

Medallion Program (or other signature guarantor

program reasonably acceptable to the Trustee)

 

B-10