Exhibit 4.6 



PENN TREATY AMERICAN
CORPORATION 



Issuer 



AND 



WELLS FARGO BANK
MINNESOTA, N.A. 



Trustee 



INDENTURE 



Dated as of February 2,
2004 



6-1/4% Convertible
Subordinated Notes Due 2008 










This Cross-Reference Table is not part
of the Indenture. 



CROSS-REFERENCE TABLE*
Trust Indenture Act Section                                                                       Indenture Section

310   (a)(1).................................................................................................7.10
      (a)(2).................................................................................................7.10
      (a)(3).................................................................................................N.A.
      (a)(4).................................................................................................N.A.
      (a)(5).................................................................................................7.10
      (b).....................................................................................................7.9
      (c)....................................................................................................N.A.
311   (a)....................................................................................................7.14
      (b)....................................................................................................7.14
      (c)....................................................................................................N.A.
312   (a).............................................................................................2.5(a); 5.1
      (b)....................................................................................................16.5
      (c)....................................................................................................16.5
313   (a).....................................................................................................7.2
      (b)(1).................................................................................................N.A.
      (b)(2)..................................................................................................7.2
      (c).....................................................................................................7.2
      (d).....................................................................................................7.2
314   (a).............................................................................................4.7(a); 5.2
      (b)....................................................................................................N.A.
      (c)(1).................................................................................................16.7
      (c)(2).................................................................................................16.7
      (c)(3).................................................................................................N.A.
      (d)....................................................................................................N.A.
      (e)....................................................................................................16.7
      (f)....................................................................................................N.A.
315   (a)..................................................................................................7.1(b)
      (b).....................................................................................................6.8
      (c)..................................................................................................7.1(a)
      (d)..................................................................................................7.1(c)
      (e).....................................................................................................6.9
316   (a) (last sentence).....................................................................................8.4
      (a)(1)(A)...............................................................................................6.7
      (a)(1)(B)...............................................................................................6.7
      (a)(2).................................................................................................N.A.
      (b).....................................................................................................6.4
      (c).....................................................................................................9.2
317   (a).....................................................................................................6.2
      (b).....................................................................................................4.4
318   (a)............................................................................................16.10; 16.11

                                            N.A. means "not applicable."






                                                  Table of Contents

                                                                                                                 Page


                                                      Article I
                                                     DEFINITIONS
         Section 1.1       DEFINITIONS............................................................................1
         Section 1.2       INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT......................................7
         Section 1.3       RULES OF CONSTRUCTION..................................................................8

                                                     Article II
                                     ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
                                                AND EXCHANGE OF NOTES
         Section 2.1       DESIGNATION, AMOUNT AND ISSUE OF NOTES.................................................8
         Section 2.2       FORM OF NOTES..........................................................................9
         Section 2.3       DATE AND DENOMINATION OF NOTES; PAYMENTS OF INTEREST...................................9
         Section 2.4       EXECUTION OF NOTES....................................................................11
         Section 2.5       EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES; RESTRICTIONS ON TRANSFER;
                           DEPOSITORY............................................................................11
         Section 2.6       MUTILATED, DESTROYED, LOST OR STOLEN NOTES............................................17
         Section 2.7       TEMPORARY NOTES.......................................................................18
         Section 2.8       CANCELLATION OF NOTES PAID, ETC.......................................................18
         Section 2.9       CUSIP NUMBERS.........................................................................18

                                                     Article III
                                         REDEMPTION AND REPURCHASE OF NOTES
         Section 3.1       REDEMPTION PRICES.....................................................................19
         Section 3.2       NOTICE OF REDEMPTION; SELECTION OF NOTES..............................................19
         Section 3.3       PAYMENT OF NOTES CALLED FOR REDEMPTION................................................20
         Section 3.4       CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.........................................21
         Section 3.5       REPURCHASE OF NOTES UPON A CHANGE OF CONTROL..........................................21

                                                     Article IV
                                         PARTICULAR COVENANTS OF THE COMPANY
         Section 4.1       PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST............................................23
         Section 4.2       MAINTENANCE OF OFFICE OR AGENCY.......................................................23
         Section 4.3       APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE....................................24
         Section 4.4       PROVISIONS AS TO PAYING AGENT.........................................................24
         Section 4.5       CORPORATE EXISTENCE...................................................................25
         Section 4.6       STAY, EXTENSION AND USURY LAWS........................................................25
         Section 4.7       COMPLIANCE STATEMENT; NOTICE OF DEFAULTS..............................................25
         Section 4.8       LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES..........26
         Section 4.9       TAXES.................................................................................26
         Section 4.10      INSURANCE.............................................................................26

                                                      Article V
                                    NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY
         Section 5.1       NOTEHOLDERS' LISTS....................................................................26
         Section 5.2       REPORTS BY COMPANY....................................................................26

                                                     Article VI
                                                DEFAULTS AND REMEDIES
         Section 6.1       EVENTS OF DEFAULT.....................................................................27
         Section 6.2       PAYMENTS OF NOTES ON DEFAULT; SUIT THEREFOR...........................................29
         Section 6.3       APPLICATION OF MONIES COLLECTED BY TRUSTEE............................................31
         Section 6.4       PROCEEDINGS BY NOTEHOLDER.............................................................32
         Section 6.5       PROCEEDINGS BY TRUSTEE................................................................32
         Section 6.6       REMEDIES CUMULATIVE AND CONTINUING....................................................33
         Section 6.7       DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF NOTEHOLDERS............33
         Section 6.8       NOTICE OF DEFAULTS....................................................................33
         Section 6.9       UNDERTAKING TO PAY COSTS..............................................................33

                                                     Article VII
                                               CONCERNING THE TRUSTEE
         Section 7.1       DUTIES AND RESPONSIBILITIES OF TRUSTEE................................................34
         Section 7.2       REPORTS BY TRUSTEE TO HOLDERS.........................................................35
         Section 7.3       RELIANCE ON DOCUMENTS, OPINIONS, ETC..................................................35
         Section 7.4       NO RESPONSIBILITY FOR RECITALS, ETC...................................................36
         Section 7.5       TRUSTEE, PAYING AGENTS, CONVERSION AGENTS OR REGISTRAR MAY OWN NOTES..................36
         Section 7.6       MONIES TO BE HELD IN TRUST............................................................36
         Section 7.7       COMPENSATION AND EXPENSES OF TRUSTEE..................................................37
         Section 7.8       OFFICERS' CERTIFICATE AS EVIDENCE.....................................................37
         Section 7.9       CONFLICTING INTERESTS OF TRUSTEE......................................................37
         Section 7.10      ELIGIBILITY OF TRUSTEE................................................................37
         Section 7.11      RESIGNATION OR REMOVAL OF TRUSTEE.....................................................38
         Section 7.12      ACCEPTANCE BY SUCCESSOR TRUSTEE.......................................................39
         Section 7.13      SUCCESSOR, BY MERGER, ETC.............................................................39
         Section 7.14      LIMITATION ON RIGHTS OF TRUSTEE AS CREDITOR...........................................40

                                                    Article VIII
                                             CONCERNING THE NOTEHOLDERS
         Section 8.1       ACTION BY NOTEHOLDERS.................................................................40
         Section 8.2       PROOF OF EXECUTION BY NOTEHOLDERS.....................................................40
         Section 8.3       WHO ARE DEEMED ABSOLUTE OWNERS........................................................40
         Section 8.4       COMPANY-OWNED NOTES DISREGARDED.......................................................41
         Section 8.5       REVOCATION OF CONSENTS, FUTURE HOLDERS BOUND..........................................41

                                                     Article IX
                                                NOTEHOLDERS' MEETINGS
         Section 9.1       PURPOSES FOR WHICH MEETINGS MAY BE CALLED.............................................42
         Section 9.2       MANNER OF CALLING MEETINGS; RECORD DATE...............................................42
         Section 9.3       CALL OF MEETING BY COMPANY OR NOTEHOLDERS.............................................42
         Section 9.4       WHO MAY ATTEND AND VOTE AT MEETINGS...................................................43
         Section 9.5       MANNER OF VOTING AT MEETINGS AND RECORD TO BE KEPT....................................43
         Section 9.6       EXERCISE OF RIGHTS OF TRUSTEE AND NOTEHOLDERS NOT TO BE HINDERED OR DELAYED...........43

                                                      Article X
                                               SUPPLEMENTAL INDENTURES
         Section 10.1      SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS................................43
         Section 10.2      SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS...................................45
         Section 10.3      EFFECT OF SUPPLEMENTAL INDENTURES.....................................................45
         Section 10.4      NOTATION ON NOTES.....................................................................46
         Section 10.5      EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO THE TRUSTEE.......46

                                                     Article XI
                             CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE
         Section 11.1      COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS........................................46
         Section 11.2      SUCCESSOR COMPANY TO BE SUBSTITUTED...................................................46
         Section 11.3      OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE.............................................47

                                                     Article XII
                              SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
         Section 12.1      LEGAL DEFEASANCE AND COVENANT DEFEASANCE OF THE NOTES.................................47
         Section 12.2      TERMINATION OF OBLIGATIONS UPON CANCELLATION OF THE NOTES.............................49
         Section 12.3      SURVIVAL OF CERTAIN OBLIGATIONS.......................................................49
         Section 12.4      ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE................................................50
         Section 12.5      APPLICATION OF TRUST ASSETS...........................................................50
         Section 12.6      REPAYMENT TO THE COMPANY; UNCLAIMED MONEY.............................................50
         Section 12.7      REINSTATEMENT.........................................................................50

                                                    Article XIII
                           IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS
         Section 13.1      INDENTURE AND NOTES SOLELY CORPORATE OBLIGATIONS......................................51

                                                     Article XIV
                                                 CONVERSION OF NOTES
         Section 14.1      RIGHT TO CONVERT......................................................................51
         Section 14.2      EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK ON CONVERSION; NO
                           ADJUSTMENT FOR INTEREST OR DIVIDENDS..................................................53
         Section 14.3      MANDATORY CONVERSION..................................................................54
         Section 14.4      CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES............................................55
         Section 14.5      CONVERSION PRICE......................................................................55
         Section 14.6      ADJUSTMENT OF CONVERSION PRICE........................................................55
         Section 14.7      EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.............................63
         Section 14.8      TAXES ON SHARES ISSUED................................................................63
         Section 14.9      RESERVATION OF SHARES; SHARES TO BE FULLY PAID........................................64
         Section 14.10     RESPONSIBILITY OF TRUSTEE.............................................................64
         Section 14.11     NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS............................................65

                                                     Article XV
                                                    SUBORDINATION
         Section 15.1      AGREEMENT TO SUBORDINATE..............................................................65
         Section 15.2      CERTAIN DEFINITIONS...................................................................65
         Section 15.3      LIQUIDATION; DISSOLUTION; BANKRUPTCY..................................................66
         Section 15.4      DEFAULT ON SENIOR INDEBTEDNESS........................................................67
         Section 15.5      WHEN DISTRIBUTION MUST BE PAID OVER...................................................67
         Section 15.6      NOTICE BY COMPANY.....................................................................68
         Section 15.7      SUBROGATION...........................................................................68
         Section 15.8      RELATIVE RIGHTS.......................................................................68
         Section 15.9      SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY..........................................68
         Section 15.10     DISTRIBUTION OR NOTICE TO REPRESENTATIVE..............................................69
         Section 15.11     RIGHTS OF TRUSTEE AND PAYING AGENT....................................................69
         Section 15.12     AUTHORIZATION TO EFFECT SUBORDINATION.................................................70
         Section 15.13     CONVERSIONS NOT DEEMED PAYMENT........................................................70
         Section 15.14     AMENDMENTS............................................................................70

                                                     Article XVI
                                              MISCELLANEOUS PROVISIONS
         Section 16.1      POOLING OF INTERESTS..................................................................70
         Section 16.2      PROVISIONS BINDING ON COMPANY'S SUCCESSORS............................................70
         Section 16.3      OFFICIAL ACTS BY SUCCESSOR COMPANY....................................................70
         Section 16.4      ADDRESSES FOR NOTICES, ETC............................................................70
         Section 16.5      COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS..........................................71
         Section 16.6      GOVERNING LAW.........................................................................71
         Section 16.7      EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT; CERTIFICATES TO TRUSTEE.............71
         Section 16.8      LEGAL HOLIDAYS........................................................................72
         Section 16.9      NO SECURITY INTEREST CREATED..........................................................72
         Section 16.10     TRUST INDENTURE ACT...................................................................72
         Section 16.11     TRUST INDENTURE ACT CONTROLS..........................................................72
         Section 16.12     BENEFITS OF INDENTURE.................................................................72
         Section 16.13     TABLE OF CONTENTS, HEADINGS ETC.......................................................72
         Section 16.14     AUTHENTICATING AGENT..................................................................72
         Section 16.15     EXECUTION IN COUNTERPARTS.............................................................73












2 



1 



        INDENTURE,
dated as of February 2, 2004, by and between PENN TREATY AMERICAN CORPORATION, a
Pennsylvania corporation (the “Company”), and WELLS FARGO BANK MINNESOTA, N.A.,
a national banking corporation (the “Trustee”). 



W I T N E S S E T H : 



        WHEREAS,
for its lawful corporate purposes, the Company has duly authorized the issuance of its
6-1/4% Convertible Subordinated Notes Due 2008 (the “Notes”), in an aggregate
principal amount not to exceed $14,000,000, and to provide the terms and conditions upon
which the Notes are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and 



        WHEREAS,
the Notes, the certificate of authentication to be borne by the Notes, a form of
assignment, a form of option to require repurchase by the Company upon a Change of Control
(as hereinafter defined), a form of conversion notice and a certificate of transfer to be
borne by the Notes are to be substantially in the forms hereinafter provided for; and 



        WHEREAS,
all acts and things necessary to make the Notes, when executed by the Company and
authenticated and delivered by the Trustee or a duly authorized authenticating agent, as
in this Indenture provided, the valid, binding and legal obligations of the Company, and
to constitute these presents a valid agreement according to its terms, have been done and
performed, and the execution of this Indenture and the issuance hereunder of the Notes
have in all respects been duly authorized. 



        NOW,
THEREFORE, THIS INDENTURE WITNESSETH: 



        That in
order to declare the terms and conditions upon which the Notes are, and are to be,
authenticated, issued and delivered, and in consideration of the premises and of the
purchase and acceptance of the Notes by the holders thereof, the Company covenants and
agrees with the Trustee for the equal and proportionate benefit of the respective holders
from time to time of the Notes (except as otherwise provided below) as follows: 



ARTICLE I 



DEFINITIONS 



Section 1.1 DEFINITIONS. The terms
defined in this Section 1.1 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any indenture
supplemental hereto shall have the respective meanings specified in this Section 1.1. All
other terms used in this Indenture that are defined in the Trust Indenture Act (as
hereinafter defined) or that are by reference defined in the Securities Act (as
hereinafter defined), except as herein otherwise expressly provided for or unless the
context otherwise requires, shall have the meanings assigned to such terms in said Trust
Indenture Act and in said Securities Act as in force on the date of this Indenture. The
words “herein,” “hereof,” “hereunder” and words of similar
import refer to this Indenture as a whole and not to any particular Article or Section. 



        ACQUISITION
PRICE: The term “Acquisition Price” shall mean the weighted average price paid
by the person or group in acquiring the Voting Stock. 



        AFFILIATE:
An “Affiliate” of any specified person shall mean an “affiliate” as
defined in Rule 144(a) as promulgated under the Securities Act. 



        BOARD
OF DIRECTORS: The term “Board of Directors” shall mean the Board of Directors of
the Company or a committee of such Board of Directors duly authorized to act for it. 



        BOARD
RESOLUTION: The term “Board Resolution” shall mean a copy of a resolution
certified by the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date of such
certification. 



        BUSINESS
DAY: The term “Business Day” shall mean a day, other than a Saturday, a Sunday
or a day on which the banking institutions in the State and City of New York are
authorized or obligated by law or executive order to close or a day that is declared a
national or New York state holiday. 



        CAPITAL
STOCK: The term “Capital Stock” of any person shall mean any and all shares,
interests, participations or other equivalents (however designated) of such person’s
corporate stock or any and all equivalent ownership interests in a person (other than a
corporation) whether now outstanding or issued after the date hereof. 



        CASH
EQUIVALENT NOTES: The term “Cash Equivalent Notes” shall have the meaning
specified in Section 14.1(c). 



        CEDE:
The term “Cede” shall mean Cede & Co., a nominee of the Depository. 



        CHANGE
OF CONTROL: The term “Change of Control” shall have the meaning specified in
Section 3.5(d). 



        CHANGE
OF CONTROL PURCHASE PRICE: The term “Change of Control Purchase Price” shall
have the meaning specified in Section 3.5(a). 



        CHANGE
OF CONTROL PURCHASE DATE: The term “Change of Control Purchase Date” shall have
the meaning specified in Section 3.5(a). 


                  CHANGE OF CONTROL OFFER: The term "Change of Control Offer" shall have the meaning specified in
Section 3.5(a).


        COMMISSION:
The term “Commission” shall mean the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act or, if at any
time after the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, the body performing such
duties at such time. 



        COMMON
STOCK: The term “Common Stock” shall mean any stock of any class of the Company
that does not have a preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the Company and
that is not subject to redemption by the Company. Subject to the provisions of Section
14.6, however, shares issuable on conversion of Notes shall include only shares of the
class designated as common stock of the Company at the date of this Indenture or shares of
any class or classes resulting from any reclassification or reclassifications thereof and
that do not have a preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the Company and
that are not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then so
issuable shall be substantially in the proportion that the total number of shares of such
class resulting from all such reclassification bears to the total number of shares of all
such classes resulting from all such reclassifications. 



        COMPANY:
The term “Company” shall mean Penn Treaty American Corporation, a Pennsylvania
corporation, and subject to the provisions of Article XI, shall include its successors and
assigns. 



        CONVERSION
PRICE: The term “Conversion Price” shall have the meaning specified in Section
14.5. 



        CORPORATE
TRUST OFFICE OF THE TRUSTEE: The term “Corporate Trust Office of the Trustee,”
or other similar term, shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally administered, which is located at
MAC N9303-120, Sixth Street & Marquette Avenue, Minneapolis, Minnesota 55479. The
Trustee also maintains an office c/o Depository Trust Company, 1st Floor, TADS
Department, 55 Water Street, New York, New York 10041, at which office it is authorized to
receive notices hereunder. 



        COVENANT
DEFEASANCE: The term “covenant defeasance” shall have the meaning specified in
Section 



12.1(c). 



        CUSTODIAN:
The term “Custodian” shall mean the Trustee, as custodian for Cede pursuant to
Section 2.5 with respect to the Notes in global form, or any successor entity thereto. 



        DEFAULT:
The term “default” shall mean any event that is, or after notice or passage of
time, or both, would be, an Event of Default. 



        DEFAULTED
INTEREST: The term “Defaulted Interest” shall have the meaning specified in
Section 2.3. 



        DEFINITIVE
NOTES; IN DEFINITIVE FORM: The term “definitive Notes” shall mean the Notes in
definitive form as set forth on Exhibit A hereto. Any reference to Notes “in
definitive form” shall mean definitive Notes, and any reference to securities
“in definitive form” shall mean definitive Notes or Common Stock as the context
requires. 



        DEPOSITORY:
The term “Depository” shall mean, with respect to the Notes issuable or issued
in whole or in part in global form, the person specified in Section 2.5(b) as the
Depository with respect to the Notes, until a successor shall have been appointed and
become such pursuant to the applicable provisions of this Indenture, and thereafter,
“Depository” shall mean or include such successor. 



        DWAC:
The term “DWAC” shall mean Deposit and Withdrawal at Custodian Service. 


                  EVENT OF DEFAULT: The term "Event of Default" shall mean any event specified in Section 6.1(a)
through (g).

                  EXCHANGE ACT: The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.


        EXPIRATION
TIME: The term “Expiration Time” shall have the meaning specified in Section
14.6(f). 



        GLOBAL
NOTE: The term “global Note” shall mean the Notes in global form as set forth in
Exhibit B 



hereto. 



        INDENTURE:
The term “Indenture” shall mean this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented. 



        INTEREST
PAYMENT DATE: The term “Interest Payment Date” shall mean each April 15 and
October 15. 



        LEGAL
DEFEASANCE: The term “legal defeasance” shall have the meaning specified in
Section 12.1(b). 



        MANDATORY
CONVERSION: The term “Mandatory Conversion” shall have the meaning specified in
Section 



14.3. 


                  MANDATORY CONVERSION DATE: The term "Mandatory Conversion Date" shall have the meaning specified
in Section 14.3.


        MARKET
CASH CONVERSION PRICE: The term “Market Cash Conversion Price” means with
respect to any exchange, the average of the closing prices of the Common Stock (or other
securities, as the case may be) for the ten Trading Day period (appropriately adjusted to
take into account the occurrence during such period of certain events that would result in
an adjustment of the Conversion Price with respect to the Common Stock or other
consideration) commencing on the first Trading Day after delivery of written notice by the
Company to the Trustee and holders that the Company has elected to pay cash in lieu of
delivering shares of Common Stock or other securities. The period between the date of
delivery by a holder to an office or agency maintained by the Company of a notice of
conversion as required pursuant to Section 14.2 hereof, and the date of determination of
the Market Cash Conversion Price may not exceed fifteen Trading Days. 



        NONPAYMENT
DEFAULT: The term “Nonpayment Default” shall have the meaning specified in
Section 



15.4(b). 



        NOTE
OR NOTES: The terms “Note” or “Notes” shall mean any one or more, as
the case may be, of the 6-1/4% Convertible Subordinated Notes Due 2008 authenticated and
delivered under this Indenture. 



        NOTEHOLDER;
HOLDER: The terms “Noteholder” or “holder” as applied to any Note, or
other similar terms (but excluding the term “beneficial holder”), shall mean any
person in whose name at the time a particular Note is registered on the Note
registrar’s books. 



        NOTE
REGISTER: The term “Note register” shall have the meaning specified in Section
2.5(a). 



        NOTE
REGISTRAR: The term “Note registrar” shall have the meaning specified in Section
2.5(a). 



        OFFICERS’
CERTIFICATE: The term “Officers’ Certificate,” when used with respect to
the Company, shall mean a certificate signed by two authorized officers which shall
include (a) any of the President, the Chief Executive Officer, the Chief Operating
Officer or the Chief Financial Officer and (b) any Treasurer or Secretary or any
Assistant Secretary of the Company, that is delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 16.7 if and to the extent
required by the provisions of such Section. 



        OPINION
OF COUNSEL: The term “Opinion of Counsel” shall mean an opinion in writing
signed by legal counsel, who may be an employee of or counsel to the Company or other
counsel acceptable to the Trustee, that is delivered to the Trustee. Each such opinion
shall include the statements provided for in Section 16.7 if and to the extent required by
the provisions of such Section. 



        OUTSTANDING:
The term “outstanding” with reference to Notes as of any particular time shall
mean, subject to the provisions of Section 8.4, all Notes authenticated and delivered by
the Trustee under this Indenture, except 



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



     (b)    
          Notes, or portions thereof, for which monies in the necessary amount shall have
          been deposited in trust with the Trustee for payment, redemption or repurchase;
          provided that if such Notes are to be redeemed prior to the maturity thereof,
          notice of such redemption shall have been given pursuant to Article III or
          provision satisfactory to the Trustee shall have been made for giving such
          notice; 



     (c)    
          Notes paid or converted pursuant to Section 2.6 hereof or Notes in lieu of or in
          substitution for which other Notes shall have been authenticated and delivered
          pursuant to the terms of Section 2.6 unless proof satisfactory to the Trustee is
          presented that any such Notes are held by BONA FIDE holders in due course; and 



     (d)    
          Notes converted into Common Stock or cash pursuant to Article XIV and Notes not
          deemed outstanding pursuant to Section 3.2 and 3.5. 



        PAYMENT
BLOCKAGE NOTICE: The term “Payment Blockage Notice” shall have the meaning
specified in Section 15.4(b). 



        PAYMENT
DEFAULT: The term “Payment Default” shall have the meaning specified in Section
6.1(d). 



        PERSON:
The term “person” shall mean a corporation, an association, a partnership, an
individual, a joint venture, a joint stock company, a trust, an unincorporated
organization or a government or an agency or a political subdivision thereof. 



        PREDECESSOR
NOTE: The term “Predecessor Note” of any particular Note shall mean every
previous Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note authenticated and
delivered under Section 2.6 in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the lost, destroyed or stolen Note. 



        PURCHASED
SHARES: The term “Purchased Shares” shall have the meaning specified in Section
14.6(f). 



        RECORD
DATE: The term “record date” with respect to any interest payment date shall
have the meaning set forth in Section 2.3 hereof. 



        RESPONSIBLE
OFFICER: The term “Responsible Officer” with respect to the Trustee, shall mean
an officer of the Trustee assigned and duly authorized by the Trustee to administer its
corporate trust matters. 



        RESTRICTED
SECURITIES: The term “Restricted Securities” shall have the meaning specified in
Section 2.5(c). 



        SECURITIES:
The term “Securities” shall have the meaning specified in Section 14.6(d). 


                  SECURITIES ACT: The term "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.


        SUBSIDIARY: The
term “Subsidiary” of any specified person shall mean (i) a corporation, a
majority of whose Capital Stock with voting power under ordinary circumstances to elect
directors is at the time directly or indirectly owned by such person or (ii) any
other person (other than a corporation) in which such person or such person and a
Subsidiary or Subsidiaries of such person or a Subsidiary or Subsidiaries of such person
directly or indirectly, at the date of determination thereof, has at least majority
ownership. 



        SUCCESSOR
COMPANY: The term “Successor Company” shall have the meaning specified in
Section 11.1. 



        TRADING
DAY: The term “Trading Day” shall mean (x) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national security
exchange, a day on which the New York Stock Exchange or such other national security
exchange is open for business or (y) if the applicable security is quoted on the Nasdaq
National Market, a day on which trades may be made thereon or (z) if the applicable
security is not so listed, admitted for trading or quoted, any day other than a Saturday
or Sunday or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close. 



        TRANSFER:
The term “Transfer” shall have the meaning specified in Section 2.5(c). 



        TRIGGER
EVENT: The term “Trigger Event” shall have the meaning specified in Section
14.6(d). 



        TRUST
INDENTURE ACT: The term “Trust Indenture Act” shall mean the Trust Indenture Act
of 1939, as amended, as it was in force at the date of execution of this Indenture, except
as provided in Sections 10.3 and 14.6; provided that in the event said Trust Indenture Act
of 1939 is amended after the date hereof, the term “Trust Indenture Act” shall
mean, to the extent required by such amendment, said Trust Indenture Act of 1939 as so
amended. 



        TRUSTEE:
The term “Trustee” shall mean Wells Fargo Bank Minnesota, N.A., its successors
and any corporation resulting from or surviving any consolidation or merger to which it or
its successors may be a party and any successor trustee at the time serving as successor
trustee hereunder. 



         U.S.       
          GOVERNMENT OBLIGATIONS: The term “U.S. Government Obligations” shall
          mean securities that are (i) direct obligations of the United States of America
          for the payment of which its full faith and credit is pledged or (ii)
          obligations of a person controlled or supervised by, and acting as an agency or
          instrumentality of, the United States of America the timely payment of which is
          unconditionally guaranteed as a full faith and credit obligation by the United
          States of America, which, in either case, are not callable or redeemable at the
          option of the issuer thereof, and shall also include a depository receipt issued
          by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian
          with respect to any such U.S. Government Obligation or a specific payment of
          principal or interest on any such U.S. Government Obligation held by such
          custodian for the account of the holder of such depository receipt; provided
          that (except as required by law) such custodian is not authorized to make any
          deduction from the amount payable to the holder of such depository receipt from
          any amount received by such custodian in respect of the U.S. Government
          Obligation or the specific payment of principal of or interest on the U.S.
          Government Obligation evidenced by such depository receipt. 



        VOTING
STOCK: The term “Voting Stock” shall have the meaning set forth in Section
3.5(e) hereof. 


Section 1.2       INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.


        Whenever
this Indenture refers to a provision of the Trust Indenture Act, the provision is
incorporated by reference in and made a part of this Indenture. 



        The
following Trust Indenture Act terms used in this Indenture have the following meanings: 



        “INDENTURE
SECURITIES” means the Notes; 



        “INDENTURE SECURITY
HOLDER” means a holder of Notes; 


                  "INDENTURE TO BE QUALIFIED" means this Indenture;


        “INDENTURE
TRUSTEE” or “INSTITUTIONAL TRUSTEE” means the Trustee; 



        “OBLIGOR”
on the Notes means the Company and any successor obligor under the Trust Indenture Act. 



        All
other terms used in this Indenture that are defined by the Trust Indenture Act, defined by
Trust Indenture Act reference to another statute or defined by Commission rule under the
Trust Indenture Act have the meanings so assigned to them. 


Section 1.3       RULES OF CONSTRUCTION.


        Unless
the context otherwise requires: 



     	(1)	
          a term has the meaning assigned to it; 


          



     	(2)	
          an accounting term not otherwise defined has the meaning assigned to it in
          accordance with generally accepted accounting principles; 


          



     	(3)	
          “or” is not exclusive; 


          



     	(4)	
          words in the singular include the plural, and in the plural include the
          singular; and 


          



     	(5)	
          provisions apply to successive events and transactions. 


          



ARTICLE II 



ISSUE, DESCRIPTION,
EXECUTION, REGISTRATION 



AND EXCHANGE OF NOTES 



Section 2.1 DESIGNATION, AMOUNT AND
ISSUE OF NOTES. The Notes shall be designated as “6-1/4% Convertible Subordinated
Notes Due 2008.” Notes not to exceed the aggregate principal amount of $14,000,000
upon the execution of this Indenture, or from time to time thereafter, may be executed by
the Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and make available for delivery said Notes upon the written order
of the Company, signed by its (a) Chief Executive Officer, President, Chief Operating
Officer or Chief Financial Officer, and (b) any Treasurer or Secretary or any
Assistant Secretary, without any further action by the Company hereunder. 



Section 2.2 FORM OF NOTES. Notes will
initially be issued in definitive form in substantially the form of Exhibit A hereto, with
the legends in substantially the form indicated in Exhibit A hereto, and shall be
registered in the name of the holders thereof, duly executed by the Company and
authenticated by the Trustee as the authenticating agent as provided herein. 



        An
interest in a global Note may be issued in exchange for any definitive Note transferred
pursuant to an effective registration statement for the Notes under the Securities Act, in
compliance with Rule 144 promulgated thereunder or after receipt of an opinion of counsel
reasonably satisfactory to the Company that such registration or compliance is not
required. Any global Note shall represent such of the outstanding Notes as shall be
specified therein and shall provide that it shall represent the aggregate amount of
outstanding Notes from time to time endorsed thereon and that the aggregate amount of
outstanding Notes represented thereby may from time to time be increased or reduced to
reflect transfers or exchanges permitted hereby. Any endorsement of a global Note to
reflect the amount of any increase or decrease in the amount of outstanding Notes
represented thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in such manner and upon written instructions given by the holder of such Notes in
accordance with the Indenture. Payment of principal of and interest and premium, if any,
on any global Note shall be made in accordance with the provisions of Section 2.3 hereof. 



        The
terms and provisions contained in the forms of Notes attached as Exhibit A and Exhibit B
hereto 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. 



Section 2.3 DATE AND DENOMINATION OF
NOTES; PAYMENTS OF INTEREST. The Notes shall be issuable in registered form only without
coupons in denominations of $1,000 principal amount and integral multiples thereof. Every
Note shall be dated the date of its authentication, shall bear interest from February 2,
2004 and shall be payable semiannually on each April 15 and October 15, commencing
April 15, 2004, as specified on the faces of the forms of Notes, attached as Exhibit
A and Exhibit B hereto. 



        The
person in whose name any Note (or its Predecessor Note) is registered at the close of
business on any record date with respect to any interest payment date (including any Note
that is converted after the record date and on or before the interest payment date) shall
be entitled to receive the interest payable on such interest payment date notwithstanding
the cancellation of such Note upon any transfer, exchange or conversion subsequent to the
record date and prior to such interest payment date. Interest may, at the option of the
Company, be paid by check mailed to the address of such person as it appears on the Note
register; provided that, with respect to any holder of Notes with an aggregate principal
amount equal to or in excess of $5,000,000, at the request (such request to include
appropriate wire instructions) of such holder in writing to the Trustee on or before the
record date preceding any interest payment date, interest on such holder’s Notes
shall be paid by wire transfer in immediately available funds. The term “record
date” with respect to any interest payment date shall mean the April 1 or
October 1 preceding said April 15 or October 15. 



        None
of the Company, the Trustee or any paying agent shall have any responsibility or liability
for any aspect of the records relating to or payment made on account of beneficial
ownership interests in a global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. 



        Interest
on the Notes shall be computed on the basis of a 360-day year composed of twelve 30-day
months. 



        Any
interest on any Note that is payable, but is not punctually paid or duly provided for, on
any said April 15 or October 15 (herein called “Defaulted Interest”),
shall forthwith cease to be payable to the Noteholder on the relevant record date by
virtue of his having been such Noteholder; and such Defaulted Interest shall be paid by
the Company, at its election in each case, as provided in clause (1) or (2) below: 



     	(1)	
          The Company may elect to make payment of any Defaulted Interest to the persons
          in whose names the Notes (or their respective Predecessor Notes) are registered
          at the close of business on a special record date for the payment of such
          Defaulted Interest, which shall be fixed in the following manner. The Company
          shall notify the Trustee in writing of the amount of Defaulted Interest to be
          paid on each Note and the date of the payment (which shall be not less than 25
          days after the receipt by the Trustee of such notice, unless the Trustee shall
          consent to an earlier date), and at the same time, the Company shall deposit
          with the Trustee an amount of money equal to the aggregate amount to be paid in
          respect of such Defaulted Interest or shall make arrangements satisfactory to
          the Trustee for such deposit prior to the date of the proposed payment, such
          money when deposited to be held in trust for the benefit of the persons entitled
          to such Defaulted Interest as in this clause provided. Thereupon, the Trustee
          shall fix a special record date for the payment of such Defaulted Interest,
          which shall be not more than 15 days and not less than 10 days prior to the date
          of the payment and not less than 10 days after the receipt by the Trustee of the
          notice of the proposed payment. The Trustee shall promptly notify the Company of
          such special record date and, in the name and at the expense of the Company,
          shall cause notice of the payment of such Defaulted Interest and the special
          record date therefor to be mailed, first-class postage prepaid, to each
          Noteholder at his address as it appears in the Note register, not less than 10
          days prior to such special record date. Notice of the proposed payment of such
          Defaulted Interest and the special record date therefor having been so mailed,
          such Defaulted Interest shall be paid to the persons in whose names the Notes
          (or their respective Predecessor Notes) were registered at the close of business
          on such special record date and shall no longer be payable pursuant to the
          following clause (2). 


          



     	(2)	
          The Company may make payment of any Defaulted Interest in any other lawful
          manner not inconsistent with the requirements of any securities exchange on
          which the Notes may be listed, and upon such notice as may be required by such
          exchange, if, after notice given by the Company to the Trustee of the proposed
          payment pursuant to this clause, such manner of payment shall be deemed
          practicable by the Trustee. 


          



Section 2.4 EXECUTION OF NOTES. The
Notes shall be signed in the name and on behalf of the Company by the signature of its
Chief Executive Officer, President, Chief Operating Officer or Chief Financial Officer and
attested by the signature of its Treasurer, Secretary or any of its Assistant Secretaries
(any of which signatures may be printed, engraved or otherwise reproduced thereon, by
facsimile or otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the forms of Note attached as
Exhibit A and Exhibit B hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 16.14), shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee (or such an authenticating agent) upon any Note executed by the Company shall
be conclusive evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits of this Indenture. 



        In
case any officer of the Company who shall have signed any of the Notes shall cease to be
such officer before the Notes so signed shall have been authenticated and delivered by the
Trustee, or disposed of by the Company, such Notes nevertheless may be authenticated and
delivered or disposed of as though the person who signed such Notes had not ceased to be
such officer of the Company; and any Note may be signed on behalf of the Company by such
persons as, at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such person
was not such an officer. 


Section 2.5       EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES; RESTRICTIONS ON TRANSFER; DEPOSITORY.


     (a)    
          The Company shall cause to be kept at the Corporate Trust Office of the Trustee
          a register (the register maintained in such office and in any other office or
          agency of the Company designated pursuant to Section 4.2 being herein sometimes
          collectively referred to as the “Note register”) in which, subject to
          such reasonable regulations as it may prescribe, the Company shall provide for
          the registration of Notes and of transfers of Notes. Such Note register shall be
          in written form or in any form capable of being converted into written form
          within a reasonable period of time. The Trustee is hereby appointed “Note
          registrar” for the purpose of registering Notes and transfers of Notes as
          herein provided. The Company may appoint one or more co-registrars. 



        Upon
surrender for registration of transfer of any Note to the Note registrar or any
co-registrar and satisfaction of the requirements for such transfer set forth in this
Section 2.5, the Company shall execute, and the Trustee shall authenticate and make
available for delivery, in the name of the designated transferee or transferees, one or
more new Notes of any authorized denominations and of a like aggregate principal amount
and bearing such restrictive legends as may be required by Sections 2.5(c) and (d). 



        Notes
may be exchanged for other Notes of any authorized denominations and of a like aggregate
principal amount, upon surrender of the Notes to be exchanged at any such office or
agency. Whenever any Notes are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and make available for delivery, the Notes that the
Noteholder making the exchange is entitled to receive bearing certificate numbers not
contemporaneously outstanding. 



        All
Notes presented or surrendered for registration of transfer or for exchange shall (if so
required by the Company, the Trustee, the Note registrar or any co-registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form satisfactory to
the Company, executed by the Noteholder thereof or his attorney duly authorized in
writing. 



        No
service charge shall be charged to the Noteholder for any exchange or registration of
transfer of Notes, but the Company may require payment of a sum sufficient to cover any
tax, assessments or other governmental charges that may be imposed in connection
therewith. 



        None
of the Company, the Trustee, the Note registrar or any co-registrar shall be required to
exchange or register a transfer of (a) any Notes for a period of 15 days next
preceding the mailing of a notice of redemption, (b) any Notes called for redemption
or, if a portion of any Note is selected or called for redemption, such portion thereof
selected or called for redemption, (c) any Notes surrendered for conversion or, if a
portion of any Note is surrendered for conversion, such portion thereof surrendered for
conversion or (d) any Notes surrendered for repurchase pursuant to Section 3.5 or, if
a portion of any Note is surrendered for repurchase pursuant to Section 3.5, such portion
thereof surrendered for repurchase pursuant to Section 3.5. 



        All
Notes issued upon any transfer or exchange of Notes shall be the valid obligations of the
Company, evidencing the same debt and entitled to the same benefits under this Indenture
as the Notes surrendered upon such registration of transfer or exchange. All Notes, the
transfer, exchange and/or registration of which is effectuated by the Trustee pursuant to
this Section 2.5, shall be accompanied by an Officers’ Certificate of the Company
certifying that such transfer, exchange and/or registration is authorized by the Company
and permitted hereunder. 



     (b)    
          Once the Notes are eligible for book-entry settlement with the Depository, all
          definitive Notes shall be exchanged for interests in a global Note registered in
          the name of the Depository or the nominee of the Depository. The transfer and
          exchange of beneficial interests in any global Note that does not involve the
          issuance of a definitive Note or the transfer of interests to another global
          Note shall be effected through the Depository (and not the Trustee or the
          Custodian) in accordance with this Indenture (including the restrictions on
          transfer set forth herein) and the procedures of the Depository therefor.
          Neither the Trustee nor the Custodian (in such respective capacities) shall have
          any responsibility for the transfer and exchange of beneficial interests in such
          global Note that does not involve the issuance of a definitive Note or the
          transfer of interests to another global Note. 



        Any
transfer of a beneficial interest in a global Note that cannot be effected through
book-entry settlement must be effected by the delivery to the transferee (or its nominee)
of a definitive Note or Notes registered in the name of the transferee (or its nominee) on
the books maintained by the Trustee, in accordance with the transfer instructions set
forth herein. With respect to any such transfer, the Trustee or the Custodian, at the
direction of the Trustee, shall cause, in accordance with the standing instructions and
procedures existing between the Depository and the Custodian, the aggregate principal
amount of the global Note to be reduced by the principal amount of the beneficial interest
in the Note being transferred and, following such reduction, the Company shall execute and
the Trustee shall authenticate and make available for delivery to the transferee (or such
transferee’s nominee, as the case may be), a definitive Note or Notes in the
appropriate aggregate principal amount in the name of such transferee (or its nominee). 



        Any
transfer of a definitive Note or Notes must be effected by the delivery to the transferee
(or its nominee) of a definitive Note or Notes registered in the name of the transferee
(or its nominee) on the books maintained by the Trustee. With respect to any such
transfer, the Company shall execute and the Trustee shall authenticate and make available
for delivery to the transferee (or such transferee’s nominee, as the case may be), a
definitive Note or Notes in the appropriate aggregate principal amount in the name of such
transferee (or its nominee) and bearing such restrictive legends as may be required by
this Indenture. As a condition to such transfer, the Trustee or the Custodian, at the
direction of the transferor, shall be provided with such representations and agreements
relating to the restrictions on transfer of such Note or Notes from such transferee (or
such transferee’s nominee) substantially in the form as set forth in Exhibit C
hereto. 



        If
a holder of a definitive Note wishes or is required under the first paragraph of this
Section 2.5(b) at any time to exchange its Note for a beneficial interest in any global
Note (or vice versa), or to transfer its definitive Note to a person who wishes to take
delivery thereof in the form of a beneficial interest in a global Note (or vice versa),
such Notes and beneficial interest may be exchanged or transferred for one another only in
accordance with such procedures as are consistent with the provisions of this Section
2.5(b) (including the certification requirements intended to ensure that such exchanges or
transfers are made pursuant to an effective registration statement under the Securities
Act or in compliance with Rule 144 promulgated thereunder) and as may be from time to time
adopted by the Company with notice to and the consent of the Trustee. Such Notes shall
bear the legends required by Sections 2.5(c) and (d) as applicable. As a condition to such
exchange or transfer, the Trustee or the Custodian, shall be provided with such
representations and agreements relating to the restrictions on transfer of such Note or
Notes from such transferor (or such transferor’s nominee) substantially in the form
as set forth in Exhibit D hereto. 



        Any
global Note may be endorsed with or have incorporated in the text thereof such legends or
recitals or changes not inconsistent with the provisions of this Indenture as may be
required by the Company with notice thereof to the Custodian or the Depository or to
indicate any special limitations or restrictions to which any particular Notes are
subject. 



     (c)    
          Every Note that bears or is required under this Section 2.5(c) to bear the
          legend set forth in this Section 2.5(c) (together with any Common Stock
          issued upon conversion of the Notes and required to bear the legend set forth in
          Section 2.5(d), collectively, the “Restricted Securities”) shall be
          subject to the restrictions on transfer set forth in this Section 2.5(c), unless
          such restrictions on transfer shall have been waived by the written consent of
          the Company or removed in accordance with the provisions of Section 2.5(e), and
          the holder of each such Restricted Security, by such holder’s acceptance
          thereof, agrees to be bound by such restrictions on transfer. As used in this
          Section 2.5(c), the term “transfer” encompasses any sale, pledge,
          transfer or other disposition of any Restricted Security. 



        Until
two years after the later of the original issuance date of any Note and the last date on
which the Company or an Affiliate of the Company was the owner of such Note, any
certificate evidencing such Note (and all securities issued in exchange therefor or
substitution thereof, other than Common Stock, if any, issued upon conversion thereof,
which shall bear the legend set forth in Section 2.5(d), if applicable) shall bear a
legend in substantially the following form, unless otherwise agreed by the Company (with
notice thereof to the Trustee): 



	 	
THE
NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND IS A
“RESTRICTED SECURITY” AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE
NOTES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTES UNDER THE SECURITIES ACT; (II) IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE SECURITIES ACT; OR (III) AFTER RECEIPT OF
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PENN TREATY AMERICAN CORPORATION THAT
SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION. 






        Any
Note (or security issued in exchange or substitution therefor) as to which such
restrictions on transfer shall have expired in accordance with their terms may, upon
satisfaction of the requirements of Section 2.5(d) and surrender of such Note for exchange
to the Note registrar in accordance with the provisions of this Section 2.5, be exchanged
for a new Note or Notes, of like tenor and aggregate principal amount, which shall not
bear the restrictive legend required by this Section 2.5(c). 



        Notwithstanding
any other provisions of this Indenture (other than the provisions set forth in this
Section 2.5(c)), a global Note 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. 



        The
Depository shall be a clearing agency registered under the Exchange Act. Neither the
Company nor the Trustee (or any registrar, paying agent or conversion agent under this
Indenture) shall have responsibility for the performance by the Depository and its
nominees, or its participants or indirect participants of its respective obligations under
the rules and procedures governing its operations. The Depository will take any action
permitted to be taken by a holder of Notes (including, without limitation, the
presentation of Notes for exchange as described below) only at the direction of one or
more participants to whose account with the Depository interests in a global Note are
credited, and only in respect of the principal amount of the Notes represented by the
global Notes as to which such participant or participants has or have given such
direction. 



        If
at any time the Depository for a global Note notifies the Company that it is unwilling or
unable to continue as Depository for such Notes, the Company may appoint a successor
Depository with respect to such Notes. If a successor Depository for the Notes is not
appointed by the Company within 90 days after the Company receives such notice, the
Company shall execute, and the Trustee, upon receipt of an Officers’ Certificate for
the authentication and delivery of Notes, shall authenticate and make available for
delivery, Notes in definitive form, in an aggregate principal amount equal to the
principal amount of the global Notes in exchange for such global Notes. 



        Definitive
Notes issued in exchange for all or a part of a global Note pursuant to this Section
2.5(c) 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 Trustee. Upon execution and authentication, the Trustee
shall make available for delivery such definitive Notes to the persons in whose names such
definitive Notes are so registered. 



        At
such time as all interests in global Notes have been redeemed, converted, repurchased or
canceled, such global Notes shall be, upon receipt thereof, canceled by the Trustee in
accordance with standing procedures and instructions existing between the Depository and
the Custodian. At any time prior to such cancellation, if any interest in a global Note is
exchanged for definitive Notes, redeemed, repurchased, converted, canceled or transferred
to a transferee who receives definitive Notes therefor or any definitive Note is exchanged
or transferred for part of a global Note, the principal amount of such global Note shall,
in accordance with the standing procedures and instructions existing between the
Depository and the Custodian, be reduced or increased, as the case may be, and an
endorsement shall be made on such global Note by the Trustee or the Custodian, at the
direction of the Trustee, to reflect such reduction or increase. 



        The
Company and the Trustee may for all purposes, including the making of payments due on any
global Note, deal with the Depository as the authorized representative of the holders of
such Note for the purposes of exercising the rights of Noteholders hereunder. The rights
of the owner of any beneficial interest in a global Note shall be limited to those
established by law and agreements between such owners and depository participants;
provided that no such agreement shall give any rights to any person against the Company or
the Trustee without the written consent of the parties so affected. Multiple requests, and
directions from and votes of, the Depository as holder of Notes in book-entry form with
respect to any particular matter, shall not be deemed inconsistent to the extent they do
not represent an amount of Notes in excess of those held in the name of the Depository or
its nominee. 



     (d)    
          Until two years after the later of the original issuance date of any Note and
          the last date on which the Company or an Affiliate of the Company was the owner
          of such Note, any stock certificate representing Common Stock issued upon or in
          connection with conversion of such Note shall bear a legend in substantially the
          following form, unless otherwise agreed by the Company (with written notice
          thereof to the Trustee and any transfer agent for the Common Stock): 



	 	
THE
COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND IS A
“RESTRICTED SECURITY” AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE
COMMON STOCK MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (I)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE COMMON STOCK UNDER THE SECURITIES
ACT; (II) IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE SECURITIES ACT; OR (III) AFTER
RECEIPT OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PENN TREATY AMERICAN
CORPORATION THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION. 






        Any
such Common Stock as to which such restrictions on transfer shall have expired in
accordance with their terms may, upon satisfaction of the requirements of Section 2.5(f)
and surrender of the certificates representing such shares of Common Stock for exchange in
accordance with the procedures of the transfer agent for the Common Stock, be exchanged
for a new certificate or certificates for a like aggregate number of shares of Common
Stock, which shall not bear the restrictive legend required by this Section 2.5(d). 



     (e)    
          Upon any sale or transfer of any Restricted Security (i) that is effected
          pursuant to an effective registration statement under the Securities Act,
          (ii) that is effected pursuant to Rule 144 as promulgated under the
          Securities Act as determined by counsel to the Company or (iii) in
          connection with which the Trustee (or transfer agent for the Common Stock, in
          the case of shares of Common Stock) receives certificates and other information,
          including an opinion from counsel having substantial experience in practice
          under the Securities Act and otherwise reasonably acceptable to the Company,
          addressed to the Company and the Trustee or transfer agent, to the effect that
          such security shall no longer be subject to the resale restrictions under
          federal and state securities laws, then the Note registrar or co-registrar (or
          transfer agent, in the case of Common Stock) shall issue a security that does
          not bear the legends set forth in Section 2.5(c) or 2.5(d), as applicable. In
          addition, any Note (or security issued in exchange or substitution therefor) or
          shares of Common Stock issued upon or in connection with conversion of any Note
          as to which the restrictions on transfer described in the legends set forth in
          Section 2.5(c) and 2.5(d), respectively, have expired by their terms, upon
          surrender thereof (in accordance with the terms of this Indenture in the case of
          Notes), together with such certifications and other information, including an
          opinion from counsel having substantial experience in practice under the
          Securities Act and otherwise reasonably acceptable to the Company, addressed to
          the Company and the Trustee or transfer agent, to the effect that such security
          shall no longer be subject to the resale restrictions under federal and state
          securities laws, may be exchanged for a new Note or Notes of like tenor and
          aggregate principal amount (in the case of Notes), or a new certificate or
          certificates for a like aggregate number of shares of Common Stock (in the case
          of Common Stock), or a new certificate or other instrument of like tenor and
          amount (in the case of securities issued in exchange or substitution for Notes),
          which shall not bear the restrictive legends set forth in Sections 2.5(c) and
          2.5(d). 



     (f)    
          Each holder or former holder of a Note agrees to indemnify the Company and the
          Trustee against any liability that may result from the transfer, exchange or
          assignment of such holder’s or former holder’s Note in violation of
          any provision of this Indenture and/or applicable U.S. federal or state
          securities law. 



Section 2.6 MUTILATED, DESTROYED,
LOST OR STOLEN NOTES. In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute, and upon its request, the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make available for
delivery a new Note bearing a number not contemporaneously outstanding in exchange and
substitution for the mutilated Note or in lieu of and in substitution for the Note so
destroyed, lost or stolen. The Company may charge such applicant for the expenses of the
Company in replacing a Note. In every case the applicant for a substituted Note shall
furnish to the Company, to the Trustee and, if applicable, to such authenticating agent
such security or indemnity as may be required by them to save each of them harmless from
any loss, liability, cost or expense caused by or connected with such substitution, and in
every case of destruction, loss or theft, the applicant shall also furnish to the Company,
to the Trustee and, if applicable, to such authenticating agent evidence to their
satisfaction of the destruction, loss or theft of such Note and of the ownership thereof. 



        The
Trustee or such authenticating agent may authenticate any such substituted Note and
deliver the same upon the receipt of such security or indemnity as the Trustee, the
Company and, if applicable, such authenticating agent may require. Upon the issuance of
any substituted Note, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Note that has matured or is about to mature or
has been called for redemption or is about to be repurchased or converted into Common
Stock or cash shall become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Note, pay or authorize the payment of or convert or
authorize the conversion of the same (without surrender thereof, except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or conversion shall
furnish to the Company, to the Trustee and, if applicable, to such authenticating agent
such security or indemnity as may be required by them to save each of them harmless from
any loss, liability, cost or expense caused by or connected with such substitution, and in
case of destruction, loss or theft, evidence satisfactory to the Company, the Trustee and,
if applicable, any paying agent or conversion agent of the destruction, loss or theft of
such Note and of the ownership thereof. 



        Every
substitute Note issued pursuant to the provisions of this Section 2.6 in lieu of any Note
that is destroyed, lost or stolen shall constitute an additional contractual obligation of
the Company, whether or not the destroyed, lost or stolen Note shall be enforceable by
anyone, and shall be entitled to all the benefits of (but shall be subject to all the
limitations set forth in) this Indenture equally and proportionately with any and all
other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held
and owned upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment or conversion of mutilated, destroyed, lost or
stolen Notes and shall preclude any and all other rights or remedies notwithstanding any
law or statute existing or hereafter enacted to the contrary with respect to the
replacement or payment or conversion of negotiable instruments or other securities without
their surrender. 



Section 2.7 TEMPORARY NOTES. Pending
the preparation of definitive Notes, the Company may execute and the Trustee or an
authenticating agent appointed by the Trustee shall, upon written request of the Company,
authenticate and make available for delivery temporary Notes (printed or lithographed).
Temporary Notes shall be issuable in any authorized denomination and shall be
substantially in the form of the definitive Notes but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined by the
Company. Every such temporary Note shall be executed by the Company and authenticated by
the Trustee or such authenticating agent upon the same conditions and in substantially the
same manner, and with the same effect, as the definitive Notes. Without unreasonable delay
the Company shall execute and deliver to the Trustee or such authenticating agent
definitive Notes (other than in the case of Notes in global form) and thereupon any or all
temporary Notes (other than any such global Note) may be surrendered in exchange therefor,
at each office or agency maintained by the Company pursuant to Section 4.2 and the Trustee
or such authenticating agent shall authenticate and make available for delivery in
exchange for such temporary Notes an equal aggregate principal amount of definitive Notes.
Such exchange shall be made by the Company at its own expense and without any charge
therefor. Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits and subject to the same limitations under this Indenture as definitive Notes
authenticated and delivered hereunder. 



Section 2.8 CANCELLATION OF NOTES
PAID, ETC. All Notes surrendered for the purpose of payment, redemption, repurchase,
conversion, exchange or registration of transfer shall, if surrendered to the Company or
any paying agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it or, if surrendered to the Trustee, shall be promptly
canceled by it and no Notes shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. If required by the Company, the Trustee shall
return canceled Notes to the Company. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the indebtedness
represented by such Notes unless and until the same are delivered to the Trustee for
cancellation. 



Section 2.9 CUSIP NUMBERS. The
Company in issuing the Notes may use “CUSIP” numbers (if then generally in use),
and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience
to holders; provided that any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Notes or as contained in any
notice of a redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by any defect
in or omission of such numbers. The Company shall promptly notify the Trustee of any
change in the CUSIP numbers. 



ARTICLE III 



REDEMPTION AND
REPURCHASE OF NOTES 



Section 3.1 REDEMPTION PRICES. The
Notes are not redeemable at the option of the Company prior to October 15, 2005. At
any time on or after that date, the Notes may be redeemed at the Company’s option,
upon notice as set forth in Section 3.2, in whole at any time or in part from time to
time, at the redemption price of 100% of principal amount of Notes plus accrued and unpaid
interest. 



Section 3.2 NOTICE OF REDEMPTION;
SELECTION OF NOTES. In case the Company shall desire to exercise the right to redeem all
or, as the case may be, any part of the Notes pursuant to Section 3.1, it shall fix a date
for redemption and, in the case of any redemption pursuant to Section 3.1, it or, at its
written request accompanied by the proposed form of notice of redemption (which must be
received by the Trustee at least 45 days prior to the date fixed for redemption unless a
shorter period is agreed to by the Trustee), the Trustee in the name of and at the expense
of the Company, shall mail or cause to be mailed a notice of such redemption at least 30
and not more than 60 days prior to the date fixed for redemption to the holders of Notes
so to be redeemed as a whole or in part at their last addresses as the same appear on the
Note register, provided that subject to the approval of the form of notice by the Trustee
if the Company shall give such notice, it shall also give such notice, and notice of the
Notes to be redeemed, to the Trustee. Such mailing shall be by first class mail. The
notice, if mailed in the manner herein provided, shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice. In any case, failure to
give such notice by mail or any defect in the notice to the holder of any Note designated
for redemption as a whole or in part shall not affect the validity of the proceedings for
the redemption of any other Note. 



        Each
such notice of redemption shall identify the Notes to be redeemed (including CUSIP
numbers), specify the aggregate principal amount of Notes to be redeemed, the date fixed
for redemption, the redemption price at which Notes are to be redeemed, the place or
places of payment, that payment shall be made upon presentation and surrender of such
Notes, that interest accrued to the date fixed for redemption shall be paid as specified
in said notice and that on and after said date, interest thereon or on the portion thereof
to be redeemed shall cease to accrue. Such notice shall also state the current Conversion
Price and the date on which the right to convert such Notes or portions thereof into
Common Stock shall expire. If fewer than all the Notes are to be redeemed, the notice of
redemption shall identify the Notes to be redeemed. In case any Note is to be redeemed in
part only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for redemption,
upon surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof shall be issued. 



        On
or prior to the Business Day prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.2, the Company shall deposit by 11:00 a.m.
Eastern Time with the Trustee or with one or more paying agents (or, if the Company is
acting as its own paying agent, set aside, segregate and hold in trust as provided in
Section 4.4) an amount of money sufficient to redeem on the redemption date all the Notes
so called for redemption (other than those theretofore surrendered for conversion into
Common Stock or cash) at the appropriate redemption price, together with accrued interest
to the date fixed for redemption. If any Note called for redemption is converted pursuant
hereto, any money deposited with the Trustee or any paying agent or so segregated and held
in trust for the redemption of such Note shall be paid to the Company upon its written
request or, if then held by the Company, shall be discharged from such trust. If fewer
than all the Notes are to be redeemed, the Company shall give the Trustee written notice
in the form of an Officers’ Certificate not fewer than 45 days (or such shorter
period of time as may be acceptable to the Trustee) prior to the redemption date as to the
aggregate principal amount of Notes to be redeemed. 



        If
fewer than all the Notes are to be redeemed, the Trustee shall select the Notes or
portions thereof to be redeemed (in principal amounts of $1,000 or integral multiples
thereof), by lot or, in its discretion, on a pro rata basis. If any Note selected for
partial redemption is converted in part after such selection, the converted portion of
such Note shall be deemed (so far as may be) to be the portion to be selected for
redemption. The Notes (or portions thereof) so selected shall be deemed duly selected for
redemption for all purposes hereof, notwithstanding that any such Note is converted as a
whole or in part before the mailing of the notice of redemption. 



        Upon
any redemption of less than all Notes, the Company and the Trustee may treat as
outstanding any Notes surrendered for conversion during the period of 15 days next
preceding the mailing of a notice of redemption and need not treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted portion of
any Note converted in part during such period. 



Section 3.3 PAYMENT OF NOTES CALLED
FOR REDEMPTION. If notice of redemption has been given as above provided, the Notes or
portion of Notes with respect to which such notice has been given shall, unless converted
into Common Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price, together
with interest thereon accrued to the date fixed for redemption, and on and after said date
(unless the Company shall default in the payment of such Notes at the redemption price,
together with interest thereon accrued to said date), interest on the Notes or portion of
Notes so called for redemption shall cease to accrue, and such Notes shall cease after the
close of business on the Business Day next preceding the date fixed for redemption to be
convertible into Common Stock or cash and, except as provided in Sections 7.6 and 12.4, to
be entitled to any benefit or security under this Indenture, and the holders thereof shall
have no right in respect of such Notes except the right to receive the redemption price
thereof and unpaid interest thereon to the date fixed for redemption. On presentation and
surrender of such Notes at a place of payment in said notice specified, the said Notes or
the specified portions thereof shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued thereon to the date fixed for redemption;
provided that any semi-annual payment of interest becoming due on the date fixed for
redemption shall be payable to the holders of such Notes registered as such on the
relevant record date subject to the terms and provisions of Section 2.3 hereof. 



        Upon
presentation of any Note redeemed in part only, the Company shall execute and the Trustee
shall authenticate and make available for delivery to the holder thereof, at the expense
of the Company, a new Note or Notes, of authorized denominations, in principal amount
equal to the unredeemed portion of the Notes so presented. 



        If
any Note called for redemption shall not be so paid upon surrender thereof for redemption,
the principal and premium, if any, shall, until paid or duly provided for, bear interest
from the date fixed for redemption at the rate borne by the Note and such Note shall
remain convertible into Common Stock until the principal and premium, if any, shall have
been paid or duly provided for. 



Section 3.4 CONVERSION ARRANGEMENT ON
CALL FOR REDEMPTION. In connection with any redemption of Notes, with notice to the
Trustee, the Company may arrange for the purchase and conversion of any Notes by an
agreement with one or more investment bankers or other purchasers to purchase such Notes
by paying to the Trustee in trust for the Noteholders, on or prior to the close of
business one Business Day prior to the date fixed for redemption, an amount not less than
the applicable redemption price, together with interest accrued to the date fixed for
redemption, of such Notes. Notwithstanding anything to the contrary contained in this
Article III, the obligation of the Company to pay the redemption price of such Notes,
together with interest accrued to the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such purchasers. If such
an agreement is entered into, a copy of which shall be filed with the Trustee prior to the
date fixed for redemption, any Notes not duly surrendered for conversion by the holders
thereof may, at the option of the Company, be deemed, to the fullest extent permitted by
law, acquired by such purchasers from such holders and (notwithstanding anything to the
contrary contained in Article XIV) surrendered by such purchasers for conversion, prior to
the close of business on the date fixed for redemption (and the right to convert any such
Notes shall be deemed to have been extended through such time), subject to payment of the
above amount as aforesaid. At the direction of the Company, the Trustee shall hold and
dispose of any such amount paid to it in the same manner as it would monies deposited with
it by the Company for the redemption of Notes. Without the Trustee’s prior written
consent, no arrangement between the Company and such purchasers for the purchase and
conversion of any Notes shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in this Indenture, and the
Company agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement for the
purchase and conversion of any Notes between the Company and such purchasers including the
costs and expenses incurred by the Trustee in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its powers,
duties, responsibilities or obligations under this Indenture. 


Section 3.5       REPURCHASE OF NOTES UPON A CHANGE OF CONTROL.


     (a)    
          If a Change of Control shall occur at any time, then each holder of Notes shall
          have the right to require that the Company repurchase such holder’s Notes
          in whole or in part in integral multiples of $1,000 at a purchase price (the
          “Change of Control Purchase Price”) in cash in an amount equal to 101%
          of the principal amount of such Notes, plus accrued and unpaid interest thereon,
          if any, to the purchase date (the “Change of Control Purchase Date”)
          pursuant to the offer described below (the “Change of Control Offer”)
          and in accordance with the other procedures set forth in this Indenture. 



     (b)    
          Within 30 days following any Change of Control, the Company shall publish a
          notice in the Wall Street Journal, notify the Trustee thereof and give written
          notice of such Change of Control to each holder of Notes, by first-class mail,
          postage prepaid, at the Noteholder’s address appearing in the Note
          register, stating, among other things, (i) that a Change of Control has
          occurred, (ii) the Change of Control Purchase Price, (iii) the Change of Control
          Purchase Date (which shall be a Business Day no earlier than 30 days nor later
          than 60 days from the date such notice is mailed, or such later date as is
          necessary to comply with requirements under the Exchange Act), (iv) that any
          Note not tendered shall continue to accrue interest and to have all of the
          benefits of this Indenture, (v) that, unless the Company defaults in the payment
          of the Change of Control Purchase Price, any Notes accepted for payment pursuant
          to the Change of Control Offer shall cease to accrue interest after the Change
          of Control Purchase Date, (vi) that Noteholders electing to have any Notes
          purchased pursuant to a Change of Control Offer shall be required to surrender
          the Notes, with the form entitled “Option of Noteholder to Elect
          Purchase” on the reverse of the Notes completed, to the Company at the
          address specified in the notice prior to the close of business on the third
          Business Day preceding the Change of Control Purchase Date, (vii) that
          Noteholders shall be entitled to withdraw their election if the Company
          receives, not later than the close of business on the second Business Day
          preceding the Change of Control Purchase Date, a telegram, telex, facsimile
          transmission or letter setting forth the name of the Noteholder, the principal
          amount of Notes delivered for purchase, and a statement that such Noteholder is
          withdrawing his election to have such Notes purchased, and (viii) that
          Noteholders whose Notes are being purchased only in part shall be issued new
          Notes equal in principal amount to the unpurchased portion of the Notes
          surrendered, which unpurchased portion must be equal to $1,000 in principal
          amount or an integral multiple thereof. The Company shall comply with the
          requirements of Rule 13e-4 and 14e-1 under the Exchange Act and any other
          securities laws and regulations thereunder to the extent such laws and
          regulations are applicable in connection with the repurchase of the Notes in
          connection with a Change of Control. 



     (c)    
          On the Change of Control Purchase Date, the Company shall, to the extent lawful,
          (i) accept for payment Notes or portions thereof tendered pursuant to the
          Change of Control Offer, (ii) deposit with the Trustee in immediately
          available funds by 11:00 a.m. Eastern Time an amount equal to the Change of
          Control Purchase Price in respect of all Notes or portions thereof so tendered
          and (iii) deliver or cause to be delivered to the Trustee the Notes so
          accepted together with an Officers’ Certificate stating the Notes or
          portions thereof tendered to the Company. The Trustee shall promptly mail to
          each Noteholder of Notes so accepted payment in an amount equal to the purchase
          price of such Notes, and the Trustee shall promptly authenticate and mail to
          each Noteholder a new Note equal in principal amount to any unpurchased portion
          of the Notes surrendered, if any; provided that each such new Note shall be in a
          principal amount of $1,000 or an integral multiple thereof. The Company shall
          publicly announce the results of the Change of Control Offer on or as soon as
          practicable after the Change of Control Payment Date. 



     (d)    
          The term “Change in Control” shall mean an event or series of events
          in which (i) any “person” or “group” (as such terms are used
          in Sections 13(d) and 14(d) of the Exchange Act) acquires “beneficial
          ownership” (as determined in accordance with Rule 13d-3 under the Exchange
          Act), directly or indirectly, of more than 50% of the total Voting Stock of the
          Company at an Acquisition Price less than the conversion price then in effect
          with respect to the Notes and (ii) the holders of the Common Stock receive
          consideration which is not all or substantially all common stock that is (or
          upon consummation of or immediately following such event or events will be)
          listed on a United States national securities exchange or approved for quotation
          on the Nasdaq Stock Market or any similar United States system of automated
          dissemination of quotations of securities’ prices; provided, however, that
          any such person or group shall not be deemed to be the beneficial owner of, or
          to beneficially own, any Voting Stock tendered in a tender offer until such
          tendered Voting Stock is accepted for purchase under the tender offer. 



     (e)    
          “Voting Stock” means stock of the class or classes pursuant to which
          the holders thereof have the general voting power under ordinary circumstances
          to elect at least a majority of the board of directors, managers or trustees of
          a corporation (irrespective whether or not at the time stock of any other class
          or classes shall have or might have voting power by reason of the happening of
          any contingency). 



ARTICLE IV 



PARTICULAR COVENANTS OF
THE COMPANY 



Section 4.1 PAYMENT OF PRINCIPAL,
PREMIUM AND INTEREST. The Company covenants and agrees that it shall duly and punctually
pay or cause to be paid the principal of and premium, if any, and interest on each of the
Notes at the places, at the respective times and in the manner provided herein and in the
Notes. Any amounts of cash to be given to the Trustee or paying agent shall be deposited
with the Trustee or paying agent in immediately available funds by 11:00 a.m. Eastern Time
on or before the date such payment is to be made. Each installment of interest on the
Notes due on any semi-annual interest payment date may be paid by mailing checks for the
interest payable to or upon the written order of the holders of Notes entitled thereto as
they shall appear on the Note register; provided that, with respect to any holder of Notes
with an aggregate principal amount equal to or in excess of $5,000,000, at the request
(such request to include appropriate wire instructions) of such holder in writing to the
Trustee, interest on such holder’s Notes shall be paid by wire transfer in
immediately available funds. An installment of principal or interest shall be considered
paid on the date due if the Trustee or paying agent (other than the Company, a Subsidiary
of the Company or any Affiliate of any of them) holds on that date money designated for
and sufficient to pay the installment of principal or interest and is not prohibited from
paying such money to the holders of the Notes pursuant to the terms of this Indenture. 



Section 4.2 MAINTENANCE OF OFFICE OR
AGENCY. The Company shall maintain in the Borough of Manhattan, The City of New York, an
office or agency where the Notes may be surrendered for registration of transfer or
exchange or for presentation for payment or for conversion, redemption or repurchase and
where notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and demands may
be made or served at the Corporate Trust Office of the Trustee. 



        The
Company may also from time to time designate one or more other offices or agencies where
the Notes may be presented or surrendered for any or all such purposes and may from time
to time rescind such designations; provided that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency. 



        The
Company hereby initially designates the Trustee as paying agent, Note registrar and
conversion agent and the Corporate Trust Office of the Trustee as offices or agencies of
the Company for the purposes set forth in the first paragraph of this Section 4.2. 



        So
long as the Trustee is the Note registrar, the Trustee agrees to mail, or cause to be
mailed, the notices set forth in Section 7.11(a). 



Section 4.3 APPOINTMENTS TO FILL
VACANCIES IN TRUSTEE’S OFFICE. The Company, whenever necessary to avoid or fill a
vacancy in the office of Trustee, shall appoint, in the manner provided in Section 7.11, a
Trustee, so that there shall at all times be a Trustee hereunder. 


Section 4.4       PROVISIONS AS TO PAYING AGENT.


     	(a)	
          If the Company shall appoint a paying agent other than the Trustee, or if the
          Trustee shall appoint such a paying agent, the Company or the Trustee, as the
          case may be, shall cause such paying agent to execute and deliver to the Trustee
          an instrument in which such agent shall agree with the Trustee, subject to the
          provisions of this Section 4.4: 


          



     	(1)	
          that it shall hold all sums held by it as such agent for the payment of the
          principal of, premium, if any, or interest on the Notes (whether such sums have
          been paid to it by the Company or by any other obligor on the Notes) in trust
          for the benefit of the holders of the Notes; 


          



     	(2)	
          that it shall give the Trustee written notice of any failure by the Company (or
          by any other obligor on the Notes) to make any payment of the principal of,
          premium, if any, or interest on the Notes when the same shall be due and
          payable; and 


          



     	(3)	
          that at any time during the continuance of an Event of Default, upon request of
          the Trustee, it shall forthwith pay to the Trustee all sums so held in trust. 


          



        The
Company shall, before each due date of the principal of, premium, if any, or interest on
the Notes, deposit with the paying agent a sum sufficient to pay such principal, premium,
if any, or interest, and (unless such paying agent is the Trustee) the Company shall
promptly notify the Trustee of any failure to take such action. 



     (b)    
          If the Company shall act as its own paying agent, it shall, on or before each
          due date of the principal of, premium, if any, or interest on the Notes, set
          aside, segregate and hold in trust for the benefit of the holders of the Notes a
          sum sufficient to pay such principal, premium, if any, or interest so becoming
          due and shall notify the Trustee of any failure to take such action and of any
          failure by the Company (or any other obligor under the Notes) to make any
          payment of the principal of, premium, if any, or interest on the Notes when the
          same shall become due and payable. 



     (c)    
          Anything in this Section 4.4 to the contrary notwithstanding, the Company may,
          at any time, for the purpose of obtaining a satisfaction and discharge of this
          Indenture, or for any other reason, pay or cause to be paid to the Trustee all
          sums held in trust by the Company or any paying agent hereunder as required by
          this Section 4.4, such sums to be held by the Trustee upon the trusts herein
          contained and upon such payment by the Company or any paying agent to the
          Trustee, the Company or such paying agent shall be released from all further
          liability with respect to such sums. 



     (d)    
          Anything in this Section 4.4 to the contrary notwithstanding, the agreement to
          hold sums in trust as provided in this Section 4.4 is subject to Sections 12.3
          and 12.4. 



Section 4.5 CORPORATE EXISTENCE.
Subject to Article XI, the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence of any Subsidiary of the Company, in accordance with the
respective organizational documents (as the same may be amended from time to time) of the
Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided that the Company shall not be
required to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the business of the
Company and its Subsidiaries, taken as a whole, and that the loss thereof is not
materially adverse to the holders of the Notes. 



Section 4.6 STAY, EXTENSION AND USURY
LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not
at any time insist upon, plead or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law or other law that would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefit or advantage of any such law,
and covenants that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted. 


Section 4.7       COMPLIANCE STATEMENT; NOTICE OF DEFAULTS


     (a)    
          The Company shall deliver to the Trustee within 120 days after the end of each
          fiscal year of the Company an Officers’ Certificate stating whether or not
          to the best knowledge of the signers thereof the Company is in compliance
          (without regard to periods of grace or notice requirements) with all conditions
          and covenants under this Indenture, and if the Company shall not be in
          compliance, specifying such non-compliance and the nature and status thereof of
          which such signer may have knowledge. 



     (b)    
          The Company shall file with the Trustee written notice of the occurrence of any
          default or Event of Default within ten days of its becoming aware of any such
          default or Event of Default. 



Section 4.8 LIMITATION ON DIVIDEND
AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary to (i) pay dividends or make any other distribution on its
Capital Stock or with respect to any other interest or participation in, or measured by,
its profits, or pay any indebtedness owed to, the Company or a Subsidiary of the Company,
(ii) make loans or advances to the Company or any Subsidiary of the Company, or
(iii) transfer any of its properties or assets to the Company. 



Section 4.9 TAXES. The Company shall
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges (including withholding
taxes and any penalties, interest and additions to taxes) levied or imposed upon the
Company or its Subsidiaries or upon the income, profits or property of the Company or any
such Subsidiary and (ii) all lawful claims for labor, materials and supplies that, if
unpaid, might by law become a lien upon the property of the Company or any such
Subsidiary; provided 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 whose amount,
applicability or validity is being contested in good faith by appropriate proceedings and
for which disputed amounts adequate reserves have been made. 



Section 4.10 INSURANCE. The Company
shall provide, or cause to be provided, for itself and its Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage of the kinds customarily
insured against by corporations similarly situated and owning like properties, including,
but not limited to, products liability insurance and public liability insurance, with
reputable insurers or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts with such deductibles and by such methods as
shall be determined in good faith by the Board of Directors to be appropriate. 



ARTICLE V 



NOTEHOLDERS’ LISTS
AND REPORTS BY THE COMPANY 



Section 5.1 NOTEHOLDERS’ 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 of Notes, the Company
and the Trustee, and shall otherwise comply with Trust Indenture Act Section 312(a). If
the Trustee is not the Notes registrar, the Company shall furnish to the Trustee on or
before at least seven Business Days preceding each interest payment date and at such other
times as the Trustee may request in writing a list in such form and as of such date as the
Trustee reasonably may require of the names and addresses of holders of Notes, and the
Company shall otherwise comply with Trust Indenture Act Section 312(a). 



Section 5.2 REPORTS BY COMPANY. The
Company shall deliver to the Trustee within 15 days after it files the same with the
Commission, copies of all reports and information (or copies of such portions of any of
the foregoing as the Commission may by its rules and regulations prescribe), if any, which
the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or pursuant to the immediately following sentence. So long as at least
$5,000,000 aggregate principal amount of Notes remain outstanding, the Company shall file
with the Commission such reports as may be required pursuant to Section 13 of the Exchange
Act in respect of a security registered pursuant to Section 12 of the Exchange Act,
regardless of whether the Company is otherwise required to file such reports. If the
Company is not subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act (or otherwise required to file reports pursuant to the immediately preceding
sentence), the Company shall deliver to the Trustee, within 15 days after it would have
been required to file such information with the Commission were it required to do so,
annual and quarterly financial statements, including any notes thereto (and, in the case
of a fiscal year end, an auditors’ report by an independent certified public
accounting firm of established national reputation), and a “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” in each
case substantially equivalent to that which it would have been required to include in such
quarterly or annual reports, information, documents or other reports if it had been
subject to the requirements of Section 13 or 15(d) of the Exchange Act. The Company shall
provide copies of the foregoing materials to the Noteholders to the extent required by the
Trust Indenture Act once this Indenture has been qualified. The Company shall also comply
with the other provisions of the Trust Indenture Act Section 314(a). 



        If
the Company is not required to file the reports and information described above with the
Commission, and the Company’s Common Stock is still publicly held, the Company shall
deliver an annual financial report for the Common Stock (as required by the Commission) to
the Trustee no later than 120 days from the end of its fiscal year and quarterly financial
reports for the Common Stock (as required by the Commission) no later than 30 days after
the end of each quarter; provided, however, that if the Company’s Common Stock is no
longer publicly held, the Company shall deliver annual and quarterly reports to the
Trustee at the same times as described in this paragraph, but the Company shall not have
to include management’s discussion and analysis of financial conditions and results
of operations or description of the business sections in such reports. 



        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). 



ARTICLE VI 



DEFAULTS AND REMEDIES 



Section 6.1 EVENTS OF DEFAULT. In
case one or more of the following Events of Default (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body) shall have occurred and be
continuing: 



     (a)    
          default in the payment of the principal of or premium, if any, on the Notes when
          due at maturity, upon redemption or otherwise, including failure by the Company
          to purchase the Notes when required under Section 3.5 (whether or not such
          payment shall be prohibited by Article XV of this Indenture); or 



     (b)    
          default in the payment of any installment of interest on the Notes as and when
          the same shall become due and payable (whether or not such payment shall be
          prohibited by Article XV of this Indenture), and continuance of such default for
          a period of 30 days; or 



     (c)    
          a failure on the part of the Company to duly observe or perform any other
          covenants or agreements on the part of the Company in this Indenture (other than
          a default in the performance or breach of a covenant or agreement that is
          specifically dealt with elsewhere in this Section 6.1) that continues for a
          period of 90 days after the date on which written notice of such failure,
          requiring the Company to remedy the same, shall have been given to the Company
          by the Trustee, or to the Company and a Responsible Officer of the Trustee, by
          the holders of at least 25% in aggregate principal amount of the Notes at the
          time outstanding determined in accordance with Section 8.4; or 



     (d)    
          an event of default occurs under any mortgage, indenture or instrument under
          which there may be issued or by which there may be secured or evidenced any
          indebtedness for money borrowed by the Company or any of its Subsidiaries (or
          the payment of which is guaranteed by the Company or any of its Subsidiaries),
          whether such indebtedness or guarantee now exists or shall be created after the
          date hereof, which default (i) is caused by a failure to pay principal or
          interest on such indebtedness prior to the expiration of the grace period
          provided in such indebtedness (a “Payment Default”) or
          (ii) results in the acceleration of such indebtedness prior to its
          expressed maturity and, in each case, the principal amount of such indebtedness,
          together with the principal amount of any other such indebtedness under which
          there has been a Payment Default or the maturity of which has been so
          accelerated, aggregates $10,000,000 or more; 



     (e)    
          final judgments or decrees shall be entered by a court of competent jurisdiction
          against the Company or any Subsidiary involving liabilities of
          $25,000,000 or more (singly or in the aggregate) (after deducting the
          portion of such liabilities accepted by a reputable insurance company) and such
          final judgments or decrees shall not have been vacated, discharged, satisfied or
          stayed pending appeal within 60 days from the entry thereof; 



     (f)    
          the Company shall commence a voluntary case or other proceeding seeking
          liquidation, reorganization or other relief with respect to itself or its debts
          under any bankruptcy, insolvency or other similar law now or hereafter in
          effect, or seeking the appointment of a trustee, receiver, liquidator, custodian
          or other similar official of it or any substantial part of its property, or
          shall consent to any such relief or to the appointment of or taking possession
          by any such official in an involuntary case or other proceeding commenced
          against it or shall make a general assignment for the benefit of creditors or
          shall fail generally to pay its debts as they become due; or 



     (g)    
          an involuntary case or other proceeding shall be commenced against the Company
          seeking liquidation, reorganization or other relief with respect to it or its
          debts under any bankruptcy, insolvency or other similar law now or hereafter in
          effect or seeking the appointment of a trustee, receiver, liquidator, custodian
          or other similar official of it or any substantial part of its property, and
          such involuntary case or other proceeding shall remain undismissed and unstayed
          for a period of 60 consecutive days; 



then, and in each and every such case
(other than an Event of Default specified in Section 6.1(f) or (g)), unless the principal
of all of the Notes shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then outstanding
hereunder determined in accordance with Section 8.4, by notice in writing to the Company
(and to the Trustee if given by Noteholders), may declare the principal of, premium, if
any, on the Notes and the interest accrued thereon to be due and payable immediately, and
upon any such declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Notes contained to the contrary notwithstanding. If
an Event of Default specified in Section 6.1(f) or (g) occurs and is continuing, the
principal of all the Notes and the interest accrued thereon shall be immediately due and
payable. The foregoing provision is subject to the conditions that if, at any time after
the principal of the Notes shall have been so declared due and payable, and before any
judgment or decree for the payment of the monies due shall have been obtained or entered
as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest upon all Notes and the principal of
and premium, if any, on any and all Notes that shall have become due otherwise than by
acceleration (with interest on overdue installments of interest (to the extent that
payment of such interest is enforceable under applicable law) and on such principal and
premium, if any, at the rate borne by the Notes, to the date of such payment or deposit)
and amounts due to the Trustee pursuant to Section 7.7, and if any and all defaults under
this Indenture, other than the nonpayment of principal of, premium, if any, and accrued
interest on Notes that shall have become due by acceleration, shall have been cured or
waived pursuant to Section 6.7, then and in every such case the holders of a majority in
aggregate principal amount of the Notes then outstanding, by written notice to the Company
and to the Trustee, may waive all defaults or Events of Default and rescind and annul such
declaration and its consequences; but no such waiver or rescission and annulment shall
extend to or shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereto. The Company shall notify a Responsible Officer of the Trustee,
promptly upon becoming aware thereof, of any Event of Default. 



        In
case the Trustee shall have proceeded to enforce any right under this Indenture and such
proceedings shall have been discontinued or abandoned because of such waiver or rescission
and annulment or for any other reason or shall have been determined adversely to the
Trustee, then and in every such case the Company, the holders of Notes and the Trustee
shall be restored respectively to their several positions and rights hereunder, and all
rights, remedies and powers of the Company, the holders of Notes and the Trustee shall
continue as though no such proceeding had been taken. 



Section 6.2 PAYMENTS OF NOTES ON
DEFAULT; SUIT THEREFOR. The Company covenants that (a) in case a default shall be made in
the payment of any installment of interest upon any of the Notes as and when the same
shall become due and payable, and such default shall have continued for a period of 30
days, or (b) in case default shall be made in the payment of the principal of or premium,
if any, on any of the Notes as and when the same shall have become due and payable,
whether at maturity of the Notes or in connection with any redemption or repurchase, by
declaration or otherwise, then, upon demand of the Trustee, the Company shall pay to the
Trustee, for the benefit of the holders of the Notes, the whole amount that then shall
have become due and payable on all such Notes for principal of, premium, if any, or
interest, or both, as the case may be, with interest upon the overdue principal, premium,
if any, and (to the extent that payment of such interest is enforceable under applicable
law) upon the overdue installments of interest at the rate borne by the Notes; and, in
addition thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee, its agents,
attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder
other than through its negligence or bad faith. Until such demand by the Trustee, the
Company may pay the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue. 



        In
case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee,
in its own name and as trustee of an express trust, shall be entitled and empowered to
institute any actions or proceedings at law or in equity for the collection of the sums so
due and unpaid and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against the Company or any other
obligor on the Notes and collect in the manner provided by law out of the property of the
Company or any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable. 



        In
case there shall be pending proceedings for the bankruptcy or for the reorganization of
the Company or any other obligor on the Notes under Title 11 of the United States Code or
any other applicable law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been appointed for
or taken possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to the
Company or such other obligor upon the Notes, or to the creditors or property of the
Company or such other obligor, the Trustee, irrespective of whether the principal of the
Notes shall then be due and payable as therein expressed or by declaration or otherwise
and irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section 6.2, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of the Notes and, in
case of any judicial proceedings, to 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 and
of the Noteholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Notes, its or their creditors, or its or their property and to
collect and receive any monies or other property payable or deliverable on any such claims
and to distribute the same after the deduction of any amounts due the Trustee under
Section 7.7; and any receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, custodian or similar official is hereby authorized by each of the Noteholders
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 Noteholders, to pay to the Trustee any amount
due it for reasonable compensation, expenses, advances and disbursements, including
counsel fees incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of the estate
in any such proceedings shall be denied for any reason, payment of the same shall be
secured by a lien on, and shall be paid out of, any and all distributions, dividends,
monies, securities and other property that the holders of the Notes may be entitled to
receive in such proceedings, whether in liquidation or under any plan of reorganization or
arrangement or otherwise. 



        Nothing
herein contained shall be deemed to authorize the Trustee to authorize or consent to or
adopt on behalf of any Noteholder any plan of reorganization or arrangement affecting the
Notes or the rights of any Noteholder, or to authorize the Trustee to vote in respect of
the claim of any Noteholder in any such proceeding. 



        All
rights of action and of asserting claims under this Indenture, or under any of the Notes,
may be enforced by the Trustee without the possession of any of the Notes or the
production thereof on any trial or other proceeding relative thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes. 



        In
any proceedings brought by the Trustee pursuant to this Indenture or any supplement hereto
(and in any proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party), the Trustee shall be held to represent all the
holders of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings. 



Section 6.3 APPLICATION OF MONIES
COLLECTED BY TRUSTEE. Any monies collected by the Trustee pursuant to this Article VI
shall be applied in the order following, at the date or dates fixed by the Trustee for the
distribution of such monies, upon presentation of the several Notes and stamping thereon
the payment, if only partially paid, and upon surrender thereof, if fully paid: 



        First:
To the payment of all amounts due the Trustee under Section 7.7; 



	 	        Second:
Subject to the provisions of Article XV, in case the principal of the outstanding Notes
shall not have become due and be unpaid, to the payment of interest on the Notes in
default in the order of the maturity of the installments of such interest, with interest
(to the extent that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate borne by the Notes, such payments to be made ratably
to the persons entitled thereto; and 







	 	        Third:
Subject to the provisions of Article XV, in case the principal of the outstanding Notes
shall have become due, by declaration or otherwise, and be unpaid, to the payment of the
whole amount then holding and unpaid upon the Notes for principal, premium, if any, and
interest, with interest on the overdue principal and premium, if any, and (to the extent
that such interest has been collected by the Trustee) upon overdue installments of
interest at the rate borne by the Notes; and in case such monies shall be insufficient to
pay in full the whole amounts so due and unpaid upon the Notes, then to the payment of
such principal, premium, if any, and interest without preference or priority of principal
and premium, if any, over interest, or of interest over principal and premium, if any, or
of any installment of interest over any other installment of interest, or of any Note over
any other Note, ratably to the aggregate of such principal and premium, if any, and
accrued and unpaid interest. 







Section 6.4 PROCEEDINGS BY
NOTEHOLDER. No holder of any Note shall have any right by virtue of or by availing of any
provision of this Indenture to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Indenture, or for the appointment of a receiver,
trustee, liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written notice of
an Event of Default and of the continuance thereof, as hereinbefore provided, and unless
also the holders of not less than 25% in aggregate principal amount of the Notes then
outstanding shall have made written request upon the Trustee to institute such action,
suit or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, and no direction inconsistent with such
written request shall have been given to the Trustee pursuant to Section 6.7; it being
understood and intended, and being expressly covenanted by the taker and holder of every
Note with every other taker and holder and the Trustee, that no one or more holders of
Notes shall have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any other holder
of Notes, to obtain or seek to obtain priority over or preference to any other such holder
or to enforce any right under this Indenture, except in the manner herein provided and for
the equal, ratable and common benefit of all holders of Notes (except as otherwise
provided herein). For the protection and enforcement of this Section 6.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given either at law
or in equity. 



        Notwithstanding
any other provision of this Indenture and any provision of any Note, the right of any
holder of any Note to receive payment of the principal of, premium, if any, and interest
on such Note, on or after the respective due dates expressed in such Note, or to institute
suit for the enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder except as
otherwise set forth herein. 



        Anything
in this Indenture or the Notes to the contrary notwithstanding, the holder of any Note,
without the consent of either the Trustee or the holder of any other Note, in his own
behalf and for his own benefit, may enforce, and may institute and maintain any proceeding
suitable to enforce, his rights of conversion as provided herein. 



Section 6.5 PROCEEDINGS BY TRUSTEE.
In case of an Event of Default and subject to the provisions of Section 7.7 hereof, the
Trustee may in its discretion proceed to protect and enforce the rights vested in it by
this Indenture by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any of such rights, either by suit in equity or by action
at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the exercise of any
power granted in this Indenture or to enforce any other legal or equitable right vested in
the Trustee by this Indenture or by law. 



Section 6.6 REMEDIES CUMULATIVE AND
CONTINUING. Except as provided in Section 2.7, all powers and remedies given by this
Article VI to the Trustee or to the Noteholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of such powers and remedies or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and agreements
contained in this Indenture, and no delay or omission of the Trustee or of any holder of
any of the Notes to exercise any right or power accruing upon any default or Event of
Default occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such default or any acquiescence therein; and,
subject to the provisions of Section 6.4, every power and remedy given by this Article VI
or by law to the Trustee or to the Noteholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the Noteholders. 



Section 6.7 DIRECTION OF PROCEEDINGS
AND WAIVER OF DEFAULTS BY MAJORITY OF NOTEHOLDERS. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding (determined in accordance with
Section 8.4) shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided that (a) such direction shall not be in conflict with
any rule of law or with this Indenture and (b) the Trustee may take any other action
deemed proper by the Trustee that is not inconsistent with such direction. The holders of
a majority in aggregate principal amount of the Notes at the time outstanding (determined
in accordance with Section 8.4) may on behalf of the holders of all of the Notes waive any
past default or Event of Default hereunder and its consequences except (i) a default
in the payment of interest or premium, if any, on, or the principal of, the Notes,
(ii) a failure by the Company to convert any Notes into Common Stock or cash, as the
case may be, or (iii) a default in respect of a covenant or provisions hereof that
under Article X cannot be modified or amended without the consent of the holders of all
Notes then outstanding. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 6.7, said default or Event of Default shall for all
purposes of the Notes and this Indenture be deemed to have been cured and to be not
continuing and the Company, the Trustee and the holders of the Notes shall as reasonably
possible be restored to their former positions and rights hereunder; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair any right
consequent thereon. 



Section 6.8 NOTICE OF DEFAULTS. The
Trustee shall, within 90 days after the occurrence of a default, mail to all Noteholders,
as the names and addresses of such holders appear upon the Note register, notice of all
defaults of which a Responsible Officer has actual knowledge, unless such defaults shall
have been cured or waived before the giving of such notice; provided that, except in the
case of default in the payment of the principal of, premium, if any, or interest on any of
the Notes, the Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Noteholders. 



Section 6.9 UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any Note by his acceptance thereof
shall be deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and that such
court may in its discretion assess reasonable costs, including reasonable attorneys’
fees and expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; provided that
the provisions of this Section 6.9 shall not apply to any suit instituted by the Trustee,
to any suit instituted by any Noteholder or group of Noteholders holding in the aggregate
more than 10% in principal amount of the Notes at the time outstanding determined in
accordance with Section 8.4 or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of, premium, if any, or interest on any Note
on or after the due date expressed in such Note or to any suit for the enforcement of the
right to convert any Note in accordance with the provisions of Article XIV. 



ARTICLE VII 



CONCERNING THE TRUSTEE 


Section 7.1       DUTIES AND RESPONSIBILITIES OF TRUSTEE.


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


               



          	 	(b) 	
               Except during the continuance of an Event of Default: 


               



          	 	(i) 	
               the Trustee need perform only those duties that are specifically set forth in
               this Indenture and no others; and 


               



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


               



          	 	(c) 	
               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 (c) does not limit the effect of paragraph (b) of this Section
               7.1; 


               



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


               



          	 	(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 6.7. 


               



          	 	(d) 	
               Every provision of this Indenture that in any way relates to the Trustee is
               subject to paragraphs (a), (b), (c) and (e) of this Section 7.1. 


               



          	 	(e) 	
               The Trustee may refuse to perform any duty or exercise any right or power or
               extend or risk its own funds or otherwise incur any financial liability unless
               it receives indemnity satisfactory to it against any loss, liability or expense. 


               



Section 7.2 REPORTS BY TRUSTEE TO
HOLDERS. Within 60 days after each April 1 commencing with the April 1 following the date
of this Indenture, the Trustee shall, if required by the Trust Indenture Act, mail to each
Noteholder a brief report dated as of such April 1 that complies with Trust Indenture Act
Section 313(a). The Trustee also shall comply with Trust Indenture Act Sections 313(b) and
313(c). 



        The
Company shall promptly notify the Trustee in writing if the Notes become listed or
delisted on any stock exchange or automatic quotation system. 



        A
copy of each report at the time of its mailing to Noteholders shall be mailed to the
Company and, to the extent required by Section 5.2 hereof and of the Trust Indenture Act
Section 313(d), filed with the Commission and each stock exchange, if any, on which the
Notes are listed. 


Section 7.3       RELIANCE ON DOCUMENTS, OPINIONS, ETC.  Except as otherwise provided in Section 7.1:


     (a)    
          The Trustee may rely and shall be protected in acting upon any resolution,
          certificate, statement, instrument, opinion, report, notice, request, consent,
          order, bond, debenture, coupon or other paper or document believed by it in good
          faith to be genuine and to have been signed or presented by the proper party or
          parties; 



     (b)    
          Any request, direction, order or demand of the Company mentioned herein shall be
          sufficiently evidenced by an Officers’ Certificate (unless other evidence
          in respect thereof be herein specifically prescribed or required by the Trust
          Indenture Act); and any resolution of the Board of Directors may be evidenced to
          the Trustee by a copy thereof certified by the Secretary or an Assistant
          Secretary of the Company; 



     (c)    
          The Trustee may consult with counsel of its selection and any advice or opinion
          of counsel shall be full and complete authorization and protection in respect of
          any action taken or omitted by it hereunder in good faith and in accordance with
          such advice or opinion of counsel; 



     (d)    
          The Trustee may execute any of the trusts or powers hereunder or perform any
          duties hereunder either directly or by or through agents or attorneys, and the
          Trustee shall not be responsible for any misconduct or negligence on the part of
          any agent or attorney appointed by it with due care hereunder; no Depository,
          Custodian or paying agent who is not the Trustee shall be deemed an agent of the
          Trustee, and the Trustee (in its capacity as Trustee) shall not be responsible
          for any act or omission by any such Depository, Custodian or paying agent; 



     (e)    
          The Trustee shall be under no obligation to exercise any of the rights or powers
          vested in it by the Indenture at the request or direction of any of the holders
          pursuant to this Indenture unless such holders have offered the Trustee
          reasonable security or indemnity against the costs, expenses and liabilities
          that would be incurred by it in compliance with such request or direction. 



     (f)    
          Subject to the provisions of Section 7.1(c), the Trustee shall not be liable for
          any action it takes or omits to take in good faith that it believes to be
          authorized or within its rights or powers; 



     (g)    
          In connection with any request to transfer or exchange any Note, the Trustee may
          request a direction (in the form of an Officers’ Certificate) from the
          Company and an Opinion of Counsel with respect to compliance with any
          restrictions on transfer or exchange imposed by this Indenture, the Securities
          Act, other applicable law or the rules and regulations of any exchange on which
          the Notes or the Common Stock may be traded, and the Trustee may rely and shall
          be protected in acting upon such direction and in accordance with such
          Officers’ Certificate and Opinion of Counsel; 



     (h)    
          The Trustee may rely and shall be fully protected in acting upon the
          determination and notice by the Company of the Conversion Price; and 



     (i)    
          The Trustee shall not be deemed to have knowledge of any Event of Default or
          other fact or event upon the occurrence of which it may be required to take
          action hereunder unless one of its Responsible Officers has actual knowledge
          thereof obtained by a written statement. 



Section 7.4 NO RESPONSIBILITY FOR
RECITALS, ETC. The recitals contained herein and in the Notes (except in the
Trustee’s certificate of authentication) shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this Indenture or of
the Notes. The Trustee shall not be accountable for the use or application by the Company
of any Notes or the proceeds of any Notes authenticated and delivered by the Trustee in
conformity with the provisions of this Indenture. 



Section 7.5 TRUSTEE, PAYING AGENTS,
CONVERSION AGENTS OR REGISTRAR MAY OWN NOTES. The Trustee, any paying agent, any
conversion agent or any Note registrar, in its individual or any other capacity, may
become the owner or pledgee of Notes with the same rights it would have if it were not
Trustee, paying agent, conversion agent or Note registrar. 



Section 7.6 MONIES TO BE HELD IN
TRUST. Subject to the provisions of Section 12.4, all monies received by the Trustee
shall, until used or applied as herein provided, be held in trust for the purposes for
which they were received. Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as may be
agreed to in writing from time to time by the Company and the Trustee. 



Section 7.7 COMPENSATION AND EXPENSES
OF TRUSTEE. The Company covenants and agrees to pay to the Trustee from time to time, and
the Trustee shall be entitled to, such compensation as the Company and the Trustee shall
from time to time agree in writing, for all services rendered by it hereunder in any
capacity (which shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust), and the Company shall pay or reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement or advance as
may arise from its negligence or bad faith. The Company also covenants to indemnify each
of the Trustee or any predecessor Trustee in any capacity under this Indenture and its
agents and any authenticating agent for, and to hold them harmless against, any and all
loss, liability, damage, claim or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on the part of the Trustee
or such agent or authenticating agent, as the case may be, and arising out of or in
connection with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending themselves against any claim of
liability in the premises. The obligations of the Company under this Section 7.7 to
compensate or indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to that of the Notes upon all
property and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the holders of particular Notes. The obligation of the Company under
this Section shall survive the satisfaction and discharge of this Indenture. 



Section 7.8 OFFICERS’
CERTIFICATE AS EVIDENCE. Except as otherwise provided in Section 7.1, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officers’ Certificate
delivered to the Trustee, and such Officers’ Certificate, in the absence of
negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee
for any action taken or omitted by it under the provisions of this Indenture upon the
faith thereof. 



Section 7.9 CONFLICTING INTERESTS OF
TRUSTEE. In the event that the Trust Indenture Act is applicable hereto, and if the
Trustee has or shall acquire a conflicting interest within the meaning of Trust Indenture
Act Section 310(b) and there exists an Event of Default hereunder (exclusive of any period
of grace or requirement of notice), the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Indenture. 



Section 7.10 ELIGIBILITY OF TRUSTEE.
There shall at all times be a Trustee hereunder that shall be a person that satisfies the
requirements of Trust Indenture Act Section 310(a)(1) and Section 310(a)(5) and that has a
combined capital and surplus of at least $50,000,000. If such person publishes reports of
condition at least annually, pursuant to law or to the requirements of any supervising or
examining authority, then for the purposes of this Section, the combined capital and
surplus of such person shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this Article VII. 


Section 7.11      RESIGNATION OR REMOVAL OF TRUSTEE.


          	 	(a) 	
               The Trustee may at any time resign by giving written notice of such resignation
               to the Company; and the Company shall mail, or cause to be mailed, notice
               thereof to the holders of Notes at their addresses as they shall appear on the
               Note register. Upon receiving such notice of resignation, the Company shall
               promptly appoint a successor trustee by written instrument, in duplicate,
               executed by order of the Board of Directors, one copy of which instrument shall
               be delivered to the resigning Trustee and one copy to the successor trustee. 


               



          	 	(b) 	
               In case at any time any of the following shall occur: 


               



          	 	(i) 	
               the Trustee shall fail to comply with Section 7.9 after written request therefor
               by the Company or by any Noteholder who has been a bona fide holder of a Note or
               Notes for at least six months; or 


               



          	 	(ii) 	
               the Trustee shall cease to be eligible in accordance with the provisions of
               Section 7.10 and shall fail to resign after written request therefor by the
               Company or by any such Noteholder; or 


               



          	 	(iii) 	
               the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or
               insolvent, or a receiver of the Trustee or of its property shall be appointed,
               or any public officer shall take charge or control of the Trustee or of its
               property or affairs for the purpose of rehabilitation, conservation or
               liquidation, 


               



then, in any such case, the Company
may remove the Trustee and appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor trustee, or any
Noteholder who has been a bona fide holder of a Note or Notes for at least six months may,
on behalf of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee. 



     (c)    
          The holders of a majority in aggregate principal amount of the Notes at the time
          outstanding may at any time remove the Trustee and nominate a successor trustee,
          which shall be deemed appointed as successor trustee unless within ten days
          after notice to the Company of such nomination the Company objects thereto, in
          which case the Trustee so removed or any Noteholder, upon the terms and
          conditions and otherwise as provided in the next paragraph, may petition any
          court of competent jurisdiction for an appointment of a successor trustee. 



        If
no successor trustee shall have been so appointed and have accepted appointment within 60
days after removal or the mailing of such notice of resignation to the Noteholders, the
Trustee resigning or being removed may petition any court of competent jurisdiction for
the appointment of a successor trustee, or, in the case of either resignation or removal,
any Noteholder who has been a bona fide holder of a Note or Notes for at least six months
may, on behalf of himself and all others similarly situated, petition any such court for
the appointment of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, appoint a successor trustee. 



     (d)    
          Any resignation or removal of the Trustee and appointment of a successor trustee
          pursuant to any of the provisions of this Section 7.11 shall become effective
          upon acceptance of appointment by the successor trustee as provided in Section
          7.12. 



Section 7.12 ACCEPTANCE BY SUCCESSOR
TRUSTEE. Any successor trustee appointed as provided in Section 7.11 shall execute,
acknowledge and deliver to the Company and to its predecessor trustee an instrument
accepting such appointment hereunder, and thereupon, the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally named as
trustee herein; but on the written request of the Company or of the successor trustee, the
Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of Section 7.7, execute and deliver an instrument transferring to such
successor trustee all the rights and powers of the Trustee so ceasing to act. Upon request
of any such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor trustee
all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien
upon all property and funds held or collected by such trustee as such, except for funds
held in trust for the benefit of holders of particular Notes, to secure any amounts then
due it pursuant to the provisions of Section 7.7. 



        No
successor trustee shall accept appointment as provided in this Section 7.12 unless at the
time of such acceptance such successor trustee shall be qualified under the provisions of
Section 7.9 and eligible under the provisions of Section 7.10. 



        Upon
acceptance of appointment by a successor trustee as provided in this Section 7.12, the
Company shall mail or cause to be mailed notice of the succession of such Trustee
hereunder to the holders of Notes at their addresses as they shall appear on the Note
register. If the Company fails to mail such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such notice to be
mailed at the expense of the Company. 



Section 7.13 SUCCESSOR, BY MERGER,
ETC. Any corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation succeeding to all
or substantially all of the corporate trust business of the Trustee, shall be the
successor to the Trustee hereunder, provided such corporation shall be qualified under the
provisions of Section 7.9 and eligible under the provisions of Section 7.10 without the
execution or filing of any paper or any further act on the part of any of the parties
hereto. 



Section 7.14 LIMITATION ON RIGHTS OF
TRUSTEE AS CREDITOR. If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Notes) and the Trust Indenture Act is applicable hereto,
the Trustee shall be subject to the provisions of Trust Indenture Act Section 311(a) or,
if applicable, Trust Indenture Act Section 311(b) regarding the collection of the
claims against the Company (or any such other obligor). 



ARTICLE VIII 



CONCERNING THE
NOTEHOLDERS 



Section 8.1 ACTION BY NOTEHOLDERS.
Whenever in this Indenture it is provided that the holders of a specified percentage in
aggregate principal amount of the Notes may take any action (including the making of any
demand or request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of such
specified percentage have joined therein may be evidenced (a) by any instrument or any
number of instruments of similar tenor executed by Noteholders in person or by agent or
proxy appointed in writing, (b) by the record of the holders of Notes voting in favor
thereof at any meeting of Noteholders duly called and held in accordance with the
provisions of Article IX or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Noteholders. Whenever the Company or the Trustee solicits
the taking of any action by the holders of the Notes, the Company or the Trustee may fix
in advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than 15 days prior to the
date of commencement of solicitation of such action. 



Section 8.2 PROOF OF EXECUTION BY
NOTEHOLDERS. Subject to the provisions of Sections 7.1, 7.2 and 9.5, proof of the
execution of any instrument by a Noteholder or by agent or proxy shall be sufficient if
made in accordance with Section 7.3 hereof. The holding of Notes shall be proved by the
Note register or by a certificate of the Note registrar. 



        The
record of any Noteholders’ meeting shall be proved in the manner provided in Section
9.5. 



Section 8.3 WHO ARE DEEMED ABSOLUTE
OWNERS. The Company, the Trustee, any paying agent, any conversion agent and any Note
registrar may deem the person in whose name such Note shall be registered upon the books
of the Company to be, and may treat such person as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of ownership
or other writing thereon) for the purpose of receiving payment of or on account of the
principal of, premium, if any, and interest on such Note, for conversion of such Note and
for all other purposes; and neither the Company nor the Trustee nor any paying agent nor
any conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon order of
such holder, shall be valid and, to the extent of the sum or sums so paid, effectual to
satisfy and discharge the liability for monies payable upon any such Note. 



        The
Depository shall be deemed to be the owner of any global Note for all purposes, including
receipt of notices to Noteholders and payment of principal of, premium, if any, and
interest on the Notes. None of the Company, the Trustee (in its capacity as Trustee), any
paying agent or the Note registrar (or co-registrar) shall have any responsibility for any
aspect of the records relating to or payments made on account of beneficial interests of a
global Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. 



Section 8.4 COMPANY-OWNED NOTES
DISREGARDED. In determining whether the holders of the requisite aggregate principal
amount of Notes have concurred in any direction, consent, waiver or other action under
this Indenture, Notes that are owned by the Company or any other obligor on the Notes or
by any person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such determination;
provided that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, consent, waiver or other action, only Notes that a
Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. 



Notes so owned that have been pledged
in good faith may be regarded as outstanding for the purposes of this Section 8.4 if the
pledgee shall establish to the satisfaction of the Trustee the pledger’s right to
vote such Notes and that the pledgee is not the Company, any other obligor on the Notes or
a person directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. 



In the case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee. Upon request of the Trustee, the Company shall furnish to the
Trustee promptly an Officers’ Certificate listing and identifying all Notes, if any,
known by the Company to be owned or held by or for the account of any of the above
described persons; and subject to Section 7.1, the Trustee shall be entitled to accept
such Officers’ Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes not listed therein are outstanding for the purpose of any such
determination. 



Section 8.5 REVOCATION OF CONSENTS,
FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee,
as provided in Section 8.1, of the taking of any action by the holders of the percentage
in aggregate principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note that is shown by the evidence to be included in the
Notes the holders of which have consented to such action may, by filing written notice
with the Trustee at its Corporate Trust Office and upon proof of holding as provided in
Section 8.2, revoke such action so far as concerns such Note. Except as aforesaid, any
such action taken by the holder of any Note shall be conclusive and binding upon such
holder and upon all future holders and owners of such Note and of any Notes issued in
exchange or substitution therefor, irrespective of whether any notation in regard thereto
is made upon such Note or any Note issued in exchange or substitution therefor. 



ARTICLE IX 



NOTEHOLDERS’
MEETINGS 



Section 9.1 PURPOSES FOR WHICH
MEETINGS MAY BE CALLED. A meeting of Noteholders may be called at any time and from time
to time pursuant to the provisions of this Article IX for any of the following purposes: 



          	 	(i) 	
               to give any notice to the Company or to the Trustee, or to give any directions
               to the Trustee, or to consent to the waiving of any default hereunder and its
               consequences, or to take any other action authorized to be taken by Noteholders
               pursuant to any of the provisions of Article VI; 


               



          	 	(ii) 	
               to remove the Trustee and appoint a successor trustee pursuant to the provisions
               of Article VII; 


               



          	 	(iii) 	
               to consent to the execution of an indenture or indentures supplemental hereto
               pursuant to the provisions of Section 10.2; or 


               



          	 	(iv) 	
               to take any other action authorized to be taken by or on behalf of the holders
               of any specified aggregate principal amount of the Notes under any other
               provisions of this Indenture or under applicable law. 


               



Section 9.2 MANNER OF CALLING
MEETINGS; RECORD DATE. The Trustee may at any time call a meeting of Noteholders to take
any action specified in Section 9.1, to be held at such time and at such place in
Minneapolis, Minnesota as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be mailed not less than 30 nor more
than 60 days prior to the date fixed for the meeting to such Noteholders at their
addresses as such addresses appear in the Note register. For the purpose of determining
Noteholders entitled to notice of any meeting of Noteholders, the Company, upon written
notice to the Trustee, shall fix in advance a date as the record date for such
determination, such date to be a business day not more than ten days prior to the date of
the mailing of such notice as hereinabove provided. Only persons in whose name any Note
shall be registered in the Note register at the close of business on a record date fixed
by the Trustee as aforesaid, or by the Company or the Noteholders as provided in Section
9.3, shall be entitled to notice of the meeting of Noteholders with respect to which such
record date was so fixed. 



Section 9.3 CALL OF MEETING BY
COMPANY OR NOTEHOLDERS. In case at any time the Company, pursuant to a resolution of its
Board of Directors or the holders of at least 10% in aggregate principal amount of the
Notes then outstanding shall have requested the Trustee to call a meeting of Noteholders
to take any action authorized in Section 9.1 by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the Trustee shall
not have mailed notice of such meeting within 20 days after receipt of such request, then
the Company or the holders of Notes in the amount above specified, as the case may be, may
fix the record date with respect to, and determine the time and the place for, such
meeting and may call such meeting to take any action authorized in Section 9.1, by mailing
notice thereof as provided in Section 9.2. The record date fixed as provided in the
preceding sentence shall be set forth in a written notice to the Trustee and shall be a
business day not less than 15 nor more than 20 days after the date on which the original
request is sent to the Trustee. 



Section 9.4 WHO MAY ATTEND AND VOTE
AT MEETINGS. Only persons entitled to receive notice of a meeting of Noteholders and their
respective proxies duly appointed by an instrument in writing shall be entitled to vote at
such meeting. The only persons who shall be entitled to be present or to speak at any
meeting of Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any representatives of
the Company and its counsel. When a determination of Noteholders entitled to vote at any
meeting of Noteholders has been made as provided in this Section, such determination shall
apply to any adjournments thereof. 



Section 9.5 MANNER OF VOTING AT
MEETINGS AND RECORD TO BE KEPT. The vote upon any resolution submitted to any meeting of
Noteholders shall be by written ballots on each of which shall be subscribed the signature
of the Noteholder or proxy casting such ballot and the identifying number or numbers of
the Notes held or represented in respect of which such ballot is cast. The chairman of the
meeting shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at the meeting.
A record in duplicate of the proceedings of each meeting of Noteholders shall be prepared
by the secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section 9.2. The record
shall show the identifying numbers of the Notes voting in favor of or against any
resolution. Each counterpart of such record shall be signed and verified by the affidavits
of the chairman and secretary of the meeting and one of the counterparts shall be
delivered to the Company and the other to the Trustee to be preserved by the Trustee. 



        Any
counterpart record so signed and verified shall be conclusive evidence of the matters
therein stated and shall be the record referred to in clause (b) of Section 8.1. 



Section 9.6 EXERCISE OF RIGHTS OF
TRUSTEE AND NOTEHOLDERS NOT TO BE HINDERED OR DELAYED. Nothing in this Article IX
contained shall be deemed or construed to authorize or permit, by reason of any call of a
meeting of Noteholders or any rights expressly or impliedly conferred hereunder to make
such call, any hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Noteholders under any of the provisions of this
Indenture or of the Notes. 



ARTICLE X 



SUPPLEMENTAL INDENTURES 



Section 10.1 SUPPLEMENTAL INDENTURES
WITHOUT CONSENT OF NOTEHOLDERS. The Company, when authorized by a Board Resolution, and
the Trustee may from time to time and at any time enter into an indenture or indentures
supplemental hereto for one or more of the following purposes: 



     (a)    
          to make provision with respect to the conversion rights of the holders of Notes
          pursuant to the requirements of Section 14.6; 



     (b)    
          subject to Article XV, to convey, transfer, assign, mortgage or pledge to the
          Trustee as security for the Notes, any property or assets; 



     (c)    
          to evidence the succession of another person to the Company, or successive
          successions, and the assumption by the Successor Company of the covenants,
          agreements and obligations of the Company pursuant to Article XI; 



     (d)    
          to add to the covenants of the Company such further covenants, restrictions or
          conditions as the Board of Directors and the Trustee shall consider to be for
          the benefit of the holders of Notes and to make the occurrence, or the
          occurrence and continuance, of a default in any such additional covenants,
          restrictions or conditions a default or an Event of Default permitting the
          enforcement of all or any of the several remedies provided in this Indenture as
          herein set forth; provided that in respect of any such additional covenant,
          restriction or condition, such supplemental indenture may provide for a
          particular period of grace after default (which period may be shorter or longer
          than that allowed in the case of other defaults) or may provide for an immediate
          enforcement upon such default or may limit the remedies available to the Trustee
          upon such default; 



     (e)    
          to provide for the issuance under this Indenture of Notes in coupon form
          (including Notes registrable as to principal only) and to provide for
          exchangeability of such Notes with the Notes issued hereunder in fully
          registered form and to make all appropriate changes for such purpose; 



     (f)    
          to cure any ambiguity or to correct or supplement any provision contained herein
          or in any supplemental indenture that may be defective or inconsistent with any
          other provision contained herein or in any supplemental indenture, or to make
          such other provisions in regard to matters or questions arising under this
          Indenture that shall not adversely affect the interests of the holders of the
          Notes; 



     (g)    
          to evidence and provide for the acceptance of appointment hereunder by a
          successor Trustee with respect to the Notes; or 



     (h)    
          to modify, eliminate or add to the provisions of this Indenture to such extent
          necessary to effect the qualification of this Indenture under the Trust
          Indenture Act (if applicable), or under any similar federal statute hereafter
          enacted (if applicable). 



        The
Trustee is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and stipulations that
may be therein contained and to accept the conveyance, transfer and assignment of any
property thereunder, but the Trustee shall not be obligated to, but may in its discretion,
enter into any supplemental indenture that affects the Trustee’s own rights, duties
or immunities under this Indenture or otherwise. 



        Any
supplemental indenture authorized by the provisions of this Section 10.1 may be executed
by the Company and the Trustee without the consent of the holders of any of the Notes at
the time outstanding, notwithstanding any of the provisions of Section 10.2. 



Section 10.2 SUPPLEMENTAL INDENTURES
WITH CONSENT OF NOTEHOLDERS. With the consent (evidenced as provided in Article VIII) of
the holders of not less than a majority in aggregate principal amount of the Notes at the
time outstanding, the Company, when authorized by a Board Resolution and the Trustee, may
from time to time and at any time enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the holders of the Notes; provided that no such
supplemental indenture shall (i) without the consent of the holders of each Note so
affected, extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium, if any,
thereon or reduce any amount payable on redemption or repurchase thereof, alter the
obligation of the Company to repurchase the Notes at the option of the holder upon the
occurrence of a Change of Control or impair or affect the right of any Noteholder to
institute suit for the payment thereof or make the principal thereof or interest or
premium, if any, thereon payable in any coin or currency other than that provided in the
Notes, modify the subordination provisions in a manner adverse to the holders of the
Notes, or impair the right to convert the Notes into Common Stock or cash subject to the
terms set forth herein or (ii) without the consent of the holders of all the Notes then
outstanding, reduce the aforesaid percentage of Notes, the holders of which are required
to consent to any such supplemental indenture. 



        Upon
the request of the Company, accompanied by a copy of a Board Resolution certified by its
Secretary or Assistant Secretary authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of Noteholders
as aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee’s own
rights, duties or immunities under this Indenture or otherwise, in which case the Trustee
may in its discretion, but shall not be obligated to, enter into such supplemental
indenture. 



        It
shall not be necessary for the consent of the Noteholders under this Section 10.2 to
approve the particular form of any proposed supplemental indenture, but it shall be
sufficient if such consent shall approve the substance thereof. 



Section 10.3 EFFECT OF SUPPLEMENTAL
INDENTURES. Any supplemental indenture executed pursuant to the provisions of this Article
X shall comply with the Trust Indenture Act, as then in effect, if such supplemental
indenture is then required to so comply. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article X, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights, limitation of
rights, obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes. 



Section 10.4 NOTATION ON NOTES. Notes
authenticated and delivered after the execution of any supplemental indenture pursuant to
the provisions of this Article X may bear a notation in form approved by the Company as to
any matter provided for in such supplemental indenture, but they need not do so. After
notice to the Trustee, if the Company shall determine to add such a notation, new Notes so
modified as to conform, in the opinion of the Board of Directors, to any modification of
this Indenture contained in any such supplemental indenture may, at the Company’s
expense, be prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 16.14) and
delivered in exchange for the Notes then outstanding, upon surrender of such Notes then
outstanding. 



Section 10.5 EVIDENCE OF COMPLIANCE
OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO THE TRUSTEE. The Trustee shall be furnished
with and, subject to the provisions of Sections 7.1 and 7.2, may rely conclusively upon an
Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements of this
Article X. 



ARTICLE XI 



CONSOLIDATION, MERGER,
SALE, CONVEYANCE, TRANSFER AND LEASE 



Section 11.1 COMPANY MAY CONSOLIDATE, ETC.
ON CERTAIN TERMS. The Company shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of its assets (determined on a consolidated
basis) to any person unless: (i) either the Company is the resulting, surviving or
transferee person (the “Successor Company”) or the Successor Company is a person
organized and existing under the laws of the United States or any State thereof or the
District of Columbia, and the Successor Company (if not the Company) expressly assumes by
a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company under this Indenture and the Notes,
including the rights pursuant to Article XIV hereof, (ii) immediately after giving
effect to such transaction, no Event of Default has happened and is continuing and
(iii) the Company delivers to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture. 



Section 11.2 SUCCESSOR COMPANY TO BE
SUBSTITUTED. In case of any such consolidation, merger, sale, conveyance, transfer or
lease and upon the assumption by the Successor Company, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due
and punctual payment of the principal of, premium, if any, and interest on all of the
Notes and the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such Successor Company shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein as the
party hereto. When a Successor Company duly assumes all the obligations of the Company
pursuant to this Indenture and the Notes, the predecessor shall be released from all such
obligations. 



Section 11.3 OPINION OF COUNSEL TO BE
GIVEN TO TRUSTEE. The Trustee, subject to Sections 7.1 and 7.2, shall receive an
Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or lease and any such assumption
complies with the provisions of this Article XI. 



ARTICLE XII 



SATISFACTION AND
DISCHARGE OF INDENTURE; UNCLAIMED MONEYS 


Section 12.1      LEGAL DEFEASANCE AND COVENANT DEFEASANCE OF THE NOTES.


          	 	(a) 	
               The Company may, at its option by Board Resolution, at any time, with respect to
               the Notes, elect to have either paragraph (b) or paragraph (c) below be applied
               to the outstanding Notes 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 Notes on the
               date the conditions set forth in paragraph (d) 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 Notes, which shall thereafter be
               deemed to be “outstanding” only for the purposes of the Sections of
               and matters under this Indenture referred to in clauses (i) and (ii) below and
               to have satisfied all its other obligations under such Notes and this Indenture
               insofar as such Notes are concerned, except for the following, which shall
               survive until otherwise terminated or discharged hereunder: (i) the rights
               of holders of outstanding Notes 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 on such Notes when
               such payments are due and (ii) obligations listed in Section 12.3. 


               



          	 	(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 XI and Section 3.5 with
               respect to the outstanding Notes on and after the date the conditions set forth
               in paragraph (d) are satisfied (hereinafter, “covenant defeasance”),
               and the Notes shall thereafter be deemed to be not “outstanding” for
               the purpose of any direction, waiver, consent or declaration or act of holders
               (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 Notes, the Company 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 6.1,
               but, except as specified above, the remainder of this Indenture and such Notes
               shall be unaffected thereby. 


               



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


               



          	 	(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, cash or non-callable U.S. Government Obligations
               maturing as to principal and interest at such times, or a combination thereof,
               in such amounts 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, if any,
               and interest on the outstanding Notes on the dates on which any such payments
               are due and payable in accordance with the terms of this Indenture and of the
               Notes as well as all other sums payable hereunder by the Company; 


               



          	 	(ii) 	
               (A) No Event of Default shall have occurred or be continuing on the date of such
               deposit, and (B) no Default or Event of Default under Section 6.1(f) or
               6.1(g) shall occur on or before the 123rd day after the date of such
               deposit; 


               



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


               



          	 	(iv) 	
               In the case of a legal defeasance under paragraph (b) above, the Company shall
               have delivered to the Trustee an Opinion of Counsel in form and substance
               reasonably satisfactory to the Trustee stating that (A) the Company has received
               from, or there has been published by, the Internal Revenue Service a ruling
               applicable to such a defeasance or (B) since the date of this Indenture, there
               has been a change in the applicable federal income tax law, in either case to
               the effect that, and based thereon such opinion shall confirm that, the holders
               of the Notes shall not recognize income, gain or loss for federal income tax
               purposes as a result of such deposit, defeasance and discharge and shall be
               subject to federal income tax on the same amounts and in the same manner and at
               the same times as would have been the case if such deposit, defeasance and
               discharge had not occurred; and, in the case of a covenant defeasance under
               paragraph (c) above, the Company shall have delivered to the Trustee an
               Officers’ Certificate and an Opinion of Counsel, in form and substance
               reasonably satisfactory to the Trustee, to the effect that holders of the Notes
               shall not recognize income, gain or loss for federal income tax purposes as a
               result of such deposit and defeasance and shall be subject to federal income tax
               on the same amounts and in the same manner and at the same times as would have
               been the case if such deposit and defeasance had not occurred; 


               



          	 	(v) 	
               The holders shall have a perfected security interest under applicable law in the
               cash or U.S. Government Obligations deposited pursuant to Section 12.1(d)(i)
               above; 


               



          	 	(vi) 	
               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, after
               the passage of 123 days following the deposit, the trust funds shall not be
               subject to any applicable bankruptcy, insolvency, reorganization or similar law
               affecting creditors’ rights generally; 


               



          	 	(vii) 	
               Such defeasance shall not cause the Trustee to have a conflicting interest with
               respect to any securities of the Company; and 


               



          	 	(viii) 	
               The Company shall have delivered to the Trustee an Officers’ Certificate
               and an Opinion of Counsel in form and substance reasonably satisfactory to the
               Trustee, each stating that all conditions precedent specified herein relating to
               the defeasance contemplated by this Section 12.1 have been complied with; 


               



provided, that no deposit under
clause (i) shall be effective to terminate the obligations of the Company under the Notes
or this Indenture prior to the passage of 123 days following such deposit. 



Section 12.2 TERMINATION OF
OBLIGATIONS UPON CANCELLATION OF THE NOTES. In addition to the Company’s rights under
Section 12.1, the Company may terminate all of its obligations under this Indenture
(subject to Section 12.3) when: 



          	 	(a) 	
               (i) all Notes theretofore authenticated and delivered (other than Notes that
               have been destroyed, lost or stolen and that have been replaced, converted or
               paid as provided in Section 2.6) have been delivered to the Trustee for
               cancellation; and 


               



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


               



          	 	(b) 	
               (i) the Notes not previously delivered to the Trustee for cancellation
               shall have become due and payable or are by their terms to become due and
               payable within one year or are to be called for redemption under arrangements
               satisfactory to the Trustee upon delivery of notice, (ii) the Company shall
               have irrevocably deposited with the Trustee, as trust funds, cash, in an amount
               sufficient to pay principal of premium, if any, and interest on the outstanding
               Notes, to maturity or redemption, as the case may be, (iii) such deposit
               shall not result in a breach or violation of, or constitute a default under, any
               agreement or instrument pursuant to which the Company is a party or by which it
               or its property is bound and (iv) the Company has delivered to the Trustee
               an Officers’ Certificate and an Opinion of Counsel in form and substance
               reasonably satisfactory to the Trustee, each stating that all conditions related
               to such defeasance have been complied with. 


               



Section 12.3 SURVIVAL OF CERTAIN
OBLIGATIONS. Notwithstanding the satisfaction and discharge of this Indenture and of the
Notes referred to in Section 12.1 or 12.2, the respective obligations of the Company and
the Trustee under Sections 2.3, 2.4, 2.5, 2.6, 3.1, 4.2, 5.1, 6.4, 6.9, 7.6, 7.11, 12.5,
12.6, 12.7, Articles XIV and XV shall survive until the Notes are no longer outstanding,
and thereafter, the obligations of the Company and the Trustee under Sections 6.9, 7.6,
12.5, 12.6 and 12.7 shall survive. Nothing contained in this Article XII shall abrogate
any of the rights, obligations or duties of the Trustee under this Indenture. 



Section 12.4 ACKNOWLEDGMENT OF
DISCHARGE BY TRUSTEE. Subject to Section 12.7, after (i) the conditions of Section 12.1 or
12.2 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 12.3. 



Section 12.5 APPLICATION OF TRUST
ASSETS. The Trustee shall hold any cash or U.S. Government Obligations deposited with it
in the irrevocable trust established pursuant to Section 12.1 or 12.2, as the case may be.
The Trustee shall apply the deposited cash or the U.S. Government Obligations, together
with earnings thereon in accordance with this Indenture and the terms of the irrevocable
trust agreement established pursuant to Section 12.1 or 12.2, as the case may be, to the
payment of principal of, premium, if any, and interest on the Notes. The cash or U.S.
Government Obligations so held in trust and deposited with the Trustee in compliance with
Section 12.1 or 12.2, as the case may be, 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. Except as specifically provided herein, the Trustee shall not be
requested to invest any amounts held by it for the benefit of the holders or pay interest
on uninvested amounts to any holder. 



        The
Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against the U.S. Government Obligations deposited pursuant to Section 12.1
hereof or Section 12.2 hereof or the principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for the account of the
holders of outstanding Notes. 



Section 12.6 REPAYMENT TO THE
COMPANY; UNCLAIMED MONEY. Subject to applicable laws governing escheat of such property,
and upon termination of the trust established pursuant to Section 12.1 hereof or 12.2
hereof, as the case may be, the Trustee shall promptly pay to the Company upon written
request any excess cash or U.S. Government Obligations held by them. Additionally, if
amounts for the payment of principal, premium, if any, or interest remains unclaimed for
two years, the Trustee shall, upon written request, pay such amounts back to the Company
forthwith. Thereafter, all liability of the Trustee with respect to such amounts shall
cease. After payment to the Company, holders entitled to such payment must look to the
Company for such payment as general creditors unless an applicable abandoned property law
designates another person. 



Section 12.7 REINSTATEMENT. If the
Trustee is unable to apply any cash or U.S. Government Obligations in accordance with
Section 12.1 or 12.2 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company’s obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.1 or 12.2 until such time as the Trustee is permitted to apply all such cash or
U.S. Government Obligations in accordance with Section 12.1 or 12.2, as the case may be;
provided that if the Company makes any payment of principal of, premium, if any, or
interest on any Notes following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the holders of such Notes to receive such payment from the
amounts held by the Trustee. 



ARTICLE XIII 


                           IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS

Section 13.1 INDENTURE AND NOTES
SOLELY CORPORATE OBLIGATIONS. No recourse for the payment of the principal of, or premium,
if any, or interest on any Note, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, shareholder, officer or director, as such, past, present or future, of the
Company or of any successor entity, either directly or through the Company or any
successor entity, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly understood that
all such liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of the Notes. 



ARTICLE XIV 



CONVERSION OF NOTES 


Section 14.1      RIGHT TO CONVERT.


     (a)    
          Subject to and upon compliance with the provisions of this Indenture, the holder
          of any Note shall have the right to convert the principal hereof or any portion
          of such principal that is $1,000 or an integral multiple thereof, into the
          Company’s Common Stock, provided that shareholder ratification and approval
          of the issuance of the Notes has been obtained on or before April 14, 2004, at
          any time after May 31, 2004 and prior to the close of business on October 14,
          2008 (except that, with respect to any Note or portion of a Note that shall be
          called for redemption or delivered for repurchase, such right shall terminate at
          the close of business one Business Day immediately preceding the date fixed for
          redemption or repurchase of such Note or portion of a Note unless the Company
          shall default in payment due upon redemption or repurchase thereof). The
          principal amount of any such Note, or any portion of such principal amount that
          is $1,000 or an integral multiple thereof, is convertible into that number of
          fully paid and nonassessable shares of Common Stock (as such shares shall then
          be constituted) obtained by dividing the aggregate principal amount of the Notes
          or portion thereof surrendered for conversion by the Conversion Price in effect
          at such time rounded to the nearest 1/100,000th of a share (with
          0.000005 being rolled upward) as such amount shall be certified by the Company
          as provided in an Officers’ Certificate, by surrender of the Notes so to be
          converted in whole or in part in the manner provided in Section 14.2. A Note (or
          portion thereof) in respect of which a holder is exercising its option to
          require repurchase upon a change of control pursuant to Section 3.5 of this
          Indenture, may only be converted if such holder withdraws its election to
          exercise said redemption option in accordance with the terms of this Indenture.
          A holder of Notes is not entitled to any rights of a holder of Common Stock
          until such holder has converted such holder’s Notes to Common Stock and
          only to the extent such Notes are deemed to have been converted to Common Stock
          under this Article XIV. 



     (b)    
          In the event that the Company does not obtain shareholder ratification and
          approval of the issuance of the Notes on or before April 14, 2004, the Company
          must promptly repurchase the Notes at a price in cash equal to 100% of the
          principal amount of the Notes, plus accrued but unpaid interest on the Notes,
          plus additional interest at a rate of 5-3/4% per annum on the principal amount
          of the Notes from the date of issuance to the date of such repurchase. 



     (c)    
          In the event a Noteholder desires to convert all, or any portion, of its Notes
          into shares of Common Stock (or other securities into which the Notes are then
          convertible) and the Company does not have authorized a sufficient number of
          shares of Common Stock (or other securities into which the Notes are then
          convertible) for such conversion, then in lieu of delivering shares of Common
          Stock (or other securities into which the Notes are then convertible) upon
          conversion pursuant to Section 14.1(a) of that portion of such holder’s
          Notes for which there is an insufficient number of shares of Common Stock (or
          other securities into which the Notes are then convertible) (the “Cash
          Equivalent Notes”), the Company shall pay to the holder converting the Cash
          Equivalent Notes who properly exercises the conversion privilege, as set forth
          in Section 14.2, an amount, as calculated by the Company and certified to the
          Trustee in an Officers’ Certificate of the Company, in cash equal to the
          Market Cash Conversion Price of the shares of Common Stock into which such Cash
          Equivalent Notes are then convertible. 



     (d)    
          In the event that the Company directs the Trustee to pay cash upon any
          conversion in lieu of delivering shares of Common Stock or any other securities,
          as the case may be, the Company shall deliver to the Trustee written notice of
          such direction not later than the close of business on the first Trading Day
          after the date of receipt by the Trustee of the notice of conversion delivered
          by such holder pursuant to Section 14.2, and the Trustee shall notify by
          facsimile the contact person specified in the holder’s conversion notice of
          such election by the Company to such holder. In such event, notwithstanding any
          other provisions in this Article XIV, in lieu of delivering Common Stock upon
          conversion of such Notes surrendered in accordance with Section 14.2, the
          Company shall pay or direct the Trustee to pay the holder surrendering such
          securities an amount in cash equal to the Market Cash Conversion Price of the
          shares of Common Stock, plus any cash and other property theretofore apportioned
          to such shares of Common Stock in accordance with Section 14.2. Prior to or
          concurrently with such cash payment, the Company will provide the Trustee with
          an Officers’ Certificate setting forth the Market Cash Conversion Price and
          will deposit with the paying agent the cash so payable. The Trustee shall have
          no obligation or liability with respect to the calculation of the Market Cash
          Conversion Price. 



     (e)    
          In the event that a Noteholder desires to convert all or any portion of its
          Notes into shares of Common Stock prior to October 15, 2005, the Company will
          pay such Noteholder an amount equal to the interest that would have been
          otherwise earned on such Notes between the date of such conversion and October
          15, 2005 discounted from October 15, 2005 to present value utilizing a rate of
          6.25% with simple interest over a 360 day year. In the event that a Noteholder
          elects to convert prior to October 15, 2005 and the Company is required to pay
          interest pursuant to this Section 14.1(e), the Company may, in its sole
          discretion, elect to make such interest payment in cash or in shares of Common
          Stock based on 90% of the average Closing Prices of the Common Stock for the
          five Trading Days immediately preceding the conversion date. Prior to or
          concurrently with such payment, the Company will provide the Trustee with an
          Officers’ Certificate setting forth the calculation of the payment required
          by this Section 14.1(e). The Trustee shall have no obligation or liability with
          respect to the calculation of the payments required by this Section 14.1(e). 



Section 14.2 EXERCISE OF CONVERSION
PRIVILEGE; ISSUANCE OF COMMON STOCK ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR
DIVIDENDS. In order to exercise the conversion privilege with respect to any Note in
definitive form, the holder of any such Note to be converted in whole or in part shall
surrender such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 4.2, accompanied by the funds, if any, required by the penultimate
sentence of this paragraph, and shall give written notice of conversion in the form
provided on the form of Note (or such other notice that is acceptable to the Company) to
the office or agency that the holder elects to convert such Note or the portion thereof
specified in said notice. Such notice shall state the name, telephone number and facsimile
number of the contact person for the conversion notice and shall also state the name or
names (with address) in which the certificate or certificates for shares of Common Stock
that shall be issuable on such conversion shall be issued and shall be accompanied by
transfer taxes, if required pursuant to Section 14.7. Each such Note surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in the name of
the holder of such Note as it appears on the Note register, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly executed
by, the holder or his duly authorized attorney. 



        In
order to exercise the conversion privilege with respect to any interest in a global Note,
the beneficial holder must complete the appropriate instruction form for conversion
pursuant to the Depository’s book-entry conversion program and follow the other
procedures set forth in such program. 



        As
promptly as practicable after satisfaction of the requirements for conversion set forth
above, subject to Section 14.1(c) and in compliance with any restrictions on transfer if
shares issuable on conversion are to be issued in a name other than that of the Noteholder
(as if such transfer were a transfer of the Note or Notes (or portion thereof) so
converted), the Company shall issue and shall deliver to such holder at the office or
agency maintained by the Company for such purpose pursuant to Section 4.2, a certificate
or certificates for the number of full shares issuable upon the conversion of such Note or
portion thereof accordance with the provisions of this Article XIV and shall issue a check
or cash in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 14.4. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion, subject to
Section 2.3, the Company shall execute and the Trustee shall authenticate and make
available for delivery to the holder of the Note so surrendered, without charge to him, a
new Note or Notes in authorized denominations in an aggregate principal amount equal to
the unconverted portion of the surrendered Note. 



        Each
conversion shall be deemed to have been effected as to any such Note (or portion thereof)
on the date on which the requirements set forth above in this Section 14.2 have been
satisfied as to such Note (or portion thereof), and, subject to Section 14.1(c), the
person in whose name any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become on said date the holder of
record of the shares represented thereby; provided that any such surrender on any date
when the stock transfer books of the Company shall be closed shall constitute the person
in whose name the certificates are to be issued as the record holder thereof for all
purposes on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which such Note
shall have been surrendered. 



        Any
unpaid interest on any Note or portion thereof as of the date such Note or portion thereof
is surrendered for conversion shall (unless such Note or portion thereof being converted
shall have been called for redemption on a redemption date during the period from the
close of business on or after any record date for the payment of interest to the close of
business on the business day following the corresponding interest payment date) be paid in
cash to the former holder of such Note or portion thereof on the next succeeding interest
payment date. 



        Upon
the conversion of an interest in a global Note, the Trustee, or the Custodian at the
direction of the Trustee, shall make a notation on such global Note as to the reduction in
the principal amount represented thereby. 



Section 14.3 MANDATORY CONVERSION.
The Notes shall be automatically converted into Common Stock on the first date (the
“Mandatory Conversion Date”) on or after the 15th Trading Day following October
15, 2005, on which: (i) the average of the Closing Price (as defined in Section 14.6(g))
of the Common Stock on 15 consecutive preceding Trading Days is equal to or greater than
110% of the Conversion Price and (ii) the Company has sufficient shares of Common Stock
(or other securities into which the Notes are then convertible) authorized to execute the
Mandatory Conversion (as defined below). The Notes shall be converted into that number of
fully paid and nonassessable shares of Common Stock (or other securities into which the
Notes are then convertible) obtained by dividing the aggregate principal amount of the
Notes by the Conversion Price in effect at such time rounded to the nearest
1/100,000th of a share (with 0.000005 being rolled upward) (the “Mandatory
Conversion”). 



        The
Company will monitor the Closing Price of the Common Stock. As promptly as practicable
after the Mandatory Conversion Date as set forth above, subject to Section 14.1(c) and in
compliance with any restrictions on transfer if shares issuable on conversion are to be
issued in a name other than that of the Noteholder (as if such transfer were a transfer of
the Note or Notes (or portion thereof) so converted), the Company shall issue and shall
deliver to such holder at the office or agency maintained by the Company for such purpose
pursuant to Section 4.2, a certificate or certificates for the number of full shares
issuable upon the conversion of such Note or portion thereof accordance with the
provisions of this Article XIV and shall issue a check or cash in respect of any
fractional interest in respect of a share of Common Stock arising upon such conversion, as
provided in Section 14.4. Any interest on the Notes accrued as of the Mandatory Conversion
Date shall be paid in cash to the former holders of such Notes on the next succeeding
interest payment date. After the Mandatory Conversion Date, the Notes will no longer
represent Indebtedness of the Company, will no longer accrue interest or require the
Company to make any payment of principal, and the Company’s obligations to make any
further payments with respect to the Notes will terminate (except for under this
Section 14.3). 



        Upon
the conversion of an interest in a global Note, the Trustee, or the Custodian at the
direction of the Trustee, shall make a notation on such global Note as to the reduction in
the principal amount represented thereby. 



Section 14.4 CASH PAYMENTS IN LIEU OF
FRACTIONAL SHARES. No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of Notes. Subject to Section 14.1(c), (i) if more
than one Note shall be surrendered for conversion at one time by the same holder, the
number of fully paid and nonassessable shares of Common Stock issuable upon conversion of
a Note shall be determined by dividing the aggregate principal amount of such Notes or
portion thereof surrendered for conversion by the Conversion Price and (ii) the aggregate
number of shares of Common Stock issuable upon conversion shall be rounded to the nearest
1/100,000th of a share (with .0000005 being rolled upward). If any fractional share of
stock would be issuable upon the conversion of any Note or Notes, the Company shall make
an adjustment therefor in cash at the current market value thereof. The current market
value of a share of Common Stock shall be determined by multiplying the fractional share
by the Closing Price on the Trading Day immediately preceding the Mandatory Conversion
Date or the date, pursuant to Section 14.2, on which the Notes (or specified portions
thereof) are deemed to have been converted. 



Section 14.5 CONVERSION PRICE. The
conversion price of the Notes (the “Conversion Price”) shall be $1.75 per share
of Common Stock, subject to adjustment as provided in this Article XIV. 



Section 14.6 ADJUSTMENT OF CONVERSION
PRICE. The Conversion Price shall be adjusted from time to time by the Company as follows: 



     (a)    
          In case the Company shall (i) pay a dividend or make a distribution on its
          outstanding Common Stock in shares of its Common Stock, (ii) subdivide or
          split its outstanding Common Stock into a greater number of shares,
          (iii) combine its outstanding Common Stock into a smaller number of shares
          or (iv) issue any shares of Capital Stock by reclassification of its Common
          Stock, the conversion price in effect immediately prior thereto shall be
          adjusted so that the holder of any Notes thereafter surrendered for conversion
          shall be entitled to receive the number of shares of Common Stock of the Company
          which such holder would have owned or have been entitled to receive after the
          occurrence of any of the events described above had such Notes been surrendered
          for conversion immediately prior to the occurrence of such event or the record
          date therefor, whichever is earlier. An adjustment made pursuant to this
          subsection (a) shall become effective immediately after the close of business on
          the record date for determination of shareholders entitled to receive such
          dividend or distribution in the case of a dividend or distribution (except as
          provided in Section 14.6(j)) and shall become effective immediately after the
          close of business on the effective date in the case of a subdivision, split,
          combination or reclassification. Any shares of Common Stock issuable in payment
          of a dividend shall be deemed to have been issued immediately prior to the close
          of business on the record date for such dividend for purposes of calculating the
          number of outstanding shares of Common Stock under Sections 14.6(b) and (c). 



     (b)    
          In case the Company shall issue rights, options or warrants to all holders of
          its outstanding shares of Common Stock entitling them to subscribe for or
          purchase shares of Common Stock at a price per share less than the Current
          Market Price (as defined in Section 14.6(g)) on the Record Date fixed for
          determination of shareholders entitled to receive such rights, options or
          warrants, the Conversion Price shall be adjusted so that the same shall equal
          the price determined by multiplying the Conversion Price in effect at the
          opening of business on the date after the Record Date by a fraction the
          numerator of which shall be the number of shares of Common Stock outstanding at
          the close of business on the Record Date plus the number of shares that the
          aggregate offering price of the total number of shares so offered would purchase
          at such Current Market Price, and the denominator of which shall be the number
          of shares of Common Stock outstanding on the close of business on the Record
          Date plus the total number of additional shares of Common Stock so offered for
          subscription or purchase. Such adjustment shall become effective immediately
          after the opening of business on the day following the Record Date fixed for
          determination of shareholders entitled to receive such rights, options or
          warrants. To the extent that shares of Common Stock are not delivered after the
          expiration or termination of such rights, options or warrants, the Conversion
          Price shall be readjusted to the Conversion Price that would then be in effect
          had the adjustments made upon the issuance of such rights, options or warrants
          been made on the basis of delivery of only the number of shares of Common Stock
          actually delivered. In the event that such rights, options or warrants are not
          so issued, the Conversion Price shall again be adjusted to be the Conversion
          Price that would then be in effect if such date fixed for the determination of
          shareholders entitled to receive such rights, options or warrants had not been
          fixed. In determining whether any rights, options or warrants entitle the
          holders to subscribe for or purchase shares of Common Stock at less than such
          Current Market Price, and in determining the aggregate offering price of such
          shares of Common Stock, there shall be taken into account any consideration
          received for such rights, options or warrants, the value of such consideration,
          if other than cash, to be determined by the Board of Directors. 



     (c)    
          In case outstanding shares of Common Stock shall be subdivided into a greater
          number of shares of Common Stock, the Conversion Price in effect at the opening
          of business on the day following the day upon which such subdivision becomes
          effective shall be proportionately reduced, and conversely, in case outstanding
          shares of Common Stock shall be combined into a smaller number of shares of
          Common Stock, the Conversion Price in effect at the opening of business on the
          day following the day upon which such combination becomes effective shall be
          proportionately increased, such reduction or increase, as the case may be, to
          become effective immediately after the opening of business on the day following
          the day upon which such subdivision or combination becomes effective. 



     (d)    
          In case the Company shall, by dividend or otherwise, distribute to all holders
          of its Common Stock shares of any class of Capital Stock of the Company (other
          than any dividends or distributions to which Section 14.6(a) applies) or
          evidences of its indebtedness or assets (including securities, but excluding any
          rights, options or warrants referred to in Section 14.6(b), and excluding any
          dividend or distribution (x) in connection with the liquidation, dissolution or
          winding-up of the Company, whether voluntary or involuntary, (y) exclusively in
          cash or (z) referred to in Section 14.6(a) (any of the foregoing hereinafter in
          this Section 14.6(d) called the “Securities”)), then, in each such
          case, the Conversion Price shall be reduced so that the same shall be equal to
          the price determined by multiplying the Conversion Price in effect immediately
          prior to the close of business on the Record Date (as defined in Section
          14.6(g)) with respect to such distribution by a fraction of which the numerator
          shall be the Current Market Price (determined as provided in Section 14.6(g)) on
          such date less the fair market value (as determined by the Board of Directors,
          whose determination shall be conclusive and described in a Board Resolution) on
          such date of the portion of the Securities so distributed applicable to one
          share of Common Stock and the denominator shall be such Current Market Price,
          such reduction to become effective immediately prior to the opening of business
          on the day following the Record Date; provided that in the event the then fair
          market value (as so determined) of the portion of the Securities so distributed
          applicable to one share of Common Stock is equal to or greater than the Current
          Market Price on the Record Date, in lieu of the foregoing adjustment, adequate
          provision shall be made so that each Noteholder shall have the right to receive
          upon conversion the amount of Securities such holder would have received had
          such holder converted each Note on such date. In the event that such dividend or
          distribution is not so paid or made, the Conversion Price shall again be
          adjusted to be the Conversion Price that would then be in effect if such
          dividend or distribution had not been declared. If the Board of Directors
          determines the fair market value of any distribution for purposes of this
          Section 14.6(d) by reference to the actual or when issued trading market for any
          securities comprising all or part of such distribution, it must in doing so
          consider the prices in such market over the same period used in computing the
          Current Market Price pursuant to Section 14.6(g) to the extent possible. 



        Notwithstanding
the foregoing provisions of this Section 14.6(d), no adjustment shall be made hereunder
for any distribution of Securities if the Company makes proper provision so that each
Noteholder who converts a Note (or any portion thereof) after the date fixed for
determination of shareholders entitled to receive such distribution shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock issuable upon such
conversion, the amount and kind of Securities that such holder would have been entitled to
receive if such holder had, immediately prior to such determination date, converted such
Note into Common Stock; provided that, with respect to any Securities that are
convertible, exchangeable or exercisable, the foregoing provision shall only apply to the
extent (and so long as) the Securities receivable upon conversion of such Note would be
convertible, exchangeable or exercisable, as applicable, without any loss of rights or
privileges for a period of at least 60 days following conversion of such Note. 



        Rights,
options or warrants distributed by the Company to all holders of Common Stock entitling
the holders thereof to purchase shares of the Company’s Capital Stock (either
initially or under certain circumstances), which rights, options or warrants, until the
occurrence of a specified event or events (the “Trigger Event”) (i) are deemed
to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are
also issued in respect of future issuances of Common Stock, shall not be deemed
distributed for purposes of this Section 14.6(d) (and no adjustment to the Conversion
Price under this Section 14.6(d) shall be required) until the occurrence of the earliest
Trigger Event. In addition, in the event of any distribution of rights, options or
warrants, or any Trigger Event with respect thereto, that shall have resulted in an
adjustment to the Conversion Price under this Section 14.6(d), (1) in the case of any such
rights, options or warrants that shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger Event, as the case
may be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of Common Stock with respect to such rights, options
or warrants (assuming such holder had retained such rights, options or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase, and (2) in
the case of such rights, options or warrants all of which shall have expired or been
terminated without exercise by any holder thereof, the Conversion Price shall be
readjusted as if such issuance had not occurred. 



        For
purposes of this Section 14.6(d) and Sections 14.6(a) and (b), any dividend or
distribution to which this Section 14.6(d) is applicable that also includes shares of
Common Stock, or rights, options or warrants to subscribe for or purchase shares of Common
Stock (or both), shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets or shares of Capital Stock other than such shares of
Common Stock or rights, options or warrants (and any Conversion Price reduction required
by this Section 14.6(d) with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares of Common Stock or
such rights, options or warrants (and any further Conversion Price reduction required by
Sections 14.6(a) and (b) with respect to such dividend or distribution shall then be made)
except (A) the Record Date of such dividend or distribution shall be substituted as
“the date fixed for the determination of shareholders entitled to receive such
dividend or other distribution” and “the date fixed for such determination”
within the meaning of Sections 14.6(a) and (b) and (B) any shares of Common Stock included
in such dividend or distribution shall not be deemed “outstanding at the close of
business on the date fixed for such determination” within the meaning of Section
14.6(a). 



          	 	(e) 	
               In case the Company shall, by dividend or otherwise, distribute to all holders
               of its Common Stock cash (excluding any cash that is distributed upon a merger
               or consolidation to which Section 14.7 applies or as part of a distribution
               referred to in Section 14.6(d) for which an adjustment to the Conversion Price
               is provided therein) in an aggregate amount that, combined together with (1) the
               aggregate amount of any other such distributions to all holders of its Common
               Stock made exclusively in cash within the 12 months preceding the date of
               payment of such distribution, and in respect of which no adjustment pursuant to
               this Section 14.6(e) has been made, and (2) the aggregate of any cash plus the
               fair market value (as determined by the Board of Directors, whose determination
               shall be conclusive and described in a Board Resolution) of consideration
               payable in respect of any tender offer, by the Company or any of its
               Subsidiaries for all or any portion of the Common Stock concluded within the 12
               months preceding the date of payment of such distribution, and in respect of
               which no adjustment pursuant to Section 14.6(f) has been made, exceeds 20.0% of
               the product of the Current Market Price (determined as provided in Section
               14.6(g)) on the Record Date with respect to such distribution times the number
               of shares of Common Stock outstanding on such date, then, and in each such case,
               immediately after the close of business on such date, unless the Company elects
               to reserve such cash for distribution to the holders of the Notes upon the
               conversion of the Notes so that any such holder converting Notes shall receive
               upon such conversion, in addition to the shares of Common Stock to that such
               holder is entitled, the amount of cash which such holder would have received if
               such holder had, immediately prior to the Record Date for such distribution of
               cash, converted its Notes into Common Stock, the Conversion Price shall be
               reduced so that the same shall equal the price determined by multiplying the
               Conversion Price in effect immediately prior to the close of business on such
               date by a fraction (i) the numerator of which shall be equal to the Current
               Market Price on the Record Date less an amount equal to the quotient of (x) the
               excess of such combined amount over such 20.0% and (y) the number of shares of
               Common Stock outstanding on the Record Date and (ii) the denominator of which
               shall be equal to the Current Market Price on such date; provided that in the
               event the portion of the cash so distributed applicable to one share of Common
               Stock is equal to or greater than the Current Market Price of the Common Stock
               on the Record Date, in lieu of the foregoing adjustment, adequate provision
               shall be made so that each Noteholder shall have the right to receive upon
               conversion the amount of cash such holder would have received had such holder
               converted each Note on the Record Date. In the event that such dividend or
               distribution is not so paid or made, the Conversion Price shall again be
               adjusted to be the Conversion Price that would then be in effect if such
               dividend or distribution had not been declared. 


               



          	 	(f) 	
               In case a tender offer made by the Company or any of its Subsidiaries for all or
               any portion of the Common Stock shall expire and such tender offer (as amended
               upon the expiration thereof) shall require the payment to shareholders (based on
               the acceptance (up to any maximum specified in the terms of the tender offer) of
               Purchased Shares (as defined below)) of an aggregate consideration having a fair
               market value (as determined by the Board of Directors, whose determination shall
               be conclusive and described in a Board Resolution) that combined together with
               (1) the aggregate of the cash plus the fair market value (as determined by the
               Board of Directors, whose determination shall be conclusive and described in a
               Board Resolution), as of the expiration of such tender offer, of consideration
               payable in respect of any other tender offer, by the Company or any of its
               Subsidiaries for all or any portion of the Common Stock expiring within the 12
               months preceding the expiration of such tender offer, and in respect of which no
               adjustment pursuant to this Section 14.6(f) has been made, and (2) the aggregate
               amount of any distributions to all holders of the Company’s Common Stock
               made exclusively in cash within 12 months preceding the expiration of such
               tender offer, and in respect of which no adjustment pursuant to Section 14.6(e)
               has been made, exceeds 20.0% of the product of the Current Market Price
               (determined as provided in Section 14.6(g)) as of the last time (the
               “Expiration Time”) tenders could have been made pursuant to such
               tender offer (as it may be amended) times the number of shares of Common Stock
               outstanding (including any tendered shares) on the Expiration Time, then, and in
               each such case, immediately prior to the opening of business on the day after
               the date of the Expiration Time, the Conversion Price shall be adjusted so that
               the same shall equal the price determined by multiplying the Conversion Price in
               effect immediately prior to close of business on the date of the Expiration Time
               by a fraction of which the numerator shall be the number of shares of Common
               Stock outstanding (including any tendered shares) on the Expiration Time
               multiplied by the Current Market Price of the Common Stock on the Trading Day
               next succeeding the Expiration Time and the denominator shall be the sum of (x)
               the fair market value (determined as aforesaid) of the aggregate consideration
               payable to shareholders based on the acceptance (up to any maximum specified in
               the terms of the tender offer) of all shares validly tendered and not withdrawn
               as of the Expiration Time (the shares deemed so accepted, up to any such
               maximum, being referred to as the “Purchased Shares”) and (y) the
               product of the number of shares of Common Stock outstanding (less any Purchased
               Shares) on the Expiration Time and the Current Market Price of the Common Stock
               on the Trading Day next succeeding the Expiration Time, such reduction to become
               effective immediately prior to the opening of business on the day following the
               Expiration Time. In the event that the Company is obligated to purchase shares
               pursuant to any such tender offer, but the Company is permanently prevented by
               applicable law from effecting any such purchases or all such purchases are
               rescinded, the Conversion Price shall again be adjusted to be the Conversion
               Price that would then be in effect if such tender offer had not been made. 


               



          	 	(g) 	
               For purposes of this Section 14.6, the following terms shall have the meaning
               indicated: 


               



          	 	(i) 	
               “Closing Price” with respect to any securities on any day shall mean
               the closing sale price regular way on such day or, in case no such sale takes
               place on such day, the average of the reported closing bid and asked prices,
               regular way, in each case on the New York Stock Exchange, or, if such security
               is not listed or admitted to trading on such exchange, on the principal national
               security exchange or quotation system on which such security is quoted or listed
               or admitted to trading, or, if not quoted or listed or admitted to trading on
               any national securities exchange or quotation system, the average of the closing
               bid and asked prices of such security on the over-the-counter market on the day
               in question as reported by the National Quotation Bureau Incorporated, or a
               similar generally accepted reporting service, or if not so available, in such
               manner as furnished by any New York Stock Exchange member firm selected from
               time to time by the Board of Directors for that purpose, or a price determined
               in good faith by the Board of Directors, whose determination shall be conclusive
               and described in a Board Resolution. 


               



          	 	(ii) 	
               “Current Market Price” shall mean the average of the daily Closing
               Prices per share of Common Stock for the ten consecutive Trading Days
               immediately prior to the date in question; provided that (1) if the
               “ex” date (as hereinafter defined) for any event (other than the
               issuance or distribution or Change of Control requiring such computation) that
               requires an adjustment to the Conversion Price pursuant to Section 14.6(a), (b),
               (c), (d), (e) or (f) occurs during such ten consecutive Trading Days, the
               Closing Price for each Trading Day prior to the “ex” date for such
               other event shall be adjusted by multiplying such Closing Price by the same
               fraction by which the Conversion Price is so required to be adjusted as a result
               of such other event, (2) if the “ex” date for any event (other than
               the issuance, distribution or Change of Control requiring such computation) that
               requires an adjustment to the Conversion Price pursuant to Section 14.6(a), (b),
               (c), (d), (e) or (f) occurs on or after the “ex” date for the issuance
               or distribution requiring such computation and prior to the day in question, the
               Closing Price for each Trading Day on and after the “ex” date for such
               other event shall be adjusted by multiplying such Closing Price by the
               reciprocal of the fraction by which the Conversion Price is so required to be
               adjusted as a result of such other event and (3) if the “ex” date for
               the issuance, distribution or Change of Control requiring such computation is
               prior to the day in question, after taking into account any adjustment required
               pursuant to clause (1) or (2) of this proviso, the Closing Price for each
               Trading Day on or after such “ex” date shall be adjusted by adding
               thereto the amount of any cash and the fair market value (as determined by the
               Board of Directors in a manner consistent with any determination of such value
               for purposes of Section 14.6(d) or (f), whose determination shall be conclusive
               and described in a Board Resolution) of the evidences of indebtedness, shares of
               Capital Stock or assets being distributed applicable to one share of Common
               Stock as of the close of business on the day before such “ex” date.
               For purposes of any computation under Section 14.6(f), the Current Market Price
               of the Common Stock on any date shall be deemed to be the average of the daily
               Closing Prices per share of Common Stock for such day and the next two
               succeeding Trading Days; provided that if the “ex” date for any event
               (other than the tender or exchange offer requiring such computation) that
               requires an adjustment to the Conversion Price pursuant to Section 14.6(a), (b),
               (c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or
               exchange offer requiring such computation and prior to the day in question, the
               Closing Price for each Trading Day on and after the “ex” date for such
               other event shall be adjusted by multiplying such Closing Price by the
               reciprocal of the fraction by which the Conversion Price is so required to be
               adjusted as a result of such other event. For purposes of this paragraph, the
               term “ex” date, (1) when used with respect to any issuance or
               distribution, means the first date on which the Common Stock trades regular way
               on the relevant exchange or in the relevant market from which the Closing Price
               was obtained without the right to receive such issuance or distribution, (2)
               when used with respect to any subdivision or combination of shares of Common
               Stock, means the first date on which the Common Stock trades regular way on such
               exchange or in such market after the time at which such subdivision or
               combination becomes effective and (3) when used with respect to any tender or
               exchange offer means the first date on which the Common Stock trades regular way
               on such exchange or in such market after the expiration of such offer.
               Notwithstanding the foregoing, whenever successive adjustments to the Conversion
               Price are called for pursuant to this Section 14.6, such adjustments shall be
               made to the Current Market Price as may be necessary or appropriate to
               effectuate the intent of this Section 14.6 and to avoid unjust or inequitable
               results as determined in good faith by the Board of Directors. 


               



          	 	(iii) 	
               “fair market value” shall mean the amount that a willing buyer would
               pay a willing seller in an arm’s-length transaction. 


               



          	 	(iv) 	
               “Record Date” shall mean, with respect to any dividend, distribution
               or other transaction or event in which the holders of Common Stock have the
               right to receive any cash, securities or other property or in which the Common
               Stock (or other applicable security) is exchanged for or converted into any
               combination of cash, securities or other property, the date fixed for
               determination of shareholders entitled to receive such cash, securities or other
               property (whether such date is fixed by the Board of Directors or by statute,
               contract or otherwise). 


               



          	 	(h) 	
               The Company may make such reductions in the Conversion Price, in addition to
               those required by Sections 14.6(a), (b), (c), (d), (e) and (f), as the Board of
               Directors considers to be advisable to avoid or diminish any income tax to
               holders of Common Stock or rights to purchase Common Stock resulting from any
               dividend or distribution of stock (or rights to acquire stock) or from any event
               treated as such for income tax purposes. To the extent permitted by applicable
               law, the Company from time to time may reduce the Conversion Price by any amount
               for any period of time if the period is at least 20 days, the reduction is
               irrevocable during the period and the Board of Directors shall have made a
               determination that such reduction would be in the best interests of the Company,
               which determination shall be conclusive and described in a Board Resolution.
               Whenever the Conversion Price is reduced pursuant to the preceding sentence, the
               Company shall mail to all holders of record of the Notes a notice of the
               reduction at least 15 days prior to the date the reduced Conversion Price takes
               effect, and such notice shall state the reduced Conversion Price and the period
               it shall be in effect. 


               



          	 	(i) 	
               No adjustment in the Conversion Price shall be required unless such adjustment
               would require an increase or decrease of at least 1% in such price; provided
               that any adjustments that by reason of this Section 14.6(i) are not required to
               be made shall be carried forward and taken into account in any subsequent
               adjustment. All calculations under this Article XIV shall be made by the Company
               and shall be made to the nearest 1/100,000 (with 0.0000005 being rolled upward). 


               



        No
adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest. 



        No
adjustment need be made for a change in the par value, or to or from no par value, of the
Common Stock. 



        To
the extent the Notes become convertible into cash, assets, property or securities (other
than Common Stock of the Company), no adjustment need be made thereafter as to the cash,
assets, property or such securities (except as such securities may otherwise by their
terms provide), and interest shall not accrue on such cash. 



     (j)    
          Whenever the Conversion Price is adjusted as herein provided, the Company shall
          promptly file with the Trustee and any conversion agent other than the Trustee
          an Officers’ Certificate setting forth the Conversion Price after such
          adjustment and setting forth a brief statement of the facts requiring such
          adjustment. Promptly after delivery of such certificate, the Company shall
          prepare a notice of such adjustment of the Conversion Price setting forth the
          adjusted Conversion Price and the date on which each adjustment becomes
          effective and shall mail such notice of such adjustment of the Conversion Price
          to the holder of each Note at his last address appearing on the Note register
          provided for in Section 2.5, within 20 days after execution thereof. Failure to
          deliver such notice shall not effect the legality or validity of any such
          adjustment. 



     (k)    
          In any case in which this Section 14.6 provides that an adjustment shall become
          effective immediately after a Record Date for an event, the Company may defer
          until the occurrence of such event (i) issuing to the holder of any Note
          converted after such Record Date and before the occurrence of such event the
          additional shares of Common Stock issuable upon such conversion by reason of the
          adjustment required by such event over and above the Common Stock issuable upon
          such conversion before giving effect to such adjustment and (ii) paying to such
          holder any amount in cash in lieu of any fraction pursuant to Section 14.4. 



Section 14.7 EFFECT OF
RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any of the following events occur,
namely (i) any reclassification or change of outstanding shares of Common Stock (other
than a change in par value, or to or from no par value, as a result of a subdivision or
combination), (ii) any consolidation, merger or combination of the Company with another
corporation as a result of which holders of Common Stock shall be entitled to receive
stock, securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock or (iii) any sale or conveyance of the properties and
assets of the Company as, or substantially as, an entirety (determined on a consolidated
basis) to any other corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, then the Company or the successor or
purchasing corporation, as the case may be, shall execute with the Trustee a supplemental
indenture (which shall comply with the Trust Indenture Act as in force at the date of
execution of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that the Notes shall be convertible into the kind and amount of
shares of stock and other securities or property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or conveyance
by a holder of a number of shares of Common Stock issuable upon conversion of such Notes
(assuming, for such purposes, a sufficient number of authorized shares of Common Stock
available to convert all such Notes) immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance, assuming such holder of Common
Stock did not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance (provided that, if the kind or
amount of securities, cash or other property receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election shall not have been
exercised (“non-electing share”), then for the purposes of this Section 14.7 the
kind and amount of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). Such supplemental indenture shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article XIV. 



        The
Company shall cause notice of the execution of such supplemental indenture to be mailed to
each holder of Notes, at his address appearing on the Note register provided for in
Section 2.5, within 20 days after execution thereof. Failure to deliver such notice shall
not affect the legality or validity of such supplemental indenture. 



        The
above provisions of this Section 14.7 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and conveyances. 



Section 14.8 TAXES ON SHARES ISSUED.
The issuance of stock certificates on conversions of Notes shall be made without charge to
the converting Noteholder for any transfer or similar tax in respect of the issue thereof.
The Company shall not, however, be required to pay any tax that may be payable in respect
of any transfer involved in the issue and delivery of stock in any name other than that of
the holder of any Note converted, and the Company shall not be required to issue or
deliver any such stock certificate unless and until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid. 



Section 14.9 RESERVATION OF SHARES;
SHARES TO BE FULLY PAID. Subject to Section 14.1(c) the Company shall reserve, free from
preemptive rights, out of its authorized but unissued shares or shares held in treasury,
sufficient shares to provide for the conversion of the Notes from time to time as such
Notes are presented for conversion. 



        Before
taking any action that would cause an adjustment reducing the Conversion Price below the
then par value, if any, of the shares of Common Stock issuable upon conversion of the
Notes, the Company shall take all corporate action that may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue shares of
such Common Stock at such adjusted Conversion Price. 



        The
Company covenants that all shares of Common Stock that may be issued upon conversion of
Notes shall, upon issuance, be fully paid and nonassessable by the Company and free from
all taxes, liens and charges with respect to the issuance thereof. 



Section 14.10 RESPONSIBILITY OF
TRUSTEE. The Trustee and any other conversion agent shall not at any time be under any
duty or responsibility to any holder of Notes to determine whether any facts exist that
may require any adjustment of the Conversion Price or notice thereof, or with respect to
the nature, accuracy or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture provided to be
employed, in making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, that may at any time be issued or
delivered upon the conversion of any Note; and the Trustee and any other conversion agent
make no representations with respect thereto or actions or omissions by the Company in
connection with this Article XIV. Subject to the provisions of Section 7.1, neither the
Trustee nor any conversion agent shall be responsible for any failure of the Company to
issue, transfer or deliver any shares of Common Stock or stock certificates or other
securities or property or cash upon the surrender of any Note for the purpose of
conversion or to comply with any of the duties, responsibilities or covenants of the
Company contained in this Article XIV. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility to
determine whether a supplemental indenture under Section 14.7 hereof need to be entered
into or the correctness of any provisions contained in any supplemental indenture entered
into pursuant to Section 14.7 relating either to the kind or amount of shares of stock or
securities or property (including cash) receivable by Noteholders upon the conversion of
their Notes after any event referred to in such Section 14.7 or to any adjustment to be
made with respect thereto, and may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the Officers’ Certificate
(which the Company shall be obligated to file with the Trustee prior to the execution of
any such supplemental indenture) with respect thereto. 


Section 14.11     NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS.  In case:


     (a)    
          the Company makes any distribution or dividend that would require an adjustment
          in the Conversion Price pursuant to Section 14.6; or 



     (b)    
          the Company takes any action that would require a supplemental indenture
          pursuant to Section 14.7; or 



     (c)    
          of the voluntary or involuntary dissolution, liquidation or winding-up of the
          Company, 



the Company shall cause to be filed
with the Trustee and to be mailed to each holder of Notes at his address appearing on the
Note register, as promptly as possible but in any event at least 15 days prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a record
date is to be taken for the purpose of such dividend, distribution, rights, options or
warrants, or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights, options or warrants
are to be determined or (y) the date on which such reclassification, change,
consolidation, merger, sale, conveyance, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification, change,
consolidation, merger, sale, conveyance, transfer, dissolution, liquidation or winding-up.
Neither the failure to give such notice nor any defect therein shall affect the legality
or validity of the proceedings referenced in clauses (a) through (c) of this Section
14.11. 



ARTICLE XV 



SUBORDINATION 



Section 15.1 AGREEMENT TO
SUBORDINATE. The Company agrees, and each Noteholder by accepting a Note agrees, that the
indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and
in the manner provided in this Article XV, to the prior payment in full of all Senior
Indebtedness and that the subordination is for the benefit of the holders of Senior
Indebtedness. 



Section 15.2 CERTAIN DEFINITIONS. For
purposes of this Article XV, the following terms shall have the meaning indicated: 



     	(1)	
          “Representative” shall mean a duly authorized indenture trustee or
          other trustee, agent or representative for any Senior Indebtedness. 


          



     	(2)	
          “Senior Indebtedness” with respect to the Notes means the principal
          of, premium, if any, and interest on, and any fees, costs, expenses and any
          other amounts (including indemnity payments) related to the following, whether
          outstanding on the date hereof or hereafter incurred or created:
          (a) indebtedness, matured or unmatured, whether or not contingent, of the
          Company for money borrowed evidenced by notes or other written obligations,
          (b) any interest rate contract, interest rate swap agreement or other
          similar agreement or arrangement designed to protect the Company or any of its
          Subsidiaries against fluctuations in interest rates, (c) indebtedness,
          matured or unmatured, whether or not contingent, of the Company evidenced by
          notes, debentures, bonds or similar instruments or letters of credit (or
          reimbursement agreements in respect thereof), (d) obligations of the
          Company as lessee under capitalized leases and under leases of property made as
          part of any sale and leaseback transactions, (e) indebtedness of others of
          any of the kinds described in the preceding clauses (a) through (d) assumed or
          guaranteed by the Company and (f) renewals, extensions, modifications,
          amendments, and refundings of, and indebtedness and obligations of a successor
          person issued in exchange for or in replacement of, indebtedness or obligations
          of the kinds described in the preceding clauses (a) through (f), unless the
          agreement pursuant to which any such indebtedness described in clauses (a)
          through (f) is created, issued, assumed or guaranteed expressly provides that
          such indebtedness is not senior or superior in right of payment to the Notes;
          provided that the following shall not constitute Senior Indebtedness:
          (i) any indebtedness or obligation of the Company in respect of the Notes,
          (ii) any indebtedness of the Company to any of its Subsidiaries or other
          Affiliates; (iii) any indebtedness that is subordinated or junior in any respect
          to any other indebtedness of the Company other than Senior Indebtedness; and
          (iv) any indebtedness incurred for the purchase of goods or materials in the
          ordinary course of business. 


          



        For
the purposes of this Indenture, Senior Indebtedness shall not be deemed to have been paid
in full until the holders of the Senior Indebtedness shall have indefeasibly received
payment in full in cash of all Senior Indebtedness; provided that if any holder of Senior
Indebtedness agrees to accept payment in full of such Senior Indebtedness for
consideration other than cash, such holder shall be deemed to have indefeasibly received
payment in full of such Senior Indebtedness. The provisions of this Article XV shall
continue to be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by any holder
of Senior Indebtedness upon the insolvency, bankruptcy or organization of the Company or
otherwise, all as though such payment had not been made. 



        A
distribution may consist of cash, securities or other property, by set-off or otherwise. 



Section 15.3 LIQUIDATION;
DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in an
assignment for the benefit of creditors or any marshalling of the Company’s assets
and liabilities, (a) holders of all Senior Indebtedness shall first be entitled to receive
payment in full of all amounts due or to become due thereon before Noteholders shall be
entitled to receive any payment with respect to the principal of, premium, if any, or
interest on the Notes (except that Noteholders may receive securities that are
subordinated to at least the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness) and (b) until all Senior
Indebtedness (as provided in clause (a) above) is paid in full, any distribution to which
Noteholders would be entitled but for this Article shall be made to holders of Senior
Indebtedness (except that Noteholders may receive securities that are subordinated to at
least the same extent as the Notes to (x) Senior Indebtedness and (y) any securities
issued in exchange for Senior Indebtedness), as their interests may appear. 



Section 15.4 DEFAULT ON SENIOR
INDEBTEDNESS. The Company may not make any payment upon or in respect of the Notes (except
in such subordinated securities) and may not acquire from the Trustee or any Noteholder
any Note for cash or property (other than securities that are subordinated to at least the
same extent as the Note to (i) Senior Indebtedness and (ii) any securities issued in
exchange for Senior Indebtedness) until all Senior Indebtedness has been paid in full if: 



     (a)    
          a default in the payment of the principal of, premium, if any, or interest on
          Senior Indebtedness occurs and is continuing beyond any applicable period of
          grace (a “Payment Default”); or 



     (b)    
          a default, other than a Payment Default on Senior Indebtedness occurs and is
          continuing that permits holders of the Senior Indebtedness as to which such
          default relates to accelerate its maturity (a “Nonpayment Default”)
          and the Trustee receives a notice of the default (a “Payment Blockage
          Notice”) from the Representative or Representatives of holders of at least
          a majority in principal amount of Senior Indebtedness then outstanding. No
          Nonpayment Default that existed or was continuing on the date of delivery of any
          such Payment Blockage Notice to the Trustee shall be, or be made, the basis for
          a subsequent Payment Blockage Notice unless such default shall have been cured
          or waived for a period of not less than 180 days. No new period of payment
          blockage may be commenced within 360 days after the receipt by the Trustee of
          any prior Payment Blockage Notice. 



        The
Company, with notice and evidence of the occurrence of (c) or (d) provided to the Trustee,
may and shall resume payments on and distributions in respect of the Notes and may acquire
them upon the earlier of: 



     (c)    
          in the case of a Payment Default, upon the date on which the default is cured or
          waived, or 



     (d)    
          in the case of a default other than a NonPayment Default: 179 days after the
          date on which the applicable Payment Blockage Notice is received, unless the
          maturity of such Senior Indebtedness has been accelerated, if this Article XV
          otherwise permits the payment, distribution or acquisition at the time of such
          payment or acquisition. 



Section 15.5 WHEN DISTRIBUTION MUST
BE PAID OVER. In the event that the Trustee (or paying agent if other than the Trustee) or
any Noteholder receives any payment of principal or interest with respect to the Notes at
a time when such payment is prohibited by Section 15.3 or 15.4 hereof, such payment shall
be held by the Trustee (or paying agent if other than the Trustee) or such Noteholder, in
trust for the benefit of, and immediately shall be paid over and delivered, upon written
request, to, the holders of Senior Indebtedness as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which Senior
Indebtedness may have been issued, as their respective interests may appear, for
application to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the holders of Senior
Indebtedness. 



        With
respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such
obligations on the part of the Trustee as are specifically set forth in this Article XV,
and no implied covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to
any such holders if the Trustee shall pay over or distribute to or on behalf of
Noteholders or the Company or any other person money or assets to which any holders of
Senior Indebtedness shall be entitled by virtue of this Article XV, except if such payment
is made as a result of the willful misconduct or gross negligence of the Trustee. 



Section 15.6 NOTICE BY COMPANY. The
Company shall promptly notify the Trustee and the paying agent in writing of any facts
known to the Company that would cause a payment of any principal or interest with respect
to the Notes to violate this Article XV, but failure to give such notice shall not affect
the subordination of the Notes to the Senior Indebtedness as provided in this Article XV. 



Section 15.7 SUBROGATION. Until all
Senior Indebtedness is paid in full and until the Notes are paid in full, Noteholders
shall be subrogated (equally and ratably with all other indebtedness pari passu with the
Notes) to the rights of holders of Senior Indebtedness to receive distributions applicable
to Senior Indebtedness to the extent that distributions otherwise payable to the
Noteholders have been applied to the payment of Senior Indebtedness. A distribution made
under this Article XV to holders of Senior Indebtedness that otherwise would have been
made to Noteholders is not, as between the Company and Noteholders, a payment by the
Company on the Notes. 



Section 15.8 RELATIVE RIGHTS. This
Article XV defines the relative rights of Noteholders and holders of Senior Indebtedness.
Nothing in this Indenture shall: 



     (a)    
          impair, as between the Company and the Noteholders, the obligation of the
          Company, which is absolute and unconditional, to pay principal of, premium, if
          any, and interest on the Notes in accordance with their terms; 



     (b)    
          affect the relative rights of Noteholders and creditors of the Company other
          than their rights in relation to holders of Senior Indebtedness; or 



     (c)    
          prevent the Trustee or any Noteholder from exercising its available remedies
          upon a default or Event of Default, subject to the rights of holders and owners
          of Senior Indebtedness to receive distributions and payments otherwise payable
          to Noteholders. 



        If
the Company fails because of this Article XV to pay principal of, premium, if any, or
interest on a Note on the due date, the failure is still a default or Event of Default. 



Section 15.9 SUBORDINATION MAY NOT BE
IMPAIRED BY COMPANY. No right of any holder of Senior Indebtedness to enforce the
subordination of the indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Company or any holder of Notes or by the failure of the Company or
any holder of Notes to comply with this Indenture. 



Section 15.10 DISTRIBUTION OR NOTICE
TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative. 



        Upon
any payment or distribution of assets of the Company referred to in this Article XV, the
Trustee and the Noteholders shall be entitled to rely upon any order or decree made by any
court of competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other person making any distribution to the Trustee or to
the Noteholders for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XV. 



Section 15.11 RIGHTS OF TRUSTEE AND
PAYING AGENT. Notwithstanding the provisions of this Article XV or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence of any
facts that would prohibit the making of any payment or distribution by the Trustee, and
the Trustee and the paying agent may continue to make payments on the Notes, unless the
Trustee shall have received at its Corporate Trust Office at least three Business Days
prior to the date of such payment written notice of facts that would cause the payment of
any principal, premium, if any, and interest with respect to the Notes to violate this
Article XV. Only the Company or a Representative may give the notice. Nothing in this
Article XV shall impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.6 hereof. 



        The
Trustee shall be entitled to rely on the delivery to it of a written notice by a person
representing such person to be a holder of Senior Indebtedness (or a trustee or agent on
behalf of such holder) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee or agent on behalf of any such holder). In the event that the
Trustee determines in good faith that further evidence is required with respect to the
right of any person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XV, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the rights of
such person under this Article XV, and if such evidence is not furnished, the Trustee may
defer any payment which it may be required to make for the benefit of such person pursuant
to the terms of this Indenture pending judicial determination as to the rights of such
person to receive such payment. 



        The
Trustee in its individual or any other capacity may hold Senior Indebtedness with the same
rights it would have if it were not Trustee. Any paying agent, any authenticating agent,
any conversion agent, any Note registrar and their successors may do the same with like
rights. 



Section 15.12 AUTHORIZATION TO EFFECT
SUBORDINATION. Each holder of a Note by the holder’s acceptance thereof authorizes
and directs the Trustee on the holder’s behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this Article XV
and appoints the Trustee to act as the holder’s attorney-in-fact for any and all such
purposes. Without limiting the foregoing, each Representative is hereby irrevocably
authorized and empowered (in its own name or in the name of the Noteholders or the Trustee
or otherwise), but shall have no obligation, to demand, sue for, collect and receive every
payment or distribution referred to in Section 15.3 above and give acquittance therefor
and to file claims and proofs of claim and take such other action as it may deem necessary
or advisable for the exercise or enforcement of any of the rights or interests of the
holders or owners of the Senior Indebtedness hereunder; provided that for purposes of this
Section 15.12 holders or owners of Senior Indebtedness may act only through such
Representative. 



Section 15.13 CONVERSIONS NOT DEEMED
PAYMENT. For the purposes of this Article XV only, the issuance and delivery of Common
Stock upon conversion of the Notes in accordance with Article XIV shall not be deemed to
constitute a payment or distribution on account of the principal of or interest on the
Notes or on account of the purchase or other acquisition of Notes. Nothing contained in
this Article or elsewhere in this Indenture or in the Notes is intended to or shall
impair, as among the Company, its creditors other than holders of Senior Indebtedness and
the holders, the right, which is absolute and unconditional, of the holder of any Note to
convert such Note in accordance with Article XIV. 



Section 15.14 AMENDMENTS. The
provisions of this Article XV shall not be amended or modified without the written consent
of the holders of Senior Indebtedness. 



ARTICLE XVI 



MISCELLANEOUS PROVISIONS 



Section 16.1 POOLING OF INTERESTS.
The Company desires to preserve its ability to account for acquisition and other business
combination transactions using the pooling-of-interests method where appropriate, and the
provisions of this Indenture shall be interpreted accordingly. 



Section 16.2 PROVISIONS BINDING ON
COMPANY’S SUCCESSORS. All the covenants, stipulations, promises and agreements in
this Indenture made by the Company shall bind its successors and assigns whether so
expressed or not. 



Section 16.3 OFFICIAL ACTS BY
SUCCESSOR COMPANY. Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board (including the Board of Directors),
committee or officer of the Company shall and may be done and performed with like force
and effect by the like board, committee or officer of any corporation that shall at the
time be the lawful sole successor of the Company. 



Section 16.4 ADDRESSES FOR NOTICES,
ETC. Any notice or demand that by any provision of this Indenture is required or permitted
to be given or served by the Trustee or by the holders of Notes on the Company shall be
deemed to have been sufficiently given or made, for all purposes if given or served by
being sent by prepaid overnight delivery or being deposited postage prepaid by registered
or certified mail in a post office letter box addressed (until another address is filed by
the Company with the Trustee) to Penn Treaty American Corporation, 3440 Lehigh Street,
Allentown, Pennsylvania 18103, Attention: General Counsel with a copy to Justin P. Klein,
Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania
19103. Any notice, direction, request or demand hereunder to or upon the Trustee shall be
deemed to have been sufficiently given or made, for all purposes, if given or served by
being sent by prepaid overnight delivery or being deposited postage prepaid by registered
or certified mail in a post office letter box addressed to the Trustee, which office is,
at the date as of which this Indenture is dated, located at MAC N9303-120, Sixth Street
& Marquette Avenue, Minneapolis, Minnesota 55479. Attention: Corporate Trust Services. 



        The
Trustee, by notice to the Company, may designate additional or different addresses for
subsequent notices or communications. 



        Any
notice or communication mailed to a Noteholder shall be mailed to him by first class mail,
postage prepaid, at the address of such Noteholder as it appears on the Note register and
shall be sufficiently given to such Noteholder if so mailed within the time prescribed. 



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



Section 16.5 COMMUNICATIONS BY
HOLDERS WITH OTHER HOLDERS. Noteholders may communicate pursuant to Trust Indenture Act
Section 312(b) with other Noteholders with respect to their rights under this Indenture or
the Notes. The Company, the Trustee, the Note registrar and any other person shall have
the protection of Trust Indenture Act Section 312(c). 



Section 16.6 GOVERNING LAW. This
Indenture shall be deemed to be a contract made under the substantive laws of New York and
for all purposes shall be construed in accordance with the substantive laws of New York
without regard to conflicts of laws principles thereof. 



Section 16.7 EVIDENCE OF COMPLIANCE
WITH CONDITIONS PRECEDENT; CERTIFICATES TO TRUSTEE. Upon any application or demand by the
Company to the Trustee to take any action under any of the provisions of this Indenture,
including those actions set forth in Trust Indenture Act Section 314(c), the Company shall
furnish to the Trustee an Officers’ Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed action have
been complied with, and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with. 



        Each
certificate or opinion provided for in this Indenture and delivered to the Trustee with
respect to compliance with a condition or covenant provided for in this Indenture shall
include: (1) a statement that the person making such certificate or opinion has read such
covenant or condition, (2) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in such certificate or
opinion is based, (3) 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 (4) a statement
as to whether or not, in the opinion of such person, such condition or covenant has been
complied with. 



Section 16.8 LEGAL HOLIDAYS. In any
case where any interest payment date, date fixed for redemption, stated maturity or Change
of Control Purchase Date of any Note or the last date on which a holder has the right to
convert his Notes shall not be a Business Day, then (notwithstanding any other provision
of this Indenture or of the Notes) payment of interest or principal (and premium, if any)
or conversion of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the Interest Payment
Date, date fixed for redemption, Change of Control Purchase Date, or at the stated
maturity, or on such last day for conversion, provided that no interest shall accrue for
the period from and after such interest payment date, date fixed for redemption, Change of
Control Purchase Date or stated maturity, as the case may be. 



Section 16.9 NO SECURITY INTEREST
CREATED. Nothing in this Indenture or in the Notes, expressed or implied, shall be
construed to constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction where property
of the Company or its Subsidiaries is located. 



Section 16.10 TRUST INDENTURE ACT.
This Indenture is hereby made subject to, and shall be governed by, the provisions of the
Trust Indenture Act required to be part of and to govern indentures qualified under the
Trust Indenture Act. 



Section 16.11 TRUST INDENTURE ACT
CONTROLS. If any provision of this Indenture limits, qualifies, or conflicts with the
duties imposed by operation of the Trust Indenture Act, the imposed duties, upon
qualification of this Indenture under the Trust Indenture Act, shall control. 



Section 16.12 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, expressed or implied, shall give to any person,
other than the parties hereto, any paying agent, any authenticating agent, any conversion
agent, any Note registrar and their successors hereunder and the holders of Notes, any
benefit or any legal or equitable right, remedy or claim under this Indenture. 



Section 16.13 TABLE OF CONTENTS,
HEADINGS ETC. The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only, are not
to be considered a part hereof, and shall in no way modify or restrict any of the terms or
provisions hereof. 



Section 16.14 AUTHENTICATING AGENT.
The Trustee may appoint an authenticating agent that shall be authorized to act on its
behalf and subject to its direction in the authentication and delivery of Notes in
connection with the original issuance thereof and transfers and exchanges of Notes
hereunder, including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents
and purposes as though the authenticating agent had been expressly authorized by this
Indenture and those Sections to authenticate and deliver Notes. For all purposes of this
Indenture, the authentication and delivery of Notes by the authenticating agent shall be
deemed to be authentication and delivery of such Notes “by the Trustee” and a
certificate of authentication executed on behalf of the Trustee by an authenticating agent
shall be deemed to satisfy any requirement hereunder or in the Notes for the
Trustee’s certificate of authentication. Such authenticating agent shall at all times
be a person eligible to serve as Trustee hereunder pursuant to Section 7.10. 



        Any
corporation into which any authenticating agent may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, consolidation or
conversion to which any authenticating agent shall be a party, or any corporation
succeeding to the corporate trust business of any authenticating agent, shall be the
successor of the authenticating agent hereunder, if such successor company is otherwise
eligible under this Section, without the execution or filing of any paper or any further
act on the part of the parties hereto or the authenticating agent or such successor
company. 



        Any
authenticating agent may at any time resign by giving written notice of resignation to the
Trustee and to the Company. The Trustee may at any time terminate the agency of any
authenticating agent by giving written notice of termination to such authenticating agent
and to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any authenticating agent shall cease to be eligible
under this Section, the Trustee shall promptly appoint a successor authenticating agent
(which may be the Trustee), shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register. 



        The
Company agrees to pay to the authenticating agent from time to time reasonable
compensation for its services. 



        The
provisions of Sections 7.3, 7.4, 7.5, 8.3 and this Section 16.14 shall be applicable to
any authenticating agent. 



Section 16.15 EXECUTION IN
COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which
shall be an original, but such counterparts shall together constitute but one and the same
instrument. 












        Wells
Fargo Bank Minnesota, N.A. hereby accepts the trusts in this Indenture declared and
provided, upon the terms and conditions hereinabove set forth. 



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



PENN TREATY AMERICAN
CORPORATION 



                                            By:        /s/ Cameron B. Waite
                                            Name:      Cameron B. Waite
                                            Title:     Executive Vice President and
                                                       Chief Financial Officer

Attest:

/S/ Jane M. Bagley

Corp. Secretary



         WELLS
FARGO BANK MINNESOTA, N.A., as Trustee



                                            By:        /s/ Michael T. Lechner
                                            Name:      Michael T. Lechner
                                            Title:     Assistant Vice President
Attest:



/s/ Marco X. Morales

Corporate Trust Officer











A-2 



A-1 



EXHIBIT A — FORM
OF DEFINITIVE NOTE 



[FORM OF FACE OF NOTE] 



     No.    
          A-___ $ 



        CUSIP
707874 AF 0 



THE NOTE EVIDENCED HEREBY HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS, AND IS A “RESTRICTED SECURITY” AS
DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE NOTES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
FOR THE NOTES UNDER THE ACT; (II) IN COMPLIANCE WITH RULE 144; OR (III) AFTER RECEIPT OF
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PENN TREATY AMERICAN CORPORATION THAT
SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION. 



PENN TREATY AMERICAN
CORPORATION 



6-1/4% Convertible
Subordinated Notes Due 2008 



        PENN
TREATY AMERICAN CORPORATION, a corporation duly organized and validly existing under the
laws of the Commonwealth of Pennsylvania (the “Company”), which term includes
any Successor Company under the Indenture referred to on the reverse hereof, for value
received hereby promises to pay to ____________________, or registered assigns, the
principal sum of _________________________________ Dollars (subject to adjustment as set
forth in the next paragraph hereof) on October 15, 2008, at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New York, or,
at the option of the holder of this Note, at the Corporate Trust Office of the Trustee, in
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, and to pay interest,
semi-annually on April 15 and October 15 of each year (each an “Interest Payment
Date”), commencing _________, _____, on said principal sum at said office or agency,
in like coin or currency, at the rate per annum specified in the title of this Note, from
__________, _____ or the most recent Interest Payment Date, as the case may be, next
preceding the date of this Note to which interest has been paid or duly provided for,
unless the date hereof is a date to which interest has been paid or duly provided for, in
which case from the date of this Global Note, or unless no interest has been paid or duly
provided for on the Notes, in which case from __________, _____, until payment of said
principal sum has been made or duly provided for. Any interest on any Note that is
payable, but is not punctually paid or duly provided for on said April 15 or
October 15 (herein called “Defaulted Interest”) shall forthwith cease to be
payable to the Noteholder on the relevant record date by virtue of his having been such
Noteholder; and such Defaulted Interest shall be paid by the Company, at its election in
each case, either (i) by notifying the Trustee of a special record date, the amount
of interest to be paid on such special record date and the date of payment (not more than
25 days after receipt by the Trustee of such interest, unless the Trustee shall consent to
an earlier date) and depositing with the Trustee an amount of money equal to the aggregate
amount to be paid in respect of such Defaulted Interest on making arrangements
satisfactory to the Trustee for such deposit or (ii) in any lawful manner not
inconsistent with the requirements of any securities exchange on which the Notes may be
listed and upon notice requested by such exchange, if, after notice to the Trustee, the
Trustee deems such manner of payment to be practicable. The interest so payable on any
April 15 or October 15 will be paid to the person in whose name this Note (or
one or more Predecessor Notes) is registered at the close of business on the record date,
which shall be the April 1 and October 1 (record date) (whether or not a
Business Day) next preceding such April 15 and October 15, respectively, provided
that any such interest not punctually paid or duly provided for shall be payable as
provided in the Indenture. Interest shall be paid by check mailed to the registered holder
at the registered address of such person unless other arrangements are made in accordance
with the provisions of the Indenture. 



        Reference
is made to the further provisions of this Note set forth on the reverse hereof, including,
without limitation, provisions giving the holder of this Note the right to convert this
Note into Common Stock of the Company (or, under certain circumstances specified in the
Indenture, into an amount of cash as set forth in the Indenture) on the terms and subject
to the limitations referred to on the reverse hereof and as more fully specified in the
Indenture. Such further provisions shall for all purposes have the same effect as though
fully set forth at this place. 









        This
Note shall not be valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture. 



        IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate
seal. 



PENN TREATY AMERICAN
CORPORATION 



                                           By:
                                            Name:
                                            Title:
Attest:



Secretary










[FORM OF CERTIFICATE OF
AUTHENTICATION] 



CERTIFICATE OF
AUTHENTICATION 



Dated: _____________ 



        This
is one of the Notes described in the within-named Indenture. 



         WELLS
FARGO BANK MINNESOTA, N.A., as Trustee



                                            By:
                                                     Authorized Signatory









[FORM OF REVERSE OF
DEFINITIVE NOTE] 



PENN TREATY AMERICAN
CORPORATION 



6-1/4% Convertible
Subordinated Notes Due 2008 



        This
Note is one of a duly authorized issue of Notes of the Company, designated as its 6-1/4%
Convertible Subordinated Notes Due 2008 (herein called the “Notes”), limited to
the aggregate principal amount of $14,000,000 all issued or to be issued under and
pursuant to an Indenture dated as of February 2, 2004 (the “Indenture”), between
the Company and Wells Fargo Bank Minnesota, N.A., as trustee (the “Trustee”), to
which Indenture and all indentures supplemental thereto reference is hereby made for a
complete description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the Notes. Each Note
is subject to, and qualified by, all such terms as set forth in the Indenture certain of
which are summarized hereon and each holder of a Note is referred to the corresponding
provisions of the Indenture for a complete statement of such terms. To the extent that
there is any inconsistency between the summary provisions set forth in the Notes and the
Indenture, the provisions of the Indenture shall govern. Capitalized terms used but not
defined in this Global Note shall have the meanings ascribed to them in the Indenture. 



        In
case an Event of Default, as defined in the Indenture, shall have occurred and be
continuing, the principal of, premium, if any, and accrued interest on all Notes may be
declared, and upon said declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture. 



        The
payment of principal of, premium, if any, and interest on the Notes will, to the extent
set forth in the Indenture, be subordinated in right of payment to the prior payment in
full of all Senior Indebtedness (as defined in the Indenture). Upon any distribution to
creditors of the Company in a liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding related to the
Company or its property, in an assignment for the benefit of creditors or any marshalling
of the Company’s assets and liabilities, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become due thereon
before the holders of the Notes will be entitled to receive any payment in respect of the
principal of, premium, if any, or interest on the Notes (except that holders of Notes may
receive securities that are subordinated at least to the same extent as the Notes to
Senior Indebtedness and any securities issued in exchange for Senior Indebtedness). 



        The
Company also may not make any payment upon or in respect of the Notes (except in such
subordinated securities) and may not acquire from the Trustee or the holder of any Note
for cash or property (other than securities subordinated to at least the same extent as
the Note to (i) Senior Indebtedness and (ii) any securities issued in exchange for Senior
Indebtedness) until all Senior Indebtedness has been paid in full if (a) a default in the
payment of the principal of, premium, if any, or interest on Senior Indebtedness occurs
and is continuing beyond any applicable period of grace or (b) any other default occurs
and is continuing with respect to Senior Indebtedness that permits holders of the Senior
Indebtedness as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a “Payment Blockage Notice”) from the
representative or representatives of holders of at least a majority in principal amount of
Senior Indebtedness then outstanding. Payments on the Notes may and shall be resumed (i)
in the case of a Payment Default, upon the date on which such default is cured or waived,
or (ii) in the case of a Nonpayment Default, 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any Senior
Indebtedness has been accelerated. No new period of payment blockage may be commenced
within 360 days after the receipt by the Trustee of any prior Payment Blockage Notice. No
default, other than a Nonpayment Default, that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice unless such default shall have been cured or waived
for a period of not less than 180 days. 



        In
the event that the Trustee (or paying agent if other than the Trustee) or any holder of
the Notes receives any payment of principal or interest with respect to the Notes at a
time when such payment is prohibited under the Indenture, such payment shall be held in
trust for the benefit of, and immediately shall be paid over and delivered to, the holders
of Senior Indebtedness or their representative as their respective interests may appear.
After all Senior Indebtedness is paid in full and until the Notes are paid in full, the
holders of the Notes shall be subrogated (equally and ratably with all other Indebtedness
pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the holders of the Notes have been applied to the payment of Senior
Indebtedness. 



        The
Indenture contains provisions permitting the Company and the Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the Notes at the
time outstanding, evidenced as in the Indenture provided, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in any manner
the rights of the holders of the Notes; provided that no such supplemental indenture shall
(i) extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable on redemption thereof, alter the obligation of the
Company to repurchase the Notes at the option of the holders upon the occurrence of a
Change of Control, or impair or affect the right of any Noteholder to institute suit for
the payment thereof, or make the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Notes, modify the
subordination provisions in a manner adverse to the holders of the Notes, or impair the
right to convert the Notes into Common Stock subject to the terms set forth in the
Indenture without the consent of the holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then outstanding.
The Company and the Trustee may amend or supplement the Indenture without notice to or
consent of any holder of Notes in certain events specified in the Indenture. It is also
provided in the Indenture that, prior to any declaration accelerating the maturity of the
Notes, the holders of a majority in aggregate principal amount of the Notes at the time
outstanding may on behalf of the holders of all of the Notes waive any past default or
Event of Default under the Indenture and its consequences except a default in the payment
of interest or any premium on or the principal of any of the Notes, a failure by the
Company to convert any Notes into Common Stock of the Company, unless otherwise excused
pursuant to the terms of the Indenture, or a default in respect of a covenant or provision
of the Indenture that under Article X thereof cannot be modified or amended without the
consent of the holders of all Notes then outstanding. Any such consent or waiver by the
holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this Note and any Notes
that may be issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes. 



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



        Interest
on the Notes shall be computed on the basis of a 360-day year composed of twelve 30-day
months. 



        The
Notes are issuable in registered form without coupons in denominations of $1,000 principal
amount and integral multiples thereof. At the office or agency of the Company referred to
on the face hereof, and in the manner and subject to the limitations provided in the
Indenture, without payment of any service charge but with payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate principal
amount of Notes of other authorized denominations. 



        The
Notes are not redeemable at the option of the Company prior to October 15, 2005. At
any time on or after that date, the Notes may be redeemed at the Company’s option,
upon notice as set forth in the Indenture, in whole at any time or in part from time to
time, at the price of 100% of the principal amount, together with accrued interest to the
date fixed for redemption; provided that if the date fixed for redemption is a date on or
after the record date and on or before the next following Interest Payment Date, then the
interest payable on such date shall be paid to the holder of record on the next preceding
October 1 or April 1, respectively. 



        If
a Change of Control (as defined in the Indenture) shall occur at any time, then each
holder of Notes shall have the right to require that the Company repurchase such
holder’s Notes in whole or in part in integral multiples of $1,000, at a purchase
price in cash in an amount equal to 101% of the principal amount of such Notes, plus
accrued and unpaid interest, if any, to the repurchase date pursuant to an offer to be
made by the Company and in accordance with the procedures set forth in the Indenture. 



        Subject
to the provisions of the Indenture, the holder hereof has the right to convert the
principal hereof or any portion of such principal that is $1,000 or an integral multiple
thereof, into the Company’s Common Stock, provided that shareholder ratification and
approval of the issuance of the Notes has been obtained on or before April 14, 2004, at
any time after May 31, 2004 until the close of business on October 14, 2008, subject
to prior redemption or repurchase, or, as to all or any portion hereof called for
redemption, prior to the close of business one business day before the date fixed for
redemption (unless the Company shall default in payment due upon redemption thereof). The
principal hereof or any portion of such principal that is $1,000 or an integral multiple
thereof, is convertible into that number of fully paid and non-assessable shares of the
Company’s Common Stock, as said shares shall be constituted at the date of
conversion, obtained by dividing the principal amount of this Note or portion thereof to
be converted by the conversion price of $1.75 per share or such conversion price as
adjusted from time to time as provided in the Indenture, upon surrender of this Note,
together with a conversion notice as provided in the Indenture, to the Company at the
office or agency of the Company maintained for that purpose in the Borough of Manhattan,
the City of New York, or at the option of such holder, the Corporate Trust Office of the
Trustee, and, unless the shares issuable on conversion are to be issued in the same name
as this Note, duly endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly authorized
attorney. 



        Except
as described in the Indenture, no adjustment will be made on conversion of any Notes for
interest accrued thereon or for dividends paid on any Common Stock issued. A Holder of
Notes at the close of business on a record date will be entitled to receive the interest
payable on such Notes on the corresponding interest payment date. Any unpaid interest on
any Note or portion thereof as of the date such Note or portion thereof is surrendered for
conversion shall (unless such Note or portion thereof being converted is called for
redemption on a redemption date during the period from the close of business on or after
any record date to the close of business on the business day following the corresponding
interest payment date) be paid in cash to the former holder of such Note or portion
thereof on the next succeeding interest payment date. 



        In
the event that the Company does not obtain shareholder ratification and approval of the
issuance of the Notes on or before April 14, 2004, the Company will repurchase the Notes
at a price in cash equal to 100% of the principal amount of the Notes, plus accrued but
unpaid interest on the Notes, plus additional interest at a rate of 5-3/4% per annum on
the principal amount of the Notes from the date of issuance to the date of redemption. 



        In
the event a holder desires to convert all or any portion of its Notes into shares of
Common Stock and the Company does not have authorized a sufficient number of shares of
Common Stock for such conversion, in lieu of delivering shares of Common Stock (or other
securities into which the Notes are then convertible) upon conversion of that portion of
such holder’s Notes for which there is an insufficient number of shares of Common
Stock (the “Cash Equivalent Notes”) pursuant to the provisions of the Indenture,
the Company will pay to the holder converting the Cash Equivalent Notes who properly
exercises the conversion privilege, as set forth in the Indenture, an amount in cash equal
to the Market Cash Conversion Price (as defined in the Indenture) of the shares of Common
Stock into which such Cash Equivalent Notes are then convertible. 



        On
any date on or after the 15th business day following October 15, 2005, if: (i) the average
of the closing price of the Common Stock on 15 consecutive business days is equal to or
greater than 110% of the conversion price (as it may be adjusted in the Indenture) and
(ii) the Company has sufficient shares of Common Stock (or other securities into which the
Notes are then convertible) authorized to execute the Mandatory Conversion (as defined
below), then the Notes shall be converted into that number of fully paid and nonassessable
shares of Common Stock (or other securities into which the Notes are then convertible)
obtained by dividing the aggregate principal amount of the Notes by the conversion price
in effect at such time rounded to the nearest 1/100,000th of a share (with
0.000005 being rolled upward) (the “Mandatory Conversion”). After the Mandatory
Conversion, the Notes will no longer represent indebtedness of the Company and will no
longer accrue interest or require the Company to make any payment of principal; and the
Company’s obligations to make any further payments with respect to the Notes will
terminate. 



        In
the event that a Noteholder desires to convert all or any portion of its Notes into shares
of Common Stock prior to October 15, 2005, the Company will pay such Noteholder an amount
equal to the interest that would have been otherwise earned on such Notes between the date
of such conversion and October 15, 2005 discounted from October 15, 2005 to present value
utilizing a rate of 6.25% with simple interest over a 360 day year. In the event that a
Noteholder elects to convert prior to October 15, 2005 and the Company is required to pay
interest pursuant to Section 14.1(e) of the Indenture, the Company may, in its sole
discretion, elect to make such interest payment in cash or in shares of Common Stock based
on 90% of the average Closing Prices of the Common Stock for the five Trading Days
immediately preceding the conversion date. 



        The
Company is not required to issue fractional shares of Common Stock upon conversion of
Notes and, in lieu thereof, will pay a cash adjustment based upon the closing price of the
Common Stock on the last business day prior to the date of conversion. 



        Upon
due presentment for registration of transfer of this Note at the office or agency of the
Company in the Borough of Manhattan, The City of New York, or at the option of the holder
of this Note, at the Corporate Trust Office of the Trustee, a new Note or Notes of
authorized denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the conditions and limitations provided in the
Indenture, without charge except for any tax or other governmental charge imposed in
connection therewith. 



        The
Company, the Trustee, any authenticating agent, any paying agent, any conversion agent and
any Note registrar may deem and treat the registered holder hereof as the absolute owner
of this Note (whether or not this Note shall be overdue and notwithstanding any notation
of ownership or other writing hereon made by anyone other than the Company or any Note
registrar), for the purpose of receiving payment hereof, or on account hereof, for the
conversion hereof and for all other purposes, and neither the Company nor the Trustee nor
any other authenticating agent nor any paying agent nor any other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments made to or
upon the order of such registered holder shall, to the extent of the sum or sums paid,
satisfy and discharge liability for monies payable on this Note. 



        No
recourse for the payment of the principal of or any premium or interest on this Note, or
for any claim based hereon or otherwise in respect hereof, and no recourse under or upon
any obligation, covenant or agreement of the Company in the Indenture or any indenture
supplemental thereto or in any Note, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or of any Successor Company,
either directly or through the Company or any Successor Company, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released. 









ABBREVIATIONS 



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



TEN COM              -   as tenants in common           UNIF GIFT MIN ACT -
                                                        Uniform Gifts to Minors Act

                                                                                            (State)
TEN ENT              -   as tenants by the entireties   ________________ Custodian
                                                                 (Cust)
JT TEN               -   as joint tenants with right    ________________ under
                         of survivorship and not as              (Minor)
                         tenants in common



Additional
abbreviations may also be used 



though not in the above
list. 









[FORM OF CONVERSION
NOTICE] 



CONVERSION NOTICE 



To: Penn Treaty American
Corporation 



        The
undersigned registered owner of this Note hereby irrevocably exercises the option to
convert this Note, or the portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Common Stock, par value $.10 per share,
of the Company in accordance with the terms of the Indenture referred to in this Note, and
directs that the shares issuable and deliverable upon such conversion, together with any
check in payment for fractional shares and any Notes representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this Note not
converted are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto. Any amount required
to be paid to the undersigned on account of interest accompanies this Note. 



Dated:                                               Contact Person:
                                                              Fax Number:
                                                              Telephone Number:


Signature(s)



     Signature(s)    
          must be guaranteed by an eligible Guarantor Institution (banks, stock brokers,
          savings and loan associations and credit unions) with membership in an approved
          signature guarantee medallion program pursuant to Securities and Exchange
          Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or Notes to
          be delivered, other than to and in the name of the registered holder. 




Signature Guarantee









Fill in for registration of shares if
to be issued, and Notes if to be delivered, other than to and in the name of the
registered holder: 




(Name)


(Street Address)


(City, State and Zip Code)

Please print name and address



	 	
Principal
amount to be converted (if less than all) $ 






     



Social Security or
Other TaxpayerIdentification 
Number 









[FORM OF OPTION TO ELECT
PURCHASE 



UPON A CHANGE OF
CONTROL] 



To: Penn Treaty American
Corporation 



        The
undersigned registered owner of this Note hereby irrevocably acknowledges receipt of a
notice from Penn Treaty American Corporation (the “Company”) as to the
occurrence of a Change of Control with respect to the Company and requests and instructs
the Company to repay the entire principal amount of this Note, or the portion thereof
(which is $1,000 principal amount or an integral multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this Note, together with accrued
interest to such date, to the registered holder hereof. 



Dated:


                                            Signature(s)




                                            Social Security or Other Taxpayer
                                            Identification Number

                                            Principal amount to be repaid (if less than
                                             all): $










[FORM OF ASSIGNMENT] 



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



        In
connection with any transfer of the within Note occurring prior to the second anniversary
of the date of original issuance of such Note, the undersigned confirms that such Note is
being transferred pursuant to and in compliance with Rule 144 under the Securities Act of
1933, as amended. 



Dated: 



Signature(s) 



     Signature(s)    
          must be guaranteed by an eligible Guarantor Institution (banks, stock brokers,
          savings and loan associations and credit unions) with membership in an approved
          signature guarantee medallion program pursuant to Securities and Exchange
          Commission Rule 17Ad-15. 



Signature Guarantee 



	 	
NOTICE:
The signature on the conversion notice, the option to elect payment upon a Change of
Control or the assignment must correspond with the name as written upon the face of the
Note in every particular without alteration or enlargement or any change whatever. 














B-15 



B-1 



EXHIBIT B — FORM
OF GLOBAL NOTE 



[FORM OF FACE OF NOTE] 



     No.    
          B -___ $ 



        CUSIP
707874 AF 0 



UNLESS AND UNTIL IT IS EXCHANGED IN
WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT
AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 



PENN TREATY AMERICAN
CORPORATION 



6-1/4% Convertible
Subordinated Notes Due 2008 



        PENN
TREATY AMERICAN CORPORATION, a corporation duly organized and validly existing under the
laws of the Commonwealth of Pennsylvania (the “Company”), which term includes
any Successor Company under the Indenture referred to on the reverse hereof, for value
received hereby promises to pay to Cede & Co., or registered assigns, the principal
sum of _________________________________ Dollars (subject to adjustment as set forth in
the next paragraph hereof) on October 15, 2008, at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York, or, at the
option of the holder of this Note, at the Corporate Trust Office of the Trustee, in 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, and to pay interest, semi-annually on
April 15 and October 15 of each year (each an “Interest Payment Date”),
commencing _________, _____, on said principal sum at said office or agency, in like coin
or currency, at the rate per annum specified in the title of this Note, from __________,
_____ or the most recent Interest Payment Date, as the case may be, next preceding the
date of this Note to which interest has been paid or duly provided for, unless the date
hereof is a date to which interest has been paid or duly provided for, in which case from
the date of this Note, or unless no interest has been paid or duly provided for on the
Notes, in which case from __________, _____, until payment of said principal sum has been
made or duly provided for. Any interest on any Note that is payable, but is not punctually
paid or duly provided for on said April 15 or October 15 (herein called
“Defaulted Interest”) shall forthwith cease to be payable to the Noteholder on
the relevant record date by virtue of his having been such Noteholder; and such Defaulted
Interest shall be paid by the Company, at its election in each case, either (i) by
notifying the Trustee of a special record date, the amount of interest to be paid on such
special record date and the date of payment (not more than 25 days after receipt by the
Trustee of such interest, unless the Trustee shall consent to an earlier date) and
depositing with the Trustee an amount of money equal to the aggregate amount to be paid in
respect of such Defaulted Interest on making arrangements satisfactory to the Trustee for
such deposit or (ii) in any lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed and upon notice requested by such
exchange, if, after notice to the Trustee, the Trustee deems such manner of payment to be
practicable. The interest so payable on any April 15 or October 15 will be paid
to the person in whose name this Note (or one or more Predecessor Notes) is registered at
the close of business on the record date, which shall be the April 1 and
October 1 (record date) (whether or not a Business Day) next preceding such April 15
and October 15, respectively, provided that any such interest not punctually paid or
duly provided for shall be payable as provided in the Indenture. Interest shall be paid by
check mailed to the registered holder at the registered address of such person unless
other arrangements are made in accordance with the provisions of the Indenture. 



        The
aggregate principal amount of this Note represented hereby may from time to time be
reduced or increased to reflect exchanges of a part of this Note for interests in the Note
or definitive Notes or exchanges of interests in the Note or definitive Notes for a part
of this Note or conversions, redemptions or repurchases of a part of this Note or
cancellations of a part of this Note or transfers of interests in the Note or definitive
Notes in return for a part of this Note or transfers of a part of this Note effected by
delivery of interests in the Note or definitive Notes, in each case, and in any such case,
by means of notations on the Schedule of Exchanges, Conversions, Redemptions, Repurchases,
Cancellations and Transfers on the last page hereof. Notwithstanding any provision of this
Note to the contrary, (i) exchanges of a part of this Note for interests in the Note or
definitive Notes, (ii) exchanges of interests in the Note or definitive Notes for a part
of this Note, (iii) conversions, redemptions or repurchases of a part of this Note, (iv)
cancellations of a part of this Note, (v) transfers of interests in the Note or definitive
Notes in return for a part of this Note and (vi) transfers of a part of this Note effected
by delivery of interests in the Note or definitive Notes may be effected without the
surrendering of this Note, provided that appropriate notations on the Schedule of
Exchanges, Conversions, Redemptions, Repurchases, Cancellations and Transfers are made by
the Trustee, or the Custodian at the direction of the Trustee, to reflect the appropriate
reduction or increase, as the case may be, in the aggregate principal amount of this Note
resulting therefrom or as a consequence thereof. 



        Reference
is made to the further provisions of this Note set forth on the reverse hereof, including,
without limitation, provisions giving the holder of this Note the right to convert this
Note into Common Stock of the Company (or, under certain circumstances specified in the
Indenture, into an amount of cash as set forth in the Indenture) on the terms and subject
to the limitations referred to on the reverse hereof and as more fully specified in the
Indenture. Such further provisions shall for all purposes have the same effect as though
fully set forth at this place. 









        This
Note shall not be valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture. 



        IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate
seal. 



PENN TREATY AMERICAN
CORPORATION 



                                            By:
                                            Name:
                                            Title:
Attest:



Secretary











[FORM OF CERTIFICATE OF
AUTHENTICATION] 



CERTIFICATE OF
AUTHENTICATION 



Dated: _____________ 



        This
is one of the Notes described in the within-named Indenture. 



         WELLS
FARGO BANK MINNESOTA, N.A., as Trustee



                                            By:
                                                     Authorized Signatory










[FORM OF REVERSE OF
GLOBAL NOTE] 



PENN TREATY AMERICAN
CORPORATION 



6-1/4% Convertible
Subordinated Notes Due 2008 



        This
Note is one of a duly authorized issue of Notes of the Company, designated as its 6-1/4%
Convertible Subordinated Notes Due 2008 (herein called the “Notes”), limited to
the aggregate principal amount of $14,000,000 all issued or to be issued under and
pursuant to an Indenture dated as of February 2, 2004 (the “Indenture”), between
the Company and Wells Fargo Bank Minnesota, N.A., as trustee (the “Trustee”), to
which Indenture and all indentures supplemental thereto reference is hereby made for a
complete description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the Notes. Each Note
is subject to, and qualified by, all such terms as set forth in the Indenture certain of
which are summarized hereon and each holder of a Note is referred to the corresponding
provisions of the Indenture for a complete statement of such terms. To the extent that
there is any inconsistency between the summary provisions set forth in the Notes and the
Indenture, the provisions of the Indenture shall govern. Capitalized terms used but not
defined in this Note shall have the meanings ascribed to them in the Indenture. 



        In
case an Event of Default, as defined in the Indenture, shall have occurred and be
continuing, the principal of, premium, if any, and accrued interest on all Notes may be
declared, and upon said declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture. 



        The
payment of principal of, premium, if any, and interest on the Notes will, to the extent
set forth in the Indenture, be subordinated in right of payment to the prior payment in
full of all Senior Indebtedness (as defined in the Indenture). Upon any distribution to
creditors of the Company in a liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding related to the
Company or its property, in an assignment for the benefit of creditors or any marshalling
of the Company’s assets and liabilities, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become due thereon
before the holders of the Notes will be entitled to receive any payment in respect of the
principal of, premium, if any, or interest on the Notes (except that holders of Notes may
receive securities that are subordinated at least to the same extent as the Notes to
Senior Indebtedness and any securities issued in exchange for Senior Indebtedness). 



        The
Company also may not make any payment upon or in respect of the Notes (except in such
subordinated securities) and may not acquire from the Trustee or the holder of any Note
for cash or property (other than securities subordinated to at least the same extent as
the Note to (i) Senior Indebtedness and (ii) any securities issued in exchange for Senior
Indebtedness) until all Senior Indebtedness has been paid in full if (a) a default in the
payment of the principal of, premium, if any, or interest on Senior Indebtedness occurs
and is continuing beyond any applicable period of grace or (b) any other default occurs
and is continuing with respect to Senior Indebtedness that permits holders of the Senior
Indebtedness as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a “Payment Blockage Notice”) from the
representative or representatives of holders of at least a majority in principal amount of
Senior Indebtedness then outstanding. Payments on the Notes may and shall be resumed (i)
in the case of a Payment Default, upon the date on which such default is cured or waived,
or (ii) in the case of a Nonpayment Default, 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any Senior
Indebtedness has been accelerated. No new period of payment blockage may be commenced
within 360 days after the receipt by the Trustee of any prior Payment Blockage Notice. No
default, other than a Nonpayment Default, that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice unless such default shall have been cured or waived
for a period of not less than 180 days. 



        In
the event that the Trustee (or paying agent if other than the Trustee) or any holder of
the Notes receives any payment of principal or interest with respect to the Notes at a
time when such payment is prohibited under the Indenture, such payment shall be held in
trust for the benefit of, and immediately shall be paid over and delivered to, the holders
of Senior Indebtedness or their representative as their respective interests may appear.
After all Senior Indebtedness is paid in full and until the Notes are paid in full, the
holders of the Notes shall be subrogated (equally and ratably with all other Indebtedness
pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the holders of the Notes have been applied to the payment of Senior
Indebtedness. 



        The
Indenture contains provisions permitting the Company and the Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the Notes at the
time outstanding, evidenced as in the Indenture provided, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in any manner
the rights of the holders of the Notes; provided that no such supplemental indenture shall
(i) extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable on redemption thereof, alter the obligation of the
Company to repurchase the Notes at the option of the holders upon the occurrence of a
Change of Control, or impair or affect the right of any Noteholder to institute suit for
the payment thereof, or make the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Notes, modify the
subordination provisions in a manner adverse to the holders of the Notes, or impair the
right to convert the Notes into Common Stock subject to the terms set forth in the
Indenture without the consent of the holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then outstanding.
The Company and the Trustee may amend or supplement the Indenture without notice to or
consent of any holder of Notes in certain events specified in the Indenture. It is also
provided in the Indenture that, prior to any declaration accelerating the maturity of the
Notes, the holders of a majority in aggregate principal amount of the Notes at the time
outstanding may on behalf of the holders of all of the Notes waive any past default or
Event of Default under the Indenture and its consequences except a default in the payment
of interest or any premium on or the principal of any of the Notes, a failure by the
Company to convert any Notes into Common Stock of the Company, unless otherwise excused
pursuant to the terms of the Indenture, or a default in respect of a covenant or provision
of the Indenture that under Article X thereof cannot be modified or amended without the
consent of the holders of all Notes then outstanding. Any such consent or waiver by the
holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this Note and any Notes
that may be issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes. 



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



        Interest
on the Notes shall be computed on the basis of a 360-day year composed of twelve 30-day
months. 



        The
Notes are issuable in registered form without coupons in denominations of $1,000 principal
amount and integral multiples thereof. At the office or agency of the Company referred to
on the face hereof, and in the manner and subject to the limitations provided in the
Indenture, without payment of any service charge but with payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate principal
amount of Notes of other authorized denominations. 



        The
Notes are not redeemable at the option of the Company prior to October 15, 2005. At
any time on or after that date, the Notes may be redeemed at the Company’s option,
upon notice as set forth in the Indenture, in whole at any time or in part from time to
time, at the price of 100% of the principal amount, together with accrued interest to the
date fixed for redemption; provided that if the date fixed for redemption is a date on or
after the record date and on or before the next following Interest Payment Date, then the
interest payable on such date shall be paid to the holder of record on the next preceding
October 1 or April 1, respectively. 



        If
a Change of Control (as defined in the Indenture) shall occur at any time, then each
holder of Notes shall have the right to require that the Company repurchase such
holder’s Notes in whole or in part in integral multiples of $1,000, at a purchase
price in cash in an amount equal to 101% of the principal amount of such Notes, plus
accrued and unpaid interest, if any, to the repurchase date pursuant to an offer to be
made by the Company and in accordance with the procedures set forth in the Indenture. 



        Subject
to the provisions of the Indenture, the holder hereof has the right to convert the
principal hereof or any portion of such principal that is $1,000 or an integral multiple
thereof, into the Company’s Common Stock, provided that shareholder ratification and
approval of the issuance of the Notes has been obtained on or before April 14, 2004, at
any time after May 31, 2004 until the close of business on October 14, 2008, subject
to prior redemption or repurchase, or, as to all or any portion hereof called for
redemption, prior to the close of business one business day before the date fixed for
redemption (unless the Company shall default in payment due upon redemption thereof). The
principal hereof or any portion of such principal that is $1,000 or an integral multiple
thereof, is convertible into that number of fully paid and non-assessable shares of the
Company’s Common Stock, as said shares shall be constituted at the date of
conversion, obtained by dividing the principal amount of this Note or portion thereof to
be converted by the conversion price of $1.75 per share or such conversion price as
adjusted from time to time as provided in the Indenture, upon surrender of this Note to
the Company at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, the City of New York, or at the option of such holder, the Corporate
Trust Office of the Trustee, and, unless the shares issuable on conversion are to be
issued in the same name as this Note, duly endorsed by, or accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney. 



        Except
as described in the Indenture, no adjustment will be made on conversion of any Notes for
interest accrued thereon or for dividends paid on any Common Stock issued. A Holder of
Notes at the close of business on a record date will be entitled to receive the interest
payable on such Notes on the corresponding interest payment date. Any unpaid interest on
any Note or portion thereof as of the date such Note or portion thereof is surrendered for
conversion shall (unless such Note or portion thereof being converted is called for
redemption on a redemption date during the period from the close of business on or after
any record date to the close of business on the business day following the corresponding
interest payment date) be paid in cash to the former holder of such Note or portion
thereof on the next succeeding interest payment date. 



        In
the event that the Company does not obtain shareholder ratification and approval of the
issuance of the Notes on or before April 14, 2004, the Company will repurchase the Notes
at a price in cash equal to 100% of the principal amount of the Notes, plus accrued but
unpaid interest on the Notes, plus additional interest at a rate of 5-3/4% per annum on
the principal amount of the Notes from the date of issuance to the date of redemption. 



        In
the event a holder desires to convert all or any portion of its Notes into shares of
Common Stock and the Company does not have authorized a sufficient number of shares of
Common Stock for such conversion, in lieu of delivering shares of Common Stock (or other
securities into which the Notes are then convertible) upon conversion of that portion of
such holder’s Notes for which there is an insufficient number of shares of Common
Stock (the “Cash Equivalent Notes”) pursuant to the provisions of the Indenture,
the Company will pay to the holder converting the Cash Equivalent Notes who properly
exercises the conversion privilege, as set forth in the Indenture, an amount in cash equal
to the Market Cash Conversion Price (as defined in the Indenture) of the shares of Common
Stock into which such Cash Equivalent Notes are then convertible. 



        On
any date on or after the 15th business day following October 15, 2005, if: (i) the average
of the closing price of the Common Stock on 15 consecutive business days is equal to or
greater than 110% of the conversion price (as it may be adjusted in the Indenture) and
(ii) the Company has sufficient shares of Common Stock (or other securities into which the
Notes are then convertible) authorized to execute the Mandatory Conversion (as defined
below), then the Notes shall be converted into that number of fully paid and nonassessable
shares of Common Stock (or other securities into which the Notes are then convertible)
obtained by dividing the aggregate principal amount of the Notes by the conversion price
in effect at such time rounded to the nearest 1/100,000th of a share (with
0.000005 being rolled upward) (the “Mandatory Conversion”). After the Mandatory
Conversion, the Notes will no longer represent indebtedness of the Company and will no
longer accrue interest or require the Company to make any payment of principal; and the
Company’s obligations to make any further payments with respect to the Notes will
terminate. 



        In
the event that a Noteholder desires to convert all or any portion of its Notes into shares
of Common Stock prior to October 15, 2005, the Company will pay such Noteholder an amount
equal to the interest that would have been otherwise earned on such Notes between the date
of such conversion and October 15, 2005 discounted from October 15, 2005 to present value
utilizing a rate of 6.25% with simple interest over a 360 day year. In the event that a
Noteholder elects to convert prior to October 15, 2005 and the Company is required to pay
interest pursuant to Section 14.1(e) of the Indenture, the Company may, in its sole
discretion, elect to make such interest payment in cash or in shares of Common Stock based
on 90% of the average Closing Prices of the Common Stock for the five Trading Days
immediately preceding the conversion date. 



        The
Company is not required to issue fractional shares of Common Stock upon conversion of
Notes and, in lieu thereof, will pay a cash adjustment based upon the closing price of the
Common Stock on the last business day prior to the date of conversion. 



        Upon
due presentment for registration of transfer of this Note at the office or agency of the
Company in the Borough of Manhattan, The City of New York, or at the option of the holder
of this Note, at the Corporate Trust Office of the Trustee, a new Note or Notes of
authorized denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the conditions and limitations provided in the
Indenture, without charge except for any tax or other governmental charge imposed in
connection therewith. 



        The
Company, the Trustee, any authenticating agent, any paying agent, any conversion agent and
any Note registrar may deem and treat the registered holder hereof as the absolute owner
of this Note (whether or not this Note shall be overdue and notwithstanding any notation
of ownership or other writing hereon made by anyone other than the Company or any Note
registrar), for the purpose of receiving payment hereof, or on account hereof, for the
conversion hereof and for all other purposes, and neither the Company nor the Trustee nor
any other authenticating agent nor any paying agent nor any other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments made to or
upon the order of such registered holder shall, to the extent of the sum or sums paid,
satisfy and discharge liability for monies payable on this Note. 



        No
recourse for the payment of the principal of or any premium or interest on this Note, or
for any claim based hereon or otherwise in respect hereof, and no recourse under or upon
any obligation, covenant or agreement of the Company in the Indenture or any indenture
supplemental thereto or in any Note, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or of any Successor Company,
either directly or through the Company or any Successor Company, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released. 









ABBREVIATIONS 



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



TEN COM              -   as tenants in common           UNIF GIFT MIN ACT -
                                                        Uniform Gifts to Minors Act

                                                                                            (State)
TEN ENT              -   as tenants by the entireties   ________________ Custodian
                                                                 (Cust)
JT TEN               -   as joint tenants with right    ________________ under
                         of survivorship and not as              (Minor)
                         tenants in common




Additional
abbreviations may also be used 



though not in the above
list. 









Fill in for registration of shares if
to be issued, and Notes if to be delivered, other than to and in the name of the
registered holder: 




(Name)


(Street Address)


(City, State and Zip Code)

Please print name and address

                                            Principal amount to be converted
                                            (if less than all)
                                            $


                                            Social Security or Other Taxpayer
                                            Identification Number










[FORM OF OPTION TO
ELECT PURCHASE 



UPON A CHANGE OF
CONTROL] 



To: Penn Treaty American
Corporation 



        The
undersigned registered owner of this Note hereby irrevocably acknowledges receipt of a
notice from Penn Treaty American Corporation (the “Company”) as to the
occurrence of a Change of Control with respect to the Company and requests and instructs
the Company to repay the entire principal amount of this Note, or the portion thereof
(which is $1,000 principal amount or an integral multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this Note, together with accrued
interest to such date, to the registered holder hereof. 



Dated:


                                            Signature(s)




                                            Social Security or Other Taxpayer
                                            Identification Number

                                            Principal amount to be repaid (if less than
                                             all): $












[FORM OF ASSIGNMENT] 



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



Dated:




Signature(s)

Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan
associations and credit unions) with membership in an approved
signature guarantee medallion program pursuant to Securities
and Exchange Commission Rule 17Ad-15.


Signature Guarantee




	 	
NOTICE:
The option to elect payment upon a Change of Control or the assignment must correspond
with the name as written upon the face of the Note in every particular without alteration
or enlargement or any change whatever. 












SCHEDULE A 



SCHEDULE OF EXCHANGES,
CONVERSIONS, 



REDEMPTIONS,
REPURCHASES, CANCELLATIONS AND TRANSFERS 



        The
initial principal amount of this global Note is U.S. $_____________. The following
additions to principal, redemptions, repurchases, exchanges of a part of this global Note
for an interest in the global Note, definitive Notes and conversions into Common Stock or
cash have been made: 



     



     



Principal 



Amount 



Redeemed, 



Repurchased 



         Principal
Exchanged forAmount 
Added Interest in


     Date of Addi-                 on                  the Global              Remaining
     tion to Prin-             Exchange of              Note or                Principal
       cipal, Re-              Interest in             Definitive             Amount Out-
       demption,               the Global               Notes or               standing               Notation
      Repurchase,                Note or             Converted into            Following             Made by or
      Exchange or              Definitive             Common Stock           such Transac-          on behalf of
       Conversion                 Notes                 or Cash                  tion                the Trustee

     



     



     



     



     



     



     



     



     



     



     



     



     



     



     











C-3 



C-1 



EXHIBIT C — FORM
OF TRANSFEREE CERTIFICATE 



Wells Fargo Bank
Minnesota, N.A. 



MAC N9303-120 



Sixth Street &
Marquette AvenueMinneapolis, 
Minnesota 55479Attention: 
Corporate Trust Services 



      Re:
Penn Treaty American Corporation



         6-1/4%
Convertible Subordinated



         Notes
Due 2008 (the “Notes”)        



        Reference
is hereby made to the Indenture dated as of February 2, 2004 (as supplemented from time to
time, the “Indenture”) between Penn Treaty American Corporation and Wells Fargo
Bank Minnesota, N.A., as Trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture. 



        The
undersigned is delivering this letter in connection with the transfer of Notes to the
undersigned, which Notes are to be held by the undersigned in definitive registered form. 



        The
undersigned hereby confirms that: 



         (i)       
          the undersigned is an “accredited investor” within the meaning of Rule
          501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
          “Securities Act”), or an entity in which all of the equity owners are
          accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under
          the Securities Act (an “Institutional Accredited Investor”); 



         (ii)       
          (A) any purchase of Notes by the undersigned will be for the undersigned’s
          own account or for the account of one or more other Institutional Accredited
          Investors or as fiduciary for the account of one or more trusts, each of which
          is an “accredited investor” within the meaning of Rule 501(a)(7) under
          the Securities Act and for each of which we exercise sole investment discretion
          or (B) we are a “bank,” within the meaning of Section 3(a)(2) of the
          Securities Act, or a “savings and loan association” or other
          institution described in Section 3(a)(5)(A) of the Securities Act that is
          acquiring Notes as fiduciary for the account of one or more institutions for
          which we exercise sole investment discretion; 



         (iii)       
          the undersigned has such knowledge and experience in financial and business
          matters that the undersigned is capable of evaluating the merits and risks of
          purchasing Notes; 



         (iv)       
          the undersigned is not acquiring Notes with a view to distribution thereof or
          with any present intention of offering or selling Notes or the Common Stock
          issuable upon conversion thereof, except as permitted below; provided that the
          disposition of the undersigned’s property and property of any accounts for
          which the undersigned is acting as fiduciary shall remain at all times within
          the undersigned’s control; and 



         (v)       
          the undersigned acknowledges that it has had access to such financial and other
          information as the undersigned deems necessary in connection with the
          undersigned’s decision to purchase Notes. 



        The
undersigned understands that the Notes have been issued in a transaction not involving any
public offering within the United States within the meaning of the Securities Act and that
the Notes and the shares of Common Stock issuable upon conversion thereof (collectively,
the “Securities”) have not been registered under the Securities Act or any
applicable state securities laws, and the undersigned agrees, on the undersigned’s
own behalf and on behalf of each account for which the undersigned acquires any
Securities, that if in the future the undersigned decides to resell or otherwise transfer
such Securities, such Securities may be resold or otherwise transferred only pursuant to
the exemption from registration provided by Rule 144 under the Securities Act (if
applicable) or pursuant to a registration statement which has been declared effective
under the Securities Act. The undersigned agrees that any such transfer of Securities
referred to in this paragraph shall be in accordance with applicable securities laws of
any State of the United States or any other applicable jurisdiction and in accordance with
the legends set forth on the Securities. The undersigned further agrees to provide any
person purchasing any of the Securities from the undersigned a notice advising such
purchaser that resales of such Securities are restricted as stated herein. The undersigned
understands that the registrar and transfer agent for the Securities will not be required
to accept for registration or transfer any Securities, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer have been
complied with. The undersigned further understands that, unless the sale of the Securities
has been registered under the Securities Act, any Securities will be in the form of
definitive physical certificates and that such certificates will bear a legend reflecting
the substance of this paragraph. 









        The
undersigned acknowledges that the Transferor, others and you will rely upon the
undersigned’s confirmation, acknowledgments and agreements set forth herein, and the
undersigned agrees to notify you promptly in writing if any of the undersigned’s
representations or warranties herein ceases to be accurate and complete. 



Dated:


                                            (Name of Transferor)



                                            By:
                                            Name:
                                            Title:
                                            Address:










D-2 



D-1 



EXHIBIT D — FORM
OF TRANSFEROR CERTIFICATE 



FOR TRANSFER FROM
DEFINITIVE REGISTERED 



FORM TO GLOBAL NOTE 



Wells Fargo Bank
Minnesota, N.A. 



MAC N9303-120 



Sixth Street &
Marquette AvenueMinneapolis, 
Minnesota 55479Attention: 
Corporate Trust Services. 



      Re:
Penn Treaty American Corporation



         6-1/4%
Convertible Subordinated



         Notes
Due 2008 (the
“Notes”)          



        Reference
is hereby made to the Indenture dated as of February 2, 2004 (as supplemented from time to
time, the “Indenture”) between Penn Treaty American Corporation and Wells Fargo
Bank Minnesota, N.A., as Trustee. Capitalized terms used but not defined herein shall have
the meanings given them in the Indenture. 



        This
letter relates to U.S.$__________ (being U.S.$1,000 and any integral multiple of
U.S.$1,000 in excess thereof) principal amount of Notes held of record in definitive
registered form through Note No. _______ (the “Definitive Note”) in the name of
_______________ (the “Transferor”). The Transferor hereby requests that on
__________ such beneficial interest represented by the Definitive Note be transferred or
exchanged for an interest in the Global Note (CUSIP No. __________) in the same principal
denomination and transferred to ______________ (the Depositary account no. ________). If
this is a partial transfer, a minimum of U.S.$1,000 and any integral multiple of U.S.
$1,000 in excess thereof of the Definitive Note will remain outstanding. 



        In
connection with such request, and in respect of such Notes, the Transferor does hereby
certify that such Notes are being transferred pursuant to an effective registration
statement or in accordance with Rule 144 under the Securities Act of 1933, as amended (the
“Securities Act”) to a transferee that the Transferor reasonably believes is
purchasing the Notes for its own account or an account with respect to which the
transferee exercises sole investment discretion and the transferee and any such account is
an “accredited investor” within the meaning of Rule 502(a) in a transaction
meeting the requirements of Rule 144 and in accordance with any applicable securities laws
of any state of the United States or any other jurisdiction. The Transferor does hereby
certify that it has notified the transferee if it has relied on Rule 144 under the
Securities Act on a basis for the exemption from the registration requirements of the
Securities Act used in connection with such transfer. 









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



Dated:

                                            [Name of Transferor]



                                            By:
                                                     Name:
                                                     Title:
                                                     Telephone No.:




Signatures must be guaranteed by an
“eligible guarantor institution” meeting the requirements of the transfer agent,
which requirements include membership or participation in STAMP or such other
“signature guarantee program” as may be determined by the transfer agent in
addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended. 




Signature Guarantee

Please print name and address (including zip code number)

cc:  Penn Treaty American Corporation