exv4w7






EXHIBIT 4.7




 






INDENTURE




Dated as of                     , 2009,




by and between




ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.,

as obligor




and




U.S. BANK NATIONAL ASSOCIATION,

as trustee




 






$50,000,000




Renewable Unsecured Subordinated Notes




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
	 	 	1	 
	Section 1.1 Definitions
	 	 	1	 
	Section 1.2 Other Definitions
	 	 	5	 
	Section 1.3 Incorporation by Reference of Trust Indenture Act
	 	 	6	 
	Section 1.4 Rules of Construction
	 	 	6	 
	ARTICLE II THE SECURITIES
	 	 	7	 
	Section 2.1 Security Terms; Amount; Accounts; Interest; Maturity
	 	 	7	 
	Section 2.2 Written Confirmation; Rejection; Rescission
	 	 	10	 
	Section 2.3 Registrar and Paying Agent
	 	 	11	 
	Section 2.4 Paying Agent to Hold Money in Trust
	 	 	12	 
	Section 2.5 List of Holders
	 	 	12	 
	Section 2.6 Transfer and Exchange
	 	 	12	 
	Section 2.7 Payment of Principal and Interest; Principal and Interest Rights Preserved
	 	 	13	 
	Section 2.8 Outstanding Securities
	 	 	14	 
	Section 2.9 Treasury Securities
	 	 	14	 
	Section 2.10 Defaulted Interest
	 	 	14	 
	Section 2.11 Temporary Notes
	 	 	14	 
	Section 2.12 Execution, Authentication And Delivery
	 	 	15	 
	Section 2.13 Book-Entry Registration
	 	 	16	 
	Section 2.14 Initial and Periodic Statements
	 	 	16	 
	Section 2.15 Appointment of Agents
	 	 	17	 
	ARTICLE III REDEMPTION AND REPURCHASE
	 	 	17	 
	Section 3.1 Redemption of Securities at the Company’s Election
	 	 	17	 
	Section 3.2 Repurchase of Securities at the Holder’s Request
	 	 	18	 
	ARTICLE IV COVENANTS
	 	 	20	 
	Section 4.1 Payment of Securities
	 	 	20	 
	Section 4.2 Maintenance of Office or Agency
	 	 	20	 
	Section 4.3 SEC Reports and Other Reports
	 	 	21	 
	Section 4.4 Compliance Certificate
	 	 	21	 
	Section 4.5 Stay, Extension and Usury Laws
	 	 	22	 
	Section 4.6 Liquidation
	 	 	22	 
	Section 4.7 Financial Covenants
	 	 	22	 
	Section 4.8 Restrictions on Dividends and Certain Transactions with Affiliates
	 	 	22	 
	Section 4.9 Securitization Transactions and Additional Indebtedness
	 	 	23	 
	ARTICLE V SUCCESSORS
	 	 	23	 
	Section 5.1 When the Company May Merge, etc.
	 	 	23	 
	Section 5.2 Successor Entity Substituted
	 	 	23	 
	ARTICLE VI DEFAULTS AND REMEDIES
	 	 	23	 
	Section 6.1 Events of Default
	 	 	23	 
	Section 6.2 Acceleration
	 	 	24	 
	Section 6.3 Other Remedies
	 	 	25	 
	Section 6.4 Waiver of Past Defaults
	 	 	25	 
	Section 6.5 Control by Majority
	 	 	25	 
	Section 6.6 Limitation on Suits
	 	 	26	 
	Section 6.7 Rights of Holders to Receive Payment
	 	 	26	 






 








 






	 	 	 	 	 
	Section 6.8 Collection Suit by Trustee
	 	 	26	 
	Section 6.9 Trustee May File Proofs of Claim
	 	 	26	 
	Section 6.10 Priorities
	 	 	27	 
	Section 6.11 Undertaking for Costs
	 	 	28	 
	ARTICLE VII TRUSTEE
	 	 	28	 
	Section 7.1 Duties of Trustee
	 	 	28	 
	Section 7.2 Rights of Trustee
	 	 	29	 
	Section 7.3 Individual Rights of Trustee
	 	 	30	 
	Section 7.4 Trustee’s Disclaimer
	 	 	30	 
	Section 7.5 Notice of Defaults
	 	 	30	 
	Section 7.6 Reports by Trustee to Holders
	 	 	31	 
	Section 7.7 Compensation and Indemnity
	 	 	31	 
	Section 7.8 Replacement of Trustee
	 	 	32	 
	Section 7.9 Successor Trustee by Merger, etc.
	 	 	33	 
	Section 7.10 Eligibility; Disqualification
	 	 	33	 
	Section 7.11 Preferential Collection of Claims Against Company
	 	 	33	 
	ARTICLE VIII DISCHARGE OF INDENTURE
	 	 	34	 
	Section 8.1 Termination of Company’s Obligations
	 	 	34	 
	Section 8.2 Application of Trust Money
	 	 	35	 
	Section 8.3 Repayment to Company
	 	 	35	 
	Section 8.4 Reinstatement
	 	 	35	 
	ARTICLE IX AMENDMENTS
	 	 	36	 
	Section 9.1 Without Consent of Holders
	 	 	36	 
	Section 9.2 With Consent of Holders
	 	 	36	 
	Section 9.3 Compliance with Trust Indenture Act
	 	 	37	 
	Section 9.4 Effect of Consents
	 	 	37	 
	Section 9.5 Notation on or Exchange of Securities
	 	 	38	 
	Section 9.6 Trustee to Sign Amendments, etc.
	 	 	38	 
	ARTICLE X SUBORDINATION
	 	 	38	 
	Section 10.1 Agreement to Subordinate
	 	 	38	 
	Section 10.2 Liquidation; Dissolution; Bankruptcy
	 	 	38	 
	Section 10.3 Default of Senior Debt
	 	 	40	 
	Section 10.4 When Distribution Must Be Paid Over
	 	 	41	 
	Section 10.5 Notice by Company
	 	 	41	 
	Section 10.6 Subrogation
	 	 	41	 
	Section 10.7 Relative Rights
	 	 	41	 
	Section 10.8 Subordination May Not Be Impaired by the Company
or Holders of Senior Debt
	 	 	42	 
	Section 10.9 Distribution or Notice to Representative
	 	 	43	 
	Section 10.10 Rights of Trustee and Paying Agent
	 	 	43	 
	Section 10.11 Authorization to Effect Subordination
	 	 	44	 
	Section 10.12 Article Applicable to Paying Agent
	 	 	44	 
	Section 10.13 Miscellaneous
	 	 	44	 
	ARTICLE XI MISCELLANEOUS
	 	 	44	 
	Section 11.1 Trust Indenture Act Controls
	 	 	44	 
	Section 11.2 Notices
	 	 	45	 






 ii 








 






	 	 	 	 	 
	Section 11.3 Communication by Holders with Other Holders
	 	 	46	 
	Section 11.4 Certificate and Opinion as to Conditions Precedent
	 	 	46	 
	Section 11.5 Statements Required in Certificate or Opinion
	 	 	46	 
	Section 11.6 Rules by Trustee and Agents
	 	 	47	 
	Section 11.7 Legal Holidays
	 	 	47	 
	Section 11.8 No Recourse Against Others
	 	 	47	 
	Section 11.9 Duplicate Originals
	 	 	47	 
	Section 11.10 Governing Law
	 	 	47	 
	Section 11.11 No Adverse Interpretation of Other Agreements
	 	 	47	 
	Section 11.12 Successors
	 	 	47	 
	Section 11.13 Severability
	 	 	47	 
	Section 11.14 Counterpart Originals
	 	 	48	 
	Section 11.15 Table of Contents, Headings, etc.
	 	 	48	 





EXHIBITS:


A — Form of Note


 iii 








 








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)
	 	N.A.
	(b)
	 	7.8; 7.10
	(c)
	 	N.A.
	311(a)
	 	7.11
	(b)
	 	7.11
	(c)
	 	N.A.
	312(a)
	 	2.5
	(b)
	 	11.3
	(c)
	 	11.3
	313(a)
	 	7.6
	(b)(1)
	 	N.A.
	(b)(2)
	 	7.6
	(c)
	 	7.6; 11.2
	(d)
	 	7.6
	314(a)
	 	4.3; 4.4; 11.2
	(b)
	 	N.A.
	(c)(1)
	 	11.4
	(c)(2)
	 	11.4
	(c)(3)
	 	11.4; 1.1
	(d)
	 	N.A.
	(e)
	 	11.5
	(f)
	 	N.A.
	315(a)
	 	7.1(b)
	(b)
	 	7.5; 11.2
	(c)
	 	7.1(a)
	(d)
	 	7.1(c)
	(e)
	 	6.11
	316(a)(last sentence)
	 	2.9
	(a)(1)(A)
	 	6.5
	(a)(1)(B)
	 	6.4
	(a)(2)
	 	N.A.
	(b)
	 	6.7
	(c)
	 	N.A.
	317(a)(1)
	 	6.8
	(a)(2)
	 	6.9
	(b)
	 	2.4
	318(a)
	 	11.1








 




			
	N.A.	 	means not applicable
	 
	*	 	This Cross Reference Table is not part of this Indenture



 








 










     THIS INDENTURE is hereby entered into as of                     , 2009, by and between Advanced
Environmental Recycling Technologies, Inc., a Delaware corporation (the “Company”), as
obligor, and U.S. Bank National Association, as trustee (the “Trustee”).



     The Company and the Trustee agree as follows for the benefit of each other and for the equal
and ratable benefit of the Holders of the renewable, unsecured, subordinated debt securities of the
Company issued pursuant to the Company’s registration statement on Form S-1, declared effective by
the Securities and Exchange Commission on or about                     , 2009 (such Registration Statement, as
amended by any post-effective amendment thereto, the “Registration Statement”):



ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE




Section 1.1 Definitions. 




     “Account” means the record of beneficial ownership of a Security maintained by the
Registrar.



     “Affiliate” of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with such specified Person.
For the purposes of this definition, “control” (including, with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.



     “Agent” means any Registrar, Paying Agent or co-registrar of the Securities or any
Person appointed and retained by the Company to perform certain of the duties or obligations, or
exercise certain of the rights and discretions, of the Company hereunder, on behalf of the Company
pursuant to Section 2.15 hereof.



     “Board of Directors” means the Board of Directors of the Company or any authorized
committee of the Board of Directors.



     “Business Day” means any day other than a Legal Holiday.



     “Company” means Advanced Environmental Recycling Technologies, Inc., a Delaware
corporation, unless and until replaced by a successor in accordance with Article V hereof and
thereafter means such successor.



     “Corporate Trust Office” means the office of the Trustee at which the corporate trust
business of the Trustee shall, at any particular time, be principally administered, which office
is, at the date as of which this Indenture is originally dated, located at 60 Livingston Avenue,
St. Paul, Minnesota 55107, Attention: Richard Prokosch.



     “Default” means any event that is or with the passage of time or the giving of notice
or both would be an Event of Default.



 









 





     “Event of Default” has the meaning set forth in Section 6.1 hereof.



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



     “Fiscal Year” means a calendar year ending on December 31st.



     “GAAP” means, as of any date, generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by a significant
segment of the accounting profession, which are in effect from time to time.



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



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



     “Indebtedness” means, with respect to any Person and without duplication, any
indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid of the purchase
price of any property (including capital lease obligations) or the expenditure for any services or
representing any interest rate swap or other hedging obligations, including without limitation, any
such balance that constitutes an accrued expense or an account or trade payable, if and to the
extent any of the foregoing indebtedness (other than letters of credit and hedging obligations)
would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP,
and also includes, to the extent not otherwise included, (a) the Guarantee of items that would be
included within this definition, and (b) liability for items that would arise by operation of a
Person’s status as a general partner of a partnership.



     “Indenture” means this Indenture as amended or supplemented from time to time.



     “Interest Accrual Period” means, as to each Security, the period from the later of the
Issue Date of such Security or the last Payment Date upon which an interest payment was made until
and including the day before the following Payment Date during which interest accrues on each
Security with respect to any Payment Date.



     “Issue Date” means, with respect to any Security, the date on which such Security is
deemed registered on the books and records of the Registrar, which shall be (i) the date the
Company accepts funds for the purchase of the Security if such funds are received prior to 12:01
p.m. (Central Time) on a Business Day, or if such funds are not so received, on the next Business
Day, or (ii) the date that the Security is renewed as of the Maturity Date pursuant to Section
2.1(e).



     “Maturity Date” means, with respect to any Security, the date on which the principal
of such Security becomes due and payable as therein provided.



2









 





     “Maturity Record Date” means, with respect to any Security, as of 11:59 p.m. of the
date 15 days prior to the Maturity Date or Redemption Date applicable to such Security.



     “Notice of Maturity” means a written notice from the Company to a Holder (as further
described in Section 2.1(d)) that the Holder’s Securities will be maturing on the related Maturity
Date occurring within 15 days but not less than 10 days of the delivery of such notice.



     “Obligations” means, with respect to any Indebtedness, any principal, premium,
interest (including Post-Petition Interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities or amounts of whatever nature payable under the documentation
governing, or with respect to, any such Indebtedness.



     “Officer” means the Chairman of the Board or principal executive officer of the
Company, the President or principal operating officer of the Company, the Chief Financial Officer
or principal financial officer of the Company, the Treasurer, Controller or principal accounting
officer of the Company, Secretary or any Executive or Senior Vice-President of the Company.



     “Officers’ Certificate” means a certificate signed by two Officers, one of whom must
be the principal executive officer, principal operating officer, principal financial officer or
principal accounting officer of the Company.



     “Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable
to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.



     “Pari Passu Debt” means any Indebtedness of the Company that is payable on a pari
passu basis with the Securities.



     “Payment Account” means the bank account designated by the Holder to receive payments
of interest and/or principal due on such Holder’s Securities, as may be amended by the Holder by
written notice to the Registrar from time to time.



     “Payment Date” means (i) with respect to any Security for which monthly interest
payments are required to be made, the first day of the following calendar month or such other date
as is designated by the Holder pursuant to subsection 2.1(c), (ii) with respect to any Security for
which interest payments are required to be made quarterly, semi-annually or annually, the same day
of the month as the quarterly, semi-annual or annual anniversary of the Issue Date of the Security
(except in the case where the Issue Date of a Security is the 29th, 30th or
31st day of the month and there is no like date in the anniversary month, in which case
the Payment Date for such month shall be the first day of the following month) and (iii) with
respect to each Security, the Maturity Date (or such date following the Maturity Date on which
payment is made pursuant to subsection 2.1(d) hereof), the Repurchase Date or the Redemption Date
of the Security; provided, that if any such day in the preceding clauses (i) through (iii) is not a
Business Day, the Business Day immediately following such day.



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



3









 





     “Post-Petition Interest” means interest accruing after the commencement of any
bankruptcy or insolvency case or proceeding with respect to the Company or any receivership,
liquidation, reorganization or other similar case or proceeding in connection therewith, at the
rate applicable to the related Indebtedness, whether or not such interest is an allowable claim in
any such proceeding.



     “Prospectus” means the prospectus included in the Registration Statement, as amended
from time to time, as supplemented by any prospectus supplement (including interest rate
supplements) relating to the Securities that are filed with the SEC pursuant to Rule 424(b) under
the Securities Act. References herein to the Prospectus shall be deemed to refer to and include
the documents incorporated therein by reference.



     “Receivables” means installment sale contracts, loans evidenced by promissory notes
secured by assets, leases, mortgages or other finance receivables or instruments purchased,
originated or owned by the Company or any of its Affiliates.



     “Redemption Notice” means a written notice from the Company to the Holders (as further
described in Section 2.1(f)) stating that the Company is redeeming all or a specified portion of
Securities pursuant to Section 3.1, with a copy to the Registrar and the Trustee.



     “Redemption Price” means, with respect to any Security to be redeemed, the principal
amount of such Security plus the interest accrued but unpaid during the Interest Accrual Period up
to and not including the Redemption Date for such Security.



     “Regular Record Date” means, with respect to each Payment Date, as of 11:59 p.m. of
the date 15 days prior to such Payment Date.



     “Repayment Election” means a written notice from a Holder to the Company (as further
described in Section 2.1(d)) stating that repayment of the Holder’s Securities is required in
connection with the maturity of such Securities.



     “Repurchase Price” means, with respect to any Security to be repurchased, the
principal amount of such Security plus the interest accrued but unpaid during the Interest Accrual
Period up to and not including the Repurchase Date for such Security, minus the Repurchase Penalty,
if any.



     “Repurchase Request” means a written notice from a Holder to the Company (as further
described in Section 2.1(g)) stating that such Holder is making an irrevocable request for the
Company to repurchase such Holder’s Securities pursuant to Section 3.2.



     “Responsible Officer” when used with respect to the Trustee, means any officer in its
Corporate Trust Office, or any other assistant officer of the Trustee in its Corporate Trust Office
customarily performing functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred because of his or
her knowledge of and familiarity with the particular subject.



     “SEC” means the U.S. Securities and Exchange Commission.



4









 





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



     “Security” or “Securities” means, the Company’s renewable, unsecured,
subordinated notes issued under this Indenture pursuant to the Registration Statement.



     “Senior Debt” means any Indebtedness other than the Securities and any Pari Passu Debt
(whether outstanding on the date hereof or thereafter created) incurred by the Company (including
its subsidiaries) whether such Indebtedness is or is not specifically designated by the Company as
being “Senior Debt” in its defining instruments.



     “Subscription Agreement” means a Subscription Agreement entered into by a Person under
which such Person has committed to purchase certain Securities as identified thereby and which is
in substantially the form filed as Exhibit 4.4 to the Registration Statement.



     “Servicing Agent” means Sumner Harrington Ltd., a Minnesota corporation.



     “TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect
on the date on which this Indenture is qualified under the TIA.



     “Total Permanent Disability” means a determination by a physician approved by the
Company that the Holder of a Security who is a natural person, who was gainfully employed on a full
time basis at the Issue Date of such Security is unable to work on a full time basis during the
succeeding twenty-four months. For purposes of this definition, “working on a full time basis”
shall mean working at least forty (40) hours per week.



     “Trustee” means U.S. Bank National Association, until a successor replaces it in
accordance with the applicable provisions of this Indenture and thereafter means the successor
serving hereunder.



     “U.S. Government Obligations” means direct obligations of the United States of
America, or any agency or instrumentality thereof for the payment of which the full faith and
credit of the United States of America is pledged.



     “Written Confirmation” means a written confirmation of the acceptance of a
subscription for, or the transfer or pledge of, a Security or Securities in the form of a
transaction statement executed or issued by the Company or its duly authorized Agent and delivered
to the Holder of such Security or Securities with a copy to the Registrar and the Trustee, which is
in substantially the form of Exhibit 4.3 to the Registration Statement.



 Section 1.2 Other Definitions.




	 	 	 	 	 
	Term	 	Defined in Section
	“Bankruptcy Law”

	 	 	6.1	 
	“Custodian”

	 	 	6.1	 
	“Event of Default”

	 	 	6.1	 
	“Legal Holiday”

	 	 	11.7	 






5









 






	 	 	 	 	 
	Term	 	Defined in Section
	“Paying Agent”

	 	 	2.3	 
	“Payment Blockage Period”

	 	 	10.3	 
	“Payment Notice”

	 	 	10.3	 
	“Redemption Date”

	 	 	2.1	(f)
	“Registrar”

	 	 	2.3	 
	“Registration Statement”

	 	Introduction

	“Repurchase Date”

	 	 	3.2	(d)
	“Repurchase Penalty”

	 	 	3.2	(b)
	“Securities Register”

	 	 	2.3	 






Section 1.3 Incorporation by Reference of Trust Indenture Act.





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




     “indenture securities” means the Securities;




     “indenture security holder” means any Holder of the Securities;




     “indenture to be qualified” means this Indenture;




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




     “obligor” on the Securities means the Company or any successor obligor upon the
Securities.




     (b) All other terms used in this Indenture that are defined by the TIA, defined by TIA
reference to another statute or defined by a SEC rule under the TIA have the meanings so
assigned to them.



Section 1.4 Rules of Construction. 




     Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an
accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c)
references to GAAP, as of any date, shall mean GAAP in effect in the United States as of such date;
(d) “or” is not exclusive; (e) words in the singular include the plural, and in the plural include
the singular; and (f) provisions apply to successive events and transactions.



6









 





ARTICLE II

THE SECURITIES




Section 2.1 Security Terms; Amount; Accounts; Interest; Maturity. 





     (a) Unlimited Amount and Form of Security. The outstanding aggregate principal
amount of Securities to be issued hereunder (absent an amendment to the Registration
Statement) is limited to $50,000,000, provided, however, that the Company and the Trustee
may, without the consent of any Holder, increase such aggregate principal amount of
Securities which may be outstanding at any time. The Securities are unsecured obligations
of the Company and shall be subordinate in right of payment to the Senior Debt of the
Company as further described in Article X. The Securities are an obligation and liability
of the Company, and not of any other Person, including, without limitation, any stockholder,
director, Officer, employee, Affiliate or Agent of the Company. The Securities are not
certificates of deposit or similar obligations of, and are not guaranteed or insured by, any
depository institution, the Federal Deposit Insurance Corporation, any other governmental or
private fund, any securities insurer or any other Person.




     In the event securities are issued in certificated form pursuant to Section 2.13(b):
(i) the Securities, together with the Trustee’s certificate of authentication, shall be in
substantially the form set forth as Exhibit A to this Indenture, with any
appropriate insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be determined by
the officers executing such Securities, as evidenced by their execution of the Securities;
(ii) any portion of the text of any Securities may be set forth on the reverse thereof, with
an appropriate reference thereto on the face of the Securities; and (iii) the Securities may
be subject to notations, legends or endorsements required by law, stock exchange rule, or
agreements to which the Company is subject or usage.




     (b) Book-Entry; Denominations; Term. Except as provided in Section 2.13(b),
each Security shall neither be issued as, nor evidenced by, a promissory note or
certificated security, but rather each Security shall be issued in book entry or
uncertificated form, in which the record of beneficial ownership of each such Security shall
be established and maintained as Accounts by the Registrar pursuant to Section 2.13. In
connection with the issuance of each Security in book entry form in accordance with Section
2.13, each such Security shall be deemed to be represented in an uncertificated form that
includes the same terms and provisions as those set forth in the form of Security in
Exhibit A to this Indenture, and the related Account for each such Security shall be
deemed to include these same terms and provisions.




     Each Security shall be in such denominations as provided by this Indenture and as may
be designated from time to time by the Company, but in no event in an original denomination
less than $1,000. Separate purchases may not be cumulated to satisfy the minimum
denomination requirements. Each Security shall have a term of six months, or



7









 







one, two, three, four, five or ten years, as designated by the Holder at the time of
purchase, subject to the Company’s acceptance thereof.




     (c) Interest and Interest Payments. Each Security shall bear interest from and
commencing on its Issue Date at such rate of interest as the Company shall determine from
time to time, which rate may vary from Holder to Holder depending upon the aggregate
principal amount of Securities held by such Holder and all immediate family members, as set
forth in the Prospectus; provided, however, that the interest rate of each Security will be
fixed for the term of such Security upon issuance, subject to change upon the renewal of the
Security at maturity. Interest on the Securities will compound daily based on a calendar
year consisting of 365 days and the Holder thereof may elect to have interest paid monthly,
quarterly, semi-annually, annually, or upon maturity, which payments shall be made on the
Payment Date, except that a Holder who elects monthly payments may select the day of the
month on which to receive interest payments; provided that no interest shall be paid to a
Holder until the expiration of the Holder’s rescission right under Section 2.2(b) and, if
the monthly interest payment date selected by the Holder is within five Business Days of the
Issue Date of the Security, the first interest payment will be made in the following month
and will include all of the interest earned since the Issue Date. If the Holder does not
elect an interest payment option, interest will be paid on the Maturity Date of the Note. A
Holder may change this election once during the term of the Security, subject to the
Company’s approval, which change shall be effective by the first Business Day following the
45th day after receipt of written notice from the Holder requesting such change.




     (d) Repayment Election at Maturity. The Company will send each Holder of a
Security (existing as of the applicable Maturity Record Date) a Notice of Maturity
approximately 15 but not less than 10 days prior to the Maturity Date of the Security held
by such Holder reminding such Holder of the pending maturity of the Security and reminding
the Holder that the automatic renewal provision described in Section 2.1(e) will take
effect, unless (i) the Company states in the Notice of Maturity that it will not allow the
Holder to renew the Security (in which case the Company shall pay the Holder principal and
accrued interest with regard to the Security on the Maturity Date), or (ii) the Holder
delivers a Repayment Election to the Company for the payment of all principal and interest
due on the Security as of the Maturity Date so that such Repayment Election is received by
the Company within 15 days after the Maturity Date. Such Notice of Maturity also shall
state that payment of principal of a Security shall be made upon presentation of a Repayment
Election requiring payment of such Security and shall specify the place where such Repayment
Election may be presented. Upon or following the delivery of a Notice of Maturity for a
Security, the Holder thereof, in their discretion, may deliver to the Company a Repayment
Election; provided that such Repayment Election must be delivered to the Company no later
than 15 days after the Maturity Date. If a Holder delivers a Repayment Election requiring
repayment on or prior to the 15th day following the Maturity Date, no interest will accrue
after the Maturity Date and the Holder will be sent payment upon the later of the Maturity
Date or five days following the date the Company receives such Repayment Election from the
Holder; provided that if the Company has previously paid interest to the Holder for periods
after the Maturity Date, such interest shall be deducted from such payment.



8









 






     The Notice of Maturity also shall state that the Holder may, and the Holder may, submit
a Repayment Election for the repayment of the maturing Security and use all or a portion of
the proceeds thereof to purchase a new Security with a different term. To exercise this
option, the Holder shall complete a new Subscription Agreement for the new Security and send
it along with the Holder’s Repayment Election to the Company. The Issue Date of the new
Security shall be the Maturity Date of the maturing Security. Any proceeds from the
maturing Security that are not applied to the purchase of the new Security shall be sent to
the Holder of such maturing Security.




     If a Security pays interest only on the Maturity Date, then the Notice of Maturity also
shall state that the Holder may, and the Holder may, submit an “interest-only” Repayment
Election in which the Holder requires the payment of the accrued interest that such Holder
has earned on the maturing Security up to the Maturity Date and allows the principal amount
of such maturing Security to renew in the manner provided in subsection (e) below.




     (e) Automatic Renewal. If a Holder of such Security has not delivered a
Repayment Election for repayment of the Security on or prior to the 15th day
following the Maturity Date, and the Company did not notify the Holder of its intention to
repay the Security in the Notice of Maturity, then such maturing Security shall be extended
automatically for an additional term equal to the original term, and shall be deemed to be
renewed by the Holder and the Company as of the Maturity Date of such maturing Security. A
maturing Security will continue to renew as described herein absent a Redemption Notice or
Repurchase Request by the Holder or an indication by the Company that it will repay and not
allow the Security to be renewed in the Notice of Maturity. Interest on the renewed
Security shall accrue from the Issue Date thereof, which is the first day of such renewed
term (i.e., the Maturity Date of the maturing Security). Such renewed Security will be
deemed to have the identical terms and provisions of the maturing Security, including
provisions relating to payment, except that the interest rate payable during the term of the
renewed Security shall be the interest rate which is being offered by the Company on other
Securities having the same term and to Persons holding the same aggregate principal amount
of Securities (including holdings of immediate family members, as described in the
Prospectus) as of the Issue Date of such renewal. If other Securities having the same term
are not then being issued on the Issue Date of such renewal, the interest rate upon renewal
will be the rate specified by the Company on or before the Maturity Date of such Security,
or the then existing rate of the Security being renewed if no such rate is specified. If
the maturing Security pays interest only on the Maturity Date, then, except as provided in
subsection (d) above, all accrued interest thereon shall be added to the principal amount of
the renewed Security upon renewal.




     Notwithstanding the foregoing or anything in Section 2.1(d) to the contrary, if a
Repayment Election is given or is due at a time when the Company has determined that a
post-effective amendment to the Registration Statement was required but not yet effective,
the Company will provide notice to the Holder (including a copy of the post-effective
amendment to the Prospectus), and the Holder will be entitled to rescind his or her
Repayment Election, if made, or to make a Repayment Election, if not previously



9









 







made, by delivering a written rescission of the earlier Repayment Election, or a
Repayment Election, as the case may be, to the Company no later than 10 days following the
postmark date on the Company’s notice of such post-effective amendment.




     (f) Redemption Notice from Company. Pursuant to Section 3.1, each Security
shall be redeemable by the Company at any time, without penalty, upon the delivery of a
Redemption Notice to the Holder of such Security. Such Redemption Notice shall set forth a
date for the redemption of such Security (the “Redemption Date”) that is at least 30
days after the date that such Redemption Notice has been delivered by the Company to the
Holder hereunder.




     (g) Repurchase Request by Holder. Pursuant to and subject to the limitations
set forth in Section 3.2, each Security shall be subject to repurchase at the request of the
Holder upon the delivery of a Repurchase Request to the Company. Subject to the limitations
on repurchase and the Repurchase Penalties described in Section 3.2, the payment of interest
and principal due upon the repurchase of a Security shall be made to the Holder on a
Repurchase Date that is within 10 days of the delivery of such Repurchase Request to the
Company or, in the case of a repurchase of a Security in connection with the death or Total
Permanent Disability of a Holder, a Repurchase Date that is within 10 days after the
Company’s receipt of satisfactory establishment or such Holder’s death or Total Permanent
Disability.




     (h) Terms of Securities. The terms and provisions contained in the Securities
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,
and the Holders by accepting the Securities, expressly agree to such terms and provisions
and to be bound hereby and thereby. In case of a conflict, the provisions of this Indenture
shall control.



Section 2.2 Written Confirmation; Rejection; Rescission. 





     (a) Except with respect to an automatically renewed Security pursuant to Section
2.1(e), a Security shall not be validly issued to a Person until the following have
occurred: (i) such Person has remitted good and available funds for the full principal
amount of such Security to the Company or a duly authorized Agent of the Company; (ii) a
Written Confirmation of the acceptance of the subscription is sent by the Company or a duly
authorized Agent of the Company to such Person; and (iii) an Account is established by the
Registrar in the name of such Person as the Holder of such Security pursuant to Section 2.13
hereof. The Company or a duly authorized Agent of the Company, in their sole discretion,
may reject any subscription from a Person for the purchase of Securities, in which event any
funds received from such Person pursuant to such subscription shall be promptly returned to
such Person. No interest shall be paid on any funds returned on a rejected subscription.




     (b) For a period of five Business Days following the mailing by the Company of (i) a
Written Confirmation that evidences the valid issuance of a Security at the time of original
purchase (but not upon transfer or automatic renewal of a Security), or (ii) notice



10









 







from the Company that a Holder’s purchase of a Security occurred at a time when a
post-effective amendment to the Registration Statement was required but not yet effective
(which notice shall be accompanied by a copy of the post-effective amendment to the
Prospectus), such Holder shall have the right to rescind the Security and receive repayment
of the principal by presenting a written request for such rescission to the Company. Such
written request for rescission (A) if personally delivered or delivered via facsimile or
electronic transmission, must be received by the Company on or prior to the 5th Business Day
following the mailing of such Written Confirmation or post-effective amendment notice by the
Company or (B) if mailed must be postmarked on or before the 5th Business Day following the
mailing by the Company of such Written Confirmation or post-effective amendment notice.
Repayment of the principal shall be made within 10 days of the Company’s receipt of such
request from the Holder. No interest shall be paid on any such rescinded Security.



Section 2.3 Registrar and Paying Agent. 





     (a) The Company shall maintain (i) an office or agency where Securities may be
presented for registration of transfer or for exchange (“Registrar”) and (ii) an
office or agency where Securities may be presented for payment (“Paying Agent”).
The Registrar shall keep a register of the Securities and of their transfer and exchange,
which shall include the name, address for notices and Payment Account of the Holder and the
payment election information, principal amount, term and interest rate for each Security
(the “Securities Register”). The Company may appoint one or more co-registrars and
one or more additional paying agents. The term “Registrar” includes any
co-registrar, and the term “Paying Agent” includes any additional paying agent. The
Company may change any Paying Agent or Registrar without prior notice to any Holder;
provided that the Company shall promptly notify the Holders and the Trustee of the name and
address of any Agent not a party to this Indenture. The Company may act as Paying Agent
and/or Registrar. In the event the Company uses any Agent other than the Company or the
Trustee, the Company shall enter into an appropriate agency agreement with such Agent, which
agreement shall incorporate the provisions of the TIA or provide that the duties performed
thereunder are subject to and governed by the provisions of this Indenture. The agreement
shall implement or be subject to the provisions of this Indenture that relate to such Agent.
The Company shall notify the Trustee of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing
notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in
accordance with Section 7.7 hereof. In no event shall the Trustee be liable for the acts or
omissions of any predecessor Paying Agent or Registrar.




     (b) Pursuant to Section 2.15, the Company hereby appoints the Servicing Agent as the
initial Registrar and as agent for service of notices and demands in connection with the
Securities. The Servicing Agent shall act as Registrar and agent for service of notices and
demands in connection with the Securities until such time as the Company gives the Trustee
written notice to the contrary. Also pursuant to Section 2.15, the Company hereby appoints
The Business Bank as the initial Paying Agent.



11









 





Section 2.4 Paying Agent to Hold Money in Trust. 




     Prior to each Payment Date, the Company shall deposit with the Paying Agent sufficient funds
to pay principal and interest then so becoming due and payable in cash. The Company shall require
each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in
trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment
of principal or interest on the Securities, and will notify the Trustee promptly in writing of any
default by the Company in making any such payment. While any such default continues, the Trustee
shall require a Paying Agent (if other than the Company) to pay all money held by it to the
Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company) shall have
no further liability for the money delivered to the Trustee. If the Company acts as Paying Agent,
then the Company shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. The Company shall notify the Trustee in writing at least five
days before the Payment Date of the name and address of the Paying Agent if a person other than the
Trustee is named Paying Agent at any time or from time to time.



Section 2.5 List of Holders. 




     The Trustee shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Holders and shall otherwise comply with TIA §
312(a). If the Trustee is not the Registrar, the Registrar shall furnish to the Trustee within 10
days after the end of each fiscal quarter during the term of this Indenture and at such other times
as the Trustee may request in writing, a copy of the current Securities Register as of such date as
the Trustee may reasonably require and the Company shall otherwise comply with TIA § 312(a).



Section 2.6 Transfer and Exchange. 





     (a) The Securities are not negotiable instruments and cannot be transferred without the
prior written consent of the Company. Requests to the Registrar for the transfer of any
Security shall be:




     (i) made to the Registrar in writing on a form supplied by the Registrar;




     (ii) duly executed by the Holder of the Security, as reflected on the
Registrar’s records as of the date of receipt of such transfer request, or such
Holder’s attorney duly authorized in writing;




     (iii) accompanied by the written consent of the Company to the transfer; and




     (iv) if requested by the Company or the Registrar, an opinion of Holder’s
counsel (which counsel shall be reasonably acceptable to the requesting party) that
the transfer does not violate any applicable securities laws and/or a signature
guarantee.



12









 






     (b) Upon transfer of a Security, the Company, or the Registrar on behalf of the
Company, will provide the new registered owner of the Security with a Written Confirmation
that will evidence the transfer of the Security in the Securities Register and will
establish a corresponding Account.




     (c) The Company or the Registrar may assess reasonable service charges to a Holder for
any registration or transfer or exchange, and the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in connection
therewith.




     (d) With respect to the relevant Regular Record Date, the Company shall treat the
individual or entity listed on each Account maintained by the Registrar as the absolute
owner of the Security represented thereby for purposes of receiving payments thereon and for
all other purposes whatsoever.



Section 2.7 Payment of Principal and Interest; Principal and Interest Rights Preserved.





     (a) Each Security shall accrue interest at the rate specified for such Security in the
Securities Register and such interest shall be payable on each Payment Date following the
Issue Date for such Security, until the principal thereof becomes due and payable. Any
installment of interest payable on a Security that is caused to be punctually paid or duly
provided for by the Company on the applicable Payment Date shall be paid to the Holder in
whose name such Security is registered in the Securities Register on the applicable Regular
Record Date with respect to the Securities outstanding, by electronic deposit to such
Holder’s Payment Account as it appears in the Securities Register on such Regular Record
Date. The payment of any interest payable in connection with the payment of any principal
payable with respect to such Security on a Maturity Date shall be payable as provided below.
In the event any payments made by electronic deposit are not accepted into the Holder’s
Payment Account for any reason, such funds shall be held in accordance with Sections 2.4 and
8.3 hereof. Any installment of interest not punctually paid or duly provided for shall be
payable in the manner and to the Holders as specified in Section 2.10 hereof.




     (b) Each of the Securities shall have stated maturities of principal as shall be
indicated on such Securities or in the Written Confirmation and as set forth in the
Securities Register. The principal of each Security shall be paid in full as of the
Maturity Date thereof pursuant to Section 2.1(d), unless the term of such Security is
renewed pursuant to Section 2.1(e) hereof or such Security becomes due and payable at an
earlier date by acceleration, redemption, repurchase or otherwise. Interest on each
Security shall be due and payable on each Payment Date at the interest rate applicable to
such Security for the Interest Accrual Period related to such Security and such Payment
Date. Notwithstanding any of the foregoing provisions with respect to payments of principal
of and interest on the Securities, if the Securities have become or been declared due and
payable following an Event of Default, then payments of principal of and interest on the
Securities shall be made in accordance with Article VI hereof. If definitive, certificated
securities are issued, then the principal payment made on any Security on any Maturity Date
(or the Redemption Price or the Repurchase Price of any Security required to be



13









 







redeemed or repurchased, respectively), and any accrued interest thereon, shall be
payable on or after the Maturity Date, Redemption Date or the Repurchase Date therefor at
the office or agency of the Company maintained by it for such purpose pursuant to Section
2.3 hereof or at the office of any Paying Agent for such Security.




     (c) All computations of interest due with respect to any Security shall be made, unless
otherwise specified in the Security, based upon a 365-day year.



Section 2.8 Outstanding Securities. 





     (a) The Securities outstanding at any time are the outstanding principal balances of
all Accounts representing the Securities maintained by the Company or such other entity as
the Company designated as Registrar.




     (b) If the principal amount of any Security is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest on it ceases to accrue.




     (c) Subject to Section 2.9 hereof, a Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.



Section 2.9 Treasury Securities. 




     In determining whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company or any Affiliate of
the Company shall be considered as though not outstanding, except that for purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver or consent, only
Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded.



Section 2.10 Defaulted Interest. 




     If the Company defaults in a payment of interest on any Security, it shall pay the defaulted
interest plus, to the extent lawful, any interest payable on the defaulted interest, to the Holder
of such Security on a subsequent special Payment Date, which date shall be at the earliest
practicable date, but in all events within 15 days following the scheduled Payment Date of the
defaulted interest, in each case at the rate provided in the Security. The Regular Record Date for
the scheduled Payment Date shall be the record date for the special Payment Date. Prior to any such
special Payment Date, the Company (or the Trustee, in the name of and at the expense of the
Company) shall mail to Holder(s) a notice that states the special Payment Date and the amount of
such interest to be paid.



Section 2.11 Temporary Notes.




     If Securities are issued in certificated form in the limited circumstances contemplated under
Section 2.13(b), pending the preparation of definitive Securities, the Company may execute, and
direct that the Trustee authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities, in lieu of which they are



14









 







issued and with such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their execution of such
Securities.



     If temporary Securities are issued, the Company will cause definitive Securities to be
prepared without unreasonable delay. After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Registrar without charge to the Holder.



     Upon surrender for cancellation of any one or more temporary Securities, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount
of definitive Securities of authorized denominations. Until so exchanged the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as definitive
Securities.



Section 2.12 Execution, Authentication And Delivery. 





     (a) Subject to subsection (b) below, the Securities shall be executed on behalf of the
Company by an Officer and attested by its Secretary or Assistant Secretary. The signature of
any of these officers on the Securities may be manual or facsimile. Securities bearing the
manual or facsimile signatures of individuals who were at any time the proper Officers of
the Company shall bind the Company, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of such Securities
or did not hold such offices at the date of such Securities.




     At the time of and from time to time after the execution and delivery of this
Indenture, the Company will deliver definitive or certificated forms of Securities, if any,
executed by the Company to the Trustee for authentication, together with a direction from
the Company for the authentication and delivery of such Securities. The Trustee in
accordance with such direction from the Company shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise. Securities issued hereunder
shall be dated as of their Issue Date.




     No Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security an authentication executed
by or on behalf of the Trustee by manual signature, and such authentication upon any
Security shall be conclusive evidence, and the only evidence, that such Security has been
duly authenticated and delivered hereunder and is entitled to the benefits of this
Indenture.




     (b) Notwithstanding the preceding subsection (a) of this Section, in connection with
the issuance of each Security in book-entry form pursuant to Section 2.13, each Security
shall be deemed to be executed and attested to by the Company and authenticated and
delivered by the Trustee, in the same manner as provided in the preceding subsection (a),
upon the delivery by the Company (or the Company’s duly authorized Agent) to the Holder of
such Security of a Written Confirmation, with a copy of such Written Confirmation delivered
to the Trustee, and the establishment by the



15









 







Registrar of an Account for such Security in the name of the Holder pursuant to Section
2.13 hereof.



Section 2.13 Book-Entry Registration. 





     (a) The Registrar shall maintain a book-entry registration and transfer system through
the establishment and maintenance of Accounts for the benefit of Holders of Securities as
the sole method of recording the ownership and transfer of ownership interests in such
Securities. The registered owners of the Accounts established by the Registrar in connection
with the purchase or transfer of the Securities shall be deemed to be the Holders of the
Securities outstanding for all purposes under this Indenture. The Company (or its duly
authorized Agent) shall promptly notify the Registrar of the acceptance of a subscriber’s
order to purchase a Security by providing a copy of the accepted Subscription Agreement and
the related Written Confirmation, and upon receipt of such notices, the Registrar shall
establish an Account for such Security by recording a credit to its book-entry registration
and transfer system to the Account of the related Holder of such Security for the principal
amount of such Security owned by such Holder and issue a Written Confirmation to the Holder,
with a copy being delivered to the Trustee, on behalf of the Company. The Registrar shall
make appropriate credit and debit entries within each Account to record all of the
applicable actions under this Indenture that relate to the ownership of the related Security
and issue Written Confirmations to the related Holders as set forth herein, with copies
being delivered to the Trustee, on behalf of the Company. For example, the total amount of
any principal and/or interest due and payable to the Holders of the Accounts maintained by
the Registrar as provided in this Indenture shall be credited to such Accounts by the
Registrar within the time frames provided in this Indenture, and the amount of any payments
of principal and/or interest distributed to the Holders of the Accounts as provided in this
Indenture shall be debited to such Accounts by the Registrar. The Trustee may review the
book-entry registration and transfer system as it deems necessary to ensure the Registrar’s
compliance with the terms of this Indenture.




     (b) Book-entry Accounts evidencing ownership of the Securities shall be exchangeable
for definitive or certificated forms of Securities in denominations of $1,000 and any amount
in excess thereof and fully registered in the names as each Holder directs only if (i) the
Company at its option advises the Trustee and the Registrar in writing of its election to
terminate the book-entry system, or (ii) after the occurrence of any Event of Default,
Holders of a majority of the aggregate outstanding principal amount of the Securities (as
determined based upon the latest quarterly statement provided to the Trustee pursuant to
Section 2.5 hereof) advise the Trustee in writing that the continuation of the book-entry
system is no longer in the best interests of such Holders and the Trustee notifies all
Holders of the Securities of such event and the availability of certificated forms of
securities to the Holders of Securities.



Section 2.14 Initial and Periodic Statements. 





     (a) Subject to the rejection of a Subscription Agreement pursuant to Section 2.2(a),
the Registrar shall send Written Confirmations to initial purchasers, registered



16









 







owners, registered pledgees, former registered owners and former pledgees, within two
Business Days of its receipt of proper notice regarding the purchase, transfer or pledge of
a Security, with copies of such Written Confirmations being delivered to the Trustee, on
behalf of the Company.




     (b) The Registrar shall send each Holder of a Security (and each registered pledgee)
via U.S. mail not later than 10 Business Days after each quarter end in which such Holder
had an outstanding balance in such Holder’s Account, a statement which indicates as of the
quarter end preceding the mailing: (i) the balance of such Account; (ii) interest credited
for the period; (iii) repayments, redemptions or repurchases, if any, during the period; and
(iv) the interest rates paid on the Securities in such Account during the period. The
Registrar may also notify the Holders of any notations made to the Securities pursuant to
Section 9.5. The Registrar shall provide additional statements as the Holders or registered
pledgees of the Securities may reasonably request from time to time. The Registrar may
charge such Holders or pledgees requesting such statements a fee to cover the charges
incurred by the Registrar in providing such additional statements.



Section 2.15 Appointment of Agents.




     The Company may from time to time engage Agents to perform its obligations and exercise its
rights and discretion under the terms of this Indenture. In each such case, the Company will
provide the Trustee with a copy of each agreement under which any such Agent is engaged and the
name, address, telephone number and capacity of the Agent appointed. If any such Agent shall
resign, or such Agent’s engagement is terminated by the Company, subsequent to the Agent’s
appointment by the Company under this Section 2.15, the Company shall promptly notify the Trustee
of such resignation or termination, along with the name, address, telephone number and capacity of
any successor Agent. Notwithstanding any engagement of an Agent hereunder, the Company shall
remain obligated to fulfill each of its obligations under this Indenture.



ARTICLE III

REDEMPTION AND REPURCHASE




Section 3.1 Redemption of Securities at the Company’s Election. 





     (a) The Company may redeem, in whole or in part, without penalty, any Security prior to
the scheduled Maturity Date of the Security by providing pursuant to Section 2.1(f) a
Redemption Notice to the Holder thereof listed on the records maintained by the Registrar,
which notice shall include the Redemption Date and the Redemption Price to be paid to the
Holder on the Redemption Date. No interest shall accrue on a Security to be redeemed under
this Section 3.1 for any period of time after the Redemption Date for such Security,
provided that the Company or the Paying Agent has timely tendered the Redemption Price to
the Holder.




     (b) The Company shall have no mandatory redemption or sinking fund obligations with
respect to any of the Securities.



17









 






     (c) In its sole discretion, the Company may offer certain Holders the ability to extend
the maturity of an existing Security through the redemption of such Security and the
issuance of a new Security. This redemption option shall not be subject to the 30 day notice
of redemption described in Section 2.1(f).



Section 3.2 Repurchase of Securities at the Holder’s Request.





     (a) Repurchase Upon Death or Disability. Subject to subsection (c) below,
within 45 days of the death or Total Permanent Disability of a Holder who is a natural
person (including Securities held in an individual retirement account), the estate of such
Holder (in the event of death) or such Holder (in the event of Total Permanent Disability)
may request that the Company repurchase, in whole and not in part, without penalty, the
Security held by such Holder, by delivering to the Company a Repurchase Request. If a
Security is held jointly by natural persons who are legally married, then a Repurchase
Request may be made when either registered Holder of such Security dies or becomes subject
to a Total Permanent Disability, the surviving Holder or the disabled Holder may request
that the Company repurchase in whole and not in part, without penalty, such Security as
jointly held by the Holders by delivering to the Company a Repurchase Request. In the event
a Security is held jointly by two or more natural persons that are not legally married,
neither of these persons shall have the right to request that the Company repurchase such
Security unless all joint holders of such Security have either died or suffered a Total
Permanent Disability. If the Security is held by a Holder who is not a natural person, such
as a trust, partnership, corporation or other similar entity, the right to request
repurchase upon death or disability does not apply.




     (b) Repurchase Upon Holder’s Election. Subject to subsection (c) below, a
Holder may request the Company to repurchase, in whole and not in part, the Security held by
such Holder by delivering a Repurchase Request to the Company. Any such requested
repurchase shall be made only at the Company’s discretion and, if made, will be subject to
an early Repurchase Penalty to be deducted from the payment of such Holder’s Repurchase
Price on the Repurchase Date. The early repurchase penalty (the “Repurchase
Penalty”) shall equal the interest accrued on a simple interest basis on such Security
from the Issue Date to the Repurchase Date at the existing interest rate thereof, but not to
exceed six months of simple interest on such Security.




     (c) Limitation on Repurchases. The Company will only be required to repurchase
Securities for which Repurchase Requests have been received pursuant to paragraph (a) above,
and, if accepted by the Company, paragraph (b) above, to the extent that the aggregate
Repurchase Price for all Securities for which Repurchase Requests are then outstanding in
any calendar quarter would not exceed the greater of (i) two percent (2%) of the aggregate
outstanding principal balance of all Securities as of the last day of the previous calendar
quarter or (ii) $1,000,000. For the purposes of applying such limits on the aggregate
Repurchase Price for outstanding Repurchase Requests, such outstanding Repurchase Requests
will be honored in the order of the date received or, in the case of Repurchase Requests
made in connection with a Holder’s death or Total Permanent Disability, the later of the
date received or the date such death or Total Permanent Disability is established to the
reasonable satisfaction of the Company, and to the extent



18









 







any Repurchase Request is not paid in the quarter received or so established due to
such limitations, it will be honored in the subsequent quarter, to the extent possible,
subject to the applicability of such limits on aggregate Repurchase Requests in each
subsequent quarter. For the avoidance of doubt, in the event that the Company would
otherwise be required to repurchase a Security hereunder in a given quarter by reason of the
priority of the Repurchase Request (as established in this Section) but for the fact that
the Repurchase Price exceeds the amount remaining under the foregoing limitations (after
giving effect to all other Repurchase Requests having priority during such quarter), the
Company may, at its option, effect a partial repurchase of such Security, up to the portion
of the Repurchase Price covered by the amount remaining, and carry the Repurchase Request
for the balance of such Security forward as provided above.




     (d) Repurchase Date. To the extent a Security for which a Repurchase Request
has been received during the then current calendar quarter is determined not to be subject
to the limitation in subsection (c) above and thus, will be repurchased during the current
quarter, then the Company shall designate a date for the repurchase of such Security (the
“Repurchase Date”), which date shall not be more than 10 days after the Company’s
receipt of the Repurchase Request or, in the case of a Repurchase Request following the
death or Total Permanent Disability of the Holder, 10 days after the Company’s receipt of
satisfactory establishment of such Holder’s death or Total Permanent Disability. On the
Repurchase Date, the Company shall pay the Repurchase Price to the Holder (or the estate of
the Holder, in the case of a request following death) in accordance with Section 2.7. With
respect to a Security for which a Repurchase Request has been received during a prior
calendar quarter and for which the Repurchase Price was not paid during such prior calendar
quarter, but rather the Repurchase Request has been carried over to and is still outstanding
in the current calendar quarter (because of the limitation in subsection (c) above), the
Company shall designate a Repurchase Date not later than the tenth (10th) day
after the start of such calendar quarter, unless subsection (c) is again applicable, in
which case such obligation shall be met not later than the tenth (10th) day after
the start of the next calendar quarter during which such limitation is no longer applicable.
No interest shall accrue on a Security to be repurchased under this Section 3.2 for any
period of time on or after the Repurchase Date for such Security, provided that the Company
or the Paying Agent has timely tendered the Repurchase Price to the Holder or the estate of
the Holder, as the case may be.




     (e) Waiver and Modification of Repurchase Policies. The Company may waive or
reduce any early Repurchase Penalty in its sole discretion and may modify at any time its
policy on the repurchase of Securities at the request of Holders; provided that no such
modification shall adversely affect the rights of Holders to the repurchase of Securities
for which Repurchase Requests are then outstanding.



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ARTICLE IV

COVENANTS




Section 4.1 Payment of Securities. 





     (a) Subject to Article X, the Company shall duly pay the principal of and interest on
each Security on the dates and in the manner provided under this Indenture. Principal and
interest (to the extent such interest is paid in cash) shall be considered paid on the date
due if the Paying Agent, if other than the Company, holds, at least one Business Day before
that date, money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal and interest then due; provided, however, that principal
and interest shall not be considered paid within the meaning of this Section 4.1 if money is
held by the Paying Agent for the benefit of holders of Senior Debt pursuant to the
provisions of Article X hereof. Such Paying Agent shall return to the Company, no later than
five days following the date of payment, any money (including accrued interest, if any) that
exceeds such amount of principal and interest paid on the Securities in accordance with this
Section 4.1.




     (b) Subject to Article X, to the extent lawful, the Company shall pay interest
(including Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate borne by the Securities, compounded annually; it shall pay interest
(including Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the same rate,
compounded annually.



Section 4.2 Maintenance of Office or Agency. 





     (a) The Company will maintain an office or agency (which may be an office of the
Trustee, Registrar or co-registrar) where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.




     (b) The Company may also from time to time designate one or more other offices or
agencies where the Securities may be presented or surrendered for any or all such purposes
and may from time to time rescind such designations. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.




     (c) The Company hereby designates its office at 1237 North Jefferson, Springdale, AR
72765, as one such office or agency of the Company in accordance with Section 2.3.



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Section 4.3 SEC Reports and Other Reports. 





     (a) The Company shall provide to the Trustee, within 45 days after filing with the SEC,
paper copies or, if such documents are readily available on the SEC’s website, notification
of the availability of, the annual reports and of the information, documents, and other
reports (or copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that the Company is required to file with the SEC pursuant to Section
13 or 15(d) of the Exchange Act. The Company shall otherwise comply with the periodic
reporting requirements as set forth in TIA § 314(a), and the Company shall file with the
Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC,
such additional information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time to time by
such rules and regulations. Notwithstanding anything to the contrary herein, the Trustee
shall have no duty to review such documents for purposes of determining compliance with any
provisions of this Indenture.




     (b) The Company, or such other entity as the Company shall designate as Registrar,
shall provide the Trustee at intervals of not more than six months with management reports
which provide the Trustee with such information regarding the Accounts maintained by the
Company for the benefit of the Holders of the Securities as the Trustee may reasonably
request which information shall include at least the following for the relevant time
interval from the date of the immediately preceding report: (i) the outstanding balance of
each Account at the end of the period; (ii) interest credited for the period; (iii)
repayments, repurchases and redemptions, if any, made during the period; and (iv) the
interest rate paid on each Security in such Account maintained by the Registrar during the
period.




     (c) Notwithstanding any provision of this Indenture to the contrary, the Company shall
not have any obligation to maintain any of its securities (other than the Securities
hereunder), including without limitation its common stock, as securities registered under
the Exchange Act or the Securities Act, as amended, or as securities listed and publicly
traded on any national securities exchange.



Section 4.4 Compliance Certificate. 





     (a) The Company shall deliver to the Trustee, within 120 days after the end of each
Fiscal Year, beginning with the end of Fiscal Year 2009, an Officers’ Certificate stating
that a review of the activities of the Company during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this Indenture,
and further stating, as to each such Officer signing such certificate, that to the best of
his/her knowledge the Company has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or observance
of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company is taking



21









 







or proposes to take with respect thereto) and that to the best of his/her knowledge no
event has occurred and remains in existence by reason of which payments on account of the
principal of or interest, if any, on the Securities are prohibited or if such event has
occurred, a description of the event and what action the Company is taking or proposes to
take with respect thereto.




     (b) The Company will, so long as any of the Securities are outstanding, deliver to the
Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an
Officers’ Certificate specifying such Default or Event of Default and what action the
Company is taking or proposes to take with respect thereto.



Section 4.5 Stay, Extension and Usury Laws. 




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



Section 4.6 Liquidation. 




     The Board of Directors or the stockholders of the Company shall not adopt a plan of
liquidation that provides for, contemplates or the effectuation of which is preceded by (a) the
sale, lease, conveyance or other disposition of all or substantially all of the assets of the
Company, otherwise than substantially as an entirety (Section 5.1 of this Indenture being the
Section hereof which governs any such sale, lease, conveyance or other disposition substantially as
an entirety), and (b) the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and of the remaining assets of the Company to the holders of
capital stock of the Company, unless the Company, prior to making any liquidating distribution
pursuant to such plan, makes provision for the satisfaction of the Company’s Obligations hereunder
and under the Securities as to the payment of principal and interest.



Section 4.7 Financial Covenants.




     The Company covenants that, so long as any of the Securities are outstanding, the Company will
maintain a positive net worth, which includes all equity held by the Company’s common and preferred
stockholders and any subordinated debt of the Company that is subordinate to these Securities.



Section 4.8 Restrictions on Dividends.




     The Company covenants that, so long as any of the Securities are outstanding, it shall not
declare or pay any cash dividends or other payments of cash to its common or preferred
stockholders, unless no Default or Event of Default with respect to the Securities then exists or



22









 







would exist immediately following the declaration or payment of such dividend or other
payment.



ARTICLE V

SUCCESSORS




Section 5.1 When the Company May Merge, etc.





     (a) The Company may not consolidate or merge with or into (whether or not the Company
is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related transactions
to another corporation, Person or entity unless (i) the Company is the surviving corporation
or the entity or the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation, limited liability company or
limited partnership organized or existing under the laws of the United States, any state
thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company) or the entity or Person to which
such sale, assignment, transfer, lease, conveyance or other disposition will have been made
assumes all the obligations of the Company pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, under the Securities and this Indenture; and (iii)
immediately after such transaction no Default or Event of Default exists.




     (b) The Company shall deliver to the Trustee prior to the consummation of the proposed
transaction an Officers’ Certificate to the foregoing effect and an Opinion of Counsel
stating that the proposed transaction and such supplemental indenture comply with this
Indenture. The Trustee shall be entitled to conclusively rely upon such Officers’
Certificate and Opinion of Counsel.



Section 5.2 Successor Entity Substituted. 




     Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company in accordance with Section 5.1, the successor
entity or Person formed by such consolidation or into or with which the Company, is merged or to
which such sale, lease, conveyance or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor entity or Person has been named as the Company herein, and
upon such succession and substitution, the Company shall be released from all of its obligations
and liabilities under this Indenture and the Securities.



ARTICLE VI

DEFAULTS AND REMEDIES




Section 6.1 Events of Default. 




     An “Event of Default” occurs if:



23









 






     (a) the Company fails to pay interest on a Security when the same becomes due and
payable and such failure continues for a period of 30 days, whether or not such payment is
prohibited by the provisions of Article X hereof;




     (b) the Company fails to pay the principal amount of any Security when the same becomes
due and payable on any Payment Date, and such failure continues for a period of 10 days,
whether or not prohibited by the provisions of Article X hereof;




     (c) the Company fails to observe or perform any material covenant, condition or
agreement on the part of the Company under this Indenture or the breach by the Company of
any material representation or warranty of the Company under this Indenture, and such
failure or breach continues unremedied for a period of 30 days after the Company’s receipt
of written notice of such failure or breach;




     (d) the Company defaults in any other senior financial obligation of the Company and
such default continues without waiver or unremedied for the greater of 30 days after the
Company’s receipt of written notice of such default and the cure period set forth in the
agreement supporting the financial obligation;




     (e) the Company pursuant to or within the meaning of any Bankruptcy Law (i) commences a
voluntary case; (ii) consents to the entry of an order for relief against it in an
involuntary case; (iii) consents to the appointment of a custodian of it or for all or
substantially all of its property; (iv) makes a general assignment for the benefit of its
creditors; or (v) admits in writing its inability to pay debts as the same become due; or




     (f) a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (i) is for relief against the Company in an involuntary case; (ii) appoints a
custodian of the Company or for all or substantially all of its property; (iii) orders the
liquidation of the Company, and in each case the order or decree remains unstayed and in
effect for 120 consecutive days.



     The term “Bankruptcy Law” means Title 11 of the U.S. Code or any similar federal or
state law for the relief of debtors. The term “custodian” means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.



     A Default under clause (c) or (d) of this Section 6.1 (except for a Default with respect to
Section 4.6 or 5.1) is not an Event of Default until the Trustee or the Holders of at least a
majority in principal amount of the then outstanding Securities notify the Company in writing of
the Default and the Company does not cure the Default or such Default is not waived within 30 days
after receipt of the notice pursuant to Section 6.4. The notice must specify the Default, demand
that it be remedied and state that the notice is a “Notice of Default.”



Section 6.2 Acceleration. 




     If an Event of Default (other than an Event of Default specified in clauses (e) or (f) of
Section 6.1) occurs and is continuing, the Trustee by notice to the Company or the Holders of at
least a majority in principal amount of the then outstanding Securities by written notice to the
Company and the Trustee may declare the unpaid principal of and any accrued interest on all the



24









 







Securities to be due and payable. Upon such declaration, all unpaid principal of and accrued
interest on all Securities shall be due and payable immediately; provided, however, that if any
Indebtedness or Obligation is outstanding pursuant to, or with respect to, the Senior Debt, such a
declaration of acceleration by the Holders shall not become effective until the earlier of (i) the
day which is five Business Days after the receipt by each of the Company and the holders of Senior
Debt of such written notice of acceleration or (ii) the date of acceleration of any Indebtedness
under any Senior Debt; and provided, further, that, so long as any Senior Debt is outstanding, any
such declaration by the Trustee or the Holders shall not become effective if any period during
which the Company is not permitted to make payment on account of the Securities pursuant to Section
10.3 is then in effect. If an Event of Default specified in clause (e) or (f) of Section 6.1
occurs, all unpaid principal of and accrued interest on all Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part of the Trustee or
any Holder.



Section 6.3 Other Remedies. 




     If an Event of Default occurs and is continuing, the Trustee may, after a declaration of
acceleration under Section 6.2 above, pursue any available remedy to collect the payment of
principal or interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.



Section 6.4 Waiver of Past Defaults. 




     Holders of a majority in principal amount of the then outstanding Securities by notice to the
Trustee may, on behalf of the Holders of all Securities, waive any existing Default or Event of
Default and its consequences under this Indenture, including without limitation a rescission of an
acceleration pursuant to Section 6.2, except for a continuing Default or Event of Default in the
payment of interest on or the principal of any Security held by a non-consenting Holder, or except
for a waiver that would conflict with any judgment or decree. Upon actual receipt of any such
notice of waiver by a Responsible Officer of the Trustee, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon.



Section 6.5 Control by Majority. 




     The Holders of a majority in principal amount of the then outstanding Securities may direct
the time, method and place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it, provided, that indemnification for the Trustee’s
fees and expenses, in a form reasonably satisfactory to the Trustee, shall have been provided.
However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of other Holders, or that may
involve the Trustee in personal liability.



25









 





Section 6.6 Limitation on Suits. 




     A Holder may pursue a remedy with respect to this Indenture only if:




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




     (b) the Holders of at least a majority in principal amount of the then outstanding
Securities make a written request to the Trustee to pursue the remedy;




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




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




     (e) during such 60 day period the Holders of a majority in principal amount of the then
outstanding Securities do not give the Trustee a direction inconsistent with the request.



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



Section 6.7 Rights of Holders to Receive Payment. 




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



Section 6.8 Collection Suit by Trustee. 




     If an Event of Default specified in Section 6.1(a) or (b) occurs and is continuing, the
Trustee is authorized to recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount of principal and interest remaining unpaid on the
Securities and interest on overdue principal and, to the extent lawful, interest and such further
amount as shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel.



Section 6.9 Trustee May File Proofs of Claim. 




     (a) The Trustee is authorized 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 (including any claim for
the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other
obligor upon the Securities), its creditors or its property and shall be



26









 







entitled and empowered to collect, receive and distribute any money or other property payable
or deliverable on any such claims and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To
the extent that the payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out
of the estate in any such proceeding, 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, money,
securities and other properties which the Holders of the Securities may be entitled to receive in
such proceeding 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 accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.



     (b) If the Trustee does not file a proper claim or proof of debt in the form required in any
such proceeding prior to 30 days before the expiration of the time to file such claims or proofs,
then any holder of Senior Debt shall have the right to demand, sue for, collect and receive the
payments and distributions in respect of the Securities which are required to be paid or delivered
to the holders of Senior Debt as provided in Article X hereof and to file and prove all claims
therefor and to take all such other action in the name of the Holders or otherwise, as such holder
of Senior Debt may determine to be necessary or appropriate for the enforcement of the provisions
of Article X hereof.



Section 6.10 Priorities. 




     If the Trustee collects any money pursuant to this Article, it shall, subject to the
provisions of Article X hereof, pay out the money in the following order:




     (a) First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7, including payment of all compensation, expenses and liabilities incurred, and
all advances made, if any, by the Trustee and the costs and expenses of collection;




     (b) Second: to holders of Senior Debt to the extent required by Article X
hereof;




     (c) Third: to (i) Holders for amounts due and unpaid on the Securities for
principal and interest, and (ii) holders of Pari Passu Debt for amounts due and unpaid on
such Pari Passu Debt for principal and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Securities and/or such Pari Passu
Debt for principal and interest, respectively; and




     (d) Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.



27









 





     The Trustee may fix a record date and payment date for any payment to Holders.


Section 6.11 Undertaking for Costs.


     In any suit for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’
fees, against any party litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than ten percent
(10%) in principal amount of the then outstanding Securities.



ARTICLE VII

TRUSTEE




Section 7.1 Duties of Trustee. 





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




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




     (i) The duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.




     (ii) In the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon resolutions, statements, reports, documents, orders,
certificates, opinions or other instruments furnished to the Trustee and conforming
to the requirements of this Indenture. However, in the case of any of the above that
are specifically required to be furnished to the Trustee pursuant to this Indenture,
the Trustee shall examine them to determine whether they substantially conform to
the requirements of this Indenture.




     (c) The Trustee may not be relieved from liabilities for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:




     (i) This paragraph does not limit the effect of paragraphs (b)(i) and (b)(ii)
of this Section.


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


28








 






     (iii) The Trustee shall not be liable to the Holders 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 6.5.




     (d) Whether or not therein expressly so provided, every provision of this Indenture
that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.




     (e) No provision of this Indenture shall require the Trustee to expend or risk its own
funds or incur any liability. The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any loss, liability
or expense.




     (f) The Trustee shall not be liable for interest on any money received by it, except as
the Trustee may agree in writing with the Company or, except with respect to any money held
by the Trustee over a holiday or weekend, in which event the Trustee shall remit to the
Company the interest earnings on such money at a rate equal to the then current rate for
money market funds invested by the Trustee; provided that the Company has directed the
Trustee to invest such money. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.



Section 7.2 Rights of Trustee. 





     (a) The Trustee may conclusively rely upon any document believed by it to be genuine
and to have been signed or presented to it by the proper Person. The Trustee need not
investigate any fact or matter stated in the document. The Trustee shall have no duty to
inquire as to the performance of the Company’s covenants in Article IV hereof. In addition,
the Trustee shall not be deemed to have knowledge of any Default or any Event of Default
except any Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.




Delivery of reports, information and documents to the Trustee under Sections 4.3(a), 4.3(b)
and 4.4(b) is for informational purposes only and the Trustee’s receipt of the foregoing
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company’s compliance with any
of their covenants hereunder (as to which the Trustee is entitled to rely conclusively on
Officers’ Certificates).




     (b) Before the Trustee acts or refrains from acting, it may require an Officers’
Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion
of Counsel. The Trustee may consult with counsel and the written advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.



29









 






     (c) The Trustee may act through agents, attorneys, custodians or nominees and shall not
be responsible for the misconduct or negligence or the supervision of any agents, attorneys,
custodians or nominees appointed by it with due care.




     (d) The Trustee shall not be liable for any action it takes or omits to take in good
faith which it believes to be authorized or within the rights or powers conferred upon it by
this Indenture.




     (e) Unless otherwise specifically provided in this Indenture, any demand, request,
direction or notice from the Company shall be sufficient if signed by an Officer of the
Company.




     (f) The Trustee shall not be deemed to have notice of an Event of Default for any
purpose under this Indenture unless notified of such Event of Default by the Company, the
Paying Agent (if other than the Company) or a Holder of the Securities.




     (g) The Trustee shall not be responsible for any costs, expenses, damages or other
liabilities arising (directly or indirectly) as a result of (i) any filing of a claim or
proof of debt by holders of Senior Debt (or their representative, successors or assigns) or
(ii) any right of holders of Senior Debt (or their representative, successors or assigns) to
file any such claim or proof of debt, in any such case in accordance with the second
paragraph of Section 10.2.



Section 7.3 Individual Rights of Trustee. 




     The Trustee in its individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or an Affiliate of the Company with the same
rights it would have if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee is subject to Sections 7.10 and 7.11.



Section 7.4 Trustee’s Disclaimer. 




     The Trustee shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for the Company’s use of
the proceeds from the Securities or any money paid to the Company or upon the Company’s direction
under any provision hereof, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Securities or any other document in connection
with the sale of the Securities or pursuant to this Indenture other than its certificate of
authentication.



Section 7.5 Notice of Defaults. 




     If a Default or an Event of Default occurs and is continuing and if it is known to a
Responsible Officer of the Trustee, the Trustee shall mail to Holders a notice of the Default or
Event of Default within 90 days after it occurs or as soon as practicable after it is known to a
Responsible Officer of the Trustee. Except in the case of a Default or an Event of Default in
payment on any Security, the Trustee may withhold the notice if and so long as the Responsible



30









 







Officer of the Trustee in good faith determines that withholding the notice is in the
interests of the Holders.



Section 7.6 Reports by Trustee to Holders. 





     (a) Within 60 days of the end of each Fiscal Year, commencing with the fiscal year
ending December 31, 2009, the Trustee shall mail to Holders (with a copy to the Company) a
brief report dated as of such reporting date that complies with TIA § 313(a) (but if no
event described in TIA § 313(a) has occurred within the 12 months preceding the reporting
date, no report need be prepared or transmitted). The Trustee also shall comply with TIA §
313(b). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).




     (b) Commencing at the time this Indenture is qualified under the TIA, a copy of each
report mailed to Holders under this Section 7.6 (at the time of its mailing to Holders)
shall be filed with the SEC and each stock exchange, if any, on which the Securities are
listed. The Company shall promptly notify the Trustee if and when the Securities are listed
on any stock exchange.



Section 7.7 Compensation and Indemnity. 





     (a) The Company shall pay to the Trustee from time to time reasonable compensation for
its acceptance of this Indenture and its performance of the duties and services required
hereunder. The Trustee’s compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly upon request
for all reasonable disbursements, advances and expenses incurred or made by it in addition
to the compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee’s agents and counsel.




     (b) The Company shall indemnify the Trustee against any and all losses, liabilities or
expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in Section 7.7(d).
The Trustee shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder, except to the extent the Company is prejudiced thereby. The Company
shall defend the claim and the Trustee shall reasonably cooperate in such defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses
of one such counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.




     (c) The obligations of the Company to pay compensation under Section 7.7(a) through the
date of termination, and for indemnification under Section 7.7(b) shall survive the
satisfaction and discharge of this Indenture.



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     (d) The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through its own negligence, bad faith or willful
misconduct.




     (e) To secure the Company’s payment obligations in this Section, the Trustee shall have
a lien prior to the Securities on all money or property held or collected by the Trustee,
except that held in trust to pay principal and interest on the Securities or to pay Senior
Debt. Such lien shall survive the satisfaction and discharge of this Indenture.




     (f) When the Trustee incurs expenses or renders services after an Event of Default
specified in Section 6.1(e) or (f) occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration under any Bankruptcy Law.



Section 7.8 Replacement of Trustee. 





     (a) A resignation or removal of the Trustee and appointment of a successor Trustee
shall become effective only upon the successor Trustee’s acceptance of appointment as
provided in this Section 7.8.




     (b) The Trustee may resign at any time and be discharged from the trust hereby created
by so notifying the Company. The Holders of a majority of the aggregate principal amount of
the outstanding Securities may remove the Trustee (including any successor Trustee) at any
time by so notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:




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




     (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief
is entered with respect to the Trustee under any Bankruptcy Law;




     (iii) a Custodian or public officer takes charge of the Trustee or its
property;




     (iv) the Trustee becomes incapable of acting as Trustee under this Indenture,
or




     (v) the Company so elects, provided such replacement Trustee is qualified.




     (c) If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee.




     (d) If a successor Trustee does not take office within 30 days after notice that the
Trustee has resigned or has been removed, the Company or the Trustee or the Holders of at
least a majority in principal amount of the then outstanding Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.



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     (e) If the Trustee after written request by any Holder who has been a Holder for at
least six months fails to comply with Section 7.10, such Holder may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.




     (f) A successor Trustee shall deliver a written acceptance of its appointment to the
retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to all Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the lien provided for in Section 7.7.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company’s
obligations to pay compensation under Section 7.7(a) through the date of termination, and
for indemnification under Section 7.7(b) hereof shall continue for the benefit of the
retiring Trustee.



Section 7.9 Successor Trustee by Merger, etc. 




     If the Trustee consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation without any further
act shall be the successor Trustee.



Section 7.10 Eligibility; Disqualification. 





     (a) There shall at all times be a Trustee hereunder which shall be a corporation
organized and doing business under the laws of the United States of America or of any state
or territory thereof or of the District of Columbia authorized under such laws to exercise
corporate trustee power, shall be subject to supervision or examination by Federal, state,
territorial or District of Columbia authority and shall have a combined capital and surplus
of at least $5,000,000 as set forth in its most recent published annual report of condition.




     (b) This Indenture shall always have a Trustee who satisfies the requirements of TIA §
310(a)(1) and (2). The Trustee shall be subject to TIA § 310(b).



Section 7.11 Preferential Collection of Claims Against Company. 




     The Trustee shall be subject to TIA § 311(a), excluding any creditor relationship listed in
TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the
extent indicated therein.



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ARTICLE VIII

DISCHARGE OF INDENTURE




Section 8.1 Termination of Company’s Obligations. 





     (a) This Indenture shall cease to be of further effect (except that the Company’s
obligations to pay compensation under Section 7.7(a) through the date of termination, and
for indemnification under Section 7.7(b) and its obligations under Section 8.4, and the
Company’s, Trustee’s and Paying Agent’s obligations under Section 8.3 shall survive) when,
without violating Article X hereof, all outstanding Securities have been paid in full and
the Company has paid all sums payable by the Company hereunder. In addition, the Company
may terminate all of its obligations under this Indenture if, without violating Article X
hereof:




     (i) the Company irrevocably deposits in trust with the Trustee or, at the
option of the Trustee, with a trustee reasonably satisfactory to the Trustee and the
Company under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, money or U.S. Government Obligations sufficient (as
certified by an independent public accountant designated by the Company) to pay
principal and interest on the Securities to maturity or redemption, as the case may
be, and to pay all other sums payable by it hereunder, provided that (A) the trustee
of the irrevocable trust shall have been irrevocably instructed to pay such money or
the proceeds of such U.S. Government Obligations to the Trustee and (B) the Trustee
shall have been irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to the payment of said principal and interest with
respect to the Securities;




     (ii) the Company delivers to the Trustee an Officers’ Certificate stating that
all conditions precedent to satisfaction and discharge of this Indenture have been
complied with; and




     (iii) no Default or Event of Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit.




Then, this Indenture shall cease to be of further effect (except as provided in this
paragraph), and the Trustee, on demand of the Company, shall execute proper instruments
acknowledging confirmation of and discharge under this Indenture. The Company may make the
deposit only if Article X hereof does not prohibit such payment. However, the Company’s
obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.2, 7.7(c), 7.8, 8.3 and 8.4 and the
Trustee’s and Paying Agent’s obligations in Section 8.3 shall survive until the Securities
are no longer outstanding. Thereafter, only the Company’s obligations to pay compensation
under Section 7.7(a) through the date of termination, and for indemnification under Section
7.7(b), its obligations under Section 8.4 and the Company’s, Trustee’s and Paying Agent’s
obligations in Section 8.3 shall survive.




     (b) After such irrevocable deposit made pursuant to this Section 8.1 and satisfaction
of the other conditions set forth herein, the Trustee upon written request shall



34









 







acknowledge in writing the discharge of the Company’s obligations under this Indenture
except for those surviving obligations specified above.




     (c) In order to have money available on a payment date to pay principal or interest on
the Securities, the U.S. Government Obligations shall be payable as to principal or interest
at least one Business Day before such payment date in such amounts as will provide the
necessary money. U.S. Government Obligations shall not be callable at the issuer’s option.



Section 8.2 Application of Trust Money. 




     The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money
or U.S. Government Obligations deposited with it pursuant to Section 8. 1. It shall apply the
deposited money and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal and interest on the Securities.



Section 8.3 Repayment to Company. 





     (a) The Trustee and the Paying Agent shall promptly pay to the Company upon written
request any excess money or securities held by them at any time.




     (b) The Trustee and the Paying Agent shall pay to the Company upon written request any
money held by them for the payment of principal or interest on the Securities that remains
unclaimed for two years after the date upon which such payment shall have become due;
provided, however, that the Company shall have either caused notice of such payment to be
mailed to each Holder entitled thereto no less than 30 days prior to such repayment or
within such period shall have published such notice in a newspaper of widespread circulation
published in Hennepin County, Minnesota. After payment to the Company, Holders entitled to
the money must look to the Company for payment as general creditors unless an applicable
abandoned property law designates another Person, and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.



Section 8.4 Reinstatement. 




     If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in
accordance with Section 8.2 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 Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.1 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.2; provided, however, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such payment, as long as no
money is owed to the Trustee by the Company, from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.



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ARTICLE IX

AMENDMENTS




Section 9.1 Without Consent of the Holders. 




     The Company and the Trustee may amend this Indenture or the Securities without the consent of
any Holder:




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




     (b) to comply with Section 5.1;




     (c) to provide for the issuance of uncertificated Securities or certificated Securities
in excess of an aggregate outstanding principal balance of $50,000,000;




     (d) to make any change that does not adversely affect the legal rights hereunder of any
Holder, including but not limited to, an increase in the aggregate dollar amount of
Securities which may be outstanding under this Indenture;




     (e) make any change in Section 3.2; provided, however, that no such change shall
adversely affect the rights of any outstanding or issued Security; or




     (f) to comply with any requirements of the SEC in connection with the qualification of
this Indenture under the TIA.



Section 9.2 With Consent of the Holders. 





     (a) The Company and the Trustee may amend this Indenture or the Securities with the
written consent of the Holders of at least a majority in principal amount of the then
outstanding Securities. The Holders of a majority in principal of the then outstanding
Securities may also waive on behalf of all Holders any existing Default or Event of Default
or compliance with any provision of this Indenture or the Securities. However, without the
consent of the Holder of each Security affected, an amendment or waiver under this Section
may not:




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




     (ii) reduce the rate of or change the time for payment of interest, including
default interest, on any outstanding Security;




     (iii) reduce the principal of or change the fixed maturity of any Security or
alter the redemption provisions or the price at which the Company shall offer to
purchase such Security pursuant to Section 3.1 of Article III hereof;




     (iv) make any Security payable in money other than that stated in the
Prospectus;



36









 






     (v) modify or eliminate the right of the estate of a Holder or a Holder to
cause the Company to repurchase a Security upon the death or Total Permanent
Disability of a Holder pursuant to Article III; provided, however, that the Company
may not modify or eliminate such right, as it may be in effect on the Issue Date, of
any Security which was issued with such right, and after an amendment under this
subsection 9.2(a)(v) becomes effective, the Company shall mail to the Holders of
each Security then outstanding a notice briefly describing the amendment;




     (vi) make any change in Section 6.4 or 6.7 hereof or in this sentence of this
Section 9.2;




     (vii) make any change in Article X that materially adversely affects the rights
of any Holders; or




     (viii) waive a Default or Event of Default in the payment of principal of or
interest on any Security (except a rescission of acceleration of the Securities by
the Holders of at least a majority in aggregate principal amount of the Securities
and a waiver of the payment default that resulted from such acceleration).




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




     (c) After an amendment or waiver under this Section becomes effective, the Company
shall mail to the Holders of each Security affected thereby a notice briefly describing the
amendment or waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such supplemental
indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in
principal amount of the Securities then outstanding may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Securities.



Section 9.3 Compliance with Trust Indenture Act. 




     If at the time this Indenture shall be qualified under the TIA, every amendment to this
Indenture or the Securities shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.



Section 9.4 Effect of Consents. 





     (a) Until an amendment or waiver becomes effective, a consent to it by a Holder of a
Security is a continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder’s Security, even
if notation of the consent is not made on any Security. An amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.



37









 






     (b) The Company may fix a record date for determining which Holders must consent to
such amendment or waivers. If the Company fixes a record date, the record date shall be
fixed at (i) the later of 30 days prior to the first solicitation of such consent or the
date of the most recent list of Holders furnished to the Trustee prior to such solicitation
pursuant to Section 2.5, or (ii) such other date as the Company shall designate.



Section 9.5 Notation on Securities.




     The Trustee may place an appropriate notation about an amendment or waiver on any Security, if
certificated, or any Account statement. Failure to make any notation or issue a new Security shall
not affect the validity and effect of such amendment or waiver.



Section 9.6 Trustee to Sign Amendments, etc. 




     The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this
Article IX if, in the Trustee’s reasonable discretion, the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee
shall be entitled to receive, if requested, an indemnity reasonably satisfactory to it and to
receive and, subject to Section 7.1, shall be fully protected in relying upon, an Officers’
Certificate and an Opinion of Counsel (or written advice of counsel) as conclusive evidence that
such amendment or supplemental indenture is authorized or permitted by this Indenture, that it is
not inconsistent herewith, and that it will be valid and binding upon the Company in accordance
with its terms. The Company may not sign an amendment or supplemental indenture until its Board of
Directors approves it.



ARTICLE X

SUBORDINATION




Section 10.1 Agreement to Subordinate. 





     (a) The Company agrees, and each Holder by accepting a Security consents and agrees,
that the Indebtedness evidenced by the Securities and the payment of the principal of, and
interest on and other amounts owing with respect to, the Securities is subordinated in right
of payment, to the extent and in the manner provided in this Article, to the prior
indefeasible payment in full, in cash, cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, of all Obligations due in respect of Senior Debt
of the Company whether outstanding on the date hereof or hereafter incurred and that the
subordination is for the benefit of the holders of Senior Debt.




     (b) For purposes of this Article X, a payment or distribution on account of the
Securities may consist of cash, property or securities, by set-off or otherwise, and a
payment or distribution on account of any of the Securities shall include, without
limitation, any redemption, purchase or other acquisition of the Securities.



Section 10.2 Liquidation; Dissolution; Bankruptcy. 



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     (a) Upon any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon (i) any dissolution or winding-up
or total or partial liquidation or reorganization of the Company whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy or (ii) any bankruptcy or
insolvency case or proceeding or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company or to its
assets, (iii) any assignment for the benefit of creditors or any other marshaling of assets
of the Company, all obligations due, or to become due, in respect of Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt) shall first indefeasibly be paid in full, or provision shall have
been made for such payment, in cash, cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, before any payment is made on account of the principal of or
interest on the Securities, except that Holders may receive securities that are subordinated
to at least the same extent as the Securities are to (x) Senior Debt and (y) any securities
issued in exchange for Senior Debt. Upon any such dissolution, winding-up, liquidation or
reorganization, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the Securities
or the Trustee under this Indenture would be entitled, except for the provisions hereof,
shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders of the
Securities or by the Trustee under this Indenture if received by them, directly to the
holders of Senior Debt (in order of priority, and when of equal priority, pro rata to such
holders of equal priority on the basis of the amounts of Senior Debt held by such holders)
or their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Debt may have been issued, as their interests
may appear, for application to the payment of Senior Debt remaining unpaid until all such
Senior Debt has been indefeasibly paid in full, or provisions shall have been made for such
payment, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt (as evidenced by their prior written consent thereto), after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders of Senior
Debt.




     (b) For purposes of this Article X, the words “cash, property or securities” shall not
be deemed to include securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment which are subordinated, to at least the same extent
as the Securities, to the payment of all Senior Debt or to the payment of all securities
issued in exchange therefor to the holders of Senior Debt. The consolidation of the Company
with, or the merger of the Company with or into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms and
conditions provided in Article V shall not be deemed a dissolution, winding-up, liquidation
or reorganization for the purposes of this Section if such other corporation shall, as part
of such consolidation, merger, conveyance or transfer, comply with the conditions stated in
Article V.



39









 





Section 10.3 Default of Senior Debt. 





     (a) In the event and during the continuation of any default in the payment of principal
of (or premium, if any) or interest on any Senior Debt, or any amount owing from time to
time under or in respect of Senior Debt or in the event that any nonpayment event of default
with respect to any Senior Debt shall have occurred and be continuing and shall have
resulted in such Senior Debt becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, or (b) in the event that any other
nonpayment event of default with respect to any Senior Debt shall have occurred and be
continuing permitting the holders of such Senior Debt (or a trustee on behalf of the holders
thereof) to declare such Senior Debt due and payable prior to the date on which it would
otherwise have become due and payable, then the Company shall make no payment, direct or
indirect (including any payment which may be payable by reason of the payment of any other
Indebtedness of the Company being subordinated to the payment of the Securities other than
securities that are subordinated to at least the same extent as the Securities are to (x)
Senior Debt and (y) any securities issued in exchange for Senior Debt) on account of any
Securities unless and until (i) such event of default shall have been cured or waived or
shall have ceased to exist or such acceleration shall have been rescinded or annulled, or
(ii) in case of any nonpayment event of default specified in (b), during the period (a
“Payment Blockage Period”) commencing on the date the Company and the Trustee
receive written notice (a “Payment Notice”) of such event of default (which notice
shall be binding on the Trustee and the Holders as to the occurrence of such an event of
default) from a holder of the Senior Debt to which such default relates and ending on the
earliest of (A) 179 days after such date, (B) the date, if any, on which such Senior Debt to
which such default relates is discharged or such default is waived by the holders of such
Senior Debt or otherwise cured and (C) the date on which the Trustee receives written notice
from the holder of such Senior Debt to which such default relates terminating the Payment
Blockage Period. Notwithstanding the foregoing, during any Payment Blockage Period, the
Company shall make payments for rescinded subscriptions under Section 2.2(b) (including
subscriptions that occur at a time when a post-effective amendment to the Registration
Statement was required but not yet effective). No new Payment Blockage Period may be
commenced within 360 days after the receipt by the Trustee of any prior Payment Notice. For
all purposes of this Section 10.3, no event of default which existed or was commencing with
respect to the Senior Debt to which a Payment Blockage Period relates on the date such
Payment Blockage Period commenced shall be made the basis for the commencement of any
subsequent Payment Blockage Period unless such event of default is cured or waived for a
period of not less than 180 consecutive days.




     (b) Subject to the provisions of Sections 6.9 and 10.7, neither the Trustee nor the
Holders may take any action to assert, demand, sue for, collect, enforce or realize upon the
Securities or the related Obligations or any part thereof in any period during which the
Company is not permitted to make payment on account of the Securities pursuant to Section
10.3, unless and only to the extent that the commencement of a legal action may be required
to toll the running of any applicable statute of limitations.



40









 





Section 10.4 When Distribution Must Be Paid Over. 





     (a) If the Trustee or any Holder receives any payment with respect to the Securities,
whether in cash, property or securities (other than securities that are subordinated to at
least the same extent as the Securities are to (x) Senior Debt and (y) any securities issued
in exchange for Senior Debt), such payment shall be held by the Trustee or such Holder, in
trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of
Senior Debt (in order of their priority, and when of equal priority, pro rata to such
holders of equal priority on the basis of the amounts of Senior Debt held by such holders)
for application to the payment of all Obligations with respect to Senior Debt remaining
unpaid to the extent necessary to pay such Obligations in full, in cash, cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, in accordance with the
terms of such Senior Debt, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Debt.




     (b) With respect to the holders of Senior Debt, the Trustee undertakes to perform only
such obligations on the part of the Trustee as are specifically set forth in this Article X,
and no implied covenants or obligations with respect to the holders of Senior Debt 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 Debt, and shall not be liable to any such holders if
the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any
other Person money or assets to which any holders of Senior Debt shall be entitled by virtue
of this Article X, except if such payment is made as a result of the willful misconduct or
negligence of the Trustee.



Section 10.5 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 Obligations with respect to the Company to
violate this Article, but failure to give such notice shall not affect the subordination of the
Securities to the Senior Debt provided in this Article.



Section 10.6 Subrogation. 




     After all Senior Debt is indefeasibly paid in full, in cash, cash equivalents or otherwise in
a manner satisfactory to the holders of such Senior Debt, and until the Securities are paid in
full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with
the Securities) to the rights of holders of Senior Debt to receive distributions applicable to
Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Debt.



Section 10.7 Relative Rights. 





     (a) This Article defines the relative rights of Holders and holders of Senior Debt.
Nothing in this Indenture shall:



41









 






     (i) impair, as between the Company and Holders, the obligations of the Company,
which are absolute and unconditional, to pay principal of and interest on the
Securities in accordance with their terms;




     (ii) affect the relative rights of Holders and creditors of the Company other
than their rights in relation to holders of Senior Debt; or




     (iii) prevent the Trustee or any Holder from exercising its available remedies
upon a Default or Event of Default, subject to the rights of holders and owners of
Senior Debt to receive distributions and payments otherwise payable to Holders.




     (b) If the Company fails because of this Article to pay principal of or interest on a
Security on the due date, the failure is still a Default or Event of Default, unless cured
by payment within 30 days after the Company’s right to make payments on the Securities has
resumed in accordance with Section 10.3.



Section 10.8 Subordination May Not Be Impaired by the Company or Holders of Senior Debt. 





     (a) No right of any present or future holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Securities and the Obligations related
thereto shall be prejudiced or impaired by any act or failure to act by any such holder or
by the Company, the Trustee or any Agent or by the failure of the Company to comply with
this Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.




     (b) Without limiting the effect of the preceding paragraph, any holder of Senior Debt
may at any time and from time to time without the consent of or notice to any other holder,
any Holder or to the Trustee, without impairing or releasing any of the rights of any holder
of Senior Debt under this Indenture, upon or without any terms or conditions and in whole or
in part:




     (i) change the manner, place or term of payment, or change or extend the time
of payment of, renew or alter any Senior Debt or any other liability of the Company
to such holder, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the provisions of this Article X shall apply to
the Senior Debt as so changed, extended, renewed or altered;




     (ii) notwithstanding the provisions of Section 5.1 hereof, sell, exchange,
release, surrender, realize upon or otherwise deal with in any manner and in any
order any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, any Senior Debt or any other liability of the Company to such
holder or any other liabilities incurred directly or indirectly in respect thereof
or hereof or any offset thereagainst;




     (iii) exercise or refrain from exercising any rights or remedies against the
Company or others or otherwise act or refrain from acting or, for any reason,



42









 







fail to file, record or otherwise perfect any security interest in or lien on
any property of the Company or any other Person; and




     (iv) settle or compromise any Senior Debt or any other liability of the Company
to such holder, or any security therefor, or any liability incurred directly or
indirectly in respect thereof.




     (c) All rights and interests under this Indenture of any holder of Senior Debt and all
agreements and obligations of the Trustee, the Holders, and the Company under Article VI and
under this Article X shall remain in full force and effect irrespective of (i) any lack of
validity or enforceability of any agreement or instrument relating to any Senior Debt or
(ii) any other circumstance that might otherwise constitute a defense available to, or a
discharge of, the Trustee, any Holder, or the Company.




     (d) Any holder of Senior Debt is hereby authorized to demand specific performance of
the provisions of this Article X, whether or not the Company shall have complied with any of
the provisions of this Article X applicable to it, at any time when the Trustee or any
Holder shall have failed to comply with any of these provisions. The Trustee and the Holders
irrevocably waive any defense based on the adequacy of a remedy at law that might be
asserted as a bar to such remedy of specific performance.



Section 10.9 Distribution or Notice to Representative. 





     (a) Whenever a distribution is to be made or a notice given to holders of Senior Debt,
the distribution may be made and the notice given to their representative.




     (b) Upon any payment or distribution of assets of the Company referred to in this
Article X, the Trustee and the Holders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending or upon any certificate of any
representative of any holder of Senior Debt or of the liquidating trustee or agent or other
Person making any distribution, delivered to the Trustee or to the Holders, for the purpose
of ascertaining the Persons entitled to participate in such distribution, the holders of the
Senior Debt 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 X.



Section 10.10  Rights of Trustee and Paying Agent. 





     (a) Notwithstanding the provisions of this Article X or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment or distribution by the Trustee, or the taking
of any action by the Trustee, and the Trustee or Paying Agent may continue to make payments
on the Securities unless it shall have received at its Corporate Trust Office at least five
Business Days prior to the date of such payment written notice of facts that would cause the
payment of any Obligations with respect to the Securities to violate this Article, which
notice, unless specified by a holder of Senior Debt as such, shall not



43









 







be deemed to be a Payment Notice. The Trustee may conclusively rely on such notice.
Only the Company or a holder of Senior Debt may give the notice. Nothing in this Article X
shall apply to amounts due to, or impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.7 hereof.




     (b) The Trustee in its individual or any other capacity may hold Senior Debt with the
same rights it would have if it were not Trustee. Any Agent may do the same with like
rights.



Section 10.11 Authorization to Effect Subordination. 




     Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to effectuate, as between the holders
of Senior Debt and the Holders, the subordination as provided in this Article X, and appoints the
Trustee his attorney-in-fact for any and all such purposes.



Section 10.12 Article Applicable to Paying Agent. 




     In case at any time any Paying Agent (other than the Trustee or the Company) shall have been
appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article X
shall in such case (unless the context otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article X in addition to or in place of the Trustee.



Section 10.13 Miscellaneous. 





     (a) The agreements contained in this Article X shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior Debt is
rescinded or must otherwise be returned by any holder of Senior Debt upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, all as though such payment had not
been made.




     (b) The Trustee shall notify all holders of Senior Debt (of whose identity the Trustee
has received reasonable advance written notice) of the existence of any Default or Event of
Default under Section 6.1 promptly after a Responsible Officer of the Trustee actually
becomes aware thereof; provided, however, that at least five Business Days prior to the
notification of any holder of Senior Debt under this Section 10.13, the Trustee shall
provide the Company with notice of its intent to provide such notification, provided
further, however, that no defect in the form or delivery of the Trustee’s notice to the
Company shall preclude the timely notice by the Trustee to the holders of Senior Debt.



ARTICLE XI

MISCELLANEOUS




Section 11.1 Trust Indenture Act Controls. 




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



44









 





Section 11.2 Notices. 





     (a) Any notice, instruction, direction, request or other communication by the Company,
the Trustee or any other holder of Senior Debt to the others is duly given if in writing and
delivered in person or mailed by first-class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery, to the
other’s address:




If to the Company:




Advanced Environmental Recycling Technologies, Inc.

1237 North Jefferson

Springdale, AR 72765

Attention: President

Telecopier: 479-756-7410





With a copy to:




Akin, Gump, Strauss, Hauer & Feld, L.L.P.

300 Convent Street, Suite 1500

San Antonio, Texas 78205

Attention: J. Patrick Ryan

Telecopier: (210) 224-2035




If to the Trustee:




U.S. Bank National Association

60 Livingston Avenue

St. Paul, Minnesota 55107

Attention: Richard Prokosch



     If to a holder of Senior Debt, such address as such holder of Senior Debt shall have provided
in writing to the Company and the Trustee.




     (b) The Company, the Trustee or a holder of Senior Debt by notice to the Company and
the Trustee may designate additional or different addresses for subsequent notices or
communications.




     (c) All notices and communications (other than those sent to Holders) shall be deemed
to have been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.




     (d) Any notice or communication to a Holder shall be mailed by first-class mail to his
address shown on the register kept by the Registrar. Failure to mail a notice or



45









 







communication to a Holder or any defect in it shall not affect its sufficiency with
respect to other Holders.




     (e) If a notice or communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.




     (f) If the Company mails a notice or communication to Holders, it shall mail a copy to
the Trustee and each Agent at the same time.



Section 11.3 Communication by Holders with Other Holders. 




     Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their
rights under this Indenture or the Securities. The Trustee shall be subject to § 312(b). The
Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).



Section 11.4 Certificate and Opinion as to Conditions Precedent. 




     Upon any request or application by the Company to the Trustee to take any action under this
Indenture, the Company shall furnish to the Trustee:




     (a) an Officers’ Certificate in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 11.5) stating that, in the
opinion of the signers, all conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been complied with; and




     (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
(which shall include the statements set forth in Section 11.5) stating that, in the opinion
of such counsel, all such conditions precedent and covenants have been complied with.



Section 11.5 Statements Required in Certificate or Opinion. 




     Each certificate or opinion with respect to compliance with a condition or covenant provided
for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) shall
include:




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




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




     (c) a statement that, in the opinion of such Person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion whether such
covenant or condition has been complied with; and




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



46









 





Section 11.6 Rules by Trustee and Agents. 




     The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar
or Paying Agent may make reasonable rules and set reasonable requirements for its functions.



Section 11.7 Legal Holidays. 




     A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions in the State
of Minnesota or the State of New York or at a place of payment are authorized or obligated by law,
regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.



Section 11.8 No Recourse Against Others. 




     No director, officer, employee, agent, manager or stockholder of the Company as such, shall
have any liability for any Obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such Obligations or their creation. Each Holder
by accepting a Security waives and releases all such liability.



Section 11.9 Duplicate Originals. 




     The parties may sign any number of copies of this Indenture. One signed copy is enough to
prove this Indenture.



Section 11.10 Governing Law. 




     THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES,
WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.



Section 11.11 No Adverse Interpretation of Other Agreements. 




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



Section 11.12 Successors. 




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



Section 11.13 Severability. 




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



47









 





Section 11.14 Counterpart Originals. 




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



Section 11.15 Table of Contents, Headings, etc. 




     The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions thereof.



[remainder of page blank]




48









 




SIGNATURES:


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



	 	 	 	 	 	 	 
	 	 	ADVANCED
ENVIRONMENTAL
RECYCLING TECHNOLOGIES, INC., a
	 	 	Delaware corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION,
	 	 	as Trustee
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title: