Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”)
is dated as of December 16, 2004, among Wave Systems Corp., a Delaware
corporation (the “Company”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively the “Purchasers”); and

 

WHEREAS, subject to the terms and conditions set forth
in this Agreement, the Company desires to issue and sell to each Purchaser, and
each Purchaser, severally and not jointly, desires to purchase from the Company
in the aggregate, up to $5,759,028 of shares of Common Stock on the Closing
Date pursuant to an effective Registration Statement on Form S-3, file no.
333-114476.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual
covenants contained in this Agreement, and for other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
Company and each Purchaser agrees as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1                                 Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have
the meanings indicated in this Section 1.1:

 

“Action” shall
have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such
terms are used in and construed under Rule 144. 
With respect to a Purchaser, any investment fund or managed account that
is managed on a discretionary basis by the same investment manager as such
Purchaser will be deemed to be an Affiliate of such Purchaser.

 

“Closing” means
the closing of the purchase and sale of the Common Stock pursuant to Section 2.1.

 

“Closing Date”
means the Trading Day when all of the Transaction Documents have been executed
and delivered by the applicable parties thereto, and all conditions precedent
to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or waived.

 

“Closing Price”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the closing bid price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b)  if the Common
Stock is not then listed or quoted on a Trading Market and if prices for the
Common Stock are then quoted on the OTC Bulletin Board, the closing bid price
of the Common Stock for such date (or the

 

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nearest preceding date)
on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted
on the OTC Bulletin Board and if prices for the Common Stock are then reported
in the “Pink Sheets” published by the National Quotation Bureau Incorporated
(or a similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported;
or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Purchasers and reasonably acceptable to the Company.

 

“Commission” means
the Securities and Exchange Commission.

 

“Common Stock” means the Class A common stock
of the Company, par value $0.01 per share, and any securities into which such
common stock may hereafter be reclassified.

 

“Common Stock Equivalents” means any securities
of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.

 

“Company Counsel” means Bingham McCutchen LLP.

 

“Disclosure Schedules” means the Disclosure
Schedules of the Company delivered concurrently herewith.

 

“Effective Date”
means the date that the Registration Statement was first declared effective by
the Commission.

 

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

 

“Exempt Issuance” means the issuance of (a)
shares of Common Stock or options to employees, officers or directors of the
Company pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise of or conversion of any securities
issued hereunder, convertible securities, options or warrants issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of
such securities or to decrease the exercise or conversion price of any such
securities, other than by express mechanics contained in such convertible
securities, options or warrants prior to the date of this Agreement,  (c) securities issued pursuant to
acquisitions or strategic transactions, including such a transaction involving
Wavexpress, Inc., provided any such issuance shall only be to a Person which
is, itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities; and (d) up to, in the

 

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aggregate, 250,000 shares of Common Stock or Common
Stock Equivalents in any 12 month period to consultants as payment for services
rendered.

 

“Intellectual Property Rights” shall have the
meaning ascribed to such term in Section 3.1(o).

 

“Liens” means a
lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.

 

“Market Price”
means the Closing Price immediately prior to the date in question.

 

“Material Adverse
Effect” shall have the meaning ascribed to such term in Section 3.1(b).

 

“Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

 

“Per Share Purchase
Price” equals $1.05, subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement.

 

“Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding” means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Registration
Statement” means the registration statement of the Company, Commission File
No. 333-114476 covering the sale to the Purchasers of the Shares.

 

“Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

 

“Rule 144” means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.

 

“SEC Reports”
shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means
the Shares.

 

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

 

“Shares” means the
shares of Common Stock issued or issuable to each Purchaser pursuant to this
Agreement.

 

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“Subscription Amount”
means, as to each Purchaser, the amounts set forth below such Purchaser’s
signature block on the signature page hereto, in United States dollars and in
immediately available funds.

 

“Subsidiary” shall
mean the subsidiaries of the Company, if any, set forth in the Company’s SEC
Reports.

 

“Trading Day”
means a day on which the Common Stock is traded on a Trading Market.

 

“Trading Market”
means the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the Nasdaq SmallCap Market, the
American Stock Exchange, the New York Stock Exchange, or the Nasdaq National
Market.

 

“Transaction Documents”
means this Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1                                 Closing.  On the Closing Date, each Purchaser shall
purchase from the Company, severally and not jointly with the other Purchasers,
and the Company shall issue and sell to each Purchaser a number of Shares equal
to such Purchaser’s Subscription Amount divided by the Per Share Purchase
Price.  The aggregate Subscription
Amounts for Shares sold hereunder shall be up to $5,759,028.  Upon satisfaction of the conditions set forth
in Section 2.2, the Closing shall occur at the offices of Company Counsel
or such other location as the parties shall mutually agree.

 

2.2                                 Deliveries.

 

(a)                                  On
the Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:

 

(i)                                                 this
Agreement duly executed by the Company;

 

(ii)                                              the
receipt by each Purchaser, via the DTC DWAC system, of the number of Shares
equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase
Price, registered in the name of such Purchaser;

 

(iii)                                           an
officer’s certificate of the Company’s Chief Executive Officer or Chief Financial
Officer, in form reasonably acceptable to the Purchasers, certifying the
continuing accuracy of the Company’s representations and warranties made in
this Agreement and the Company’s performance of the covenants to be performed
by it pursuant to this Agreement at or prior to Closing; and

 

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(iv)                                          a
legal opinion of Company Counsel, in the form of Exhibit B attached
hereto.

 

(b)                                 On
the Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company the following:

 

(i)                                                 this
Agreement duly executed by such Purchaser; and

 

(ii)                                              such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company.

 

2.3                                 Closing
Conditions. 

 

(a)                                  The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

 

(i)                                                 the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;

 

(ii)                                              all
obligations, covenants and agreements of the Purchasers required to be
performed at or prior to the Closing Date shall have been performed; and

 

(iii)                                           the
delivery by the Purchasers of the items set forth in Section 2.2(b) of
this Agreement.

 

(b)                                 The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

 

(i)                                                 the
accuracy in all material respects on the Closing Date of the representations
and warranties of the Company contained herein;

 

(ii)                                              all
obligations, covenants and agreements of the Company required to be performed
at or prior to the Closing Date shall have been performed;

 

(iii)                                           the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

 

(iv)                                          there
shall have been no Material Adverse Effect with respect to the Company since
the date hereof, which shall not have been reasonably cured by the Company; and

 

(v)                                             From
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the

 

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Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable to purchase
the Shares at the Closing.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1                                 Representations
and Warranties of the Company. 
Except as set forth under the corresponding section of the
Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof,
the Company hereby makes the representations and warranties set forth below to
each Purchaser:

 

(a)                                  Subsidiaries.  All of the direct and indirect subsidiaries
of the Company are set forth in the SEC Reports as filed with the
Commission.  The Company owns, directly
or indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities.  If the Company
has no subsidiaries, then references in the Transaction Documents to the
Subsidiaries will be disregarded.

 

(b)                                 Organization
and Qualification.  Each of the
Company and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. 
Neither the Company nor any Subsidiary is in violation or default of any
of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no
Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.

 

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(c)                                  Authorization;
Enforcement.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. 
The execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company in connection therewith other
than in connection with the Required Approvals. 
Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

 

(d)                                 No
Conflicts.  The execution, delivery
and performance of the Transaction Documents by the Company, the issuance and
sale of the Shares and the consummation by the Company of the other
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal
and state securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected, or (iv) conflict with or
violate the terms of any agreement by which the Company or any Subsidiary is
bound or to which any property or asset of the Company or any Subsidiary is
bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.

 

(e)                                  Filings,
Consents and Approvals.  The Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the Notification Form: Listing of
Additional Shares required by the NASDAQ Stock Market, (ii) filings required
pursuant to Section 4.3 of this Agreement, and (iii) such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

 

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(f)                                    Issuance
of the Securities.  The Shares are
duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement.

 

(g)                                 Capitalization.  The capitalization of the Company is as
described in the Company’s most recent periodic report filed with the
Commission.  The Company has not issued
any capital stock since such filing other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock
purchase plan and pursuant to the conversion or exercise of outstanding Common
Stock Equivalents.  No Person has any
right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the
Transaction Documents.  There are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock.  The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not result
in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval
or authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares.  There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.

 

(h)                                 SEC
Reports; Financial Statements.  The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension.  As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light

 

8

 

of the circumstances
under which they were made, not misleading. 
The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at
the time of filing.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present
in all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.

 

(i)                                     Material
Changes.  Since the date of the
latest audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, except as has been reasonably cured by the
Company (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans.  The Company
does not have pending before the Commission any request for confidential
treatment of information.

 

(j)                                     Litigation.  There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse
Effect.  Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.

 

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(k)                                  Labor
Relations.  No material labor dispute
exists or, to the knowledge of the Company, is imminent with respect to any of
the employees of the Company which could reasonably be expected to result in a
Material Adverse Effect.

 

(l)                                     Compliance.  Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business except in each case as could
not have a Material Adverse Effect.

 

(m)                               Regulatory
Permits.  The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not have or reasonably be
expected to result in a Material Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.

 

(n)                                 Title
to Assets.  The Company and the
Subsidiaries have good and marketable title in fee simple to all real property
owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.

 

(o)                                 Patents
and Trademarks.  The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights necessary or material for use in connection
with their respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).  Neither the
Company nor any Subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any Subsidiary violates or infringes
upon the rights of any Person.  To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the Intellectual
Property Rights of others.

 

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(p)                                 Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged, including but not limited
to, directors and officers insurance coverage of $5,000,000.  To the best of Company’s knowledge, such
insurance contracts and policies are accurate and complete.  Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

 

(q)                                 Transactions
With Affiliates and Employees. 
Except as set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $60,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements under any
stock option plan of the Company.

 

(r)                                    Sarbanes-Oxley;
Internal Accounting Controls.  The
Company is in material compliance with all provisions of the Sarbanes-Oxley Act
of 2002 which are applicable to it as of the Closing Date.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures as of the date prior to the filing date of the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no
significant changes in the Company’s internal controls (as such term is defined
in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company’s
knowledge, in other factors that could significantly affect the Company’s
internal controls.

 

(s)                                  Certain
Fees.  No brokerage or finder’s fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this Agreement,
other than a fee to Corpfin Inc. in connection with the

 

11

 

sale of the Shares at Closing.  The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.

 

(t)                                    Listing
and Maintenance Requirements.  The
Company’s Common Stock is registered pursuant to Section 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration.  The Company has not, in
the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance with all such
listing and maintenance requirements.

 

(u)                                 Application
of Takeover Protections.  The Company
and its Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.

 

(v)                                 Disclosure.  The Company confirms that, neither the
Company nor any officer, director or employee of the Company acting on its
behalf has provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, non-public
information.   The Company understands
and confirms that the Purchasers will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company.  All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby
furnished by or on behalf of the Company with respect to the representations
and warranties made herein are true and correct with respect to such
representations and warranties and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in Section 3.2
hereof.

 

(w)                               No
Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would, to
the best of the Company’s knowledge, cause this offering of

 

12

 

the Securities,
when, and if, integrated with prior offerings by the Company, to require
shareholder approval, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated.

 

(x)                                   Solvency.  Based on the financial condition of the
Company as of the Closing Date after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the
Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof; and (iii) the current
cash flow of the Company through the current fiscal year, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts are required
to be paid.  The Company does not intend
to incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its debt).  The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. 
The SEC Reports set forth, as of the dates thereof, all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness”
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $50,000 due under leases required to
be capitalized in accordance with GAAP. 
Neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.

 

(y)                                 Effective
Registration Statement.  The
Registration Statement has been declared effective by the Commission and the
Company knows of no reason why the Registration Statement will not continue to
remain effective for the foreseeable future.

 

(z)                                   Taxes.  Except for matters that would not,
individually or in the aggregate, have, or reasonably be expected to result in,
a Material Adverse Effect, to the best of the Company’s knowledge, the Company
and each Subsidiary has filed all necessary federal, state and foreign income
and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a tax deficiency which has been
asserted or threatened against the Company or any Subsidiary.

 

13

 

(aa)                            Foreign
Corrupt Practices.  Neither the
Company, nor to the knowledge of the Company, any agent or other person acting
on behalf of the Company, has (i) directly or indirectly, used any corrupt
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made by
any person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.

 

(bb)                          Acknowledgment
Regarding Purchasers’ Purchase of Shares. 
The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby.  The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Shares.  The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

(cc)                            Approvals.  The issuance and listing on the Nasdaq
National Market of the Shares requires no further approvals, including but not
limited to, the approval of shareholders.

 

(dd)                          Accountants.  The Company’s accountants are set forth on Schedule 3.1(dd)
of the Disclosure Schedule.  To the
Company’s knowledge, such accountants, who the Company expects will express
their opinion with respect to the financial statements to be included in the
Company’s Annual Report on Form 10-K for the year ending December 31,
2004, are a registered public accounting firm as required by the Securities
Act.

 

(ee)                            Acknowledgement
Regarding Purchasers’ Trading Activity.  Anything in this Agreement or elsewhere
herein to the contrary notwithstanding, it is understood and agreed by the
Company (i) that none of the Purchasers have been asked to agree, nor has any
Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term; (ii)
that past or future open market or other transactions by any Purchaser,
including Short Sales, and specifically including, without limitation, Short
Sales or “derivative” transactions, before or after the closing of this or
future private placement transactions, may negatively impact the market price
of the Company’s publicly-traded securities; (iii) that any Purchaser, and
counter parties in “derivative” transactions to which any such Purchaser is a
party, directly or indirectly, presently may have a “short” position in the
Common Stock, and (iv) that each Purchaser

 

14

 

shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any “derivative” transaction.

 

3.2                                 Representations
and Warranties of the Purchasers. 
Each Purchaser hereby, for itself and for no other Purchaser, represents
and warrants as of the date hereof and as of the Closing Date to the Company as
follows:

 

(a)                                  Organization;
Authority.  Such Purchaser is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser.  Each Transaction Document to
which it is a party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be limited by applicable law.

 

(b)                                 Purchaser
Representation.  Such Purchaser does
not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(c)                                  Experience
of Such Purchaser.  Such Purchaser,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 

(d)                                 Short
Sales.  Each Purchaser represents
that from the date that it was approached (on or about December 16, 2004)
to participate in the transaction contemplated by this Agreement through the
Closing Date, neither it nor any of its Affiliates over which Purchaser
exercises investment discretion have made any net short sales of, or granted
any option for the purchase of or entered into any hedging or similar
transaction with the same economic effect as a net short sale, in the Common
Stock.

 

(e)                                  Securities
Laws.  If a Purchaser engaged in any
of the trading activities described in Section 3.1(d) above, such
Purchaser did so in compliance with federal securities laws.

 

15

 

The Company acknowledges and agrees that each
Purchaser does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in this Section 3.2.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1                                 No
Transfer Restrictions.

 

(a)                                  Certificates
evidencing the Shares shall not contain any legend restricting their
transferability by the Purchaser. The Company shall cause its counsel to issue
a legal opinion to the Company’s transfer agent if required by the Company’s
transfer agent to effect a transfer of any of the Securities.

 

(b)                                 In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Shares (based on the Market Price of the Common Stock on the
date such Securities are submitted to the Company’s transfer agent) for
transfer, $10 per Trading Day (increasing to $20 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each Trading Day
after three (3) Trading Days until such Securities are delivered. Nothing
herein shall limit such Purchaser’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any Securities as required
by the Transaction Documents, and such Purchaser shall have the right to pursue
all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief.

 

4.2           Furnishing of Information.  As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act.  As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) such information as is required for the Purchasers
to sell the Securities under Rule 144. The Company further covenants that it
will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

4.3                                 Securities
Laws Disclosure; Publicity.  The
Company shall, by 9:00 a.m. Eastern time on the Trading Day following the date
hereof file a Current Report on Form 8-K which attaches as exhibits all
agreements relating to this transaction, in each case reasonably acceptable to
each Purchaser, if such Purchaser is readily available to review such Form 8-K
in a timely manner, disclosing the material terms of the transactions
contemplated hereby.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, except as set forth in the exhibits to be
attached to the Form 8-K contemplated above, without the prior written consent
of such Purchaser (such consent not to be unreasonably

 

16

 

withheld), except (i) as required by federal
securities law and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under subclause (i)
or (ii).

 

4.4                                 Shareholders
Rights Plan.  No claim will be made
or enforced by the Company or, to the knowledge of the Company, any other
Person that any Purchaser is an “Acquiring Person” under any shareholders
rights plan or similar plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers. The Company shall conduct its business in a manner so that it will
not become subject to the Investment Company Act.

 

4.5                                 Non-Public
Information.  The Company covenants
and agrees that neither it nor any other Person acting on its behalf will
provide any Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information.  The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

 

4.6                                 Reimbursement.  If any Purchaser becomes involved in any
capacity in any Proceeding by or against any Person who is a stockholder of the
Company (except as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder), solely as a
result of such Purchaser’s acquisition of the Securities under this Agreement,
the Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred.  The reimbursement obligations
of the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchasers who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Purchasers and any such Affiliate and any such Person.  The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.

 

4.7                                 Indemnification
of Purchasers.   Subject to the
provisions of this Section 4.7, the Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any
of the representations, warranties, covenants or agreements made by the Company
in this Agreement or in the other Transaction Documents or (b) any action
instituted against a Purchaser, or any of them or their respective Affiliates,
by any stockholder of the Company who is not an Affiliate of such Purchaser,
with respect to any of the transactions contemplated by the

 

17

 

Transaction Documents (unless such action is based upon a breach of
such Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). 
If any action shall be brought against any Purchaser Party in respect of
which indemnity may be sought pursuant to this Agreement, such Purchaser Party
shall promptly notify the Company in writing, and the Company shall have the
right to assume the defense thereof with counsel of its own choosing.  Any Purchaser Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party.  The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.

 

4.8                                 Reservation
of Common Stock. As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the
purpose of enabling the Company to issue Shares pursuant to this
Agreement.   

 

4.9                                 Listing
of Common Stock.  The Company hereby
agrees to use best efforts to maintain the listing of the Common Stock on a
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will include in such
application all of the Shares and will take such other action as is necessary
to cause all of the Shares to be listed on such other Trading Market as
promptly as possible.  The Company will
take all action reasonably necessary to continue the listing and trading of its
Common Stock on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.

 

4.10                           Equal
Treatment of Purchasers.  No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents.  For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended to
treat for the Company the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

 

4.11                           Subsequent
Equity Sales.  From the date hereof
until 30 days after the Closing Date, neither the Company nor any Subsidiary
shall issue shares of Common Stock or Common

 

18

 

Stock Equivalents; without the prior written consent of each Purchaser
(such consent not to be unreasonably withheld). 
Notwithstanding the foregoing, this Section 4.11 shall not apply in
respect of an Exempt Issuance or in respect of shares of Common Stock and
Common Stock Equivalents which the Company is not permitted to register under
the Securities Act for at least 12 months following the Closing Date.

 

4.12                           Approval
of Subsequent Equity Sales.  The
Company shall not issue shares of Common Stock or Common Stock Equivalents if
such issuance would require shareholder approval pursuant to Rule 4350 of the
NASD Marketplace Rules, unless and until such shareholder approval is obtained.

 

4.13                           Participation
in Future Financing.  From the date
hereof until 6 months after the Closing Date, upon any financing by the Company
of its Common Stock or Common Stock Equivalents (a “Subsequent Financing”),
each Purchaser shall have the right to participate in up to 100% of such
Subsequent Financing (the “Participation Maximum”).  At least 5
Trading Days prior to the closing of the Subsequent Financing, the Company
shall deliver to each Purchaser a written notice of its intention to effect a
Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such
Purchaser if it wants to review the details of a proposed financing (such additional
notice, a “Subsequent Financing Notice”).  Upon the request of a
Purchaser, and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than 1 Trading Day
after such request, deliver a Subsequent Financing Notice to such
Purchaser.  The Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of proceeds
intended to be raised thereunder, the Person with whom such Subsequent Financing
is proposed to be effected, and attached to which shall be a term sheet or
similar document relating thereto.    If by 6:30 p.m. (New York
City time) on the fifth Trading Day after all of the Purchasers have received
the Pre-Notice, notifications by the Purchasers of their willingness to
participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the Subsequent
Financing, then the Company may effect the remaining portion of such Subsequent
Financing on the terms and to the Persons set forth in the Subsequent Financing
Notice.  If the Company receives no notice from a Purchaser as of such
fifth Trading Day, such Purchaser shall be deemed to have notified the Company
that it does not elect to participate.  The Company must provide the
Purchasers with a second Subsequent Financing Notice, and the Purchasers will
again have the right of participation set forth above in this Section 4.13,
if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent
Financing Notice within 60 Trading Days after the date of the initial
Subsequent Financing Notice. In the event the Company receives responses to
Subsequent Financing Notices from Purchasers seeking to purchase more than the
aggregate amount of the Subsequent Financing, each such Purchaser shall have
the right to purchase their Pro Rata Portion (as defined below) of the
Participation Maximum.  “Pro Rata Portion” is the ratio of (x) the
Subscription Amount of Securities purchased by a participating Purchaser and
(y) the sum of the aggregate Subscription Amount of all participating
Purchasers.  Notwithstanding the foregoing, this Section 4.13 shall
not apply in respect of an Exempt Issuance.

 

19

 

ARTICLE V.

MISCELLANEOUS

 

5.1                                 Termination.  This Agreement may be terminated by any
Purchaser, as applied to such Purchaser, by written notice to the other parties,
if the Closing has not been consummated on or before December 31, 2004,
provided however that no such termination will affect the right of any party to
sue for any breach by the other party (or parties).

 

5.2                                 Fees
and Expenses.  The Company shall deliver,
prior to the Closing, a completed and executed copy of the Closing Statement,
attached hereto as Annex A. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The
Company shall pay all stamp and other taxes and duties levied in connection
with the sale of the Securities.

 

5.3                                 Entire
Agreement.  The Transaction
Documents, together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.

 

5.4                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth on the signature pages attached hereto prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 6:30 p.m. (New York
City time) on any Trading Day, (c) the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given.  The address for such notices and
communications shall be as set forth on the signature pages attached hereto.

 

5.5                                 Amendments;
Waivers.  No provision of this
Agreement may be waived or amended except in a written instrument signed, in
the case of an amendment, by the Company and each Purchaser or, in the case of
a waiver, by the party against whom enforcement of any such waiver is
sought.  No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right.

 

5.6                                 Construction.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.  The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction
will be applied against any party.

 

20

 

5.6                                 Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns.  The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser.  Any
Purchaser may assign any or all of its rights under this Agreement to any
Person to whom such Purchaser assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the “Purchasers”.

 

5.7                                 No
Third-Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.7.

 

5.8                                 Governing
Law.  All questions concerning the
construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof.  Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of  any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  The parties hereby
waive all rights to a trial by jury.  If
either party shall commence an action or proceeding to enforce any provisions
of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

 

5.9                                 Survival.  The representations and warranties herein
shall survive the Closing and delivery of the Shares.

 

5.10                           Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 
In the event that any signature is delivered by facsimile transmission,
such signature shall create a valid and binding

 

21

 

obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

 

5.11                           Severability.  If any provision of this Agreement is held to
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

5.12                           Rescission
and Withdrawal Right. 
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever any
Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Purchaser may rescind or withdraw, in
its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to
its future actions and rights.

 

5.13                           Replacement
of Securities.  If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary
and reasonable indemnity, if requested. 
The applicants for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs associated with the issuance of
such replacement Securities.

 

5.14                           Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers and the Company will be entitled to specific performance
under the Transaction Documents.  The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.

 

5.15                           Payment
Set Aside.  To the extent that the
Company makes a payment or payments to any Purchaser pursuant to any
Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

 

5.16                           Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of

 

22

 

any other Purchaser, and no Purchaser shall be responsible in any way
for the performance of the obligations of any other Purchaser under any
Transaction Document.  Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by
the Transaction Document.  Each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.  Each Purchaser has been
represented by its own separate legal counsel in their review and negotiation
of the Transaction Documents.  For
reasons of administrative convenience only, Purchasers and their respective
counsel have chosen to communicate with the Company through Feldman Weinstein
LLP (“FW”).  FW does not represent
all of the Purchasers but only Corpfin Inc., who has acted as placement agent
to the transaction.  The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.

 

5.17                           Liquidated
Damages.  The Company’s obligations
to pay any partial liquidated damages or other amounts owing under the
Transaction Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other amounts have
been paid notwithstanding the fact that the instrument or security pursuant to
which such partial liquidated damages or other amounts are due and payable
shall have been canceled.

 

5.18                           Construction.
The parties agree that each of them and/or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and,
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.

 

(Signature
Page Follows)

 

23

 

IN WITNESS WHEREOF, the
parties hereto have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.

 

 

	
  Wave Systems Corp.

  	
  Address for Notice:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Wave Systems Corp

  
	
  Name: Gerard T. Feeney

  	
  480 Pleasant Street

  
	
  Title: Chief Financial Officer

  	
  Lee, MA 01238

  
	
   

  	
   

  
	
  With a copy to (which shall not constitute notice):

  	
   

  
					

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

24

 

[PURCHASER SIGNATURE PAGES TO WAVX SECURITIES PURCHASE AGREEMENT]

 

IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

 

Name of Investing Entity:

Signature
of Authorized Signatory of Investing Entity:

Name of Authorized
Signatory:

Title of Authorized
Signatory:

Email Address of
Authorized Entity:

 

Address for Notice of
Investing Entity:

 

 

 

 

Address for Delivery of
Securities for Investing Entity (if not same as above):

 

 

DWAC Instructions for
Common Stock:

 

 

Subscription Amount: $   ,000,000

 

EIN Number:  [PROVIDE THIS UNDER
SEPARATE COVER]

 

[SIGNATURE PAGES CONTINUE]

 

25

 

Annex A

 

CLOSING STATEMENT

 

Pursuant to the attached
Securities Purchase Agreement, dated as of the date hereto, the purchasers
shall purchase up to $   ,000,000 of Common Stock from Wave
Systems Corp., a Delaware corporation (the “Company”).  All funds will be wired into the Company’s
account.  All funds will be disbursed in
accordance with this Closing Statement.

 

Disbursement Date:  December      ,
2004

 

 

	
  I.

  	
  PURCHASE
  PRICE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Gross
  Proceeds to be Received

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  II.

  	
  DISBURSEMENTS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Corpfin Inc.

  	
  $

  	
   

  
	
   

  	
  $

  	
   

  
	
   

  	
  $

  	
   

  
	
   

  	
  $

  	
   

  
	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Amount Disbursed:

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WIRE
  INSTRUCTIONS:

  	
   

  	
   

  	
   

  
	
  See
  attached

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  To:

  	
   

  	
   

  	
   

  	
   

  
											

 

26

 

SCHEDULE 3.1(g) to the

SECURITIES PURCHASE AGREEMENT DATED DECEMBER 16,
2004

 

FOR

WAVE SYSTEMS CORP.

 

OPTIONS AND WARRANTS
OUTSTANDING:

 

	
  Options granted pursuant to Employee and
  Non-employee

  	
   

  	
   

  	
   

  
	
  Director Stock Option plans

  	
   

  	
  11,522,357

  	
   

  
	
  Warrants Outstanding(1)

  	
   

  	
  5,754,823

  	
   

  
	
  Total

  	
   

  	
  17,277,180

  	
   

  

 

(1) Includes warrants
granted in connection with the August 2, 2004 offering, to purchase
3,529,412 Class A Common Shares initially granted with an exercise price of
$1.15 adjusted to an exercise price of $1.1428 pursuant to a Series A Common
Stock Purchase Warrant and 882,353 Class A Common Shares initially granted with
an exercise price of $1.30 adjusted to an exercise price of $1.2820 pursuant to
a Series B Common Stock Purchase Warrant. 
The Series A and Series B Stock Purchase Warrants contained a provision
whereby their exercise price would be adjusted in the event that Wave sold additional
shares at prices below the exercise prices contained therein.

 

27

 

SCHEDULE 3.1(j) to the

SECURITIES PURCHASE AGREEMENT DATED DECEMBER 16,
2004

 

FOR

WAVE SYSTEMS CORP.

 

LITIGATION:

 

Securities and Exchange
Commission Investigation

 

On December 17, 2003, Wave received an Order by
the Securities and Exchange Commission (the “Commission”) regarding a formal
investigation.  The focus of this
investigation is on certain public statements made by Wave during and around August 2003,
as well as certain trading in Wave’s securities during such time.  The Commission has not concluded that there
has been any wrongdoing and Wave is cooperating fully with the Commission on
this matter.  Wave cannot predict the
potential effect on Wave as a result of this investigation at this time.

 

Purported
Class Actions

 

Several (9 known) similar purported class action
complaints have been filed between January 23, 2004, and February 23,
2004, most in the United States District Court for the District of
Massachusetts, seven (7) of which name Wave, its Chief Executive Officer, its
Chief Financial Officer and two (2) of which also name Wave’s Chairman of the
Board, as defendants.

 

The purported class action complaints have been filed
by alleged purchasers of Wave’s Class A Common Stock during the purported class
period July 31, 2003, through February 2, 2004.  The plaintiffs have since filed consolidated
amended complaints.  The complaints claim
that Wave and the named individuals violated the federal securities laws by publicly
disseminating materially false and misleading statements regarding Wave,
relating to Intel and IBM agreements, resulting in the artificial inflation of
Wave’s Class A Common Stock price during the purported class periods.  The complaints do not specify the amount of
alleged damages plaintiffs seek to recover.

 

Wave intends to defend the actions vigorously.  At this time, Wave is unable to predict the
outcome of these actions.

 

Derivative Actions

 

Wave has learned of three
(3) other complaints filed in the United States District Court for the District
of Massachusetts.  The plaintiffs have
since filed consolidated amended complaints. 
Wave believes that the complaints name all of its directors as
defendants and allege claims for breach of fiduciary duties and other
claims.  The allegations are very similar
to the allegations made in the purported securities class actions because the
allegations concern the very same alleged statements alleged in the purported
class actions.  Wave is also named as a
nominal defendant, although the actions are derivative in nature and
purportedly asserted on behalf of Wave. 
Wave is in the process of evaluating these claims.

 

Wave intends to defend
the actions vigorously.  At this time,
Wave is unable to predict the outcome of these actions.

 

28

 

SCHEDULE 3.1(t)
to the

SECURITIES PURCHASE AGREEMENT DATED DECEMBER 16,
2004

 

FOR

WAVE SYSTEMS CORP.

LISTING & MAINTENANCE
REQUIREMENTS:

 

On September 14,
2004, Wave Systems Corp. received notification from The Nasdaq Stock Market
indicating that for the last 30 consecutive business days, the bid price of
Wave’s common stock has closed below the minimum $1.00 per share requirement
for continued inclusion under Marketplace Rule 4450(b)(4).  The Nasdaq notice indicated that in
accordance with Marketplace Rule 4450(e)(2), Wave will be provided 180 calendar
days, or until March 14, 2005, to regain compliance by having its shares
close above $1.00 for a minimum of 10 consecutive trading days.  The Nasdaq notice further provided that, if
Wave’s shares have not regained compliance during this period, but otherwise
meet the applicable initial listing requirements, Wave may qualify for a second
180 day compliance period.  Thereafter,
if Wave has not regained compliance by July 26, 2005, Nasdaq will issue a
letter notifying Wave of its continued non-compliance, the pending expiration
of the compliance period, and its right to request a hearing.  If Wave does not regain compliance by March 14,
2005 and is not eligible for an additional compliance period, Nasdaq will
provide written notification that Wave’s common stock will be delisted or moved
to The Nasdaq SmallCap Market.  At that
time, Wave may appeal the determination to delist its securities to a Listings
Qualifications Panel.

 

29

 

SCHEDULE 3.1(x) to the

SECURITIES PURCHASE AGREEMENT DATED DECEMBER 16,
2004

 

FOR

WAVE SYSTEMS CORP.

 

Solvency:

 

As used in the second
full sentence of section 3.1(x) of the purchase agreement, “debt” shall
exclude trade accounts payable, accrued expenses incurred in the normal course
of business, deferred revenue and commitments on operating leases.

 

30

 

SCHEDULE 3.1(dd) to the

SECURITIES PURCHASE AGREEMENT DATED DECEMBER 16,
2004

 

FOR

WAVE SYSTEMS CORP.

ACCOUNTANTS:

KPMG, LLP

 

31Exhibit 4.1

 

 

 

FIRST REGIONAL BANCORP,

as Issuer

 

 

INDENTURE

 

Dated as of December 15, 2004

 

 

WILMINGTON TRUST COMPANY,

as Trustee

 

 

FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES

 

DUE 2034

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I. DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  Section 1.1.

  	
  Definitions.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. DEBENTURES

  	
   

  
	
   

  	
   

  
	
  Section 2.1.

  	
  Authentication
  and Dating.

  	
   

  
	
  Section 2.2.

  	
  Form
  of Trustee’s Certificate of Authentication.

  	
   

  
	
  Section 2.3.

  	
  Form
  and Denomination of Debentures.

  	
   

  
	
  Section 2.4.

  	
  Execution
  of Debentures.

  	
   

  
	
  Section 2.5.

  	
  Exchange
  and Registration of Transfer of Debentures.

  	
   

  
	
  Section 2.6.

  	
  Mutilated,
  Destroyed, Lost or Stolen Debentures.

  	
   

  
	
  Section 2.7.

  	
  Temporary
  Debentures.

  	
   

  
	
  Section 2.8.

  	
  Payment
  of Interest and Additional Interest.

  	
   

  
	
  Section 2.9.

  	
  Cancellation
  of Debentures Paid, etc.

  	
   

  
	
  Section 2.10.

  	
  Computation
  of Interest.

  	
   

  
	
  Section 2.11.

  	
  Extension
  of Interest Payment Period.

  	
   

  
	
  Section 2.12.

  	
  CUSIP
  Numbers.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.
  PARTICULAR COVENANTS OF THE COMPANY

  	
   

  
	
   

  	
   

  
	
  Section 3.1.

  	
  Payment
  of Principal, Premium and Interest; Agreed Treatment of the Debentures.

  	
   

  
	
  Section 3.2.

  	
  Offices for Notices and Payments, etc.

  	
   

  
	
  Section 3.3.

  	
  Appointments to Fill Vacancies in Trustee’s
  Office.

  	
   

  
	
  Section 3.4.

  	
  Provision as to Paying Agent.

  	
   

  
	
  Section 3.5.

  	
  Certificate to Trustee.

  	
   

  
	
  Section 3.6.

  	
  Additional Sums.

  	
   

  
	
  Section 3.7.

  	
  Compliance with Consolidation Provisions.

  	
   

  
	
  Section 3.8.

  	
  Limitation on Dividends.

  	
   

  
	
  Section 3.9.

  	
  Covenants as to the Trust.

  	
   

  
	
  Section 3.10.

  	
  Additional Junior Indebtedness.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV.
  SECURITYHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

  	
   

  
	
   

  	
   

  
	
  Section 4.1.

  	
  Securityholders’ Lists.

  	
   

  
	
  Section 4.2.

  	
  Preservation and Disclosure of Lists.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.
  REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT

  	
   

  
	
   

  	
   

  
	
  Section 5.1.

  	
  Events of Default.

  	
   

  
	
  Section 5.2.

  	
  Payment of Debentures on Default; Suit
  Therefor.

  	
   

  
	
  Section 5.3.

  	
  Application of Moneys Collected by
  Trustee.

  	
   

  
	
  Section 5.4.

  	
  Proceedings by Securityholders.

  	
   

  
	
  Section 5.5.

  	
  Proceedings by Trustee.

  	
   

  
	
  Section 5.6.

  	
  Remedies Cumulative and Continuing; Delay
  or Omission Not a Waiver.

  	
   

  

 

i

 

	
  Section 5.7.

  	
  Direction of Proceedings and Waiver of
  Defaults by Majority of Securityholders.

  	
   

  
	
  Section 5.8.

  	
  Notice of Defaults.

  	
   

  
	
  Section 5.9.

  	
  Undertaking to Pay Costs.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.
  CONCERNING THE TRUSTEE

  	
   

  
	
   

  	
   

  
	
  Section 6.1.

  	
  Duties and Responsibilities of Trustee.

  	
   

  
	
  Section 6.2.

  	
  Reliance on Documents, Opinions, etc.

  	
   

  
	
  Section 6.3.

  	
  No Responsibility for Recitals, etc.

  	
   

  
	
  Section 6.4.

  	
  Trustee, Authenticating Agent, Paying
  Agents, Transfer Agents or Registrar May Own Debentures.

  	
   

  
	
  Section 6.5.

  	
  Moneys to be Held in Trust.

  	
   

  
	
  Section 6.6.

  	
  Compensation and Expenses of Trustee.

  	
   

  
	
  Section 6.7.

  	
  Officers’ Certificate as Evidence.

  	
   

  
	
  Section 6.8.

  	
  Eligibility of Trustee.

  	
   

  
	
  Section 6.9.

  	
  Resignation or Removal of Trustee

  	
   

  
	
  Section 6.10.

  	
  Acceptance by Successor Trustee.

  	
   

  
	
  Section 6.11.

  	
  Succession by Merger, etc.

  	
   

  
	
  Section 6.12.

  	
  Authenticating Agents.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII.
  CONCERNING THE SECURITYHOLDERS

  	
   

  
	
   

  	
   

  
	
  Section 7.1.

  	
  Action by Securityholders.

  	
   

  
	
  Section 7.2.

  	
  Proof of Execution by Securityholders.

  	
   

  
	
  Section 7.3.

  	
  Who Are Deemed Absolute Owners.

  	
   

  
	
  Section 7.4.

  	
  Debentures Owned by Company Deemed Not
  Outstanding.

  	
   

  
	
  Section 7.5.

  	
  Revocation of Consents; Future Holders
  Bound.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII.
  SECURITYHOLDERS’ MEETINGS

  	
   

  
	
   

  	
   

  
	
  Section 8.1.

  	
  Purposes of Meetings.

  	
   

  
	
  Section 8.2.

  	
  Call of Meetings by Trustee.

  	
   

  
	
  Section 8.3.

  	
  Call of Meetings by Company or
  Securityholders.

  	
   

  
	
  Section 8.4.

  	
  Qualifications for Voting.

  	
   

  
	
  Section 8.5.

  	
  Regulations.

  	
   

  
	
  Section 8.6.

  	
  Voting.

  	
   

  
	
  Section 8.7.

  	
  Quorum; Actions.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX.
  SUPPLEMENTAL INDENTURES

  	
   

  
	
   

  	
   

  
	
  Section 9.1.

  	
  Supplemental Indentures without Consent of
  Securityholders.

  	
   

  
	
  Section 9.2.

  	
  Supplemental Indentures with Consent of
  Securityholders.

  	
   

  
	
  Section 9.3.

  	
  Effect of Supplemental Indentures.

  	
   

  
	
  Section 9.4.

  	
  Notation on Debentures.

  	
   

  
	
  Section 9.5.

  	
  Evidence of Compliance of Supplemental
  Indenture to be Furnished to Trustee.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X.
  REDEMPTION OF SECURITIES

  	
   

  
	
   

  	
   

  
	
  Section 10.1.

  	
  Optional Redemption.

  	
   

  
	
  Section 10.2.

  	
  Special Event Redemption.

  	
   

  
	
  Section 10.3.

  	
  Notice of Redemption; Selection of
  Debentures.

  	
   

  
	
  Section 10.4.

  	
  Payment of Debentures Called for
  Redemption.

  	
   

  

 

ii

 

	
  ARTICLE XI.
  CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

  	
   

  
	
   

  	
   

  
	
  Section 11.1.

  	
  Company May Consolidate, etc., on Certain
  Terms.

  	
   

  
	
  Section 11.2.

  	
  Successor Entity to be Substituted.

  	
   

  
	
  Section 11.3.

  	
  Opinion of Counsel to be Given to Trustee.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII.
  SATISFACTION AND DISCHARGE OF INDENTURE

  	
   

  
	
   

  	
   

  
	
  Section 12.1.

  	
  Discharge of Indenture.

  	
   

  
	
  Section 12.2.

  	
  Deposited Moneys to be Held in Trust by
  Trustee.

  	
   

  
	
  Section 12.3.

  	
  Paying Agent to Repay Moneys Held.

  	
   

  
	
  Section 12.4.

  	
  Return of Unclaimed Moneys.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII.
  IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

  	
   

  
	
   

  	
   

  
	
  Section 13.1.

  	
  Indenture and Debentures Solely Corporate
  Obligations.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV.
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  
	
  Section 14.1.

  	
  Successors.

  	
   

  
	
  Section 14.2.

  	
  Official Acts by Successor Entity.

  	
   

  
	
  Section 14.3.

  	
  Surrender of Company Powers.

  	
   

  
	
  Section 14.4.

  	
  Addresses for Notices, etc.

  	
   

  
	
  Section 14.5.

  	
  Governing Law.

  	
   

  
	
  Section 14.6.

  	
  Evidence of Compliance with Conditions
  Precedent.

  	
   

  
	
  Section 14.7.

  	
  Table of Contents, Headings, etc.

  	
   

  
	
  Section 14.8.

  	
  Execution in Counterparts.

  	
   

  
	
  Section 14.9.

  	
  Separability.

  	
   

  
	
  Section 14.10.

  	
  Assignment.

  	
   

  
	
  Section 14.11.

  	
  Acknowledgment of Rights.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV.
  SUBORDINATION OF DEBENTURES

  	
   

  
	
   

  	
   

  
	
  Section 15.1.

  	
  Agreement to Subordinate.

  	
   

  
	
  Section 15.2.

  	
  Default on Senior Indebtedness.

  	
   

  
	
  Section 15.3.

  	
  Liquidation, Dissolution, Bankruptcy.

  	
   

  
	
  Section 15.4.

  	
  Subrogation.

  	
   

  
	
  Section 15.5.

  	
  Trustee to Effectuate Subordination.

  	
   

  
	
  Section 15.6.

  	
  Notice by the Company.

  	
   

  
	
  Section 15.7.

  	
  Rights of the Trustee; Holders of Senior
  Indebtedness.

  	
   

  
	
  Section 15.8.

  	
  Subordination May Not Be Impaired.

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Floating Rate Junior Subordinated
  Deferrable Interest Debenture

  	
   

  
				

 

iii

 

THIS INDENTURE, dated as
of December 15, 2004, between First Regional Bancorp, a California
corporation (the “Company”), and Wilmington Trust Company, a Delaware
banking corporation, as debenture trustee (the “Trustee”).

 

WITNESSETH:

 

WHEREAS, for its lawful
corporate purposes, the Company has duly authorized the issuance of its
Floating Rate Junior Subordinated Deferrable Interest Debentures due 2034 (the “Debentures”)
under this Indenture to provide, among other things, for the execution and
authentication, delivery and administration thereof, and the Company has duly
authorized the execution of this Indenture; and

 

WHEREAS, all acts and
things necessary to make this Indenture a valid agreement according to its
terms, have been done and performed;

 

NOW, THEREFORE, This
Indenture Witnesseth:

 

In consideration of the
premises, and the purchase of the Debentures by the holders thereof, the
Company covenants and agrees with the Trustee for the equal and proportionate
benefit of the respective holders from time to time of the Debentures as
follows:

 

ARTICLE I.

DEFINITIONS

 

Section 1.1.                                Definitions.  The terms defined in this Section 1.1
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1.  All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with generally accepted accounting principles and the term “generally accepted
accounting principles” means such accounting principles as are generally
accepted in the United States at the time of any computation.  The words “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.

 

“Additional Interest”
has the meaning set forth in Section 2.11.

 

“Additional Junior
Indebtedness” means, without duplication and other than the Debentures, any
indebtedness, liabilities or obligations of the Company, or any Subsidiary of
the Company, under debt securities (or guarantees in respect of debt
securities) initially issued after the date of this Indenture to any trust, or
a trustee of a trust, partnership or other entity affiliated with the Company
that is, directly or indirectly, a finance subsidiary (as such term is defined
in Rule 3a-5 under the Investment Company Act of 1940) or other financing
vehicle of the Company or any Subsidiary of the Company in connection with the
issuance by that entity of preferred securities or other securities that are
eligible to qualify for Tier 1 capital treatment (or its then equivalent)
for purposes of the capital adequacy guidelines of the Federal Reserve, as then
in effect and applicable to the Company (or, if the Company is not a bank
holding company, such guidelines applied to the Company as if the Company were
subject to such guidelines); provided, however, that the
inability of the Company to treat all or any portion of the Additional Junior
Indebtedness as Tier 1 capital shall not disqualify it as Additional
Junior Indebtedness if such inability results from the Company having cumulative
preferred stock, minority interests in consolidated subsidiaries, or any other
class of security or interest which the Federal Reserve now or may hereafter
accord Tier 1 capital treatment (including the Debentures) in excess of
the amount which may qualify for treatment as Tier 1 capital under
applicable capital adequacy guidelines.

 

“Additional Sums”
has the meaning set forth in Section 3.6.

 

1

 

“Affiliate” has
the same meaning as given to that term in Rule 405 of the Securities Act
or any successor rule thereunder.

 

“Authenticating Agent”
means any agent or agents of the Trustee which at the time shall be appointed
and acting pursuant to Section 6.12.

 

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

 

“Board of Directors”
means the board of directors or the executive committee or any other duly
authorized designated officers of the Company.

 

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

 

“Business Day”
means any day other than a Saturday, Sunday or any other day on which banking
institutions in New York City or Wilmington, Delaware are permitted or required
by any applicable law or executive order to close.

 

“Capital Securities”
means undivided beneficial interests in the assets of the Trust which rank pari  passu with
Common Securities issued by the Trust; provided, however, that
upon the occurrence and continuance of an Event of Default (as defined in the
Declaration), the rights of holders of such Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise are subordinated to the rights of holders of such Capital Securities.

 

“Capital Securities
Guarantee” means the guarantee agreement that the Company enters into with Wilmington
Trust Company, as guarantee trustee, or other Persons that operates directly or
indirectly for the benefit of holders of Capital Securities of the Trust.

 

“Capital Treatment
Event” means the receipt by the Company and the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of any amendment to, or change (including any announced prospective
change) in, the laws, rules or regulations of the United States or any
political subdivision thereof or therein, or as the result of any official or
administrative pronouncement or action or decision interpreting or applying
such laws, rules or regulations, which amendment or change is effective or
which pronouncement, action or decision is announced on or after the date of
original issuance of the Debentures, there is more than an insubstantial risk
that the Company will not, within 90 days of the date of such opinion, be
entitled to treat an amount equal to the aggregate liquidation amount of the
Capital Securities as “Tier 1 Capital” (or its then equivalent) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company (or if the Company is not a bank holding
company, such guidelines applied to the Company as if the Company were subject
to such guidelines); provided, however, that the inability of the
Company to treat all or any portion of the liquidation amount of the Capital
Securities as Tier l Capital shall not constitute the basis for a Capital
Treatment Event, if such inability results from the Company having cumulative
preferred stock, minority interests in consolidated subsidiaries, or any other
class of security or interest which the Federal Reserve or OTS, as applicable,
may now or hereafter accord Tier 1 Capital treatment in excess of the
amount which may now or hereafter qualify for treatment as Tier 1 Capital
under applicable capital adequacy guidelines; provided  further, however,
that the distribution of Debentures in connection with the liquidation of the
Trust shall not in and of itself constitute a Capital Treatment Event unless
such liquidation shall have occurred in connection with a Tax Event or an
Investment Company Event.

 

2

 

“Certificate”
means a certificate signed by any one of the principal executive officer, the
principal financial officer or the principal accounting officer of the Company.

 

“Common Securities”
means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided,
however, that upon the occurrence and continuance of an Event of Default
(as defined in the Declaration), the rights of holders of such Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of holders
of such Capital Securities.

 

“Company” means First
Regional Bancorp, a California corporation, and, subject to the provisions of Article XI,
shall include its successors and assigns.

 

“Coupon Rate” has
the meaning set forth in Section 2.8.

 

“Debenture” or “Debentures”
has the meaning stated in the first recital of this Indenture.

 

“Debenture Register”
has the meaning specified in Section 2.5.

 

“Declaration” means
the Amended and Restated Declaration of Trust of the Trust, as amended or
supplemented from time to time.

 

“Default” means
any event, act or condition that with notice or lapse of time, or both, would
constitute an Event of Default.

 

“Defaulted Interest”
has the meaning set forth in Section 2.8.

 

“Distribution Period”
means (i) with respect to interest paid on the first Interest Payment
Date, the period beginning on (and including) the date of original issuance and
ending on (but excluding) the Interest Payment Date in March 2005 and
(ii) thereafter, with respect to interest paid on each successive Interest
Payment Date, the period beginning on (and including) the preceding Interest
Payment Date and ending on (but excluding) such current Interest Payment Date.

 

“Determination Date”
has the meaning set forth in Section 2.10.

 

“Event of Default”
means any event specified in Section 5.1, continued for the period of
time, if any, and after the giving of the notice, if any, therein designated.

 

“Extension Event of
Default” means an Event of Default under Section 5.1(a), (d) or (e),
whatever the reason for such Extension Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body.

 

“Extension Period”
has the meaning set forth in Section 2.11.

 

“Federal Reserve”
means the Board of Governors of the Federal Reserve System, or its designated district
bank, as applicable, and any successor federal agency that is primarily
responsible for regulating the activities of bank holding companies.

 

“Indenture” means
this instrument as originally executed or, if amended or supplemented as herein
provided, as so amended or supplemented, or both.

 

“Institutional Trustee”
has the meaning set forth in the Declaration.

 

3

 

“Interest Payment Date”
means March 15, June 15, September 15 and December 15 of
each year during the term of this Indenture, or if such day is not a Business
Day, then the next succeeding Business Day, commencing in March 2005.

 

“Interest Rate”
means for the Distribution Period beginning on (and including) the date of
original issuance and ending on (but excluding) the Interest Payment Date in March 2005
the rate per annum of 4.45%, and for each Distribution Period beginning on or
after the Interest Payment Date in March 2005, the Coupon Rate for such
Distribution Period.

 

“Investment Company Event”
means the receipt by the Company and the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of the occurrence
of a change in law or regulation or written change (including any announced
prospective change) in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority, there
is more than an insubstantial risk that the Trust is or, within 90 days of the
date of such opinion will be considered an “investment company” that is
required to be registered under the Investment Company Act of 1940, as amended
which change or prospective change becomes effective or would become effective,
as the case may be, on or after the date of the issuance of the Debentures.

 

“Liquidation Amount”
means the stated amount of $1,000.00 per Trust Security.

 

“Maturity Date”
means December 15, 2034.

 

“Officers’ Certificate”
means a certificate signed by the Chairman of the Board, the Chief Executive
Officer, the Vice Chairman, the President, any Managing Director or any Vice
President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an
Assistant Comptroller, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee.  Each such
certificate shall include the statements provided for in Section 14.6 if
and to the extent required by the provisions of such Section.

 

“Opinion of Counsel”
means an opinion in writing signed by legal counsel, who may be an employee of
or counsel to the Company, or may be other counsel reasonably satisfactory to
the Trustee.  Each such opinion shall
include the statements provided for in Section 14.6 if and to the extent
required by the provisions of such Section.

 

“OTS” means the
Office of Thrift Supervision and any successor federal agency that is primarily
responsible for regulating the activities of savings and loan holding
companies.

 

The term “outstanding,”
when used with reference to Debentures, means, subject to the provisions of Section 7.4,
as of any particular time, all Debentures authenticated and delivered by the
Trustee or the Authenticating Agent under this Indenture, except:

 

(a)                                  Debentures
theretofore canceled by the Trustee or the Authenticating Agent or delivered to
the Trustee for cancellation;

 

(b)                                 Debentures,
or portions thereof, for the payment or redemption of which moneys in the
necessary amount shall have been deposited in trust with the Trustee or with
any paying agent (other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act as its own paying
agent); provided, however, that, if such Debentures, or portions
thereof, are to be redeemed prior to maturity thereof, notice of such
redemption shall have been given as provided in Section 10.3 or provision
satisfactory to the Trustee shall have been made for giving such notice; and

 

(c)                                  Debentures
paid pursuant to Section 2.6 or in lieu of or in substitution for which
other Debentures shall have been authenticated and delivered pursuant to the
terms of Section 2.6 unless proof

 

4

 

satisfactory to
the Company and the Trustee is presented that any such Debentures are held by
bona fide holders in due course.

 

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

 

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

 

“Principal Office of
the Trustee,” or other similar term, means the office of the Trustee, at
which at any particular time its corporate trust business shall be principally
administered, which at the time of the execution of this Indenture shall be Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600,
Attention: Corporate Trust Administration.

 

“Redemption Date”
has the meaning set forth in Section 10.1.

 

“Redemption Price”
means 100% of the principal amount of the Debentures being redeemed, plus
accrued and unpaid interest (including any Additional Interest) on such
Debentures to the Redemption Date.

 

“Responsible Officer”
means, with respect to the Trustee, any officer within the Principal Office of
the Trustee, including any vice-president, any assistant vice-president, any
secretary, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer or other officer of the Principal Trust Office of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of that
officer’s knowledge of and familiarity with the particular subject.

 

“Securities Act”
means the Securities Act of 1933, as amended from time to time or any successor
legislation.

 

“Securityholder,” “holder
of Debentures,” or other similar terms, means any Person in whose name at the
time a particular Debenture is registered on the register kept by the Company
or the Trustee for that purpose in accordance with the terms hereof.

 

“Senior Indebtedness”
means, with respect to the Company, (i) the principal, premium, if any,
and interest in respect of (A) indebtedness of the Company for all
borrowed and purchased money and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company;
(ii) all capital lease obligations of the Company; (iii) all
obligations of the Company issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Company and all obligations
of the Company under any title retention agreement; (iv) all obligations
of the Company for the reimbursement of any letter of credit, any banker’s
acceptance, any security purchase facility, any repurchase agreement or similar
arrangement, any interest rate swap, any other hedging arrangement, any obligation
under options or any similar credit or other transaction; (v) all
obligations of the Company associated with derivative products such as interest
and foreign exchange rate contracts, commodity contracts, and similar
arrangements; (vi) all obligations of the type referred to in
clauses (i)

 

5

 

through (v) above
of other Persons for the payment of which the Company is responsible or liable
as obligor, guarantor or otherwise including, without limitation, similar
obligations arising from off-balance sheet guarantees and direct credit
substitutes; and (vii) all obligations of the type referred to in
clauses (i) through (vi) above of other Persons secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company), whether incurred on or prior to the date of this Indenture or
thereafter incurred.  Notwithstanding the
foregoing, “Senior Indebtedness” shall not include (1) any Additional
Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and
guarantees in respect of such Debentures, (3) trade accounts payable of the
Company arising in the ordinary course of business (such trade accounts payable
being pari passu in right of payment to the
Debentures), or (4) obligations with respect to which (a) in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is provided that such obligations are pari passu,
junior or otherwise not superior in right of payment to the Debentures and (b)
the Company, prior to the issuance thereof, has notified (and, if then required
under the applicable guidelines of the regulating entity, has received approval
from) the Federal Reserve (if the Company is a bank holding company) or the OTS
(if the Company is a savings and loan holding company).  Senior Indebtedness shall continue to be
Senior Indebtedness and be entitled to the subordination provisions
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness.

 

“Special Event”
means any of a Capital Treatment Event, an Investment Company Event or a Tax
Event.

 

“Special Redemption
Date” has the meaning set forth in Section 10.2.

 

“Special Redemption
Price” means the price set forth in the following table for any Special
Redemption Date that occurs on the date indicated below (or if such day is not
a Business Day, then the next succeeding Business Day), expressed as the
percentage of the principal amount of the Debentures being redeemed:

 

	
  Month in which Special

  Redemption Date Occurs

  	
   

  	
  Special Redemption Price

  	
   

  
	
  March 2005

  	
   

  	
  104.625

  	
  %

  
	
  June 2005

  	
   

  	
  104.300

  	
  %

  
	
  September 2005

  	
   

  	
  104.000

  	
  %

  
	
  December 2005

  	
   

  	
  103.650

  	
  %

  
	
  March 2006

  	
   

  	
  103.350

  	
  %

  
	
  June 2006

  	
   

  	
  103.000

  	
  %

  
	
  September 2006

  	
   

  	
  102.700

  	
  %

  
	
  December 2006

  	
   

  	
  102.350

  	
  %

  
	
  March 2007

  	
   

  	
  102.050

  	
  %

  
	
  June 2007

  	
   

  	
  101.700

  	
  %

  
	
  September 2007

  	
   

  	
  101.400

  	
  %

  
	
  December 2007

  	
   

  	
  101.050

  	
  %

  
	
  March 2008

  	
   

  	
  100.750

  	
  %

  
	
  June 2008

  	
   

  	
  100.450

  	
  %

  
	
  September 2008

  	
   

  	
  100.200

  	
  %

  
	
  December 2008 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

6

 

plus, in each
case, accrued and unpaid interest (including any Additional Interest) on such
Debentures to the Special Redemption Date.

 

“Subsidiary” means
with respect to any Person, (i) any corporation at least a majority of the
outstanding voting stock of which is owned, directly or indirectly, by such
Person or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries, (ii) any general partnership, joint venture or
similar entity, at least a majority of the outstanding partnership or similar
interests of which shall at the time be owned by such Person, or by one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries and
(iii) any limited partnership of which such Person or any of its Subsidiaries
is a general partner.  For the purposes
of this definition, “voting stock” means shares, interests, participations or
other equivalents in the equity interest (however designated) in such Person
having ordinary voting power for the election of a majority of the directors
(or the equivalent) of such Person, other than shares, interests,
participations or other equivalents having such power only by reason of the
occurrence of a contingency.

 

“Tax Event” means
the receipt by the Company and the Trust of an opinion of counsel experienced
in such matters to the effect that, as a result of any amendment to or change
(including any announced prospective change) in the laws or any regulations
thereunder of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement (including any private letter ruling, technical advice
memorandum, field service advice, regulatory procedure, notice or announcement,
including any notice or announcement of intent to adopt such procedures or
regulations) (an “Administrative Action”) or judicial decision
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Company or the Trust and whether or not subject to
review or appeal, which amendment, clarification, change, Administrative Action
or decision is enacted, promulgated or announced, in each case on or after the
date of original issuance of the Debentures, there is more than an
insubstantial risk that:  (i) the
Trust is, or will be within 90 days of the date of such opinion, subject
to United States federal income tax with respect to income received or accrued
on the Debentures; (ii) interest payable by the Company on the Debentures
is not, or within 90 days of the date of such opinion, will not be,
deductible by the Company, in whole or in part, for United States federal
income tax purposes; or (iii) the Trust is, or will be within 90 days
of the date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.

 

“3-Month LIBOR”
has the meaning set forth in Section 2.10.

 

“Telerate Page 3750”
has the meaning set forth in Section 2.10.

 

“Trust” shall mean
First Regional Statutory Trust IV, a Delaware statutory trust, or any other
similar trust created for the purpose of issuing Capital Securities in
connection with the issuance of Debentures under this Indenture, of which the
Company is the sponsor.

 

“Trust Securities”
means Common Securities and Capital Securities of the Trust.

 

7

 

“Trustee” means Wilmington
Trust Company, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder.

 

ARTICLE II.

DEBENTURES

 

Section 2.1.                                Authentication
and Dating.  Upon the execution
and delivery of this Indenture, or from time to time thereafter, Debentures in
an aggregate principal amount not in excess of $20,619,000.00 may be executed
and delivered by the Company to the Trustee for authentication, and the
Trustee, upon receipt of a written authentication order from the Company, shall
thereupon authenticate and make available for delivery said Debentures to or
upon the written order of the Company, signed by its Chairman of the Board of
Directors, Chief Executive Officer, Vice Chairman, the President, one of its
Managing Directors or one of its Vice Presidents without any further action by
the Company hereunder.  Notwithstanding
anything to the contrary contained herein, the Trustee shall be fully protected
in relying upon the aforementioned authentication order and written order in
authenticating and delivering said Debentures. 
In authenticating such Debentures, and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall
be fully protected in relying upon:

 

(a)                                  a
copy of any Board Resolution or Board Resolutions relating thereto and, if
applicable, an appropriate record of any action taken pursuant to such
resolution, in each case certified by the Secretary or an Assistant Secretary
of the Company, as the case may be; and

 

(b)                                 an
Opinion of Counsel prepared in accordance with Section 14.6 which shall
also state:

 

(1)                                   that
such Debentures, when authenticated and delivered by the Trustee and issued by
the Company in each case in the manner and subject to any conditions specified
in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, subject to or limited by applicable bankruptcy,
insolvency, reorganization, conservatorship, receivership, moratorium and other
statutory or decisional laws relating to or affecting creditors’ rights or the
reorganization of financial institutions (including, without limitation,
preference and fraudulent conveyance or transfer laws), heretofore or hereafter
enacted or in effect, affecting the rights of creditors generally; and

 

(2)                                   that
all laws and requirements in respect of the execution and delivery by the
Company of the Debentures have been complied with and that authentication and
delivery of the Debentures by the Trustee will not violate the terms of this
Indenture.

 

The Trustee shall have
the right to decline to authenticate and deliver any Debentures under this Section if
the Trustee, being advised in writing by counsel, determines that such action
may not lawfully be taken or if a Responsible Officer of the Trustee in good
faith shall determine that such action would expose the Trustee to personal
liability to existing holders.

 

The definitive Debentures
shall be typed, printed, lithographed or engraved on steel engraved borders or
may be produced in any other manner, all as determined by the officers
executing such Debentures, as evidenced by their execution of such Debentures.

 

Section 2.2.                                Form
of Trustee’s Certificate of Authentication. 
The Trustee’s certificate of authentication on all Debentures shall
be in substantially the following form:

 

8

 

This is one of the
Debentures referred to in the within-mentioned Indenture.

 

WILMINGTON TRUST COMPANY,
as Trustee

 

	
  By

  	
   

  	
   

  
	
  Authorized Signer

  

 

Section 2.3.                                Form
and Denomination of Debentures.  The
Debentures shall be substantially in the form of Exhibit A attached
hereto.  The Debentures shall be in
registered, certificated form without coupons and in minimum denominations of
$100,000.00 and any multiple of $1,000.00 in excess thereof.  Any attempted transfer of the Debentures in a
block having an aggregate principal amount of less than $100,000.00 shall be
deemed to be void and of no legal effect whatsoever.  Any such purported transferee shall be deemed
not to be a holder of such Debentures for any purpose, including, but not
limited to the receipt of payments on such Debentures, and such purported
transferee shall be deemed to have no interest whatsoever in such
Debentures.  The Debentures shall be
numbered, lettered, or otherwise distinguished in such manner or in accordance
with such plans as the officers executing the same may determine with the
approval of the Trustee as evidenced by the execution and authentication
thereof.

 

Section 2.4.                                Execution
of Debentures.  The Debentures
shall be signed in the name and on behalf of the Company by the manual or
facsimile signature of its Chairman of the Board of Directors, Chief Executive
Officer, Vice Chairman, President, one of its Managing Directors or one of its
Executive Vice Presidents, Senior Vice Presidents or Vice Presidents.  Only such Debentures as shall bear thereon a
certificate of authentication substantially in the form herein before recited,
executed by the Trustee or the Authenticating Agent by the manual signature of
an authorized signer, shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. 
Such certificate by the Trustee or the Authenticating Agent upon any
Debenture executed by the Company shall be conclusive evidence that the
Debenture so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.

 

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

 

Every Debenture shall be
dated the date of its authentication.

 

Section 2.5.                                Exchange
and Registration of Transfer of Debentures.  The Company shall
cause to be kept, at the office or agency maintained for the purpose of
registration of transfer and for exchange as provided in Section 3.2, a
register (the “Debenture Register”) for the Debentures issued hereunder
in which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration and transfer of all Debentures as in
this Article II provided.  The
Debenture Register shall be in written form or in any other form capable of
being converted into written form within a reasonable time.

 

Debentures to be
exchanged may be surrendered at the Principal Office of the Trustee or at any
office or agency to be maintained by the Company for such purpose as provided
in Section 3.2, and the Company shall execute, the Company or the Trustee
shall register and the Trustee or the Authenticating Agent shall authenticate
and make available for delivery in exchange therefor the Debenture or

 

9

 

Debentures which
the Securityholder making the exchange shall be entitled to receive.  Upon due presentment for registration of
transfer of any Debenture at the Principal Office of the Trustee or at any
office or agency of the Company maintained for such purpose as provided in Section 3.2,
the Company shall execute, the Company or the Trustee shall register and the
Trustee or the Authenticating Agent shall authenticate and make available for
delivery in the name of the transferee or transferees a new Debenture for a
like aggregate principal amount. 
Registration or registration of transfer of any Debenture by the Trustee
or by any agent of the Company appointed pursuant to Section 3.2, and
delivery of such Debenture, shall be deemed to complete the registration or
registration of transfer of such Debenture.

 

All Debentures presented
for registration of transfer or for exchange or payment shall (if so required
by the Company or the Trustee or the Authenticating Agent) be duly endorsed by,
or be accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company and the Trustee or the Authenticating Agent duly
executed by the holder or his attorney duly authorized in writing.

 

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

 

The Company or the
Trustee shall not be required to exchange or register a transfer of any
Debenture for a period of 15 days next preceding the date of selection of
Debentures for redemption.

 

Notwithstanding anything
herein to the contrary, Debentures may not be transferred except in compliance
with the restricted securities legend set forth below, unless otherwise
determined by the Company, upon the advice of counsel expert in securities law,
in accordance with applicable law:

 

THIS SECURITY IS NOT A
SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY
AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE
CORPORATION.

 

THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW.  NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.  THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY
IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH
RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED
INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE

 

10

 

REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH
THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

 

THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT
IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN
THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR
HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS
ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER
APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH
RESPECT TO SUCH PURCHASE OR HOLDING.  ANY
PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO
HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS
NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA,
OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR
OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER
PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO
FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE
EXEMPTION.

 

THIS SECURITY WILL BE
ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL
AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS
THEREOF.  ANY ATTEMPTED TRANSFER OF THIS
SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN
$100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

 

THE HOLDER OF THIS
SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

 

Section 2.6.                                Mutilated,
Destroyed, Lost or Stolen Debentures.  In case any Debenture
shall become mutilated or be destroyed, lost or stolen, the Company shall
execute, and upon its written request the Trustee shall authenticate and
deliver, a new Debenture bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated Debenture, or in lieu of and in
substitution for the Debenture so destroyed, lost or stolen.  In every case the applicant for a substituted
Debenture shall furnish to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee evidence to their satisfaction of the destruction,
loss or theft of such Debenture and of the ownership thereof.

 

The Trustee may
authenticate any such substituted Debenture and deliver the same upon the
written request or authorization of any officer of the Company.  Upon the issuance of any substituted

 

11

 

Debenture, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith.  In case
any Debenture which has matured or is about to mature or has been called for
redemption in full shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Debenture, pay or authorize the
payment of the same (without surrender thereof except in the case of a
mutilated Debenture) if the applicant for such payment shall furnish to the
Company and the Trustee such security or indemnity as may be required by them
to save each of them harmless and, in case of destruction, loss or theft,
evidence satisfactory to the Company and to the Trustee of the destruction,
loss or theft of such Debenture and of the ownership thereof.

 

Every substituted
Debenture issued pursuant to the provisions of this Section 2.6 by virtue
of the fact that any such Debenture is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Debenture shall be found at any time, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Debentures duly issued hereunder.  All Debentures shall be held and owned upon
the express condition that, to the extent permitted by applicable law, the
foregoing provisions are exclusive with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Debentures and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.

 

Section 2.7.                                Temporary
Debentures.  Pending the preparation of definitive
Debentures, the Company may execute and the Trustee shall authenticate and make
available for delivery temporary Debentures that are typed, printed or
lithographed.  Temporary Debentures shall
be issuable in any authorized denomination, and substantially in the form of
the definitive Debentures in lieu of which they are issued but with such
omissions, insertions and variations as may be appropriate for temporary
Debentures, all as may be determined by the Company.  Every such temporary Debenture shall be
executed by the Company and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Debentures.  Without
unreasonable delay the Company will execute and deliver to the Trustee or the
Authenticating Agent definitive Debentures and thereupon any or all temporary
Debentures may be surrendered in exchange therefor, at the principal corporate
trust office of the Trustee or at any office or agency maintained by the
Company for such purpose as provided in Section 3.2, and the Trustee or
the Authenticating Agent shall authenticate and make available for delivery in
exchange for such temporary Debentures a like aggregate principal amount of
such definitive Debentures.  Such exchange
shall be made by the Company at its own expense and without any charge therefor
except that in case of any such exchange involving a registration of transfer
the Company may require payment of a sum sufficient to cover any tax, fee or
other governmental charge that may be imposed in relation thereto.  Until so exchanged, the temporary Debentures
shall in all respects be entitled to the same benefits under this Indenture as
definitive Debentures authenticated and delivered hereunder.

 

Section 2.8.                                Payment
of Interest and Additional Interest.  Interest at the
Interest Rate and any Additional Interest on any Debenture that is payable, and
is punctually paid or duly provided for, on any Interest Payment Date for
Debentures shall be paid to the Person in whose name said Debenture (or one or
more Predecessor Securities) is registered at the close of business on the
regular record date for such interest installment except that interest and any
Additional Interest payable on the Maturity Date shall be paid to the Person to
whom principal is paid.

 

Each Debenture shall bear
interest for the period beginning on (and including) the date of original
issuance and ending on (but excluding) the Interest Payment Date in March 2005
at a rate per annum of 4.45%, and shall bear interest for each successive Distribution
Period beginning on or after the Interest

 

12

 

Payment Date in March 2005
at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10,
plus 2.00% (the “Coupon Rate”), applied to the principal amount thereof,
until the principal thereof becomes due and payable, and on any overdue
principal and to the extent that payment of such interest is enforceable under
applicable law (without duplication) on any overdue installment of interest
(including Additional Interest) at the Interest Rate in effect for each
applicable period compounded quarterly. 
Interest shall be payable (subject to any relevant Extension Period)
quarterly in arrears on each Interest Payment Date with the first installment
of interest to be paid on the Interest Payment Date in March 2005.

 

Any interest on any
Debenture, including Additional Interest, that is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called “Defaulted Interest”) shall forthwith cease to be payable to the
registered holder on the relevant regular record date by virtue of having been
such holder; and such Defaulted Interest shall be paid by the Company to the
Persons in whose names such Debentures (or their respective Predecessor
Securities) are registered at the close of business on a special record date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner: the Company shall notify the Trustee in writing at least 25
days prior to the date of the proposed payment of the amount of Defaulted
Interest proposed to be paid on each such Debenture and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided.  Thereupon the Trustee shall fix a special
record date for the payment of such Defaulted Interest which shall not be more
than 15 nor less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment.  The Trustee shall
promptly notify the Company of such special record date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at its address as it appears in
the Debenture Register, not less than 10 days prior to such special record
date.  Notice of the proposed payment of
such Defaulted Interest and the special record date therefor having been mailed
as aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names such Debentures (or their respective Predecessor Securities) are
registered on such special record date and shall be no longer payable.

 

The Company may make
payment of any Defaulted Interest on any Debentures in any other lawful manner
after notice given by the Company to the Trustee of the proposed payment
method; provided, however, the Trustee in its sole discretion
deems such payment method to be practical.

 

Any interest (including
Additional Interest) scheduled to become payable on an Interest Payment Date
occurring during an Extension Period shall not be Defaulted Interest and shall
be payable on such other date as may be specified in the terms of such
Debentures.

 

The term “regular record
date” as used in this Section shall mean the close of business on the 5th
Business Day preceding the applicable Interest Payment Date.

 

Subject to the foregoing
provisions of this Section, each Debenture delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any other
Debenture shall carry the rights to interest accrued and unpaid, and to accrue,
that were carried by such other Debenture.

 

Section 2.9.                                Cancellation
of Debentures Paid, etc.  All Debentures surrendered for the
purpose of payment, redemption, exchange or registration of transfer, shall, if
surrendered to the Company or any paying agent, be surrendered to the Trustee
and promptly canceled by it, or, if surrendered to the Trustee or any
Authenticating Agent, shall be promptly canceled by it, and no

 

13

 

Debentures shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture.  All Debentures canceled by any Authenticating
Agent shall be delivered to the Trustee. 
The Trustee shall destroy all canceled Debentures unless the Company
otherwise directs the Trustee in writing. 
If the Company shall acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
surrendered to the Trustee for cancellation.

 

Section 2.10.                         Computation
of Interest.  The amount of interest payable for each
Distribution Period will be calculated by applying the Interest Rate to the
principal amount outstanding at the commencement of the Distribution Period on
the basis of the actual number of days in the Distribution Period concerned
divided by 360.  All percentages
resulting from any calculations on the Debentures will be rounded, if necessary,
to the nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upward (e.g., 9.876545% (or
..09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used
in or resulting from such calculation will be rounded to the nearest cent (with
one-half cent being rounded upward)).

 

(a)                                  “3-Month
LIBOR” means the London interbank offered interest rate for three-month,
U.S. dollar deposits determined by the Trustee in the following order of
priority:

 

(1)                                  the
rate (expressed as a percentage per annum) for U.S. dollar deposits having a
three-month maturity that appears on Telerate Page 3750 as of
11:00 a.m. (London time) on the related Determination Date (as defined
below).  “Telerate Page 3750” means
the display designated as “Page 3750” on the Dow Jones Telerate Service or
such other page as may replace Page 3750 on that service or such other
service or services as may be nominated by the British Bankers’ Association as
the information vendor for the purpose of displaying London interbank offered
rates for U.S. dollar deposits;

 

(2)                                  if
such rate cannot be identified on the related Determination Date, the Trustee
will request the principal London offices of four leading banks in the London
interbank market to provide such banks’ offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London
time) on such Determination Date.  If at
least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of
such quotations;

 

(3)                                  if
fewer than two such quotations are provided as requested in clause (2)
above, the Trustee will request four major New York City banks to provide such
banks’ offered quotations (expressed as percentages per annum) to leading
European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on
such Determination Date.  If at least two
such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations; and

 

(4)                                  if
fewer than two such quotations are provided as requested in clause (3)
above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the
Distribution Period immediately preceding such current Distribution Period.

 

If the rate for U.S.
dollar deposits having a three-month maturity that initially appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date is superseded on the Telerate Page 3750 by a corrected
rate by 12:00 noon (London time) on such Determination Date, then the
corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.

 

(b)                                 The
Interest Rate for any Distribution Period will at no time be higher than the
maximum rate then permitted by New York law as the same may be modified by
United States law.

 

14

 

(c)                                  “Determination
Date” means the date that is two London Banking Days (i.e., a business day
in which dealings in deposits in U.S. dollars are transacted in the London
interbank market) preceding the particular Distribution Period for which a
Coupon Rate is being determined.

 

(d)                                 The
Trustee shall notify the Company, the Institutional Trustee and any securities
exchange or interdealer quotation system on which the Capital Securities are
listed, of the Coupon Rate and the Determination Date for each Distribution
Period, in each case as soon as practicable after the determination thereof but
in no event later than the thirtieth (30th) day of the relevant Distribution
Period.  Failure to notify the Company,
the Institutional Trustee or any securities exchange or interdealer quotation
system, or any defect in said notice, shall not affect the obligation of the
Company to make payment on the Debentures at the applicable Coupon Rate.  Any error in the calculation of the Coupon
Rate by the Trustee may be corrected at any time by notice delivered as above
provided.  Upon the request of a holder
of a Debenture, the Trustee shall provide the Coupon Rate then in effect and,
if determined, the Coupon Rate for the next Distribution Period.

 

(e)                                  Subject
to the corrective rights set forth above, all certificates, communications,
opinions, determinations, calculations, quotations and decisions given,
expressed, made or obtained for the purposes of the provisions relating to the
payment and calculation of interest on the Debentures and distributions on the
Capital Securities by the Trustee or the Institutional Trustee will (in the
absence of willful default, bad faith and manifest error) be final, conclusive
and binding on the Trust, the Company and all of the holders of the Debentures
and the Capital Securities, and no liability shall (in the absence of willful
default, bad faith or manifest error) attach to the Trustee or the
Institutional Trustee in connection with the exercise or non-exercise by either
of them or their respective powers, duties and discretion.

 

Section 2.11.                         Extension
of Interest Payment Period.  So
long as no Extension Event of Default has occurred and is continuing, the
Company shall have the right, from time to time, and without causing an Event
of Default, to defer payments of interest on the Debentures by extending the
interest payment period on the Debentures at any time and from time to time
during the term of the Debentures, for up to 20 consecutive quarterly
periods (each such extended interest payment period, an “Extension Period”),
during which Extension Period no interest (including Additional Interest) shall
be due and payable (except any Additional Sums that may be due and
payable).  No Extension Period may end on
a date other than an Interest Payment Date. 
During an Extension Period, interest will continue to accrue on the
Debentures, and interest on such accrued interest will accrue at an annual rate
equal to the Interest Rate in effect for such Extension Period, compounded
quarterly from the date such interest would have been payable were it not for
the Extension Period, to the extent permitted by law (such interest referred to
herein as “Additional Interest”). 
At the end of any such Extension Period the Company shall pay all
interest then accrued and unpaid on the Debentures (together with Additional
Interest thereon); provided, however, that no Extension Period
may extend beyond the Maturity Date; provided  further, however,
that during any such Extension Period, the Company shall not and shall not
permit any Affiliate to (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect
to, any of the Company’s or such Affiliate’s capital stock (other than payments
of dividends or distributions to the Company) or make any guarantee payments
with respect to the foregoing or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company or any Affiliate that rank pari passu
in all respects with or junior in interest to the Debentures (other than, with
respect to clauses (i) or (ii) above, (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Company in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in connection
with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of any exchange or conversion of any

 

15

 

class or series of the Company’s capital stock (or any capital stock of
a subsidiary of the Company) for any class or series of the Company’s capital
stock or of any class or series of the Company’s indebtedness for any class or
series of the Company’s capital stock, (c) the purchase of fractional
interests in shares of the Company’s capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholders’ rights plan, or the issuance of rights, stock or other property under
any stockholders’ rights plan, or the redemption or repurchase of rights
pursuant thereto, (e) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with
or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith, or (f) payments under the Capital
Securities Guarantee).  Prior to the
termination of any Extension Period, the Company may further extend such
period, provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. 
Upon the termination of any Extension Period and upon the payment of all
accrued and unpaid interest and Additional Interest, the Company may commence a
new Extension Period, subject to the foregoing requirements.  No interest or Additional Interest shall be
due and payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest to the extent permitted by
applicable law.  The Company must give
the Trustee notice of its election to begin or extend an Extension Period by
the close of business at least 5 Business Days prior to the Interest Payment
Date with respect to which interest on the Debentures would have been payable
except for the election to begin or extend such Extension Period.  The Trustee shall give notice of the Company’s
election to begin a new Extension Period to the Securityholders.

 

Section 2.12.                         CUSIP
Numbers.  The Company in issuing
the Debentures may use “CUSIP” numbers (if then generally in use), and, if so,
the Trustee shall use CUSIP numbers in notices of redemption as a convenience
to Securityholders; provided, however, that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be
affected by any defect in or omission of such numbers.  The Company will promptly notify the Trustee
in writing of any change in the CUSIP numbers.

 

ARTICLE III.

PARTICULAR COVENANTS OF THE COMPANY

 

Section 3.1.                                Payment
of Principal, Premium and Interest; Agreed Treatment of the Debentures.

 

(a)                                  The
Company covenants and agrees that it will duly and punctually pay or cause to
be paid the principal of and premium, if any, and interest and any Additional
Interest and other payments on the Debentures at the place, at the respective
times and in the manner provided in this Indenture and the Debentures. Each
installment of interest on the Debentures may be paid (i) by mailing
checks for such interest payable to the order of the holders of Debentures
entitled thereto as they appear on the registry books of the Company if a
request for a wire transfer has not been received by the Company or
(ii) by wire transfer to any account with a banking institution located in
the United States designated in writing by such Person to the paying agent no
later than the related record date. 
Notwithstanding the foregoing, so long as the holder of this Debenture
is the Institutional Trustee, the payment of the principal of and interest on
this Debenture will be made in immediately available funds at such place and to
such account as may be designated by the Institutional Trustee.

 

16

 

(b)           The
Company will treat the Debentures as indebtedness, and the amounts payable in
respect of the principal amount of such Debentures as interest, for all United
States federal income tax purposes.  All
payments in respect of such Debentures will be made free and clear of United
States withholding tax to any beneficial owner thereof that has provided an
Internal Revenue Service Form W8 BEN (or any substitute or successor form)
establishing its non-United States status for United States federal income tax
purposes.

 

(c)           As
of the date of this Indenture, the Company has no present intention to exercise
its right under Section 2.11 to defer payments of interest on the Debentures by
commencing an Extension Period.

 

(d)           As
of the date of this Indenture, the Company believes that the likelihood that it
would exercise its right under Section 2.11 to defer payments of interest on
the Debentures by commencing an Extension Period at any time during which the
Debentures are outstanding is remote because of the restrictions that would be
imposed on the Company’s ability to declare or pay dividends or distributions
on, or to redeem, purchase or make a liquidation payment with respect to, any
of its outstanding equity and on the Company’s ability to make any payments of
principal of or interest on, or repurchase or redeem, any of its debt
securities that rank pari passu in
all respects with (or junior in interest to) the Debentures.

 

Section 3.2.           Offices for Notices
and Payments, etc.  So long as any of the Debentures
remain outstanding, the Company will maintain in Wilmington, Delaware, an
office or agency where the Debentures may be presented for payment, an office
or agency where the Debentures may be presented for registration of transfer
and for exchange as in this Indenture provided and an office or agency where
notices and demands to or upon the Company in respect of the Debentures or of
this Indenture may be served.  The
Company will give to the Trustee written notice of the location of any such
office or agency and of any change of location thereof.  Until otherwise designated from time to time
by the Company in a notice to the Trustee, or specified as contemplated by Section
2.5, such office or agency for all of the above purposes shall be the office or
agency of the Trustee.  In case the
Company shall fail to maintain any such office or agency in Wilmington,
Delaware, or shall fail to give such notice of the location or of any change in
the location thereof, presentations and demands may be made and notices may be
served at the Principal Office of the Trustee.

 

In addition to any such office or agency, the Company
may from time to time designate one or more offices or agencies outside Wilmington,
Delaware, where the Debentures may be presented for registration of transfer
and for exchange in the manner provided in this Indenture, and the Company may
from time to time rescind such designation, as the Company may deem desirable
or expedient; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain any such office or agency in Wilmington, Delaware, for the purposes
above mentioned.  The Company will give
to the Trustee prompt written notice of any such designation or rescission
thereof.

 

Section 3.3.           Appointments to Fill
Vacancies in Trustee’s Office. 
The Company, whenever necessary to avoid or fill a vacancy in the office
of Trustee, will appoint, in the manner provided in Section 6.9, a
Trustee, so that there shall at all times be a Trustee hereunder.

 

Section 3.4.           Provision as to
Paying Agent.

 

(a)           If
the Company shall appoint a paying agent other than the Trustee, it will cause
such paying agent to execute and deliver to the Trustee an instrument in which
such agent shall agree with the Trustee, subject to the provision of this
Section 3.4,

 

(1)           that it will hold all sums held by it
as such agent for the payment of the principal of and premium, if any, or
interest, if any, on the Debentures (whether such sums have

 

17

 

been paid to it by
the Company or by any other obligor on the Debentures) in trust for the benefit
of the holders of the Debentures;

 

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

 

(3)           that it will, at any time during the
continuance of any Event of Default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust by such paying agent.

 

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

 

Whenever the Company shall have one or more paying
agents for the Debentures, it will, on or prior to each due date of the
principal of and premium, if any, or interest, if any, on the Debentures,
deposit with a paying agent a sum sufficient to pay the principal, premium,
interest or other payments so becoming due, such sum to be held in trust for
the benefit of the Persons entitled thereto and (unless such paying agent is
the Trustee) the Company shall promptly notify the Trustee in writing of its
action or failure to act.

 

(c)           Anything
in this Section 3.4 to the contrary notwithstanding, the Company may, at
any time, for the purpose of obtaining a satisfaction and discharge with
respect to the Debentures, or for any other reason, pay, or direct any paying
agent to pay to the Trustee all sums held in trust by the Company or any such
paying agent, such sums to be held by the Trustee upon the trusts herein
contained.

 

(d)           Anything
in this Section 3.4 to the contrary notwithstanding, the agreement to hold
sums in trust as provided in this Section 3.4 is subject to
Sections 12.3 and 12.4.

 

Section 3.5.           Certificate to
Trustee.  The Company will
deliver to the Trustee on or before 120 days after the end of each fiscal
year, so long as Debentures are outstanding hereunder, a Certificate stating
that in the course of the performance by the signers of their duties as
officers of the Company they would normally have knowledge of any default
during such fiscal year by the Company in the performance of any covenants
contained herein, stating whether or not they have knowledge of any such
default and, if so, specifying each such default of which the signers have
knowledge and the nature and status thereof.

 

Section 3.6.           Additional Sums.  If and for so long as the Trust is the holder
of all Debentures and the Trust is required to pay any additional taxes
(including withholding taxes), duties, assessments or other governmental
charges as a result of a Tax Event, the Company will pay such additional
amounts (“Additional Sums”) on the Debentures as shall be required so
that the net amounts received and retained by the Trust after paying taxes
(including withholding taxes), duties, assessments or other governmental
charges will be equal to the amounts the Trust would have received if no such
taxes, duties, assessments or other governmental charges had been imposed.  Whenever in this Indenture or the Debentures
there is a reference in any context to the payment of principal of or interest
on the Debentures, such mention shall be deemed to include mention of payments
of the Additional Sums provided for in this paragraph to the

 

18

 

extent that, in such context, Additional Sums are, were or would be payable
in respect thereof pursuant to the provisions of this paragraph and express
mention of the payment of Additional Sums (if applicable) in any provisions
hereof shall not be construed as excluding Additional Sums in those provisions
hereof where such express mention is not made; provided, however,
that the deferral of the payment of interest during an Extension Period
pursuant to Section 2.11 shall not defer the payment of any Additional
Sums that may be due and payable.

 

Section 3.7.           Compliance with Consolidation
Provisions.  The Company
will not, while any of the Debentures remain outstanding, consolidate with, or
merge into, or merge into itself, or sell or convey all or substantially all of
its property to any other Person unless the provisions of Article XI
hereof are complied with.

 

Section 3.8.           Limitation on
Dividends.  If Debentures
are initially issued to the Trust or a trustee of such Trust in connection with
the issuance of Trust Securities by the Trust (regardless of whether Debentures
continue to be held by such Trust) and (i) there shall have occurred and
be continuing an Event of Default, (ii) the Company shall be in default
with respect to its payment of any obligations under the Capital Securities
Guarantee, or (iii) the Company shall have given notice of its election to
defer payments of interest on the Debentures by extending the interest payment
period as provided herein and such period, or any extension thereof, shall be
continuing, then the Company shall not, and shall not allow any Affiliate of
the Company to, (x) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Company’s capital stock or its Affiliates’ capital stock (other than
payments of dividends or distributions to the Company) or make any guarantee
payments with respect to the foregoing or (y) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (x) and (y) above,  (1) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or
in connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
if any, (2) as a result of any exchange or conversion of any class or
series of the Company’s capital stock (or any capital stock of a subsidiary of
the Company) for any class or series of the Company’s capital stock or of any
class or series of the Company’s indebtedness for any class or series of the
Company’s capital stock, (3) the purchase of fractional interests in
shares of the Company’s capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(4) any declaration of a dividend in connection with any stockholders’
rights plan, or the issuance of rights, stock or other property under any
stockholders’ rights plan, or the redemption or repurchase of rights pursuant
thereto, (5) any dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of such
warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with
or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith, or (6) payments under the Capital
Securities Guarantee).

 

Section 3.9.           Covenants as to the
Trust.  For so long as the
Trust Securities remain outstanding, the Company shall maintain 100% ownership
of the Common Securities; provided, however, that any permitted
successor of the Company under this Indenture may succeed to the Company’s
ownership of such Common Securities.  The
Company, as owner of the Common Securities, shall, except in connection with a
distribution of Debentures to the holders of Trust Securities in liquidation of
the Trust, the redemption of all of the Trust Securities or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, cause
the Trust  (a) to remain a statutory
trust, (b) to otherwise

 

19

 

continue to be classified as a grantor trust for United States federal
income tax purposes, and (c) to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Debentures.

 

Section 3.10.        Additional Junior
Indebtedness.  The Company
shall not, and it shall not cause or permit any Subsidiary of the Company to,
incur, issue or be obligated on any Additional Junior Indebtedness, either
directly or indirectly, by way of guarantee, suretyship or otherwise, other
than Additional Junior Indebtedness (i) that, by its terms, is expressly
stated to be either junior and subordinate or pari passu
in all respects to the Debentures, and (ii) of which the Company has
notified (and, if then required under the applicable guidelines of the
regulating entity, has received approval from) the Federal Reserve, if the
Company is a bank holding company, or the OTS, if the Company is a savings and
loan holding company.

 

ARTICLE IV.

SECURITYHOLDERS’ LISTS AND
REPORTS 

BY THE COMPANY AND THE TRUSTEE

 

Section 4.1.           Securityholders’
Lists.  The Company
covenants and agrees that it will furnish or caused to be furnished to the
Trustee:

 

(a)           on
each regular record date for the Debentures, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the
Securityholders of the Debentures as of such record date; and

 

(b)           at
such other times as the Trustee may request in writing, within 30 days
after the receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list
is furnished;

 

except that no such lists
need be furnished under this Section 4.1 so long as the Trustee is in
possession thereof by reason of its acting as Debenture registrar.

 

Section 4.2.           Preservation and
Disclosure of Lists.

 

(a)           The
Trustee shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the holders of Debentures
(1) contained in the most recent list furnished to it as provided in
Section 4.1 or (2) received by it in the capacity of Debentures
registrar (if so acting) hereunder.  The
Trustee may destroy any list furnished to it as provided in Section 4.1
upon receipt of a new list so furnished.

 

(b)           In
case three or more holders of Debentures (hereinafter referred to as “applicants”)
apply in writing to the Trustee and furnish to the Trustee reasonable proof
that each such applicant has owned a Debenture for a period of at least 6
months preceding the date of such application, and such application states that
the applicants desire to communicate with other holders of Debentures with
respect to their rights under this Indenture or under such Debentures and is
accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall within 5 Business Days
after the receipt of such application, at its election, either:

 

(1)           afford such applicants access to the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2, or

 

(2)           inform such applicants as to the
approximate number of holders of Debentures whose names and addresses appear in
the information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2, and as to

 

20

 

the approximate
cost of mailing to such Securityholders the form of proxy or other
communication, if any, specified in such application.

 

If the Trustee shall elect not to afford such
applicants access to such information, the Trustee shall, upon the written
request of such applicants, mail to each Securityholder whose name and address
appear in the information preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section 4.2 a copy of
the form of proxy or other communication which is specified in such request
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender, the Trustee shall mail
to such applicants and file with the Securities and Exchange Commission, if
permitted or required by applicable law, together with a copy of the material
to be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the holders of
all Debentures, as the case may be, or would be in violation of applicable
law.  Such written statement shall
specify the basis of such opinion.  If
said Commission, as permitted or required by applicable law, after opportunity
for a hearing upon the objections specified in the written statement so filed,
shall enter an order refusing to sustain any of such objections or if, after
the entry of an order sustaining one or more of such objections, said
Commission shall find, after notice and opportunity for hearing, that all the
objections so sustained have been met and shall enter an order so declaring,
the Trustee shall mail copies of such material to all such Securityholders with
reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.

 

(c)           Each
and every holder of Debentures, by receiving and holding the same, agrees with
Company and the Trustee that neither the Company nor the Trustee nor any paying
agent shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the holders of Debentures in
accordance with the provisions of subsection (b) of this Section 4.2,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under said subsection (b).

 

ARTICLE V.

REMEDIES OF THE TRUSTEE AND
SECURITYHOLDERS

UPON AN EVENT OF DEFAULT

 

Section
5.1.           Events of
Default.  “Event
of Default,” wherever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

 

(a)           the
Company defaults in the payment of any interest upon any Debenture, including
any Additional Interest in respect thereof, following the nonpayment of any
such interest for twenty or more consecutive Distribution Periods; or

 

(b)           the
Company defaults in the payment of all or any part of the principal of (or premium,
if any, on) any Debentures as and when the same shall become due and payable
either at maturity, upon redemption, by declaration of acceleration or
otherwise; or

 

(c)           the
Company defaults in the performance of, or breaches, any of its covenants or agreements
in this Indenture or in the terms of the Debentures established as contemplated
in this Indenture (other than a covenant or agreement a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the

 

21

 

outstanding Debentures, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a “Notice
of Default” hereunder; or

 

(d)           a
court of competent jurisdiction shall enter a decree or order for relief in
respect of the Company in an involuntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Company or for any substantial part of its
property, or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90 consecutive
days; or

 

(e)           the
Company shall commence a voluntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect,
shall consent to the entry of an order for relief in an involuntary case under
any such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or

 

(f)            the
Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up
its business or otherwise terminated its existence except in connection with
(i) the distribution of the Debentures to holders of such Trust Securities
in liquidation of their interests in the Trust, (ii) the redemption of all
of the outstanding Trust Securities or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.

 

If an Event of Default under Section 5.1(a), (d)
or (e) occurs and is continuing with respect to the Debentures, then, and in
each and every such case, unless the principal of the Debentures shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Debentures then outstanding
hereunder, by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal of the Debentures and the
interest accrued thereon, if any, to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable.  If an Event of Default under
Section 5.1(b), (c) or (f) occurs and is continuing with respect to the
Debentures, then, and in each and every such case, unless the principal of the
Debentures shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debentures
then outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by Securityholders), may proceed to remedy the default or
breach thereunder by such appropriate judicial proceedings as the Trustee or
such holders shall deem most effectual to remedy the defaulted covenant or
enforce the provisions of this Indenture so breached, either by suit in equity
or by action at law, for damages or otherwise.

 

The foregoing provisions, however, are subject to the
condition that if, at any time after the principal of the Debentures shall have
been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, (i) the Company shall pay or shall deposit with the Trustee a
sum sufficient to pay all matured installments of interest upon all the
Debentures and the principal of and premium, if any, on the Debentures which
shall have become due otherwise than by acceleration (with interest upon such principal
and premium, if any, and Additional Interest) and such amount as shall be
sufficient to cover reasonable compensation to the Trustee and each predecessor
Trustee, their respective agents, attorneys and counsel, and all other amounts
due to the Trustee pursuant to Section 6.6, if any, and (ii) all
Events of Default under this Indenture, other than the non-payment of the
principal of or premium, if any, on Debentures which shall have become due by
acceleration, shall have been cured, waived or otherwise remedied as provided
herein -- then and in every such case the holders of a majority in
aggregate principal amount of the Debentures then outstanding, by written
notice to the Company and to the Trustee, may

 

22

 

waive all defaults and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereon.

 

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

 

Section 5.2.           Payment of
Debentures on Default; Suit Therefor.  The Company covenants that upon the
occurrence of an Event of Default pursuant to Section 5.1(a) or (b) then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Debentures the whole amount that then shall have become due
and payable on all Debentures for principal and premium, if any, or interest,
or both, as the case may be, with Additional Interest accrued on the Debentures
(to the extent that payment of such interest is enforceable under applicable
law and, if the Debentures are held by the Trust or a trustee of such Trust,
without duplication of any other amounts paid by the Trust or a trustee in
respect thereof); and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any other amounts due to the Trustee under Section 6.6.  In case the Company shall fail forthwith to
pay such amounts upon such demand, the Trustee, in its own name and as trustee
of an express trust, shall be entitled and empowered to institute any actions
or proceedings at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against the Company
or any other obligor on such Debentures and collect in the manner provided by
law out of the property of the Company or any other obligor on such Debentures
wherever situated the moneys adjudged or decreed to be payable.

 

In case there shall be pending proceedings for the
bankruptcy or for the reorganization of the Company or any other obligor on the
Debentures under Bankruptcy Law, or in case a receiver or trustee shall have
been appointed for the property of the Company or such other obligor, or in the
case of any other similar judicial proceedings relative to the Company or other
obligor upon the Debentures, or to the creditors or property of the Company or
such other obligor, the Trustee, irrespective of whether the principal of the
Debentures shall then be due and payable as therein expressed or by declaration
of acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 5.2, shall be
entitled and empowered, by intervention in such proceedings or otherwise,

 

(i)                                     to
file and prove a claim or claims for the whole amount of principal and interest
owing and unpaid in respect of the Debentures,

 

(ii)                                  in
case of any judicial proceedings, to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for reasonable compensation to the Trustee and
each predecessor Trustee, and their respective agents, attorneys and counsel,
and for reimbursement of all other amounts due to the Trustee under
Section 6.6), and of the Securityholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Debentures, or
to the creditors or property of the Company or such other obligor, unless
prohibited by applicable law and regulations, to vote on behalf of the holders
of the Debentures in any election of a trustee or a standby trustee in
arrangement,

 

23

 

reorganization,
liquidation or other bankruptcy or insolvency proceedings or Person performing
similar functions in comparable proceedings,

 

(iii)                               to collect and receive
any moneys or other property payable or deliverable on any such claims, and

 

(iv)                              to
distribute the same after the deduction of its charges and expenses.

 

Any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized by each of the
Securityholders 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 Securityholders,
to pay to the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other amounts due to the Trustee under
Section 6.6.

 

Nothing herein contained shall be construed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any holder thereof or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.

 

All rights of action and of asserting claims under
this Indenture, or under any of the Debentures, may be enforced by the Trustee
without the possession of any of the Debentures, or the production thereof at
any trial or other proceeding relative thereto, and any such suit or proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the holders of the Debentures.

 

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

 

Section 5.3.           Application of
Moneys Collected by Trustee. 
Any moneys collected by the Trustee pursuant to this Article V
shall be applied in the following order, at the date or dates fixed by the
Trustee for the distribution of such moneys, upon presentation of the several
Debentures in respect of which moneys have been collected, and stamping thereon
the payment, if only partially paid, and upon surrender thereof if fully paid:

 

First:  To the
payment of costs and expenses incurred by, and reasonable fees of, the Trustee,
its agents, attorneys and counsel, and of all other amounts due to the Trustee
under Section 6.6;

 

Second:  To the
payment of all Senior Indebtedness of the Company if and to the extent required
by Article XV;

 

Third:  To the
payment of the amounts then due and unpaid upon Debentures for principal (and
premium, if any), and interest on the Debentures, in respect of which or for
the benefit of which money has been collected, ratably, without preference or
priority of any kind, according to the amounts due on such Debentures
(including Additional Interest); and

 

Fourth:  The
balance, if any, to the Company.

 

Section 5.4.           Proceedings by
Securityholders.  No
holder of any Debenture shall have any right to institute any suit, action or
proceeding for any remedy hereunder, unless such holder previously shall have
given to the Trustee written notice of an Event of Default with respect to the
Debentures and

 

24

 

unless the holders of not less than 25% in aggregate principal amount
of the Debentures then outstanding shall have given the Trustee a written
request to institute such action, suit or proceeding and shall have offered to
the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred thereby, and the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity shall have
failed to institute any such action, suit or proceeding.

 

Notwithstanding any other provisions in this
Indenture, however, the right of any holder of any Debenture to receive payment
of the principal of, premium, if any, and interest, on such Debenture when due,
or to institute suit for the enforcement of any such payment, shall not be
impaired or affected without the consent of such holder and by accepting a
Debenture hereunder it is expressly understood, intended and covenanted by the
taker and holder of every Debenture with every other such taker and holder and
the Trustee, that no one or more holders of Debentures shall have any right in
any manner whatsoever by virtue or by availing itself of any provision of this
Indenture to affect, disturb or prejudice the rights of the holders of any
other Debentures, or to obtain or seek to obtain priority over or preference to
any other such holder, or to enforce any right under this Indenture, except in
the manner herein provided and for the equal, ratable and common benefit of all
holders of Debentures.  For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.

 

Section 5.5.           Proceedings by
Trustee.  In case of an
Event of Default hereunder the Trustee may in its discretion proceed to protect
and enforce the rights vested in it by this Indenture by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any of such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.

 

Section 5.6.           Remedies Cumulative
and Continuing; Delay or Omission Not a Waiver.  Except as otherwise provided in
Section 2.6, all powers and remedies given by this Article V to the
Trustee or to the Securityholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers and remedies available
to the Trustee or the holders of the Debentures, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture or otherwise established with respect to
the Debentures, and no delay or omission of the Trustee or of any holder of any
of the Debentures to exercise any right, remedy or power accruing upon any
Event of Default occurring and continuing as aforesaid shall impair any such
right, remedy or power, or shall be construed to be a waiver of any such
default or an acquiescence therein; and, subject to the provisions of
Section 5.4, every power and remedy given by this Article V or by law
to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee (in accordance with
its duties under Section 6.1) or by the Securityholders.

 

Section 5.7.           Direction of
Proceedings and Waiver of Defaults by Majority of Securityholders.  The holders of a majority in aggregate
principal amount of the Debentures affected (voting as one class) at the time
outstanding shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to such
Debentures; provided, however, that (subject to the provisions of
Section 6.1) the Trustee shall have the right to decline to follow any
such direction if the Trustee shall determine that the action so directed would
be unjustly prejudicial to the holders not taking part in such direction or if
the Trustee being advised by counsel determines that the action or proceeding
so directed may not lawfully be taken or if a Responsible Officer of the
Trustee shall determine that the action or proceedings so directed would
involve the Trustee in personal liability.

 

25

 

The holders of a majority in aggregate principal
amount of the Debentures at the time outstanding may on behalf of the holders
of all of the Debentures waive (or modify any previously granted waiver of) any
past default or Event of Default, and its consequences, except a default
(a) in the payment of principal of, premium, if any, or interest on any of
the Debentures, (b) in respect of covenants or provisions hereof which
cannot be modified or amended without the consent of the holder of each
Debenture affected, or (c) in respect of the covenants contained in
Section 3.9; provided, however, that if the Debentures are
held by the Trust or a trustee of such trust, such waiver or modification to
such waiver shall not be effective until the holders of a majority in
Liquidation Amount of Trust Securities of the Trust shall have consented to
such waiver or modification to such waiver, provided, further,
that if the consent of the holder of each outstanding Debenture is required,
such waiver shall not be effective until each holder of the Trust Securities of
the Trust shall have consented to such waiver. 
Upon any such waiver, the default covered thereby shall be deemed to be
cured for all purposes of this Indenture and the Company, the Trustee and the
holders of the Debentures shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.  Whenever any default or Event
of Default hereunder shall have been waived as permitted by this Section, said
default or Event of Default shall for all purposes of the Debentures and this
Indenture be deemed to have been cured and to be not continuing.

 

Section 5.8.           Notice of Defaults.  The Trustee shall, within 90 days after
the actual knowledge by a Responsible Officer of the Trustee of the occurrence
of a default with respect to the Debentures, mail to all Securityholders, as
the names and addresses of such holders appear upon the Debenture Register,
notice of all defaults with respect to the Debentures known to the Trustee,
unless such defaults shall have been cured before the giving of such notice
(the term “defaults” for the purpose of this Section 5.8 being hereby
defined to be the events specified in clauses (a), (b), (c), (d), (e) and
(f) of Section 5.1, not including periods of grace, if any, provided for
therein); provided, however, that, except in the case of default
in the payment of the principal of, premium, if any, or interest on any of the
Debentures, the Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Securityholders.

 

Section 5.9.           Undertaking to Pay
Costs.  All parties to
this Indenture agree, and each holder of any Debenture by his acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted
by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys’ fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; provided,
however, that the provisions of this Section 5.9 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any
Securityholder, or group of Securityholders, holding in the aggregate more than
10% in principal amount of the Debentures outstanding, or to any suit
instituted by any Securityholder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Debenture against the
Company on or after the same shall have become due and payable.

 

ARTICLE VI.

CONCERNING THE TRUSTEE

 

Section 6.1.           Duties and
Responsibilities of Trustee. 
With respect to the holders of Debentures issued hereunder, the Trustee,
prior to the occurrence of an Event of Default with respect to the Debentures
and after the curing or waiving of all Events of Default which may have
occurred, with respect to the Debentures, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture, and no
implied covenants shall be read into this Indenture against the Trustee.  In

 

26

 

case an Event of Default with respect to the Debentures has occurred
(which has not been cured or waived), 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.

 

No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:

 

(a)           prior
to the occurrence of an Event of Default with respect to Debentures and after
the curing or waiving of all Events of Default which may have occurred

 

(1)           the duties and obligations of the
Trustee with respect to Debentures shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable except for
the performance of such duties and obligations with respect to the Debentures
as are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee, and

 

(2)           in the absence of bad faith on the
part of the Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Indenture;

 

(b)           the
Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer or Officers of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts; and

 

(c)           the
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith, in accordance with the direction of the
Securityholders pursuant to Section 5.7, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.

 

None of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if there is ground for believing that
the repayment of such funds or liability is not assured to it under the terms
of this Indenture or indemnity satisfactory to the Trustee against such risk is
not reasonably assured to it.

 

Section 6.2.           Reliance on Documents,
Opinions, etc.  Except as
otherwise provided in Section 6.1:

 

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

 

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

 

27

 

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

 

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

 

(e)           the
Trustee shall not be liable for any action taken or omitted by it in good faith
and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default with respect to the Debentures (that has not been cured or waived)
to exercise with respect to Debentures such of the rights and powers vested in
it by this Indenture, and to 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;

 

(f)            the
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond, debenture, coupon or other
paper or document, unless requested in writing to do so by the holders of not
less than a majority in aggregate principal amount of the outstanding
Debentures affected thereby; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to so
proceeding;

 

(g)           the
Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents (including any Authenticating
Agent) or attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed by
it with due care; and

 

(h)           with
the exceptions of defaults under Sections 5.1(a) or (b), the Trustee shall not
be charged with knowledge of any Default or Event of Default with respect to
the Debentures unless a written notice of such Default or Event of Default
shall have been given to the Trustee by the Company or any other obligor on the
Debentures or by any holder of the Debentures.

 

Section 6.3.           No Responsibility
for Recitals, etc.  The
recitals contained herein and in the Debentures (except in the certificate of
authentication of the Trustee or the Authenticating Agent) shall be taken as
the statements of the Company, and the Trustee and the Authenticating Agent
assume no responsibility for the correctness of the same.  The Trustee and the Authenticating Agent make
no representations as to the validity or sufficiency of this Indenture or of
the Debentures.  The Trustee and the
Authenticating Agent shall not be accountable for the use or application by the
Company of any Debentures or the proceeds of any Debentures authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the
provisions of this Indenture.

 

Section 6.4.           Trustee,
Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own
Debentures.  The Trustee
or any Authenticating Agent or any paying agent or any transfer agent or any
Debenture registrar, in its individual or any other capacity, may become the
owner or pledgee of Debentures with the same rights it would have if it were
not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture
registrar.

 

28

 

Section 6.5.           Moneys to be Held in
Trust.  Subject to the
provisions of Section 12.4, all moneys received by the Trustee or any paying
agent shall, until used or applied as herein provided, be held in trust for the
purpose for which they were received, but need not be segregated from other
funds except to the extent required by law. 
The Trustee and any paying agent shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed in
writing with the Company.  So long as no
Event of Default shall have occurred and be continuing, all interest allowed on
any such moneys shall be paid from time to time upon the written order of the
Company, signed by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, a Managing Director, a Vice President, the Treasurer or
an Assistant Treasurer of the Company.

 

Section 6.6.           Compensation and
Expenses of Trustee.  The
Company covenants and agrees to pay or reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or willful misconduct.  For purposes of clarification, this
Section 6.6 does not contemplate the payment by the Company of acceptance
or annual administration fees owing to the Trustee pursuant to the services to
be provided by the Trustee under this Indenture or the fees and expenses of the
Trustee’s counsel in connection with the closing of the transactions
contemplated by this Indenture.  The
Company also covenants to indemnify each of the Trustee or any predecessor
Trustee (and its officers, agents, directors and employees) for, and to hold it
harmless against, any and all loss, damage, claim, liability or expense
including taxes (other than taxes based on the income of the Trustee) incurred
without negligence or willful misconduct on the part of the Trustee and arising
out of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim of
liability.  The obligations of the
Company under this Section 6.6 to compensate and indemnify the Trustee and
to pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. 
Such additional indebtedness shall be secured by a lien prior to that of
the Debentures upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the holders of particular
Debentures.

 

Without prejudice to any other rights available to the
Trustee under applicable law, when the Trustee incurs expenses or renders
services in connection with an Event of Default specified in
Section 5.1(d), (e) or (f), the expenses (including the reasonable charges
and expenses of its counsel) and the compensation for the services are intended
to constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.

 

The provisions of this Section shall survive the
resignation or removal of the Trustee and the defeasance or other termination
of this Indenture.

 

Notwithstanding anything in this Indenture or any
Debenture to the contrary, the Trustee shall have no obligation whatsoever to
advance funds to pay any principal of or interest on or other amounts with
respect to the Debentures or otherwise advance funds to or on behalf of the
Company.

 

Section 6.7.           Officers’
Certificate as Evidence.  Except
as otherwise provided in Sections 6.1 and 6.2, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking
or omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
willful misconduct on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers’ Certificate delivered to the Trustee,
and such certificate, in the absence of negligence or willful misconduct on the
part of the Trustee, shall be full warrant to the Trustee for any action taken
or omitted by it under the provisions of this Indenture upon the faith thereof.

 

29

 

Section 6.8.           Eligibility of
Trustee.  The Trustee
hereunder shall at all times be a corporation organized and doing business
under the laws of the United States of America or any state or territory
thereof or of the District of Columbia or a corporation or other Person
authorized under such laws to exercise corporate trust powers, having (or whose
obligations under this Indenture are guaranteed by an affiliate having) a
combined capital and surplus of at least 50 million U.S. dollars
($50,000,000.00) and subject to supervision or examination by federal, state,
territorial, or District of Columbia authority. 
If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 6.8 the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent records of
condition so published.

 

The Company may not, nor may any Person directly or
indirectly controlling, controlled by, or under common control with the
Company, serve as Trustee.

 

In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.8, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 6.9.

 

If the Trustee has or shall acquire any “conflicting
interest” within the meaning of § 310(b) of the Trust Indenture Act of 1939,
the Trustee shall either eliminate such interest or resign, to the extent and
in the manner described by this Indenture.

 

Section 6.9.           Resignation or
Removal of Trustee

 

(a)           The
Trustee, or any trustee or trustees hereafter appointed, may at any time resign
by giving written notice of such resignation to the Company and by mailing
notice thereof, at the Company’s expense, to the holders of the Debentures at
their addresses as they shall appear on the Debenture Register.  Upon receiving such notice of resignation,
the Company shall promptly appoint a successor trustee or trustees by written
instrument, in duplicate, executed by order of its Board of Directors, one copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor Trustee.  If no successor
Trustee shall have been so appointed and have accepted appointment within 30
days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee, or any Securityholder
who has been a bona fide holder of a Debenture or Debentures for at least six
months may, subject to the provisions of Section 5.9, on behalf of himself
and all others similarly situated, petition any such court for the appointment
of a successor Trustee.  Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe, appoint
a successor Trustee.

 

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

 

(1)           the Trustee shall fail to comply with
the provisions of Section 6.8 after written request therefor by the
Company or by any Securityholder who has been a bona fide holder of a Debenture
or Debentures for at least 6 months, or

 

(2)           the Trustee shall cease to be
eligible in accordance with the provisions of Section 6.8 and shall fail
to resign after written request therefor by the Company or by any such
Securityholder, or

 

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

 

30

 

then, in any such case, the Company may remove the
Trustee and appoint a successor Trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor Trustee,
or, subject to the provisions of Section 5.9, any Securityholder who has
been a bona fide holder of a Debenture or Debentures for at least 6 months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.  Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint successor Trustee.

 

(c)           Upon
prior written notice to the Company and the Trustee, the holders of a majority
in aggregate principal amount of the Debentures at the time outstanding may at
any time remove the Trustee and nominate a successor Trustee, which shall be
deemed appointed as successor Trustee unless within 10 Business Days after such
nomination the Company objects thereto, in which case, or in the case of a
failure by such holders to nominate a successor Trustee, the Trustee so removed
or any Securityholder, upon the terms and conditions and otherwise as in
subsection (a) of this Section 6.9 provided, may petition any court
of competent jurisdiction for an appointment of a successor.

 

(d)           Any
resignation or removal of the Trustee and appointment of a successor Trustee
pursuant to any of the provisions of this Section shall become effective upon
acceptance of appointment by the successor Trustee as provided in
Section 6.10.

 

Section 6.10.        Acceptance by Successor
Trustee.  Any successor
Trustee appointed as provided in Section 6.9 shall execute, acknowledge
and deliver to the Company and to its predecessor Trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, duties and obligations with respect to the Debentures of its
predecessor hereunder, with like effect as if originally named as Trustee
herein; but, nevertheless, on the written request of the Company or of the
successor Trustee, the Trustee ceasing to act shall, upon payment of any
amounts then due it pursuant to the provisions of Section 6.6, execute and
deliver an instrument transferring to such successor Trustee all the rights and
powers of the Trustee so ceasing to act and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee thereunder.  Upon request of any
such successor Trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such
successor Trustee all such rights and powers. 
Any Trustee ceasing to act shall, nevertheless, retain a lien upon all
property or funds held or collected by such Trustee to secure any amounts then
due it pursuant to the provisions of Section 6.6.

 

If a successor Trustee is appointed, the Company, the
retiring Trustee and the successor Trustee shall execute and deliver an
indenture supplemental hereto which shall contain such provisions as shall be
deemed necessary or desirable to confirm that all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Debentures as to which
the predecessor Trustee is not retiring shall continue to be vested in the
predecessor Trustee, and shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the Trust hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be Trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee.

 

No successor Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Trustee shall be eligible under the provisions of Section 6.8.

 

In no event shall a retiring Trustee be liable for the
acts or omissions of any successor Trustee hereunder.

 

31

 

Upon acceptance of appointment by a successor Trustee
as provided in this Section 6.10, the Company shall mail notice of the
succession of such Trustee hereunder to the holders of Debentures at their
addresses as they shall appear on the Debenture Register.  If the Company fails to mail such notice
within 10 Business Days after the acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Company.

 

Section 6.11.        Succession by Merger,
etc.  Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided such corporation shall be otherwise eligible and
qualified under this Article.

 

In case at the time such successor to the Trustee
shall succeed to the trusts created by this Indenture any of the Debentures
shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee,
and deliver such Debentures so authenticated; and in case at that time any of
the Debentures shall not have been authenticated, any successor to the Trustee
may authenticate such Debentures either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Debentures
or in this Indenture provided that the certificate of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of
any predecessor Trustee or authenticate Debentures in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.

 

Section 6.12.        Authenticating Agents.  There may be one or more Authenticating
Agents appointed by the Trustee upon the request of the Company with power to
act on its behalf and subject to its direction in the authentication and
delivery of Debentures issued upon exchange or registration of transfer thereof
as fully to all intents and purposes as though any such Authenticating Agent
had been expressly authorized to authenticate and deliver Debentures; provided,
however, that the Trustee shall have no liability to the Company for any
acts or omissions of the Authenticating Agent with respect to the
authentication and delivery of Debentures. 
Any such Authenticating Agent shall at all times be a corporation
organized and doing business under the laws of the United States or of any
state or territory thereof or of the District of Columbia authorized under such
laws to act as Authenticating Agent, having a combined capital and surplus of
at least $50,000,000.00 and being subject to supervision or examination by
federal, state, territorial or District of Columbia authority.  If such corporation publishes reports of
condition at least annually pursuant to law or the requirements of such
authority, then for the purposes of this Section 6.12 the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.  If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect herein specified in this
Section.

 

Any corporation into which any Authenticating Agent
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of any Authenticating Agent,
shall be the successor of such Authenticating Agent hereunder, if such
successor corporation is otherwise eligible under this Section 6.12
without the execution or filing of any paper or any further act on the part of
the parties hereto or such Authenticating Agent.

 

Any Authenticating Agent may at any time resign by
giving written notice of resignation to the Trustee and to the Company.  The Trustee may at any time terminate the
agency of any Authenticating

 

32

 

Agent with respect to the Debentures by giving written notice of
termination to such Authenticating Agent and to the Company.  Upon receiving such a notice of resignation
or upon such a termination, or in case at any time any Authenticating Agent
shall cease to be eligible under this Section 6.12, the Trustee may, and
upon the request of the Company shall, promptly appoint a successor
Authenticating Agent eligible under this Section 6.12, shall give written
notice of such appointment to the Company and shall mail notice of such
appointment to all holders of Debentures as the names and addresses of such
holders appear on the Debenture Register. 
Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all rights, powers, duties and
responsibilities with respect to the Debentures of its predecessor hereunder,
with like effect as if originally named as Authenticating Agent herein.

 

The Company agrees to pay to any Authenticating Agent
from time to time reasonable compensation for its services.  Any Authenticating Agent shall have no
responsibility or liability for any action taken by it as such in accordance
with the directions of the Trustee.

 

ARTICLE VII.

CONCERNING THE SECURITYHOLDERS

 

Section 7.1.           Action by
Securityholders.  Whenever
in this Indenture it is provided that the holders of a specified percentage in
aggregate principal amount of the Debentures may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action) the fact that at the time of taking any such
action the holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar
tenor executed by such Securityholders in person or by agent or proxy appointed
in writing, or (b) by the record of such holders of Debentures voting in
favor thereof at any meeting of such Securityholders duly called and held in
accordance with the provisions of Article VIII, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders or (d) by any other method the Trustee
deems satisfactory.

 

If the Company shall solicit from the Securityholders
any request, demand, authorization, direction, notice, consent, waiver or other
action or revocation of the same, the Company may, at its option, as evidenced
by an Officers’ Certificate, fix in advance a record date for such Debentures
for the determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so.  If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other action or
revocation of the same may be given before or after the record date, but only
the Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of outstanding Debentures have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action or revocation of the same,
and for that purpose the outstanding Debentures shall be computed as of the
record date; provided, however, that no such authorization,
agreement or consent by such Securityholders on the record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than 6 months after the record date.

 

Section 7.2.           Proof of Execution
by Securityholders.  Subject
to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of
any instrument by a Securityholder or his agent or proxy shall be sufficient if
made in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee.  The ownership of Debentures
shall be proved by the Debenture Register or by a certificate of the Debenture registrar.  The Trustee may require such additional proof
of any matter referred to in this Section as it shall deem necessary.

 

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The record of any Securityholders’ meeting shall be
proved in the manner provided in Section 8.6.

 

Section 7.3.           Who Are Deemed
Absolute Owners.  Prior to
due presentment for registration of transfer of any Debenture, the Company, the
Trustee, any Authenticating Agent, any paying agent, any transfer agent and any
Debenture registrar may deem the Person in whose name such Debenture shall be
registered upon the Debenture Register to be, and may treat him as, the
absolute owner of such Debenture (whether or not such Debenture shall be
overdue) for the purpose of receiving payment of or on account of the principal
of, premium, if any, and interest on such Debenture and for all other purposes;
and neither the Company nor the Trustee nor any Authenticating Agent nor any
paying agent nor any transfer agent nor any Debenture registrar shall be
affected by any notice to the contrary. 
All such payments so made to any holder for the time being or upon his
order shall be valid, and, to the extent of the sum or sums so paid, effectual
to satisfy and discharge the liability for moneys payable upon any such
Debenture.

 

Section 7.4.           Debentures Owned by
Company Deemed Not Outstanding. 
In determining whether the holders of the requisite aggregate principal
amount of Debentures have concurred in any direction, consent or waiver under
this Indenture, Debentures which are owned by the Company or any other obligor
on the Debentures or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or
any other obligor on the Debentures shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided, however,
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver, only Debentures which a
Responsible Officer of the Trustee actually knows are so owned shall be so
disregarded.  Debentures so owned which
have been pledged in good faith may be regarded as outstanding for the purposes
of this Section 7.4 if the pledgee shall establish to the satisfaction of
the Trustee the pledgee’s right to vote such Debentures and that the pledgee is
not the Company or any such other obligor or Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company or any such other obligor. 
In the case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.

 

Section 7.5.           Revocation of
Consents; Future Holders Bound. 
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.1, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action, any holder (in cases where no record
date has been set pursuant to Section 7.1) or any holder as of an
applicable record date (in cases where a record date has been set pursuant to
Section 7.1) of a Debenture (or any Debenture issued in whole or in part
in exchange or substitution therefor) the serial number of which is shown by
the evidence to be included in the Debentures the holders of which have
consented to such action may, by filing written notice with the Trustee at the
Principal Office of the Trustee and upon proof of holding as provided in
Section 7.2, revoke such action so far as concerns such Debenture (or so
far as concerns the principal amount represented by any exchanged or
substituted Debenture).  Except as
aforesaid any such action taken by the holder of any Debenture shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Debenture, and of any Debenture issued in exchange or substitution
therefor or on registration of transfer thereof, irrespective of whether or not
any notation in regard thereto is made upon such Debenture or any Debenture
issued in exchange or substitution therefor.

 

ARTICLE VIII.

SECURITYHOLDERS’ MEETINGS

 

Section 8.1.           Purposes of Meetings.  A meeting of Securityholders may be called at
any time and from time to time pursuant to the provisions of this
Article VIII for any of the following purposes:

 

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

 

(b)           to
remove the Trustee and nominate a successor trustee pursuant to the provisions
of Article VI;

 

(c)           to
consent to the execution of an indenture or indentures supplemental hereto
pursuant to the provisions of Section 9.2; or

 

(d)           to
take any other action authorized to be taken by or on behalf of the holders of
any specified aggregate principal amount of such Debentures under any other
provision of this Indenture or under applicable law.

 

Section 8.2.           Call of Meetings by
Trustee.  The Trustee may
at any time call a meeting of Securityholders to take any action specified in
Section 8.1, to be held at such time and at such place as the Trustee
shall determine.  Notice of every meeting
of the Securityholders, setting forth the time and the place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be
mailed to holders of Debentures affected at their addresses as they shall
appear on the Debentures Register and, if the Company is not a holder of
Debentures, to the Company.  Such notice
shall be mailed not less than 20 nor more than 180 days prior to the date
fixed for the meeting.

 

Section 8.3.           Call of Meetings by
Company or Securityholders. 
In case at any time the Company pursuant to a Board Resolution, or the
holders of at least 10% in aggregate principal amount of the Debentures, as the
case may be, then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall
not have mailed the notice of such meeting within 20 days after receipt of
such request, then the Company or such Securityholders may determine the time
and the place for such meeting and may call such meeting to take any action
authorized in Section 8.1, by mailing notice thereof as provided in
Section 8.2.

 

Section 8.4.           Qualifications for
Voting.  To be entitled to
vote at any meeting of Securityholders a Person shall (a) be a holder of
one or more Debentures with respect to which the meeting is being held or
(b) a Person appointed by an instrument in writing as proxy by a holder of
one or more such Debentures.  The only
Persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.

 

Section 8.5.           Regulations.  Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Securityholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination
of proxies, certificates and other evidence of the right to vote, and such
other matters concerning the conduct of the meeting as it shall think fit.

 

The Trustee shall, by an instrument in writing,
appoint a temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Securityholders as provided in Section 8.3, in
which case the Company or the Securityholders calling the meeting, as the case
may be, shall in like manner appoint a temporary chairman.  A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.

 

35

 

Subject to the provisions of Section 7.4, at any
meeting each holder of Debentures with respect to which such meeting is being
held or proxy therefor shall be entitled to one vote for each $1,000.00
principal amount of Debentures held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any
Debenture challenged as not outstanding and ruled by the chairman of the
meeting to be not outstanding.  The
chairman of the meeting shall have no right to vote other than by virtue of
Debentures held by him or instruments in writing as aforesaid duly designating
him as the Person to vote on behalf of other Securityholders.  Any meeting of Securityholders duly called
pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from
time to time by a majority of those present, whether or not constituting a
quorum, and the meeting may be held as so adjourned without further notice.

 

Section 8.6.           Voting.  The vote upon any resolution submitted to any
meeting of holders of Debentures with respect to which such meeting is being
held shall be by written ballots on which shall be subscribed the signatures of
such holders or of their representatives by proxy and the serial number or
numbers of the Debentures held or represented by them.  The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in triplicate of all votes cast at
the meeting.  A record in duplicate of
the proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more Persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
mailed as provided in Section 8.2. 
The record shall show the serial numbers of the Debentures voting in
favor of or against any resolution.  The
record shall be signed and verified by the affidavits of the permanent chairman
and secretary of the meeting and one of the duplicates shall be delivered to
the Company and the other to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting.

 

Any record so signed and verified shall be conclusive
evidence of the matters therein stated.

 

Section 8.7.           Quorum; Actions.  The Persons entitled to vote a majority in
principal amount of the Debentures then outstanding shall constitute a quorum
for a meeting of Securityholders; provided, however, that if any
action is to be taken at such meeting with respect to a consent, waiver,
request, demand, notice, authorization, direction or other action which may be
given by the holders of not less than a specified percentage in principal
amount of the Debentures then outstanding, the Persons holding or representing
such specified percentage in principal amount of the Debentures then
outstanding will constitute a quorum.  In
the absence of a quorum within 30 minutes of the time appointed for any
such meeting, the meeting shall, if convened at the request of Securityholders,
be dissolved.  In any other case the
meeting may be adjourned for a period of not less than 10 days as
determined by the permanent chairman of the meeting prior to the adjournment of
such meeting.  In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further adjourned
for a period of not less than 10 days as determined by the permanent
chairman of the meeting prior to the adjournment of such adjourned
meeting.  Notice of the reconvening of
any adjourned meeting shall be given as provided in Section 8.2, except
that such notice need be given only once not less than 5 days prior to the date
on which the meeting is scheduled to be reconvened.  Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the
principal amount of the Debentures then outstanding which shall constitute a
quorum.

 

Except as limited by the provisos in the first
paragraph of Section 9.2, any resolution presented to a meeting or
adjourned meeting duly reconvened at which a quorum is present as aforesaid may
be adopted by the affirmative vote of the holders of a majority in principal
amount of the Debentures then outstanding; provided, however,
that, except as limited by the provisos in the first paragraph of

 

36

 

Section 9.2, any resolution with respect to any
consent, waiver, request, demand, notice, authorization, direction or other
action which this Indenture expressly provides may be given by the holders of
not less than a specified percentage in principal amount of the Debentures then
outstanding may be adopted at a meeting or an adjourned meeting duly reconvened
and at which a quorum is present as aforesaid only by the affirmative vote of
the holders of a not less than such specified percentage in principal amount of
the Debentures then outstanding.

 

Any resolution passed or decision taken at any meeting
of holders of Debentures duly held in accordance with this Section shall be
binding on all the Securityholders, whether or not present or represented at
the meeting.

 

ARTICLE
IX.

SUPPLEMENTAL INDENTURES

 

Section 9.1.           Supplemental Indentures without Consent of
Securityholders.  The
Company, when authorized by a Board Resolution, and the Trustee may from time
to time and at any time enter into an indenture or indentures supplemental
hereto, without the consent of the Securityholders, for one or more of the
following purposes:

 

(a)           to evidence the succession of another Person to the
Company, or successive successions, and the assumption by the successor Person
of the covenants, agreements and obligations of the Company, pursuant to
Article XI hereof;

 

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

 

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

 

(d)           to
add to, delete from, or revise the terms of Debentures, including, without
limitation, any terms relating to the issuance, exchange, registration or
transfer of Debentures, including to provide for transfer procedures and
restrictions substantially similar to those applicable to the Capital
Securities as required by Section 2.5 (for purposes of assuring that no
registration of Debentures is required under the Securities Act); provided,
however, that any such action shall not adversely affect the interests
of the holders of the Debentures then outstanding (it being understood, for
purposes of this proviso, that transfer restrictions on Debentures
substantially similar to those that were applicable to Capital Securities shall
not be deemed to materially adversely affect the holders of the Debentures);

 

(e)           to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures and to add to
or change any of the provisions of this Indenture as

 

37

 

shall
be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee;

 

(f)            to make any change (other than as elsewhere provided in
this paragraph) that does not adversely affect the rights of any Securityholder
in any material respect; or

 

(g)           to
provide for the issuance of and establish the form and terms and conditions of
the Debentures, to establish the form of any certifications required to be
furnished pursuant to the terms of this Indenture or the Debentures, or to add
to the rights of the holders of Debentures.

 

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

 

Any supplemental indenture authorized by the
provisions of this Section 9.1 may be executed by the Company and the
Trustee without the consent of the holders of any of the Debentures at the time
outstanding, notwithstanding any of the provisions of Section 9.2.

 

Section 9.2.           Supplemental Indentures with Consent of
Securityholders.  With
the consent (evidenced as provided in Section 7.1) of the holders of not
less than a majority in aggregate principal amount of the Debentures at the
time outstanding affected by such supplemental indenture (voting as a class),
the Company, when authorized by a Board Resolution, and the Trustee may from
time to time and at any time enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the
Debentures; provided, however, that no such supplemental indenture
shall without the consent of the holders of each Debenture then outstanding and
affected thereby (i) change the fixed maturity of any Debenture, or reduce
the principal amount thereof or any premium thereon, or reduce the rate or
extend the time of payment of interest thereon, or reduce any amount payable on
redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that provided in the
Debentures, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the
option of the holder, or (ii) reduce the aforesaid percentage of
Debentures the holders of which are required to consent to any such supplemental
indenture; provided  further, however, that if the
Debentures are held by a trust or a trustee of such trust, such supplemental
indenture shall not be effective until the holders of a majority in Liquidation
Amount of Trust Securities shall have consented to such supplemental indenture;
provided  further, however, that if the consent of the
Securityholder of each outstanding Debenture is required, such supplemental
indenture shall not be effective until each holder of the Trust Securities
shall have consented to such supplemental indenture.

 

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

 

Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Debenture Register.  Any

 

38

 

failure
of the Trustee to mail such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such supplemental indenture.

 

It shall not be necessary for the consent of the Securityholders under
this Section 9.2 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall
approve the substance thereof.

 

Section 9.3.           Effect of Supplemental Indentures.  Upon the execution of any supplemental
indenture pursuant to the provisions of this Article IX, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and
immunities under this Indenture of the Trustee, the Company and the holders of
Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.

 

Section 9.4.           Notation on Debentures.  Debentures authenticated and delivered after
the execution of any supplemental indenture pursuant to the provisions of this
Article IX may bear a notation as to any matter provided for in such
supplemental indenture.  If the Company
or the Trustee shall so determine, new Debentures so modified as to conform, in
the opinion of the Board of Directors of the Company, to any modification of
this Indenture contained in any such supplemental indenture may be prepared and
executed by the Company, authenticated by the Trustee or the Authenticating
Agent and delivered in exchange for the Debentures then outstanding.

 

Section 9.5.           Evidence of Compliance of Supplemental Indenture
to be Furnished to Trustee. 
The Trustee, subject to the provisions of Sections 6.1 and 6.2,
shall, in addition to the documents required by Section 14.6, receive an
Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX.  The Trustee
shall receive an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article IX is authorized
or permitted by, and conforms to, the terms of this Article IX and that it
is proper for the Trustee under the provisions of this Article IX to join
in the execution thereof.

 

ARTICLE X.

REDEMPTION OF SECURITIES

 

Section 10.1.        Optional Redemption.  The Company shall have the right (subject to
the receipt by the Company of prior approval (i) if the Company is a bank
holding company, from the Federal Reserve, if then required under applicable
capital guidelines or policies of the Federal Reserve or (ii) if the
Company is a savings and loan holding company, from the OTS, if then required
under applicable capital guidelines or policies of the OTS) to redeem the
Debentures, in whole or in part, but in all cases in a principal amount with
integral multiples of $1,000.00, on any Interest Payment Date on or after the
Interest Payment Date in December 2009 (the “Redemption Date”), at the
Redemption Price.

 

Section 10.2.        Special Event Redemption.  If a Special Event shall occur and be
continuing, the Company shall have the right (subject to the receipt by the
Company of prior approval (i) if the Company is a bank holding company,
from the Federal Reserve, if then required under applicable capital guidelines
or policies of the Federal Reserve or (ii) if the Company is a savings and
loan holding company, from the OTS, if then required under applicable capital
guidelines or policies of the OTS) to redeem the Debentures in whole, but not
in part, at any Interest Payment Date, within 120 days following the
occurrence of such Special Event (the “Special Redemption Date”) at the
Special Redemption Price.

 

39

 

Section 10.3.        Notice of Redemption; Selection of Debentures.  In case the Company shall desire to exercise
the right to redeem all, or, as the case may be, any part of the Debentures, it
shall cause to be mailed a notice of such redemption at least 30 and not more
than 60 days prior to the Redemption Date or the Special Redemption Date
to the holders of Debentures so to be redeemed as a whole or in part at their
last addresses as the same appear on the Debenture Register.  Such mailing shall be by first class
mail.  The notice if mailed in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or not the holder receives such notice. 
In any case, failure to give such notice by mail or any defect in the
notice to the holder of any Debenture designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Debenture.

 

Each such notice of redemption shall specify the CUSIP number, if any,
of the Debentures to be redeemed, the Redemption Date or the Special Redemption
Date, as applicable, the Redemption Price or the Special Redemption Price, as
applicable, at which Debentures are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Debentures, that interest accrued to the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon
or on the portions thereof to be redeemed will cease to accrue.  If less than all the Debentures are to be
redeemed the notice of redemption shall specify the numbers of the Debentures
to be redeemed.  In case the Debentures
are to be redeemed in part only, the notice of redemption shall state the
portion of the principal amount thereof to be redeemed and shall state that on
and after the date fixed for redemption, upon surrender of such Debenture, a
new Debenture or Debentures in principal amount equal to the unredeemed portion
thereof will be issued.

 

Prior to 10:00 a.m. New York City
time on the Redemption Date or Special Redemption Date, as applicable, the Company
will deposit with the Trustee or with one or more paying agents an amount of
money sufficient to redeem on the Redemption Date or the Special Redemption
Date, as applicable, all the Debentures so called for redemption at the
appropriate Redemption Price or Special Redemption Price.

 

If all, or less than all, the Debentures are to be redeemed, the
Company will give the Trustee notice not less than 45 nor more than
60 days, respectively, prior to the Redemption Date or Special Redemption
Date, as applicable, as to the aggregate principal amount of Debentures to be
redeemed and the Trustee shall select, in such manner as in its sole discretion
it shall deem appropriate and fair, the Debentures or portions thereof (in
integral multiples of $1,000.00) to be redeemed.

 

Section 10.4.        Payment of Debentures Called for Redemption.  If notice of redemption has been given as
provided in Section 10.3, the Debentures or portions of Debentures with
respect to which such notice has been given shall become due and payable on the
Redemption Date or Special Redemption Date, as applicable, and at the place or
places stated in such notice at the applicable Redemption Price or Special
Redemption Price and on and after said date (unless the Company shall default
in the payment of such Debentures at the Redemption Price or Special Redemption
Price, as applicable) interest on the Debentures or portions of Debentures so
called for redemption shall cease to accrue. 
On presentation and surrender of such Debentures at a place of payment
specified in said notice, such Debentures or the specified portions thereof
shall be paid and redeemed by the Company at the applicable Redemption Price or
Special Redemption Price.

 

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

 

40

 

ARTICLE
XI.

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

 

Section 11.1.        Company May Consolidate, etc., on Certain Terms.  Nothing contained in this Indenture or in the
Debentures shall prevent any consolidation or merger of the Company with or
into any other Person (whether or not affiliated with the Company) or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance,
transfer or other disposition of the property of the Company or its successor
or successors as an entirety, or substantially as an entirety, to any other
Person (whether or not affiliated with the Company, or its successor or
successors) authorized to acquire and operate the same; provided, however,
that the Company hereby covenants and agrees that, upon any such consolidation,
merger (where the Company is not the surviving corporation), sale, conveyance,
transfer or other disposition, the due and punctual payment of the principal of
(and premium, if any) and interest on all of the Debentures in accordance with
their terms, according to their tenor, and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be kept or
performed by the Company, shall be expressly assumed by supplemental indenture
satisfactory in form to the Trustee executed and delivered to the Trustee by
the entity formed by such consolidation, or into which the Company shall have
been merged, or by the entity which shall have acquired such property.

 

Section 11.2.        Successor Entity to be Substituted.  In case of any such consolidation, merger,
sale, conveyance, transfer or other disposition and upon the assumption by the
successor entity, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Debentures and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed or observed by the
Company, such successor entity shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the Company,
and thereupon the predecessor entity shall be relieved of any further liability
or obligation hereunder or upon the Debentures. 
Such successor entity thereupon may cause to be signed, and may issue in
its own name, any or all of the Debentures issuable hereunder which theretofore
shall not have been signed by the Company and delivered to the Trustee or the
Authenticating Agent; and, upon the order of such successor entity instead of
the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee or the Authenticating Agent shall
authenticate and deliver any Debentures which previously shall have been signed
and delivered by the officers of the Company, to the Trustee or the
Authenticating Agent for authentication, and any Debentures which such
successor entity thereafter shall cause to be signed and delivered to the
Trustee or the Authenticating Agent for that purpose.  All the Debentures so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Debentures theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Debentures had been issued at the date of
the execution hereof.

 

Section 11.3.        Opinion of Counsel to be Given to Trustee.  The Trustee, subject to the
provisions of Sections 6.1 and 6.2, shall receive, in addition to the
Opinion of Counsel required by Section 9.5, an Opinion of Counsel as
conclusive evidence that any consolidation, merger, sale, conveyance, transfer
or other disposition, and any assumption, permitted or required by the terms of
this Article XI complies with the provisions of this Article XI.

 

ARTICLE
XII.

SATISFACTION AND DISCHARGE OF INDENTURE

 

Section 12.1.        Discharge of Indenture.  When

 

(a)                                  the
Company shall deliver to the Trustee for cancellation all Debentures
theretofore authenticated (other than any Debentures which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.6) and not theretofore canceled, or

 

41

 

(b)                                 all
the Debentures not theretofore canceled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within 1 year or are to be called for redemption within 1 year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds,
which shall be immediately due and payable, sufficient to pay at maturity or
upon redemption all of the Debentures (other than any Debentures which shall
have been destroyed, lost or stolen and which shall have been replaced or paid
as provided in Section 2.6) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, but excluding, however, the amount of any moneys for the payment of
principal of, and premium, if any, or interest on the Debentures
(1) theretofore repaid to the Company in accordance with the provisions of
Section 12.4, or (2) paid to any state or to the District of Columbia
pursuant to its unclaimed property or similar laws,

 

and if in the case of
either clause (a) or clause (b) the Company shall also pay or cause
to be paid all other sums payable hereunder by the Company, then this Indenture
shall cease to be of further effect except for the provisions of Sections 2.5,
2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such
Debentures shall mature and be paid. 
Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee,
on demand of the Company accompanied by an Officers’ Certificate and an Opinion
of Counsel, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with, and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture.  The Company agrees to reimburse the Trustee
for any costs or expenses thereafter reasonably and properly incurred by the
Trustee in connection with this Indenture or the Debentures.

 

Section 12.2.        Deposited Moneys to be Held in Trust by Trustee.  Subject to the provisions of
Section 12.4, all moneys deposited with the Trustee pursuant to
Section 12.1 shall be held in trust in a non-interest bearing account and
applied by it to the payment, either directly or through any paying agent
(including the Company if acting as its own paying agent), to the holders of
the particular Debentures for the payment of which such moneys have been
deposited with the Trustee, of all sums due and to become due thereon for
principal, and premium, if any, and interest.

 

Section 12.3.        Paying Agent to Repay Moneys Held.  Upon the satisfaction and discharge of this
Indenture all moneys then held by any paying agent of the Debentures (other
than the Trustee) shall, upon demand of the Company, be repaid to it or paid to
the Trustee, and thereupon such paying agent shall be released from all further
liability with respect to such moneys.

 

Section 12.4.        Return of Unclaimed Moneys.  Any moneys deposited with or paid
to the Trustee or any paying agent for payment of the principal of, and
premium, if any, or interest on Debentures and not applied but remaining
unclaimed by the holders of Debentures for 2 years after the date upon which
the principal of, and premium, if any, or interest on such Debentures, as the
case may be, shall have become due and payable, shall, subject to applicable
escheatment laws, be repaid to the Company by the Trustee or such paying agent
on written demand; and the holder of any of the Debentures shall thereafter
look only to the Company for any payment which such holder may be entitled to
collect, and all liability of the Trustee or such paying agent with respect to
such moneys shall thereupon cease.

 

42

 

ARTICLE
XIII.

IMMUNITY OF INCORPORATORS, STOCKHOLDERS,

OFFICERS AND DIRECTORS

 

Section 13.1.        Indenture and Debentures Solely
Corporate Obligations.  No
recourse for the payment of the principal of or premium, if any, or interest on
any Debenture, or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture or in any supplemental indenture, or in any such
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee, officer or
director, as such, past, present or future, of the Company or of any successor
Person of the Company, either directly or through the Company or any successor
Person of the Company, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise, it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Debentures.

 

ARTICLE
XIV.

MISCELLANEOUS PROVISIONS

 

Section 14.1.        Successors.  All the covenants, stipulations,
promises and agreements of the Company in this Indenture shall bind its
successors and assigns whether so expressed or not.

 

Section 14.2.        Official Acts by Successor Entity.  Any act or proceeding by any
provision of this Indenture authorized or required to be done or performed by
any board, committee or officer of the Company shall and may be done and
performed with like force and effect by the like board, committee, officer or
other authorized Person of any entity that shall at the time be the lawful
successor of the Company.

 

Section 14.3.        Surrender of Company Powers.  The Company by instrument in
writing executed by authority of at least 2/3 (two-thirds) of its Board of
Directors and delivered to the Trustee may surrender any of the powers reserved
to the Company and thereupon such power so surrendered shall terminate both as
to the Company, and as to any permitted successor.

 

Section 14.4.        Addresses for Notices, etc.  Any notice, consent, direction,
request, authorization, waiver or demand which by any provision of this
Indenture is required or permitted to be given, made, furnished or served by
the Trustee or by the Securityholders on or to the Company may be given or
served in writing by being deposited postage prepaid by registered or certified
mail in a post office letter box addressed (until another address is filed by
the Company, with the Trustee for the purpose) to the Company, 1801 Century
Park East, Los Angeles, California  90067,
Attention:  Thomas McCullough.  Any notice, consent, direction, request,
authorization, waiver or demand by any Securityholder or the Company to or upon
the Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the office of the Trustee, addressed
to the Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware  19890-1600,
Attention: Corporate Trust Administration. 
Any notice, consent, direction, request, authorization, waiver or demand
on or to any Securityholder shall be deemed to have been sufficiently given or
made, for all purposes, if given or made in writing at the address set forth in
the Debenture Register.

 

Section 14.5.        Governing Law.  This Indenture and each Debenture
shall be deemed to be a contract made under the law of the State of New York,
and for all purposes shall be governed by and construed in accordance with the
law of said State, without regard to conflict of laws principles thereof.

 

43

 

Section 14.6.        Evidence of Compliance with Conditions
Precedent.  Upon
any application or demand by the Company to the Trustee to take any action
under any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officers’ Certificate stating that in the opinion of the signers all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been
complied with.

 

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

 

Section 14.7.        Table of Contents, Headings, etc.  The table of contents and the titles and
headings of the articles and sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof, and
shall in no way modify or restrict any of the terms or provisions hereof.

 

Section 14.8.        Execution in Counterparts.  This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

 

Section 14.9.        Separability.  In case any one or more of the provisions
contained in this Indenture or in the Debentures shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Indenture or
of such Debentures, but this Indenture and such Debentures shall be construed
as if such invalid or illegal or unenforceable provision had never been
contained herein or therein.

 

Section 14.10.      Assignment.  The Company will have the right at
all times to assign any of its rights or obligations under this Indenture to a
direct or indirect wholly owned Subsidiary of the Company, provided that, in
the event of any such assignment, the Company will remain liable for all such
obligations.  Subject to the foregoing,
this Indenture is binding upon and inures to the benefit of the parties hereto
and their respective successors and assigns. 
This Indenture may not otherwise be assigned by the parties hereto.

 

Section 14.11.      Acknowledgment of Rights.  The Company agrees that, with
respect to any Debentures held by the Trust or the Institutional Trustee of the
Trust, if the Institutional Trustee of the Trust fails to enforce its rights
under this Indenture as the holder of Debentures held as the assets of such
Trust after the holders of a majority in Liquidation Amount of the Capital
Securities of such Trust have so directed such Institutional Trustee, a holder
of record of such Capital Securities may, to the fullest extent permitted by
law, institute legal proceedings directly against the Company to enforce such
Institutional Trustee’s rights under this Indenture without first instituting
any legal proceedings against such trustee or any other Person.  Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest (or premium, if any) or principal on the
Debentures on the date such interest (or premium, if any) or principal is
otherwise payable (or in the case of redemption, on the redemption date), the
Company agrees that a holder of record of Capital Securities of the Trust may
directly institute a proceeding against the Company for enforcement of payment
to such holder directly of the principal of (or premium, if any) or interest on
the

 

44

 

Debentures having an
aggregate principal amount equal to the aggregate Liquidation Amount of the
Capital Securities of such holder on or after the respective due date specified
in the Debentures.

 

ARTICLE
XV.

SUBORDINATION OF DEBENTURES

 

Section 15.1.        Agreement to Subordinate.  The Company covenants and agrees, and each
holder of Debentures by such Securityholder’s acceptance thereof likewise
covenants and agrees, that all Debentures shall be issued subject to the
provisions of this Article XV; and each holder of a Debenture, whether
upon original issue or upon transfer or assignment thereof, accepts and agrees
to be bound by such provisions.

 

The payment by the Company of the principal of, and
premium, if any, and interest on all Debentures shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred; provided,
however, that the Debentures shall rank pari
passu in right of payment with the Company’s:  Floating Rate Junior Subordinated Debentures
due December 18, 2031 issued pursuant to an Indenture dated as of December 18,
2001 by and between the Company and U.S. Bank National Association; Floating
Rate Junior Subordinated Debentures due September 26, 2032 issued pursuant to
an Indenture dated as of September 26, 2002 by and between the Company and U.S.
Bank National Association; and Floating Rate Junior Subordinated Debentures due
March 17, 2034 issued pursuant to an Indenture dated as of March 17, 2004 by
and between the Company and U.S. Bank National Association.

 

No provision of this Article XV shall prevent the
occurrence of any default or Event of Default hereunder.

 

Section 15.2.        Default on Senior Indebtedness.  In the event and during the
continuation of any default by the Company in the payment of principal,
premium, interest or any other payment due on any Senior Indebtedness of the
Company following any grace period, or in the event that the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default
and such acceleration has not been rescinded or canceled and such Senior
Indebtedness has not been paid in full, then, in either case, no payment shall
be made by the Company with respect to the principal (including redemption) of,
or premium, if any, or interest on the Debentures.

 

In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.2, such payment shall, subject to
Section 15.7, be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that the holders of the Senior
Indebtedness (or their representative or representatives or a trustee) notify
the Trustee in writing within 90 days of such payment of the amounts then
due and owing on the Senior Indebtedness and only the amounts specified in such
notice to the Trustee shall be paid to the holders of Senior Indebtedness.

 

Section 15.3.        Liquidation, Dissolution, Bankruptcy.  Upon any payment by the Company or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution or winding-up
or liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due upon all Senior Indebtedness of the Company shall first be paid
in full, or payment thereof provided for in money in accordance with its terms,
before any payment is made by the Company, on account of the principal (and
premium, if any) or interest on the Debentures. 
Upon any such dissolution or winding-up

 

45

 

or liquidation or
reorganization, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Securityholders or the Trustee would be entitled to receive from the
Company, except for the provisions of this Article XV, 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
Securityholders or by the Trustee under this Indenture if received by them or
it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money’s worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Trustee.

 

In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior Indebtedness is paid in full, or provision is
made for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of such Senior Indebtedness or their representative
or representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing such Senior Indebtedness may have been
issued, as their respective interests may appear, as calculated by the Company,
for application to the payment of all Senior Indebtedness, remaining unpaid to
the extent necessary to pay such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior Indebtedness.

 

For purposes of this Article XV, the words “cash, property or
securities” shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article XV with respect to the Debentures to the payment of all Senior
Indebtedness, that may at the time be outstanding, provided that (i) such
Senior Indebtedness is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment, and (ii) the rights of the
holders of such Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment.  The consolidation of the Company with, or the
merger of the Company 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 for in Article XI of this Indenture
shall not be deemed a dissolution, winding-up, liquidation or reorganization
for the purposes of this Section if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article XI of this Indenture. 
Nothing in Section 15.2 or in this Section shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture.

 

Section 15.4.        Subrogation.  Subject to the payment in full of
all Senior Indebtedness, the Securityholders shall be subrogated to the rights
of the holders of such Senior Indebtedness to receive payments or distributions
of cash, property or securities of the Company, applicable to such Senior Indebtedness
until the principal of (and premium, if any) and interest on the Debentures
shall be paid in full.  For the purposes
of such subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Securityholders
or the Trustee would be entitled except for the provisions of this
Article XV, and no payment over pursuant to the provisions of this
Article XV to or for the benefit of the holders of such Senior
Indebtedness by Securityholders or the Trustee, shall, as between the Company,
its creditors other than holders of Senior Indebtedness of the

 

46

 

Company,
and the holders of the Debentures be deemed to be a payment or distribution by
the Company to or on account of such Senior Indebtedness.  It is understood that the provisions of this
Article XV are and are intended solely for the purposes of defining the
relative rights of the holders of the Securities, on the one hand, and the
holders of such Senior Indebtedness, on the other hand.

 

Nothing contained in this Article XV or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
holders of the Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Debentures the principal of (and
premium, if any) and interest on the Debentures as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Debentures and creditors
of the Company, other than the holders of Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Debenture
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article XV
of the holders of such Senior Indebtedness in respect of cash, property or
securities of the Company, received upon the exercise of any such remedy.

 

Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of
Article VI of this Indenture, and the Securityholders shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Securityholders,
for the purposes of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this
Article XV.

 

Section 15.5.        Trustee to Effectuate Subordination.  Each Securityholder by such
Securityholder’s acceptance thereof authorizes and directs the Trustee on such
Securityholder’s behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article XV and appoints
the Trustee such Securityholder’s attorney-in-fact for any and all such
purposes.

 

Section 15.6.        Notice by the Company. 
The Company shall give prompt written notice to a Responsible
Officer of the Trustee at the Principal Office of the Trustee of any fact known
to the Company that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the provisions of this
Article XV.  Notwithstanding the
provisions of this Article XV or any other provision of this Indenture,
the Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment of monies to or by the Trustee in
respect of the Debentures pursuant to the provisions of this Article XV, unless
and until a Responsible Officer of the Trustee at the Principal Office of the
Trustee shall have received written notice thereof from the Company or a holder
or holders of Senior Indebtedness or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Article VI of this Indenture, shall be entitled in all respects to assume
that no such facts exist; provided, however, that if the Trustee
shall not have received the notice provided for in this Section at least 2
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (or premium, if any) or interest on any Debenture), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to
the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within 2 Business Days prior
to such date.

 

47

 

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

 

Section 15.7.        Rights of the Trustee; Holders of Senior
Indebtedness.  The
Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article XV in respect of any Senior Indebtedness at any time
held by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.

 

With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XV, and no implied covenants
or obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. 
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of such Senior Indebtedness and, subject to the provisions of Article VI
of this Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Securityholders, the Company or
any other Person money or assets to which any holder of such Senior
Indebtedness shall be entitled by virtue of this Article XV or otherwise.

 

Nothing in this Article XV shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.6.

 

Section 15.8.        Subordination May Not Be Impaired.  No right of any present or future
holder of any Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company, or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company, with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with.

 

Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Securityholders, without
incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Debentures to the holders of such Senior
Indebtedness, do any one or more of the following:  (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, such Senior
Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company, and any other Person.

 

Signatures appear on the following page

 

48

 

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

 

	
   

  	
  FIRST REGIONAL BANCORP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas McCullough

  	
   

  
	
   

  	
   

  	
  Name: Thomas McCullough

  
	
   

  	
   

  	
  Title:   Corporate Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WILMINGTON TRUST
  COMPANY, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher J.
  Monigole

  	
   

  
	
   

  	
   

  	
  Name: Christopher J.
  Monigole

  
	
   

  	
   

  	
  Title:   Assistant Vice President

  
					

 

49

 

EXHIBIT A

 

FORM OF FLOATING RATE JUNIOR
SUBORDINATED DEFERRABLE INTEREST

DEBENTURE

 

[FORM OF FACE OF
SECURITY]

 

THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE
FEDERAL DEPOSIT INSURANCE CORPORATION.

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW.  NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.  THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A
NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF
SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT
IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE
COMPANY.

 

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)
(EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY
REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN
ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF THIS SECURITY IS NOT PROHIBITED BY

 

A-1-1

 

SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING.  ANY PURCHASER OR HOLDER OF THE SECURITIES OR
ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND
HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE
MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE
IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE
BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY
EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE
WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.

 

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN
$100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

 

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY
WITH THE FOREGOING RESTRICTIONS.

 

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.

 

Floating Rate Junior
Subordinated Deferrable Interest Debenture

 

of

 

First Regional Bancorp

 

December 15, 2004

 

First Regional Bancorp, a California corporation (the “Company” which
term includes any successor Person under the Indenture hereinafter referred
to), for value received promises to pay to Wilmington Trust Company, not in its
individual capacity but solely as Institutional Trustee for First Regional
Statutory Trust IV (the “Holder”) or registered assigns, the principal sum of twenty
million six hundred nineteen thousand dollars ($20,619,000.00) on December 15,
2034, and to pay interest on said principal sum from December 15, 2004, or from
the most recent Interest Payment Date (as defined below) to which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 15, June 15, September 15 and
December 15 of each year or if such day is not a Business Day, then the
next succeeding Business Day (each such date, an “Interest Payment Date”) (it
being understood that interest accrues for any such non-Business Day),
commencing on the Interest Payment Date in March 2005, at an annual rate equal
to 4.45% beginning on (and including) the date of original issuance and ending
on (but excluding) the Interest Payment Date in March 2005 and at an annual
rate for each successive period beginning on (and including) the Interest
Payment Date in March 2005, and each succeeding Interest Payment Date, and
ending on (but excluding) the next succeeding Interest Payment Date (each a “Distribution
Period”), equal to 3-Month LIBOR, determined as described below, plus 2.00%
(the “Coupon Rate”), applied to the principal amount hereof, until the
principal hereof is paid or duly provided for or made available for payment,
and on any overdue principal and (without duplication and to the extent that
payment of such interest is enforceable under applicable law) on any

 

A-1-2

 

overdue installment of interest (including Additional
Interest) at the Interest Rate in effect for each applicable period, compounded
quarterly, from the dates such amounts are due until they are paid or made
available for payment.  The amount of
interest payable for any period will be computed on the basis of the actual
number of days in the Distribution Period concerned divided by 360.  The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as provided
in the Indenture, be paid to the Person in whose name this Debenture (or one or
more Predecessor Securities) is registered at the close of business on the
regular record date for such interest installment, which shall be five Business
Days prior to the day on which the relevant Interest Payment Date occurs.  Any such interest installment not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such regular record date and may be paid to the Person in whose name
this Debenture (or one or more Predecessor Securities) is registered at the
close of business on a special record date.

 

“3-Month LIBOR” as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Trustee in
the following order of priority:  (i) the
rate (expressed as a percentage per annum) for U.S. dollar deposits having a
three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m.
(London time) on the related Determination Date (“Telerate Page 3750” means the
display designated as “Page 3750” on the Dow Jones Telerate Service or such
other page as may replace Page 3750 on that service or such other service or
services as may be nominated by the British Bankers’ Association as the
information vendor for the purpose of displaying London interbank offered rates
for U.S. dollar deposits); (ii) if such rate cannot be identified on the
related Determination Date, the Trustee will request the principal London
offices of four leading banks in the London interbank market to provide such
banks’ offered quotations (expressed as percentages per annum) to prime banks
in the London interbank market for U.S. dollar deposits having a three-month
maturity as of 11:00 a.m. (London time) on such Determination Date.  If at least two quotations are provided, 3-Month
LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than
two such quotations are provided as requested in clause (ii) above, the Trustee
will request four major New York City banks to provide such banks’ offered quotations
(expressed as percentages per annum) to leading European banks for loans in
U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.  If at least two such quotations are provided,
3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately preceding such
current Distribution Period.  If the rate
for U.S. dollar deposits having a three-month maturity that initially appears
on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date is superseded on the Telerate Page 3750 by a corrected rate
by 12:00 noon (London time) on such Determination Date, then the corrected rate
as so substituted on the applicable page will be the applicable 3-Month LIBOR
for such Determination Date.  As used
herein, “Determination Date” means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period.

 

The Interest Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be
modified by United States law.

 

All percentages resulting from any calculations on the Debentures will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all
dollar amounts used in or resulting from such calculation will be rounded to
the nearest cent (with one-half cent being rounded upward)).

 

The principal of and interest on this Debenture shall be payable at the
office or agency of the Trustee (or other paying agent appointed by the
Company) maintained for that purpose in any coin or

 

A-1-3

 

currency of the United States of America that at the
time of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made by check mailed to the
registered holder at such address as shall appear in the Debenture Register if
a request for a wire transfer by such holder has not been received by the
Company or by wire transfer to an account appropriately designated by the
holder hereof.  Notwithstanding the
foregoing, so long as the holder of this Debenture is the Institutional
Trustee, the payment of the principal of and interest on this Debenture will be
made in immediately available funds at such place and to such account as may be
designated by the Trustee.

 

So long as no Extension Event of Default has occurred and is
continuing, the Company shall have the right, from time to time, and without
causing an Event of Default, to defer payments of interest on the Debentures by
extending the interest payment period on the Debentures at any time and from
time to time during the term of the Debentures, for up to 20 consecutive
quarterly periods (each such extended interest payment period, an “Extension
Period”), during which Extension Period no interest (including Additional
Interest) shall be due and payable (except any Additional Sums that may be due
and payable).  No Extension Period may
end on a date other than an Interest Payment Date.  During an Extension Period, interest will
continue to accrue on the Debentures, and interest on such accrued interest
will accrue at an annual rate equal to the Interest Rate in effect for such
Extension Period, compounded quarterly from the date such interest would have
been payable were it not for the Extension Period, to the extent permitted by
law (such interest referred to herein as “Additional Interest”).  At the end of any such Extension Period the
Company shall pay all interest then accrued and unpaid on the Debentures
(together with Additional Interest thereon); provided, however,
that no Extension Period may extend beyond the Maturity Date; provided  further,
however, that during any such Extension Period, the Company shall not
and shall not permit any Affiliate to engage in any of the activities or
transactions described on the reverse side hereof and in the Indenture.  Prior to the termination of any Extension
Period, the Company may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 20 consecutive quarterly periods, or extend beyond the Maturity
Date.  Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Company may commence a new Extension Period, subject
to the foregoing requirements.  No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest.  The Company must
give the Trustee notice of its election to begin or extend an Extension Period
by the close of business at least 5 Business Days prior to the Interest Payment
Date with respect to which interest on the Debentures would have been payable
except for the election to begin or extend such Extension Period.

 

The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto.  Each holder of this Debenture, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his or her attorney-in-fact for any
and all such purposes.  Each holder
hereof, by his or her acceptance hereof, hereby waives all notice of the
acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.

 

This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by or on behalf
of the Trustee.

 

A-1-4

 

The provisions of this Debenture are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as
though fully set forth at this place.

 

A-1-5

 

IN WITNESS WHEREOF, the Company has duly executed this certificate.

 

	
   

  	
  FIRST REGIONAL BANCORP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 

CERTIFICATE OF
AUTHENTICATION

 

This is one of the Debentures referred to in the within-mentioned
Indenture.

 

	
   

  	
  WILMINGTON TRUST
  COMPANY, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  
					

 

A-1-6

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