Document:

ex4-2

 

Exhibit 4.2

NEITHER THIS WARRANT NOR
THE SHARES UNDERLYING THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (“ACT”), OR APPLICABLE STATE LAW. THIS WARRANT AND THE
SHARES UNDERLYING IT MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS
CONTAINED IN A SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE INVESTOR, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

VOID AFTER 5:00 P.M. EASTERN TIME, AUGUST 26, 2007

WARRANT

For the Purchase of

______Shares of Common Stock

of

VIDEO NETWORK COMMUNICATIONS, INC.

1.     Warrant.

        THIS CERTIFIES THAT, in consideration for purchasing a $______
in original principal amount unsecured 9% promissory note (“Note”) from Video
Network Communications, Inc. (“Company”), ______
(“Holder”), as registered owner of this Warrant, is entitled, at any time or
from time to time at or after August 26, 2002 (“Commencement Date”), and at or
before 5:00 p.m., Eastern Time on August 26, 2007 (“Expiration Date”), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to
______(______) shares of the common stock of the Company (“Common
Stock”). If the Expiration Date is a day on which banking institutions are
authorized by law to close, then this Warrant may be exercised on the next
succeeding day that is not such a day in accordance with the terms herein.
During the period ending on the Expiration Date, the Company agrees not to take
any action that would terminate the Warrant. This Warrant is being issued
together with Warrants of like tenor and Notes in a private offering of Notes
and Warrants by the Company (“Offering”).

2.     Exercise.

        2.1     Exercise Price. This Warrant is initially exercisable at an initial
exercise price equal to $1.30 per share of Common Stock purchased; provided,
however, that upon the occurrence of any of the events specified in Section 6
hereof, the rights granted by this Warrant, including the exercise price, and
in certain circumstances the number of shares of Common Stock to be received
upon such exercise, shall be adjusted as therein specified. The term “Exercise
Price” shall mean the initial exercise price or the adjusted exercise price,
depending on the context, of a share of Common Stock.

        2.2     Exercise Notice; Payment for Shares. In order to exercise this
Warrant, the exercise notice form attached hereto must be duly executed and
completed and delivered to the Company, together with this Warrant and payment
of the Exercise Price (except as provided in Section 2.4 hereof) in cash or by
certified check or official bank check for the shares being purchased. If this
Warrant has not been wholly exercised at or before 5:00 p.m., Eastern time, on
the Expiration Date, this Warrant shall become and be void without further
force or effect, and all rights represented hereby shall cease and expire.

 

 

        2.3     Legend. Each certificate for shares of Common Stock purchased under
this Warrant shall bear the following legends, unless the issuance of such
shares of Common Stock have been registered under the Securities Act of 1933,
as amended (“Act”):

		
	 	“The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended
(“Act”) or applicable state law. The shares may not be
pledged, sold, assigned or transferred in the absence of an
effective registration statement with respect thereto under
the Act and any applicable state securities law, or unless
the Company receives an opinion of counsel, satisfactory to
the Company, that such registration is not required.”
	 
	 	“The shares represented by this certificate are subject to
the restrictions contained in the Subscription Agreement
between the Company and the Holder, a copy of which is on
file with the Secretary of the Company.”

        2.4     Conversion Right.

                 2.4.1     Determination of Amount. In lieu of the payment of the Exercise
Price in the manner required by Section 2.2, the Holder shall have the right
(but not the obligation) to convert any exercisable but unexercised portion of
this Warrant into securities (“Conversion Right”) as follows: Upon exercise of
the Conversion Right, the Company will deliver to the Holder (without payment
by the Holder of any of the Exercise Price in cash) that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the “Value” (as
defined below) of the portion of the Warrants being converted by (y) the
“Market Price” (as defined below). The “Value” of the portion of the Warrants
being converted will equal the remainder derived from subtracting (a) the
Exercise Price multiplied by the number of shares of Common Stock underlying
the portion of the Warrants being converted from (b) the Market Price
multiplied by the number of shares of Common Stock underlying the portion of
the Warrants being converted. As used herein, the term “Market Price” is
deemed to be product of (x) the last reported sale price of the Common Stock on
the date prior to the date the Conversion Right is exercised, or, in case no
such reported sale takes place on such day, the average of the last reported
sale prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed
or admitted to trading on any national securities exchange or if any such
exchange on which the Common Stock is listed is not its principal trading
market, the last reported sale price as furnished by the National Association
Securities Dealers, Inc. through the Nasdaq National Market or SmallCap Market,
or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed
or admitted to trading on any of the foregoing markets, or similar
organization, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.

                 2.4.2     Mechanics of Conversion Right. The Conversion Right may be
exercised by the Holder on any business day on or after the Commencement Date
and not later than the Expiration Date, by delivering to the Company the
Warrants with a duly executed exercise form attached hereto with the conversion
section completed exercising the Conversion Right.

3.     Transfer.

        3.1     General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
promptly transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.

        3.2     Restrictions Imposed by the Securities Act. This Warrant and the
shares of Common Stock underlying this Warrant shall not be transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that such securities may be sold pursuant to an exemption from registration
under the Act, and

2

 

 applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such securities has been filed by the Company and declared
effective by the Securities and Exchange Commission (“Commission”) and
compliance with applicable state law.

4.     New Warrants to be Issued.

        4.1     Partial Exercise or Transfer. Subject to the restrictions in Section
3 hereof, this Warrant may be exercised or assigned in whole or in part. In
the event of the exercise or assignment hereof in part only, upon surrender of
this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price multiplied by the number of shares of Common Stock for which
this Warrant is exercised and/or transfer tax, the Company shall cause to be
delivered to the Holder without charge a new Warrant of like tenor to this
Warrant in the name of the Holder evidencing the right of the Holder to
purchase the aggregate number of shares of Common Stock as to which this
Warrant has not then been exercised or assigned.

        4.2     Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant and of reasonably satisfactory indemnification, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered as a result of such loss, theft, mutilation or
destruction shall constitute a substitute contractual obligation on the part of
the Company.

5.     Registration Rights. The Company has agreed to file a registration
statement with the Commission or include the shares of Common Stock purchasable
under this Warrant on a registration statement, in accordance with the
registration rights set forth in full on and subject to the terms and
conditions set forth on Schedule 1 of the Subscription Agreement signed by the
Company and the original Holder of this Warrant in connection with the
Offering. These registration rights shall inure to the benefit of the
transferees of this Warrant and the shares underlying it.

6.     Adjustments.

        6.1     Adjustments to Exercise Price and Number of Shares. The Exercise
Price and the number of shares of Common Stock underlying this Warrant shall be
subject to adjustment from time to time as hereinafter set forth:

                 6.1.1     Stock Dividends — Recapitalization, Reclassification, Split-Ups.
If, after the date hereof, and subject to the provisions of Section 6.2 below,
the number of outstanding shares of Common Stock is increased by a stock
dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.

                 6.1.2     Aggregation of Shares. If after the date hereof, the number of
outstanding shares of Common Stock is decreased by a consolidation,
combination, reverse stock split or reclassification of shares of Common Stock
or other similar event, then, upon the effective date thereof, the number of
shares of Common Stock issuable on exercise of this Warrant shall be decreased
in proportion to such decrease in outstanding shares.

                 6.1.3     Additional Adjustments.

	 	 	 
	(A)	 	
If at any time after the date on
which this Warrant is first issued (the “Issuance
Date”), the Company shall issue (i) any Additional Stock
(as hereinafter defined) without consideration or for a
consideration per share less than the Exercise Price in
effect immediately prior to the issuance of such
Additional Stock, and/or (ii) any Additional Stock,
including any additional Warrants, with a per share
conversion or exercise price less than the Exercise
Price of this Warrant in effect immediately prior to the
issuance of such Additional Stock, then the Exercise
Price of this Warrant in effect immediately prior to
each such

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issuance shall forthwith, respectively, be reduced to
an amount equal to such lower purchase price for such
Additional Stock (or in the case of options and similar
securities, the sum of the consideration received for
the option and the consideration to be received upon
exercise of such option), or, if for no consideration,
$.01.
 
	(B)	 	
If at any time after the Issuance
Date, the Company shall issue additional Warrants solely
in connection with the Offering at an exercise price
different than the Exercise Price of this Warrant, then
the Exercise Price of this Warrant shall be increased or
decreased to match the exercise price of such
subsequently issued Warrant.
 
	(C)	 	
“Additional Stock” as used herein
shall mean any shares of Common Stock issued (or deemed
to have been issued) or rights, warrants, options or
other securities convertible into or exchangeable for
Common Stock (including shares of Common Stock held in
the Company’s treasury) by the Company after the date
hereof, other than Common Stock issuable upon exercise
or conversion of options, warrants, preferred stock and
other rights and convertible securities outstanding as
of the Issuance Date.
 
	(D)	 	
No adjustment of the Exercise Price
pursuant to this paragraph 6.1.3. shall have the effect
of increasing the Exercise Price above the Exercise
Price in effect immediately prior to such adjustment.
 
	(E)	 	
In the case of the issuance of Common
Stock for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed
to be the fair value thereof as determined in good faith
by the Board.
 
	(F)	 	
In the case of the issuance of
options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all
purposes of this Section:

	 	 	 
	(1)	 	
The aggregate maximum
number of shares of Common Stock deliverable upon
exercise (assuming the satisfaction of any
conditions to exercisability including, without
limitation, the passage of time, but without
taking into account potential antidilution
adjustments) of such options to purchase or rights
to subscribe for Common Stock shall be deemed to
have been issued at the time such options or
rights were issued and for a consideration equal
to the consideration, if any, received by the
Company upon the issuance of such options or
rights plus the minimum exercise price provided in
such options or rights (without taking into
account potential antidilution adjustments) for
the Common Stock covered thereby.
 
	(2)	 	
The aggregate maximum
number of shares of Common Stock deliverable upon
conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility
or exchangeability including, without limitation,
the passage of time, but without taking into
account potential antidilution adjustments) for
any such convertible or exchangeable securities or
upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange
thereof, shall be deemed to have been issued at
the time such securities were issued or

4

 

	 	 	 
	 	 	
such options or rights were issued and for a
consideration equal to the consideration, if any,
received by the Company for any such securities
and related options or rights (excluding any cash
received on account of accrued interest or
accrued dividends), plus the minimum additional
consideration, if any, to be received by the
Company (without taking into account potential
antidilution adjustments) upon the conversion or
exchange of such securities or the exercise of
any related options or rights.
 
	(3)	 	
In the event of any
change in the number of shares of Common Stock
deliverable or in the consideration payable to the
Company upon exercise of such options or rights or
upon conversion of or in exchange for such
convertible or exchangeable securities (excluding
a change resulting solely from the antidilution
provisions thereof if such change results from an
event which gives rise to an antidilution
adjustment under this paragraph), the Exercise
Price, to the extent in any way affected by or
computed using such options, rights or securities,
shall be recomputed to reflect such change;
provided, however, that the Exercise Price shall
not be increased from the Exercise Price in effect
immediately prior to such change, but no further
adjustment shall be made for the actual issuance
of Common Stock or any payment of such
consideration upon the exercise of any such
options or rights or the conversion or exchange of
such securities.
 
	(4)	 	
Common Stock for purposes
of this Section shall be deemed to include
securities ordinarily having the right to vote in
the election of directors (apart from rights
accruing under special circumstances); provided,
however, that the number of shares of Common Stock
deemed issued shall be the number that equals the
number of shares of such security multiplied by a
fraction, the numerator of which is the number of
votes each share of such security has in votes for
the election of directors and the denominator of
which is the number of votes each share of Common
Stock has in votes for the election of directors;
such number of shares of Common Stock deemed
issued shall be recomputed to reflect any change
in the number of votes that either each share of
such other security or the Common Stock has in
votes for the election of directors.

                 6.1.4     No Impairment. The Company will not, by amendment of its Articles
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company but will at
all times in good faith assist in the carrying out of all the provisions of
this Section 6 and in the taking of all such actions as may be necessary or
appropriate in order to protect against impairment of the rights of the Holder
of this Warrant to adjustments in the Exercise Price.

                 6.1.5     Notice of Adjustment. Upon the happening of any event requiring an
adjustment of the Exercise Price hereunder, the Company shall forthwith give
written notice thereof to the Holder of this Warrant stating the adjusted
Exercise Price and the adjusted number of shares of Common Stock underlying the
Warrants resulting from such event and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based
(“Price Notice”). The Price Notice shall describe the event causing the change
and the method of calculating same and shall be certified as being true and
accurate by the Company’s President and Chief Financial Officer.

                 6.1.6     Replacement of Shares upon Reorganization, etc. In case of any
reclassification or reorganization of the outstanding shares of Common Stock
other than a change covered by Section 6.1.1 hereof or

5

 

 which solely affects the par value of such shares of Common Stock, or in
the case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification or
reorganization of the outstanding shares of Common Stock), or in the case of
any sale or conveyance to another corporation or entity of the property of the
Company as an entirety or substantially as an entirety in connection with which
the Company is dissolved, the Holder of this Warrant shall have the right
thereafter (until the expiration of the right of exercise of this Warrant) to
receive upon the exercise hereof, for the same aggregate Exercise Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a
dissolution following any such sale or other transfer, by a Holder of the
number of shares of Common Stock of the Company obtainable upon exercise of
this Warrant immediately prior to such event. The provisions of this Section
6.1. shall similarly apply to successive reclassifications, reorganizations,
mergers or consolidations, sales or other transfers.

                 6.1.7     Adjustments in Exercise Price. Whenever the number of shares of
Common Stock purchasable upon the exercise of this Warrant is adjusted, as
provided in this Section 6.1, the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and (y) the denominator of which shall be
the number of shares of Common Stock purchasable immediately thereafter.

                 6.1.8     Changes in Form of Warrant. This form of Warrant need not be
changed because of any change pursuant to this Section, and Warrants issued
after such change may state the same Exercise Price and the same number of
shares of Common Stock and Warrants as are stated in the Warrants initially
issued pursuant to this Agreement. The acceptance by the Holder of the
issuance of new Warrants reflecting a required or permissive change shall not
be deemed to waive any rights to a prior adjustment or the computation thereof.

        6.2     Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.

7.     Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common
Stock or other securities, properties or rights as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon exercise of the
Warrants and payment of the Exercise Price therefor, all shares of Common Stock
and other securities issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive rights of
any stockholder. As long as the Warrants shall be outstanding, the Company
shall use its best efforts to cause all shares of Common Stock issuable upon
exercise of the Warrants to be listed (subject to official notice of issuance)
on all securities exchanges (or, if applicable on Nasdaq or the OTC Bulletin
Board) on which the Common Stock is then listed and/or quoted.

8.     Certain Notice Requirements.

        8.1     Holder’s Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holder the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as
having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall use its best efforts to give written notice of such
event at least fifteen days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the stockholders
entitled to such dividend, rights offering, merger or reorganization, or
entitled to vote on such proposed dissolution, liquidation, winding up or sale.
Such notice shall specify such record date or the date of the closing of the
transfer books, as the case may be.

        8.2     Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events:
(i) if the Company shall take a record of the holders of its

6

 

shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution, (ii) the Company shall offer to all the holders of
its Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor, (iii) the
signing of a merger or reorganization agreement pursuant to which the Company
is not the surviving party or (iv) a dissolution, liquidation or winding up of
the Company (other than in connection with a consolidation or merger) or a sale
of all or substantially all of its property, assets and business shall be
proposed.

        8.3     Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant must be in writing and is sufficiently given
if delivered to the addressees in person, by overnight courier service, or, if
mailed, postage prepaid, by certified mail (return receipt requested), and will
be effective three days after being placed in the mail if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on
the books of the Company, or (ii) if to the Company, to its principal executive
office.

9.     Miscellaneous.

        9.1     Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.

        9.2     Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings
of the parties, oral and written, with respect to the subject matter hereof.

        9.3     Binding Effect. This Warrant shall inure solely to the benefit of and
shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Warrant or any provisions herein contained.

        9.4     Governing Law; Submission to Jurisdiction. This Warrant will be
deemed to have been made and delivered in New York City and will be governed as
to validity, interpretation, construction, effect and in all other respects by
the internal laws of the State of New York. Each of the Company and the Holder
hereby (i) agrees that any legal suit, action or proceeding arising out of or
relating to this Warrant will be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (ii) waives any objection to the venue of
any such suit, action or proceeding and the right to assert that such forum is
not a convenient forum for such suit, action or proceeding, (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New
York in any such suit, action or proceeding, (iv) agrees to accept and
acknowledge service of any and all process that may be served in any such suit,
action or proceeding in New York State Supreme Court, County of New York or in
the United States District Court for the Southern District of New York and (v)
agrees that service of process upon it mailed by certified mail to its address
set forth in Section 8.3 hereof will be deemed in every respect effective
service of process upon it in any suit, action or proceeding.

        Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Warrant shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Warrant or any provision hereof or the right of the Company or any Holder
to thereafter enforce each and every provision of this Warrant. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Warrant shall be effective unless set forth in a written instrument executed by
the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.

        IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 28th day of March, 2002.

	 	VIDEO NETWORK COMMUNICATIONS, INC.

	 	By:________________________

Name: Robert H. Emery

Title: Chief Financial Officer

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Form to be used to exercise Warrant:

____________________________

____________________________

____________________________

Date: ______, 200______

        The undersigned hereby elects irrevocably to exercise the within Warrant
and to purchase ______shares of Common Stock of Video Network
Communications, Inc. and hereby makes payment of $______(at the rate of
$          per share of Common Stock) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock as to which this Warrant is exercised
in accordance with the instructions given below.

or

        The undersigned hereby elects irrevocably to exercise the within Warrant
to purchase ______shares of Common Stock of Video Network Communications,
Inc. by surrender of the unexercised portion of the within Warrant. Please
issue the shares of Common Stock in accordance with the instructions given
below.

and

        As of the date of exercise of this Warrant, the undersigned hereby
represents and warrants to the Company that it is an “Accredited Investor”
within the meaning of the Securities Act of 1933, as amended (the “Act”), and
is acquiring these securities for its own account and not with a view to, or
for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the same. The undersigned further
represents that it does not have any contract, agreement, understanding or
arrangement with any person to sell, transfer or grant the shares of Common
Stock issuable under the Warrant. The undersigned understands that the shares
it will be receiving are “restricted securities” under Federal securities laws
inasmuch as they are being acquired from Video Network Communications, Inc., in
transactions not including any public offering and that under such laws such
shares may be sold without registration under the Act only in limited
circumstances. The undersigned is familiar with Rule 144 promulgated under the
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Act. The undersigned is a resident of or has its principal
place of business and executive offices located in the State of ______.
The undersigned understands and acknowledges that the Company will rely on the
accuracy of these representations and warranties in issuing the securities
underlying the Warrant.

__________________

Signature

        NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name __________________________________________

                                        (Print in Block Letters)

Address ____________________________

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Form to be used to assign Warrant:

ASSIGNMENT

(To be executed by the registered Holder to effect a transfer of the
within Warrant):

           FOR VALUE RECEIVED, ______does hereby sell,
assign and transfer unto ______the right to
purchase ______shares of Common Stock of Video Network
Communications, Inc. (“Company”) evidenced by the within Warrant and does
hereby authorize the Company to transfer such right on the books of the
Company.

Dated:______, 200______

	 	______________________________

Signature

           NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.

9ex4-1

 

EXHIBIT 4.1

EXECUTION COPY

SUNRISE ASSISTED LIVING, INC.

5 1⁄4% CONVERTIBLE SUBORDINATED NOTES DUE FEBRUARY 1, 2009

INDENTURE

DATED AS OF JANUARY 30, 2002

FIRST UNION NATIONAL BANK,

AS TRUSTEE

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 
	 	 	 	Page
	 	 	 	

	Article 1 Definitions and Incorporation By Reference
	 	 	1	 
	 	Section 1.1. Definitions
	 	 	1	 
	 	Section 1.2. Other Definitions
	 	 	6	 
	 	Section 1.3. Trust Indenture Act Provisions
	 	 	7	 
	 	Section 1.4. Rules of Construction
	 	 	7	 
	Article 2 The Securities
	 	 	8	 
	 	Section 2.1. Form and Dating
	 	 	8	 
	 	Section 2.2. Executions and Authentication
	 	 	9	 
	 	Section 2.3. Registrar, Paying Agent and Conversion Agent
	 	 	10	 
	 	Section 2.4. Paying Agent to Hold Money in Trust
	 	 	10	 
	 	Section 2.5. Securityholder Lists
	 	 	11	 
	 	Section 2.6. Transfer and Exchange
	 	 	11	 
	 	Section 2.7. Replacement Securities
	 	 	12	 
	 	Section 2.8. Outstanding Securities
	 	 	12	 
	 	Section 2.9. Treasury Securities
	 	 	13	 
	 	Section 2.10. Temporary Securities
	 	 	13	 
	 	Section 2.11. Cancellation
	 	 	13	 
	 	Section 2.12. Legend; Additional Transfer and Exchange Requirements
	 	 	14	 
	 	Section 2.13. CUSIP Numbers
	 	 	16	 
	Article 3 Redemption and Purchases
	 	 	16	 
	 	Section 3.1. Right to Redeem; Notice to Trustee
	 	 	16	 
	 	Section 3.2. Selection of Securities to be Redeemed
	 	 	17	 
	 	Section 3.3. Notice of Redemption
	 	 	17	 
	 	Section 3.4. Effect of Notice of Redemption
	 	 	18	 
	 	Section 3.5. Deposit of Redemption Price
	 	 	18	 
	 	Section 3.6. Securities Redeemed in Part
	 	 	18	 
	 	Section 3.7. Conversion Arrangement on Call for Redemption
	 	 	18	 
	 	Section 3.8. Purchase of Securities at Option of the Holder Upon Change in Control
	 	 	19	 
	 	Section 3.9. Effect of Change in Control Purchase Notice
	 	 	22	 
	 	Section 3.10. Deposit of change in Control Purchase Price
	 	 	22	 
	 	Section 3.11. Securities Purchase in Part
	 	 	23	 
	 	Section 3.12. Compliance with Securities Laws Upon Purchase of Securities
	 	 	23	 
	 	Section 3.13. Repayment to the Company
	 	 	23	 
	Article 4 Conversion
	 	 	23	 
	 	Section 4.1. Conversion Privilege
	 	 	23	 
	 	Section 4.2. Conversion Procedure
	 	 	24	 
	 	Section 4.3. Fractional Shares
	 	 	25	 
	 	Section 4.4. Taxes on Conversion
	 	 	25	 
	 	Section 4.5. Company to Provide Stock
	 	 	25	 
	 	Section 4.6. Adjustment of Conversion Price
	 	 	26	 
	 	Section 4.7. No Adjustment
	 	 	30	 
	 	Section 4.8. Adjustment for Tax Purposes
	 	 	31	 

-i-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 
	 	 	 	Page
	 	 	 	

	 	Section 4.9. Notice of Adjustment
	 	 	31	 
	 	Section 4.10. Notice of Certain Transactions
	 	 	31	 
	 	Section 4.11. Effect of Reclassification, Consolidation, Merger or
Sale on Conversion Privilege
	 	 	31	 
	 	Section 4.12. Trustee’s Disclaimer
	 	 	32	 
	 	Section 4.13. Voluntary Reduction
	 	 	32	 
	Article 5 Subordination
	 	 	33	 
	 	Section 5.1. Agreement of Subordination
	 	 	33	 
	 	Section 5.2. Payments to Holders
	 	 	33	 
	 	Section 5.3. Subrogation of Securities
	 	 	35	 
	 	Section 5.4. Authorization to Effect Subordination
	 	 	36	 
	 	Section 5.5. Notice to Trustee
	 	 	36	 
	 	Section 5.6. Trustee’s Relation to Senior Indebtedness
	 	 	37	 
	 	Section 5.7. No Impairment of Subordination
	 	 	37	 
	 	Section 5.8. Certain Conversions Deemed Payment
	 	 	38	 
	 	Section 5.9. Article Applicable to Paying Agents
	 	 	38	 
	 	Section 5.10. Senior Indebtedness Entitled to Rely
	 	 	38	 
	Article 6 Covenants
	 	 	38	 
	 	Section 6.1. Payment of Securities
	 	 	38	 
	 	Section 6.2. SEC Reports
	 	 	39	 
	 	Section 6.3. Compliance Certificates
	 	 	39	 
	 	Section 6.4. Further Instruments and Acts
	 	 	39	 
	 	Section 6.5. Maintenance of Corporate Existence
	 	 	40	 
	 	Section 6.6. Rule 144A Information Requirement
	 	 	40	 
	 	Section 6.7. Stay, Extension and Usury Laws
	 	 	40	 
	 	Section 6.8. Payment of Additional Interest
	 	 	40	 
	Article 7 Consolidation, Merger, Conveyance, Transfer or Lease
	 	 	41	 
	 	Section 7.1. Company May Consolidate, Etc., Only on Certain Terms
	 	 	41	 
	 	Section 7.2. Successor Substituted
	 	 	41	 
	Article 8 Defaults and Remedies
	 	 	42	 
	 	Section 8.1. Events of Default
	 	 	42	 
	 	Section 8.2. Acceleration
	 	 	43	 
	 	Section 8.3. Other Remedies
	 	 	44	 
	 	Section 8.4. Waiver of Defaults and Events of Default
	 	 	44	 
	 	Section 8.5. Control by Majority
	 	 	44	 
	 	Section 8.6. Limitations on Suits
	 	 	45	 
	 	Section 8.7. Rights of Holders to Receive Payment and to Convert
	 	 	45	 
	 	Section 8.8. Collection Suit By Trustee
	 	 	45	 
	 	Section 8.9. Trustee May File Proofs of Claim
	 	 	45	 
	 	Section 8.10. Priorities
	 	 	46	 

ii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 
	 	 	 	Page
	 	 	 	

	 	Section 8.11. Undertaking for Costs
	 	 	46	 
	Article 9 Trustee
	 	 	47	 
	 	Section 9.1. Duties of Trustee
	 	 	47	 
	 	Section 9.2. Rights of Trustee
	 	 	47	 
	 	Section 9.3. Individual Rights of Trustee
	 	 	48	 
	 	Section 9.4. Trustee’s Disclaimer
	 	 	49	 
	 	Section 9.5. Notice of Default or Events of Default
	 	 	49	 
	 	Section 9.6. Reports by Trustee to Holders
	 	 	49	 
	 	Section 9.7. Compensation and Indemnity
	 	 	49	 
	 	Section 9.8. Replacement of Trustee
	 	 	50	 
	 	Section 9.9. Successor Trustee by Merger, Etc
	 	 	51	 
	 	Section 9.10. Eligibility; Disqualification
	 	 	51	 
	 	Section 9.11. Preferential Collection of Claims Against Company
	 	 	51	 
	Article 10 Satisfaction and Discharge of Indenture
	 	 	51	 
	 	Section 10.1. Satisfaction and Discharge of Indenture
	 	 	51	 
	 	Section 10.2. Application of Trust Money
	 	 	52	 
	 	Section 10.3. Repayment to Company
	 	 	52	 
	 	Section 10.4. Reinstatement
	 	 	53	 
	Article 11 Amendments, Supplements and Waivers
	 	 	53	 
	 	Section 11.1. Without Consent of Holders
	 	 	53	 
	 	Section 11.2. With Consent of Holders
	 	 	53	 
	 	Section 11.3. Compliance with Trust Indenture Act
	 	 	54	 
	 	Section 11.4. Revocation and Effect of Consents
	 	 	54	 
	 	Section 11.5. Notation on or Exchange of Securities
	 	 	55	 
	 	Section 11.6. Trustee to Sign Amendments, Etc
	 	 	55	 
	 	Section 11.7. Effect of Supplemental Indentures
	 	 	55	 
	Article 12 Miscellaneous
	 	 	55	 
	 	Section 12.1. Trust Indenture Act Controls
	 	 	55	 
	 	Section 12.2. Notices
	 	 	55	 
	 	Section 12.3. Communications by Holders With Other Holders
	 	 	56	 
	 	Section 12.4. Certificate and Opinion as to Conditions Precedent
	 	 	56	 
	 	Section 12.5. Record Date for Vote or Consent of Securityholders
	 	 	57	 
	 	Section 12.6. Rules by Trustee, paying Agent, Registrar and Conversion Agent
	 	 	57	 
	 	Section 12.7. Legal Holidays
	 	 	57	 
	 	Section 12.8. Governing Law
	 	 	58	 
	 	Section 12.9. No Adverse Interpretation of Other Agreements
	 	 	58	 
	 	Section 12.10. No Recourse Against Others
	 	 	58	 
	 	Section 12.11. Successors
	 	 	58	 
	 	Section 12.12. Multiple Counterparts
	 	 	58	 
	 	Section 12.13. Separability
	 	 	58	 
	 	Section 12.14. Table of Contents, Headings, Etc
	 	 	58	 

iii

 

CROSS-REFERENCE TABLE*

	 	 	 	 	 	 	 
	TIA SECTION	 	 	 	INDENTURE
	
	 	 	 	SECTION
	 	 	 	 	

	Section	 	
310(a)(1)
	 	 	9.10	 
	 	 	
(a)(2)
	 	 	9.10	 
	 	 	
(a)(3)
	 	 	N.A.**	 
	 	 	
(a)(4)
	 	 	N.A.	 
	 	 	
(a)(5)
	 	 	9.10	 
	 	 	
(b)
	 	 	9.8; 9.10	 
	 	 	
(c)
	 	 	N.A.	 
	Section	 	
311(a)
	 	 	9.11	 
	 	 	
(b)
	 	 	9.11	 
	 	 	
(c)
	 	 	N.A.	 
	Section	 	
312(a)
	 	 	2.5	 
	 	 	
(b)
	 	 	12.3	 
	 	 	
(c)
	 	 	12.3	 
	Section	 	
313(a)
	 	 	9.6	 
	 	 	
(b)(1)
	 	 	N.A.	 
	 	 	
(b)(2)
	 	 	9.6	 
	 	 	
(c)
	 	 	9.6; 12.2	 
	 	 	
(d)
	 	 	9.6	 
	Section	 	
314(a)
	 	 	6.2; 6.3, 6.4; 12.2	 
	 	 	
(b)
	 	 	N.A.	 
	 	 	
(c)(1)
	 	 	12.4(a)	
	 	 	
(c)(2)
	 	 	12.4(a)	
	 	 	
(c)(3)
	 	 	N.A.	 
	 	 	
(d)
	 	 	N.A.	 
	 	 	
(e)
	 	 	12.4(b)	
	 	 	
(f)
	 	 	N.A.	 
	Section	 	
315(a)
	 	 	9.1(b)	
	 	 	
(b)
	 	 	9.5; 12.2	 
	 	 	
(c)
	 	 	9.1(a)	
	 	 	
(d)
	 	 	9.1(c)	
	 	 	
(e)
	 	 	8.11	 
	Section	 	
316(a)(last sentence)
	 	 	2.9	 
	 	 	
(a)(1)(A)
	 	 	8.5	 
	 	 	
(a)(1)(B)
	 	 	8.4	 
	 	 	
(a)(2)
	 	 	N.A.	 
	 	 	
(b)
	 	 	8.7	 
	 	 	
(c)
	 	 	12.5	 
	Section	 	
317(a)(1)
	 	 	8.8	 
	 	 	
(a)(2)
	 	 	8.9	 
	 	 	
(b)
	 	 	2.4	 

	*	 	This Cross-Reference Table shall not, for any purpose, be deemed a part
of this Indenture.
	 
	**	 	N.A. means Not Applicable.

 

 

     THIS INDENTURE dated as of January 30, 2002 is between Sunrise Assisted
Living, Inc., a corporation duly organized under the laws of the State of
Delaware (the “Company”), and First Union National Bank, a national banking
association organized under the laws of the United States, as Trustee (the
“Trustee”).

     In consideration of the premises and the purchase of the Securities by the
Holders thereof, both parties agree as follows for the benefit of the other and
for the equal and ratable benefit of the registered Holders of the Company’s 5
1/4% Convertible Subordinated Notes Due February 1, 2009.

Article 1

Definitions and Incorporation By Reference

     Section 1.1. Definitions

     “Additional Interest” has the meaning specified in Section 5 of the
Registration Rights Agreement. All references herein to interest accrued or
payable as of any date shall include any Additional Interest accrued or payable
as of such date as provided in the Registration Rights Agreement.

     “Affiliate” means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this
definition, “control” when used with respect to any person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.

     “Agent” means any Registrar, Paying Agent or Conversion Agent.

     “Applicable Procedures” means, with respect to any transfer or exchange of
beneficial ownership interests in a Global Security, the rules and procedures
of the Depositary, in each case to the extent applicable to such transfer or
exchange.

     “Board of Directors” means either the board of directors of the Company or
any committee of the Board of Directors authorized to act for it with respect
to this Indenture.

     “Business Day” means each day that is not a Legal Holiday.

     “Capital Stock” of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, but excluding any debt
securities convertible into such equity.

     “Cash” or “cash” means such coin or currency of the United States as at
any time of payment is legal tender for the payment of public and private
debts.

     “Certificated Security” means a Security that is in substantially the form
attached hereto as Exhibit A and that does not include the information or the
schedule called for by footnotes 1, 3 and 4 thereof.

1

 

     “Common Stock” means the common stock of the Company, $0.01 par value, as
it exists on the date of this Indenture and any shares of any class or classes
of capital stock of the Company resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company and which are not subject to
redemption by the Company; provided, however, that if at any time there shall
be more than one such resulting class, the shares of each such class then so
issuable on conversion of Securities shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.

     “Company” means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to the applicable provisions
of this Indenture, and thereafter “Company” shall mean such successor Company.

     “Continuing Director” means at any date a member of the Company’s Board of
Directors (i) who was a member of such Board of Directors on the date of
original issuance of the Securities or (ii) who was nominated or elected by at
least a majority of the directors who were Continuing Directors at the time of
such nomination or election or whose election the Company’s Board of Directors
was recommended or endorsed by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election.

     “Corporate Trust Office” means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at the date of the execution of this Indenture is located at 800
East Main Street, Richmond, VA 23219, Attention: Corporate Trust or at any
other time at such other address as the Trustee may designate from time to time
by notice to the Company.

     “Default” or “default” means, when used with respect to the Securities,
any event which is or, after notice or passage of time or both, would be an
Event of Default.

     “Designated Senior Indebtedness” means any particular Senior Indebtedness
of the Company in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or any related agreements or documents to
which the Company is a party) expressly provides that such Senior Indebtedness
shall be “Designated Senior Indebtedness” for purposes of this Indenture
(provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Indebtedness to exercise
the rights of Designated Senior Indebtedness). If any payment made to any
holder of any Designated Senior Indebtedness or its Representative with respect
to such Designated Senior Indebtedness is rescinded or must otherwise be
returned by such holder or Representative upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the reinstated Indebtedness of the
Company arising as a result of such rescission or return shall constitute
Designated Senior Indebtedness effective as of the date of such rescission or
return.

     “Exchange Act” means the Securities and Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.

     “Final Maturity Date” means February 1, 2009.

     “GAAP” means generally accepted accounting principles in the United States
of America as in effect as of the date of this Indenture, including those set
forth in (1) the opinions and pronouncements of the

2

 

Accounting Principles Board of the American Institute of Certified Public
Accountants, (2) the statements and pronouncements of the Financial Accounting
Standards Board, (3) such other statements by such other entity as approved by
a significant segment of the accounting profession and (4) the rules and
regulations of the SEC governing the inclusion of financial statements
(including pro forma financial statements) in registration statements filed
under the Securities Act and periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the accounting staff
of the SEC.

     “Global Security” means a permanent Global Security that is in
substantially the form attached hereto as Exhibit A and that includes the
information and schedule called for by footnotes 1, 3 and 4 thereof and which
is deposited with the Depositary or its custodian and registered in the name of
the Depositary or its nominee.

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

     “Indebtedness” means, with respect to any Person, without duplication, (a)
all indebtedness, obligations and other liabilities (contingent or otherwise)
of such Person (i) for borrowed money (including obligations of such Person in
respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or (ii)
evidenced by credit or loan agreements, bonds, debentures, notes or similar
instruments (whether or not the recourse of the lender is to the whole of the
assets of such Person or to only a portion thereof) (other than any accounts
payable or other accrued current liability or obligation incurred in the
ordinary course of business in connection with the obtaining of materials or
services), (b) all reimbursement obligations and other liabilities (contingent
or otherwise) of such Person with respect to letters of credit, bank guarantees
or bankers’ acceptances, (c) all obligations and liabilities (contingent or
otherwise) of such Person (i) in respect of leases of such Person required, in
conformity with GAAP, to be accounted for as capitalized lease obligations on
the balance sheet of such Person (as determined by the Company), or (ii) under
any lease or related document (including a purchase agreement, conditional sale
or other title retention agreement) in connection with the lease of real
property or improvement thereon (or any personal property included as part of
any such lease) which provides that such Person is contractually obligated to
purchase or cause a third party to purchase the leased property or pay an
agreed upon residual value of the leased property to the lessor (whether or not
such lease transaction is characterized as an operating lease or a capitalized
lease in accordance with GAAP), (d) all obligations (contingent or otherwise)
of such Person with respect to any interest rate or other swap, cap, floor or
collar agreement, hedge agreement, forward contract, or other similar
instrument or agreement or foreign currency hedge, exchange, purchase or
similar instrument or agreement; (e) all direct or indirect guaranties,
agreements to be jointly liable or similar agreements by such Person in respect
of, and obligations or liabilities of such Person to purchase or otherwise
acquire or otherwise assure a creditor against loss in respect of,
indebtedness, obligations or liabilities of another Person of the kind
described in clauses (a) through (d), and (f) any and all deferrals, renewals,
extensions, refinancings and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (e).

     “Indenture” means this Indenture as amended or supplemented from time to
time pursuant to the terms of this Indenture.

     “Initial Purchasers” means Credit Suisse First Boston Corporation,
Robertson Stephens, Inc. and First Union Securities, Inc.

3

 

     “Officer” means the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Controller, the
Secretary or any Assistant Secretary of the Company.

     “Officers’ Certificate” means a certificate signed by two Officers;
provided, however, that for purposes of Sections 4.11 and 6.3, “Officers’
Certificate” means a certificate signed by the principal executive officer,
principal financial officer or principal accounting officer of the Company and
by one other Officer.

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

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

     “Principal” or “principal” of a debt security, including the Securities,
means the principal of the security plus, when appropriate, the premium, if
any, on the security.

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

     “Redemption Price” when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture, as set
forth in the form of Security annexed as Exhibit A hereto.

     “Registration Rights Agreement” means the Registration Rights Agreement
dated, as of January 24, 2002, among the Company and the Initial Purchasers.

     “Representative” means the (a) indenture trustee or other trustee, agent
or representative for any Senior Indebtedness or (b) with respect to any Senior
Indebtedness that does not have any such trustee, agent or other
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as among the holders or owners
of such Senior Indebtedness, any holder or owner of such Senior Indebtedness
acting with the consent of the required persons necessary to bind such holders
or owners of such Senior Indebtedness and (ii) in the case of all other such
Senior Indebtedness, the holder or owner of such Senior Indebtedness.

     “Restricted Global Security” means a Global Security that is a Restricted
Security.

     “Restricted Security” means a Security required to bear the restricted
legend set forth in the form of Security set forth in Exhibit A of this
Indenture.

     “Rights Agreement” means the Rights Agreement, dated as of April 26, 1996,
as amended as of December 17, 1998, between the Company and First Union
National Bank of North Carolina, as further amended from time to time by the
Company and any successor rights agreement thereto.

     “Rule 144” means Rule 144 under the Securities Act or any successor to
such Rule.

     “Rule 144A” means Rule 144A under the Securities Act or any successor to
such Rule.

     “SEC” means the Securities and Exchange Commission.

4

 

     “Securities” means the 5 1/4% Convertible Subordinated Notes Due February
1, 2009 or any of them (each, a “Security”), as amended or supplemented from
time to time, that are issued under this Indenture.

     “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.

     “Securities Custodian” means the Trustee, as custodian with respect to the
Securities in global form, or any successor thereto.

     “Senior Indebtedness” means the principal of, premium, if any, interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowed as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether outstanding
on the date of this Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by the Company (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption
or guarantee thereof expressly provides that such Indebtedness shall not be
senior in right of payment to the Securities or expressly provides that such
Indebtedness is “pari passu” or “junior” to the Securities. Notwithstanding the
foregoing, the term Senior Indebtedness shall not include (i) any Indebtedness
of the Company to any Subsidiary of the Company (other than Indebtedness of the
Company to such Subsidiary arising by reason of guarantees by the Company of
Indebtedness of such Subsidiary to a Person that is not a Subsidiary of the
Company); (ii) any Indebtedness of the Company to any officer, director or
employee of the Company or any Subsidiary; (iii) any obligation for federal,
state, local or other taxes; or (iv) the Securities. If any payment made to
any holder of any Senior Indebtedness or its Representative with respect to
such Senior Indebtedness is rescinded or must otherwise be returned by such
holder or Representative upon the insolvency, bankruptcy or reorganization of
the Company or otherwise, the reinstated Indebtedness of the Company arising as
a result of such rescission or return shall constitute Senior Indebtedness
effective as of the date of such rescission or return.

     “Significant Subsidiary” means, in respect of any Person, (i) a Subsidiary
of such Person that or (ii) any group of Subsidiaries of such Person that, if
such group were a single Person, would constitute a “significant subsidiary” as
such term is defined under Rule 1-02(w) of Regulation S-X under the Securities
Act and the Exchange Act.

     “Subsidiary” means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, general partners
or trustees thereof is at the time owned or controlled, directly or indirectly,
by (i) such Person; (ii) such Person and one or more Subsidiaries of such
Person; or (iii) one or more Subsidiaries of such Person.

     “TIA” means the Trust Indenture Act of 1939, as amended, and the rules and
regulations thereunder as in effect on the date of this Indenture, except as
provided in Section 11.3, and except to the extent any amendment to the Trust
Indenture Act expressly provides for application of the Trust Indenture Act as
in effect on another date.

5

 

     “Trading Day” means, with respect to any security, each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any day on which securities are not
generally traded on the principal exchange or market in which such security is
traded.

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

     “Trust Officer” means, with respect to the Trustee, any officer assigned
to the Corporate Trust Office, and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer’s
knowledge of and familiarity with the particular subject.

     “Unrestricted Certificated Security” means a Certificated Security that is
not a Restricted Security.

     “Unrestricted Global Security” means a Global Security that is not a
Restricted Security.

     “Vice President” when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title “vice president.”

     “Voting Stock” of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.

     Section 1.2. Other Definitions

	 	 	 	 
	Term	 	Defined in Section
	
	
	

	“Agent Members”	 	 	
2.1(b)
	“Bankruptcy Law”	 	 	
8.1
	“Change in Control”	 	 	
3.8(a)
	“Change in Control Purchase Date”	 	 	
3.8(a)
	“Change in Control Purchase Notice”	 	 	
3.8(c)
	“Change in Control Purchase Price”	 	 	
3.8(a)
	“Closing Price”	 	 	
4.6(d)
	“Company Order”	 	 	
2.2
	“Conversion Agent”	 	 	
2.3
	“Conversion Date”	 	 	
4.2
	“Conversion Price”	 	 	
4.6
	“Current Market Price”	 	 	
4.6(d)
	“Custodian”	 	 	
8.1
	“DTC”	 	 	
2.1(a)
	“Depositary”	 	 	
2.1(a)
	“Determination Date”	 	 	
4.6(c)
	“Event of Default”	 	 	
8.1
	“Expiration Date”	 	 	
4.6(c)
	“Expiration Time”	 	 	
4.6(c)
	“Legal Holiday”	 	 	
12.7
	“Legend”	 	 	
2.12

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	Term	 	Defined in Section
	
	 	

	“NNM”	 	 	
4.6(d)
	“Paying Agent”	 	 	
2.3
	“Payment Blockage Notice”	 	 	
5.2
	“Primary Registrar”	 	 	
2.3
	“Purchase Agreement”	 	 	
2.1
	“Purchased Shares”	 	 	
4.6(c)
	“QIB”	 	 	
2.1(a)
	“Registrar”	 	 	
2.3
	“Triggering Distribution”	 	 	
4.6(c)
	“Trigger Event”	 	 	
4.6(c)
	“Unissued Shares”	 	 	
3.8(a)

     Section 1.3. Trust Indenture Act Provisions

     Whenever this Indenture refers to a provision of the TIA, that provision
is incorporated by reference in and made a part of this Indenture. The
Indenture shall also include those provisions of the TIA required to be
included herein by the provisions of the Trust Indenture Reform Act of 1990.
The following TIA terms used in this Indenture have the following meanings:

     “indenture securities” means the Securities;

     “indenture security holder” means a Securityholder;

     “indenture to be qualified” means this Indenture;

     “indenture trustee” or “institutional trustee” means the Trustee; and
“obligor” on the indenture securities means the Company or any other obligor on
the Securities.

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

     Section 1.4. Rules of Construction

     Unless the context otherwise requires:

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

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

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

     (D)  provisions apply to successive events and transactions;

7

 

     (E)  the term “merger” includes a statutory share exchange and the term
“merged” has a correlative meaning;

     (F)  the masculine gender includes the feminine and the neuter;

     (G)  references to agreements and other instruments include subsequent
amendments thereto; and

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

Article 2

The Securities

     Section 2.1. Form and Dating

     The Securities and the Trustee’s certificate of authentication shall be
substantially in the respective forms set forth in Exhibit A, which Exhibit is
incorporated in and made part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall provide any such notations, legends or endorsements
to the Trustee in writing. Each Security shall be dated the date of its
authentication. The Securities are being offered and sold by the Company
pursuant to a Purchase Agreement, dated January 24, 2002 (the “Purchase
Agreement”), between the Company and the Initial Purchasers, in one or more
transactions exempt from, or not subject to, the registration requirements of
the Securities Act.

     (a)  Restricted Global Securities. All of the Securities are initially
being offered and sold to qualified institutional buyers as defined in Rule
144A (collectively, “QIBs” or individually, each a “QIB”) in reliance on Rule
144A under the Securities Act and shall be issued initially in the form of one
or more Restricted Global Securities, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Trustee, at its
Corporate Trust Office, as custodian for the depositary, The Depository Trust
Company (“DTC”) (such depositary, or any successor thereto, being hereinafter
referred to as the “Depositary”), and registered in the name of its nominee,
Cede & Co., duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Restricted Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Securities Custodian as hereinafter provided, subject in
each case to compliance with the Applicable Procedures.

     (b)  Global Securities In General. Each Global Security shall represent
such of the outstanding Securities as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Securities
from time to time endorsed thereon and that the aggregate amount of outstanding
Securities represented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges, redemptions, purchases or conversions of
such Securities. Any adjustment of the aggregate principal amount of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.12 hereof and shall be made on the records of the Trustee and the Depositary.

8

 

     Members of, or participants in, the Depositary (“Agent Members”) shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or under the Global Security, and the Depositary
(including, for this purpose, its nominee) may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner and
Holder of such Global Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall (A) prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or (B)
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.

     (c)  Book Entry Provisions. The Company shall execute and the Trustee
shall, in accordance with this Section 2.1(c), authenticate and deliver
initially one or more Global Securities that (i) shall be registered in the
name of the Depositary, (ii) shall be delivered by the Trustee to the
Depositary or pursuant to the Depositary’s instructions and (iii) shall bear
legends substantially to the following effect:

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO SUNRISE ASSISTED LIVING, INC. (THE “COMPANY”) OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN ARTICLE 2 OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.”

     Section 2.2. Executions and Authentication

     An Officer shall sign the Securities for the Company by manual or
facsimile signature attested by the manual or facsimile signature of the
Secretary or an Assistant Secretary of the Company. Typographic and other
minor errors or defects in any such facsimile signature shall not affect the
validity or enforceability of any Security which has been authenticated and
delivered by the Trustee.

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

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

     The Trustee shall authenticate and make available for delivery Securities
for original issue in the aggregate principal amount of up to $125,000,000 upon
receipt of a written order or orders of the Company signed by two Officers of
the Company (a “Company Order”). The Company Order shall specify the amount

9

 

of Securities to be authenticated, shall provide that all such Securities
will be represented by a Restricted Global Security and the date on which each
original issue of Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $125,000,000 except
as provided in Section 2.7.

     The Trustee shall act as the initial authenticating agent. Thereafter,
the Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent shall have the same rights as an Agent to deal with the
Company or an Affiliate of the Company.

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

     Section 2.3. Registrar, Paying Agent and Conversion Agent

     The Company shall maintain one or more offices or agencies where
Securities may be presented for registration of transfer or for exchange (each,
a “Registrar”), one or more offices or agencies where Securities may be
presented for payment (each, a “Paying Agent”), one or more offices or agencies
where Securities may be presented for conversion (each, a “Conversion Agent”)
and one or more offices or agencies where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will at all times maintain a Paying Agent, Conversion Agent, Registrar
and an office or agency where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served in the Borough of
Manhattan, The City of New York. One of the Registrars (the “Primary
Registrar”) shall keep a register of the Securities and of their transfer and
exchange.

     The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any Agent not a party to this
Indenture. If the Company fails to maintain a Registrar, Paying Agent,
Conversion Agent or agent for service of notices and demands in any place
required by this Indenture, or fails to give the foregoing notice, the Trustee
shall act as such. The Company or any Affiliate of the Company may act as
Paying Agent (except for the purposes of Section 6.1 and Article 10).

     The Company hereby initially designates the Trustee as Paying Agent,
Registrar, Custodian and Conversion Agent, and each of the Corporate Trust
Office of the Trustee and the office or agency of the Trustee in the Borough of
Manhattan, The City of New York (which shall initially be the office of the
Trustee located at 12 East 49th Street, New York, NY 10017, Attn: Corporate
Trust), one such office or agency of the Company for each of the aforesaid
purposes.

     Section 2.4. Paying Agent to Hold Money in Trust

     Prior to 11:00 a.m., New York City time, on each due date of the principal
of or interest, if any, on any Securities, the Company shall deposit with a
Paying Agent a sum sufficient to pay such principal or interest, if any, so
becoming due. Subject to Section 5.2, a Paying Agent shall hold in trust for
the benefit of Securityholders or the Trustee all money held by the Paying
Agent for the payment of principal of or interest, if any, on the Securities,
and shall notify the Trustee of any default by the Company (or any other
obligor on the Securities) in making any such payment. If the Company or an
Affiliate of the Company acts as Paying

10

 

Agent, it shall, before 11:00 a.m., New York City time, on each due date
of the principal of or interest on any Securities, segregate the money and hold
it as a separate trust fund. The Company at any time may require a Paying
Agent to pay all money held by it to the Trustee, and the Trustee may at any
time during the continuance of any default, upon written request to a Paying
Agent, require such Paying Agent to pay forthwith to the Trustee all sums so
held in trust by such Paying Agent. Upon doing so, the Paying Agent (other
than the Company) shall have no further liability for the money.

     Section 2.5. Securityholder Lists

     The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Primary Registrar, the Company
shall furnish to the Trustee on or before each semiannual interest payment
date, and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the
names and addresses of Securityholders.

     Section 2.6. Transfer and Exchange

     (a)  Subject to compliance with any applicable additional requirements
contained in Section 2.12, when a Security is presented to a Registrar with a
request to register a transfer thereof or to exchange such Security for an
equal principal amount of Securities of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested;
provided, however, that every Security presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by
an assignment form and, if applicable, a transfer certificate each in the form
included in Exhibit A, and in form satisfactory to the Registrar duly executed
by the Holder thereof or its attorney duly authorized in writing. To permit
registration of transfers and exchanges, upon surrender of any Security for
registration of transfer or exchange at an office or agency maintained pursuant
to Section 2.3, the Company shall execute and the Trustee shall authenticate
Securities of a like aggregate principal amount at the Registrar’s request.
Any exchange or transfer shall be without charge, except that the Company or
the Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto, and provided, that
this sentence shall not apply to any exchange pursuant to Section 2.10,
2.12(a), 3.6, 3.11, 4.2 (last paragraph) or 11.5.

     Neither the Company, any Registrar nor the Trustee shall be required to
exchange or register a transfer of (i) any Securities for a period of 15 days
next preceding any mailing of a notice of Securities to be redeemed, (ii) any
Securities or portions thereof selected or called for redemption (except, in
the case of redemption of a Security in part, the portion thereof not to be
redeemed) or (iii) any Securities or portions thereof in respect of which a
Change in Control Purchase Notice has been delivered and not withdrawn by the
Holder thereof (except, in the case of the purchase of a Security in part, the
portion thereof not to be purchased).

     All Securities issued upon any transfer or exchange of Securities shall be
valid obligations of the Company, evidencing the same debt and entitled to the
same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.

     (b)  Any Registrar appointed pursuant to Section 2.3 hereof shall provide
to the Trustee such information as the Trustee may reasonably require in
connection with the delivery by such Registrar of Securities upon transfer or
exchange of Securities.

11

 

     (c)  Each Holder of a Security agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder’s Security in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.

     The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Agent Members or
other beneficial owners of interests in any Global Security) other than to
require delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required by the
terms of, this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.

     Section 2.7. Replacement Securities

     If any mutilated Security is surrendered to the Company, a Registrar or
the Trustee, or the Company, a Registrar and the Trustee receive evidence to
their satisfaction of the destruction, loss or theft of any Security, and there
is delivered to the Company, the applicable Registrar and the Trustee such
security or indemnity as will be required by them to save each of them
harmless, then, in the absence of notice to the Company, such Registrar or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute, and upon its written request the Trustee shall
authenticate and deliver, in exchange for any such mutilated Security or in
lieu of any such destroyed, lost or stolen Security, a new Security of like
tenor and principal amount, bearing a number not contemporaneously outstanding.

     In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is about to be redeemed or purchased
by the Company pursuant to Article 3, the Company in its discretion may,
instead of issuing a new Security, pay, redeem or purchase such Security, as
the case may be.

     Upon the issuance of any new Securities under this Section 2.7, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the reasonable fees and expenses of the Trustee
or the Registrar) in connection therewith.

     Every new Security issued pursuant to this Section 2.7 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.

     The provisions of this Section 2.7 are (to the extent lawful) exclusive
and shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Securities.

     Section 2.8. Outstanding Securities

     Securities outstanding at any time are all Securities authenticated by the
Trustee, except for those canceled by it, those converted pursuant to Article
4, those delivered to it for cancellation or surrendered for transfer or
exchange and those described in this Section 2.8 as not outstanding.

12

 

     If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Company receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.

     If a Paying Agent (other than the Company or an Affiliate of the Company)
holds on a Redemption Date, a Change in Control Purchase Date or the Final
Maturity Date money sufficient to pay the principal of (including premium, if
any) and accrued interest on Securities (or portions thereof) payable on that
date, then on and after such Redemption Date, Change in Control Purchase Date
or the final Maturity Date, as the case may be, such Securities (or portions
thereof, as the case may be) shall cease to be outstanding and interest on them
shall cease to accrue; provided, that if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or
provision therefore satisfactory to the Trustee has been made.

     Subject to the restrictions contained in Section 2.9, a Security does not
cease to be outstanding because the Company or an Affiliate of the Company
holds the Security.

     Section 2.9. Treasury Securities

     In determining whether the Holders of the required principal amount of
Securities have concurred in any notice, direction, waiver or consent,
Securities owned by the Company or any other obligor on the Securities or by
any Affiliate of the Company or of such other obligor shall be disregarded,
except that, for purposes of determining whether the Trustee shall be protected
in relying on any such notice, direction, waiver or consent, only Securities
which a Trust Officer of the Trustee actually knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith shall
not be disregarded if the pledgee establishes to the satisfaction of the
Trustee the pledgee’s right so to act with respect to the Securities and that
the pledgee is not the Company or any other obligor on the Securities or any
Affiliate of the Company or of such other obligor.

     Section 2.10. Temporary Securities

     Until definitive Securities are ready for delivery, the Company may
prepare and execute, and, upon receipt of a Company Order, the Trustee shall
authenticate and deliver, temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company with the consent of the Trustee considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate and deliver definitive Securities in exchange for
temporary Securities.

     Section 2.11. Cancellation

     The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee or its agent any Securities surrendered to them for
transfer, exchange, redemption, payment or conversion. The Trustee and no one
else shall cancel, in accordance with its standard procedures, all Securities
surrendered for transfer, exchange, redemption, payment, conversion or
cancellation and shall deliver the canceled Securities to the Company. All
Securities which are redeemed, purchased or otherwise acquired by the Company
or any of its Subsidiaries prior to the Final Maturity Date shall be delivered
to the Trustee for cancellation, and the Company may not hold or resell such
Securities or issue any new Securities to replace any such Securities or any
Securities that any Holder has converted pursuant to Article 4. Without
limitation to the foregoing, any Securities acquired by any investment bankers
or other purchasers pursuant to Section 3.7 shall be surrendered for conversion
and thereafter cancelled, and may not be reoffered, sold or otherwise
transferred.

13

 

     Section 2.12. Legend; Additional Transfer and Exchange Requirements

     If Securities are issued upon the transfer, exchange or replacement of
Securities subject to restrictions on transfer and bearing the legends set
forth on the forms of Securities attached hereto as Exhibit A (collectively,
the “Legend”), or if a request is made to remove the Legend on a Security, the
Securities so issued shall bear the Legend, or the Legend shall not be removed,
as the case may be, unless there is delivered to the Company and the Registrar
such satisfactory evidence, which shall include an opinion of counsel if
requested by the Company or such Registrar, as may be reasonably required by
the Company and the Registrar, that neither the Legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof comply
with the provisions of Rule 144A or Rule 144 under the Securities Act or that
such Securities are not “restricted” within the meaning of Rule 144 under the
Securities Act; provided that no such evidence need be supplied in connection
with the sale of such Security pursuant to a registration statement that is
effective at the time of such sale. Upon (i) provision of such satisfactory
evidence if requested, or (ii) notification by the Company to the Trustee and
Registrar of the sale of such Security pursuant to a registration statement
that is effective at the time of such sale, the Trustee, at the written
direction of the Company, shall authenticate and deliver a Security that does
not bear the Legend. If the Legend is removed from the face of a Security and
the Security is subsequently held by an Affiliate of the Company, the Legend
shall be reinstated.

     (a)  A Global Security may not be transferred, in whole or in part, to any
Person other than the Depositary or a nominee or any successor thereof, and no
such transfer to any such other Person may be registered; provided that the
foregoing shall not prohibit any transfer of a Security that is issued in
exchange for a Global Security but is not itself a Global Security. No transfer
of a Security to any Person shall be effective under this Indenture or the
Securities unless and until such Security has been registered in the name of
such Person. Notwithstanding any other provisions of this Indenture or the
Securities, transfers of a Global Security, in whole or in part, shall be made
only in accordance with this Section 2.12.

     (b)  Subject to the succeeding paragraph, every Security shall be subject
to the restrictions on transfer provided in the Legend other than a Restricted
Global Security. Whenever any Restricted Security other than a Restricted
Global Security is presented or surrendered for registration of transfer or for
exchange for a Security registered in a name other than that of the Holder,
such Security must be accompanied by a certificate in substantially the form
set forth in Exhibit B, dated the date of such surrender and signed by the
Holder of such Security, as to compliance with such restrictions on transfer.
The Registrar shall not be required to accept for such registration of transfer
or exchange any Security not so accompanied by a properly completed
certificate.

     (c)  The restrictions imposed by the Legend upon the transferability of any
Security shall cease and terminate when such Security has been sold pursuant to
an effective registration statement under the Securities Act or transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or, if earlier, upon the expiration of the holding period applicable
to sales thereof under Rule 144(k) under the Securities Act (or any successor
provision). Any Security as to which such restrictions on transfer shall have
expired in accordance with their terms or shall have terminated may, upon a
surrender of such Security for exchange to the Registrar in accordance with the
provisions of this Section 2.12 (accompanied, in the event that such
restrictions on transfer have terminated by reason of a transfer in compliance
with Rule 144 or any successor provision, by, if requested, an opinion of
counsel reasonably acceptable to the Company, addressed to the Company and in
form acceptable to the Company, to the effect that the transfer of such
Security has been made in compliance with Rule 144 or such successor
provision), be exchanged for a new Security, of like tenor and aggregate
principal amount, which shall not bear the

14

 

restrictive Legend. The Company shall inform the Trustee of the effective
date of any registration statement registering the Securities under the
Securities Act. The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the aforementioned opinion
of counsel or registration statement.

     (d)  As used in the preceding two paragraphs of this Section 2.12, the term
“transfer” encompasses any sale, pledge, transfer, hypothecation or other
disposition of any Security.

     (e)  The provisions of clauses (i), (ii), (iii), (iv) and (v) below shall
apply only to Global Securities:

		
	 	     (i) Notwithstanding any other provisions of this Indenture or
the Securities, a Global Security shall not be exchanged in whole or
in part for a Security registered in the name of any Person other
than the Depositary or one or more nominees thereof, provided that a
Global Security may be exchanged for Securities registered in the
names of any person designated by the Depositary in the event that
(A) the Depositary has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Security or such
Depositary has ceased to be a “clearing agency” registered under the
Exchange Act, and a successor Depositary is not appointed by the
Company within 90 days, (B) the Company has provided the Depositary
with written notice that it has decided to discontinue use of the
system of book-entry transfer through the Depositary or any
successor Depositary or (C) an Event of Default has occurred and is
continuing with respect to the Securities. Any Global Security
exchanged pursuant to clauses (A) or (B) above shall be so exchanged
in whole and not in part, and any Global Security exchanged pursuant
to clause (C) above may be exchanged in whole or from time to time
in part as directed by the Depositary. Any Security issued in
exchange for a Global Security or any portion thereof shall be a
Global Security; provided that any such Security so issued that is
registered in the name of a Person other than the Depositary or a
nominee thereof shall not be a Global Security.

		
	 	     (ii) Securities issued in exchange for a Global Security or any
portion thereof shall be issued in definitive, fully registered
form, without interest coupons, shall have an aggregate principal
amount equal to that of such Global Security or portion thereof to
be so exchanged, shall be registered in such names and be in such
authorized denominations as the Depositary shall designate and shall
bear the applicable legends provided for herein. Any Global Security
to be exchanged in whole shall be surrendered by the Depositary to
the Trustee, as Registrar. With regard to any Global Security to be
exchanged in part, either such Global Security shall be so
surrendered for exchange or, if the Trustee is acting as custodian
for the Depositary or its nominee with respect to such Global
Security, the principal amount thereof shall be reduced, by an
amount equal to the portion thereof to be so exchanged, by means of
an appropriate adjustment made on the records of the Trustee. Upon
any such surrender or adjustment, the Trustee shall authenticate and
deliver the Security issuable on such exchange to or upon the order
of the Depositary or an authorized representative thereof.

		
	 	     (iii) Subject to the provisions of clause (v) below, the
registered Holder may grant proxies and otherwise authorize any
Person, including Agent Members and persons that may hold interests
through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.

15

 

		
	 	     (iv) In the event of the occurrence of any of the events
specified in clause (i) above, the Company will promptly make
available to the Trustee a reasonable supply of Certificated
Securities in definitive, fully registered form, without interest
coupons.

		
	 	     (v) Neither Agent Members nor any other Persons on whose behalf
Agent Members may act shall have any rights under this Indenture
with respect to any Global Security registered in the name of the
Depositary or any nominee thereof, or under any such Global
Security, and the Depositary or such nominee, as the case may be,
may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner and holder of such
Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or
any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the
Depositary or such nominee, as the case may be, or impair, as
between the Depositary, its Agent Members and any other person on
whose behalf an Agent Member may act, the operation of customary
practices of such Persons governing the exercise of the rights of a
holder of any Security.

     Section 2.13. CUSIP Numbers

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

Article 3

Redemption and Purchases

     Section 3.1. Right to Redeem; Notice to Trustee

     The Securities may be redeemed at the election of the Company, as a whole
or from time to time in part, at any time on or after February 5, 2006, at the
Redemption Prices specified in paragraph 5 of the reverse side of the form of
Security attached hereto as Exhibit A, together with accrued interest up to,
but not including, the Redemption Date; provided that if the Redemption Date
falls after an interest payment record date and on or before an interest
payment date, then the interest will be payable to the Holders in whose name
the Securities are registered at the close of business on the interest payment
record date.

     If the Company elects to redeem Securities pursuant to this Section 3.1
and paragraph 5 of the reverse side of the Securities, it shall notify the
Trustee at least 45 days prior to the Redemption Date as fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee) of the
Redemption Date and the principal amount of Securities to be redeemed. If
fewer than all of the Securities are to be redeemed, the record date relating
to such redemption shall be selected by the Company and given to the Trustee,
which record date shall not be less than ten days after the date of notice to
the Trustee (unless a shorter notice shall be satisfactory to the Trustee).

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     Section 3.2. Selection of Securities to be Redeemed

     If less than all of the Securities are to be redeemed, unless the
procedures of the Depositary provide otherwise, the Trustee shall, at least 20
days but not more than 60 days prior to the Redemption Date, select the
Securities to be redeemed. The Trustee shall make the selection from the
Securities outstanding and not previously called for redemption, by lot, or in
its discretion, on a pro rata basis. Securities in denominations of $1,000 may
only be redeemed in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.

     If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed to
be the portion selected for redemption. Securities which have been converted
during a selection of Securities to be redeemed shall be treated by the Trustee
as outstanding for the purpose of such selection.

     Section 3.3. Notice of Redemption

     At least 20 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption to each Holder
of Securities to be redeemed at such Holder’s address as it appears on the
Primary Registrar’s books.

     The notice shall identify the Securities (including CUSIP numbers) to be
redeemed and shall state:

     (1)  the Redemption Date;

     (2)  the Redemption Price;

     (3)  the then current Conversion Price;

     (4)  the name and address of each Paying Agent and Conversion Agent;

     (5)  that Securities called for redemption must be presented and
surrendered to a Paying Agent to collect the Redemption Price;

     (6)  that Holders who wish to convert Securities must surrender such
Securities for conversion no later than the close of business on the Business
Day immediately preceding the Redemption Date and must satisfy the other
requirements set forth in paragraph 8 of the Securities;

     (7)  that, unless the Company defaults in making the payment of the
Redemption Price, interest on Securities called for redemption shall cease
accruing on and after the Redemption Date and the only remaining right of the
Holder shall be to receive payment of the Redemption Price plus accrued
interest, if any upon presentation and surrender to a Paying Agent of the
Securities; and

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

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     If any of the Securities to be redeemed is in the form of a Global
Security, then the Company shall modify such notice to the extent necessary to
accord with the procedures of the Depositary applicable to redemptions. At the
Company’s written request, which request shall set forth all relevant
information required by clauses (1) through (8) of the preceding paragraph, the
Trustee shall give the notice of redemption in the Company’s name and at the
Company’s expense. The Company may cancel such written request that the
Trustee give such notice of redemption by providing written notice of such
cancellation to a Trust Officer prior to both the mailing of such Notice of
Redemption to any Holder and any public disclosure of such redemption and, upon
compliance with the foregoing provisions, such notice of redemption shall
thereby be void and of no further effect.

     Section 3.4. Effect of Notice of Redemption

     Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price
stated in the notice, together with accrued interest, if any, except for
Securities that are converted in accordance with the provisions of Article 4.
Upon presentation and surrender to a Paying Agent, Securities called for
redemption shall be paid at the Redemption Price, plus accrued interest up to
but not including the Redemption Date; provided that if the Redemption Date is
an interest payment date, interest will be payable to the Holders in whose
names the Securities are registered on the Redemption Date.

     Section 3.5. Deposit of Redemption Price

     Prior to 11:00 a.m. New York City time, on the Redemption Date, the
Company shall deposit with a Paying Agent (or, if the Company acts as Paying
Agent, shall segregate and hold in trust) an amount of money (in immediately
available funds if deposited on such Redemption Date) sufficient to pay the
Redemption Price of and accrued interest on all Securities to be redeemed on
that date, other than Securities or portions thereof called for redemption on
that date which have been delivered by the Company to the Trustee for
cancellation or have been converted. The Paying Agent shall as promptly as
practicable return to the Company any money not required for that purpose
because of the conversion of Securities pursuant to Article 4 or, if such money
is then held by the Company in trust and is not required for such purpose, it
shall be discharged from the trust.

     Section 3.6. Securities Redeemed in Part

     Upon presentation and surrender of a Security that is redeemed in part,
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder a new Security equal in principal amount to the unredeemed portion of
the Security surrendered.

     Section 3.7. Conversion Arrangement on Call for Redemption

     In connection with any redemption of Securities, the Company may arrange
for the purchase and conversion of any Securities called for redemption by an
agreement with one or more investment bankers or other purchasers that such
purchasers shall purchase such Securities by paying to a Paying Agent (other
than the Company or any of its Affiliates) in trust for the Holders, on or
before 11:00 a.m. New York City time on the Redemption Date, an amount that,
together with any amounts deposited with such Paying Agent by the Company for
the redemption of such Securities, is not less than the Redemption Price,
together with interest accrued to, but not including, the Redemption Date, of
such Securities. Notwithstanding anything to the contrary contained in this
Article 3, the obligation of the Company to pay the Redemption Price of such

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Securities, including all accrued interest, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers; provided, however, that nothing in this Section 3.7 shall relieve
the Company of its obligation to pay the Redemption Price, plus accrued
interest to but excluding the relevant Redemption Date, on Securities called
for redemption. If such an agreement with one or more investment banks or
other purchasers is entered into, any Securities called for redemption and not
surrendered for conversion by the Holders thereof prior to the relevant
Redemption Date may, at the option of the Company upon written notice to the
Trustee, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article 4) surrendered by such purchasers for conversion, all as
of 11:00 a.m. New York City time on the Redemption Date, subject to payment of
the above amount as aforesaid. The Paying Agent shall hold and pay to the
Holders whose Securities are selected for redemption any such amount paid to it
for purchase in the same manner as it would money deposited with it by the
Company for the redemption of Securities. Without the Paying Agent’s prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Securities shall increase or otherwise affect
any of the powers, duties, responsibilities or obligations of the Paying Agent
as set forth in this Indenture, and the Company agrees to indemnify the Paying
Agent from, and hold it harmless against, any loss, liability or expense
arising out of or in connection with any such arrangement for the purchase and
conversion of any Securities between the Company and such purchasers, including
the costs and expenses incurred by the Paying Agent in the defense of any claim
or liability arising out of or in connection with the exercise or performance
of any of its powers, duties, responsibilities or obligations under this
Indenture.

     Section 3.8. Purchase of Securities at Option of the Holder Upon Change in
Control

     (a)  If at any time that Securities remain outstanding there shall occur a
Change in Control, Securities shall be purchased by the Company at the option
of the Holders, as of the date that is 30 Business Days after the occurrence of
the Change in Control (the “Change in Control Purchase Date”) at a purchase
price equal to 100% of the principal amount of the Securities, together with
accrued and unpaid interest to, but excluding, the Change in Control Purchase
Date (the “Change in Control Purchase Price”), subject to satisfaction by or on
behalf of any Holder of the requirements set forth in subsection (c) of this
Section 3.8.

     A “Change in Control” shall be deemed to have occurred if any of the
following occurs after the date hereof:

     (1)  any “person” or “group” (as such terms are defined below) is or
becomes the “beneficial owner” (as defined below), directly or indirectly, of
shares of Voting Stock of the Company representing 50% or more of the total
voting power of all outstanding classes of Voting Stock of the Company or has
the power, directly or indirectly, to elect a majority of the members of the
Board of Directors of the Company; or

     (2)  the Company consolidates with, or merges with or into, another Person
or the Company sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of the assets Company in a transaction requiring
the approval of its stockholders under applicable corporate law, or any Person
consolidates with, or merges with or into, the Company, in any such event other
than pursuant to a transaction in which the Persons that “beneficially owned”
(as defined below), directly or indirectly, shares of Voting Stock of the
Company immediately prior to such transaction “beneficially own” (as defined
below), directly or indirectly, shares of Voting Stock of the Company
representing at least a majority of the total voting power of all outstanding
classes of Voting Stock of the surviving or transferee Person; or

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     (3)  the Continuing Directors do not constitute a majority of the Board of
Directors of the Company; or

     (4)  the holders of capital stock of the Company approve any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the terms hereof).

For the purpose of the definition of “Change in Control”, (i) “person” and
“group” have the meanings given such terms under Section 13(d) and 14(d) of the
Exchange Act or any successor provision to either of the foregoing, and the
term “group” includes any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act (or any successor provision thereto), (ii) a “beneficial owner”
shall be determined in accordance with Rule 13d-3 under the Exchange Act, as in
effect on the date of this Indenture, except that the number of shares of
Voting Stock of the Company shall be deemed to include, in addition to all
outstanding shares of Voting Stock of the Company and Unissued Shares deemed to
be held by the “person” or “group” (as such terms are defined above) or other
Person with respect to which the Change in Control determination is being made,
all Unissued Shares deemed to be held by all other Persons, and (iii) the terms
“beneficially owned” and “beneficially own” shall have meanings correlative to
that of “beneficial owner”. The term “Unissued Shares” means shares of Voting
Stock not outstanding that are subject to options, warrants, rights to purchase
or conversion privileges exercisable within 60 days of the date of
determination of a Change in Control.

     Notwithstanding anything to the contrary set forth in this Section 3.8, a
Change in Control will not be deemed to have occurred if either:

     (1)  the Closing Price (determined in accordance with Section 4.6(d) of
this Indenture) of the Common Stock for any five Trading Days during the ten
Trading Days immediately preceding the Change in Control is at least equal to
105% of the Conversion Price in effect on such Trading Day; or

     (2)  in the case of a merger or consolidation, all of the consideration
(excluding cash payments for fractional shares and cash payments pursuant to
dissenters’ appraisal rights) in the merger or consolidation constituting the
Change in Control consists of common stock traded on a United States national
securities exchange or quoted on the Nasdaq National Market (or which will be
so traded or quoted when issued or exchanged in connection with such Change in
Control) and as a result of such transaction or transactions the Securities
become convertible solely into such common stock.

     (b)  Within 10 Business Days after the occurrence of a Change in Control,
the Company shall mail a written notice of the Change in Control to the Trustee
and to each Holder (and to beneficial owners as required by applicable law).
The notice shall include the form of a Change in Control Purchase Notice to be
completed by the Holder and shall state:

     (1)  the date of such Change in Control and, briefly, the events causing
such Change in Control;

     (2)  the date by which the Change in Control Purchase Notice pursuant to
this Section 3.8 must be given;

     (3)  the Change in Control Purchase Date;

     (4)  the Change in Control Purchase Price;

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     (5)  the Holder’s right to require the Company to purchase the Securities;

     (6)  briefly, the conversion rights of the Securities;

     (7)  the name and address of each Paying Agent and Conversion Agent;

     (8)  the Conversion Price and any adjustments thereto;

     (9)  that Securities as to which a Change in Control Purchase Notice has
been given may be converted into Common Stock pursuant to Article 4 of this
Indenture only to the extent that the Change in Control Purchase Notice has
been withdrawn in accordance with the terms of this Indenture;

     (10)  the procedures that the Holder must follow to exercise rights under
this Section 3.8;

     (11)  the procedures for withdrawing a Change in Control Purchase Notice,
including a form of notice of withdrawal; and

     (12)  that the Holder must satisfy the requirements set forth in the
Securities in order to convert the Securities.

     If any of the Securities is in the form of a Global Security, then the
Company shall modify such notice to the extent necessary to accord with the
procedures of the Depositary applicable to the repurchase of Global Securities.

     (c)  A Holder may exercise its rights specified in subsection (a) of this
Section 3.8 upon delivery of a written notice (which shall be in substantially
the form included in Exhibit A hereto and which may be delivered by letter,
overnight courier, hand delivery, facsimile transmission or in any other
written form and, in the case of Global Securities, may be delivered
electronically or by other means in accordance with the Depositary’s customary
procedures) of the exercise of such rights (a “Change in Control Purchase
Notice”) to any Paying Agent at any time prior to the close of business on the
Business Day next preceding the Change in Control Purchase Date.

     The delivery of such Security to any Paying Agent (together with all
necessary endorsements) at the office of such Paying Agent shall be a condition
to the receipt by the Holder of the Change in Control Purchase Price therefor.

     The Company shall purchase from the Holder thereof, pursuant to this
Section 3.8, a portion of a Security if the principal amount of such portion is
$1,000 or an integral multiple of $1,000. Provisions of the Indenture that
apply to the purchase of all of a Security pursuant to Sections 3.8 through
3.13 also apply to the purchase of such portion of such Security.

     Notwithstanding anything herein to the contrary, any Holder delivering to
a Paying Agent the Change in Control Purchase Notice contemplated by this
subsection (c) shall have the right to withdraw such Change in Control Purchase
Notice in whole or in a portion thereof that is a principal amount of $1,000 or
in an integral multiple thereof at any time prior to the close of business on
the Business Day next preceding the Change in Control Purchase Date by delivery
of a written notice of withdrawal to the Paying Agent in accordance with
Section 3.9.

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     A Paying Agent shall promptly notify the Company of the receipt by it of
any Change in Control Purchase Notice or written withdrawal thereof.

     Anything herein to the contrary notwithstanding, in the case of Global
Securities, any Change in Control Purchase Notice may be delivered or withdrawn
and such Securities may be surrendered or delivered for purchase in accordance
with the Applicable Procedures as in effect from time to time.

     Section 3.9. Effect of Change in Control Purchase Notice

     Upon receipt by any Paying Agent of the Change in Control Purchase Notice
specified in Section 3.8(c), the Holder of the Security in respect of which
such Change in Control Purchase Notice was given shall (unless such Change in
Control Purchase Notice is withdrawn as specified below) thereafter be entitled
to receive the Change in Control Purchase Price with respect to such Security.
Such Change in Control Purchase Price shall be paid to such Holder promptly
following the later of (a) the Change in Control Purchase Date with respect to
such Security (provided the conditions in Section 3.8(c) have been satisfied)
and (b) the time of delivery of such Security to a Paying Agent by the Holder
thereof in the manner required by Section 3.8(c). Securities in respect of
which a Change in Control Purchase Notice has been given by the Holder thereof
may not be converted into shares of Common Stock pursuant to Article 4 on or
after the date of the delivery of such Change in Control Purchase Notice unless
such Change in Control Purchase Notice has first been validly withdrawn.

     A Change in Control Purchase Notice may be withdrawn by means of a written
notice (which may be delivered by mail, overnight courier, hand delivery,
facsimile transmission or in any other written form and, in the case of Global
Securities, may be delivered electronically or by other means in accordance
with the Depositary’s customary procedures) of withdrawal delivered by the
Holder to a Paying Agent at any time prior to the close of business on the
Business Day immediately preceding the Change in Control Purchase Date,
specifying the principal amount of the Security or portion thereof (which must
be a principal amount of $1,000 or an integral multiple of $1,000 in excess
thereof) with respect to which such notice of withdrawal is being submitted.

     Section 3.10. Deposit of change in Control Purchase Price

     On or before 11:00 a.m. New York City time on the Change in Control
Purchase Date, the Company shall deposit with the Trustee or with a Paying
Agent (other than the Company or an Affiliate of the Company) an amount of
money (in immediately available funds if deposited on such Change in Control
Purchase Date) sufficient to pay the aggregate Change in Control Purchase Price
of all the Securities or portions thereof that are to be purchased as of such
Change in Control Purchase Date. The manner in which the deposit required by
this Section 3.10 is made by the Company shall be at the option of the Company,
provided that such deposit shall be made in a manner such that the Trustee or a
Paying Agent shall have immediately available funds on the Change in Control
Purchase Date.

     If a Paying Agent holds, in accordance with the terms hereof, money
sufficient to pay the Change in Control Purchase Price of any Security for
which a Change in Control Purchase Notice has been tendered and not withdrawn
in accordance with this Indenture then, on the Change in Control Purchase Date,
such Security will cease to be outstanding and the rights of the Holder in
respect thereof shall terminate (other than the right to receive the Change in
Control Purchase Price as aforesaid). The Company shall publicly announce the
principal amount of Securities purchased as a result of such Change in Control
as soon as practicable after the Change in Control Purchase Date.

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     Section 3.11. Securities Purchase in Part

     Any Security that is to be purchased only in part shall be surrendered at
the office of a Paying Agent, and promptly after the Change in Control Purchase
Date the Company shall execute and the Trustee shall authenticate and deliver
to the Holder of such Security, without service charge, a new Security or
Securities, of such authorized denomination or denominations as may be
requested by such Holder, in aggregate principal amount equal to, and in
exchange for, the portion of the principal amount of the Security so
surrendered that is not purchased.

     Section 3.12. Compliance with Securities Laws Upon Purchase of Securities

     In connection with any offer to purchase or purchase of Securities under
Section 3.8, the Company shall (a) comply with Rule 13e-4 and Rule 14e-1 (or
any successor to either such Rule), if applicable, under the Exchange Act, (b)
file the related Schedule TO (or any successor or similar schedule, form or
report) if required under the Exchange Act, and (c) otherwise comply with all
federal and state securities laws in connection with such offer to purchase or
purchase of Securities, all so as to permit the rights of the Holders and
obligations of the Company under Sections 3.8 through 3.11 to be exercised in
the time and in the manner specified therein.

     Section 3.13. Repayment to the Company

     To the extent that the aggregate amount of cash deposited by the Company
pursuant to Section 3.10 exceeds the aggregate Change in Control Purchase Price
together with interest, if any, thereon of the Securities or portions thereof
that the Company is obligated to purchase, then promptly after the Change in
Control Purchase Date the Trustee or a Paying Agent, as the case may be, shall
return any such excess cash to the Company.

Article 4

Conversion

     Section 4.1. Conversion Privilege

     Subject to the further provisions of this Article 4 and paragraph 8 of the
Securities, a Holder of a Security may convert the principal amount of such
Security (or any portion thereof equal to $1,000 or any integral multiple of
$1,000 in excess thereof) into Common Stock at any time prior to the close of
business on the Final Maturity Date, at the Conversion Price then in effect;
provided, however, that, if such Security is called for redemption or submitted
or presented for purchase pursuant to Article 3, such conversion right shall
terminate at the close of business on the Business Day immediately preceding
the Redemption Date or Change in Control Purchase Date, as the case may be, for
such Security or such earlier date as the Holder presents such Security for
redemption or for purchase (unless the Company shall default in making the
redemption payment or Change in Control Purchase Price payment when due, in
which case the conversion right shall terminate at the close of business on the
date such default is cured and such Security is redeemed or purchased, as the
case may be). The number of shares of Common Stock issuable upon conversion of
a Security shall be determined by dividing the principal amount of the Security
or portion thereof surrendered for conversion by the Conversion Price in effect
on the Conversion Date. The initial Conversion Price is set forth in paragraph
8 of the reverse side of the Securities and is subject to adjustment as
provided in this Article 4.

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     Provisions of this Indenture that apply to conversion of all of a Security
also apply to conversion of a portion of a Security.

     A Security in respect of which a Holder has delivered a Change in Control
Purchase Notice pursuant to Section 3.8(c) exercising the option of such Holder
to require the Company to purchase such Security may be converted only if such
Change in Control Purchase Notice is withdrawn by a written notice of
withdrawal delivered to a Paying Agent prior to the close of business on the
Business Day immediately preceding the Change in Control Purchase Date in
accordance with Section 3.9.

     A Holder of Securities is not entitled to any rights of a holder of Common
Stock until such Holder has converted its Securities to Common Stock, and only
to the extent such Securities are deemed to have been converted into Common
Stock pursuant to this Article 4.

     Section 4.2. Conversion Procedure

     To convert a Security, a Holder must (a) complete and manually sign the
conversion notice on the back of the Security and deliver such notice to a
Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish
appropriate endorsements and transfer documents if required by a Registrar or a
Conversion Agent, and (d) pay any transfer or similar tax, if required. The
date on which the Holder satisfies all of those requirements is the “Conversion
Date.” As soon as practicable after the Conversion Date, the Company shall
deliver to the Holder through a Conversion Agent a certificate for the number
of whole shares of Common Stock issuable upon the conversion and cash in lieu
of any fractional shares pursuant to Section 4.3. Anything herein to the
contrary notwithstanding, in the case of Global Securities, conversion notices
may be delivered and such Securities may be surrendered for conversion in
accordance with the Applicable Procedures as in effect from time to time.

     The person in whose name the Common Stock certificate is registered shall
be deemed to be a stockholder of record on the Conversion Date; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the
person or persons entitled to receive the shares of Common Stock upon such
conversion as the record holder or holders of such shares of Common Stock on
such date, but such surrender shall be effective to constitute the person or
persons entitled to receive such shares of Common Stock as the record holder or
holders thereof for all purposes at the close of business on the next
succeeding day on which such stock transfer books are open; provided, further,
that such conversion shall be at the Conversion Price in effect on the
Conversion Date as if the stock transfer books of the Company had not been
closed. Upon conversion of a Security, such person shall no longer be a Holder
of such Security. No payment or adjustment will be made for dividends or
distributions on shares of Common Stock issued upon conversion of a Security.

     Securities so surrendered for conversion (in whole or in part) during the
period from the close of business on any regular record date to the opening of
business on the next succeeding interest payment date (excluding Securities or
portions thereof called for redemption or presented for purchase upon a Change
in Control on a Redemption Date or Change in Control Purchase Date, as the case
may be, during the period beginning at the close of business on a regular
record date and ending at the opening of business on the first Business Day
after the next succeeding interest payment date, or if such interest payment
date is not a Business Day, the second such Business Day) shall also be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest payable on such interest payment date on the principal amount of
such Security then being converted, and such interest shall be payable to such
registered Holder notwithstanding the conversion of such Security, subject to
the provisions of this Indenture relating to the

24

 

payment of defaulted interest by the Company. Except as otherwise
provided in this Section 4.2, no payment or adjustment will be made for accrued
interest on a converted Security. If the Company defaults in the payment of
interest payable on such interest payment date, the Company shall promptly
repay such funds to such Holder.

     Nothing in this Section shall affect the right of a Holder in whose name
any Security is registered at the close of business on a record date to receive
the interest payable on such Security on the related interest payment date in
accordance with the terms of this Indenture and the Securities. If a Holder
converts more than one Security at the same time, the number of shares of
Common Stock issuable upon the conversion shall be based on the aggregate
principal amount of Securities converted.

     Upon surrender of a Security that is converted in part, the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder, a new
Security equal in principal amount to the unconverted portion of the Security
surrendered.

     Section 4.3. Fractional Shares

     The Company will not issue fractional shares of Common Stock upon
conversion of Securities. In lieu thereof, the Company will pay an amount in
cash for the current market value of the fractional shares. The current market
value of a fractional share shall be determined (calculated to the nearest
1/1000th of a share) by multiplying the Closing Price (determined as set forth
in Section 4.6(d)) of the Common Stock on the Trading Day immediately prior to
the Conversion Date by such fractional share and rounding the product to the
nearest whole cent.

     Section 4.4. Taxes on Conversion

     If a Holder converts a Security, the Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon such conversion. However, the Holder shall pay any such tax which
is due because the Holder requests the shares to be issued in a name other than
the Holder’s name. The Conversion Agent may refuse to deliver the certificate
representing the Common Stock being issued in a name other than the Holder’s
name until the Conversion Agent receives a sum sufficient to pay any tax which
will be due because the shares are to be issued in a name other than the
Holder’s name. Nothing herein shall preclude any tax withholding required by
law or regulation.

     Section 4.5. Company to Provide Stock

     The Company shall, prior to issuance of any Securities hereunder, and from
time to time as may be necessary, reserve, out of its authorized but unissued
Common Stock, a sufficient number of shares of Common Stock to permit the
conversion of all outstanding Securities into shares of Common Stock.

     All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares, shall be duly authorized, validly issued, fully
paid and nonassessable and shall be free from preemptive rights and free of any
lien or adverse claim.

     The Company will endeavor promptly to comply with all federal and state
securities laws regulating the offer and delivery of shares of Common Stock
upon conversion of Securities, if any, and will list or cause to have quoted
such shares of Common Stock on each national securities exchange or on the
Nasdaq National Market or other over-the-counter market or such other market on
which the Common Stock is then listed or quoted; provided, however, that if
rules of such automated quotation system or exchange permit the Company

25

 

to defer the listing of such Common Stock until the first conversion of
the Notes into Common Stock in accordance with the provisions of this
Indenture, the Company covenants to list such Common Stock issuable upon
conversion of the Notes in accordance with the requirements of such automated
quotation system or exchange at such time. Any Common Stock issued upon
conversion of a Security hereunder which at the time of conversion was a
Restricted Security will also be a Restricted Security.

     Section 4.6. Adjustment of Conversion Price

     The conversion price as stated in paragraph 8 of the reverse side of the
Securities (the “Conversion Price”) shall be adjusted from time to time by the
Company as follows:

     (a)  In case the Company shall (i) pay a dividend on its Common Stock in
shares of Common Stock, (ii) make a distribution on its Common Stock in shares
of Common Stock, (iii) subdivide its outstanding Common Stock into a greater
number of shares, or (iv) combine its outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior thereto
shall be adjusted so that the Holder of any Security thereafter surrendered for
conversion shall be entitled to receive that number of shares of Common Stock
which it would have owned had such Security been converted immediately prior to
the happening of such event. An adjustment made pursuant to this subsection
(a) shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of subdivision or combination.

     (b)  In case the Company shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
commencing no earlier than the record date described below and expiring not
more than 60 days after such record date) to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price per
share (or having a conversion price per share) less than the Current Market
Price per share of Common Stock (as determined in accordance with subsection
(d) of this Section 4.6) on the record date for the determination of
stockholders entitled to receive such rights or warrants, the Conversion Price
in effect immediately prior thereto shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding on such record date
plus the number of shares which the aggregate offering price of the total
number of shares of Common Stock so offered (or the aggregate conversion price
of the convertible securities so offered, which shall be determined by
multiplying the number of shares of Common Stock issuable upon conversion of
such convertible securities by the conversion price per share of Common Stock
pursuant to the terms of such convertible securities) would purchase at the
Current Market Price per share (as defined in subsection (d) of this Section
4.6) of Common Stock on such record date, and of which the denominator shall be
the number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock offered (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever any such rights or warrants are issued, and shall
become effective immediately after such record date. If at the end of the
period during which such rights or warrants are exercisable not all rights or
warrants shall have been exercised, the adjusted Conversion Price shall be
immediately readjusted to what it would have been based upon the number of
additional shares of Common Stock actually issued (or the number of shares of
Common Stock issuable upon conversion of convertible securities actually
issued).

     (c)  In case the Company shall distribute to all or substantially all
holders of its Common Stock any shares of capital stock of the Company (other
than Common Stock), evidences of indebtedness or other non-cash assets
(including securities of any person other than the Company but excluding (1)
dividends or distributions paid exclusively in cash or (2) dividends or
distributions referred to in subsection (a) of this

26

 

Section 4.6), or shall distribute to all or substantially all holders of
its Common Stock rights or warrants to subscribe for or purchase any of its
securities (excluding those rights and warrants referred to in subsection (b)
of this Section 4.6 and also excluding the distribution of rights to all
holders of Common Stock pursuant to the adoption of a stockholders rights plan
or the detachment of such rights under the terms of such stockholder rights
plan), then in each such case the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the current Conversion
Price by a fraction of which the numerator shall be the Current Market Price
per share (as defined in subsection (d) of this Section 4.6) of the Common
Stock on the record date mentioned below less the fair market value on such
record date (as determined by the Board of Directors, whose determination shall
be conclusive evidence of such fair market value and which shall be evidenced
by an Officers’ Certificate delivered to the Trustee) of the portion of the
capital stock, evidences of indebtedness or other non-cash assets so
distributed or of such rights or warrants applicable to one share of Common
Stock (determined on the basis of the number of shares of Common Stock
outstanding on the record date), and of which the denominator shall be the
Current Market Price per share (as defined in subsection (d) of this Section
4.6) of the Common Stock on such record date. Such adjustment shall be made
successively whenever any such distribution is made and shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such distribution.

     In the event the then fair market value (as so determined by the Board of
Directors in the immediately preceding paragraph) of the portion of the capital
stock, evidences of indebtedness or other non-cash assets so distributed or of
such rights or warrants applicable to one share of Common Stock is equal to or
greater than the Current Market Price per share of the Common Stock on such
record date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each holder of a Security shall have the right to receive upon
conversion the amount of capital stock, evidences of indebtedness or other
non-cash assets so distributed or of such rights or warrants such holder would
have received had such holder converted each Security on such record date. In
the event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been declared. If
the Board of Directors determines the fair market value of any distribution for
purposes of this Section 4.6(c) by reference to the actual or when issued
trading market for any securities, it must in doing so consider the prices in
such market over the same period used in computing the Current Market Price of
the Common Stock.

     Upon conversion of the Securities into Common Stock, to the extent that
the Rights Agreement is still in effect upon such conversion, the holders of
Securities will receive, in addition to the Common Stock, the rights described
therein (whether or not the rights have separated from the Common Stock at the
time of conversion), subject to the limitations set forth in the Rights
Agreement. Any distribution of rights or warrants pursuant to a Rights
Agreement complying with the requirements set forth in the immediately
preceding sentence of this paragraph shall not constitute a distribution of
rights or warrants pursuant to this Section 4.6(c).

     Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company’s Capital Stock (either initially or under certain circumstances),
which rights or warrants, until the occurrence of a specified event or events
(“Trigger Event”): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 4.6 (and no adjustment to the Conversion Price under
this Section 4.6 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the
Conversion Price shall be made under this Section 4.6(c). If any such right or
warrant, including any such existing rights or

27

 

warrants distributed prior to the date of this Indenture, are subject to
events, upon the occurrence of which such rights or warrants become exercisable
to purchase different securities, evidences of indebtedness or other assets,
then the date of the occurrence of any and each such event shall be deemed to
be the date of distribution and record date with respect to new rights or
warrants with such rights (and a termination or expiration of the existing
rights or warrants without exercise by any of the holders thereof). In
addition, in the event of any distribution (or deemed distribution) of rights
or warrants, or any Trigger Event or other event (of the type described in the
preceding sentence) with respect thereto that was counted for purposes of
calculating a distribution amount for which an adjustment to the Conversion
Price under this Section 4.6 was made, (1) in the case of any such rights or
warrants which shall all have been redeemed or repurchased without exercise by
any holders thereof, the Conversion Price shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger Event,
as the case may be, as though it were a cash distribution, equal to the per
share redemption or repurchase price received by a holder or holders of Common
Stock with respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights
or warrants which shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.

     (d)  In case the Company shall, by dividend or otherwise, at any time
distribute (a “Triggering Distribution”) to all or substantially all holders of
its Common Stock cash in an aggregate amount that, together with the aggregate
amount of (A) any cash and the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive evidence thereof and which
shall be evidenced by an Officers’ Certificate delivered to the Trustee) of any
other consideration payable in respect of any tender offer by the Company or a
Subsidiary of the Company for Common Stock consummated within the 12 months
preceding the date of payment of the Triggering Distribution and in respect of
which no Conversion Price adjustment pursuant to this Section 4.6 has been made
and (B) all other cash distributions to all or substantially all holders of its
Common Stock made within the 12 months preceding the date of payment of the
Triggering Distribution and in respect of which no Conversion Price adjustment
pursuant to this Section 4.6 has been made, exceeds an amount equal to 10.0% of
the product of the Current Market Price per share of Common Stock (as
determined in accordance with subsection (d) of this Section 4.6) on the
Business Day (the “Determination Date”) immediately preceding the day on which
such Triggering Distribution is declared by the Company multiplied by the
number of shares of Common Stock outstanding on the Determination Date
(excluding shares held in the treasury of the Company), the Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying such Conversion Price in effect immediately prior to the
Determination Date by a fraction of which the numerator shall be the Current
Market Price per share of the Common Stock (as determined in accordance with
subsection (d) of this Section 4.6) on the Determination Date less the sum of
the aggregate amount of cash and the aggregate fair market value (determined as
aforesaid in this Section 4.6(c)(1)) of any such other consideration so
distributed, paid or payable within such 12 months (including, without
limitation, the Triggering Distribution) applicable to one share of Common
Stock (determined on the basis of the number of shares of Common Stock
outstanding on the Determination Date) and the denominator shall be such
Current Market Price per share of the Common Stock (as determined in accordance
with subsection (d) of this Section 4.6) on the Determination Date, such
reduction to become effective immediately prior to the opening of business on
the day following the date on which the Triggering Distribution is paid.

     (e)  In case any tender offer made by the Company or any of its
Subsidiaries for Common Stock shall expire and such tender offer (as amended
upon the expiration thereof) shall involve the payment of aggregate
consideration in an amount (determined as the sum of the aggregate amount of
cash consideration and the aggregate fair market value (as determined by the
Board of Directors, whose determination shall be

28

 

conclusive evidence thereof and which shall be evidenced by an Officers’
Certificate delivered to the Trustee thereof) of any other consideration) that,
together with the aggregate amount of (A) any cash and the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive evidence thereof and which shall be evidenced by an Officers’
Certificate delivered to the Trustee) of any other consideration payable in
respect of any other tender offers by the Company or any Subsidiary of the
Company for Common Stock consummated within the 12 months preceding the date of
the Expiration Date (as defined below) and in respect of which no Conversion
Price adjustment pursuant to this Section 4.6 has been made and (B) all cash
distributions to all or substantially all holders of its Common Stock made
within the 12 months preceding the Expiration Date and in respect of which no
Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds
an amount equal to 10.0% of the product of the Current Market Price per share
of Common Stock (as determined in accordance with subsection (d) of this
Section 4.6) as of the last date (the “Expiration Date”) tenders could have
been made pursuant to such tender offer (as it may be amended) (the last time
at which such tenders could have been made on the Expiration Date is
hereinafter sometimes called the “Expiration Time”) multiplied by the number of
shares of Common Stock outstanding (including tendered shares but excluding any
shares held in the treasury of the Company) at the Expiration Time, then,
immediately prior to the opening of business on the day after the Expiration
Date, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately
prior to the close of business on the Expiration Date by a fraction of which
the numerator shall be the product of the number of shares of Common Stock
outstanding (including tendered shares but excluding any shares held in the
treasury of the Company) at the Expiration Time multiplied by the Current
Market Price per share of the Common Stock (as determined in accordance with
subsection (d) of this Section 4.6) on the Trading Day next succeeding the
Expiration Date and the denominator shall be the sum of (x) the aggregate
consideration (determined as aforesaid) payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender offer) of
all shares validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
“Purchased Shares”) and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares and excluding any shares held in the
treasury of the Company) at the Expiration Time and the Current Market Price
per share of Common Stock (as determined in accordance with subsection (d) of
this Section 4.6) on the Trading Day next succeeding the Expiration Date, such
reduction to become effective immediately prior to the opening of business on
the day following the Expiration Date. In the event that the Company is
obligated to purchase shares pursuant to any such tender offer, but the Company
is permanently prevented by applicable law from effecting any or all such
purchases or any or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price which would have been in
effect based upon the number of shares actually purchased. If the application
of this Section 4.6(c)(2) to any tender offer would result in an increase in
the Conversion Price, no adjustment shall be made for such tender offer under
this Section 4.6(c)(2).

     (1)  For purposes of this Section 4.6(c), the term “tender offer” shall
mean and include both tender offers and exchange offers, all references to
“purchases” of shares in tender offers (and all similar references) shall mean
and include both the purchase of shares in tender offers and the acquisition of
shares pursuant to exchange offers, and all references to “tendered shares”
(and all similar references) shall mean and include shares tendered in both
tender offers and exchange offers.

     (f)  For the purpose of any computation under subsections (b) and (c) of
this Section 4.6, the current market price (the “Current Market Price”) per
share of Common Stock on any date shall be deemed to be the average of the
daily closing prices for the 30 consecutive Trading Days commencing 45 Trading
Days before (i) the Determination Date or the Expiration Date, as the case may
be, with respect to distributions or tender offers under subsection (c) of this
Section 4.6 or (ii) the record date with respect to distributions, issuances or

29

 

other events requiring such computation under subsection (b) or (c) of
this Section 4.6. The closing price (the “Closing Price”) for each day shall
be the last reported sales price or, in case no such reported sale takes place
on such date, the average of the reported closing bid and asked prices in
either case on the Nasdaq National Market (the “NNM”) or, if the Common Stock
is not listed or admitted to trading on the NNM, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on the NNM or any national securities
exchange, the last reported sales price of the Common Stock as quoted on NASDAQ
or, in case no reported sales takes place, the average of the closing bid and
asked prices as quoted on NASDAQ or any comparable system or, if the Common
Stock is not quoted on NASDAQ or any comparable system, the closing sales price
or, in case no reported sale takes place, the average of the closing bid and
asked prices, as furnished by any two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose. If no such prices are available, the Current Market Price per share
shall be the fair value of a share of Common Stock as determined by the Board
of Directors, whose determination shall be conclusive evidence thereof and
which shall be evidenced by an Officers’ Certificate delivered to the Trustee.

     (g)  In any case in which this Section 4.6 shall require that an adjustment
be made following a record date or a Determination Date or Expiration Date, as
the case may be, established for purposes of this Section 4.6, the Company may
elect to defer (but only until five Business Days following the filing by the
Company with the Trustee of the certificate described in Section 4.9) issuing
to the Holder of any Security converted after such record date or Determination
Date or Expiration Date the shares of Common Stock and other capital stock of
the Company issuable upon such conversion over and above the shares of Common
Stock and other capital stock of the Company issuable upon such conversion only
on the basis of the Conversion Price prior to adjustment; and, in lieu of the
shares the issuance of which is so deferred, the Company shall issue or cause
its transfer agents to issue due bills or other appropriate evidence prepared
by the Company of the right to receive such shares. If any distribution in
respect of which an adjustment to the Conversion Price is required to be made
as of the record date or Determination Date or Expiration Date therefor is not
thereafter made or paid by the Company for any reason, the Conversion Price
shall be readjusted to the Conversion Price which would then be in effect if
such record date had not been fixed or such effective date or Determination
Date or Expiration Date had not occurred.

     Section 4.7. No Adjustment

     No adjustment in the Conversion Price shall be required unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price as last adjusted; provided, however, that any adjustments
which by reason of this Section 4.7 are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Article 4 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be, except as set forth in
Section 4.3.

     No adjustment need be made for issuances of Common Stock pursuant to a
Company plan for reinvestment of dividends or interest or for a change in the
par value or a change to no par value of the Common Stock.

     To the extent that the Securities become convertible into the right to
receive cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.

30

 

     Section 4.8. Adjustment for Tax Purposes

     The Company shall be entitled to make such reductions in the Conversion
Price, in addition to those required by Section 4.6, as it in its discretion
shall determine to be advisable in order that any stock dividends, subdivisions
of shares, distributions of rights to purchase stock or securities or
distributions of securities convertible into or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.

     Section 4.9. Notice of Adjustment

     Whenever the Conversion Price or conversion privilege is adjusted, the
Company shall promptly mail to Securityholders a notice of the adjustment and
file with the Trustee an Officers’ Certificate briefly stating the facts
requiring the adjustment and the manner of computing it. Unless and until the
Trustee shall receive an Officers’ Certificate setting forth an adjustment of
the Conversion Price, the Trustee may assume without inquiry that the
Conversion Price has not been adjusted and that the last Conversion Price of
which it has knowledge remains in effect.

     Section 4.10. Notice of Certain Transactions

     In the event that:

     (1)  the Company takes any action which would require an adjustment in the
Conversion Price;

     (2)  the Company consolidates or merges with, or transfers all or
substantially all of its property and assets to, another corporation and
stockholders of the Company must approve the transaction under applicable
corporate law; or

     (3)  there is a dissolution or liquidation of the Company,

the Company shall mail to Holders and file with the Trustee a notice stating
the proposed record or effective date, as the case may be. The Company shall
mail the notice at least ten days before such date. Failure to mail such
notice or any defect therein shall not affect the validity of any transaction
referred to in clause (1), (2) or (3) of this Section 4.10.

		
	 	     Section 4.11. Effect of Reclassification, Consolidation, Merger or Sale on
Conversion Privilege

     If any of the following shall occur, namely:  (a) any reclassification or
change of shares of Common Stock issuable upon conversion of the Securities
(other than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or combination, or
any other change for which an adjustment is provided in Section 4.6); (b) any
consolidation or merger or combination to which the Company is a party other
than a merger in which the Company is the continuing corporation and which does
not result in any reclassification of, or change (other than in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding shares of Common Stock;
or (c) any sale or conveyance as an entirety or substantially as an entirety of
the property and assets of the Company, directly or indirectly, to any person,
then the Company, or such successor, purchasing or transferee corporation, as
the case may be, shall, as a condition precedent to such reclassification,
change, combination, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental

31

 

indenture providing that the Holder of each Security then outstanding
shall have the right to convert such Security into the kind and amount of
shares of stock and other securities and property (including cash) receivable
upon such reclassification, change, combination, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock deliverable upon
conversion of such Security immediately prior to such reclassification, change,
combination, consolidation, merger, sale or conveyance. Such supplemental
indenture shall provide for adjustments of the Conversion Price which shall be
as nearly equivalent as may be practicable to the adjustments of the Conversion
Price provided for in this Article 4. If, in the case of any such
consolidation, merger, combination, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Common Stock include shares of stock or other securities and property of a
person other than the successor, purchasing or transferee corporation, as the
case may be, in such consolidation, merger, combination, sale or conveyance,
then such supplemental indenture shall also be executed by such other person
and shall contain such additional provisions to protect the interests of the
Holders of the Securities as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. The provisions of this Section 4.11
shall similarly apply to successive reclassifications, changes, combinations,
consolidations, mergers, sales or conveyances.

     In the event the Company shall execute a supplemental indenture pursuant
to this Section 4.11, the Company shall promptly file with the Trustee (x) an
Officers’ Certificate briefly stating the reasons therefor, the kind or amount
of shares of stock or other securities or property (including cash) receivable
by Holders of the Securities upon the conversion of their Securities after any
such reclassification, change, combination, consolidation, merger, sale or
conveyance, any adjustment to be made with respect thereto and that all
conditions precedent have been complied with and (y) an Opinion of Counsel that
all conditions precedent have been complied with, and shall promptly mail
notice thereof to all Holders.

     Section 4.12. Trustee’s Disclaimer

     The Trustee shall have no duty to determine when an adjustment under this
Article 4 should be made, how it should be made or what such adjustment should
be, but may accept as conclusive evidence of that fact or the correctness of
any such adjustment, and shall be protected in relying upon, an Officers’
Certificate including the Officers’ Certificate with respect thereto which the
Company is obligated to file with the Trustee pursuant to Section 4.9. The
Trustee makes no representation as to the validity or value of any securities
or assets issued upon conversion of Securities, and the Trustee shall not be
responsible for the Company’s failure to comply with any provisions of this
Article 4.

     The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 4.11, but may accept as conclusive evidence of the
correctness thereof, and shall be fully protected in relying upon, the
Officers’ Certificate with respect thereto which the Company is obligated to
file with the Trustee pursuant to Section 4.11.

     Section 4.13. Voluntary Reduction

     The Company from time to time may reduce the Conversion Price by any
amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period if our Board of Directors determines
that such reduction would be in the best interest of the Company or to avoid or
diminish income tax to holders of shares of our Common Stock in connection with
a dividend or distribution of stock or similar event, and the Company provides
15 days prior notice of any reduction in the Conversion Price; provided,
however, that in no event may the Company reduce the Conversion Price to be
less than the par value of a share of Common Stock.

32

 

Article 5

Subordination

     Section 5.1. Agreement of Subordination

     The Company covenants and agrees, and each Holder of Securities issued
hereunder by its acceptance thereof likewise covenants and agrees, that all
Securities shall be issued subject to the provisions of this Article 5; and
each Person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees to be bound by such
provisions.

     The payment of the principal of, premium, if any, and interest (including
Additional Interest, if any) on all Securities (including, but not limited to,
the Redemption Price with respect to the Securities called for redemption or
the Change in Control Purchase Price with respect to the Securities subject to
purchase in accordance with Article 3 as provided in this Indenture) issued
hereunder shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full in
cash or payment satisfactory to the holders of Senior Indebtedness of all
Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter incurred.

     No provision of this Article 5 shall prevent the occurrence of any default
or Event of Default hereunder.

     Section 5.2. Payments to Holders

     No payment shall be made with respect to the principal of, or premium, if
any, or interest (including Additional Interest, if any) on the Securities
(including, but not limited to, the Redemption Price with respect to the
Securities to be called for redemption or the Change in Control Purchase Price
with respect to the Securities subject to purchase in accordance with Article 3
as provided in this Indenture), except payments and distributions made by the
Trustee as permitted by the first or second paragraph of Section 5.5, if:

     (i)  a default in the payment of principal, premium, interest, rent or
other obligations due on any Designated Senior Indebtedness having a principal
amount outstanding in excess of $10 million (or with respect to which the
holders thereof are obligated to lend in excess of $10 million in principal
amount) occurs and is continuing (or, in the case of Designated Senior
Indebtedness for which there is a period of grace, in the event of such a
default that continues beyond the period of grace, if any, specified in the
instrument or lease evidencing such Designated Senior Indebtedness), unless and
until such default shall have been cured or waived or shall have ceased to
exist; or

     (ii)  a default, other than a payment default, on any Designated Senior
Indebtedness having a principal amount outstanding in excess of $10 million (or
with respect to which the holders thereof are obligated to lend in excess of
$10 million in principal amount) occurs and is continuing that then permits
holders of such Designated Senior Indebtedness to accelerate its maturity and
the Trustee receives a notice of the default (a “Payment Blockage Notice”) from
a Representative or holder of Designated Senior Indebtedness or the Company.

     Subject to the provisions of Section 5.5, if the Trustee receives any
Payment Blockage Notice pursuant to clause (ii) above, no subsequent Payment
Blockage Notice shall be effective for purposes of this Section unless and
until at least 365 days shall have elapsed since the initial effectiveness of
the immediately prior Payment Blockage Notice. No nonpayment default that
existed or was continuing on the date of

33

 

delivery of any Payment Blockage Notice to the Trustee (unless such
default was waived, cured or otherwise ceased to exist and thereafter
subsequently reoccurred) shall be, or be made, the basis for a subsequent
Payment Blockage Notice.

     The Company may and shall resume payments on and distributions in respect
of the Securities upon the earlier of:

     (a)  in the case of a default referred to in clause (i) above, the date
upon which the default is cured or waived or ceases to exist, or

     (b)  in the case of a default referred to in clause (ii) above, the
earlier of the date on which such default is cured or waived or ceases to exist
or 179 days pass after the date on which the applicable Payment Blockage Notice
is received, if the maturity of such Designated Senior Indebtedness has not
been accelerated, unless this Article 5 otherwise prohibits the payment or
distribution at the time of such payment or distribution.

     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 similar proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash, or other payments
satisfactory to the holders of Senior Indebtedness before any payment is made
on account of the principal of, premium, if any, or interest (including
Additional Interest, if any) on the Securities (except payments made pursuant
to Article 3 and Article 10 from monies deposited with the Trustee pursuant
thereto prior to commencement of proceedings for such dissolution, winding-up,
liquidation or reorganization); and upon any such dissolution or winding-up or
liquidation or reorganization of the Company or bankruptcy, insolvency,
receivership or other proceeding, 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 Holders of the Securities or the Trustee would be
entitled, except for the provision of this Article 5, shall (except as
aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Holders of the Securities or by the Trustee under this Indenture if
received by them 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, or as otherwise required by law or a court
order) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may
appear, to the extent necessary to pay all Senior Indebtedness in full in cash,
or other payment satisfactory to the holders of Senior Indebtedness, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Indebtedness, before any payment or distribution is made to the
Holders of the Securities or to the Trustee.

     For purposes of this Article 5, 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 5 with respect to
the Securities to the payment of all Senior Indebtedness which may at the time
be outstanding; provided that (i) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from any reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness (other than leases which
are not assumed by the Company or the new corporation, as the case may be) 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

34

 

corporation or the liquidation or dissolution of the Company following the
conveyance, transfer or lease of its property as an entirety, or substantially
as an entirety, to another corporation upon the terms and conditions provided
for in Article 7 shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 5.2 if such other corporation
shall, as a part of such consolidation, merger, conveyance, transfer or lease,
comply with the conditions stated in Article 7.

     In the event of the acceleration of the Securities because of an Event of
Default, no payment or distribution shall be made to the Trustee or any Holder
of Securities in respect of the principal of, premium, if any, or interest
(including Additional Interest, if any) on the Securities by the Company
(including, but not limited to, the Redemption Price with respect to the
Securities called for redemption or the Change in Control Purchase Price with
respect to the Securities subject to purchase in accordance with Article 3 as
provided in this Indenture), except payments and distributions made by the
Trustee as permitted by Section 5.5, until all Senior Indebtedness has been
paid in full in cash or other payment satisfactory to the holders of Senior
Indebtedness or such acceleration is rescinded in accordance with the terms of
this Indenture. If payment of the Securities is accelerated because of an Event
of Default, the Company shall promptly notify holders of Senior Indebtedness of
such acceleration.

     In the event that, notwithstanding the foregoing provisions, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (including, without limitation, by way of setoff
or otherwise), prohibited by the foregoing, shall be received by the Trustee or
the Holders of the Securities before all Senior Indebtedness is paid in full,
in cash or other payment satisfactory to the holders of Senior Indebtedness, or
provision is made for such payment thereof in accordance with its terms in cash
or other payment satisfactory to the holders of Senior Indebtedness, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any 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 all Senior Indebtedness in
full, in cash or other payment satisfactory to the holders of Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Indebtedness.

     Nothing in this Section 5.2 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 9.7. This Section 5.2 shall be subject to
the further provisions of Section 5.5.

     Section 5.3. Subrogation of Securities

     Subject to the payment in full, in cash or other payment satisfactory to
the holders of Senior Indebtedness, of all Senior Indebtedness, the rights of
the Holders of the Securities shall be subrogated to the extent of the payments
or distributions made to the holders of such Senior Indebtedness pursuant to
the provisions of this Article 5 (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordinated to other
indebtedness of the Company to substantially the same extent as the Securities
are subordinated and is entitled to like rights of subrogation) to the rights
of the holders of Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company applicable to the Senior
Indebtedness until the principal, premium, if any, and interest (including
Additional Interest, if any) on the Securities shall be paid in full in cash or
other payment satisfactory to the holders of Senior Indebtedness; and, for the
purposes of such subrogation, no payments or distributions to the holders of
the Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article 5, and no payment over pursuant to the provisions

35

 

of this Article 5, to or for the benefit of the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as between the
Company, its creditors other than holders of Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness; and no payments or distributions of cash,
property or securities to or for the benefit of the Holders of the Securities
pursuant to the subrogation provisions of this Article 5, which would otherwise
have been paid to the holders of Senior Indebtedness shall be deemed to be a
payment by the Company to or for the account of the Securities. It is
understood that the provisions of this Article 5 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 the Senior Indebtedness, on the
other hand.

     Nothing contained in this Article 5 or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of (and premium, if any)
and interest on the Securities 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 Securities and creditors of the Company
other than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article 5 of the holders
of 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 5, the Trustee, subject to the provisions of Section 9.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or to the Holders of the Securities, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount thereof
or payable thereon and all other facts pertinent thereto or to this Article 5.

     Section 5.4. Authorization to Effect Subordination

     Each Holder of a Security by the Holder’s acceptance thereof authorizes
and directs the Trustee on the Holder’s behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 5 and appoints the Trustee to act as the Holder’s attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
5.3 hereof at least 30 days before the expiration of the time to file such
claim, the holders of any Senior Indebtedness or their representatives are
hereby authorized to file an appropriate claim for and on behalf of the Holders
of the Securities.

     Section 5.5. Notice to Trustee

     The Company shall give prompt written notice in the form of an Officers’
Certificate to a Trust Officer of the Trustee and to any Paying Agent of any
fact known to the Company which would prohibit the making of any payment of
monies to or by the Trustee or any Paying Agent in respect of the Securities
pursuant to the provisions of this Article 5. Notwithstanding the provisions of
this Article 5 or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Securities

36

 

pursuant to the provisions of this Article 5, unless and until a Trust
Officer of the Trustee shall have received written notice thereof at the
Corporate Trust Office from the Company (in the form of an Officers’
Certificate) or a Representative or a Holder or Holders of Senior Indebtedness
or from any trustee thereof; and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 9.1, shall be entitled in all
respects to assume that no such facts exist; provided that if on a date not
less than one Business Day prior to the date upon which by the terms hereof any
such monies may become payable for any purpose (including, without limitation,
the payment of the principal of, or premium, if any, or interest on any
Security) the Trustee shall not have received, with respect to such monies, the
notice provided for in this Section 5.5, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date. Notwithstanding anything in this
Article 5 to the contrary, nothing shall prevent any payment by the Trustee to
the Holders of monies deposited with it pursuant to Article 10, and any such
payment shall not be subject to the provisions of Article 5.

     The Trustee, subject to the provisions of Section 9.1, shall be entitled
to rely on the delivery to it of a written notice by a Representative or a
person representing himself to be a holder of Senior Indebtedness (or a trustee
on behalf of such holder) to establish that such notice has been given by a
Representative or a holder of Senior Indebtedness or a trustee 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 Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 5, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 5, 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 5.6. Trustee’s Relation to Senior Indebtedness

     The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 5 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 Section 9.11 or elsewhere 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 5, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 9.1, the Trustee shall not be liable to any holder of
Senior Indebtedness if it shall pay over or deliver to Holders of Securities,
the Company or any other person money or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article 5 or otherwise.

     Section 5.7. No Impairment of Subordination

     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

37

 

Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.

     Section 5.8. Certain Conversions Deemed Payment

     For the purposes of this Article 5 only, (1) the issuance and delivery of
junior securities upon conversion of Securities in accordance with Article 4
shall not be deemed to constitute a payment or distribution on account of the
principal of (or premium, if any) or interest on Securities or on account of
the purchase or other acquisition of Securities, and (2) the payment, issuance
or delivery of cash (except in satisfaction of fractional shares pursuant to
Section 4.3), property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of
the principal of such Security. For the purposes of this Section 5.8, the term
“junior securities” means (a) shares of any stock of any class of the Company,
or (b) securities of the Company which are subordinated in right of payment to
all Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as provided in this
Article. Nothing contained in this Article 5 or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders, the right,
which is absolute and unconditional, of the Holder of any Security to convert
such Security in accordance with Article 4.

     Section 5.9. Article Applicable to Paying Agents

     If at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term “Trustee” as
used in this Article shall (unless the context otherwise requires) be construed
as extending to and including such Paying Agent within its meaning as fully for
all intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that the first
paragraph of Section 5.5 shall not apply to the Company or any Affiliate of the
Company if it or such Affiliate acts as Paying Agent.

     Section 5.10. Senior Indebtedness Entitled to Rely

     The holders of Senior Indebtedness (including, without limitation,
Designated Senior Indebtedness) shall have the right to rely upon this Article
5, and no amendment or modification of the provisions contained herein shall
diminish the rights of such holders unless such holders shall have agreed in
writing thereto.

Article 6

Covenants

     Section 6.1. Payment of Securities

     The Company shall promptly make all payments in respect of the Securities
on the dates and in the manner provided in the Securities and this Indenture.
An installment of principal or interest or Additional Interest, if any, shall
be considered paid on the date it is due if the Paying Agent (other than the
Company) holds by 11:00 a.m., New York City time, on that date money, deposited
by the Company or an Affiliate thereof, sufficient to pay the installment. The
Company shall, (in immediately available funds) to the fullest extent permitted
by law, pay interest on overdue principal (including premium, if any) and
overdue installments of interest at the rate borne by the Securities per annum.

38

 

     Payment of the principal of (and premium, if any) and any interest on the
Securities shall be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York (which shall
initially be the office of the Trustee located at 12 East 49th Street, New
York, NY 10017, Attn: Corporate Trust) or at the Corporate Trust Office of the
Trustee (which shall be the initial place for such payment) in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address appears in the Register;
provided further that a Holder with an aggregate principal amount in excess of
$2,000,000 will be paid by wire transfer in immediately available funds at the
election of such Holder if such Holder has provided wire transfer instructions
to the Company at least 10 Business Days prior to the payment date.

     Section 6.2. SEC Reports

     The Company shall file all reports and other information and documents
which it is required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act, and within 15 days after it files them with the SEC, the
Company shall file copies of all such reports, information and other documents
with the Trustee. If the Company is not required to file information,
documents or reports pursuant to either Section 13 or 15(d) of the Exchange
Act, the Company will file with the Trustee and the SEC such of the
supplementary and periodic information, documents, and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed in
such rules and regulation. The Company will also comply with Section 314(a)(3)
of the TIA.

     Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee’s receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company’s
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers’ Certificates).

     Section 6.3. Compliance Certificates

     The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company (beginning with the fiscal year ending December
31, 2002), an Officers’ Certificate as to the signer’s knowledge of the
Company’s compliance with all conditions and covenants on its part contained in
this Indenture and stating whether or not the signer knows of any default or
Event of Default. If such signer knows of such a default or Event of Default,
the Officers’ Certificate shall describe the default or Event of Default and
the efforts to remedy the same. For the purposes of this Section 6.3,
compliance shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this Indenture.

     Section 6.4. Further Instruments and Acts

     Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.

39

 

     Section 6.5. Maintenance of Corporate Existence

     Subject to Article 7, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence.

     Section 6.6. Rule 144A Information Requirement

     Within the period prior to the expiration of the holding period applicable
to sales thereof under Rule 144(k) under the Securities Act (or any successor
provision), the Company covenants and agrees that it shall, during any period
in which it is not subject to Section 13 or 15(d) under the Exchange Act, upon
the request of any Holder or beneficial holder of the Securities make available
to such Holder or beneficial holder of Securities or any Common Stock issued
upon conversion thereof which continue to be Restricted Securities in
connection with any sale thereof and any prospective purchaser of Securities or
such Common Stock designated by such Holder or beneficial holder, the
information required pursuant to Rule 144A(d)(4) under the Securities Act and
it will take such further action as any Holder or beneficial holder of such
Securities or such Common Stock may reasonably request, all to the extent
required from time to time to enable such Holder or beneficial holder to sell
its Securities or Common Stock without registration under the Securities Act
within the limitation of the exemption provided by Rule 144A, as such Rule may
be amended from time to time. Upon the request of any Holder or any beneficial
holder of the Securities or such Common Stock, the Company will deliver to such
Holder a written statement as to whether it has complied with such
requirements.

     Section 6.7. Stay, Extension and Usury Laws

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

     Section 6.8. Payment of Additional Interest

     If Additional Interest is payable by the Company pursuant to the
Registration Rights Agreement, the Company shall deliver to the Trustee a
certificate to that effect stating (i) the amount of such Additional Interest
that is payable and (ii) the date on which such Additional Interest is payable.
Unless and until a Trust Officer of the Trustee receives such a certificate,
the Trustee may assume without inquiry that no such Additional Interest is
payable. If the Company has paid Additional Interest directly to the Persons
entitled to it, the Company shall deliver to the Trustee a certificate setting
forth the particulars of such payment.

40

 

Article 7

Consolidation, Merger, Conveyance, Transfer or Lease

     Section 7.1. Company May Consolidate, Etc., Only on Certain Terms

     The Company shall not consolidate with or merge into any other Person (in
a transaction in which the Company is not the surviving corporation) or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, unless:

          (1)  in case the Company shall consolidate with or merge into another
Person (in a transaction in which the Company is not the surviving corporation)
or convey, transfer or lease its properties and assets substantially as an
entirety in a transaction requiring the approval of its stockholders under
applicable corporate law to any Person, the Person formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation organized and validly
existing under the laws of the United States of America, any State thereof or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal of
and any premium and interest on all the Securities and the performance or
observance of every covenant of this Indenture on the part of the Company to be
performed or observed and the conversion rights shall be provided for in
accordance with Article 4, by supplemental indenture satisfactory in form to
the Trustee, executed and delivered to the Trustee, by the Person (if other
than the Company) formed by such consolidation or into which the Company shall
have been merged or by the Person which shall have acquired the Company’s
assets;

          (2)  immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and

          (3)  the Company has delivered to the Trustee an Officers’ Certificate and
an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with this
Article and that all conditions precedent herein provided for relating to such
transaction have been complied with.

     Section 7.2. Successor Substituted

     Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety as to which Section 7.1
applies, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.

41

 

Article 8

Defaults and Remedies

     Section 8.1. Events of Default

     An “Event of Default” shall occur if:

          (1)  the Company defaults in the payment of any interest or Additional
Interest, if any, payable to all holders of Registrable Securities (as defined
in the Registration Rights Agreement) on any Security when the same becomes due
and payable and the default continues for a period of 30 days, whether or not
such payment shall be prohibited by the provisions of Article 5 hereof;

          (2)  the Company defaults in the payment of any principal of (including,
without limitation, any premium, if any, on) any Security when the same becomes
due and payable (whether at maturity, upon redemption, on a Change of Control
Purchase Date or otherwise), whether or not such payment shall be prohibited by
the provisions of Article 5 hereof;

          (3)  the Company fails to comply with any of its other agreements contained
in the Securities or this Indenture and the default continues for the period
and after the notice specified below;

          (4)  the Company defaults in the payment of the purchase price of any
Security when the same becomes due and payable, whether or not such payment
shall be prohibited by the provisions of Article 5 hereof; or

          (5)  the Company fails to provide a Change in Control Purchase Notice when
required by Section 3.8; or

          (6)  any indebtedness under any bond, debenture, note or other evidence of
indebtedness for money borrowed by, or guaranteed or assumed by, the Company or
any Significant Subsidiary or under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by, or guaranteed or assumed by, the Company or
any Significant Subsidiary (an “Instrument”) with a principal amount then
outstanding in excess of U.S. $10,000,000, whether such indebtedness now exists
or shall hereafter be created, is not paid at final maturity of the Instrument
(either at its stated maturity or upon acceleration thereof), and such
indebtedness is not discharged, or such acceleration is not rescinded or
annulled, within a period of 30 days after there shall have 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 Outstanding Securities a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause such
default to be cured or waived or such acceleration to be rescinded or annulled
and stating that such notice is a “Notice of Default” hereunder; provided, that
in the case of a group of Subsidiaries that is considered a Significant
Subsidiary solely because, if such group were a single Person, such group would
constitute a “significant subsidiary” as such term is defined under Rule
1-02(w) of Regulation S-X under the Securities Act and the Exchange Act, each
member of the group must be in default on indebtedness under Instruments that,
in the aggregate, exceeds $10,000,000 in principal amount then outstanding; or

          (7)  the Company or any Significant Subsidiary (and in the case of a group
of Subsidiaries that is considered a Significant Subsidiary solely because, if
such group were a single Person, such group would constitute a “significant
subsidiary” as such term is defined under Rule 1-02(w) of Regulation S-X

42

 

under the Securities Act and the Exchange Act, then each member of that
group), pursuant to or within the meaning of any Bankruptcy Law:

		
	 	     (A) commences a voluntary case or
proceeding;

		
	 	     (B) consents to the entry of an order for
relief against it in an involuntary case or proceeding;

		
	 	     (C) consents to the appointment of a
Custodian of it or for all or substantially all of its
property; or

		
	 	     (D) makes a general assignment for the
benefit of its creditors; or

          (8)  a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

		
	 	     (A) is for relief against the Company or
any Significant Subsidiary in an involuntary case or
proceeding;

		
	 	     (B) appoints a Custodian of the Company or
any Significant Subsidiary or for all or substantially
all of the property of the Company or any Significant
Subsidiary; or
	 
	 	     (C) orders the liquidation of the Company
or any Significant Subsidiary;

and in each case the order or decree remains unstayed and in effect for 60
consecutive days.

     The term “Bankruptcy Law” means Title 11 of the United States Code (or any
successor thereto) or any similar federal or state law for the relief of
debtors. The term “Custodian” means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.

     A default under clause (3) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding notify the Company and the
Trustee, in writing of the default, and the Company does not cure the default
within 60 days after receipt of such notice. The notice given pursuant to this
Section 8.1 must specify the default, demand that it be remedied and state that
the notice is a “Notice of Default.” When any default under this Section 8.1
is cured, it ceases.

     The Trustee shall not be charged with knowledge of any Event of Default
unless written notice thereof shall have been given to a Trust Officer at the
Corporate Trust Office of the Trustee by the Company, a Paying Agent, any
Holder or any agent of any Holder.

     Section 8.2. Acceleration

     If an Event of Default (other than an Event of Default specified in clause
(7) or (8) of Section 8.1) occurs and is continuing, the Trustee may, by notice
to the Company, or the Holders of at least 25% in aggregate principal amount of
the Securities then outstanding may, by notice to the Company and the Trustee,
declare all unpaid principal to the date of acceleration on the Securities then
outstanding (if not then due and payable) to be due and payable upon any such
declaration, and the same shall become and be immediately due

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and payable. If an Event of Default specified in clause (7) or (8) of
Section 8.1 occurs, all unpaid principal of the Securities then outstanding
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in aggregate principal amount of the Securities then outstanding
by notice to the Trustee may rescind an acceleration and its consequences if
(a) all existing Events of Default, other than the nonpayment of the principal
of the Securities which has become due solely by such declaration of
acceleration, have been cured or waived; (b) to the extent the payment of such
interest is lawful, interest (calculated at the rate per annum borne by the
Securities) on overdue installments of interest and overdue principal, which
has become due otherwise than by such declaration of acceleration, has been
paid; (c) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and (d) all payments due to the Trustee and
any predecessor Trustee under Section 9.7 have been made. No such rescission
shall affect any subsequent default or impair any right consequent thereto.

     Section 8.3. Other Remedies

     If an Event of Default occurs and is continuing, the Trustee may, but
shall not be obligated to, pursue any available remedy by proceeding at law or
in equity to collect the payment of the principal of or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.

     The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.

     Section 8.4. Waiver of Defaults and Events of Default

     Subject to Sections 8.7 and 11.2, the Holders of a majority in aggregate
principal amount of the Securities then outstanding by notice to the Trustee
may waive an existing default or Event of Default and its consequence, except a
default or Event of Default in the payment of the principal of, premium, if
any, or interest on any Security, a failure by the Company to convert any
Securities into Common Stock or any default or Event of Default in respect of
any provision of this Indenture or the Securities which, under Section 11.2,
cannot be modified or amended without the consent of the Holder of each
Security affected. When a default or Event of Default is waived, it is cured
and ceases.

     Section 8.5. Control by Majority

     The Holders of a majority in aggregate principal amount of the Securities
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of another Holder or the Trustee, or that may
involve the Trustee in personal liability unless the Trustee is offered
indemnity satisfactory to it; provided, however, that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.

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     Section 8.6. Limitations on Suits

     A Holder may not pursue any remedy with respect to this Indenture or the
Securities (except actions for payment of overdue principal or interest or for
the conversion of the Securities pursuant to Article 4) unless:

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

          (2)  the Holders of at least 25% in aggregate principal amount of the then
outstanding Securities make a written request to the Trustee to pursue the
remedy;

          (3)  such Holder or Holders offer to the Trustee reasonable indemnity to
the Trustee against any loss, liability or expense;

          (4)  the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and

          (5)  no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in aggregate
principal amount of the Securities then outstanding.

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

     Section 8.7. Rights of Holders to Receive Payment and to Convert

     Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of the principal of and interest on the
Security, on or after the respective due dates expressed in the Security and
this Indenture, to convert such Security in accordance with Article 4 and to
bring suit for the enforcement of any such payment on or after such respective
dates or the right to convert, is absolute and unconditional and shall not be
impaired or affected without the consent of the Holder.

     Section 8.8. Collection Suit By Trustee

     If an Event of Default in the payment of principal or interest specified
in clause (1) or (2) of Section 8.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or another obligor on the Securities for the whole amount of principal
and accrued interest remaining unpaid, together with, to the extent that
payment of such interest is lawful, interest on overdue principal and on
overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.

     Section 8.9. Trustee May File Proofs of Claim

     The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Holders allowed in
any judicial proceedings relative to the Company (or any other obligor on the
Securities), its creditors or its

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property and shall be entitled and empowered to collect and receive any
money or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
9.7, and to the extent that such payment of the reasonable compensation,
expenses, disbursements and advances in any such proceedings shall be denied
for any reason, payment of the same shall be secured by a lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
property which the Holders may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to, or, on behalf of any Holder, to authorize, accept
or adopt any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.

     Section 8.10. Priorities

     If the Trustee collects any money pursuant to this Article 8, it shall pay
out the money in the following order:

     First, to the Trustee for amounts due under Section 9.7;

     Second, to the holders of Senior Indebtedness to the extent required by
Article 5;

     Third, to Holders for amounts due and unpaid on the Securities for
principal and interest (including Additional Interest, if any), ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest (including Additional
Interest, if any), respectively; and

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

     The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 8.10.

     Section 8.11. Undertaking for Costs

     In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys’ fees and expenses, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 8.11 does not apply to a suit made by the
Trustee, a suit by a Holder pursuant to Section 8.7, or a suit by Holders of
more than 10% in aggregate principal amount of the Securities then outstanding.

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Article 9

Trustee

     Section 9.1. Duties of Trustee

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

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

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

          (2)  in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. The Trustee, however, shall
examine any certificates and opinions which by any provision hereof are
specifically required to be delivered to the Trustee to determine whether or
not they conform to the requirements of this Indenture.

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

          (1)  this paragraph does not limit the effect of subsection (b) of this
Section 9.1;

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

          (3)  the Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 8.5.

     (d)  No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers unless the Trustee shall have received adequate indemnity in
its opinion against potential costs and liabilities incurred by it relating
thereto.

     (e)  Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1.

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

     Section 9.2. Rights of Trustee

     Subject to Section 9.1:

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     (a) The Trustee may rely conclusively on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.

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

     (c)  The Trustee may act through its agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.

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

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

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

     (g)  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, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation.

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

     (i)  The rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed to act
hereunder.

     Section 9.3. Individual Rights of Trustee

     The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or an
Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 9.10 and 9.11.

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     Section 9.4. Trustee’s Disclaimer

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

     Section 9.5. Notice of Default or Events of Default.

     If a default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Securityholder notice of
the default or Event of Default within 90 days after it occurs. However, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determine that withholding notice is in the interests of
Securityholders, except in the case of a default or an Event of Default in
payment of the principal of or interest on any Security.

     Section 9.6. Reports by Trustee to Holders

     If such report is required by TIA Section 313, within 60 days after each
[January 31], beginning with the [January 31] following the date of this
Indenture, the Trustee shall mail to each Securityholder a brief report dated
as of such [January 31] that complies with TIA Section 313(a). The Trustee
also shall comply with TIA Section 313(b)(2) and (c).

     A copy of each report at the time of its mailing to Securityholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if
any, on which the Securities are listed. The Company shall notify the Trustee
whenever the Securities become listed on any stock exchange or listed or
admitted to trading on any quotation system and any changes in the stock
exchanges or quotation systems on which the Securities are listed or admitted
to trading and of any delisting thereof.

     Section 9.7. Compensation and Indemnity

     The Company shall pay to the Trustee from time to time such compensation
(as agreed to from time to time by the Company and the Trustee in writing) for
its services (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust). The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
expenses and advances incurred or made by it. Such expenses may include the
reasonable compensation, disbursements and expenses of the Trustee’s agents and
counsel.

     The Company shall indemnify the Trustee or any predecessor Trustee (which
for purposes of this Section 9.7 shall include its officers, directors,
employees and agents) for, and hold it harmless against, any and all loss,
liability or expense including taxes (other than taxes based upon, measured by
or determined by the income of the Trustee), (including reasonable legal fees
and expenses) incurred by it in connection with the acceptance or
administration of its duties under this Indenture or any action or failure to
act as authorized or within the discretion or rights or powers conferred upon
the Trustee hereunder including the reasonable costs and expenses of the
Trustee and its counsel in defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company need not pay
for any settlement without its written consent, which shall not be unreasonably
withheld.

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     The Company need not reimburse the Trustee for any expense or indemnify it
against any loss or liability incurred by it resulting from its gross
negligence or bad faith.

     To secure the Company’s payment obligations in this Section 9.7, the
Trustee shall have a senior claim to which the Securities are hereby made
subordinate on all money or property held or collected by the Trustee, except
such money or property held in trust to pay the principal of and interest on
the Securities. The obligations of the Company under this Section 9.7 shall
survive the satisfaction and discharge of this Indenture or the resignation or
removal of the Trustee.

     When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (7) or (8) of Section 8.1 occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law. The provisions of this Section shall
survive the termination of this Indenture.

     Section 9.8. Replacement of Trustee

     The Trustee may resign by so notifying the Company. The Holders of a
majority in aggregate principal amount of the Securities then outstanding may
remove the Trustee by so notifying the Trustee and may, with the Company’s
written consent, appoint a successor Trustee. The Company may remove the
Trustee if:

          (1)  the Trustee fails to comply with Section 9.10;

          (2)  the Trustee is adjudged a bankrupt or an insolvent;

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

          (4)  the Trustee becomes incapable of acting.

     If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. The resignation or removal of a Trustee shall not be effective until
a successor Trustee shall have delivered the written acceptance of its
appointment as described below.

     If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of 10% in principal amount of the Securities then outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee at the expense of the Company.

     If the Trustee fails to comply with Section 9.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.

     A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee and be released from its obligations (exclusive of any
liabilities that the retiring Trustee may have incurred while acting as
Trustee) hereunder, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder.

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     A retiring Trustee shall not be liable for the acts or omissions of any
successor Trustee after its succession.

     Notwithstanding replacement of the Trustee pursuant to this Section 9.8,
the Company’s obligations under Section 9.7 shall continue for the benefit of
the retiring Trustee.

     Section 9.9. Successor Trustee by Merger, Etc

     If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust assets (including the
administration of this Indenture) to, another corporation, the resulting,
surviving or transferee corporation, without any further act, shall be the
successor Trustee, provided such transferee corporation shall qualify and be
eligible under Section 9.10. Such successor Trustee shall promptly mail notice
of its succession to the Company and each Holder.

     Section 9.10. Eligibility; Disqualification

     The Trustee shall always satisfy the requirements of paragraphs (1), (2)
and (5) of TIA Section 310(a). The Trustee (or its parent holding company)
shall have a combined capital and surplus of at least $50,000,000. If at any
time the Trustee shall cease to satisfy any such requirements, it shall resign
immediately in the manner and with the effect specified in this Article 9. The
Trustee shall be subject to the provisions of TIA Section 310(b). Nothing
herein shall prevent the Trustee from filing with the SEC the application
referred to in the penultimate paragraph of TIA Section 310(b).

     Section 9.11. Preferential Collection of Claims Against Company

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

Article 10

Satisfaction and Discharge of Indenture

     Section 10.1. Satisfaction and Discharge of Indenture

     This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for and except as further provided below),
and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when

          (1)  either

               (A)  all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.7 and (ii) Securities for whose
payment money has theretofore been deposited in trust and thereafter repaid to
the Company as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or

               (B)  all such Securities not theretofore delivered to the Trustee for
cancellation

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                    (i)  have become due and payable, or

                    (ii)  will become due and payable at the Final Maturity Date within one
year, or

                    (iii)  are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company,

and the Company, in the case of clause (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the Trustee or
a Paying Agent (other than the Company or any of its Affiliates) as trust funds
in trust for the purpose cash in an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal and interest (including Additional Interest, if
any) to the date of such deposit (in the case of Securities which have become
due and payable) or to the Final Maturity Date or Redemption Date, as the case
may be;

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

          (3)  the Company has delivered to the Trustee 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.

     Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 9.7 shall survive and,
if money shall have been deposited with the Trustee pursuant to subclause (B)
of clause (1) of this Section, the provisions of Sections 2.3, 2.4, 2.5, 2.6,
2.7, 2.12, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13 and 12.5, Article 4, the last
paragraph of Section 6.2 and this Article 10, shall survive until the
Securities have been paid in full.

     Section 10.2. Application of Trust Money

     Subject to the provisions of Section 10.3, the Trustee or a Paying Agent
shall hold in trust, for the benefit of the Holders, all money deposited with
it pursuant to Section 10.1 and shall apply the deposited money in accordance
with this Indenture and the Securities to the payment of the principal of and
interest on the Securities. Money so held in trust shall not be subject to the
subordination provisions of Article 5.

     Section 10.3. Repayment to Company

     The Trustee and each Paying Agent shall promptly pay to the Company upon
request any excess money (i) deposited with them pursuant to Section 10.1 and
(ii) held by them at any time.

     The Trustee and each Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years after a right to such money has matured; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such payment, may at the expense of the Company cause to be mailed to each
Holder entitled to such money notice that such money remains unclaimed and that
after a date specified therein, which shall be at least 30 days from the date
of such mailing, any unclaimed balance of such money then remaining will be
repaid to the Company. After payment to the Company, Holders entitled to money
must look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person.

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     Section 10.4. Reinstatement

     If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 10.2 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Company’s
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 10.1 until
such time as the Trustee or such Paying Agent is permitted to apply all such
money in accordance with Section 10.2; provided, however, that if the Company
has made any payment of the principal of or interest on any Securities because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive any such payment from the
money held by the Trustee or such Paying Agent.

Article 11

Amendments, Supplements and Waivers

     Section 11.1. Without Consent of Holders

     The Company and the Trustee may amend or supplement this Indenture or the
Securities without notice to or consent of any Securityholder:

     (a)  to comply with Sections 4.11 and 7.1;

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

     (c)  to make any other change that does not adversely affect the rights of
any Securityholder;

     (d)  to comply with the provisions of the TIA;

     (e)  to add to the covenants of the Company for the equal and ratable
benefit of the Securityholders or to surrender any right, power or option
conferred upon the Company; or

     (f)  to appoint a successor Trustee.

     Section 11.2. With Consent of Holders

     The Company and the Trustee may amend or supplement this Indenture or the
Securities with the written consent of the Holders of at least a majority in
aggregate principal amount of the Securities then outstanding. The Holders of
at least a majority in aggregate principal amount of the Securities then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Securities without notice to any
Securityholder. However, notwithstanding the foregoing but subject to Section
11.4, without the written consent of each Securityholder affected, an
amendment, supplement or waiver, including a waiver pursuant to Section 8.4,
may not:

     (a)  change the stated maturity of the principal of, or interest on, any
Security;

     (b)  reduce the principal amount of, or any premium or interest on, any
Security;

     (c)  reduce the amount of principal payable upon acceleration of the
maturity of any Security;

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     (d)  change the place or currency of payment of principal of, or any
premium or interest on, any Security;

     (e)  impair the right to institute suit for the enforcement of any payment
on, or with respect to, any Security;

     (f)  modify the provisions with respect to the purchase right of Holders
pursuant to Article 3 upon a Change in Control in a manner adverse to Holders;

     (g)  modify the subordination provisions of Article 5 in a manner
materially adverse to the Holders of Securities;

     (h)  adversely affect the right of Holders to convert Securities other than
as provided in or under Article 4 of this Indenture;

     (i)  reduce the percentage of the aggregate principal amount of the
outstanding Securities whose Holders must consent to a modification or
amendment;

     (j)  reduce the percentage of the aggregate principal amount of the
outstanding Securities necessary for the waiver of compliance with certain
provisions of this Indenture or the waiver of certain defaults under this
Indenture; and

     (k)  modify any of the provisions of this Section or Section 8.4, except to
increase any such percentage or to provide that certain provisions of this
Indenture cannot be modified or waived without the consent of the Holder of
each outstanding Security affected thereby.

     It shall not be necessary for the consent of the Holders under this
Section 11.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

     After an amendment, supplement or waiver under this Section 11.2 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplement or waiver.
An amendment or supplement under this Section 11.2 or under Section 11.1 may
not make any change that adversely affects the rights under Article 5 of any
holder of an issue of Senior Indebtedness unless the holders of that issue,
pursuant to its terms, consent to the change.

     Section 11.3. Compliance with Trust Indenture Act

     Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as in effect at the date of such amendment or supplement.

     Section 11.4. Revocation and Effect of Consents

     Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder’s Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to its Security or

54

 

portion of a Security if the Trustee receives the notice of revocation
before the date the amendment, supplement or waiver becomes effective.

     After an amendment, supplement or waiver becomes effective, it shall bind
every Securityholder, unless it makes a change described in any of clauses (a)
through (k) of Section 11.2. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder’s Security.

     Section 11.5. Notation on or Exchange of Securities

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

     Section 11.6. Trustee to Sign Amendments, Etc

     The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 11 if the amendment or supplemental indenture does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, in its sole discretion, but need not sign it. In
signing or refusing to sign such amendment or supplemental indenture, the
Trustee shall be entitled to receive and, subject to Section 9.1, shall be
fully protected in relying upon, an Opinion of Counsel stating that such
amendment or supplemental indenture is authorized or permitted by this
Indenture. The Company may not sign an amendment or supplement indenture until
the Board of Directors approves it.

     Section 11.7. Effect of Supplemental Indentures

     Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

Article 12

Miscellaneous

     Section 12.1. Trust Indenture Act Controls

     If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 to 317, inclusive, of the TIA through
operation of Section 318(c) thereof, such imposed duties shall control.

     Section 12.2. Notices

     Any demand, authorization notice, request, consent or communication shall
be given in writing and delivered in person or mailed by first-class mail,
postage prepaid, addressed as follows or transmitted by

55

 

facsimile transmission (confirmed by delivery in person or mail by
first-class mail, postage prepaid, or by guaranteed overnight courier) to the
following facsimile numbers:

	 	If to the Company, to:

	 	Sunrise Assisted Living, Inc.

7902 Westpark Drive

McLean, Virginia 22102

Attention: Corporate Counsel

Facsimile No.: (703) 744-1990

	 	if to the Trustee, to:

	 	First Union National Bank

800 East Main Street

Richmond, VA 23219

Attn: Corporate Trust

Facsimile No.: (804) 343-6699

     Such notices or communications shall be effective when received.

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

     Any notice or communication mailed to a Securityholder shall be mailed by
first-class mail or delivered by an overnight delivery service to it at its
address shown on the register kept by the Primary Registrar.

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

     Section 12.3. Communications by Holders With Other Holders

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

     Section 12.4. Certificate and Opinion as to Conditions Precedent

     (a)  Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at
the request of the Trustee:

          (1)  an Officers’ Certificate stating that, in the opinion of the signers,
all conditions precedent (including any covenants, compliance with which
constitutes a condition precedent), if any, provided for in this Indenture
relating to the proposed action have been complied with; and

56

 

          (2)  an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent (including any covenants, compliance with which
constitutes a condition precedent) have been complied with.

     (b)  Each Officers’ Certificate and Opinion of Counsel 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 or she has made
such examination or investigation as is necessary to enable him or her 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;

provided however, that with respect to matters of fact an Opinion of Counsel
may rely on an Officers’ Certificate or certificates of public officials.

     Section 12.5. Record Date for Vote or Consent of Securityholders

     The Company (or, in the event deposits have been made pursuant to Section
10.1, the Trustee) may set a record date for purposes of determining the
identity of Holders entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture, which record date shall
not be more than thirty (30) days prior to the date of the commencement of
solicitation of such action. Notwithstanding the provisions of Section 11.4,
if a record date is fixed, those persons who were Holders of Securities at the
close of business on such record date (or their duly designated proxies), and
only those persons, shall be entitled to take such action by vote or consent or
to revoke any vote or consent previously given, whether or not such persons
continue to be Holders after such record date.

     Section 12.6. Rules by Trustee, paying Agent, Registrar and Conversion
Agent

     The Trustee may make reasonable rules (not inconsistent with the terms of
this Indenture) for action by or at a meeting of Holders. Any Registrar,
Paying Agent or Conversion Agent may make reasonable rules for its functions.

     Section 12.7. Legal Holidays

     A “Legal Holiday” is a Saturday, Sunday or a day on which state or
federally chartered banking institutions in New York, New York and the state in
which the Corporate Trust Office is located are not required to be open. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
date shall not be affected.

57

 

     Section 12.8. Governing Law

     This Indenture and the Securities shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to
principles of conflicts of laws.

     Section 12.9. No Adverse Interpretation of Other Agreements

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

     Section 12.10. No Recourse Against Others

     All liability described in paragraph 18 of the Securities of any director,
officer, employee or shareholder, as such, of the Company is waived and
released.

     Section 12.11. Successors

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

     Section 12.12. Multiple Counterparts

     The parties may sign multiple counterparts of this Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent the
same agreement.

     Section 12.13. Separability

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

     Section 12.14. Table of Contents, Headings, Etc

     The table of contents, cross-reference sheet 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.

[SIGNATURE PAGE FOLLOWS]

58

 

     IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date and year first above written.

	 	 	 	 	 
	 	 	SUNRISE ASSISTED LIVING, INC
	 
		 	
By:

Name:

Title:
	 	 /s/ Larry E. Hulse        

Larry E. Hulse

Senior Vice President and Chief Financial

Officer
	 
	 	 	FIRST UNION NATIONAL BANK, as Trustee
	 
	 	 	
By:

Name:

Title:
	 	 /s/ Patricia A. Welling        

Patricia A. Welling

Vice President

 

 

EXHIBIT A

[FORM OF FACE OF SECURITY]

     [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY
IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.]1

     [THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
“SECURITIES ACT”), AND THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.]2

     THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER

	 	 	1 These paragraphs should be included only if the Security is a Global
Security.
	 
	 	 	2 These paragraphs to be included only if the Security is a Restricted
Security.

A-1

 

THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT
OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.]2

     [THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION
RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE
REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO
COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.]2

	 	 	2 These paragraphs to be included only if the Security is a Restricted
Security.

A-2

 

SUNRISE ASSISTED LIVING, INC.

	 	 	 	 	 
	CUSIP: ________	 	
     
	 	R-________

5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE FEBRUARY 1, 2009

     Sunrise Assisted Living, Inc, a Delaware corporation (the “Company”, which
term shall include any successor corporation under the Indenture referred to on
the reverse hereof), promises to pay to ______________________________,
registered assigns, the principal sum of _______________________ Dollars
($_______) on February 1, 2009 [or such greater or lesser amount as is
indicated on the Schedule of Exchanges of Notes on the other side of this
Note].3

Interest Payment Dates:February 1 and August 1.

Record Dates: January 15 and July 15.

     This Note is convertible as specified on the other side of this Note.
Additional provisions of this Note are set forth on the other side of this
Note.

SIGNATURE PAGE FOLLOWS

	 	 	3 This phrase should be included only if the Security is a global Security.

A-3

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

	 
	SUNRISE ASSISTED LIVING, INC
	 
	By: ______________________________
	Name:
	Title:

Attest:

Name:

Title:

Dated:

Trustee’s Certificate of Authentication: This is one of the

Securities referred to in the within-mentioned Indenture.

FIRST UNION NATIONAL BANK,

as Trustee

Authorized Signatory

By:

A-4

 

[FORM OF REVERSE SIDE OF SECURITY]

SUNRISE ASSISTED LIVING, INC.

5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE FEBRUARY 1, 2009

1.     INTEREST

     Sunrise Assisted Living, Inc., a Delaware corporation (the “Company”,
which term shall include any successor corporation under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Note at the rate of 5 1/4% per annum. The Company shall pay interest
semiannually on February 1 and August 1 of each year, commencing August 1,
2002. Interest on the Notes shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January 30, 2002;
provided, however, that if there is not an existing default in the payment of
interest and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding interest payment date, interest shall
accrue from such interest payment date. Interest will be computed on the basis
of a 360-day year of twelve 30-day months. Any reference herein to interest
accrued or payable as of any date shall include any Additional Interest accrued
or payable on such date as provided in the Registration Rights Agreement.

2.     METHOD OF PAYMENT

     The Company shall pay interest on this Note (except defaulted interest) to
the person who is the Holder of this Note at the close of business on January
15 or July 15, as the case may be, next preceding the related interest payment
date. The Holder must surrender this Note to a Paying Agent to collect payment
of principal. The Company will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. The Company may, however, pay principal and interest in
respect of any Certificated Security by check or wire payable in such money;
provided, however, that a Holder with an aggregate principal amount in excess
of $2,000,000 will be paid by wire transfer in immediately available funds at
the election of such Holder if such Holder has provided wire transfer
instructions to the Company. The Company may mail an interest check to the
Holder’s registered address. Notwithstanding the foregoing, so long as this
Note is registered in the name of a Depositary or its nominee, all payments
hereon shall be made by wire transfer of immediately available funds to the
account of the Depositary or its nominee.

3.     PAYING AGENT, REGISTRAR AND CONVERSION AGENT

     Initially, First Union National Bank (the “Trustee”, which term shall
include any successor trustee under the Indenture hereinafter referred to) will
act as Paying Agent, Registrar and Conversion Agent. The Company may change
any Paying Agent, Registrar or Conversion Agent without notice to the Holder.
The Company or any of its Subsidiaries may, subject to certain limitations set
forth in the Indenture, act as Paying Agent or Registrar.

4.     INDENTURE, LIMITATIONS

     This Note is one of a duly authorized issue of Securities of the Company
designated as its 5 1/4% Convertible Subordinated Notes Due February 1, 2009
(the “Notes”), issued under an Indenture dated as of January 30, 2002 (together
with any supplemental indentures thereto, the “Indenture”), between the Company
and the Trustee. The terms of this Note include those stated in the Indenture
and those required by or made

A-5

 

part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended, as in effect on the date of the Indenture. This Note is subject to
all such terms, and the Holder of this Note is referred to the Indenture and
said Act for a statement of them.

     The Notes are subordinated unsecured obligations of the Company limited to
$125,000,000 aggregate principal amount. The Indenture does not limit other
debt of the Company, secured or unsecured, including Senior Indebtedness.

5.     OPTIONAL REDEMPTION

     The Notes are subject to redemption, at any time on or after February 5,
2006, as a whole or from time to time in part, at the election of the Company.
The Redemption Prices (expressed as percentages of the principal amount) are as
follows for Notes redeemed during the periods set forth below:

	 	 	 	 	 
	Period	 	Redemption Price
	
	 	

	February 5, 2006 through January 31, 2007
	 	 	101.750	%
	February 1, 2007 through January 31, 2008
	 	 	100.875	%
	February 1, 2008 and thereafter
	 	 	100.000	%

in each case together with accrued interest up to but not including the
Redemption Date; provided that if the Redemption Date falls after an interest
payment record date and on or before an interest payment date, then the
interest will be payable to the Holders in whose names the Notes are registered
at the close of business on the relevant interest payment record dates.

     No sinking fund is provided for the Notes.

6.     NOTICE OF REDEMPTION

     Notice of redemption will be mailed by first-class mail at least 20 days
but not more than 60 days before the Redemption Date to each Holder of Notes to
be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part, but only in whole multiples of $1,000. On and
after the Redemption Date, subject to the deposit with the Paying Agent of
funds sufficient to pay the Redemption Price plus accrued interest, if any,
accrued to, but excluding, the Redemption Date, interest shall cease to accrue
on Notes or portions of them called for redemption.

7.     PURCHASE OF NOTES AT OPTION OF HOLDER UPON A CHANGE IN CONTROL

     At the option of the Holder and subject to the terms and conditions of the
Indenture, the Company shall become obligated to purchase all or any part
specified by the Holder (so long as the principal amount of such part is $1,000
or an integral multiple of $1,000 in excess thereof) of the Notes held by such
Holder on the date that is 30 Business Days after the occurrence of a Change in
Control, at a purchase price equal to 100% of the principal amount thereof
together with accrued interest up to, but excluding, the Change in Control
Purchase Date. The Holder shall have the right to withdraw any Change in
Control Purchase Notice (in whole or in a portion thereof that is $1,000 or an
integral multiple of $1,000 in excess thereof) at any time prior to the close
of business on the Business Day next preceding the Change in Control Purchase
Date by delivering a written notice of withdrawal to the Paying Agent in
accordance with the terms of the Indenture.

A-6

 

8.     CONVERSION

     A Holder of a Note may convert the principal amount of such Note (or any
portion thereof equal to $1,000 or any integral multiple of $1,000 in excess
thereof) into shares of Common Stock at any time prior to the close of business
on February 1, 2009; provided, however, that if the Note is called for
redemption or subject to purchase upon a Change in Control, the conversion
right will terminate at the close of business on the Business Day immediately
preceding the Redemption Date or the Change in Control Purchase Date, as the
case may be, for such Note or such earlier date as the Holder presents such
Note for redemption or purchase (unless the Company shall default in making the
redemption payment or Change in Control Purchase Price, as the case may be,
when due, in which case the conversion right shall terminate at the close of
business on the date such default is cured and such Note is redeemed or
purchased).

     The initial Conversion Price is $35.84 per share, subject to adjustment
under certain circumstances as provided in the Indenture. The number of shares
of Common Stock issuable upon conversion of a Note is determined by dividing
the principal amount of the Note or portion thereof converted by the Conversion
Price in effect on the Conversion Date. No fractional shares will be issued
upon conversion; in lieu thereof, an amount will be paid in cash based upon the
Closing Price (as defined in the Indenture) of the Common Stock on the Trading
Day immediately prior to the Conversion Date.

     To convert a Note, a Holder must (a) complete and manually sign the
conversion notice set forth below and deliver such notice to a Conversion
Agent, (b) surrender the Note to a Conversion Agent, (c) furnish appropriate
endorsements and transfer documents if required by a Registrar or a Conversion
Agent, and (d) pay any transfer or similar tax, if required. Notes so
surrendered for conversion (in whole or in part) during the period from the
close of business on any regular record date to the opening of business on the
next succeeding interest payment date (excluding Notes or portions thereof
called for redemption or subject to purchase upon a Change in Control on a
Redemption Date or Change in Control Purchase Date, as the case may be, during
the period beginning at the close of business on a regular record date and
ending at the opening of business on the first Business Day after the next
succeeding interest payment date, or if such interest payment date is not a
Business Day, the second such Business Day) shall also be accompanied by
payment in funds acceptable to the Company of an amount equal to the interest
payable on such interest payment date on the principal amount of such Note then
being converted, and such interest shall be payable to such registered Holder
notwithstanding the conversion of such Note, subject to the provisions of this
Indenture relating to the payment of defaulted interest by the Company. If the
Company defaults in the payment of interest payable on such interest payment
date, the Company shall promptly repay such funds to such Holder. A Holder may
convert a portion of a Note equal to $1,000 or any integral multiple thereof.

     A Note in respect of which a Holder had delivered a Change in Control
Purchase Notice exercising the option of such Holder to require the Company to
purchase such Note may be converted only if the Change in Control Purchase
Notice is withdrawn in accordance with the terms of the Indenture.

9.     CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION

     Any Notes called for redemption, unless surrendered for conversion before
the close of business on the Business Day immediately preceding the Redemption
Date, may be deemed to be purchased from the Holders of such Notes at an amount
not less than the Redemption Price, together with accrued interest, if any, to,
but not including, the Redemption Date, by one or more investment bankers or
other purchasers who may agree with the Company to purchase such Notes from the
Holders, to convert them into Common Stock of the Company and to make payment
for such Notes to the Paying Agent in trust for such Holders.

A-7

 

10.     SUBORDINATION

     The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness of the Company. Any
Holder by accepting this Note agrees to and shall be bound by such
subordination provisions and authorizes the Trustee to give them effect. In
addition to all other rights of Senior Indebtedness described in the Indenture,
the Senior Indebtedness shall continue to be Senior Indebtedness and entitled
to the benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any terms of any instrument relating to the Senior
Indebtedness or any extension or renewal of the Senior Indebtedness.

11.     DENOMINATIONS, TRANSFER, EXCHANGE

     The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder may register the transfer of
or exchange Notes in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes or other governmental charges that may be
imposed in relation thereto by law or permitted by the Indenture.

12.     PERSONS DEEMED OWNERS

     The Holder of a Note may be treated as the owner of it for all purposes.

13.     UNCLAIMED MONEY

     If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent will pay the money back to the Company
at its written request, subject to applicable unclaimed property law. After
that, Holders entitled to money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
person.

14.     AMENDMENT, SUPPLEMENT AND WAIVER

     Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and an existing
default or Event of Default and its consequence or compliance with any
provision of the Indenture or the Notes may be waived in a particular instance
with the consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding. Without the consent of or notice to any Holder,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to, among other things, cure any ambiguity, defect or inconsistency or make any
other change that does not adversely affect the rights of any Holder.

15.     SUCCESSOR ENTITY

     When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture in accordance with the terms and
conditions of the Indenture, the predecessor corporation (except in certain
circumstances specified in the Indenture) be released from those obligations.

A-8

 

16.     DEFAULTS AND REMEDIES

     Under the Indenture, an Event of Default includes: (i) default for 30
days in payment of any interest or Additional Interest on any Notes; (ii)
default in payment of any principal (including, without limitation, any
premium, if any) on the Notes when due; (iii) failure by the Company for 60
days after notice to it to comply with any of its other agreements contained in
the Indenture or the Notes; (iv) default in the payment of certain indebtedness
of the Company or a Significant Subsidiary and (v) certain events of
bankruptcy, insolvency or reorganization of the Company or any Significant
Subsidiary. If an Event of Default (other than as a result of certain events
of bankruptcy, insolvency or reorganization of the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding may declare all unpaid principal to the
date of acceleration on the Notes then outstanding to be due and payable
immediately, all as and to the extent provided in the Indenture. If an Event
of Default occurs as a result of certain events of bankruptcy, insolvency or
reorganization of the Company, unpaid principal of the Notes then outstanding
shall become due and payable immediately without any declaration or other act
on the part of the Trustee or any Holder, all as and to the extent provided in
the Indenture. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Notes. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the Notes
then outstanding may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing default (except
a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company is required to file
periodic reports with the Trustee as to the absence of default.

17.     TRUSTEE DEALINGS WITH THE COMPANY

     First Union National Bank, the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from and
perform services for the Company or an Affiliate of the Company, and may
otherwise deal with the Company or an Affiliate of the Company, as if it were
not the Trustee.

18.     NO RECOURSE AGAINST OTHERS

     A director, officer, employee or shareholder, as such, of the Company
shall not have any liability for any obligations of the Company under the Notes
or the Indenture nor for any claim based on, in respect of or by reason of such
obligations or their creation. The Holder of this Note by accepting this Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of this Note.

19.     AUTHENTICATION

     This Note shall not be valid until the Trustee or an authenticating agent
manually signs the certificate of authentication on the other side of this
Note.

20.     ABBREVIATIONS AND DEFINITIONS

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

A-9

 

     All terms defined in the Indenture and used in this Note but not
specifically defined herein are defined in the Indenture and are used herein as
so defined.

21.     INDENTURE TO CONTROL; GOVERNING LAW

     In the case of any conflict between the provisions of this Note and the
Indenture, the provisions of the Indenture shall control. This Note shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to principals of conflicts of law.

     The Company will furnish to any Holder, upon written request and without
charge, a copy of the Indenture. Requests may be made to: Sunrise Assisted
Living, Inc., 7902 Westpark Drive, McLean, Virginia 22102, (703) 273-7500,
Attention: Corporate Counsel.

A-10

 

ASSIGNMENT FORM

     To assign this Note, fill in the form below:

     I or we assign and transfer this Note to

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint

agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.

	 	 	 
	 	 	
Your Signature:
	 
	Date: __________________________	 	____________________________________________
	 	 	
(Sign exactly as your name appears on the

other side of this Note)

*Signature guaranteed by:

By: ___________________________

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

A-11

 

CONVERSION NOTICE

     To convert this Note into Common Stock of the Company, check the box: [  ]

     To convert only part of this Note, state the principal amount to be
converted (must be $1,000 or a integral multiple of $1,000): $_______.

     If you want the stock certificate made out in another person’s name, fill
in the form below:

(Insert assignee’s soc. sec. or tax I.D. no.)

 

(Print or type assignee’s name, address and zip code)

	 	 	 
	 	 	
Your Signature:
	 
	Date: __________________________	 	_________________________________________
	 	 	
(Sign exactly as your name appears on the

other side of this Note)

*Signature guaranteed by:

By:

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

A-12

 

OPTION TO ELECT REPURCHASE

UPON A CHANGE OF CONTROL

To: Sunrise Assisted Living, Inc.

     The undersigned registered owner of this Security hereby irrevocably
acknowledges receipt of a notice from Sunrise Assisted Living, Inc. (the
“Company”) as to the occurrence of a Change in Control with respect to the
Company and requests and instructs the Company to redeem the entire principal
amount of this Security, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Security at the Change in Control Purchase Price,
together with accrued interest to, but excluding, such date, to the registered
Holder hereof.

	 	 	 
	Dated: _____________	 	_______________________________
	 
		 	_______________________________
	 	 	
Signature(s)
	 
	 	 	
Signature(s) must be guaranteed by

a qualified guarantor institution

with membership in an approved

signature guarantee program

pursuant to Rule 17Ad-15 under the

Securities Exchange Act of 1934.
	 
	 	 	_______________________________

	 	 	
Signature Guaranty

Principal amount to be redeemed

(in an integral multiple of $1,000, if less than all):

NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.

A-13

 

SCHEDULE OF EXCHANGES OF NOTES4

     The following exchanges, redemptions, repurchases or conversions of a part
of this global Note have been made:

	 	 	 
	Principal Amount
	of this Global Note	 	Authorized	 	 	 	 	 	Amount of
	Following Such	 	Signatory of	 	 	Amount of Decrease in	 	 	Increase in
	Decrease Date	 	Securities	 	 	Principal Amount	 	 	Principal Amount
	of Exchange (or Increase)	 	Custodian	 	 	of this Global Note	 	 	of this Global Note
	
	 	
	 	 	
	 	 	

	 	 	4 This schedule should be included only if the Security is a global Security.

A-14

 

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION

OF TRANSFER OF TRANSFER RESTRICTED SECURITIES5

	 	 	 
	Re:	 	
5 1/4% Convertible Subordinated Notes Due February 1, 2009 (the “Notes”)
of Sunrise Assisted Living, Inc.

     This certificate relates to $_______ principal amount of Notes owned in
(check applicable box)

     [  ] book-entry or      [  ] definitive form by _________________________(the “Transferor”).

     The Transferor has requested a Registrar or the Trustee to exchange or
register the transfer of such Notes.

     In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with transfer
restrictions relating to the Notes as provided in Section 2.12 of the Indenture
dated as of January 30, 2002 between Sunrise Assisted Living, Inc. and First
Union National Bank, as trustee (the “Indenture”), and the transfer of such
Note is being made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the “Securities Act”) (check applicable
box) or the transfer or exchange, as the case may be, of such Note does not
require registration under the Securities Act because (check applicable box):

	 	[  ]	 	Such Note is being transferred pursuant to an effective registration
statement under the Securities Act.
	 
	 	[  ]	 	Such Note is being acquired for the Transferor’s own account,
without transfer.
	 
	 	[  ]	 	Such Note is being transferred to the Company or a Subsidiary (as
defined in the Indenture) of the Company.
	 
	 	[  ]	 	Such Note is being transferred to a person the Transferor reasonably
believes is a “qualified institutional buyer” (as defined in Rule
144A or any successor provision thereto (“Rule 144A”) under the
Securities Act) that is purchasing for its own account or for the
account of a “qualified institutional buyer”, in each case to whom
notice has been given that the transfer is being made in reliance on
such Rule 144A, and in each case in reliance on Rule 144A.
	 
	 	[  ]	 	Such Note is being transferred pursuant to and in compliance with an
exemption from the registration requirements under the Securities
Act in accordance with Rule 144 (or any successor thereto) (“Rule
144”) under the Securities Act.

     Such Note is being transferred pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act (other than
an exemption referred to above) and as a result of which such

	 	 	5 This certificate should only be included if this Security is a Restricted
Security.

A-15

 

Note will, upon such transfer, cease to be a “restricted security” within
the meaning of Rule 144 under the Securities Act.

     The Transferor acknowledges and agrees that, if the transferee will hold
any such Notes in the form of beneficial interests in a global Note which is a
“restricted security” within the meaning of Rule 144 under the Securities Act,
then such transfer can only be made pursuant to Rule 144A under the Securities
Act and such transferee must be a “qualified institutional buyer” (as defined
in Rule 144A).

	 	 	 
	Date: ______________________	 	
______________________________________
	 	 	
(Insert Name of Transferor)

A-16

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